Derewala Industries Limited Vs ACIT/DCIT (ITAT Jaipur)
ITAT Jaipur held that disallowance u/s. 40(a)(i) of the Income Tax Act untenable since amount of commission paid to a non resident outside India for the services rendered outside India will not fall in the category of income, and as such would not be chargeable to tax.
Facts- The Assessing Officer assessed total loss of the assessee at Rs. 4,48,87,707/-, after disallowing a sum of Rs. 3,63,287/- worked out u/s. 40(a)(i) of the Act due to non-deduction of the TDS; after disallowance a sum of Rs. 5,73,999/- worked out u/s. 14A of the Act; and after disallowance of a sum of Rs.75,000/-as per provisions of section 37(1) of the Act. CIT (A) has confirmed the addition made by the Assessing Officer vide order dated 23.12.2019. Being aggrieved, the present appeal is filed.
Conclusion- Held that in view of provisions of section 5(2) of the Act, amount of commission paid to a non resident outside India for the services rendered outside India will not fall in the category of income, and as such would not be chargeable to tax. So, the assessee was not liable to deduct TDS on the commission. Consequently, provisions of section 40(a) (i) of the Act were not attracted for the purposes of disallowance of said amount.
