Pradip Kumar Kedia ORDER
Pradip Kumar Kedia, Member (A)
1. The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-1, Vadodara ('CIT(A)' in short), dated 11.02.2019 arising in the assessment order dated 22.12.2017 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.
2. The grounds of appeal raised by Revenue read hereunder:
"1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in law and fact in deleting the addition made on account of non deduction of TDS on the amount of Rs. 78,90,570/- without appreciating the findings of Assessing Officer in the assessment order and in view of circular No. 7 of 2009 of the Board."
3. The AO in the instant case disallowed claim towards commission expenses on export sales to the extent of Rs. 78,90,570/-(being 30% of total commission claimed amounting to Rs. 2,63,01,900/-) in the course of the assessment carried out under s. 143(3) of the Act on the ground that the assessee has defaulted in deduction of tax at source under s. 195(1) of the Act. As a consequence of alleged default, provisions of Section 40(a)(i) of the Act was invoked and expenses incurred were disallowed to the extent of 30% of such expenses. While doing so, the AO also observed that the expenses incurred are in the nature of 'fee for technical services' and thus falls within the sweep of Section 9(1)(vii) r.w. Explanation (2) thereto as against the claim of the assessee that commission payments are business expenses without involvement of any managerial, technical or consultancy services.
4. Aggrieved by the disallowance, the assessee preferred appeal before the CIT(A).
5. The CIT(A) took note of the decision of the Tribunal in assessee's own case concerning AY 2010-11 in ITA No. 1391/Ahd/2015 order dated 25.09.2017 and reversed the action of the AO. The relevant operative para of the order of CIT(A) is reproduced hereunder:
"5. I have carefully considered the facts on record, observations of the AO and the written submission of the appellant.
5.1 Ground No. 1 and 2 relate to disallowance u/s. 40(a)(i) of the Act amounting to Rs. 78,90,570/- on the ground of non-deduction of tax u/s. 195 against commission payment made to Non-Resident outside India. At the outset, the Ld. AR informed that the same issue arose in AY 2010-11 wherein an order u/s. 263 was passed by the Hon'ble Pr. CIT disallowing entire foreign commission payment made without complying the provisions of Section 40(a)(ia). The Tribunal in ITA No. 1391/AHD/2015 did not concur the view of the ld. CIT and quashed the order passed u/s. 263 of the Act. Key findings are as under:
i) Commission payments made to Non-Resident agents did not have any taxability in India, even under the-provision of domestic law i.e. Section 9.
ii) Once concluded that income embedded in these payments did not have tax implication in India, no fault can be found in not deducting tax at source from these payments or for the purpose, even not approaching the AO for order u/s. 195.
5.2. The order of the jurisdictional t........