TMI Blog2022 (8) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing feature in the facts of the case for the year under consideration and that of earlier years nor has placed any contrary binding decision in its support. Therefore, respectfully following the same, we uphold the finding of the learned CIT-A and hereby dismissed the ground of appeal raised by the Revenue. Deduction claimed u/s 80IC - whether the research and development expenses incurred by the assessee should be allocated to eligible unit while working out the deduction under section 80-IC? - HELD THAT:- This question has been answered by the judgment of the Hon ble Gujarat High Court in the case of the CIT Vs. Torrent Pharmaceuticals Ltd [ 2016 (7) TMI 1301 - GUJARAT HIGH COURT] wherein it was held that the R and D expenses should not be allocated to the units eligible for deduction under section 80-IA. Revenue in the own case of the assessee for the assessment year 2010-11 in the assessment framed under section 143(3) of the Act has not allocated the research and development expenses to the eligible unit for the purpose of computing the deduction under section 80-IC of the Act. Admittedly, there is no change in the facts and circumstances of the year under consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2) that the Ld. C1T(A) has erred in law and on the facts in deleting the disallowance of deduction u/s 80IC of the Act amounting to Rs. 1,31,63,890/-. 3) that ihe Ld. CIT(A) has erred in law and on the facts in allowing additional claim raised during the assessment proceedings relating to expenses of Rs. 1,17,18,989/- incurred outside the approved facility. 4) that the Ld. CIT (A) has erred in law and on the facts in deleting Disallowance of depreciation on electric installation of Rs. 8,15,987/-. 5) that the Ld. CIT(A) has erred in law and on the facts in deleting the disallowance of foreign commission expenses of Rs. 57,07,6751-. 3. The first issue raised by the Revenue is that the learned CIT-A erred in deleting the addition of Rs. 9,70,63,667/- on account of disallowance of business promotion expenses under section 37(1) of the Act. 4. The facts are in brief that the assessee is a public company and engaged in the business of manufacturing of drugs Pharmaceuticals. During the year, the assesse has claimed certain expenditures under the head business promotions, detailed as under: Sr. No. Particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, were incurred for the benefit of doctors. Therefore, such expenditures are not allowable for deduction as the same violates the code of ethics issued by the Medical Council of India which is a statutory body. Thus, the same covered under the explanation attached to section 37(1) of the Act. Hence the AO disallowed such promotion expenses to the extent of Rs. 9,70,63,667/- and added to the total income of the assessee. 6. Aggrieved assesse carried the matter before the learned CIT-A, who deleted the addition made by the AO by observing as under: On facts, in the course of assessment proceedings, AO has not doubted the veracity of the expense but disallowed the same for the reasons that these are violative of the MCI Guidelines referred supra and hence, are hit by Explanation 1 to section 37 (1) of the Act. In the course of appellate proceedings a letter was received from the AO in No. DCIT(OSD) Circle-8/high demand /2014-15 dated 23.05.2014 requesting for representing the case in the appellate proceedings. In the appellate proceedings my Predecessor forwarded the submission of the appellant which included the ledger account copy ot the impugned expenses to the AO on 26.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed the CD containing the details of all the expenses as required by the AO in the prescribed format, no adverse inference was drawn by the AO in the impugned assessment order in this regard. In the appellate proceedings also appellant furnished a complete print out of ledger account giving details of narration, cheque number etc., of each and every expense under consideration. In the impugned Assessment Order AO has not disallowed the expenses for want of factual verification but for the reasons that they are hit by the Explanation 1 to Section 37 {1) of the Act. It is also not the case that any expense is incurred in cash or the ledger account does not give the details of expense incurred also appellant has furnished the copies of bills obtained from the vendors which were randomly verified by the AO as evident from the remand report reproduced hereinabove. Appellant contended that they have obtained the duplicate bills of large number of expenses as mentioned in the remand report and submitted to the AO out of which AO could point out only a few instances ,of wrong classification only and no bill was found to be false nor expense therein was found to be i incurred for any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAX ACT, 1961 - BUSINESS EXPENDITURE -OF - INADMISSIBIUTYOF EXPENSES INCURRED IN PROVIDING FREEBtES TO MEDICAL PRACTITIONER BY PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY CIRCULAR NO. 5/2012 [F. NO. 22S/142/2012.1TA.II], DATED 1-8- 2012 It has been brought to the notice of the Board that some pharmaceutical and allied health sector Industries arc providing freebees (freebies) to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India (the 'Council') which is a regulatory body constituted under the Medical Council Act, 1956, 2. The council in exercise of its statutory powers amended the Indian Medical Council {Professional Conduct, Etiquelle and Ethics) Regulations, 2002 (the regulations) on 10-12- 2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries. 3. Section 37(1) of Income tax Act provides for deduction of any revenue expenditure (other than those failing under sections 30 to 36) from the business Income if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dila Pharmaceutical Ltd. Vs. DCIT (2017) 85 Taxmann.com 354, and Sunflower Pharmacy reported in 88 Taxman.com 326 (Ahd-Trib) and judgment of Hon'ble ITAT Mumbai in the case of PHL Pharma P. Ltd. 78 Taxmann.com 36 (2017). The ARs of the Appellant contended that MCI guidelines are not applicable to the pharma companies but are applicable only to professional doctors in practice. Reliance was placed on decisions of Hon'ble ITAT, Ahmedabad and Mumbai ITAT in the cases referred herein above wherein it has been held that Medical Council of India Regulations, 2002 do not apply to pharmaceutical companies. The Appellant has also argued that CBDT circular relied upon by Assessing Officer was issued on 1S| August, 2012 hence such circular cannot have retrospective effect in current Assessment Year for which heavy reliance was placed on decision of Hon'ble Mumbai ' ITAT in the case of Syncon Formulations Limited V/s DCIT, Sunflower Pharmacy (supra) and Cadila Pharmaceutical Ltd. (supra). Hon'ble ITAT Mumbai in the case of PHL Pharma after discussing the judgment of Hon'ble Himachal High Court in the case of Confederation of Indian Industries Vs. CBDT have held as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record and gone through the orders of authorities below. The issue involved in the present appeal, i.e. whether freebies distributed to medical professionals by a pharmaceutical company is allowable u/s 37(1) of the Act or not in light of circular issued by MCI was subject matter of deliberations by the co-ordinate bench of ITAT, Mumbai Bench A in assessee's own case for A.Y. 2011-12. The co-ordinate bench, after considering various aspects including the circular issued by MCI and also circular of CBDT vide circular No.5 of 2012 held that the assessee was entitled for claim of sales promotion expenses incurred on distribution of articles to the stockists, distributors, dealers and doctors. The relevant findings of the Tribunal are as under:- '21. We have deliberated at length on the issue under consideration and after perusing the regulations issued by the Medical Council of India, find that the same lays down the code of conduct in respect of the doctors and other medical professionals registered with it, and are not applicable to the pharmaceuticals or allied health sector industries. Rather, a perusal of the provisions of the Indian Medical Council Act, 1956, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any hospital, pharmaceutical company or any healthcare sector, then any such regulation issued by it cannot have any prohibitory effect on the manner in which the pharmaceutical company like the assessee conducts its business. On the basis of our aforesaid observations, we are unable to comprehend that now when the MCI has no jurisdiction upon the pharmaceutical companies, then where could there be an occasion for concluding that the assessee-company had violated any regulation issued by MCI. We thus, in terms of our aforesaid observations are of the considered view that even if the assessee had incurred expenditure on distribution of freebies to doctors and medical practitioners, the same though may not be in conformity with the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (as amended on 10.12.2009), however, as the same only regulates the code of conduct of the medical practitioners/doctors, therefore, in the absence of any prohibition on the pharmaceutical companies in incurring of such sales promotion expenses, the latter cannot be held to have incurred an expenditure for a purpose which is an offence or is prohibited by law. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income. 4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. The assessing officers of such medical practitioner or professional associations should examine the same and take an appropriate action. This may be brought to the notice of all the officers of the charge for necessary action. We may herein observe that a perusal of the aforesaid CBDT Circular reveals that the freebies provided by the pharmaceutical companies or allied health sector industries to medical practitioners or their professional associations in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) regulations, 2002 shall be inadmissible under Sec. 37(1) of the Income-Tax Act, 1961, as the same would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation, 2002, by making the same applicable even to the pharmaceutical companies or allied healthcare sector industries. We are of the considered view that such an enlargement of the scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provision either under the Income Tax Act or under the Indian Medical Council Regulations. We are of a strong conviction that the CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. Still further, though the CBDT can tone down the rigours of law in order to ensure a fair enforcement of the provisions by issuing circulars for clarifying the statutory provisions, however, it is divested of its power to create a new impairment adverse to an assessee or to a class of assessee without any sanction or authority of law. We are of the considered view that the circulars which are issued by the CBDT must confirm to the tax laws and though are meant for the purpose of giving administrative relief or for clarifying the provisions of law, but the same cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax V. S.R.M.B Dairy Farming (P.) Ltd. (2018) 400 ITR 9 (SC). The Hon'ble Apex Court in its aforesaid judgment has held that beneficial circulars had to be applied retrospectively, while oppressive circulars had to be applied prospectively, observing as under: 25. It is in this context, the question arises, when the instruction expressly states that the benefit of the said policy is prospective, still can the courts place a construction on such instruction so as to make it retrospective. In this context, the Apex Court in the case of CCE v. Mysore Electricals Industries Ltd. reported in [2006] 204 ELT 517 (SC) : [2007] 8 RC 1, dealing with the question how a beneficial circular is to be construed, has approached this question in the following manner. At paragraph 13 of the judgment, it is stated that the learned counsel further submitted that the circular being oppressive and against the respondent, has to apply only prospectively and cannot be applied retrospectively. In other words, a beneficial circular has to be applied prospectively. Thus, when the circular is against the assessee they have a right to claim the enforcement of the same prospectively. It is further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for accommodation of doctor. Similarly, MCM expenditure was incurred for conference. The stand of the assessee was that conferences were being organized for the purpose of business. When a large number of doctors assembled, they share their experience in day-to-day professional life and what type of hurdles they faced while treating patients, either by use of equipments or by pharma products. If a pharma-company wants to organize such type of conference or seminars then it will be quite reasonable to understand the deficiency in its products, and if the doctors were required to pay from their pockets, then probably some of them would not like to participate. At this stage, it is pertinent to visualize the provisions under the Income Tax Act for allowance of business expenditure. In order to claim expenditure under section 37(1) of the Income tax Act, the assessee is required to fulfill certain conditions viz. (a) there must be expenditure, (b) such expenditure must not be of the nature described in sections 30 to 36, (c) the expenditure must not be in the nature of capital expenditure or personal expenditure of the assessee, and (d) expenditure must be laid out or exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re neither attributable to Thol unit nor to Dehradun unit. As such the expenditures under research and development activity constitute separate unit and claimed at business level but only for presentation purpose, the same has been shown in HO and Thol Unit. 12.1 The assessee also submitted that the research and development activities are connected to the future products to be manufactured but whether, the same will be manufactured is not known. Therefore, for this reason also research and development expenditure cannot be attributed to any of the manufacturing unit and accordingly, the same are allowable separately at business level and not at individual unit level. 14. However, the AO held that research and development activities are related to several products which are already manufactured at both the units i.e. Thol and Dehradun. The future product based on research and development will also be produced at both the units. Therefore, it is necessary to allocate the expenditure to the both the units. Accordingly, the AO attributed an amount of 1,31,63,890/- to the Dehradun unit which has resulted reduction in profit of Deharadun unit and increase in profit of Thol unit by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahd/2016 and ITA No.918/Ahd/2016 also reported in 85 Taxmann.com 354 have held the following in the similar set of facts: 24. We have heard both the parties at length. The assessee admittedly has three production divisions at Jammu, Ankleshwar and Dholka; respectively. Case records at page 396 indicate tno same to be operating exclusively for formulation (domestic sales), bulk drugs (domestic and export sales) and formulations (domestic and international sates); respectively. The assessee pleaded before the DRP at page 409 that it had not done any research and development for any of the formulation product manufactured in Jammu unit in relevant previous year. The same has neither been specifically rebutted nor accepted in DRP's directions. Nor is there any specific material quoted to disturb assessee's accounts separately maintaining each and every minute detail pertaining to these three units in question. It thus emerges that the authorities below have adopted adhocism in applying the above turnover formula for allocating the impugned expenditure. Hon'ble Bombay high court's decision in Zhandu Pharmaceutical Works Ltd. vs. CIT (2013) 350 ITR 366 (Bom.) delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an independent centre and that its main object is to conduct research for the business of the assessee. The research centre, therefore, in our opinion, is not directly linked with the eligible undertaking. Thus, for the purpose of computing deduction u/s.80HH and 80I, profit from eligible undertaking is to be computed on the basis of gross income by reducing expenditure which has been incurred for the eligible undertaking out of the gross income derived from the industrial undertaking. In view of the aforesaid, question no.(A) is answered in favour of the assessee and against the Revenue. 22.1 In addition to the above, we also note that the Revenue in the own case of the assessee for the assessment year 2010-11 in the assessment framed under section 143(3) of the Act has not allocated the research and development expenses to the eligible unit for the purpose of computing the deduction under section 80-IC of the Act. Admittedly, there is no change in the facts and circumstances of the year under consideration viz a viz the earlier assessment year i.e. 2010-11, thus we are of the view that the principles of consistency should be adopted. 22.2 We also draw support and guidanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the judgment of Hon ble Supreme Court in the case M/s Goetze (India) Ltd vs. CIT reported in 284 ITR 323, the income shown in the return filed by the assessee cannot be revised merely by filing a letter to that effect. The AO on merit also rejected the claim of the assessee by holding that weighted deduction of R D expenditure under section 35(2AB) is allowable only on the R D activity carried out inside the approved facility. 27. Aggrieved assessee preferred an appeal before the learned CIT-A. The assessee besides reiterating its submission made during the assessment proceeding submitted that it is the duty of the AO to levy the tax on the correct income only. The assessee further submitted that the case of the assessee is pari-materia with the facts of Cadila Health Care Ltd. where ITAT has decided the issue in favour of the assessee and Hon ble Gujarat High Court subsequently confirmed the finding of the Tribunal reported in 31 taxmann.com 300. 28. The learned CIT-A after considering the facts in totality accepted the additional claim of the assessee by placing reliance on the judgment of Hon ble Gujarat High Court in case of CIT vs. Miteshh Impex reported in 270 CTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant portion of the order of Hon ble High Court is quoted as under: HELD -Section 35(2AB) provides for deduction to a company engaged in business of biotechnology or in the business of manufacture or production of any article or thing notified by the Board towards expenditure of scientific research development facility approved by the prescribed authority. [Para 14] -The Explanation to section 35(2AB)(1) provides that for the purpose of said clause, i.e. clause (I) of section 35(2AD), expenditure on scientific research in relation to drugs and pharmaceutical shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under the Central State or Provincial Act and filing an application for a patent under the Patents Act, 1970. [Para 15] -The whole idea appears to be to give encouragement to scientific research. By the very nature of things, clinical trials may not always be possible to be conducted in closed laboratory or in similar in-house facility provided by the assessee and approved by the prescribed authority. Before a pharmaceutical drug could he put in the market, the regulatory authorities wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt and allowed relief to the assessee. Therefore, finding no infirmity in the order of learned CIT(A), ground no.1 of Revenue s appeal is dismissed. 33.1 The issue on hand is squarely covered by the order of the coordinate bench in the own case of the appellant. Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Therefore, respectfully following the same we uphold the finding of the learned CITA and hereby dismissed the ground of appeal raised by the Revenue. 34. The next issue raised by the Revenue is the learned CIT-A erred in allowing the depreciation @ 15% on electrical installations instead of @10% as provided under income tax rule. 35. The assessee during the year under consideration has shown addition in the block of assets of plant and machinery on account of Electrical Insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this tribunal in own case of the assessee in ITA No. 2028/Ahd/2013 corresponding to A.Y. 2009-10 where the coordinate bench vide order dated 16-08-2016 decided the issue in favour of the assessee by observing as under: 12. In ground no. 3, the Assessing Officer is aggrieved that the learned CIT(A) erred in deleting the disallowance of Rs 10,66,974 made on account of electric installations . 13. Learned representatives fairly agree that this issue is also covered, in favour of the assessee, by order dated 9th July 2010 of a coordinate bench, in assessee s own case for the assessment year 2005-06. Learned CIT(A) has merely followed this decision. Respectfully following this binding judicial precedent, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 14. Ground no. 3 is also dismissed. 41.1 The issue on hand is squarely covered by the order of the coordinate bench in the own case of the appellant. Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, the Revenue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outset we find that the issue whether assessee was required to deduct withholding tax on commission paid to foreign agents or not came before this Tribunal in own case of the assessee in ITA No. 2028/Ahd/2013 corresponding to A.Y. 2009-10 where the coordinate bench vide order dated 16-08- 2016 decided the issue in favour of assessee by observing as under: 3. So far as this grievance is concerned, learned representatives fairly agree that the issue is covered by the decision of a coordinate bench of this Tribunal, in the case of ITO Vs Excel Chemicals India Pvt Ltd (ITA No 5/Ahd/16; order dated 29th June 2016). Learned counsel, however, hastens to place his reliance on the stand of the Assessing Officer, and that, in the present case, reliance has been placed on Section 9(1)(vii) rather than 9 (1)(i) as was the case in the Excel Chemicals (supra). 4. As learned counsel rightly points out, the issue, as to whether the commission paid to non resident agents could be disallowed when it was paid without deduction of tax at source under section 195, came up for consideration in the case of Excel Chemicals (supra). Rejecting the contentions of the revenue, the coordinate bench, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission arose in India, for the simple reason that the orders were executed in India. The Assessing Officer was of the view that the facts of the assessee s case are identical to the afore cited case since assessee was liable to pay the export commission to nonresident for export order from abroad, but the orders were executed from India . A reference was then made to Explanation 4 to Section 9(1)(i), introduced by the Finance Act 2012 w.r.e.f 1st April 1962, that the expression through shall mean to include, and shall always be deemed to have included, by means of , in consequence of and by reason of . The claim of the assessee that the income did not accrue or arise in India was thus rejected. As regards the reliance on the certificate issued by the chartered accountant, certifying that no tax deduction at source was warranted from the remittances for commission, the Assessing Officer relied upon decision of the Tribunal, in the case of DCIT Vs Rediff.com India Limited [(2011) 47 SOT 310 (Mum)] in support of the proposition that such a certificate cannot be conclusive determination of taxability in the hands of the recipient. As regards all the judicial precedents cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent were carried out in India, he would have realized that even though deeming diction under section 9(1)(i) is triggered on the facts of this case, on account of commission agent s business connection in India, it has no impact on taxability in the hands of commission agent because admittedly no business operations were carried out in India, and, therefore Explanation 1 to Section 9(1)(i) comes into play. The seemingly erudite analysis by the Assessing Officer is based on a half-baked legal theory, and the conclusions, therefore, clearly fallacious. 6. As for the AAR ruling in the case of SKF Boilers (supra), on which so much reliance has been placed by the Assessing Officer, we find that this decision merely follows the earlier ruling in the case of Rajiv Malhotra (supra) which, in our considered view, does not take into account the impact of Explanation 1 to Section 9(1)(i) properly. That was a case in which the non-resident commission agent worked for procuring participation by other non-resident entities in a food and wine show in India, and the claim of the assessee was that since the agent has not carried out any business operations in India, the commission agent was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l forum, even if not binding, cannot simply be brushed aside either, and that these rulings at least have persuasive value. We have no quarrel with this proposition. We have, with utmost care and deepest respect, perused the above rulings rendered by the Hon ble Authority for Advance Ruling. With greatest respect, but without slightest hesitation, we humbly come to the conclusion that we are not persuaded by these rulings. 7. In view of the above discussions, in our considered view, learned CIT(A) was indeed justified in holding that given the undisputed and uncontroverted facts of this case, the nonresident commission agents were not taxable in India in respect of their commission earnings from orders procured abroad. 8. It is also now well settled in law that when the payment made to a non-resident does not have an element of income, tax deduction source requirements under section 195(2) do not come into play at all. Hon ble Supreme Court, in the case of G E India Technology Centre Pvt Ltd Vs CIT [(2010) 327 ITR 436 (SC)], has inter alia observed as follows: In our view, Section 195(2) is based on the principle of proportionality . The said sub-Section gets attrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that aspect of the matter is also covered, in favour of the assessee, by a large number of judicial precedents- including Hon ble Madras High Court s judgment in the case of CIT Vs Farida Leather Co. [(2016) 66 taxmann.com 321 (Madras)], wherein Their Lordships have, inter alia, observed as follows: 5. The main contention of the learned counsel for the assessee / respondent is that the agency commission / sales commission paid by the assessee to non-resident agents, for the services rendered by them, outside India, in procuring export orders for the assessee, would not attract or partake the character of fees for technical services as explained in the context of 9 (1) (vii) of the Act and therefore, there is no scope for the application of the provisions of Section 195 of the Act (Tax Deducted at Source). It is also contended that as the non-resident agents have neither business connection in India nor they have permanent establishment in India, they are liable to be taxed in India. 5.1 Yet another contention of the learned counsel for the assessee is that: (a) the assessee paid the amount by way of commission to foreign agents for the services rendered outside India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139. Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub section (1) of section 139 thirty per cent of, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.' (ii) Explanation 2 to Section 195(1) of the Act :- 'Section 195 - Other sums: (1) Any person responsible for paying to a non-resident not being a company, or to a foreign company, any interest (not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India. The provisions of this sub-clause made applicable to interest have been extended to payment of royalty, technical fees and any other sum chargeable under this Act. The section provides that the sums covered by the sub-clause, which are chargeable under the Act and are payable outside India, shall not be allowed as an expenditure to the assessee, unless tax is paid thereon or is deducted therefrom under Chapter XVII-B of the Act. 7.3 Section 195(1) of the Act deals with deduction of tax from payment to nonresidents and foreign companies. Section 195(1) of the Act comes into play at a stage where the payer, who is enjoined to deduct the tax, either credit such income to the account of the payee or make payment thereof, whether in cash / cheque / draft or any other mode. The taxability of such amount in the hands of the payee or occasioning of the taxable event is alien for the purpose of Section 195(1) of the Act. 7.4 Section 195(2) is an enabling provision, enabling an assessee to file an application before the Assessing Officer to determine the appropriate proportion of the sum chargeable and upon such determination, the tax has to be deducted under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which payments have been made directly to the non-residents abroad, does not involve any technical knowledge or assistance in technical operations or other support in respect of any other technical matters. It also does not require any contribution of technical knowledge, experience, expertise, skill or technical know-how of the processes involved or consist in the development and transfer of a technical plan or design. The parties merely source the prospective buyers for effecting sales by the assessee, and is analogous to a land or a house / real estate agent / broker, who will be involved in merely identifying the right property for the prospective buyer / seller and once he completes the deal, he gets the commission. Thus, by no stretch of imagination, it cannot be said that the transaction partakes the character of fees for technical services as explained in the context of Section 9(1)(vii) of the Act. 12. As the non-residents were not providing any technical services to the assessee, as held above and as held by the Commissioner of Income Tax (Appeals), the commission payment made to them does not fall into the category of fees of technical services and therefore, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant. Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above have been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier years nor has placed any contrary binding decision in its support. Therefore, respectfully following the same we uphold the finding of the learned CIT-A and hereby dismissed the ground of appeal raised by the Revenue. 48. In the result appeal of the Revenue is hereby dismissed. Coming to CO No. 167/Ahd/2019 for A.Y. 2011-12 (in ITA No. 939/Ahd/2019) by the assessee 49. At the outset we note that the assessee in the CO filed by it has supported the order of the Ld. CIT-A. Accordingly, we hold that no separate adjudication is required for the CO filed by the assessee. Hence, we dismiss the same as Infructuous. 49.1 In the result, the CO filed by the assessee is dismissed as infructuous. Coming to ITA No. 1129/Ahd/2019 an appeal by the Revenue corresponding to A.Y. 2012-13. 50. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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