9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 1212 - AT - Income TaxTDS u/s 195 - disallowance of commission expenses under section 40(i) - commission paid to foreign agents - assessee was unable to produce evidences to prove the genuineness of such payments and also the factum of actual rendering of services by such recipients - CIT-A deleted the addition - HELD THAT - As decided in own case 2016 (9) TMI 107 - ITAT AHMEDABAD for application of Section 195, it is sine qua non that the payment to no-resident must have an element of income liable to be taxed under the Indian Income Tax Act, 1961. On the facts of this case, as we have already concluded, no part of the remittance to the commission agent was taxable in India. The assessee was, therefore, not under any obligation, on the facts of this case, to deduct any tax at source from the commission payments to the non-residents. Since there was no obligation to deduct tax at source, the very foundation of impugned disallowance under sect/on 40(a)(i) ceases to hold good in law. Learned CIT(A) was, therefore, quite justified in deleting the impugned disallowance. - Decided in favour of assessee.
Issues:
1. Disallowance of commission expenses under section 40(a)(i) of the Income Tax Act, 1961. 2. Taxability of commission paid to foreign agents. 3. Justification of commission payments and rendering of services by recipients. 4. Applicability of Explanation 1 to Section 9(1)(i) regarding income deemed to accrue or arise in India. 5. Obligation to deduct tax at source under Section 195 for payments to non-residents. Analysis: 1. The appeal was filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals)-2, Ahmedabad, regarding the disallowance of commission expenses under section 40(a)(i) of the Act for the Assessment Year 2016-17. The Assessing Officer disallowed the expenditure claimed under "Commission expenses" amounting to Rs. 2,14,03,441 paid to non-residents for non-deduction tax at source. The assessee challenged this before the Ld. CIT(A)-2, Ahmedabad, providing evidence that the commission payments were for services provided by parties outside India, and none of them had a business connection in India. 2. The Tribunal dismissed the Revenue's appeal and allowed the commission paid to parties outside India. The Hon'ble Gujarat High Court in a similar case deleted additions on commission payments. Consequently, the disallowance made by the Assessing Officer was deleted by Ld. CIT(A). 3. The Revenue appealed against this decision, arguing that the disallowance was made without proper appreciation of facts and evidence. However, the Senior D.R. for the Revenue acknowledged that a Co-ordinate Bench had previously dismissed a similar appeal by the Revenue in the assessee's own case for the Assessment Year 2013-14. The commission payments to non-residents remained consistent with previous years, and the order for the earlier assessment year was deemed applicable. 4. The Tribunal analyzed the legal position regarding the taxability of non-resident commission agents under Explanation 1 to Section 9(1)(i). It was concluded that since no operations of the commission agent were carried out in India, the income of the commission agents was not taxable in India. The Tribunal also highlighted the obligation to deduct tax at source under Section 195, emphasizing that such deduction is required only when the payment to a non-resident has an element of income liable to be taxed in India. 5. Ultimately, the Tribunal upheld the order passed by Ld. CIT(A) and dismissed the appeal filed by the Revenue, as well as the Cross Objection filed by the Assessee. The decision was based on the consistent application of legal principles and precedents in similar cases, confirming that the commission payments to non-residents were not taxable in India, and there was no obligation to deduct tax at source in this scenario.
|
