2012 (10) TMI 1177 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) for AY 2007-08; Disallowance u/s 40(a)(i) of ITA.

Issue 1: Order passed without granting opportunity to appellant
- Assessee raised grounds challenging order of CIT(A) passed without granting opportunity to explain services rendered by agent.
- Assessee did not press this ground during hearing, which was subsequently dismissed.

Issue 2: Disallowance made u/s 40(a)(i)
- Assessing Officer disallowed payment made to agent for non-deduction of TDS.
- Assessee contended payment was for commission agent services outside India, not taxable in India.
- AO considered payment for managerial services, falling under 'fee for technical services' u/s 9(1)(vii) of IT Act.
- CIT(A) upheld disallowance, stating payment included fees for technical services taxable u/s 195 of IT Act.

Arguments before ITAT:
- Assessee argued payment was commission for services as per agreement with agent.
- Assessee pointed out no disallowance in earlier years, hence sec. 195 not applicable.
- Revenue argued services provided by agent were managerial, falling under 'fee for technical services'.
- ITAT examined agency agreement clauses and payment details, concluding payment based on sales turnover, not for specific services.
- ITAT held payment was commission to agent, not taxable in India, deleted disallowance u/s 40(a)(ia).

Conclusion:
- ITAT partly allowed the appeal, ruling in favor of the assessee.
- Disallowance u/s 40(a)(ia) was deleted.
- Order pronounced on 30th Oct 2012.