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M/s. Karmen International P. Ltd., Versus The Deputy Commissioner of Income Tax, Company Circle II (4) , Chennai.

2015 (5) TMI 999 - ITAT CHENNAI

Disallowance of export commission payment - non deduction of tds - Held that:- As payments of "Export Sales Commission" to the non-residents for procuring export orders, are not assessable to tax in India and consequently the assessee company is not under any obligation to deduct the TDS on the above commission payments u/s.195 of the Act. Accordingly, the additions made by the Assessing Officer, on account of disallowance of "Export Sales Commission" payments for non-deduction of TDS u/s.40(a)( .....

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er section 14A of the Act and also the ld. CIT(A) passed very detailed order and gave specific findings that the assessee has not maintained any separate books of account for the investment in shares, there was no separate establishment to look after the investments. Even before us, the assessee has not able to establish that no interest borrowing funds were used for investments in shares. Further, the ld. CIT(A), after considering the detailed explanation and books of accounts given by the asse .....

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A - Held that:- CIT(A), by following the decision of the Tribunal in the case of GRT Firms & Others (2012 (6) TMI 802 - ITAT CHENNAI) as well as judgement of the Hon’ble Jurisdictional High Court in the case of Velayudhaswamy Spinning Mills v. ACIT (2010 (3) TMI 860 - Madras High Court ), directed the Assessing Officer to allow the assessee’s claim of deduction under section 80IA of the Act. Thus, we find no infirmity in the order passed by the ld. CIT(A) - Decided in favour of assessee - I.T.A. .....

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facts of the case are that the assessee has filed its return of income by declaring total income of ₹ 6,98,67,820/-. The Assessing Officer, while completing the assessment under section 143(3) of the Income Tax Act, assessed the income of the assessee at ₹ 7,79,65,080/- by making various additions/disallowances. On appeal, the ld. CIT(A) confirmed/deleted some of the additions/disallowances against which both the assessee as well as Revenue are in appeal before us. 3. The first groun .....

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9;s submissions as well as the orders of the Hon'ble ITAT in the case of A.Y.2007-08 (in ITA No.225/Mds/2013 dated 30.05.2013). The facts involved in the A.Y.2007-08 are exactly similar to those involved in the present A.Y.2010-11 also. The payments made to the non-residents in the A.Y.2007-08 without making TDS, were similar to those made by the assessee company in the present A.Y.2010-11. In the A.Y.2007-08, the Assessing Officer disallowed the payments u/s.40(a)(i) for non-deduction of TD .....

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aid companies. The relevant portion of the order of the ITAT (in ITA No.225/Mds/2013 dated 30.05.2013) is reproduced as under: 5. We have heard the submissions made by the representative of both sides and have perused the orders of the authorities below. The assessee has paid commission to foreign agent M/s. Met- Tech International Pte, Singapore for procuring export orders for the assessee from companies-located in Japan, Indonesia and UK. The Commissioner of Income Tax (Appeals) has given cate .....

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that, if the income chargeable to tax is not assessable in India, there is no question of deduction of tax at source. In view of the well settled law and the facts of the case, we do not find any error in the findings of the Commissioner of Income Tax (Appeals) on the issue. 4.1.3 In the present assessment year also the facts and circumstances are exactly identical to those involved in the A.Y.2007-08, and hence the above decision of the ITAT, (in ITA No.225/Mds/2013 dated 30.05.2013), is equal .....

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(48 Taxmann.com 48)(Mad), I hold that the above payments of "Export Sales Commission" to the non-residents for procuring export orders, are not assessable to tax in India and consequently the assessee company is not under any obligation to deduct the TDS on the above commission payments u/s.195 of the Act. The provisions of sec.40(a)(i) have no application in the present case. Accordingly, the additions made by the Assessing Officer, on account of disallowance of "Export Sales Co .....

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7; 25,63,409/- into consideration in the final computation of taxable income, no separate relief is required and thus, we find no infirmity in the order passed by the ld. CIT(A). Accordingly, the ground raised by the assessee is dismissed. 5. The next ground raised by the assessee in ground No.3 was not pressed at the time of hearing and accordingly the ground is dismissed as not pressed. 6. Ground Nos. 4 and 5 in the grounds of appeal is relating to disallowance under section 14 of the Act. In .....

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e has several activities including investments in shares. For the purpose of making these investments, etc. the same management, manpower, machinery and infrastructural facilities of the assessee are being used. Hence, there is an element of expenditure involved in the process. This expenditure may not be direct. The ld. CIT(A) has further observed that the assessee is not maintaining any separate books of accounts for the investment made in shares nor there was separate establishment to look af .....

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with. With the above observations, by following various decisions of the ITAT, the disallowance made by the Assessing Officer was confirmed by the ld. CIT(A). The relevant portion of the order of the ld. CIT(A) is extracted as under: 4.3.2 I have considered the assessee's submissions carefully. The total investments in shares/funds were ₹ 8.75 crores as on 31.03.2010 (and ₹ 6.86 crores as on 31.03.2009), as could be seen from the investments of the balance during the financial y .....

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ree funds, especially if the books are not maintained separately. Further, all the funds, i.e. the interest-free own funds and the interest bearing borrowed funds are put into a common pool of funds. From this common kitty all the outgoings (i.e. investments in shares, regular business expenses etc) are met with. In other words, once the funds, i.e. whether the interest-free own funds or the interest bearing borrowed funds, are put into a common pool of funds, they will loose their distinction a .....

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t, in the case of Godrej Boyce Mfg Co Ltd v. CIT, decided on 12.08.2010, held that Sec. 14A(2) & (3) of the Act, is constitutionally valid and is applicable from assessment year 2008-09 onwards. In this case, the High Court has clearly and categorically held that "the provisions of Rule 8D of the Income Tax Rules which have been notified with effect from 24 March 2008 shall apply with effect from Assessment Year 2008-09". 4.3.4 The disallowance of expenses u/s.14A r.w. rule 8D is i .....

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pecial Bench of ITAT Delhi in the case of Cheminvest Ltd. v. ITO [2009] (121 ITD 318)(Del)(SB) / (124 TTJ 577)(Del) (SB), which is as under: Cheminvest Ltd. v. ITO [2009] (121 ITD 318)(Del)(SB) Section 14A, read with section 10(34), of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includible in total income Assessment year 2004-05 - Whether since dividend income is exempted from tax by virtue of section 10(34), interest paid on borrowed capital utilized in purchase of .....

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. What is to be seen the amount of investments made and the efforts taken by the assessee in the said process. Therefore the amount of disallowance is to be worked out proportionate to the investments made and the expenses (either direct or indirect) involved in the process, even if there are no such exempt income earned during the year. 4.3.6 As could be seen from the P&L account, the assessee has several activities including investments in shares. For the purpose of making these investment .....

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tional Finance Ltd. (2006/10 SOT 722 (Delhi)- Trib.): In light of clear provisions of section 14A, even in case it is not possible to identify expenses incurred in earning income which does not form part of total income, disallowance has to be made on some basis. Marezban Bharucha v. Asstt. CIT [2007/12 SOT 133 (Mum.-Trib.): Where an expenditure is composite one, i.e., relating to taxable receipts as well as non-taxable receipts, Assessing Officer is duty-bound to disallow proportionate amount o .....

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nses @ 0.5% of the average investments made as per step-3 of the formula given in Rule-8D. Accordingly the legislature incorporated and introduced the Rule-8D. 4.3.8 Further, as could be seen from the assessment order, the Assessing Officer has analysed the assessee's activity of investing in shares and observed that there will be some element of expenditure, both in terms of financial burden (interest element) as well as the in terms of use of manpower and infrastructural facilities in maki .....

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er is satisfied that there was an element of expenses involved in making investments whose income is exempt from tax. The Assessing Officer is duty bound to invoke the provisions of Rule-8D. Once the provisions of Rule 8D are invoked, the Assessing Officer has no option but to arrive at the expenses @ 0.5% as per step- 3 of the formula which is mandatory. In fact, the Assessing Officer in his order has clearly stated these facts before invoking the provisions of section 14A r.w.r.8D. Hence the A .....

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and also submitted that no investment was also made in this year. So far as this argument of the ld. Counsel for the assessee is concerned, the assessee has not able to establish that the borrowed funds are not used for the purpose of investments and even the assessee has failed to establish that no investment is made in the year under consideration. Therefore, this argument of the ld. Counsel for the assessee is rejected. 9. Alternatively, he has submitted that the Assessing Officer has, witho .....

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see has not able to establish that no interest borrowing funds were used for investments in shares. Further, the ld. CIT(A), after considering the detailed explanation and books of accounts given by the assessee the addition made by the Assessing Officer was sustained. Accordingly, we find no infirmity in the order passed by the ld. CIT(A) and therefore, the ground raised by the assessee is dismissed. I.T.A. No. 64/Mds/2015 10. In the appeal of the Revenue, the only ground raised is with regard .....

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profits of the windmills on stand-alone basis and directed the Assessing Officer to allow the assessee s claim of deduction under section 80IA of the Act. The relevant portion of the order of the ld. CIT(A) is extracted as under: 4.4.3 I have considered the assessee's submissions as well as the orders of the Hon'ble ITAT in the case of M/s. GRT Firm and others (in ITA Nos.528 to 530/Mds/2012 dated 04.06.2012). The facts and circumstances of present appeals are exactly identical to those .....

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amp; other vs. ACIT (231 CTR 368)(Mad),has held that the depreciation which was already set off, cannot be carried forward notionally for the purpose of computing the profits of the windmills on stand-alone basis. The relevant portion of the order of the ITAT (ITA Nos.528 to 530/Mds/2012 dated 04.06.2012, in the case of M/s. GRT Firm and others) is reproduced as under: 2. The only and the common issue raised by the Revenue in these appeals is that the Commissioner of Income tax (Appeals) has err .....

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The issue has been considered by the Income-tax Appellate Tribunal, C-Bench, Chennai through their order dated 30-9-2010 in assessees' own group cases. Relying on the judgment of the Hon'ble Madras High Court, rendered in the case of Velayudhaswamy Spinning Mills, the Tribunal held that once the set off of depreciation/ loss is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. As held by the Tribuna .....

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