2021 (7) TMI 152 - AT - Income Tax

Deduction u/s. 37(1) denied - addition on account of export commission treating the same as non-genuine - also addition u/s 40(a)(ia) - assessee failed to deduct the TDS on the impugned amount of export commission TDS u/s 195 - HELD THAT - CIT (A) was pleased to hold that the provisions of TDS are not applicable with respect to the commission paid to the overseas parties. Besides this the assessee furnishes the necessary details to justify that the export commission was genuine in support of its claim. Accordingly the learned CIT (A) deleted the addition made by the AO for a sum made by the AO. The balance amount was confirmed by the learned CIT (A) on the reasoning that the assessee failed to furnish the details of the parties and the services rendered by such parties. AR before us at the time of hearing requested to restore the matter to the file of the AO and assured to file the requisite details in support of the claim of the assessee - matter before us pertains to the assessment year 2013-14 which was decided by the AO dated 29 December 2015 and subsequently the learned CIT (A) has passed the order dated 17th February 2016. The assessee before the authorities below failed to furnish the details of the parties despite having several opportunities. Even now before us the matter has been listed 16 times prior to the present date of hearing but the assessee has not brought anything on record about the details of such parties after filing the appeal on 4th April 2018. Thus it is transpired that it is very unlikely that the assessee shall be in a position to furnish the necessary details. Accordingly we are not inclined to give fresh opportunity to the assessee by restoring the matter to the file of the AO as prayed by the learned AR for the assessee. Accordingly without going into the merit of the case the ground of appeal of the assessee in the absence of documentary evidence as discussed above is hereby dismissed. Capitalizing the amount of interest attributable to the advances given to the parties for acquiring the capital asset - HELD THAT - As the assessee has not utilized the borrowed fund for making the advance to the party as discussed above. Thus the question of capitalizing the element of interest attributable on the advances given by the assessee for acquiring the technical know-how does not arise. Hence the ground of appeal of the assessee is allowed. Admission of additional evidence - HELD THAT - AR in the application for the admission of the additional evidences has just casually mentioned that these additional evidences pertain to the 3rd parties and therefore the assessee has taken time to collect the same. The reason given by the assessee is not based on any supporting documents. On perusal of the documents for the admission we note that all the documents pertain to the period prior to the date of assessment order except some certificate which are not very relevant to decide the issue on hand. Likewise it is not also the case of the assessee that the authorities below have not furnished the sufficient opportunities for providing such additional evidences. Accordingly we are of the view that the additional evidences filed by the assessee in support of its claim cannot be admitted as the assessee has not furnished the sufficient cause which prevented to produce the aforesaid additional evidences. Hence we deny to accept the additional evidences filed by the assessee and thus without going into the merit of the case we confirm the order of the authorities below. Hence the ground of appeal of the assessee is dismissed.

Summary

Issues Involved: Disallowance of export commission, addition under section 40(a)(i) for non-deduction of TDS, disallowance under section 36(1)(iii) for interest on capital advances, charging of interest under sections 234A, 234B, 234C, and 234D, and initiation of penalty proceedings under section 271(1)(c).

Issue-wise Analysis:

1. Disallowance of Export Commission:
The assessee challenged the disallowance of Rs. 5,75,929 out of the total export commission of Rs. 29,61,337. The AO disallowed the commission due to lack of documentary evidence like agreements, identity proof, and services rendered by foreign agents. Additionally, the AO noted the failure to deduct TDS under section 195, leading to disallowance under section 40(a)(i). The CIT(A) partly upheld the AO's decision, confirming the disallowance of Rs. 5,75,929 due to insufficient details about parties and services. The Tribunal, considering the repeated failure of the assessee to furnish necessary details, dismissed the appeal, denying further opportunity for fresh adjudication.

2. Addition under Section 40(a)(i):
The Tribunal upheld the CIT(A)'s decision that the provisions of TDS were not applicable to the commission paid to overseas parties, as the services were rendered outside India, and the agents had no business connection or permanent establishment in India. However, the disallowance of Rs. 5,75,929 was confirmed due to lack of evidence supporting the genuineness of the transactions.

3. Disallowance under Section 36(1)(iii) for Interest on Capital Advances:
The AO capitalized the interest of Rs. 6,85,804 attributable to advances given for acquiring technical know-how. The CIT(A) upheld this, noting that the assessee's own funds were insufficient to cover the advances. The Tribunal, however, concluded that the assessee's own funds and interest-free loans exceeded the advances, thus no borrowed funds were used. Consequently, the disallowance was deleted, allowing the assessee's appeal on this ground.

4. Charging of Interest under Sections 234A, 234B, 234C, and 234D:
The assessee contested the charging of interest under these sections, but no specific arguments or Tribunal findings were detailed in the judgment.

5. Initiation of Penalty Proceedings under Section 271(1)(c):
The assessee challenged the initiation of penalty proceedings, but similar to the interest issue, no specific arguments or Tribunal findings were detailed in the judgment.

Additional Appeals for A.Y. 2014-15:

1. Disallowance of Export Commission:
For the A.Y. 2014-15, the AO disallowed Rs. 2,94,852 out of the total export commission of Rs. 24,78,592 due to lack of evidence. The CIT(A) confirmed this disallowance. The assessee submitted additional evidence to the Tribunal, but it was not admitted due to insufficient cause for not presenting it earlier. Consequently, the Tribunal dismissed the appeal, confirming the disallowance.

2. Addition under Section 40(a)(i):
Similar to the previous year, the Tribunal upheld the CIT(A)'s decision that the TDS provisions were not applicable, but confirmed the disallowance due to lack of evidence.

3. Disallowance under Section 36(1)(iii) for Interest on Capital Advances:
The Tribunal applied the same reasoning as in the previous year, concluding that the assessee's own funds and interest-free loans exceeded the advances. Thus, the disallowance was deleted, allowing the appeal.

Conclusion:
Both appeals were partly allowed, with the Tribunal confirming some disallowances due to lack of evidence while deleting others based on sufficient own funds and interest-free loans.