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2013 (12) TMI 1095 - AT - Income TaxApplicability of section 172 Payments towards shipping business of the non-residents through shipping agents - Held that - Special procedures are provided u/s. 172 of the Act for payment of taxes in case of any shipping owners or charters by non-resident - The Board Circular No. 723 dated 19-09-1995 (supra) clarifies that the provisions of section 172 would apply and no deduction of tax is required to be made as per provision of section 194C of the Act Decided against Revenue. Purchase of Lac and Shellac Disallowance on account of inflation of local purchase - Held that - No defects have been pointed out by the AO to show that there was any inflation in the purchases Disallowance cannot be made on the basis of estimation Decided against Revenue. Commission paid to non-resident Held that - The commission has been paid to non-resident outside India for services rendered outside India Following G.E India Technology Centre (P.) Ltd v. CIT 2010 (9) TMI 7 - SUPREME COURT OF INDIA CBDT Circular No. 786 dated 07-07-2000 as also Circular no. 23 dated 23-7-1969 clarifies that where the non-resident agent operates outside India, no part of his income arises in India - Decided against Revenue. Disallowance of supervision charges, export expenses, packing expenses, lorry hire charges and motor car and telephone expenses Held that - All the disallowance are made on estimate basis and no specific defect has been pointed out by the AO Decided against Revenue. expenditure under the head foreign travelling Held that - Foreign travel by husband of the assessee was exclusively for the business purpose of the assessee - Assessee s husband was also promoting his own business during the same time Decided against assessee.
Issues Involved:
1. Appeal by revenue against order of Commissioner of Income-tax (Appeals) for assessment year 2008-09. 2. Disallowance under various heads - Section 172 applicability, purchase of Lac and Shellac, commission payment, and disallowance under different heads. 3. Disallowance of foreign travel expenses. Analysis: Issue 1: Appeal by Revenue The revenue challenged the CIT(A)'s decision to allow relief on various disallowances. The primary contention was regarding the applicability of Section 172 and the requirement for TDS under Section 194C or 195. The revenue argued that TDS should have been deducted, invoking Section 40(a)(ia). However, the CIT(A) held that Section 172 applied, exempting the need for TDS. The ITAT upheld the CIT(A)'s decision, emphasizing that the payments were made to non-residents through agents, falling under the special procedures of Section 172. The ITAT found no evidence to support the revenue's claims, leading to the dismissal of this ground of appeal. Issue 2: Disallowance under Various Heads a. Purchase of Lac and Shellac: The AO disallowed a percentage of local purchases due to suspected inflation, which the CIT(A) overturned. The ITAT supported the CIT(A)'s decision, as no specific defects were identified to justify the disallowance. b. Commission Payment: The AO disallowed commission payment to a non-resident, contending that the income accrued in India. However, the CIT(A) ruled in favor of the assessee, citing CBDT Circulars and legal precedents. The ITAT upheld the CIT(A)'s decision, as the payment was made outside India. c. Disallowance under Different Heads: The AO made estimated disallowances under various heads, which the CIT(A) deleted. The ITAT concurred with the CIT(A), noting the absence of specific defects justifying the disallowances. Issue 3: Disallowance of Foreign Travel Expenses The assessee contested the disallowance of foreign travel expenses, arguing that it was essential for business purposes. The AO disallowed 50% of the expenses, alleging dual business interests of the assessee's husband. The ITAT upheld the disallowance, as no evidence was presented to prove the travel was solely for the assessee's business, resulting in the dismissal of the cross objection. In conclusion, the ITAT dismissed the revenue's appeal and the assessee's cross objection, upholding the CIT(A)'s decisions on various disallowances and the foreign travel expenses.
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