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Issues involved: Appeal against order of CIT(Appeals) for AY 2009-10 on dis-allowance u/s. 40(a)(i) for commissions paid to foreign concerns and re-computation of deduction u/s. 10B by excluding freight expenditure.
Dis-allowance u/s. 40(a)(i): The assessee, a company engaged in manufacturing and export, claimed deduction u/s 10A for AY 2009-10. During assessment, dis-allowance u/s 40(a)(i) was made by AO for not deducting tax at source on commission paid to foreign agents. The CIT(Appeals) allowed the appeal of the assessee against this dis-allowance. The Revenue challenged this before ITAT Chennai. The ITAT Chennai noted that the foreign agents had no permanent establishment in India and the services were rendered outside India. Citing a similar case, the Tribunal held that no tax deduction at source was required on payments made to non-residents for services rendered abroad. The Tribunal dismissed the Revenue's appeal on this ground, as it was similar to a previously adjudicated case. Re-computation of deduction u/s 10B: The second ground of appeal related to the computation of deduction u/s 10A. The Special Bench of the Tribunal in the case of M/s. Saksoft Ltd held that certain expenses, including freight, should be excluded from both export turnover and total turnover while calculating deduction u/s 10B. The Revenue contested this citing an appeal filed u/s 260A, but failed to provide any contrary judgment. The Tribunal dismissed the Revenue's appeal on this ground as well, stating that the order had not been stayed by any Higher Court. In conclusion, the ITAT Chennai dismissed the appeal of the Revenue as it lacked merit. The order was pronounced on August 14, 2013, in Chennai.
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