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TMI Blog2014 (7) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 (in short the 'Act'). 2. The assessee in its appeal I.T.A.No.2255/Mds/2013, challenges the CIT(A)'s order affirming disallowances/additions of Rs. 11,92,282/- u/s 14A r.w.r 8D qua 'exempt' income and that of Rs. 47,84,000/- towards provision for insurance settlement; made by the Assessing Officer. Whereas the Revenue's sole substantive grievance in its appeal I.T.A.No.372/Mds/2014 is that the CIT(A) ought to have upheld the disallowance u/s 40(a)(i) of Rs. 50,48,590/- on account of non-deduction of tax on export commission payments. 3. Brief facts common to both appeals are that the assesseecompany is a bulk drug manufacturer. On 28.8.2009, it had filed return admitting income of Rs. 4,23,73,140/- which was 'summarily' processed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in case of no 'exempt' income. Regarding assessee's books, he held that there existed a common basket of interest and non-interest bearing funds and there was no evidence of utilization of only the latter funds for investments in question. Proceeding on these reasons, the Assessing Officer applied rule 8D and computed the impugned disallowance of Rs. 11,92,282/-. 5. In lower appellate order, the CIT(A) has affirmed the Assessing Officer's findings. 6. We have heard both parties and gone through the case file. Admitted factual position is that the assessee has earned 'exempt' income from dividends amounting to Rs. 93,403/-. It has not attributed any expenditure relating to earning of this 'exempt' income in the profit & loss account. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision stated to have arisen from part rejection of its export consignment. Being a bulk drug manufacturer, the assessee had exported its produce worth Rs. 6.65 crores to a 'dutch' entity namely Purac Bio Chem. The export consignment comprised of 35 full loads of 40' containers. Out of them, 5 containers stood rejected for quality reasons. The assessee had realized full amount thereof. Because of part rejection, it had made the aforesaid provision by foreseeing its liability to make good the rejected material to the consignee in case the insurer company refused the claim. The assessee had also placed on record rejection letter of the Oriental Insurance Company Ltd. dated 28.9.2010 declining the claim. It submitted that to make good the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by whatsoever reasons gives rise to a compensation claim. The fact also remains that till date, the consignee entity is yet to raise its claim. The damages' amount is yet to be ascertained. In these circumstances, we observe that the assessee has failed to prove the nature of liability claimed as an ascertained one. Therefore, we find no fault with the CIT(A)'s order affirming the impugned disallowance of Rs. 47,84,000/-. So, the assessee's relevant ground fails. Assessee's appeal I.T.A.No.2255/Mds/2013 is partly allowed. 10. Now we come to Revenue's appeal I.T.A.No.372/Mds/2014 raising sole substantive issue of disallowance of Rs. 50,48,590/- u/s 40(a)(i) of the Act. The assessee had paid overseas export sales commission of Rs. 40,07,215 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agents read Rs. 40,07,215/-. Per Revenue, these payments ought to have been subjected to TDS provision postulated in the Act whose non-compliance invites disallowance u/s 40(a)(i). However, no cogent material has been placed on record to prove rendering of any technical or managerial services u/s 9 of the Act or that the payments are taxable as income in India. The assessee's overseas agents have procured export orders and rendered marketing services outside India and in lieu thereof payments have been made in foreign countries. A co-ordinate bench (supra) has decided the very issue that in payments made for export commission etc., no TDS liability arises to an assessee. The hon'ble apex court (supra) has also held that TDS liability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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