TMI Blog2016 (9) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, we are of the considered view that the findings recoded by the learned CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Resultantly, this ground raised by the Revenue stands dismissed. Addition u/s 41(1) - Held that:- CIT(A) has taken into consideration that a substantial portion of the outstanding amount was out of provision made for A.Y. 2004-05 under consideration, and therefore the ld. CIT(A) has rightly held that the AO’s contention that the whole commission was outstanding for last so many years was not correct. Ld. CIT(A) has also considered that the said commission payable by assessee was not been waived or unilaterally written off by the receiver of commission and also the payment of said amount was not time barred in relevant assessment year. Considering all the facts and legal propositions, the CIT(A) has rightly come to the conclusion that the non submission of reply to the same cannot be enough to construe that no services might have been rendered by the assessee and hence the treatment of said liability as non-genuine was not fully substantiated in the assessment order and hence the additions of this ground was rightly dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r add a new ground, which may be necessary. 2. The brief facts of the case are that the assessee filed return of income on 29.10.2005 declaring total income of ₹ 41,89,968/-. Subsequently the return was revised on 12.01.2006 declaring total income of ₹ 43,37,321/-. The return was revised to disallow the expenses of ₹ 1,47,353/- u/s 40(a)(ia). The above return of income was processed u/s143(1) on 10.08.2006 and 08.03.2006 respectively. After recording the satisfaction note and obtaining the necessary approval notice u/s 148 was issued and served upon the assessee and after considering the submissions of the assessee, the order of assessment dated 06.03.2013 was passed by DCIT u/s 143(3) r.w.s.147 of the I.T. Act,1961 thereby making disallowance u/s 40(a)(ia) and making additions u/s 40(a)(ia) of the I.T. Act. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT (A) and the learned CIT (A) after hearing both the parties and perusal of the record, had partly allowed the appeal of the assessee. Being aggrieved by this order of the CIT(A), the Revenue is now in appeal before us on the aforementioned grounds. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporated in them. Therefore, it was held in said case that the tax was to be deducted on gross amount if such payment included in it an amount which was exigible to tax in India. It was held that if the payer wanted to deduct tax at source not on gross amount out on the lesser amount, then it was necessary for him to make an application u/s 195(2) before the AO. In this context, the Hon'ble Supreme Court distinguished the case of Transmission Corporation (supra), and observed that the observation in that case had been completely, with respect, misunderstood by the Karnataka High Court to mean that it is not open for the payer to contend that if the amount paid by him to the non-resident is not at all chargeable to tax in India , then no tax at source is required to be deducted from such payment. The Hon 'ble Supreme Court observed that this interpretation of the High Court completely lost sight of the plain words of Sec. 195(1) which in clear terms laid down that tax at source is deductible only from sums chargeable under the provisions of LT. Act, i.e. chargeable u/s 4, 5 and 9 of the Act. Therefore, the case of Samsung Electronics Co. Ltd. (supra) was set aside by Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a belief, the appellant did not make any application u/s 195(2) to the AO, which cannot be sufficient ground to assume that the appellant was responsible to deduct tax at source u/s 195( 1) of the Act. In fact, the AO has not gone into the question of deductibility of tax at source on such payments on merits, so as to invoke the provisions of Sec. 195( 1); rather the said provisions have been invoked merely for the appellant not making application U/S 195(2). In these circumstances, the action of AO cannot be sustained relying upon the decision of Hon'ble Supreme Court in the case of CE India Technology Centre Pvt. Ltd. (supra), since nothing has been brought on record to show that the appellant's belief that tax was not required to be deducted on payment to said non-resident was unfounded. In view of the above, the addition made of ₹ 1,46,19,722/- u/s 40(a)(ia) is not sustainable, hence deleted. Therefore, the gorunds of appeal are allowed. After analyzing the afore mentioned order of CIT and hearing the parties. We are of the opinion that the revenue has raised the afore mentioned ground only on the basis that the assessee has neither deducted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings recoded by the learned CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Resultantly, this ground raised by the Revenue stands dismissed. Ground No.3 The said ground relates to deleting the addition u/s 41(1) of ₹ 2,06,93,996/- on the ground that the onus of proving the genuineness of the same was with the assessee during the course of the assessment proceedings, which the assessee fail to do so. CIT(A) has decided the said issue in para no.6.1 of its order which is reproduced herein below for the sake of reference: The AO observed that the assessee showed foreign commission payable at ₹ 2,06,93,996/- of earlier years. On being asked to explain as to why the said outstanding commission should not be added to its total income considering it as ceased liability, the assessee did not reply to the same. The assessee had not produced any evidence in support of foreign commission outstanding and it was also not clear whether services were rendered by foreign parties or according to AO, the commission was outstanding for last so many years. It showed that commission was to be paid; therefore, the entire foreign commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid only. after the payment from respective buyers was made and any issues were settled, I find the contention of appellant is not out of context as it is not uncommon to withhold payments to commission agents pending settlement of dues from corresponding buyers. It also seems to be an undisputed fact that the said commission payable by appellant is not waived or unilaterally written off by the receiver of commission, and also the payment of said amount was not time barred in relevant assessment year. Therefore, it cannot be considered as. ceased liability u/s 41(1) of the Act. The appellant's reliance-on various case laws referred in the written submissions also does not seem to be out of context. I further find that the AO has not brought sufficient facts on record to treat the said liability as non-genuine. The assessment order speaks of the appellant having been asked to explain as to why the outstanding commission of ₹ 2,06,93,996/- should not be added to its total income considering it as ceased liability. The nonsubmission of reply to the same cannot be enough to construe that no services might have been rendered by said party, and hence the treatment of said lia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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