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TMI Blog2016 (10) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices by these concerns. He simply observed that the assessee failed to submit details. That observation was found to be incorrect by the ld.CIT(A). The reason assigned by the ld.CIT(A) is that books of accounts of the assessee are audited. Details of agents were very much available, and the assessee has provided PANs. of these four agents. - Decided against revenue - ITA. No. 1707/Ahd/2012 - - - Dated:- 18-10-2016 - Rajpal Yadav (Judicial Member) And Manish Borad (Accountant Member) For the Revenue : James Kurian, Sr.DR For the Assessee : Bhavin Shah, AR ORDER Rajpal Yadav (Judicial Member) Revenue is in appeal before the Tribunal against the order of the ld.CIT(A), Valsad dated 23.5.2012 passed for the Asstt.Year 2009-10. 2. Ground nos.1 and 2 are inter-connected with each other. In these grounds, grievance of the Revenue is that the ld.CIT(A) has erred in deleting the addition of ₹ 35,71,622/-. 3. Brief facts of the case are that the assessee at the relevant time was engaged in the business of running cold chain project, mainly, trading and processing of fresh fruits and vegetables in cold storage unit. It has filed its return of income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All these commission agents do not have any place or permanent establishment in India. They while working abroad have procured orders. The commission is paid to them in proportion to quantity of material sold through them and as a percentage of sales in foreign currency. While making the payments of commission to them no TDS liability arises as it is not required to be deducted as the services are rendered abroad. Since overseas Agents earned commission income not on account of business connection and in the absence of permanent establishment (PE) in India, these payments cannot be subject to tax in India as per relevant DTAA. Since these agents do not carry on business through PE situated in India the commission payment is not taxable in India as no operation being carried out in India no income has accrued or arose in India. 4. After making an analysis of the explanation, the ld.AO has disallowed the claim of the assessee by observing as under: [5.1] The explanation offered by the assessee is carefully considered but the same is not acceptable. The assessee did not produce any evidence with respect to services rendered by the foreign agents to whom assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as non-business expenditure. While disallowing this claim, principal of res judicata is duly considered, which do not apply to Income tax Proceedings. A penalty proceeding u/s. 271(l)(c) of the'l.T. Act is initiated separately for furnishing inaccurate particulars of income. 5. On appeal, the ld.CIT(A) has deleted the addition: DECISION :- I have considered the facts of the case, material on record as well as the contentions of the appellant as well as the observation of the AO in the assessment order. There is no plausible reason to even doubt the genuineness of the commission paid to five non-resident agents, as the appellant has filed sufficient documentary evidences in support of the claim and expenditure on this front is inevitable and has been incurred year after year. Since the commission has been paid to those five foreign agents through banking channel, their identity is proved and confirmations have been obtained from them, I am inclined to accept that the said expense is a genuine business expenditure. Secondly I find that nothing has been brought on record by the revenue to show that commission of ₹ 35,71,622/-paid to five different non-reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) the expenditure must not be in the nature of capital expenditure or personal expenses of the assessee, and (d) the expenditure must have been laid down or expended wholly and exclusively for the purpose of business or profession. The expression wholly refers to quantum of expenditure, while expression exclusively refers to the motive, object and purpose of the expenditure. In the present case, we find that the assessee has quantified the expenditure, hence, to some extent fulfill expression wholly , but it fail to demonstrate how the expenditure was incurred for the purpose of business. This limb could be fulfilled, if the assessee had produced evidence of services rendered by the alleged commission agent. The ld.AO has recorded a specific finding that except producing certain invoices, the assessee failed to produce any other evidence. The payment through banking channel or raising of invoices are not the only requirement. The assessee should have produced some correspondence with the agents or how the agents have helped the assessee to procure the orders. There is no such material in the paper book. We have specifically perused page nos.9 to 29 of the paper book, wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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