Income Tax Appellate Tribunal - Chennai
Rane Engine Valves Ltd., Chennai vs Assessee on 16 May, 2012
IN THE INCOME-TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI.
Before Shri Abraham P. George, Accountant Member &
Shri Challa Nagendra Prasad, Judicial Member
I.T.A. No. 1949/Mds/2011
Assessment year: 2007- 08
M/s. Rane Engine Valves Ltd., The Income Tax Officer (OSD),
Maithri, 132, Cathedral Road, Vs. Company Circle V(3),
Chennai 600 086. Chennai 600 034.
[PAN:AAACE1413G]
(Appellant) (Respondent)
Appellant by : Shri R. Vijayaraghavan, Advocate
Respondent by : Shri Anirudh Rai, CIT-DR
Date of Hearing : 16.05.2012
Date of pronouncement : 16.05.2012
ORDER
PER Challa Nagendra Prasad, Judicial Member
This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) V, Chennai dated 30.09.2011 in appeal No. CIT(A)-V/IT No. 288/2009-10 for the assessment year 2007-08. Shri R. Vijayaraghavan, Advocate represented on behalf of the assessee and Shri Anirudh Rai, CIT-DR represented on behalf of the Revenue.
2. The only issue in the appeal of the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance made under section 40(a)(ia) of the Act in respect of export commission paid to non- 2 I.T.A. No.1949
No.1949/M/ 1949/M/11 /M/11 resident agents.
3. The brief facts of the case are that the assessee is a company engaged in the business of manufacture of automobile components. The assessee paid commission to its foreign agents in processing orders as under:
1. Sikler, Germany ... `. 1,49,43,419/-
2. Folkcraft, Germany ... `. 14,16,871/-
3. Impact Marketing, Bangladesh ... `. 27,893/-
4. Ashok Leyland Mega Motors Co. Iran ... `. 8,67,668/-
Total ... `. 1,72,55,851/-
4. The Assessing Officer while passing the assessment order by invoking provisions of section 40(a)(ia), disallowed commission paid to foreign agents as the assessee did not deduct TDS under section 195 of the Act on such commission payments.
5. On appeal by the assessee, the Commissioner of Income Tax (Appeals) deleted the disallowance of commission paid to Sikler, Germany and Folkcraft, Germany following the decision of the Hon'ble Supreme Court in the case of G.E. India Technology (P) Ltd. vs. CIT & Anr [327 ITR 456].
However, in respect of the commission paid to other two parties i.e. Impact Marketing, Bangladesh and Ashok Leyland Mega Motors Co. Iran, the Commissioner of Income Tax (Appeals) confirmed the disallowance on the ground that these two foreign agents have their principle places of business at Chennai and Howrah respectively. Against the order of the Commissioner 3 I.T.A. No.1949 No.1949/M/ 1949/M/11 /M/11 of Income Tax (Appeals) in confirming the disallowance of commission paid to Impact Marketing, Bangladesh and Ashok Leyland Mega Motors Co., Iran, the assessee came up in appeal before us.
6. At the time of hearing, the counsel for the assessee submitted that the assessee had paid commission to foreign agents before 31.03.2007 i.e. before the end of the accounting year relevant to the assessment year 2007-
08. Therefore, he submitted that no TDS is required to be made under section 40(a)(ia) in view of the Special Bench decision of ITAT, Visakhapatnam in the case of Merilyn Shipping & Transports vs. Addl. CIT 2012-TIOL-184-ITAT-VIZAG-SB [70 DTR 81]. A copy of the order of the Tribunal is placed before us. The counsel for the assessee submitted that in view of the Special Bench decision of ITAT, Visakhapatnam, no disallowance can be made under section 40(a)(ia) of the Act.
7. The counsel for the Revenue submitted that the matter may be remitted to the file of the Assessing Officer to verify whether the payment of commission was made before 31.03.2007 i.e. before the end of the accounting year relevant to the assessment year 2007-08 under appeal and adjudicate the issue accordingly in view of the Special Bench decision.
8. We have heard both sides, perused the materials available on record and the order of the Special Bench of ITAT, Vishakapatnam. The Special 4 I.T.A. No.1949 No.1949/M/ 1949/M/11 /M/11 Bench of the Tribunal held that the provisions of section 40(a)(ia) come into operation only if the amounts remain "payable" at the end of the accounting year. If the payments are already made by the end of the accounting year, provisions of section 40(a)(ia) cannot be invoked. Respectfully following the Special Bench decision of the Tribunal in the case of Merilyn Shipping & Transports (supra), we direct the Assessing Officer to verify as to whether the commission payments to Impact Marketing, Bangladesh and Ashok Leyland Mega Motors Co. Iran were made within the accounting year itself or not and decide the issue in the light of the decision of the Special Bench of ITAT in the case of Merilyn Shipping & Transports (supra).
9. In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court at the time of hearing on Wednesday, the 16th May, 2012 at Chennai.
Sd/- Sd/- (ABRAHANM P. GEORGE) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 16.05.2012 Vm/- To: The assessee//A.O./CIT(A)/CIT/D.R.