TMI Blog2023 (7) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings of the ld. CIT (Appeals). Decided against revenue. Disallowance of export promotion expenses for non-deduction of TDS - HELD THAT:- As already held payments to organizations located outside India and not having permanent establishment in India are not covered u/s 9 of the Act and consequently Section 195 of the Act does not come into play as it is not a Fee for Technical Service . Thus payment to persons located outside India is thus allowed - Decided against revenue. Disallowance of interest expense - assessee has claimed interest expenses on secured and un-secured loans - CIT (Appeals) deleted the disallowance of interest for the reason that the advances made by the assessee for purchase of property were fully covered by the non-interest bearing funds as available with the assessee - HELD THAT:- As finding by the ld. CIT (Appeals) that the interest bearing funds have been fully utilized for stock and sundry debtors. CIT (Appeals) deleted the disallowance of interest as the advances for purchase of property are covered by non-interest bearing funds which the assessee is having correctly.Decided against revenue. Disallowance on account of preservation charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs13,91,753/- made by Assessing Officer on account of interest expenses since the assessee was under legal obligation to follow the provisions of TDS prescribed under Income Tax Act 1961 before the credit or remittance of export promotion expenses 4. On the facts and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 72 lacs made by Assessing Officer on account of preservation charges as it was clear from comparative chart given by the assessee that quantity of production has gone down from 1.72 lacs kg. in the year relevant to A.Y. 2010-11 to 1.68 lacs kg. in A.Y.2011-12 and the assessee was failed to established that there was any additional requirement of space for preservation of goods during the year. Further, the marginal increase in sales/turnover in sales/turnover from Rs. 213.14 crore in A.Y. 2010-11 to Rs. 217.34 crore in A.Y. 2011-12 was only due to marginal increase in the rate of realization/selling price. 3. Ground No. 1 of grounds of appeal of the Revenue is in respect of deletion of disallowance of commission paid to foreign agents for non-ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. [(2015) 378 ITR 205 (Del)] wherein the Hon ble Delhi High Court held that where overseas enterprise acts as a liaison agent for an assessee and receives remuneration from each client successfully solicited for assessee such services cannot be said to be included within the meaning of consultancy services and would not come within the purview of the technical services under section 9 of the Act. 7. Heard rival submissions perused the orders of the authorities below. The ld. CIT (Appeals) deleted the disallowance of commission paid to foreign agents holding that the assessee was not liable to deduct TDS at source on commission paid to agents located outside India for procuring orders from buyers were all located outside India and not having permanent establishment in India. The provisions of section 195 of the Act were not applicable on the commission paid by the assessee as the same was not taxable in India as per the provisions of section 9(1) of the Act and, therefore, deleted the disallowance which was disallowed applying the provisions of section 40 of the Act for non-deduction of TDS while deleting the disallowance. The ld. CIT (Appeals) held as under:- 4.1.3 I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) Vs. Panalfa Autoelektrik Ltd. (supra) the co-ordinate bench of Delhi Tribunal had taken a similar view in the case of ACIT Vs. Kapoor Industries Ltd. [187 ITD 603]. Therefore, on careful perusal of the order of the ld. CIT (Appeals) we do not find any good reason to interfere with the findings of the ld. CIT (Appeals). The order of the ld. CIT (Appeals) on this issue is sustained. Ground No. 1 of grounds of appeal is rejected. 9. Ground No. 2 of grounds of appeal of the Revenue is in respect of deleting the disallowance of Rs. 13,94,547/- out of Rs. 14,90,547/- on account of export promotion expenses. disallowance of export promotion expenses for non-deduction of TDS. The Assessing Officer while completing the assessment noticed that the assessee claimed export promotion expenses of Rs. 44,00,261/- as deduction. Out of Rs. 44,00,261/- an amount of Rs. 14,90,547/- pertained to participation charges in fair/ exhibitions. The assessee was required to furnish details of expenses with evidence for deduction of tax at source. The assessee furnished all the details and explained that the expenditure on foreign travel by the partners and staff, also expenditure incurred on export cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st expense. Briefly stated the facts are that in the course of assessment proceedings the assessee noticed that assessee has claimed interest expenses on secured and un-secured loans of Rs. 18.47 crores and Rs. 1.57 crores respectively as on 31.03.2011. The Assessing Officer noticed that the assessee has claimed bank charges and interest expenses of Rs. 1.88 crores in the P L account. The Assessing Officer was of the view that assessee had diverted funds in the name of partners of the firm. Assessee was required to furnish details of expenses outstanding as on 1.04.2010 and investment made during the year and to show cause as to why proportionate interest on such investments made in properties by partners should not be disallowed. Assessee furnished its reply stating that the firm had given funds to three parties for purchase of properties amounting to Rs. 1.40 crores as on 31.03.2011 as under:- (i) Advant IT Park P. Ltd. Rs. 36,45,800/- (ii) Sun City Projects (P.) Ltd. Rs. 43,57,489/- (iii) Shree Mukund Associates Rs. 60,12,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in respect of Miki Export International, one of the sister concerns of the assessee covered under section 40A(2b) of the Act. The Assessing Officer noticed that the assessee paid preservation charges of Rs. 5,00,000/- per month during the whole year and later on, on 31.03.2011 two additional entries in respect of expenses of Rs. 60,00,000/- and Rs. 12,00,000/- were made on 31.03.2011 in respect of credit of these amounts to M/s. Miki Exports International. The assessee was required to furnish details and explain to justify the claim of these expenses. The assessee submitted that during the assessment year it had hired one chamber for storage/preserving meat at Rs. 5,00,000/- per month irrespective of any quantity at Meerut. It was explained that during the assessment year 2011-12 due to necessity it hired two chambers for storage/preserving meat at Rs. 5,00,000/- each chamber per month irrespective of any quantity at Meerut due to shortage of space at Meerut also and paid Rs. 12,00,000/-. However, the Assessing Officer on comparison of sales quantity and average rate between the assessment years 2010-11 and 2011-12 was of the view that there was no requirement of space of preser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods as compared to the previous year. In fact, the quantity of production has gone down from 1.72 lacs kg in the year relevant to A.Y. 2010-11 to 1.68 lacs Kg. in A.Y. 2011-12. The marginal increase in the sale/turnover from Rs213.14 crore in A.Y. 2010-11 to Rs217.34 crore in AY2011- 12 has been only due to marginal increase in the rate of realization/selling price. Further, there is no justification of suddenly made additional credit of Rs72,00,000/- as preservation charges to the sister concern at the end of the Financial Year 2010-11 i.e. 31-03-2011. The assessee has also not filed any evidence to the effect that there was any additional requirement of space for preservation of goods during the year. Further no detail no agreement or any other document has been filed as to what the additional preservation facilities were availed by the assessee and as to when those facilities were taken. From the facts it becomes clear that additional credit of Rs. 72 lacs in P L account made in the account of sister concern M/s Miki Export International is for non-business consideration which has been shown by the assessee to reduce the tax liability of the assessee firm. 8.5 In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay have to be refrigerated for a longer period of time. The manufacturing activity cannot be closed in case the inventory is piled up. The plant has to run at the appropriate capacity at all times. The premises required for storage does not depend on the quantity sold but the level of stock maintained as per the availability of stocks and requirement of business. Also, the space at the cold storage may not be readily available on a short notice and has to be booked in advance The quantitative details of the opening and closing stock and meat processed are as under: A. Y. 2011-12 A. Y. 2010-11 Opening Stock 11,66,115 8,86,447 Finished Goods Purchased 2,29,944 Meat processed 175,38,271 172,85,554 Goods returned 1,40,000 Sale 188,44,386 168,43,496 184,01,945 172,35,830 Closing Stock : 20,00,890 11,66,115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iately preceding year. The meat which has been processed at Mumbai had to be preserved and stored in Mumbai only. For preserving the additional quantity of meat, extra space was required for which additional chamber was taken on hire. The processing of meat has slightly decreased at Muzaffarnagar but the firm had to maintain an adequate level of storage facilities depending on the peak level of stock. Due to inadequate supply of meat, additional storage facility was taken on rent at Meerut @ Rs. 1 lac per month. The meat is processed as per the availability of animals and is exported as per the requirements of the customers. There is a time lag between the processing and actual export, between which the processed meat is preserved in cold storage. The export needs custom and other clearances and there may be delays on account of non- availability of space in ships to the required destinations. The turnover cannot form the basis of requirement of preservation facilities. There may be times when there are continuous orders supported by ready availability of animals and space on ships then preservation facilities may not be required. Similarly when there is disproportionate s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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