9911796707
TMI Blog2011 (3) TMI 1628X X X X Extracts X X X X X X X X Extracts X X X X ..... eals and the assessee is also same, these are clubbed together and disposed off by this combined order for the sake of convenience. 2. Since the facts are identical in all these appeals, for the sake of brevity, we deal with the facts mentioned in ITA No. 601/Hyd/09 for the assessment year 2001-02. Briefly stated facts of the case are that the assessment under section 143(3) for the year under consideration was completed on 26-2-2004 determining the total income of ₹ 6,95,42,210/-. Aggrieved against this assessment order, the assessee filed an appeal before the CIT (A). On appeal, the CIT (A) allowed certain relief to the assessee. Against the order of the CIT (A), the department filed appeal before the ITAT. The Tribunal vide order dated 31-10-2007 allowed the appeal of the department in ITA No.797/Hyd/2004. The Tribunal in the order referred to above set aside the issue relating to disallowance under section 40a (ia) of the Act for the commission payments made by the assessee to the foreign agents. As regards computation of deduction under section 80HHC of the Act when the income is computed under section 115JA, the Tribunal directed to compute the eligible profit for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h grounds are general in nature and no adjudication is required. 5. Ground Nos. 2 and 3 are with regard to the disallowance of commission paid to non-resident agents under section 40a (ia) of the Act. In the present assessment order, the assessing officer observed that, the Tribunal had set aside the issue for re-examination of the issue after considering agreement, if any between the parties and also to find out whether there was any intention to make the payment by cheque or draft. The assessing officer was also directed to reconsider the issue in the light of the judgment of Hon'ble Apex Court in the case of Oagle Glass Works. In response to the notice issued by the assessing officer, the assessee reiterated that the commission was paid by them to the foreign agents for the services rendered outside India and the payments were remitted through the banking channel as per the requirement of RBI regulations. The assessee also stated that the fact in their case is different from the one referred to the case of Oagle Glass Works. The assessee also relied on the decision of the Tribunal, Hyderabad Bench "B" in the case of Premier Explosives Limited in ITA No.736/Hyd/03 for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [A] by following several decisions of the Tribunal and in particular, the judgment of the Apex Court in the case of CIT vs. Toshuku Ltd., reported in 125 ITR 525 held that the payment of commission to non-resident selling agents does not attract the provisions of section 195 and consequently disallowance under section 40a [ia] of the Act would not arise. Accordingly he deleted the said disallowance except in the case of payment made to San International. 6. The learned departmental representative submitted that during the year under consideration, the assessee claimed to have paid commission of ₹ 38,81,237/- to 29 non-resident agents. Out of total 25 non-resident agents, the assessee furnished correspondence in respect of 13 agents only. In respect of other agents, the assessee could not substantiate the claim that the provisions of section 40a (ia) are not attracted. Therefore, it is rightly held by the assessing officer that the provisions of section 40a (ia) are attracted. It is further submitted that wherever the assessing officer found that the payment of commission was not liable for deduction of TDS, he allowed the expenses as allowable expenditure and the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt because the basic criteria provided in the section is about genesis or accruing or arising in India, by virtue of connection with the property in India, control and management vested in India, which are not satisfied in the present cases. Under these circumstances, withdrawal of earlier circulars issued by the CBDT has no assistance to the department, in any way, in disallowing such expenditure. It appears that an overseas agent of Indian exporter operates in his own country and no part of his income arises in India and his commission is usually remitted directly to him by way of TT or posting of cheques/demand drafts in India and therefore the same is not received by him or on his behalf in India and such an overseas agent is not liable to income-tax in India on these commission payments. This view is fortified by the judgment of Apex Court in the case of CIT vs. Toshoku Limited reported in 125 ITR 525. 9. It is pertinent to note that the section 195 of the Act has to be read along with the charging sections 4, 5 and 9 of the Act. One should not read section 195 to mean that the moment there is a remittance; the obligation to deduct TDS automatically arises. If we were to acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited vs. Director of Income-tax, Mumbai reported in 288 ITR 408 wherein it was held that for section 195 is to be attracted, the services rendered by the nonresident should have been rendered in India and also should have been used in India and that, this twin tests has to be satisfied for section 195 is to be attracted. We find that the Legislation introduced the Explanation to section 9(2) of the Act, after this judgment, with retrospective effect from 1-6-1976 in the Finance Act, 2007. Despite this introduction of Explanation to section 9(2) of the Act, the Karnataka High Court in the case of Jindal Thermal Power Co. Ltd., vs. DCIT reported in 321 ITR 31 held that the law laid down by the Apex Court in the case of Ishikawajima Harima Heavy Industries Limited (supra) still holds good despite the retrospective amendment to section 9 of the Act. In our opinion, the requirement of services of the non-resident being rendered in India and being utilized in India is still valid, despite the judgment of the Karnataka High Court in the case of Samsung Electronics (supra) and withdrawal of earlier circulars issued on this subject by CBDT. 11. It is well settled law that the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer to restrict himself to the computation of deduction under section 80HHC in terms of Special Bench decision of ITAT in the case of DCIT vs. Syncome Formulations (I) Ltd., (13 SOT 404). 13. The learned departmental representative submitted that the deduction under section 80HHC of the Act is to be recomputed as per the directions of the Tribunal in view of the amended provisions of section 80HHC. Assessee was given deduction as per the amended provisions since the turnover of the assessee is more than ₹ 10 crores and the assessee could not furnish any details. Therefore, the assessing officer rightly not allowed proportionate deduction on 90% export incentive to the assessee. Since the issue was entirely restored to the file of the assessing officer by the Tribunal, the assessing officer has to make any adjustment under section 80HHC under the normal provisions of the Act. 14. We find that the Tribunal in its order directed that - " The next ground of appeal in all the appeals except ITA No.772/Hyd/2000 is regarding computation of deduction u/s 80HHC when the income is computed under section 115JA. We have heard the learned departmental representative and the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
