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2019 (6) TMI 427 - AT - Income TaxTDS u/s 195 - Disallowance of commission paid to non-residence - DTAA provisions - HELD THAT - CIT(A) has rightly deleted this addition as the commission paid to non-resident cannot be treated as assessee s income from other sources as the assessee had earned income the said income outside India and also the payment was made to non-resident which cannot be taxable in India when the parameters of DTAAs are applied to such transactions. Besides this in assessee s own case for A.Y. 2010-11 2018 (4) TMI 517 - ITAT DELHI the Tribunal has dismissed this ground taken by the Revenue and no contrary or distinguishing facts were pointed out during the hearing in the present assessment by the Ld. DR - Decided against revenue Disallowance of polishing charges - CIT(A) restricting the addition made by disallowing 15% of polishing charges to 3, 87, 925/- - HELD THAT - We have heard both the parties and perused the material available on record. The CIT(A) has rightly allowed the expenses of 22, 963/- and upheld the disallowance of 3, 73, 469/- as the assessee failed to furnish the requisite information in respect of payment made to 5 parties . Therefore there is no need to interfere with the findings of the CIT(A). Addition of excess claim of depreciation on electrical fitting - plant and machinery v/s furniture and fixtures - HELD THAT - The depreciation on electrical fittings has rightly been claimed by the assessee at 15% by treating it as part of plant and machinery and not as furniture and fixtures. It is necessary to have electrical fittings for the power supply to the machineries and plant without electrical fittings and power supply there is no use of plant and machinery. Therefore Ground No. 2 of assessee s appeal is allowed. Addition on interest free advances - notional interest on interest free advances - CIT(A) upheld the said disallowance made by the AO - HELD THAT - No addition can be made assessee has its own funds which amount to 22.54 crores as on 31/3/2011 and 23.84 crores as on 31/03/2010. Therefore advances were given out of its own funds only. Thus in light of the decision of M/S RELIANCE INDUSTRIES LTD 2019 (1) TMI 757 - SUPREME COURT no addition on account of notional interest can be made by the Assessing Officer. - Decided in favour of assessee
Issues Involved:
1. Disallowance of commission paid to non-residents. 2. Disallowance of polishing charges. 3. Depreciation rate on electrical fittings. 4. Notional interest on interest-free advances. Issue-wise Detailed Analysis: 1. Disallowance of Commission Paid to Non-Residents: The Revenue contended that the commission paid to non-resident agents should be disallowed as it was deemed to accrue or arise in India, thus requiring tax deduction at source (TDS) under Section 195. The Assessing Officer (AO) relied on CBDT Circular No. 7/2009 and the decision in SKF Boiler & Driers Pvt. Ltd. The CIT(A) deleted this disallowance, stating that the commission did not arise from a ‘business connection’ in India and was not taxable under Section 9(1)(i). The Tribunal upheld the CIT(A)'s decision, referencing the assessee's own case for A.Y. 2010-11 and other judicial precedents, confirming that the payments to non-residents for services rendered outside India were not taxable in India. 2. Disallowance of Polishing Charges: The AO made an ad-hoc disallowance of 15% of the polishing charges due to non-compliance from certain parties. The CIT(A) reduced this disallowance, accepting the assessee's evidence for most payments but upheld disallowance for ?3,73,469/- due to lack of sufficient evidence. The Tribunal confirmed the CIT(A)'s decision, noting that the assessee had provided adequate documentation for the majority of the polishing charges and that ad-hoc additions without specific discrepancies were not justified. 3. Depreciation Rate on Electrical Fittings: The AO allowed depreciation on electrical fittings at 10%, categorizing them as furniture and fittings, while the assessee claimed 15% treating them as part of plant and machinery. The CIT(A) upheld the AO's decision. However, the Tribunal allowed the assessee's claim, stating that electrical fittings integral to plant and machinery should be depreciated at 15%, as they are essential for the operation of the machinery. 4. Notional Interest on Interest-Free Advances: The AO disallowed ?1,91,645/- as notional interest on interest-free advances, asserting they were not for business purposes. The CIT(A) upheld this disallowance. The Tribunal reversed this decision, noting that the assessee had sufficient own funds exceeding the advances given. Citing Supreme Court decisions, the Tribunal held that no disallowance should be made when the assessee's own funds are more than the interest-free advances. Conclusion: The Tribunal partly allowed the appeals for statistical purposes, confirming the CIT(A)'s decisions on commission to non-residents and polishing charges, but reversed the decisions on depreciation rate and notional interest, favoring the assessee. The identical issues for A.Y. 2012-13 were also partly allowed for statistical purposes.
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