Roomag Motors & Controls P.Ltd. Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad Deletes Disallowances on Foreign Commission, Warranty Provision & 14A; Partial Relief Granted to Rotomag
Ahmedabad Tribunal delivered its order in the case of Rotomag Enertec Ltd. for AY 2014-15, where multiple disallowances aggregating to Rs.56.08 lakh were made by AO & sustained by the NFAC. The additions related to foreign commission payments, employees’ PF contribution, medical expenses of director, disallowance u/s 14A, addition of interest income based on Form 26AS mismatch & provision for warranty expenses. Tribunal, after detailed examination, partly allowed the appeal of Assessee.
On the issue of commission paid to non-resident agent Octacom Antriebstechnik, Germany, AO invoked sec.40(a)(i) alleging failure to deduct tax u/s 195. Tribunal, relying on the Supreme Court ruling in GE India Technology Centre & the Gujarat High Court in Nova Technocast, held that commission for procuring export orders rendered wholly outside India was not chargeable to tax in India. Since the non-resident had no PE or business connection in India, there was no TDS liability & consequently the disallowance was deleted.
With regard to employees’ contribution to PF amounting to Rs.20,250, Assessee did not press the ground in view of settled legal position, & Tribunal dismissed it as not pressed. On the disallowance of medical expenses of a director, Tribunal noted that the reimbursement was duly authorized by a Board resolution & formed part of contractual remuneration. Since a company, being a juristic person, cannot incur personal expenditure, such reimbursement was held to be incurred on grounds of commercial expediency & allowable u/s 37(1). The addition of Rs.1,00,901 was accordingly deleted.
