TMI Blog2014 (2) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... only prospective and not retrospective. As a result, we also observe that since the impugned assessment year is 2008-09 i.e well before 22.10.2009, the circular issued in the year 2009 did not have any effect in the assessee s case. That being so, the Assessing Officer had rightly followed the circular in allowing the assessee s foreign agent commission payments as expenditure without deduction of any TDS. Rather, in the case of Faizan Shoes Pvt. Ltd [ 2014 (1) TMI 440 - ITAT CHENNAI] the co-ordinate bench of the Chennai tribunal holds that even in assessment year 2009-10, the circular dated 22.10.2009 does not apply. Thus, we hold that the Assessing Officer had taken the only possible view by following the circular issued by the board which provided that in case of foreign agent commission payments the said income could not be taxed in India. In this manner, the argument of the assessee challenging the sole reason stated in the section 263 show cause notice succeeds. That leaves us with the latter reason in the impugned order that since the Assessing Officer did not carry out any investigation/ enquiry to determine nature of the commission payments and therefore, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shoes Pvt. Ltd I.T.A.No.2095/Mds/2012 ACIT vs M/s Farida Shoes Pvt. Ltd I.T.A.No. 359/Mds/2013 M/s Exotic Fruits Pvt. Ltd vs ITO I.T.A.Nos.1008 to 1013/Bang/2012 In view thereof, acceptance of the appeal has been prayed for. 3. Per contra, the Revenue supports the order of CIT assuming proceedings u/s 263 of the Act and argues that during the course of regular assessment, the Assessing Officer did not carry out a detailed enquiry/investigation to find out nature of the foreign agent s commission paid. Hence, the impugned proceedings have been rightly initiated against the assessee. 4. Facts of the case are in a very narrow compass. The assessee is a firm . It is engaged in the business of tanning, processing of raw leather to finished leather as well as its sale and export. On 31.10.2009, the assessee had filed its return disclosing total income of Rs. 2,73,19,910/-. The same was summarily processed. Thereafter, vide assessment order dated 16.12.2010, the Assessing Officer framed regular assessment admitting the income already declared by the assessee. 5. It is to be seen from the case file that on 26.4.2012, the CIT issued section 263 notice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also prejudicial to the interests of revenue. I, therefore, propose to pass an order u/s 263 of the Income-tax Act, 1961 as the facts and circumstances of the case deem it fit. Hence, you are hereby given an opportunity to file your written submissions/objections or personally appear before the undersigned through your authorised representative, if any, on the issue mentioned above on 3.5.2012 and that your case stands posted for hearing on the same date at 03.00 P.M in my Office at the address given above, for this purpose. 6. In response thereof, the assessee strongly contested the notice and submitted before the CIT that in the impugned assessment year, the circulars of the board issued in 1969 and 2000 (supra) were applicable as the one withdrawing them bearing No.7 dated 22.10.2009 had come latter in point of time. It pleaded that the Assessing Officer had rightly followed the board s circular applicable in the impugned assessment year as it had rightly not deducted any TDS and prayed for dropping section 263 proceedings. We find from the case file that the CIT has rejected the assessee s aforesaid explanation as follows: 6. I have considered the issue. The ostensib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS qua the said payments. Per Revenue, the assessee was supposed to deduct TDS in question. The assessee places reliance on the circulars of the board bearing No.23 dated 23.7.1969, No.163 dated 29.5.1975 and No.786 dated 7.2.2000. In the first circular, the board had clarified that a foreign agent of Indian exporter is not liable to pay any income tax in India. This position continued till the year 2009. It was only in the year 2009 i.e after the impugned assessment year 2008-09 that the board decided to withdraw the circular on 22.10.2009. In these circumstances, we notice that the hon'ble Delhi high court in the case of CIT vs Angelique International Ltd (supra) has held that the action of the board in issuing withdrawal of earlier circulars with effect from 22.10.2009 is only prospective and not retrospective. As a result, we also observe that since the impugned assessment year is 2008-09 i.e well before 22.10.2009, the circular issued in the year 2009 did not have any effect in the assessee s case. That being so, the Assessing Officer had rightly followed the circular in allowing the assessee s foreign agent commission payments as expenditure without deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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