2014 (6) TMI 837 - AT - Income Tax

Deletion of disallowance of USA expenses - non deduction of TDS on remittance to non-resident - reimbursement of expenses - Held that - Following Himalya International Ltd. Versus DCIT Circle-12(1), New Delhi and ITO, Ward-12(4), New Delhi Versus Himalya International Ltd. 2014 (3) TMI 617 - ITAT DELHI - all US expenses incurred by the consignment agent on behalf of the assessee were the responsibility of the assessee as per MOU dated 19.9.2002 and subsequent agreement dated 30.3.2004, which were also certified by CPA audit report, when actual export sale was effected at USA through consignment agent on behalf of the assessee, then expenses claimed by the assessee for the purpose of business cannot be treated as post sales expenses and observations and findings of the Assessing Officer are not correct and justified in this regard and we set aside the same to this extent only relying upon GE India Technology Centre Private Ltd. Versus Commissioner of Income Tax & Anr. 2010 (9) TMI 7 - SUPREME COURT OF INDIA followed thus, Circular No. 715 dated 8.8.95 is not applicable. The AO concluded the assessment n contradictory finding because on the one hand, the AO has considered gross sales realized value in USA as sales of the assessee for the financial year under consideration and on the other hand the AO held that the export sale was completed when the consigned goods left the Indian Customs Border and all expenses incurred thereafter were post sale expenses thus, the first part of findings of the AO are correct that the gross sales realized value in USA is the export sales of the assessee but export sales was not completed when the goods left the Indian Custom Borders because it was consignment which was intended to be sold through consignment agent of the assessee i.e. M/s Global Reliance In. in USA - CIT(A) has very elaborately dealt with the issue and had rightly deleted the addition Decided against Revenue. Deletion of late deposit of ESIC and PF - Held that - Following Commissioner of Income Tax Versus AIMIL Limited and others 2009 (12) TMI 38 - DELHI HIGH COURT - CIT(A) has allowed the claim of the assessee on account of payment of employees contribution / PF and ESIC - the amount of PF/ESIC was deposited before the due date of filing of return u/s 139(1) of the Act Decided against Revenue.

Summary

Issues involved:
1. Disallowance of USA expenses
2. Deletion of late deposit of ESIC and PF

Analysis:
1. Disallowance of USA expenses:
The Revenue appealed against the deletion of a disallowance of Rs.4,78,76,044 on account of USA expenses for the assessment year 2002-03. The Ld. CIT(A) had deleted the disallowance, citing similar disallowances in the assessee's case for the assessment year 2006-07 and 2007-08. The Tribunal referred to previous orders and agreements between the assessee and M/s Global Reliance Inc., emphasizing that expenses were the responsibility of the assessee. The Tribunal analyzed various legal precedents, including the decision of the Hon'ble Supreme Court and ITAT Mumbai, to conclude that the expenses claimed by the assessee were related to marketing and sales expenses. It was observed that the consignment agent did not render services in India, and thus, consignment commission was not taxable in India. The Tribunal also noted that the authorities had accepted the accounting method of the assessee. In light of these observations and legal principles, the Tribunal dismissed the Revenue's appeal.

2. Deletion of late deposit of ESIC and PF:
The second issue pertained to the deletion of a sum of Rs.2,70,959 by the Ld. CIT(A) concerning the late deposit of ESIC and PF. The Tribunal upheld the decision of the Ld. CIT(A) based on the precedent set by the Hon'ble Delhi High Court in a previous case. It was noted that the PF/ESIC amount was deposited before the due date of filing the return under section 139(1) of the Act. Following the legal precedent, the Tribunal dismissed this ground of appeal as well.

In conclusion, the Tribunal dismissed the Revenue's appeal based on the detailed analysis and application of legal principles to the issues at hand. The judgment provided a thorough examination of the facts, agreements, legal precedents, and decisions, leading to the dismissal of the Revenue's grounds of appeal.