DY. C.I.T. Vs. KOTHARI FOOD & FRAGRANCES
LAWS(IT)-2014-9-20
INCOME TAX APPELLATE TRIBUNAL
Decided on September 05,2014

DY. C.I.T. Appellant
VERSUS
Kothari Food And Fragrances Respondents

JUDGEMENT

A.K.Garodia, Member (A) - (1.) THIS is Revenue's appeal directed against the order passed by learned CIT(A) -I, Kanpur, dated 30/11/2011 for the assessment year 2008 -2009.
(2.) IN this appeal, the Revenue has raised the following grounds: "1. That Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 59,36,606/ - made by the AO being disallowance out of discount allowed on sales by invoking the provisions of section 195 read with section 40(a)(i) of the Income tax Act, 1961, holding that no withholding of tax in terms of provisions of section 195 of the Act was required in this case as the discount allowed did not form any payment to the non -resident, without appreciating the AO's finding of fact that the payment to non -resident was not under any contractual obligation as no stipulation regarding payment of discount to the non -resident was made in the contract -note entered into by the assessee with the non -resident company. 2. That Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 59,36,606/ - made by the AO being disallowance out of discount allowed on sales by invoking the provisions of section 195 read with section 40(a)(i) of the Income tax Act, 1961, holding that the assessee has debited its trading account and credited the foreign company's account with the equivalent amount, and it was covered by the explanation below the provision of section 195(1), and the withholding of tax under the provision of section 195 was obligatory upon the assessee. That Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 59,36,606/ - made by the AO being disallowance out of discount allowed on sales by invoking the provisions of section 195 read with section 40(a)(i) of the Income tax Act, 1961, holding that discounts credited in the foreign buyers account in the assessee's book constituting a "Credit', though not 'payment', it attracted the provisions of section 195(1) read with its explanation, and since the assessee had debited an equivalent amount as expenditure, by not deducting or withholding tax on such payment, the expenditure on account of discount allowed was inadmissible under the provisions of section 40(a)(i) of the IT Act 1961.
(3.) THAT the order of CIT(A) deserves to be vacated and the assessment order passed by the Assessing Officer be restored." 3. Learned D.R. of the Revenue supported the assessment order. He also submitted that payment of discount is in the nature of interest and therefore, TDS was deductible u/s. 195(1) and hence, the order of CIT(A) should be reversed and that of the Assessing Officer should be restored. 4. As against this, Learned A.R. of the assessee supported the order of CIT(A). He also submitted that in the present case, there is neither payment of interest nor commission and therefore, no TDS was deductible. He placed reliance on the following judicial pronouncements: (i) Addl. CIT vs. Pearl Bottling (P) Ltd., [2011] 46 SOT 133 (Vizag.) (ii) G.E. India Technology Centre (P) Ltd. vs. CIT : [2010] 327 ITR 456 (SC) (iii) Foster's India (P) Ltd. vs. Income Tax Officer : [2008] 117 TTJ (Pune) 346 (iv) CIT vs. Singapore Airlines Ltd. : [2009] 319 ITR 29 (Del.) (v) Income Tax Officer vs. Mother Dairy Food Processing Ltd., [2011] 7 ITR (Trib) 16 (Delhi) (vi) NMDC Ltd. vs. ACIT (TDS), [2011] 7 ITR (Trib) 690 (Vizag.) (vii) Decision of I.T.A.T. Allahabad Bench in the case of Ankur Udyog Ltd. vs. ACIT in I.T.A. No. 96/Alld/2013;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.