TMI Blog2017 (6) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Supreme Court in the case of Woodward Governor India (P) Ltd. in [2009 (4) TMI 4 - SUPREME COURT]. Accordingly, this ground of assessee is allowed TDS u/s 195 - Disallowance u/s.40(a)(i)- commission paid without deducting TDS - Held that:- A similar issue came for consideration before this Tribunal in assessee's own case for assessment year 2008-09 as held that the non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the nonresident agents would not fall within the definition of “fees for technical services” and the assessee was not liable to deduct tax at source on payment of commission. - Decided in favour of assessee Addition on account of retention money - Held that:- As decided in CIT vs East Coast Constructions and Ind. Ltd, [2006 (1) TMI 77 - MADRAS High Court] the assessee was entitled to receive the retention money after completion of the contract. On the date of the bills, no enforceable liability had accrued or arisen. When the assessee had no right to receive the money by virtue of the contract between the parties and the assessee also had no righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) observed that the assessee provides specific percentage 2% on total sales and the same is written back in two years, in equal installments. Further, Ld.CIT(A) observed that the decision of the jurisdictional High Court cited supra relying by the ld. Assessing Officer was reversed by the Hon ble Supreme Court in the case of M/s.Bharat Earth Movers Vs. CIT in (2000) 245 ITR 428(SC) wherein the Apex Court laid down certain important guidelines with regard to provisions for warranty to be allowed as a business expenditure. The gist of the guidelines is as follows:- a provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past even; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. According to Ld.CIT(A), it is seen from the written submissions filed by the assessee that the assessee provides at a specific percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore Ld.CIT(A), the assessee submitted that the assessee company maintained accounts regularly on mercantile system and following accounting standards prescribed by ICAI, on account of fluctuation in the rate of foreign exchange as on the date of balance sheet was an item of expenditure u/s.37(1) of the Act, notwithstanding that the liability had not been discharged in the year in which the fluctuation in the rate of foreign exchange occurred and placed reliance in the case of Oil and Natural Gas Corporation Ltd. In [2010] 189 Taxman 292(SC). On appeal, the Ld.CIT(A) observed that while deciding the appeal in above cited supreme court judgemnet relied by the assessee, the Hon ble Supreme Court followed the decision rendered in Woodward Governor India (P) Ltd.,. The Hon ble Supreme Court while deciding the case summarized certain important factors to be taken into account on account of fluctuation in foreign exchange currency rates. The Ld.CIT(A) observed that the facts of the present case are completely different from the facts in the case referred to above. According to Ld.CIT(A), in this case the assessee has not been able to prove that the factors mentioned by the Apex court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the materials on record. With regard to the issue as to whether the TDS has to be deducted or not when the commission payment made to the overseas agents, the issue is squarely covered in favour of the assessee by the decision of the Hon ble jurisdictional High Court in the case of CIT Vs. Faizan Shoes Pvt Ltd. [2014} 367 ITR 155, wherein by dismissing the appeal of the Revenue, the Hon ble High Court has held as under:-- Held, dismissing the appeal, that on a reading of section 9(1)(vii), commission paid by the assessee to the non-resident agents would not come under the term fees for technical services . For procuring orders for leather business from overseas buyers, wholesalers or retailers, as the case may be, the non-resident agent was paid 2.5 per cent. commission on free on board basis. This was a commission simpliciter. What was the nature of technical service that the nonresident agents had provided abroad to the assessee was not clear from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10) 12. The first issue in Revenue s appeal is with regard to deletion of disallowance u/s.40(a)(i) of the Act in respect of commission paid to M/s.Tricel Ltd., and M/s.English Boiler, without deducting TDS. 12.1 As discussed earlier the same issue in para -10 of this order in ITA No.2385/Mds./2014, this issue is squarely covered in favour of the assessee by the decision of the Hon ble jurisdictional High Court in the case of CIT Vs. Faizan Shoes Pvt Ltd. [2014} 367 ITR 155(Mad.).Accordingly, this ground of Revenue stands dismissed. 13. The second issue in Revenue s appeal is with regard to deletion of addition on account of retention money amounting to ₹ 49,35,891/-. 13.1 As discussed earlier the same issue in para -11 of this order in ITA No.2385/Mds./2014, this issue is squarely covered in favour of the assessee by the decision of the Madras High Court in the case of CIT vs East Coast Constructions and Ind. Ltd, 283 ITR 297(Mad.). Accordingly, this ground of Revenue stands dismissed. 14. The last issue is with regard to deletion of addition of ₹ 50 lakhs made towards forfeited trade advances. 14.1 The facts of the issue are that the AO found ..... X X X X Extracts X X X X X X X X Extracts X X X X
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