9911796707
TMI Blog2012 (11) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... nconsequential. Ground No.9 is not maintainable as charging of interest u/s 234B and 234C of the Act is mandatory and consequential in nature. The remaining grounds are relating to the various issues, namely: (1) (Ground No.2) that the authorities below erred in disallowing ₹ 10,68,71,384/- being Info tracking of delivery schedules paid to South Elegant Limited (SEL); (2) (Ground Nos. 3,4 5) that the authorities below were not justified in disallowing ₹ 18,35,79,000/- paid to SEL as termination fees; (3) (ground Nos.6 7) that the authorities below erred in disallowing/restricting the claims under various heads, namely: Under the head Disallowed by the AO Restricted to by CIT(A) Staff Welfare expenses ₹ 16,80,270/- ₹ 10,00,000/- Administration Exp. Others ₹ 16,64,580/- ₹ 9,00,000/- (4) (Ground No.8) that the order of the authority below was bad in law that during the course of assessment proceeding, no opportunity was given on the additions made. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s general in nature and, therefore, it doesn t survive for adjudication. The remaining grounds are as under: (1) that the CIT (A) erred in holding that the amount was taxed in the proceedings u/s 143 (3) of the Act and, therefore, is not taxable u/s 201 of the Act. This is a separate proceedings altogether; - that the CIT (A) erred in not appreciating that s. 37(1) and s 40(a)(i) are not mutually exclusive. A.Y 2007-08- ITA NO.1270/B/10 - (Revenue s appeal): 6. As in last assessment year, the Revenue has raised ten grounds, out of which, ground Nos.1, 2, 9 10 do not qualify for adjudication as no specific issues have been raised. In the remaining grounds, the issues raised are reformulated as under: Under the head Disallowed by the AO Relief allowed by CIT(A) (gr.3) Staff Welfare Exp. ₹ 7038859 restricted the addition to 15% (Gr.4) Others ₹ 833587 - do (Gr.5) Water charges ₹ 519993 - do (Gr.6) Travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the learned counsel for the assessee that admission of this evidence is essential for proper adjudication of the issue. As this voluminous evidece needs verification by the AO, we deem it fit and proper to remand this issue to the file of the AO with a direction to the assessee to produce these additional evidences before him and the AO is directed to reconsider the issue in accordance with law 9.1. In the meanwhile, the assessee came up with a Misc. Application [M.P. No.50/B/11 dated 9.11.2011] wherein it has been claimed that in the order of the earlier Bench (supra), an inadvertent error had crept in, which according to the assessee, requires rectification. To justify its claim, the assessee had submitted that the AO had disallowed the assessee s claim of expenditure of (i) handling and tracking of delivery schedule; and (ii) termination fee for the termination of such services etc. While presenting the assessee s case before the earlier Bench, the learned A R had filed additional evidence, certifying the genuineness of transaction entered into between the assessee and SEL. The additional evidence sought to be produced, according to the assessee, comprised of only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is pertinent to mention here that the pendency of the revenue s appeal before the Tribunal for the very same assessment years were not brought to the notice of the Bench at the time of hearing of these appeals. However, taking note of the evidence filed by the learned counsel for the assessee before us, we are inclined to recall the order of the Tribunal dated 28.2.2011. The registry is directed to post the appeals in due course for hearing, 9.3. Consequently, these appeals have come up before this Bench for adjudication. Let us now proceed to deal with the issues raised by the assessee, chronologically, as under: A.Y 2006-07- ITA NO.1242/B/10 (assessee s appeal): 10. For the sake of clarity, both the issues, namely, disallowances of (i) Info tracking schedules payment of ₹ 10.68 crores to SEL; and (ii) termination charges of ₹ 18.35 crores to SEL are taken up together for consideration. 10.1. In respect of the disallowance of termination fee of ₹ 18.35 crores paid to SEL, it was the claim of the assessee that it had entered into an agreement dated 1.7.2002 with SEL for availing the services on information and tracking of delivery schedules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the parties, the payee - SEL never visited the premises of the assessee in India and such type of non-living, non-existent relationship itself gives a hunch that the payment was not genuine and the contract was only a window dressing to cover up the non-genuine payment. It was, further, pointed out by the AO that even if the payment was through banking channel, it did not prove that the payment was for business purpose and cannot be allowed u/s 37(1) of the Act. It was also stressed that in any case the assessee while crediting the amount to the account of the nonresident SEL in May, 2006, had not filed any application u/s 195(2) of the Act and, therefore, the entire sum was to be added u/s 40(a)(i) of the Act. He had relied on the ruling of the Hon ble jurisdictional High Court in the case of CIT v. M/s. Samsung Electronics reported in (2009) 320 ITR 209 (Kar). 10.4. The affirmation of the AO has been strongly denied by the assessee in its rejoinder to the remand report as recorded in the order of the CIT (A). 10.5. After due consideration of rival submissions, the CIT (A) had rejected the contentions of the assessee and upheld the additions made on twin issues, namely, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O in the assessment order speaks about some discreet enquiry conducted in respect of SEL which revealed that the SEL is likely to be non-existent. Such allegation itself would have roused the appellant at the appellate stage to show sufficient proofs and provide satisfactory explanation that SEL exists and it is financially sound and stable and carried on activities in the nature of customer tacking in Europe scientifically. Such could have been done by providing copies of incorporation certificate, commencement of business certificates, Memorandum and Articles of Associations, exact location of the industry or place of business, the nature of its activity, the financial statement, the audit report, its manpower with qualification of each employee and so on so forth which a prudent businessman would definitely ask and require before assigning any contract of huge amount of ₹ 10 crores unless the other party is a dummy or / and the contract is non-existent. However, nothing of such sort had been done. Even at rejoinder stage, even if the AO alleged. SEL to be dummy one having no activity at all in the remand report, no additional evidence had been furnished by the AR to disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1872 and section 10 of Indian Stamp Act, 1899. In banking parlance, stamp duty is a kind of legal/court fee payable by affixing stamps on the documents under the provisions of Stamp Act, 1899 and any document/instruments not stamped adequately and properly is not acceptable in a court of law. As per Taxation law, if a document dealing with such matters as transfer of property, shares, contract of high value or even any legal proceedings or private instrument of almost any nature whatsoever are written is unstamped, such document becomes invalid, vide commentaries on - The Laws of England, page 312 (1765) by William Blackstone. Thus, what is being pointed out above is that a contract on stamp paper is suo moto recognized as evidence in a court of law whereas if it is on paper, it loses its enforceability and, therefore, cannot be held as a contract at all. In fact contract has been defined as an enforceable agreement. The agreement to become enforceable must possess certain characteristics viz., (i) It must be in writing because writing provides exact meaning to the terms of contract which need interpretation at the time of dispute; (ii) It must be signed by the contracting p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that during the course of survey proceedings, the agreement dated 1.7.2002 and also the letter terminating services of SEL could not be produced for verification as they have been dislocated. However, he had asserted that those documents were available with the Department even before the survey operation. Thus, the learned AR argued, the conclusion of the learned CIT (A) was based only on assumption, presumption and contrary to the facts. He had, further, contradicted the presumption of the CIT (A) that the agreement was not genuine as it was executed on a plain paper instead of a stamp paper. He had also disowned the theory of the CIT (A) that the agreement was made on a plain paper as it would be a problem to obtain back dated stamp paper. The learned AR had refused to buy the CIT (A) s philosophy that the nonexistence of the agreement came to light only during the survey proceedings and on demand a copy of the non-existent plain paper agreement was produced etc. Instead, he had categorically advocated that the copies of the agreement as well as the termination letter were with the Department much before the survey proceedings initiated. With regard to the CIT (A) s al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat even after three years of the initial assessment concluded, the Revenue had not come up with any evidence and, thus, the disallowance made was solely on assumption. Thus, according to the learned AR, the assessment as well as appellate proceedings was concluded merely on suspicion, assumption and without any concrete evidence. 10.9. With regard to the allegation that no evidence was filed either during the course of assessment or appellate proceedings to prove that the amounts were paid and also availed the services rendered by SEL, it was submitted by the learned AR that the following documents were furnished during the course of assessment proceedings, namely: (i) Write up on the services rendered by SEL; (ii) Agreement with SEL (iii) copies of invoices raised by SEL and Gruyters Agenturen BV; (iv) Ledger extract of the Info tracking of delivery schedules; (v) Details about payments through banking channels; (vi) Confirmation for receipt of the amount by SEL and Gruyters Agenturen BV. 10.10. Further, it was submitted that the confirmation received from one of the customers, namely, GSTAR has been filed as additional evidence before this Hon ble Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not aware of the ownership/management details of SEL, it was submitted that on specific requirement was indicated in the appellate order, the assessee has now obtained the ownership details and furnished the same before this Bench and also to the revenue. 10.13. With regard to the Revenue s allegation that the assessee was not able to explain why the termination fees had to be paid to Hong Kong entity as per European regulation when the contract was enforceable in Hong Kong, the learned AR submitted that the AO had acknowledged the fact that the services were performed by an European national based in Netherlands. It was the prerogative of the service provider to plan his affairs. In this case, the contract was with Hong Kong entity does not alter the deductibility of expenditure in the hands of the assessee. It was, further, claimed that the fact that even the department had not disputed the providing of service has been rendered in Europe. The bona-fide understanding of the assessee about the termination amount being payable as per European law as well as express provision of the written agreement in good faith would be obvious even from the response to questions recorded duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, argued that in the assessment order, extracts of the survey conducted on JKPL has been produced, however, the AO had not cited this reason now advanced by the Addl. CIT for disallowance of these amounts. Accordingly, the learned AR argued that neither the DR nor the Addl. CIT have the jurisdiction to go beyond the orders passed by the AO and the CIT (A) or raise any point different from that considered by the lower authorities. If the DR/ Addl. CIT were to be allowed to take this line of argument, it was claimed by the learned AR, that this would be setting up an altogether new and different case which is not permissible. 10.16. In respect of the Revenue s argument that if the additional evidence were to be accepted, the same should be sent to the AO to examine the issues arising from the evidence filed etc., the learned AR submitted that the CIT (A) had resorted to confirm the disallowance for the alleged two reasons, namely, (i) invalid plain paper agreement; and (ii) void agreement as legal formalities were not followed while entering into such agreement. 10.16.1. In this connection, it was submitted that all the relevant materials necessary for deciding the issues i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not able to explain why the payments had to be made to a Hong Kong [HK] entity, whose directors were unknown; and that the assessee had not furnished any detail of ownership of SEL either at assessment or at appellate stage; - that one Mr. Manfred Gruyters who owned M/s.Gruyters BV Netherlands had received commission in the name of his entity registered in Netherlands. If Mr. Manfred were to be the ultimate owner of SEL, the reason as to why he had to take the commission in Hong Kong instead of in Netherlands and why the assessee had to make the payments in Hong Kong for which, there was no explanation from the assessee; - that the assessee s sister concern JKPL had started its business during the AY 2006-07 and it had also made commission payments; and that the said commission payment was made to SEL. The assessee has now come up with a theory that the ultimate beneficiary of both M/s.South Elegant Ltd, Hong Kong and M/s Sharp Eagle Ltd, Hong Kong was Mr. Manfred Gruyters only; - that during the year under dispute, the assessee had made a commission payment of ₹ 10.68 crores to SEL and JKPL also made a payment of ₹ 14.75 crores to Sharp Eagle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proof as regards services rendered by SEL and moreover, the ownership and the transactions with SEL had also not been explained by the assessee either during the course of assessment as well as appellate proceedings. The MD of the assessee had, on oath, feigned his ignorance about the directors and owners of SEL. - That the assessee had claimed that the commission payment and the termination fees were in accordance with the agreement dated 1.7.2012 (sic) 1.7.2002 with SEL. The genuineness of this contract, considering it being on a plain paper not being notarized has also been brought on focal point. Though the alleged contract was enforceable in HK, the assessee had claimed that the payment of termination fee was in accordance with European regulations. 10.18. In conclusion, it was forcefully argued that since the claims of the assessee with regard to (i) payment of ₹ 10.68 crores being info tracking of delivery schedules paid to SEL; and (ii) termination fee of ₹ 18.35 crores have not been properly explained coupled with documentary proofs and also the assessee has now come up with additional evidence before this Hon ble Bench which have not been placed eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent dated 1.7.2002 or the copy or the original of the scheme of arrangement dated 1.4.2005 or the copy / original of termination agreement were found which could be held as an evidence that the payments were for some other purpose (because payment is proved) and had not been on the basis of the alleged contract or scheme of arrangement. Secondly, Mr. Kothari, CMD in his statement on oath expressed his ignorance about the existence of any such contract. If such a person says in clear terms that he does not remember about any agreement between SEL and the assessee, it has to be held that no agreement existed and the payment was not for the purpose of business. Thirdly, even if it is agreed that there is payment, it is necessary to examine whether the payee was capable of doing such business so as to make it eligible to receive such payment. During the course of assessment proceeding, the AO had insisted for proofs of the existence of the company SEL and had also been required to show proof that such companies own manpower, machineries and technology to provide the info and tracking of delivery schedules and therefore the AR was wrong in alleging that no specific proof was required by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or appellate proceedings. During the course of hearing, the learned D R argued that if the additional evidences sought to be furnished by the assessee were to be admitted by this Bench, the twin issues under consideration are to be remanded back to the file of the AO to examine the issues afresh. The learned AR had conceded to the argument of the learned D R with a rider that the AO be strictly directed by this Hon ble Bench to confine himself to verify/examine as to whether the additional evidence now produced is authentic to the argument put forth of the assessee. 11.4.1. The additional evidences now produced were the documents the CIT (A) had specified in his order which would aid in establishing the genuineness of the expenditure. These documents were not available with the assessee during the course of appellate proceedings before the CIT (A) and the same is vital and necessary and, hence, the additional evidences now produced is taken on record for advancement of substantial cause and justice. 11.4.2. On a careful perusal of the Service Agreement purported to have been entered into on 1.7.2002, it has been noticed under the recitals that SEL is a sourcing agent for or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it a mere ploy to divert funds from the country 11.5.2. In essence, both the issues as mentioned (supra) are restored to the file of the AO with specific directions to look into the issues afresh and to take appropriate action in accordance with the provisions of the Act after affording a reasonable opportunity to the assessee of being heard. Since these issues are restored to the file of the AO, the contention as to whether the service agreement is valid and whether the payments are disallowable u/s 40(a)(i) of the Act has not been adjudicated/considered. It is ordered accordingly. 12. The next ground of the assessee is that the authorities below have erred in disallowing/restricting the claims under various heads, namely, staff Welfare expenses and administration Expenses etc., Staff Welfare Expenditure administrative expenses - others: 12.1. It was the case of the AO that the assessee had debited ₹ 67.21 lakhs towards Staff Welfare expenses, however, on verification, he had found that the expenditure mainly on providing food to its employees which was not an allowable expenditure. Moreover, according to the AO, this expenditure was over and above the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 12.5. The AO had stated in the assessment order that no bills/vouchers/documents were produced for verification in support of the expenses claimed [Refer: Paras 6 7 of the asst. order] whereas the assessee claimed during the course of hearing that information sought by the learned AO (ledger extracts of Staff Welfare and Other administrative expenses) was submitted to the learned AO during the assessment proceedings [Refer: P 9 of assessee s Note dt.14.6.2012]. 12.5.1. During the course of hearing, the learned A R had furnished nine voluminous paper books running into thousands of pages which, inter alia, containing the correspondences [along with copies of ledgers account] made with authorities below. In its letter dated 8.12.2009 addressed to the AO, the assessee had furnished the printout of ledgers, pertaining to, among others, (i) staff Welfare; (ii) business promotion expenses; (iii) Other administrative expenses; (iv) sample expenses; (v) canteen expenses etc., This has been duly acknowledged by the Office of the Addl. CIT, Range-11, Bangalore on 8.12.2009 [courtesy: P 1186 of P.B. 4 Part 1 of A.R]. Even though the AO had admitted in his assessment order dated 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, even though the details of expenses claimed were in his possession, the AO had, without pointing out any omission and commission in the details furnished, resorted to restrict the claims of the assessee on an ad-hoc basis which, in our view, is against the principles of natural justice. Thus, both the issues have been remitted back to the file of the AO for fresh consideration. 13. The other issue [ground No.8] raised by the assessee was that the order of the assessing officer was bad in law as no opportunity of being heard was extended when the additions were made during the assessment proceedings. 13.1. At the outset, we would like to point out that there is no substance in the allegation of the assessee since the assessment proceedings were stretched to almost four months right from 10.9.2009 to 8.12.2009 [source: Asst. order] and that the assessee had ample time at its disposal to put across its grievance, if any, at that relevant point of time. Therefore, this allegation of the assessee doesn t deserve any merit. It is dismissed accordingly. A.Y 2007-08 ITA No.1243/B/10- [by the assessee]: 14. For this assessment year too, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyance. When compared to immediate preceding year, on a turnover of ₹ 150.90 crores the assessee company has incurred an expenditure of ₹ 1.02 crores whereas during the assessment year in question, on a turnover of ₹ 20.24 crores the assessee company has shown to have incurred an expenses of ₹ 0.76 crore which is much higher when compared to the preceding year. Further on verification, it was found that the expense debited under this head is not fully supported by proper bills/ vouchers. Hence, a disallowance of 30% of the expenses debited under this head is made and added to the returned income which works out to ₹ 22,98,780/- . On further appeal, the CIT (A) restricted the addition to ₹ 11,49,390/-. The assessee being aggrieved is in appeal before us. The learned counsel for the assessee submitted the above said expenses were incurred for business purpose and duly supported by bills and vouchers. The AO did not examine the details of vouchers and, therefore, it was submitted it was wrong and erroneous to note that the expenses debited under this head was not fully supported by bills and vouchers. Necessary details were in fact furnished and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its letter dated 8.12.2009 addressed to the AO, the assessee had furnished copies of printout of the ledgers, pertaining, among others, to water charges [Refer: pages 464 473 paper Book 2] This has been duly acknowledged by the Office of the Addl. CIT, Range-11, Bangalore on 8.12.2009 [courtesy: P 153 of P.B. 2 of A.R]. Even though the AO had admitted in his assessment order dated 8.12.2009 [para 4.2.] that The assessee company has thereafter filed its written replies dated 27.11.2009, 30.10.2009 and dated 8.12.2009 which have been considered , we are of the considered view that the AO would not have been in a position to verify all the claims of the assessee with reference to the ledger accounts, cash vouchers etc., 16.2.1. Therefore, we are of the opinion that the AO was not justified in resorting to disallow the claim of the assessee on ad-hoc basis when all the relevant details were available with him. The AO is accordingly directed to verify the assessee s claim with reference to the details furnished by it and to take suitable action in the matter. To enable the AO to do the above mentioned exercise, this issue is restored to him. 17. Likewise, the assessee had als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 18.1. As could be seen from the grounds of appeal raised before the CIT (A), the assessee had represented that Ground No.10. The learned DCIT erred in disallowing a sum of ₹ 2,20,986/- under the head repairs maintenance on the facts and circumstances of the case. Even in its Statement of Facts [attached to Form No.35], the assessee had mentioned as Repair and maintenance of ₹ 2,20,986/- [Courtesy: Para 2 of Statement of facts before the CIT (A)]. However, while dealing with this issue, the CIT (A), perhaps, under wrong notion, treated this claim of customs duty machinery falls under the head repairs maintenance [as subscribed by the assessee] and restricted the addition of ₹ 2,20,986/- to ₹ 1,00,000/-. 18.2. We have carefully considered the assessee s contentions and also diligently perused the reasoning of the AO in disallowing the assessee s claim. It is an undisputed fact that the assessee had debited a sum of ₹ 2.2 lakhs towards customs duty machinery. Admittedly, the expenditure debited towards customs duty on machinery was capital in nature, the AO was well within his domain to come to a conclusion that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure has been disallowed. The salary paid to the MD was in consonance with the profits earned by the assessee and that the MD had handled every sale which had brought the kind of profit etc. It was submitted that the salary paid to the MD was assessed as income in the hands of the MD u/s 143(3) of the Act which has been accepted by the revenue. There was also TDS on the entire amount of salary to paid Shri Kothari. 20.3. After due consideration of the assessee s contentions, the CIT (A) had recorded his findings that the AO had not brought any evidence on record to prove that the payment was excessive, even though the AO had, in the remand report, mentioned that the provisions of s.40A(2) are attracted. The AO s reasoning of MD s physical presence in India [hardly for 14 15 days in a year) was countered by the assessee that the physical stay of the MD in India doesn t have anything to do with the assessee s business. The CIT (A) had also justified the argument of the assessee that the MD was directly responsible for its business as he had brought in sales from Italy and other European countries and, therefore, justified the remuneration paid to Shri Kothari. The CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther units have also been leased out by the assessee to JKPL for which the assessee was getting rent of ₹ 12.25 lakhs from JKPL including the Yeshwanthpur unit which was, according to the AO, meager considering the fact that the assessee was paying rent of ₹ 45.27 lakhs in respect of Yeshwanthpur Unit to the land lord. According to the AO, the assessee s intention in not charging proper rent from JKPL was to enable the JKPL to increase its income so as to avail benefit u/s 10B of the Act. Accordingly, the AO had brought to tax ₹ 33.02 lakhs being the difference between the rent paid to the land lord and the rent received from JKPL. 21.2. When the issue went before the CIT (A) for adjudication, the CIT (A) had, after taking into account the contentions of the assessee as recorded in his order under dispute, observed that in terms of section 23 of the Income-tax Act, 1961, the higher of the rent received or rent receivable following needs to be adopted as ALV. Since the AO has not brought anything on record to hold that the rent received is not in excess of the municipal valuation, I am left with no option, but to agree with the AR and I hereby direct the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2006-07 - ITA No.141/B/11 Revenue s appeal: 22. In this appeal, the main grouse of the Revenue was that the CIT (A) erred in holding that the amount was taxed in the proceedings u/s 143 (3) of the Act and, therefore, was not taxable u/s 201 of the Act. 22.1. The issue, in brief, was that during the course of assessment proceedings, as pointed out earlier, the AO had noticed that the assessee had made remittances to SEL, Hong Kong towards compensation for termination of service agreement entered into with SEL and that no TDS has been effected on the said remittances. Accordingly, the AO had initiated proceedings u/s 201(1) of the Act for the failure on the part of the assessee to effect TDS. According to the service agreement entered into with SEL, the assessee had engaged SEL as a sourcing agent w. e. f. 1.7.2002 for a period of ten years. As per the terms of the said agreement, the assessee had paid compensation of ₹ 18.35 crores for premature termination of the agreement and the said amount was remitted to the nonresident SEL without effecting TDS. According to the AO, the nature of services (to be) rendered by SEL and also the basis of commission payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the survey conducted u/s 133A by the regular AO it is not established that M/s. SEL had any permanent establishment in India. Accordingly, it is held that M/s SEL had no PE in India. 9.2. Item No.(ii): .Accordingly, even as per explanation 2(a) to section 9(1)(i), since M/s.SEL s activities are limited to the agency commission towards purchase of goods or merchandize for the non-resident buyers abroad, M/s. SEL s activities cannot be regarded as having business connection . Accordingly, it is held that no income accrued or arose in India since there was no business connection as per Explanation 2(a) to section 9(1)(i). 9.3. Item No.(iii): As per provisions of section 28(ii)(c) Any person .thereto , getting any compensation or any payment due to or received by becomes taxable in their hands. For applying these provisions, it is to be proved that the foreign agent had an agency in India but in this case of M/s SEL was a commission agent on the foreign soil i.e., in Hong Kong and was not having any agency in India and, accordingly, these provisions are not applicable to the appellant . .. 9.6. Item No.(vi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 195 This will not prejudice the findings of the AO that the amount is allowable u/s 37(1) and if the higher appellate authorities give a different finding, then this issue is again open for interpretation. 22.4. Aggrieved, the Revenue has come up with the present appeal. It was the case of the Revenue that the CIT (A) erred in holding that the amount was taxed by the AO in the proceedings u/s 143(3) and, therefore, is not taxable u/s 201(1). It was further urged that this is a separate proceedings altogether. It was, therefore, prayed that the stand of the AO on this point requires to be restored. 22.5. On the other hand, the learned AR supported the findings of the CIT (A) and pleaded that as there was no infirmity in the stand of the CIT (A), there was no cause for the Revenue in seeking the intervention of this Bench on the issue. 22.6. We have carefully considered the rival submission and diligently perused the relevant case records. 22.7. At the outset, we would like to reiterate that the claim of deduction u/s 37 of termination charges amounting to ₹ 18.35 lakhs as genuine business expenditure was restored to the file of the AO for fresh considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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