The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench consisting of Mahavir Prasad, Judicial Member and Waseem Ahmed, Accountant Member quashed order of Commissioner of Income Tax (CIT) for passing an order passed against assessee without considering Double Tax Avoidance Agreements (DTAA) with various countries.
The assessee, ADF Foods Limited is engaged in the business of processing and, packaging various food items and its turnover is mainly from exports to foreign countries. Hence, to improve its international market it had appointed various persons as ‘Country Managers’ in different countries. They were non-residents and they provided all business and marketing related services abroad.
The counsel for the assessee, Bhavin Marfatia submitted that the CIT erred in fact and in law in confirming the action of the Assessing Officer (AO) without properly considering the DTAA with various countries and that confirming the action of the AO in charging interest u/s. 234B of the Act is also bad in law and fact. The Counsel further submitted that the CIT erred in confirming the action of the AO in charging interest u/s. 234C of the Act and also in in confirming the action of the AO in initiating penalty u/s. 271 (1)(c) of the Act. The counsel submitted that the appointment of the country managers was reduced to in writing, stating the terms and conditions and was a contract between the assessee and the country managers. For the various services rendered as per the terms of the contract the assessee company used to pay monthly retainer ship fees, commission on sales and reimbursement of various expenses. These expenses were booked under the head legal & professional fees. As payments were made in foreign currency and its persons are foreign resident and services rendered in foreign country, therefore, assessee cannot be held liable to deduct tax under Section 195 of the Act.
The Tribunal said” CIT ought to have considered the submission and case laws filed by the assessee in its support, thereafter, ought to have passed a detailed and reasoned order”.
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