17 June 2024


Income Tax Appellate Tribunal

Divya Creations vs. The ACIT



Direct Taxation

Assessee is not required to deduct tax at source on payments of foreign agency commission

Present appeal by Assessee has been directed against the Order of the Learned CIT(A), for the Assessment year (AY) 2014-2015, challenging the addition of Rs.13,67,739. The AO on perusal of Schedule-18 of Selling Expenses noticed that, assessee had debited expenses in the name of commission to non-resident other than a company or a foreign company amounting to Rs.13,67,739. The AO noted that similar disallowance were made under Section 40(a)(i) of the Income Tax Act, 1961 (IT Act) and considering the fact that the expenses made in foreign agency commission are of the same nature as last year and no TDS has been deducted by the assessee, therefore, the amount in question was disallowed under Section 40(a)(i) of the IT Act. CIT(A) dismissed the appeal of assessee.

Learned Counsel for the Assessee, at the outset submitted that, in AY 2010-2011, similar issue was considered by ITAT, in the case of assessee and disallowance have been deleted. The Tribunal held that, “where assessee-firm made payments of commission to those agents, since those agents had their offices situated abroad and, moreover, services were also rendered by them outside India, assessee was not required to deduct tax at source while making payments in question.”

It is not in dispute that, the issue is same as have already been considered in earlier year by the Tribunal. The parties are also same. The Tribunal examined the issue in the light of agreement and material on record and found that, the agent had their base situated in Abroad and moreover services were also rendered by them outside. Therefore, assessee is not required to deduct tax at source while making payments in question. The AO in the assessment order has also made disallowance since in earlier year also of the same issue and no TDS have been deducted. Therefore, the facts being identical, no disallowance is required in the matter. Therefore, in view of the Order of the Tribunal in the case of assessee for the AY 2010-2011, the Orders of the authorities below is set aside and the addition are deleted. Appeal of Assessee allowed.

Tags : Expenses Foreign agency commission Addition

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