TMI Blog2018 (4) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... [1980 (8) TMI 2 - SUPREME Court] Disallowance u/s 14A r.w.r. 8D - Held that:- As relying on Indus Valley Investment & Finance Pvt. Ltd. vs. DCIT [2015 (4) TMI 1171 - ITAT DELHI] CIT-A correctly restricted the disallowance u/s 14A read with Rule 8D(iii) to the extent of dividend income earned by the assessee company which is in accordance with the settled principles of law applicable - AO is directed to compute the disallowance accordingly. - Appeal of assessee partly allowed. - ITA No.6548/Del./2015 - - - Dated:- 19-4-2018 - SHRI G.D. AGRAWAL, PRESIDENT VERSUS SHRI KULDIP SINGH, JUDICIAL MEMBER For The ASSESSEE : None For The REVENUE : Shri S.R. Senapati, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be spread so as to apportion appropriate cost of fund invested in the activity lending to carrying out exempt income. 3. Assessee carried the matter by way of filing appeal before the ld. CIT (A) who has deleted the addition made by the AO on account of sales commission paid to the foreign agent and restricted the disallowance u/s 14A to the extent of dividend income received by the assessee company by partly allowing the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal. 4. Assessee has not preferred to put in appearance despite issuance of the notice of 23.08.2017, 01.11.2017 and 05.04.2018 and consequently, we proceeded to decide the present appeal with the assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; what was the effect of the entries in the books of accounts of the Indian assessee which had resulted in debit and credit entries on account of commission and secondly, whether procurement of export orders by the foreign companies for the Indian company had resulted in a business connection. Two contentions were rejected by the Supreme Court inter-alia recording as under:- It cannot be said that the making of the book entries in the books of the statutory agent amounted to receipt by the assessees who were non-residents as the amounts so credited in their favour were not at their disposal or control. It is not possible to hold that the non-resident assessees in this case either received or can be deemed to have received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the stand of the Revenue is contrary to the two circulars issued by the CBDT in which it is clearly held that when a nonresident agent operates outside the country no part of his income arises in India, and since payment is remitted directly abroad, and merely because an entry in the books of accounts is made, it does not mean that the non-resident has received any payment in India. This fact alone does not establish business connection. In Circular No. 786 dated 7th February, 2000, it has been stated that in such cases, the Indian assessee is not liable to deduct TDS under Section 195 of the Act from the commission and other related charges payable to such a non-resident having rendered service outside India. 14. The term b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable. Appellate authorities, on the basis of material on record, have rightly held that business connection is not established. 15. The scope and ambit of Section 195 of the Act has been explained by the Supreme Court in GE India Techonology Centre (P) Ltd. vs. CIT (2010) 327 ITR 456. In the said case the expression any other sum chargeable under the provisions of the Act in Section 195 of the Act was elucidated and explained. It was held that if payment is made in respect of the amount which is not chargeable to tax under the provisions of Act, tax at source (TDS, for short) is not liable to be deducted. Decision of Supreme Court in Transmission Corporation of Andhra Pradesh vs. CIT, (1999) 239 ITR 587 (SC), operates an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he has received dividend income of ₹ 45,992/-. It is also not in dispute that assessee company has not made any suo motu disallowance u/s 14A proportionate to the exempt income earned. However, ld. CIT (A) by relying upon the decision rendered by the coordinate Bench of the Tribunal in case of Indus Valley Investment Finance Pvt. Ltd. vs. DCIT in ITA No.3768/Del/2013 order dated 29.04.2015 which has been passed in view of the law laid down by Hon ble Delhi High Court cases cited as Joint Investment Pvt. Ltd. vs. CIT judgment dated 25.02.2015 and CIT vs. Holcim India Pvt. Ltd. 90 CCH 081-DEL-HC , restricted the disallowance u/s 14A read with Rule 8D(iii) to the extent of dividend income earned by the assessee company which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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