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2016 (9) TMI 990 - ITAT MUMBAI

2016 (9) TMI 990 - ITAT MUMBAI - TMI - TDS u/s 195 - deduction of TDS on payment of commission - Held that:- But in the present case the applicability of section 195(2) would only arise in case the assessee is doubtful or is not sure as to what should be the portion so taxable or the amount of tax to be deducted and in case where a person responsible for deduction is fairly certain then in that eventuality he can make his own determination as to whether the tax was deductible at source and if so .....

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over, there is no reason for us to deviate from the findings recorded by the learned CIT (A). 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 cons .....

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hat 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 deleted by CIT(A). No new circumstance has been brought on record before us by the learned DR in order to controvert or rebut the findings recorded by the learned CIT (A) on the basis of the remand report. Mor .....

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SANDEEP GOSAIN,JUDICIAL MEMBER: The present appeal has been filed by the Revenue against the order of the learned CIT (A)-25, Mumbai dated 02-05-2014 passed in appeal No.CIT(A)-25/IT-70/14(2)/2013-14 for assessment year 2005-06 on the following grounds:- "1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition u/s 40(a)(ia) of ₹ 1 ,46,19,7721- as the assessee has neither deducted the TDS on payment of commission nor made any ap .....

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present case, the issue is taxing the commission. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition u/s 41 (1) of ₹ 2,06,93,996/- without appreciating the fact that the onus of proving the genuineness of the same was with the assessee during the course of the assessment proceedings, which the assessee failed to do so. 4. For the above mentioned reason and any other reasons that may be urged at the time of hearing, it is reques .....

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)(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 o .....

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e we thought it fit to dispose off the same through the present common order. 3. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. The afore mentioned grounds have been dealt by CIT(A) in para no.5.3 of its order and the same is reproduced below. 5.3 I have perused the assessment order, submissions of appellant, and the facts and circumstance of the case. I find that the A .....

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ication to AO in this regard. The appellant has however contended the said decisions were not directly on the subject case of the appellant, as these were on the Royalty issue and not on foreign commission as in present case of appellant. Further, the appellant has contended that the said decisions have been over-ruled by the decision of Hon'ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd. vs. CIT 327 ITR 456 (SC) pronounced on 09.09.2010, wherein it was held that tax is .....

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income which was exigible to tax in India, and the only issue raised in that case was whether TOS was applicable only to pure income payments and not to composite payments which had an element of income embedded or incorporated 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 am .....

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equired 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'ble Supreme Court. In aforesaid case of GE India Technol .....

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t to be remitted but is not sure as to what should be the portion so taxable or the amount of tax to be deducted. In such a situation he is required to make an application to ITO (TOS) for determining the amount. It is only when these conditions are satisfied that the question of making an order u/s 195(2) arises. The Hon'ble Supreme Court also held that where a person responsible for deduction is fairly certain, then he can make his own determination as to whether the tax was deductible at .....

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aid circular, attention was also drawn to earlier Circular No.23 dated 23.07.l969 wherein the taxability of Foreign Agents of Indian Exporters' was considered, and It was clarified then that where the non-resident agent operates outside the country, no part of his income arises in India; and further since the payment is usually remitted directly abroad, it cannot be held to have been received by or on behalf of agent in India. Such payments were therefore held to be not taxable in India. The .....

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le 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 noth .....

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essee has neither deducted the TDS on payment of commission nor made any application to the AO to that effect for nonpayment of TDS. Although ld. DR appearing on behalf of revenue relied upon the judgment in the case of Samsung Electronics Co. Ltd. 345 ITR 494 and relied upon the orders of AO. However after perusal of all the judicial pronouncements rendered by both the parties as well as orders passed by revenue authorities, we found that the Hon ble Supreme Court has already over-ruled and set .....

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Court held that Section 195(2) pre-supposes that the person responsible for making the payment to the non-resident is in no doubt that tax is payable in respect of some part of the amount to be remitted but is not sure as to what should be the portion so taxable or the amount of tax to be deducted. In such a situation he is required to make an application to ITO (TDS) for determining the amount. But in the present case the applicability of section 195(2) would only arise in case the assessee is .....

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plication to the AO for non deduction of TDS. Since all those facts have already been considered by CIT(A) while passing impugned order. No new circumstances have been brought on record before us in order to controvert or rebut the findings recorded by the learned CIT (A). Moreover, there is no reason for us to deviate from the findings recorded by the learned CIT (A). Therefore, we are of the considered view that the findings recoded by the learned CIT (A) are judicious and are well reasoned. A .....

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ed 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 .....

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and from the table mentioned in the said para which reveals that there was running account which was being maintained by outstanding creditors as on 31.03.2005 which included foreign commission payable and in addition it has been submitted that the assessee has already been showing this liability in its balance sheet . ld. AR further submitted that the assessee has not written off the foreign commission payable from its books of account nor did the other party namely PD SINAR write it off and t .....

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vidence filed and without giving sufficient time. I find from the details of outstanding liability of foreign commission payable submitted by the appellant that the amounts pertaining to prior to 01.04.2004 (i.e. the beginning of relevant. financial year 2004-05) was in respect of Foreign Exp. Comm. - Sri Lanka (Rs.l2,09,802/-), South Africa (Rs.20,12,161/-), and Morocco (Rs.28,81,363/-), aggregating to ₹ 61,03,3261- only. This shows that a substantial portion of the outstanding amount of .....

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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. Therefor .....

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t 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 liability as non-genuine is not fully substantiated in the assessment order and hence the additions on this ground cannot be sustained. The appellant has submitted the amounts of foreign commission payable assessment year- wise, showing outstanding commission of large amounts payable till A. Y. 2010-11, even though no .....

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