PANKAJ A. SHAH Vs. INCOME-TAX OFFICER
LAWS(IT)-2014-6-20
INCOME TAX APPELLATE TRIBUNAL
Decided on June 27,2014

Pankaj A. Shah Appellant
VERSUS
INCOME -TAX OFFICER Respondents

JUDGEMENT

Anil Chaturvedi, Member (A) - (1.) THIS appeal is filed by the Assessee against the order of CIT(A) -IV, Ahmedabad dated 03.08.2010 for A.Y. 2007 -08. The facts as culled out from the material on record are as under.
(2.) ASSESSEE is a individual stated to be engaged in the business of manufacturing of Chemicals. Assessee filed his return of income for A.Y. 2007 -08 on 29.10.2007 declaring total income of Rs. 51,19,360/ -. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 30.12.2009 and the total income was determined at Rs. 57,40,744/ -. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) vide order dated 03.08.2010 granted partial relief to the Assessee. Aggrieved by the order of CIT(A), Assessee is now in appeal before us and has raised the following grounds: - - 1. That on facts and circumstances of the case, the learned CIT (A) has erred in not admitting the contention of the appellant and thereby confirming the disallowance of commission paid to non resident Indian u/s. 40(a)(i) rws 195 of the Act of Rs. 1,67,859/ - as made by the learned AO. 2. That on facts and circumstances of the case, the learned CIT (A) has erred in treating the export commission paid to non -resident Indian without deducting tax at source is covered u/s. 40(a)(i) without considering various submissions, evidences and supporting placed on record during the course of proceedings. That on facts of the case, payment is made for facilitating export business and income of non resident person engaged for facilitating export business is not deemed to accrue or arise or deemed to be accrue or arise in India.
(3.) THAT on facts of the case, a non resident agent of Indian exporter operates outside the country, no part of his income arises in India, therefore it cannot be held to have been received by or on behalf of the agent in India with the result that such payment is not taxable in India. Thus, where such a nonresident was paid export commission, tax is not deductible at source. 3. Though the Assessee has raised various grounds, the only effective issue is about addition made under section 40(a)(i). 4. During the course of assessment proceedings, A.O. noticed that Assessee had paid commission to two parties situated outside India, aggregating to Rs. 1,67,859/ - but had not deducted TDS on such payment. In response to the query raised by A.O, Assessee inter alia submitted that the parties to whom the commission have been paid have Permanent Establishment overseas and the services have also been provided overseas and they have no branches or representative in India and therefore on the commission paid to them no TDS was applicable. The submissions of the Assessee was not found acceptable to the A.O. A.O. was of the view that the commission income of the foreign person was chargeable to tax in India as per the provisions of Section 9 & 5 of the I.T. Act. Further the commission was liable for TDS under section 195 of the Act. Since the Assessee has not deducted TDS, the commission paid to non resident was not allowable u/s. 40(a)(i) r.w.s. 195 of the Act and accordingly he added the same to the income. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) upheld the order of A.O. by holding as under: - - 2.2 I have carefully considered the submission of the L x L Counsel as well as the facts of the case. There is no substance in the submission of the Ld. Counsel. The commission was paid by an Indian Company for the services rendered by the commission agents for the Indian company. The said payment of commission is subject to TDS as per provisions of sec. 195 of the Act. If no tax was deductible, the appellant company was required to get a certificate u/s. 195(3) of the Act. There is inbuilt system of non -deduction of tax or less deduction of tax in the provisions of sec. 195 of the Act. The appellant, in contravention of the provisions paid the commission to the non -residents and therefore, the amount of commission paid without TDS is disallowance u/s. 40(a)(i) of the Act. The disallowance so made by the Assessing Officer is as per law and I have no reason to interfere in his finding. The addition of Rs. 1,67,859/ - is sustained. The first ground of appeal is accordingly dismissed.;


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