TMI Blog2017 (5) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... owance. So, reversing his order, we decide the first ground of appeal in favour of the assessee. Disallowance made u/s. 14A - Held that:- As stated earlier, the assessee had not these the issue before the FAA. Before us, it was argued that the AO had made disallowance of ₹ 17.18 lakhs, that the AO was not justified in making disallowance under the head interest expenditure, that the assessee had sufficient own interest-free funds to make investments, that it had made strategic investment, that the AO had not arrived at the conclusion that disallowance made by the assessee was not as per the provisions of the law. The DR stated that order of the AO did not require any interference. We have admitted the additional ground, raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 (Rules), that the issue raised is legal in nature. Therefore, we admit the additional ground pertaining to disallowance u/s. 14 A of the Act. 3. First ground of appeal is about tax to be deducted at source with regard to the payment made to agents, amounting two ₹ 3.66 lakhs u/s. 40(a)(i) r.w.s. 195 of the Act. During the assessment proceedings, the AO found that the assessee had claimed an expenditure of ₹ 3, 66, 723/- under the head payment of commission to non-resident agents for export sales, that it had not detected tax at source as required by the provisions of section 195 of the Act. He directed the assessee to explain as to why the claim made by it should not be disallowed u/s. 40(a)(i) r.w.s. 195 (1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering the submission of the assessee and the assessment order, the F AA held that there was no written agreement between the assessee and the agents, that payments were made on account of commission on export, that the genuineness of payment as well as payments being made on account of export executed by the appellant were not in doubt, that circulars, relied upon by the assessee, were applicable, that the CBD the head withdrawn both the circulars in the year 2009, that the circulars in question were not applicable to the payments made by the assessee, that payments made to non-resident isn t were spread over during the year, that certain payments were prior to withdrawal of the circulars, that certain payments were made after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the AO had made a disallowance of said amount u/s. 40(a)(i) of the Act, that the FAA reduced the disallowance. There is no doubt that the persons receiving the commission incomes were located outside India and they had no permanent establishment in India. It is also a fact that services were not rendered in India. In the circumstances, we are of the opinion that considering the peculiar facts and circumstances of the case it has to be held that provisions of section 40(a)(i) could not be applicable to the payments made by the assessee to the foreign agetns. We would like to reproduce the relevant portion of the order of the Tribunal for the earlier AY.(supra) and it reads as under: 5. The issue under consideration is also squarely c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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