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TMI Blog2021 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding adjusted against commission by treating same as prior period expenses. Ld. CIT (A) ought to have delete disallowance as liabilities for payment crystalize in the current year and appellant company is in same rate of tax for all the years. It be so held now. 2. Ld. CIT (A) erred in law and on facts in confirming addition of Rs. 5,75,929/- by invoking provision of section 40(a) (i) of the Act on without prejudice basis ignoring submission of the appellant that agents rendered services outside India and does not have any,-permanent establishment In India and hence provision of section 40(a)(i) is not applicable to the appellant. It be so held now. 3. Ld. CIT (A) erred in law and on facts in confirming disallowance of Rs. 6,85,804/- us 36(1)(iii) of the Act ignoring fact that appellant has huge interest free funds in form of Share Capital and Reserves & Surplus. Ld. CIT (A) ought to have considered the submission of the appellant and delete the disallowance. It be so held now. 4. Ld. CIT (A) ought to have considered the submission of the appellant that amount paid to H L Pharma Co., Korea as capital advances to acquired intangible assets pursuant to technology transfer ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rendering the services on the basis of commission has been paid has been provided. The AO without prejudice has also disallowed the above expenditure as the IDS has not been deducted on the above foreign commission. 2.4 The appellant has submitted that it has submitted before the AO oil copies of invoices of export commission, tax residency certificate of non resident received along with copy of Form 15CA & 15CB to establish the genuineness of expenditure and that appellant is not required to deduct IDS on the foreign commission. Appellant has further submitted that CIT(A) in the earlier assessment year has allowed such disallowances made by the AO. 2.5 It is evident from the detail of export commission submitted that appellant has claimed provision made for export sales commission of Rs. 1,36,544/- and outstanding adjusted against commission of Rs. 4,39,3857-out of total claim of export commission of Rs. 29,61,3377-. As no detail of party mentioned for the provision made for export sale commission of Rs. 1,36,5447-, the identity and genuineness of the expenditure is not proved. As regard to export commission of Rs,4,39,3857- debited under the head export commission as outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties on the export sales amounting to Rs. 29,61,337/- only. But the same was disallowed by the AO on account of two reasons. Firstly, the assessee failed to furnish the documentary evidences such as the identity of the party, the services rendered by such parties, details of the exports made by it through the commission agents. Thus the genuineness of the transaction was doubted. Secondly, the assessee failed to deduct the TDS under section 195 read with section 40(a)(i) of the Act. 8.1 However, the learned CIT (A) was pleased to hold that the provisions of TDS are not applicable with respect to the commission paid to the overseas parties. Besides this the assessee furnishes the necessary details to justify that the export commission was genuine in support of its claim. Accordingly the learned CIT (A) deleted the addition made by the AO for a sum of Rs. 23,85,408.00 out of the total addition of Rs. 29,61,337.00 made by the AO. In other words the balance amount of Rs. 5,75,929.00 was confirmed by the learned CIT (A) on the reasoning that the assessee failed to furnish the details of the parties and the services rendered by such parties. 8.2 Nevertheless, the learned AR before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76,148/-to M/s. H. L Pharma Co., Korea. The appellant has submitted that the capital advance of Rs.l,92,76,148/- was made to M7s. H. L. Pharma Co. against the purchase of technical know how for business purpose and out of own fund, therefore, provision of section 36(1) (iii) is not applicable, 3.4. Appellant has submitted that it has own fund of Rs. 3.92 crore including share capital of Rs. 3 crore and reserve and surplus of Rs. 0.92 crore against the capital advance of Rs.l.92 crore. Therefore, in view of various judicial pronouncements, no disallowance u/s.36(1)(iii) is called for. 3.5 On perusal of balance sheet, it is seen that appellant had share capital and reserve and surplus of Rs. 3.25 crore as on 31/03/2012. The capital advances of Rs. 1.92 crore has been made during the year and the share capital and reserve and surplus as on 31/03/2013 is Rs. 3.91 crore. As there is increase in reserve fund of Rs. 70 lacs only, the appellant's argument that capital advance of Rs. 1.92 crore was made from own fund is not found tenable. In view of the above, disallowance made by the AO is found correct and justified and same is confirmed. 12. Being aggrieved by the order of the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 15 of the paper book. Thus the own fund of the assessee along with the interest free loans received by it aggregates to a sum of Rs. 7,01,81,000.00 which is in excess of the advance given to the party for an amount of Rs. 1,92,76,148.00 only. Accordingly a presumption can be drawn that the own fund of the assessee has been used for advancing money to the party as discussed above for acquiring the technical know-how. In other words, the borrowed fund has not been used for advancing the sum of Rs. 1,92,76,148.00 to the party. 15.2 In holding so we draw support and guidance from the judgment of Hon'ble jurisdictional High court in the case of CIT vs. Torrent Power Ltd reported in 363 ITR 474 where the head note reads as under: "It was noted from records that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the extent of`Rs. 195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the revenue which earned it the interest on bonds and dividend income. [Para 7]" 15.3 In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same as non-genuine as well as non-deduction of TDS u/s.195 r.w.s 40(a)(i) of the Act. 17.1 The AO during the assessment proceedings in the absence of necessary documents held that the impugned amount of export commission of Rs. 24,78,592/- has not been incurred for the purpose of the business and therefore same cannot be allowed as deduction u/s. 37(1) of the Act. 17.2 Besides the above, the AO also found that the assessee failed to deduct the TDS on the impugned amount of export commission under the provision of section 195 of the Act. Accordingly the AO also disallowed the same under the provision of section 40(a)(i) of the Act and added to the total income of the assessee. 18. On appeal, the Ld. CIT(A) partly confirmed the order of the AO by observing as under: 3.3 I have carefully considered the facts of the case, assessment order and submission of the appellant. The AO has made the disallowance of export commission of Rs. 24,78,592/- on the ground that appellant has not been able to prove the identity of the commission agents as no copy of agreement executed between the foreign agents and the assesses has been furnished and no proof of rendering the services on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record. In the present case the AO made the disallowance of the export commission expenses claimed by the assessee for Rs. 24,78,592/- by treating them as non-genuine as well as the assessee failed to deduct the TDS with respect to such commission expenses paid to the overseas parties under the provisions of section 195 of the Act. However, the learned CIT (A) was pleased to delete the addition for an amount of Rs. 21,83,740/- except for the sum of Rs. 2,94,852/- only. The learned AR before us has filed additional evidences in support of the commission expenses in dispute to justify that the commission expenses were incurred for the purpose of the business and the assessee was not liable to deduct the TDS under the provisions of section 195 of the Act. The 1st controversy that arises before us to adjudicate the admission of the additional evidences filed by the assessee vide letter dated 6 August 2020 which is placed on record. 22.1 Pursuant to provisions of sub-section (5) of section 255 of the Act, the ITAT Rules, 1963 ("the Appellate Tribunal Rules") have been formulated. Rule 18(4) and Rules 29, 30 & 31 of the Appellate Tribunal Rules are relevant for the discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary to do so to enable it to pass order or for any other substantial cause. " 22.3 In view of the aforesaid discussion, the additional evidence cannot be placed by the assessee for the admission before the Tribunal as a matter of right. The Tribunal has the sole discretion whether to admit or not to admit additional evidence. However such discretion cannot be used in arbitrary manner. 22.4 Now coming to the facts of the case on hand, the learned AR in the application for the admission of the additional evidences has just casually mentioned that these additional evidences pertain to the 3rd parties and therefore the assessee has taken time to collect the same. The reason given by the assessee is not based on any supporting documents. On perusal of the documents for the admission, we note that all the documents pertain to the period prior to the date of assessment order except some certificate which are not very relevant to decide the issue on hand. 22.5 Likewise, it is not also the case of the assessee that the authorities below have not furnished the sufficient opportunities for providing such additional evidences. Accordingly, we are of the view that the additional evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X
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