TMI Blog2013 (4) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to tax under the provision of the Act, and hence the requirement of tax deduction at source u/s. 195(1) was not applicable on the said payments of commissions. The commission paid to the non-resident agents for the services rendered abroad is not taxable in India since no part of the income from said commission could arise or deemed to have arisen in India within the meaning of section 5(2) read with section 9 of the Act. It is also relevant to note that this position has been affirmed by the Supreme Court in its decision in the case of M/s. Toshuku Ltd. -125 ITR 525; and that it has also been clarified by the CBDT by its circular No. 786 dated 7.2.2000 which is applicable upto AY2009-10. Once the amount is not chargeable to tax in India, the TDS provision u/s. 195 - which section otherwise applicable for TDS in the case of nonresidents - is not applicable since the said section makes the TDS obligatory only on the sum chargeable under the provision of the Act. This aspect of the law has been affirmed in number of decisions of the Tribunals and the High Courts, which has now been also confirmed by the Supreme Court in its decision in the case of G.E. India Technology Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not accepting the ruling pronounced by the Delhi Tribunal in the case of Expeditors International (India) P. Ltd., reported in 2 ITR (Trib) 153, and in the case of Orient Ceramics and Industries Ltd., reported in 3 ITR (Trib) 346. The latter decision in fact has been upheld by the Delhi High Court in ITA. No. 65 66 of 2011, (decided on 20.1.2011), following its own earlier decision in the case of BSES Yamuna Powers Ltd. (ITA. No. 1267 decided on 31.8.2010). Instead, the learned CIT(A) opted to follow the earlier decision from Delhi Tribunal in the case of Nestle India Ltd as reported in 111 TTJ 498 and thus ignored the sound principle of honoring of the pronouncement of the superior court of law. 2. The ground nos. 1 and 2 relate to the issue about the claim of the commission disallowed by the Assessing Officer under Section 40(a)(i) and confirmed by the CIT(A) under Section 40(a)(i) as well as under Section 37 of the Income Tax Act. We have heard the rival submissions and carefully considered the same. We noted that this issue is duly covered in favour of the Assessee so far it relates to the disallowance made under Section 40(a)(i) by the decision of this Tribunal dtd. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.786. It is therefore, becomes clear that the Circulars on which the Tribunal has placed reliance while deciding the case for assessment year 1997-98 in assessee's own case hold good for the instant year as well. It is axiomatic that a Circular in operation through the assessment year 1998-99 cannot be held to be in operational simply by reason of the fact that it has been withdrawn in the year 2009. The withdrawal of such Circulars will be effective only after the said date of 22-10-2009 by which these Circulars will be effective only after the said date of 22-10-2009 by which these Circulars have been withdrawn with immediate effect. Accordingly, Circular No.7 of 2009 withdrawing the Circular No.23 of 1969,163 of 1975 and 786 of 2000 will be operative only from 22-10-2009 and not prior to that date. Thus, we are of the view that this assessment year is 2005-06 and it is not applicable for the year under consideration. Therefore, we allow the appeal of the assessee on this ground. 3. So far as the issue relating to disallowance of the Commission under Section 37 is concerned, the issue is covered by the order dt. 8.3.2013 of this Tribunal in the case of the Assessee in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the expenditure has been incurred during the respective previous years. There is also no dispute that this expenditure has not been incurred for any purpose which is an offence or which is prohibited by law. The expenditure so incurred by the assessee company cannot be regarded to be the personal expenditure of the assessee. There is no evidence on record that these expenses were incurred to meet out the personal needs of the assessee company. The company is always incorporated for the purpose of carrying on the business as stipulated under its object clause laid down in the Memorandum of Association. The company so incorporated is not human being, which may have personal needs. The company is an artificial person incorporated under the legislature by having a separate entity. Although by having a separate entity; it may work as a human being in its own name but it does not require any expenditure to be incurred, as a human being requires for meeting out its personal needs. Therefore the expenditure incurred by the assessee company cannot be regarded to be the personal expenditure of the assessee. The personal expenditure of the management or the human beings who are control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 37(1) even though there was no compelling necessity to incur such expenditure. The Supreme Court, in the case of CIT Vs Malayalam Plantation (1964) 53 ITR 140 (SC), held that it is not only expenditure which directly results in benefit or advantage to the assessee‟s business that is entitled to deduction, but also any expenditure which is incurred with a view to facilitating the carrying on of the business. 26. We do agree with the submissions of the Ld. AR that it is not open to the department to prescribe what expenditure the assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best as this has been clearly laid down by the Hon‟ble Apex Court in 91 ITR 544 in the case of CIT Vs Dhanrajgiri Raja Narsinghgiri. No doubt every businessman is the best judge of his business expediency but the Assessing Officer in our opinion has the right to know whether the expenditure has been incurred for business purposes or not or whether it has been incurred for other extraneous consideration. Similar view has been taken by the Hon‟ble Rajasthan High Court in the case of Jaipur Electro Pvt. Ltd. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not come in the way of an expenditure being allowed by way of deduction u/s 37 of the Act if it otherwise satisfies the tests laid down by law. The bill read any expenditure laid out or expended wholly, necessarily and exclusively for the purposes of the business or profession shall be allowed . In view of the protests raised by the taxpayers the word necessarily came to be dropped. It will be also noticed that in CIT Vs Chandulal Keshavlal and Co. (1960) 38 ITR 601, 610, it was observed as follows:- Another fact that emerges from these cases is that if the expense is incurred for fostering the business of another only or was made by way of distribution of profits or was wholly gratuitous or for some improper or oblique purpose outside the course of business then the expense is not deductible. In deciding whether a payment of money is a deductible expenditure one has to take into consideration questions of commercial expediency and the principles of ordinary commercial trading. If the payment or expenditure is incurred for the purpose of the trade of the assessee it does not matter that the payment may incur to the benefit of a third party (Usher‟s Wiltshire Brewery Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without bringing anything contrary on record. CIT (A) while rejecting this vital piece of evidence has merely stated vide para 6.5 of his appellate order that it is possible that the assessee may have some kind of business relationship with the above two companies. It is also possible that there may be some correspondence with the two companies with regard to sales of iron ore abroad. But this shall not be sufficient justification to prove that the companies abroad have rendered necessary services for effecting sales so as to justify the claim of commission. Whereas in our considered view, the contents of the emails furnished by the assessee, which have been summarized herein above, clearly show that those were being exchanged with the said two non-resident agents in actual performance of their services for which they had been engaged by the assessee as per the respective agreements entered into with them and for which commission had been paid to them. It is not the case of the Revenue that the impugned emails were fabricated or forged one. In fact, the CIT (A) has admitted in his appellate order that it is possible that there may some correspondence with the two companies wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng message from the buyer to the assessee. Thus, there remains no doubt in our mind that the non-resident agents were actually rendering the services as middlemen in terms of their respective agreements with the assessee and, accordingly, commission was genuinely paid by the assessee for those services only, i.e., wholly and exclusively for the purpose of the business of the assessee. The decision in Laxminarayan Madanlal Vs CIT (1972) 86 ITR 439 (SC), relied upon by the Revenue is totally distinguishable on facts. In that case the assessee had only produced the agreements and the Hon‟ble apex court decided that the mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there were such payments, does not bind the ITO to hold that payment was made exclusively and wholly for the purpose of the assessee‟s business. Whereas in the instant case, the assessee has placed other documentary evidences on record besides the agreements, which clearly demonstrate that the requisite services under those agreements for which commission was paid to them, had actually been rendered by them. Thus, in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scientific research. However, in the present case, considering the definition of scientific research provided u/s 43(4)(i) the AO observed that the case of the assessee is not covered under the definition of scientific research. The CIT(A) in view of the conclusion of the AO took the view that the AO should have not again treated this expenditure to be scientific expenditure and therefore, he deleted the addition. Respectfully following the decision of the Tribunal, we set aside the order of the CIT(A) and delete the disallowance made by the Assessing Officer. Thus, ground no. 3 stands allowed. 5. Ground no. 4 relate to the disallowance of ₹ 1,49,782/- on account of depreciation of UPS. The brief facts relating to this ground are that the Assessee has installed UPS as part of the computer and claimed depreciation @ 60%. The Assessing Officer allowed depreciation @ 15% and disallowed the balance amount. When the matter went before CIT(A), the CIT(A) also confirmed the disallowance. The Learned AR in this regard relied on the decision of the Tribunal in the following cases : SL No Title Forum Citation No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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