9911796707
Advanced Search 
TMI Blog2013 (2) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... ' detected by United Nations appointed Volcker Committee. For this, revenue has raised following two grounds: "1. That on the facts and circumstances of the case, Ld. CIT(a) has erred in law in allowing illegal commission payment amounting to Rs.29,60,513/- to some Iraqi politician without appreciating the facts that U.N.O. appointed Volcker Committee which identified the assessee in question who had made illegal payment of Iraqi politician in the name of commission. 2. That on the facts and circumstances of the case, Ld. CIT(A) has erred in law in mentioning that section 40(a)(ia) does not apply in this case without appreciating the facts that assesee did not deduct tax from payment of foreign agents u/s. 195." 3. Both these appeals have been delayed by 23 and 31 days respectively. Revenue has filed affidavits explaining the reasons for delay in Assessment Years 2002-03 & 2003-04 separately, which are as under: For Assessment Year 2002-03: "Date Reasons 12.10.2010 to 28.10.2010 Application for filing second appeal was not communicated. 29.10.2010 Application for filing second appeal communicated. 30.10.2010 to 31.10.2010 Saturday and Sunday. 01.11.2010 to 03.11.2010 The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly remitted directly to him and is, therefore, not received by him or on his behalf in India. Such an agent is not liable to income-tax in India on the commission" 9.3. Further, the circular no 786 dated February 7, 2000 issued by the Income Tax Department clearly states that the payment made to non resident agent operating from outside India is not taxable in India as no part of his income arises in India. Since, the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Hence, the same is not to be considered taxable in India. Therefore, no tax is deductible under section 195 and consequently, the expenditure on export commission and other related charges payable to a non-resident for services rendered outside India becomes allowable expenditure. In my opinion the commission was not after sales service fee and there being no specific information available with Volcker Committee regarding payment. 9.4. It was submitted that there are no evidences to show that the payment made by the appellant was of the nature of a kick-back as alleged; nor would it have made any difference in the matter of allowability of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. The appellant has produced ample material in support of the reasonableness and legality of the payment of commission. The legal formalities required to be observed for remittance of the commission abroad were observed and the commission was paid through the normal Banking channel. At no point of time any question was raised that the payment by the appellant was illegal. The appellant has established that the payment of commission was made for the purpose of business on grounds of business expediency and there was no element of illegality in making the payment". 10.1. On the basis of the facts narrated by A.O. and after carefully considering the submission of the appellant, respectfully following the decision of my predecessor and decision of Hon'ble Tribunal, Kolkata in case of Kotsons (P) Ltd in 1TA NO. 2315/Kol/2005, Northern Projects Ltd. in ITA No. 1424/Kol/2008 & TIL Limited reported in 16 SOT page 33. I hold that the payment of commission of Rs. 13,66,167/- by the appellant was not illegal and is an allowable business expenditure. The disallowance made by the A.O. in this regard is deleted. 10.2. Further, I would like to mention that Section 40(a)(i) shall not be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ministry of Electricity, Baghdad with the efforts of Mr. Kubaisi. The Department has not controverted the submission of the Ld. A.R. that Mr. Kubaisi was to ensure that the due approval of UNO was received by the assessee, the Letters of Credit are sent by the concerned Iraqi Department at the earliest so that the assessee company could complete the maximum supply under the two purchase orders. Mr. Kubaisi was to arrange internal approval of such supplies by the Ministry of Electricity, Iraq. Therefore, we are of the considered view that the assessee-company has paid commission to Mr. Kubaisi for the services rendered by Mr. Knbarsi to the assessee company. The payment of commission is on account of business consideration. 22. Further, we observe that a part of the supplies/consignments was in transit. The war broke out in Iraq and due to that the Port of Iraq was badly damaged. It was not possible to take the containers from Dubai to that port. The assessee had to make interim arrangement for storage and security arrangement. In this regard, the assessee took the help of M/s. NTE International. Pursuant to the agreement entered into between the assessee and the NTE Internatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserve that the assessee paid the commission for export made to Mauritious and Nigeria respectively. There is no dispute to the fact that the commission was paid to M/s. Barbes Pougnet Ltd. with the approval of Reserve Bank of India and through normal banking channel. The relevant correspondent is placed at pages 409 to 423 of the paper book. Similarly the assessee also paid commission to M/s. Mann International India Pvt. Ltd. at the rate of 10% as per the agreement entered into for the supply made to M/s. Sam & Sam International of Nigeria against six invoices for the aggregate value of US Dollars 424776. In this regard, the agreement was duly entered into, the copy of which is placed at page 401 read with page 402 of the paper book. Therefore, we agree with the ld. A.R. that the payment of commission at the rate of 10% to Dr. S. S. Mann was for the services rendered to the assessee. It was paid for the business purposes and not for any extraneous consideration. 25. Further we also observe that the assessee company received appreciation for earning foreign exchange through export business and development export market. The Department has not disputed the above observation made b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
