2012 (5) TMI 638 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of export commission u/s 40(a)(i) of the Income-tax Act, 1961.
2. Revisionary proceedings u/s 263 of the Act.
3. Obligation to deduct tax at source u/s 195 on payments to non-residents.

Summary:

1. Disallowance of Export Commission u/s 40(a)(i):
The assessee was aggrieved by the CIT(Appeals) confirming the disallowance of export commission by the A.O., relying on Section 40(a)(i) of the Income-tax Act, 1961.

2. Revisionary Proceedings u/s 263:
The appeal was filed against an order passed by the Assessing Officer pursuant to revisionary proceedings u/s 263 of the Act. The revisionary proceedings involved the same issue since the original order of A.O. was set aside for not considering the disallowance on export commission paid. The Tribunal had previously dismissed the appeal of the assessee, holding that the assessee was obliged to deduct tax at source on the payment of commission.

3. Obligation to Deduct Tax at Source u/s 195:
The Tribunal, in its order, discussed the obligation to deduct tax at source u/s 195. It was noted that the representatives were remunerated for services rendered, which included promoting, marketing, and providing technical and commercial information. The Tribunal referenced the Supreme Court decision in Transmission Corporation of A.P. Ltd and the Special Bench decision in Prasad Productions Ltd., concluding that if the payment to non-residents is chargeable to tax, the payer must deduct tax at source. The Tribunal found that the assessee did not have a bona fide belief that the payments were not taxable in India, and thus, the non-deduction of TDS u/s 195 denied the assessee the benefit of deduction of expenditure.

Conclusion:
The Tribunal upheld the CIT's decision, confirming the disallowance of the export commission and the enhancement of the assessment. The appeal filed by the assessee was dismissed. The order was pronounced in the open court on 3rd May, 2012.