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2015 (3) TMI 5 - AT - Income TaxDisallowance of export commission - non deduction of TDS on the commission paid to non-residents - Held that - Since the above exports commission relates to services rendered outside India and payment is made outside India, there is no income chargeable to tax in India in the hands of foreign agents and hence the provisions of Section 195 of the Act was not applicable. As in the assessee's own case for Assessment Year 2008-09, the co-ordinate bench of the Tribunal has allowed the export commission to the very same non-resident, so therefore the ld CIT(A) erred in disallowing the said export commission merely on the basis that TDS was not deducted by the assessee. Thus disallowance under section 40(a)(i) was not called for on sales commission paid to non-resident - Decided in favour of assessee.
Issues:
Disallowance of export commission for non-deduction of TDS and non-submission of supporting evidence. Analysis: The appellant appealed against the order of the CIT(A)-IV regarding the disallowance of export commission amounting to Rs. 2,82,54,644 due to non-deduction of TDS. The AO disallowed the commission for non-deduction of TDS by the assessee to non-resident/outsiders and lack of supporting evidence. The CIT(A) upheld the disallowance citing the jurisdictional High Court's ruling that payments to non-residents for exports originating from India are liable for TDS under Section 40(a)(ia). The CIT(A) rejected the appellant's arguments based on previous decisions and upheld the disallowance. The appellant challenged this decision before the ITAT. The ITAT considered the appellant's argument that a co-ordinate bench had allowed export commission in the appellant's favor for the preceding assessment year. The ITAT reviewed the facts and found that the appellant, engaged in manufacturing steel ingots, bars, etc., paid commission to non-residents on export sales. The authorities held that TDS should have been deducted on the commission paid to non-residents, and the expense claimed was not eligible for deduction under Section 40(a)(i). The ITAT referred to a previous case where the CIT(A) had deleted a similar addition after considering additional evidence provided by the appellant. The ITAT concurred with the CIT(A)'s decision, finding no flaws in the reasoning and upholding the order. The ITAT distinguished the present case from the Havell's case cited by the CIT(A) and the DR, emphasizing that the issue at hand was not similar to the testing charges scenario discussed in the Havell's case. The ITAT referenced a Delhi High Court judgment stating that payment of sales commission to a non-resident for export sales is not subject to disallowance under Section 40(a)(i) if the non-resident operates outside India and the payment is remitted abroad. Based on this case law and the previous decision in the appellant's favor for the 2008-09 assessment year, the ITAT allowed the appeal, concluding that the appellant was not required to deduct TDS on the export commission to non-residents. In conclusion, the ITAT allowed the appeal, overturning the disallowance of export commission due to non-deduction of TDS. The ITAT's decision was based on distinguishing the present case from previous judgments and following the precedent set in the appellant's favor for the 2008-09 assessment year.
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