2017 (9) TMI 248 - HC - Income Tax

Addition u/s. 40(a)(ia) towards payment of commission of foreign agents - non deduction of tds - withholding of tax - whether commission paid to export agents is taxable in India in view of sec.5(2)(b) r.w.s. 9(1)(i) of IT Act? - Held that - The question would not arise because the finding of the fact remained unchallenged. The question of TDS on commission income paid to foreign agents and the non-deduction of TDS is an issue fully covered by the decision of the Supreme Court in GE India Technology Centre Private Limited v Commissioner of Income Tax & Anr. (2010 (9) TMI 7 - SUPREME COURT OF INDIA) as held that commission earned by a non-resident (that is to say, foreign) agent who carried on the business of selling Indian goods outside India cannot be said to be deemed income accrued or arising in India. Disallowance of additional depreciation - proof of activities carried out by the assessee amounts to manufacture or production as defined in section 2(29BA) - Held that - Mining for the purpose of production of mineral ore falls within the ambit of the word production . The Division Bench of this Court had held that in such a process, ore has to be extracted or raised from earth. This activity is production , entitling the assessee to the benefit of Section 32(A) of the Act. Thus, there would be an allowable depreciation deduction in respect of the machinery used in mining. It cannot be said that mining is neither production nor manufacture. See Sesa Resources Ltd. case 2017 (9) TMI 126 - BOMBAY HIGH COURT Addition under Section 40(a)(ia) r/w. Section 195(1) - demurrage paid to a non-resident buyer of iron ore without deducting TDS - Held that - This issue is also fully covered by the decision in GE India (2010 (9) TMI 7 - SUPREME COURT OF INDIA) and the assessee s reliance on the decision of the Bombay High Court in Commissioner of Income-Tax v Orient (Goa) Private Limited 2009 (10) TMI 575 - Bombay High Court is misplaced for that judgment was expressly overruled by the Full Bench of the Bombay High Court in Commissioner of Income Tax v VS Dempo and Company Pvt Ltd. 2016 (2) TMI 308 - BOMBAY HIGH COURT). No substantial question of law

Summary

Issues involved: Appeal by Principal Commissioner of Income Tax against ITAT order, disallowance of various expenses, substantial questions of law proposed, ITAT's decision on addition of commission, demurrage, and additional depreciation.

Analysis:

1. The appeal before the High Court was filed by the Principal Commissioner of Income Tax (PCIT) challenging an order of the Income Tax Appellate Tribunal (ITAT) related to the assessment period of 2010-2011. The ITAT had partly allowed the Revenue's appeal against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of certain expenses claimed by the assessee, Sesa Goa Ltd (SGL).

2. Three substantial questions of law were proposed for consideration by the High Court. The first question related to the addition of commission paid to foreign agents without deduction of TDS, the second question concerned the demurrage paid to a non-resident buyer of iron ore without TDS deduction, and the third question was about the disallowance of additional depreciation claimed by SGL.

3. The High Court's judgment addressed each proposed question in detail. Regarding the first question, the Court found that the issue of TDS on commission income paid to foreign agents was settled by previous decisions of the Supreme Court and the Bombay High Court. The Court cited relevant case laws to support its decision and concluded that the question did not arise for consideration.

4. Moving on to the second question, the Court noted that the ITAT's decision to delete the addition of demurrage paid to a non-resident buyer without TDS deduction was in line with the legal precedents established by the Supreme Court and the Bombay High Court. The Court dismissed the appellant's argument based on a previous judgment that had been overruled by a Full Bench of the Bombay High Court.

5. Finally, the Court addressed the third question regarding the disallowance of additional depreciation claimed by SGL. The Court referred to the decision in another case involving Sesa Resources Ltd, which fully covered the issue raised in this question. Therefore, the Court held that this question did not require separate consideration.

6. In conclusion, the High Court dismissed the appeal by the PCIT, stating that there were no substantial questions of law that warranted admission. The Court emphasized that the issues raised were either questions of fact or were already settled by binding legal decisions. The appeal was accordingly dismissed with no costs awarded.