9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (5) TMI 1819 - AT - Income TaxTDS u/s 195 - tds on foreign remittances - HELD THAT - Services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the Assessing Officer towards export commission paid by the assessee to the non-resident was rightly deleted. Judgment of Hon ble Madras High Court in the case of Farida Leather Company 2016 (2) TMI 798 - MADRAS HIGH COURT directly covers the dispute between rival parties. The Hon ble Madras High Court was seized for AY 201011 in the above case. Thus, based on our detailed discussions and reasoning, we hold that under factual matrix of the case no additions u/s 40(a)(i) of the 1961 Act read with Section 195 are warranted in the instant case on payments made by assessee to four overseas agents towards commission expenses for generating export orders or facilitating import for the assessee. We affirm the decision of learned CIT(A) and Revenue fails in this appeal. Addition u/s 68 - CIT(A) relying on the additional evidences filed by the assessee accepted the contention of the assessee and allowed relief to the assessee - HELD THAT - In terms of Rule 46A(3) of the 1962 Rules, it was incumbent upon Ld. CIT(A) to have forwarded additional evidences to AO for necessary verifications/ comments . The Principles of Natural justice are clearly breached by learned CIT(A) by non affording AO to rebut additional evidence filed by assessee for the first time before learned CIT(A). Rule 46A(3) of the 1962 Rule is not merely an empty formality as principles of natural justice are embedded in it as clearly Revenue is entitled to rebut any additional evidence filed by the taxpayer for the first time before learned CIT(A) and violation thereof will clearly vitiate the order. It is also observed that learned CIT(A) accepted this additional evidence filed by the assessee for the first time before learned CIT(A) without making any enquiry or verification itself as to the veracity of this additional evidences filed by the assessee for the first time before learned CIT(A). - we are inclined to set aside and restore this issue to file of the AO for fresh adjudication. - Decided in favour of revenue for statistical purposes.
Issues Involved:
1. Deletion of addition of ?1,68,19,775/- for payments made to non-residents without complying with Section 195 of the Income-tax Act, 1961. 2. Deletion of addition of ?27,39,215/- under Section 68 of the Income-tax Act, 1961 based on additional evidence filed during appellate proceedings without giving the Assessing Officer (AO) an opportunity to review. Issue-Wise Detailed Analysis: 1. Deletion of Addition of ?1,68,19,775/- for Payments Made to Non-Residents Without Complying with Section 195 of the Income-tax Act, 1961: The Revenue contended that the assessee made payments to non-residents without filing an application before the AO for determination of the sum and rate of tax as mandated by the amended Section 195. The AO disallowed the expenses, arguing that the payments were not justified and lacked proper compliance with Section 195. The AO also noted that the assessee did not submit Form No. 15CA/15CB before making the remittance. The assessee, engaged in the business of dealing in Drugs & Pharmaceuticals, argued that the payments were made to overseas agents for commission, which included registration and marketing costs. The assessee provided details of these payments and agreements with the agents, asserting that the commissions were necessary for the business and were reduced in subsequent years. The assessee also argued that the payments were not chargeable to tax in India under the Double Taxation Avoidance Agreement (DTAA). The CIT(A) deleted the addition, holding that the payments were business expenses incurred wholly and exclusively for the business. The CIT(A) also concluded that the payments were not covered under Section 195 as the services were rendered outside India, and the agents did not have a permanent establishment in India. The Tribunal upheld the CIT(A)'s decision, referring to the Supreme Court's decision in GE India Technology Centre Pvt. Ltd. v. CIT, which clarified that tax is deductible only if the payment is chargeable to tax in India. The Tribunal also cited various High Court decisions supporting the view that payments to non-residents for services rendered outside India are not taxable in India and hence not subject to TDS under Section 195. 2. Deletion of Addition of ?27,39,215/- Under Section 68 of the Income-tax Act, 1961 Based on Additional Evidence Filed During Appellate Proceedings Without Giving the AO an Opportunity to Review: The AO made an addition of ?27,39,215/- under Section 68 due to discrepancies in the reconciliation of balances with M/s Chikhloli Chemicals Pvt. Ltd. The assessee claimed purchases from the said party, but the party's confirmation did not match the assessee's records. The AO rejected the confirmation provided by the assessee as it was signed by a third party, M/s Purva Inorganics Pvt. Ltd. During the appellate proceedings, the assessee filed a fresh confirmation from M/s Chikhloli Chemicals Pvt. Ltd., explaining that the earlier confirmation was a clerical error. The CIT(A) accepted the new evidence and deleted the addition without calling for a remand report from the AO. The Revenue argued that the CIT(A) violated Rule 46A of the Income-tax Rules, 1962, by not giving the AO an opportunity to examine the new evidence. The Tribunal agreed with the Revenue, noting that the CIT(A) should have forwarded the additional evidence to the AO for verification. The Tribunal set aside the CIT(A)'s order on this issue and remanded the matter back to the AO for fresh adjudication, directing the AO to verify the new evidence and provide the assessee with an opportunity to be heard. Conclusion: The Tribunal partly allowed the Revenue's appeal, upholding the CIT(A)'s decision on the deletion of the addition of ?1,68,19,775/- but remanding the issue of the addition of ?27,39,215/- back to the AO for fresh adjudication. The Tribunal emphasized the need for compliance with procedural rules and principles of natural justice.
|
