2020 (12) TMI 86 - HC - Income Tax

TDS u/s 195 - gross sales commission paid to the foreign parties / non-residents - payments made to the foreign parties for the services rendered outside India - ITAT held that the assessee despite opportunity being afforded, failed to place on record any material to controvert the finding recorded by CIT (Appeals) that the assessee has failed to establish that no material evidence are brought on record to show that the payments to were made to the foreign parties for the services rendered by them outside India - HELD THAT - Both the aforesaid Courts have concurrently held that the assessee has failed to place any material evidence on record to show that the payment made by the assessee to the foreign firms was for the services rendered by them to the assessee outside India. It is pertinent to mention here that the revenue has not disputed the payments made by the assessee to the foreign firms.It is the case of the revenue that the assessee has failed to prove that the aforesaid expenditure was incurred by the assessee in connection with its business so as to entitle it to claim deduction under Section 37(1) of the Act. Substantial questions of law framed by this Court do not arise for consideration in this appeal. Therefore, it is not necessary for us to answer the same.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal correctly disposed of the appeal without independent examination of facts?
2. Whether the tribunal was justified in upholding the order of CIT(A)?

Analysis:
1. The appellant, engaged in granite business, filed an appeal for the Assessment Year 2009-10 regarding disallowance of gross sales commission paid to foreign parties without TDS deduction. The Assessing Officer found non-compliance with Section 195 of the Income Tax Act and disallowed the commission. The CIT(A) upheld the disallowance due to lack of evidence that payments were for services outside India. The Tribunal dismissed the appeal as the appellant failed to provide material evidence. The appellant argued that documents were submitted to the Assessing Officer, but were not considered by the CIT(A) or the Tribunal. The Court noted that the payments were not disputed, but the appellant failed to prove the expenditure was for business purposes under Section 37(1) of the Act.

2. The Court reviewed the orders of the CIT(A) and the Tribunal, both concluding that the appellant did not provide evidence that the payments to foreign firms were for services rendered outside India. The Court emphasized that the appellant's failure to establish the purpose of the payments for business led to the disallowance. The Court found no merit in remitting the matter for fresh consideration, as the appellant did not substantiate the nature of the payments. Both lower courts' decisions were upheld, and the substantial questions of law framed by the Court were deemed irrelevant to the appeal's outcome.

In conclusion, the appeal was dismissed as the appellant failed to demonstrate that the payments made to foreign firms were for services rendered outside India and for the business purpose. The Court affirmed the lower courts' decisions, emphasizing the lack of material evidence provided by the appellant to support their claim for deduction under the Income Tax Act.