Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (6) TMI 703 - AT - Income TaxTDS u/s 195 - Disallowance of commission expenditure paid to foreign agents for non-deduction of tax - HELD THAT - It is not the case of the revenue that export commission income of foreign agent for soliciting orders from outside India was earlier chargeable to tax and CBDT circulars exempted it. Withdrawal of those circulars does not have any impact on taxability of export commission and TDS there on. In the present case It is an established fact that agents are non-residents, operating their business activity outside India, commission payments is related to their service rendered outside India and Revenue could not show that those commission agents have any permanent establishment in India. Assessee has consistently denied that they do not have any permanent establishments in India. Further the commission was remitted to them directly outside India. The issue is squarely covered in favor of the assessee that foreign commission paid to foreign agents no tax is required to be deducted u/s 195 of the Act and, therefore, disallowance u/s 40(a)(ia) has correctly been deleted. Thus, we confirm the order of the Id. CIT (Appeals) and dismiss ground Nos. 1 and 2 of the appeal of AO. Disallowance of commission - Allegation of the AO was that commission paid to Rohit Anand (HUF) is for rendering services, but the commission is paid to HUF - HELD THAT - In the present case the rendition of the service is not in dispute. The taxability of commission income in the hands of the recipient in the status of Individual or HUF cannot be of relevant consideration to make any disallowance in the hands of the assessee. Thus, when the rendition of service is not in doubt, amount of commission paid is also not questioned, the tax deduction at source on commission is verified and when the payment is made by account payee cheque, in all these combined circumstances we do not find any merit in ground No. 3 of the appeal. Addition on account of interest on investment when the assessee had not sufficient interest free funds available - HELD THAT - We find that assessee has shown capital of ₹ 28,00,000/- and also interest free loan from family members of ₹ 1,05,90,000/- against which the investment in property is merely ₹ 28,93,600/-, Thus there was enough interest free funds available with the assessee. Thus the action of the Id. Assessing Officer to disallow the interest on the above sum @ 12% out of above interest paid by the assessee of ₹ 13,91,000/- is not correct and hence, correctly been deleted by the Id. CIT (Appeals). DR could not show any error in the order of the Id. CIT (Appeals). Thus, ground No. 4 of the appeal is dismissed.
Issues:
1. Disallowance of commission payment without TDS deduction under Section 197 of the IT Act. 2. Disallowance of commission payment to agents subject to tax deduction under Section 195 of the Act. 3. Disallowance of commission payment without proving genuineness of the transaction. 4. Deletion of addition on account of interest on investments without sufficient interest-free funds. Analysis: Issue 1: Disallowance of Commission Payment without TDS Deduction The appeal concerned the disallowance of commission payments totaling &8377;3,41,57,558 made to foreign agents without tax deduction at source. The Assessing Officer contended that tax should have been deducted under Section 195 of the Act. However, the Id. CIT (Appeals) deleted the disallowance based on the foreign agents operating outside India, no accrual of income in India, and lack of permanent establishment in India. The Tribunal upheld the decision citing relevant case laws and the absence of tax liability in India, confirming the deletion of the disallowance. Issue 2: Disallowance of Commission Payment Subject to Tax Deduction Another aspect was the disallowance of commission payments to agents subject to tax deduction under Section 195 of the Act. The Assessing Officer argued for disallowance based on AAR rulings and High Court decisions. However, the Id. CIT (Appeals) ruled in favor of the assessee, emphasizing the non-taxability of foreign commission payments to non-residents without a permanent establishment in India. The Tribunal concurred with this view, dismissing the appeal on this issue. Issue 3: Disallowance of Commission Payment without Proving Genuineness Regarding the disallowance of commission payment of &8377;1,31,995 to an Indian party, the Assessing Officer questioned the genuineness of the transaction due to the absence of a written agreement. However, the Tribunal found no merit in this ground as the service rendition was not disputed, payment method was verified, and tax deduction at source was in order. Consequently, the Tribunal upheld the Id. CIT (Appeals) decision to delete this disallowance. Issue 4: Deletion of Addition on Account of Interest on Investments The final issue concerned the deletion of an addition of &8377;3,47,232 on interest on investments due to alleged insufficient interest-free funds. The Tribunal analyzed the available funds against the investments and concluded that there were ample interest-free funds, leading to the deletion of the addition by the Id. CIT (Appeals). The Tribunal dismissed the appeal on this ground, affirming the decision of the Id. CIT (Appeals). In conclusion, the Tribunal dismissed the appeal of the Assessing Officer, upholding the decisions of the Id. CIT (Appeals) on all the issues raised in the case.
|