2020 (2) TMI 315 - AT - Income Tax

TDS u/s 195 - services provided by the non-resident foreign agent or being utilised in India - taxability under section 9(1)(i) and 9(1)(vi) (b) - HELD THAT - The paper book filed before us shows that the assessee produced certain documentary evidence in support of rate difference, brokerages etc and now it remains an admitted fact that such material was not available before the Assessing Officer when the assessment was made. The impugned order also does not reveal that, before placing reliance on such documentary evidence, the Ld. CIT(A) gave any opportunity to the learned Assessing Officer to verify the correctness of the documents and to comment upon them. Following the view taken by the coordinate benches of this Tribunal for the assessment years 2010-11 and 2011-12 in assessee s own case, under identical facts and circumstances, we find it a fit case to set aside the impugned order on this aspect and to remand the issue to the file of the learned Assessing Officer for verification of the documents produced by way of additional evidence before the Ld. CIT(A) and to take a fresh view. We accordingly set aside the issue to the file of the learned Assessing Officer for verification of the documents produced by way of additional evidence before the Ld. CIT(A) and decide it afresh. Grounds No. 1 and 2 are accordingly allowed for statistical purpose. Addition u/s 40(a)(ia) - Not in dispute that the services of the foreign agents were rendered outside India for sales and the payment was also made outside India. Under similar circumstances for the assessment year 2011-12 observed that such payment of commission does not come under the purview of section 195 of the Act and therefore, the Ld. CIT(A) was justified in deleting the addition made under section 40 (1) (i)of the Act. Since facts are identical, we are of the considered opinion that a different view cannot be taken and while respectfully following the same we uphold the findings of the Ld. CIT(A) on this aspect

Summary

Issues:
1. Disallowance of TDS on commission paid to foreign agents.
2. Disallowance of loss on rate settlement under section 43(5) of the Act.
3. Additional evidence presented without opportunity to Assessing Officer.
4. Disallowance of commission payment under section 40(1)(i) of the Act.

1. Disallowance of TDS on Commission Paid to Foreign Agents:
The Revenue challenged the order passed by the Commissioner of Income Tax (Appeals) regarding the disallowance of TDS on commission paid to non-resident foreign agents. The Assessing Officer contended that services provided by foreign agents were taxable under sections 9(1)(i) and 9(1)(vi)(b) of the Act, thus necessitating TDS under section 195. The Tribunal upheld the deletion of the disallowance for the assessment year 2011-12, ruling that the payment did not fall under section 195. Given the identical facts, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this issue.

2. Disallowance of Loss on Rate Settlement under Section 43(5) of the Act:
The Assessing Officer disallowed a loss claimed by the assessee on rate settlement, treating it as a speculative loss under section 43(5) of the Act. The CIT(A) deleted this disallowance, noting that disputes were settled through mediators or arbitrators, and the losses were not due to breach of contracts. The Revenue contended that the transactions were speculative without evidence of disputes or settlements through legal means. The Tribunal remanded the issue to the Assessing Officer for verification of additional evidence presented during the appeal, following the precedent set in similar cases for earlier assessment years.

3. Additional Evidence Presented Without Opportunity to Assessing Officer:
The Tribunal found that the CIT(A) accepted additional evidence without giving the Assessing Officer an opportunity to verify it, contravening Rule 46-A of the Income Tax Rules. The issue was remanded to the Assessing Officer for proper examination of the documents provided during the appeal, aligning with the approach taken in previous cases for the same assessee.

4. Disallowance of Commission Payment under Section 40(1)(i) of the Act:
The Revenue argued that the commission paid to foreign agents without TDS deduction justified the disallowance under section 40(1)(i) of the Act. However, the Tribunal, based on the facts that services were rendered and payments made outside India, upheld the CIT(A)'s decision to delete the addition under section 40(1)(i). The Tribunal maintained consistency with its earlier decision for the assessment year 2011-12, concluding that the commission payment did not fall under section 195. As a result, the appeal of the Revenue was allowed in part for statistical purposes.

This detailed analysis of the judgment addresses the issues raised in the legal case, providing a comprehensive understanding of the Tribunal's decision on each matter.