2022 (11) TMI 832 - HC - Income Tax

TDS u/s 195 - Disallowance u/s 40(a)(i) - payment made to International Freight Forwarding Agents (related companies) - HELD THAT - Tribunal had dismissed the revenue s appeal by following the assessee s own case for the assessment year 2010-11 wherein a similar disallowance under Section 40(a)(i) was upheld by the Tribunal vide order 2019 (4) TMI 2000 - ITAT KOLKATA holding that the amount paid by the assessee company to International Freight Forwarding Agent was neither covered under Section 9(1)(i) nor under Section 9(1)(vii) of the Act and the same, therefore, did not construe the income as deemed to occur or arise in India in the Memorandum of Grounds of Appeal From the impugned order passed by the learned Tribunal we find that the learned Tribunal has taken note of the decision of the CIT (Appeals) for the assessment year 2010-2011 which was in favour of the assessee. There is nothing on record to indicates that the fact situation for the assessment year 2010-11 is materially different or in any manner different from the assessment year under consideration, i.e. A.Y. 2014. That apart we find that the learned Tribunal had examined the entire factual position and gone through the agreement and thereafter tested the correctness of the argument of the revenue on the ground that the foreign companies are related parties. Tribunal did not agree with the said condition since on facts it noted that those foreign companies are independent legal entities in foreign countries and they have no business activity nor any permanent establishment in India and, therefore, cannot automatically have business connection in India just because they are related parties. The revenue has not been able to dislodge the factual finding recorded by the Tribunal in its order. Thus we find that there is no question of law much less substantial question of law arises for consideration in this appeal.

Summary

Issues:
1. Delay in filing the appeal.
2. Disallowance under Section 40(a)(i) of the Income Tax Act, 1961.
3. Application of the decision in the assessee's own case for a previous assessment year.
4. Whether each assessment year is distinct.

Analysis:
1. Delay in filing the appeal:
The Court acknowledged a delay of 210 days in filing the appeal and found sufficient cause for condonation of the delay. The application for condonation was allowed, and the delay was condoned.

2. Disallowance under Section 40(a)(i) of the Income Tax Act, 1961:
The appeal was filed by the revenue against the order of the Income Tax Appellate Tribunal regarding the disallowance of a payment made to International Freight Forwarding Agents. The Tribunal upheld the disallowance, stating that the payment was not covered under relevant sections of the Act. It was noted that the foreign companies involved were independent legal entities with no business activity or establishment in India, thus rejecting the argument that they automatically had a business connection in India as related parties. The Tribunal's factual findings were upheld, and no substantial question of law was found to arise.

3. Application of the decision in the assessee's own case for a previous assessment year:
The Tribunal had previously dismissed the revenue's appeal by following the decision in the assessee's own case for a previous assessment year. The department did not appeal against the order for the earlier year. The Court emphasized the need for consistency in decisions unless there are distinguishing features in facts or law. As the factual situation for the previous assessment year was not found to be materially different from the current assessment year, the Tribunal's decision was upheld.

4. Distinctness of each assessment year:
The argument was made that each assessment year is distinct and different, and therefore, the Tribunal should not have relied on the decision from the assessee's previous case. However, the Court highlighted the need for consistency unless there are significant differences in facts or law. As no distinguishing features were found, the Tribunal's decision was considered appropriate.

In conclusion, the appeal was dismissed as no substantial question of law was found to arise, and the Tribunal's decision was upheld based on the factual findings and legal analysis presented.