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TMI Blog2014 (4) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that the payment of commission is genuine in the absence of any evidences such as reasons for payment, basis of payment details of orders procured by the agent, copies of bills etc." 3. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made u/s.40(a)(ia) without giving an opportunity as per Rule 46A to the AO before accepting any evidence relating to genuineness of the commission paid." 4. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made u/s.40(a)(i) in the absence of evidence to prove that the commission is paid for services rendered outside India." 5. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that the decision of Hon ble Special Bench decision in the case of Merilyn Shipping and Transports vs. Add!. CIT (16 ITR (Trib.) 1 (Vishakhapatnam) is applicable in the assessee's case as the disallowance is made u/s.40(a)(ia), but erroneously mentioned in the assessment order u/s.40(a) (ia).' 6. "The appellant prays that the order of Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. The assessee filed written submission before Ld. CIT(A) dated 13/8/2012. It was submitted that Shri Bharat Goel is a non-resident agent who has given services outside India, therefore, no TDS was required to be deducted and such version of the assessee was supported by aforementioned circulars which were in existence for the years under consideration. The assessee company was incorporated in financial year 2005-06. The major part of income derived by the assessee is from overseas export sales. The assessee does not maintain any office or permanent establishment in foreign country. The export sales of the assessee for the year under consideration is a sum of Rs. 56,68,40,104/- out of total sales of Rs. 57,90,64,163/-, which is 90% of the total turnover. The brokers and commission agent procure the order from buyers, place the order to the assessee and act as intermediaries right from the procurement of the order till delivery of the goods as well as receipt of the payments from the respective buyers. In lieu of such services assessee is making payment which is in the nature of brokerage or commission. Those agents do not have any office or permanent establishment in India. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia of the commission or foreign agent rendering services abroad and it was clarified that deduction of tax under section 195 would arises if the payment of the commission to the non-resident is chargeable to tax in India. Where the non-resident agent operates outside the country, no part of his income would arise in India, therefore, no TDS is required to be deducted on the payment of commission to non-resident. Reliance was placed on various decisions inter-alia including the decision of Hon'ble Supreme Court in the case of CIT vs. Toshoku Ltd., 125 ITR 525, wherein similar proposition was laid down and it was held that commission amount which was earned by the non-resident for services rendered outside India could not be deemed to be income which had either accrued or arisen in India. Reliance was also placed on the decision of Hon'ble Bombay High Court in the case of Clifford Chance Vs. DCIT, 318 ITR 237 (Bom) to plead that no such TDS was required to be deducted on the payments made by the assessee to Shri Bharat Goel. So far as it relates to contention of AO that since aforementioned circulars were withdrawn by a subsequent Circular No.7/2009 dated 22/10/2009, it was submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said withdrawal was not retrospective. It is in this manner Ld. CIT(A) has deleted the disallowance. Revenue is aggrieved, hence, has raised aforementioned grounds of appeal. 3. It may be mentioned here that in Ground No.3, revenue has taken a ground regarding violation of provisions of Rule 46A. During the course of hearing, Ld. DR was required to explain that how there was violation of Rule 46A. However, Ld. DR submitted that he is relying on grounds of appeal. 4. After narrating the facts it was submitted by Ld. DR that the AO was justified in making the disallowance as assessee could not prove the business expediency of making the payment of commission to Shri Bharat Goel. Ld. DR submitted that disallowance was also rightly made by AO on the ground that assessee had failed to make deduction of tax from the payments made by the assessee to Shri Bharat Goel. Therefore, he pleaded that according to provisions of section 195 r.w.s. 40(a)(ia) the disallowance was rightly made by the AO. Ld. DR also referred to para-4 of Circular No.7/2009 dated 22/10/2009 which read as under: "4. Even when the Circular was in force, the Income-tax Department has argued in appeals, references ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d versus Commissioner of Income Tax, (2012) 3 SCC 784, it has been observed that the Central Board of Direct Taxes has statutory right to issue circulars under Section 119 of the Act to explain or tone down the rigours of law and to ensure fair enforcement of the provisions. Circulars issued have force of law and are binding of the Income Tax authorities though they cannot be enforced adversely against the assessee. Normally these circulars cannot be ignored. Thus a circular may not override or detract from the provisions of the Act but can seek to mitigate the rigour of a particular provision for the benefit of an assessee in specified circumstances. 9. First circular in question had been in force for a long time, from 1969. The Board may have withdrawn this circular and other circulars vide Circular No. 7 dated 22nd October, 2009 but the said withdrawal cannot be retrospective. Circular No. 7 of 2009 cannot be classified as explaining or clarifying the earlier circulars issued in 1969 and 2000. This assertion in the assessment order is far-fetched and does not merit acceptance. Circular No. 7 does not clarify the earlier circulars but withdraws them. This is obvious and apparen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a non-resident and who does not own any permanent establishment or administrative office in India. Similarly, assessee is also not maintaining any permanent establishment in foreign countries. It is in these circumstances the assessee is making payment of commission to non-resident at specified rate. The recipient of the commission is also not a related party to the assessee. All these findings of facts have been recorded by Ld. CIT(A) and are not disputed by the Revenue as there is no material on record to suggest that these findings of Ld. CIT(A) are either incorrect or false. It is also the findings recorded by Ld. CIT(A) that similar payments were made by the assessee in earlier years to Shri Bharat Goel and have been accepted as allowable expenditure by the Revenue. This fact is clear from the assessment order for A.Y 2006-07 which is passed under the provisions of section 143(3) of the Act and copy is placed on the paper book. It is also a matter of fact that while making the disallowance the AO did not bring any material on record to suggest that the payment made by the assessee to Shri Bharat Goel was for any purpose other than business of the assessee. In view of all the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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