DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(2), DELHI, I.P.ESTATE V. BUREAU VERITAS CONSUMER PRODUCTS SERVICES(INDIA) PVT. LTD., LAJPAT NAGAR

ITA 3158/DEL/2023

AI Insights

The case involves the Deputy Commissioner of Income Tax (Appellant) vs. Bureau Veritas Consumer Products Services (India) Pvt. Ltd. (Respondent) concerning the Assessment Year 2017-18. The primary issue was the disallowance of Rs. 8,63,14,907 as expenses on Rebate and Discount by the AO, which was later deleted by the CIT(A). The AO had disallowed these expenses on the grounds that they were not incurred wholly and exclusively for the business purposes of the assessee, as there was no tripartite agreement to demonstrate that the rebates and discounts were passed to the customers. The CIT(A) found in favor of the assessee, which led to the Revenue's appeal to the ITAT. The ITAT found contradictions in the CIT(A)'s decision and remitted the matter back to the AO for further examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47310 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: ITA No. 5582/Del/2019
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: PRATIBHA MEENA
• Assessee Lawyers: JASKARAN SINGH
• Keywords: Set aside; Opportunity of being heard; Wholly owned subsidiary

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA,ACCOUNTANT MEMBER ITA No.3158/Del/2023,A.Y. 2017-18 Deputy Commissioner of income Tax, Circle-4(2), Central Revenue Building, I.P.Estate, New Delhi Vs. Bureau Veritas Consumer ProductsServices (India) Pvt. Ltd. Lajpat Nagar,New Delhi PAN: AAACM6792J (Appellant) (Respondent) Appellant by Ms. Pratibha Meena, Sr.DR Respondent by Sh. Jaskaran Singh, AR Date of Hearing 14/01/2025 Date of Pronouncement 14/01/2025 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal of the Revenue for the Assessment Year (hereinafter, the ‘AY’) 2017-18 is directed against the order dated 30.08.2023of the Commissioner of Income Tax (Appeals), NFAC, New Delhi [hereinafter, the ‘CIT(A)’]. 2. Following grounds have been raised by the Revenue: - ITA No.3158/Del/2023 Bureau Veritas Consumer Products Services (India), P. ltd. 2 “1. Whether the Ld. CIT(A) has erred in deleting the addition of Rs. 8,63,14,907/- being expenses on Rebate and Discount, when such Rebates and Discounts are not verifiable from the bills to the customers and not proved to have incurred wholly and exclusively for the purpose of its business. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.” 3. The relevant facts giving rise to this appeal are that the assessee, a wholly owned subsidiary of Bureau Veritas SA., France, provides testing, inspection and audit services to Indian affiliates of MNCs. Firstly, the services rendered by the assessee were billed to the customers. Thereafter, the rebate & discount is given to the customer through the holding company AE as per the master agreement entered between customers and its AEs. During the assessment proceedings, the assessee admitted that it had provided complete details of discount paid to its AEs vis a vis details of services rendered to its customers alongwith percentage of discount offered/given to them during the relevant year. The sum of such rebate & discount was paid, in aggregate, to the holding company AE for making payment of the same to the customers. The Assessing Officer (hereinafter, the ‘AO’)was not satisfied with the explanation of the assessee as there was no tripartite agreement in this regard to demonstrate that the rebate & discount paid to the AE had passed to the foreign customers. Further, the assessee did not bring any material on the record before the AO to demonstrate the live nexus between the customers and holding company ITA No.3158/Del/2023 Bureau Veritas Consumer Products Services (India), P. ltd. 3 AE to justify the said claim. The AO therefore, inferred that the said rebate & discount claimed to have been paid, in aggregate, to the AE was not actually passed to the customers and thus, he disallowed the same on the reasoning that the same had not been incurred wholly and exclusively for the business of the assessee. The AO also opined that the payment of rebate & discount through the holding company AE was not nothing but a mechanism to transfer the profit in the garb of rebate & discount to the holding company AE. Aggrieved, the assessee filed appeal before the CIT(A) and succeeded. 4. The Ld. Sr. DR, placing reliance on the AO’s finding, submitted that the assessee had failed to demonstrate, with the help of any corroboratory evidence, that such rebate & discount had actually passed on to its customers through its AE. The agreement/MOU entered between holding company AE and the assessee, being self-serving document, did not demonstrate that the said rebate & discount had been actually passed on to the customers through the AE. Thus, the assessee could not establish that the said rebate & discount had been incurred wholly and exclusively for the business purposes, argued the Ld. Sr. DR. It was also submitted that there was no tripartite agreement or third-party document justifying the assessee’s claim that the said rebate &discount had been passed on to the customers of the assessee. The Ld. Sr. DR drew our attention to the finding of the Ld. CIT(A) to emphasize that the Ld. CIT(A) did not pass any ITA No.3158/Del/2023 Bureau Veritas Consumer Products Services (India), P. ltd. 4 speaking order justifying his finding. The impugned order did not mention any reasoning for deleting the said disallowance. The finding of the Ld. CIT(A) was contradictory in itself as evident from the relevant para of the impugned order as under: “5.1.2 Respectfully following the decision of the ITAT bench Delhi mentioned supra, I am of the opinion that in the preceding AY similar issues were raised and in AY 2014-15 also thorough deliberations was required on the part of the AO. The AO should have examined the facts in the light of MOUs/agreements, which is not the case here. The documentary evidences on record also favour the contentions of the appellant. I find force in the evidences provided by the appellant and hereby direct the AO to delete the addition of Rs.8,63,14,907/- being expenses on rebate and discount.” 4.1 The Ld. Sr. DR drew our attention to the fining of the Ld. CIT(A) to emphasize that the Ld. CIT(A), on one hand, placed reliance on the decision of the Tribunal in the assessee’s own case in the ITA No. 5582/Del/2019; however, he did not elaborate the details/documents based on which he deleted the said disallowance. In the interest of justice, she prayed for remitting the matter back to the CIT(A) as the present case was squarely covered by the decision of the Tribunal in the assessee’s own case (supra). 5. On the other hand, the Ld. AR submitted that the said rebate & discount had been paid as per the agreement between the assessee and its AE, which later on, passed on to the foreign customers through MOUs ITA No.3158/Del/2023 Bureau Veritas Consumer Products Services (India), P. ltd. 5 between the AE and customers. The Ld. AR drew our attention to the said agreement/MOU. The Ld. AR drew our attention to the categorical finding of the Ld. CIT(A) that ‘this year case was different than the preceding year and the documentary evidences on record also favour the contentions of the appellant. I find force in the evidences provided by the appellant.’ 5.1 The Ld. AR did not bring any such documentary evidence before us to buttress the finding of the Ld. CIT(A). 6. We have heard both parties at length and have perused the material available on the record. We find merit in the argument/contention/ submission of the Ld. Sr. DR that the Ld. CIT(A) had not given detailed justification for relief and the finding of the Ld. CIT(A) is having contradictions. We are of the considered view that this case is squarely covered by the decision of the Tribunal in the assessee’s own case (supra). Therefore, respectfully following the decision of the Tribunal in the assessee’s own case, we deem it fit to restore this issue to the file of the AO. The assessee is directed to demonstrate that discounts/rebates have ultimately been passed on to customers. The AO is directed to verify the same in light of Agreements/MOUs. Needless to mention, the AO shall give reasonable and sufficient opportunity of being heard to the assessee. The impugned order is thus, set aside and the matter ofrebate & discount is remitted to the AO as above. ITA No.3158/Del/2023 Bureau Veritas Consumer Products Services (India), P. ltd. 6 7. In the result, the appeal is allowed for statistical purposes. Order pronounced in open Court on 14 January, 2025 Sd/- Sd/- (SATBEER SINGH GODARA) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:08/04/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. Sr. DR-ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "