DCIT Vs Kewalram Textiles Pvt. Ltd. (ITAT Ahmedabad)
Overseas Commission Genuine & Revenue Neutral: Ahmedabad ITAT Upholds Deletion of ₹3.42 Cr Disallowance
The Ahmedabad “D” Bench of the ITAT dismissed the Revenue’s appeal in DCIT, Circle-2(1)(1), Ahmedabad vs. Kewalram Textiles Pvt. Ltd., ITA No. 1076/Ahd/2025, AY 2017-18, vide order dated 18.12.2025, thereby upholding the deletion of ₹3.42 crore disallowed u/s 37(1) on account of commission paid to non-resident agents
The AO had disallowed export commission paid to overseas agents on the grounds of alleged lack of genuineness, unsigned agreements, and non-deduction of TDS. The CIT(A), NFAC deleted the disallowance, noting that the commission was an integral part of export business and that identical disallowances had consistently been deleted in the Assessee’s own case in earlier years, including by the Tribunal.
The ITAT observed that the issue was squarely covered by past orders of coordinate benches in the Assessee’s own case and by the landmark Supreme Court ruling in CIT vs. Toshoku Ltd. (125 ITR 525), holding that commission paid to non-resident agents operating outside India is not chargeable to tax in India and therefore does not attract TDS. Once TDS provisions are inapplicable, disallowance u/s 37(1) on that ground cannot survive.
Emphasising consistency, settled law, and business expediency, the Tribunal held that the CIT(A) was justified in deleting the addition and that no infirmity existed in the impugned order.
Accordingly, the Revenue’s appeal was dismissed, confirming full relief to the Assessee.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
