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2016 (11) TMI 733 - ITAT DELHI

2016 (11) TMI 733 - ITAT DELHI - TMI - TDS u/ s 195 - liability to deduct the tax at source on the bank guarantee commission paid to VTB bank - PE in India - Held that:- When the Revenue authorities have failed to lay hands on any cogent material that the bank guarantee commission paid by the assessee company paid on account of business transaction between assessee company and VTB bank particularly in the face of the fact that VTB bank has no PE in India, the question of attracting provision con .....

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SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Department : Sh. FR MEENA, Sr. DR For The Assessee : S h . MANOJ GUPTA, CA ORDER PER H.S. SIDHU : JM The Revenue has filed the present appeal against the impugned order dated 7/1/2014 passed by the Ld. Commissioner of Income Tax (Appeals)-XVII, Delhi on the following grounds:- 1. On the fact and circumstances of the case the ld. CIT(A) has erred in deleting the addition of ₹ 4,85,24,202/- made by the AO u/s. 40(a)(i) of t .....

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ained its finality. 4. The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal. 2. The facts in brief are that the assessee has filed its return declaring NIL income on 29.9.2009. In the computation chart of income the assessee company claimed unabsorbed depreciation and unabsorbed business loss of ₹ 9,04,54,773/- which included business loss and depreciation to the tune of ₹ 3,04,60,459/- and ₹ 58,20,013/- res .....

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4,202/- to VTB Bank, but it failed to do so. Therefore, as per the provision of Section 40(a)(i), the amount of ₹ 4,85,24,202/- was disallowed and added to the total income of the assessee by completing the assessment at ₹ 9,01,75,635/- u/s. 143(3) of the I.T. Act, 1961 vide his order dated 15.2.2013. 3. Aggrieved with the aforesaid order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 7.1.2014 has deleted the addition in dispute by partly allow .....

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on the basis of the Ld. CIT(A)-VII, Delhi decision for the assessment years 2006-07 to 2008-09. He further stated that in the earlier years i.e. AYrs. 2006-07 to 2008-09 against the order of the Ld. CIT(A), Department went in Appeal before the Tribunal and the Tribunal vide order dated 5.2.2016 has dismissed the appeals of the Revenue by upholding the order of the Ld. CIT(A) on the issue in dispute. In this behalf, he filed the copy of the tribunal s order dated 5.2.2016 for the assessment years .....

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is year, I do not find any scope to deviate from the findings of the Ld. CIT(A)-VII, Delhi for AY 2006-07, 2007-08 and 2008-09. Therefore, with a view to maintain consistency, the issue decided in favour of the appellant. The addition on account of disallowance of ₹ 4,85,24,202/- made u/s. 40(a)(i) is deleted. This ground of appeal is ruled in favour of the appellant. 7.1 We also find that ITAT vide its order dated 5.2.2016 in Revenue s Appeals being ITA No. 3834/Del/2009 (AY 2006-07); ITA .....

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5,20,56,831/-, ₹ 5,52,49,559/- and s.4,77,71,123/- on account of bank guarantee commission having been paid to a foreign bank on behalf of holding company of the assessee qua Assessment Years 2006-07, 2007-08 & 2008-09 respectively and the same have been disallowed by the Assessing Officers u/s 40(a)(1) of the Act because of non deduction of tax at source (TDS) paid in India. 8.1 The Assessing Officer after declaring the bank guarantee commission paid by the assessee company in India t .....

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tract for providing bank guarantee has been entered into between the appellant company and VTB Bank Russia; that VTB Bank has rendered all the services from outside India; that he assessee company has paid bank guarantee commission to a non resident bank i.e. VTB Bank, Russia having no PE in India. 8.3 Now, the first question arises for determination is, as to whether the assessee company was liable to deduct the tax at source (TDS) on bank guarantee commission paid in India to VTB Bank, a forei .....

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he aforesaid question, we are required to decide first, as to whether the assessee company was liable to deduct the tax at source (TDS) on bank guarantee commission paid in India to VTB Bank, a foreign bank . 8.4 When the assessee company has placed on record for perusal of the revenue authorities cogent material that it has paid bank guarantee commission to a foreign bank, the Assessing Officer could not lay hands on any material to treat the bank guarantee commission as interest or deemed inte .....

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or in respect of any credit facility which has not been utilized. On the other hand, commission is a specified sum in terms of percentage to be paid to an agent or salesman for services rendered. Since in this case, VTB Bank, Russia got bank guarantee issued by Canara Bank by tendering its own counter guarantee and charged the commission thereon irrespective of the fact that the bank guarantee has been utilized or not, we are of the considered view that by any stretch of imagination even the ban .....

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