Case Law Details
Himalya International Ltd Vs DCIT (ITAT Delhi)
The DR also pointed out that apart from reimbursement of expenses, the payment made to Global Reliance Inc. also contains commission paid to consignment agent, therefore, the assessee is under an obligation to deduct TDS thereon. The DR further pointed out that if TDS has not been deducted by the assessee, then the entire amount of payment as claimed by the assessee was rightly disallowed by the Assessing Officer.
On careful consideration of above contentions, we are of the view that on careful perusal of the agreement/MOU dated 19.9.2002 and additional agreement dated 30.3.2004 between the assessee and Global Reliance Inc., we clearly observe that the expenses incurred on behalf of the assessee by its consignment agent M/s Global Reliance Inc, the entire expenses claimed by the assessee were related to marketing and sales expenses and as per clause 03 of the first agreement dated 19.9.2002, the assessee was responsible for all costs, taxes and other tax expenses relating to the import from India to USA and sale of products made by Global Reliance Inc. including custom duty, ocean freight and land freight of USA, warehousing expenses in USA and other general and administrative expenses including USA Salaries payments, Telephone Expenses, Travelling Expenses, Staff Education and Medical Expenses, Courier Expenses, Web Hosting Expenses, USA Local Expenses, Membership Fees paid to different Associations, Legal & Professional Fees, Car Expenses etc. We also observe that as a prudent business decision and with an aim to restrict and control expenses in USA, the assessee also fixed the selling and administrative expenses remuneration and other incidentals @9.05% of the sales effected in USA. Undisputedly, the amount of remittance or reimbursement made to Global Reliance Inc. also contained an element of commission of consignment agent i.e. Global Reliance Inc. but at the same time, we clearly observe that the consignment agent has not rendered any service in India and, therefore, consignment commission is not taxable in India.
All US expenses incurred by the consignment agent on behalf of the assessee were the responsibility of the assessee as per MOU dated 19.9.2002 and subsequent agreement dated 30.3.2004, which were also certified by CPA audit report, when actual export sale was effected at USA through consignment agent on behalf of the assessee, then expenses claimed by the assessee for the purpose of business can not be treated as post sales expenses and observations and findings of the Assessing Officer are not correct and justified in this regard and we set aside the same to this extent only.
On the basis of above factual matrix emerged from the evidence submitted by the assessee before the authorities below, we clearly observe that the ratio of decision of Hon’ble Supreme Court in the case of GE India Technology Centre P. Ltd. (supra) is applicable to the present case. We also hold that the benefit of the ratio of the decision of Special Bench, Mumbai in the case of Mahindra & Mahindra (supra) is also squarely applicable to the present case in favour of the assessee. Hence, in this situation and above facts and circumstances of the case, Circular No. 715 dated 8.8.95 is not applicable to the present case.
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