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TMI Blog2015 (1) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... do not find any error or illegality in the order of ld. CIT(A) qua this issue. - Decided in favour of assessee. Salary paid to Non-resident Managing Director - non deduction of TDS - disallowance u/s. 40a(iii) - CIT(A) deleted the addition - Held that:- salary in question was paid to Mr. Jayant Bhardwaj, MD of the assessee in US. The assessee produced the passport and visa of the MD to show that he was a non-resident Indian during the year under consideration and, therefore, the salary received by him outside India for the services rendered outside India are not taxable in India. Since the fact that the MD of the assessee is a non resident during the year has not been disputed by the Revenue , therefore, the salary paid outside India at US for the services to the US branch would not be taxable in India as per the provisions of Section 9 of the Income tax Act, thus no corresponding disallowance can be made under section 40(a)(i) of the Income tax Act, 1961. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted the tax at source from the chargeable salary and hence the disallowance u/s. 40a(iii) was mandatory. 3(ii). The CIT(A) ought to have held that part of the salary of the Managing Director was earned in India and hence the same was chargeable to tax u/s. 9(1)(ii) of the I.T. Act. 3(iii). The CIT(A) ought to have noted that the assessee had failed to deduct the tax at source u/s. 192 of the I.T. Act from the chargeable salary of the Managing Director of the assessee company. 4. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored." 2. Ground No.1 is regarding deleting the addition on account of discrepancy in the amount of receipt shown in the books of account and as per the TDS certificate. The assessee is engaged in the business of shipping industry as freight forwarding agent. The assessee filed its return of income on 29.11.2006 declaring total income of ₹ 1,31,64,006/-. During the course of scrutiny assessment the AO noted that receipt as per TDS certificate stood at ₹ 10,54,03,747/- whereas income credited in the Profit and Loss Account (P/L Account) is at ₹ 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is received at the destination of the cargo. For FOB shipment TDS cannot be deducted since amount is realized outside India. As a general practice in the industry only the difference between receipt including freight and reimbursement of charges and payment of freight and other charges for movement of cargo is taken to the P/L Account. The assessee is consistently following this practice since inception and revenue has accepted this since beginning. There was no addition on this account either in the earlier assessment year or in the subsequent assessment year . He has submitted that the assessee duly explained before the AO that it raised the bills on customers which include freight, terminal handling charges, documentation charges and other charges incurred on behalf of the clients and only the balance income is credited to the P/L Account. Further, export freight where payment is made in other countries, no TDS is deducted. Sample copies of bills raised on account of freight and other charges were produced before the AO. Either the AO misunderstood the fact and made the addition by considering the TDS receipts without considering the gross amount received by the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 45,32,25,329/-. Accordingly, the assessee has worked out the income from freight on exports at ₹ 4,54,69,496/-. Apart from the income from exports, assessee has also shown income from freight on imports commission as well as USA branch income and thereby arrived at the total voyage income at ₹ 9,78,04,154/-. The CIT(A) after considering this break-up, has decided the issue, that addition was not justified and is to be deleted as given in para-8 as under :- "8. I have gone through the submission of the appellant as well as the reconciliation of receipts submitted by the appellant. From the reconciliation it becomes crystal clear that the receipts are not of ₹ 10,54,03,747/- but at ₹ 49,86,94,825/-. It is also proved by the appellant that the entire receipt shown in the TDS Certificate of ₹ 10,54,03,747/- has duly been considered by the appellant while preparing its P&L Account and therefore nothing remains which has not been disclosed in the P&L Account. Therefore, I hold that there is no income which has not been disclosed in the books. In view of the facts, addition made of ₹ 75,99,593/- deserves to be deleted. Accordingly, this ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and therefore, the salary paid outside India for the service rendered outside India by a non-resident is not taxable in India and consequently no TDS is required to be deducted. He has supported the order of CIT(A). 4.4 We have considered the rival submissions as well as the relevant material on record. The Revenue has not disputed the fact that the branch at US is independently assessed to tax in US being PE of the assessee . We find that the salary in question was paid to Mr. Jayant Bhardwaj, MD of the assessee in US. The assessee produced the passport and visa of the MD to show that he was a non-resident Indian during the year under consideration and, therefore, the salary received by him outside India for the services rendered outside India are not taxable in India. Since the fact that the MD of the assessee is a non resident during the year has not been disputed by the Revenue , therefore, the salary paid outside India at US for the services to the US branch would not be taxable in India as per the provisions of Section 9 of the Income tax Act. CIT(A) after considering the facts has deleted the addition in para-10 as under :- "10. I have considered the submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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