Basilco India Ltd., New Delhi V. ITO, New Delhi

ITA 1141/DEL/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7104 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: S C GOYAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.1141/DEL/2011 ASSESSMENT YEAR : 2007-08 BASILCO INDIA LTD., 1497, BHARDWAJ BHAWAN, OPP. SACHDEVA PT COLLEGE, BHISHMA PITAMAH MARG, DEFENCE COLONY, NEW DELHI. PAN : AABCB0019L VS. ITO, WARD 2 (3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.C. GOYAL, CA, REVENUE BY : MRS. ANUSHA KHURANA, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER: THE APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECTED AGA INST THE ORDER PASSED BY THE CIT (A) DATED 27 TH DECEMBER, 2010 FOR ASSESSMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER:- 1. THAT THE LEARNED CIT (A) AND THE ASSESSING OFFICER HAVE ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN NOT ALLOWING COMMISSION PAYMENTS OF RS.1,10, 478/-. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISP OSED OFF. 2. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE DECLAR ING NIL INCOME. THE COMPUTATION FILED BY THE ASSESSEE SHOWED LO SS AT ` 4,45,100/-. THE ASSESSMENT HAS BEEN COMPUTED BY THE ASSESSI NG ITA NO.1141/DEL/2011 2 OFFICER AT ` 10,025/- IN WHICH VARIOUS DISALLOWANCES W ERE MADE INTER ALIA A SUM OF ` 1,10,478/- ON ACCOUNT OF COMMISSION. LD. ASSESSING OFFICER HAS DISCUSSED THIS ISSUE AT PAGE 2 AND 3 OF THE ASSE SSMENT ORDER. THE AFOREMENTIONED AMOUNT WAS CLAIMED AS COMM ISSION PAID TO MR. MAHENDRA UDAWAT, RESIDENT OF A-24, SHASTRI NAG AR, BHILWARA OF ` 54,543/- AND MR. C.S. MATHUR, RESIDENT OF JODHPUR, RAJASTHAN OF ` 55,935/- ON THE SALES EFFECTED BY THE COMPANY. IT WA S SUBMITTED THAT THE COMPANY HAD ALSO DEDUCTED TDS ON THE COMMISSION, B UT THE ASSESSING OFFICER DID NOT ACCEPT SUCH SUBMISSIONS OF THE ASSESSE E ON THE GROUND THAT THE COMMISSION CANNOT BE ALLOWED SIMPL Y FOR THE REASON THAT THE AMOUNT HAS BEEN PAID AND TAX HAS BEEN DEDUCTED. IT IS OBSERVED BY THE ASSESSING OFFICER THAT SALES MADE BY THE ASSESSEE HAD DECREASED TO ` 78,15,164/- FROM ` 79,96,069/- OF PRECEDING YEAR AND IN PRECEDING YEAR THE ASSESSEE DID NOT CLAIM ANY CO MMISSION EXPENDITURE. IT IS ALSO OBSERVED BY THE ASSESSING OFFICER THAT NEXUS OF THE COMMISSION PAYMENT DID NOT PROVE THAT IT WAS FOR T HE PURPOSE OF ENHANCEMENT OF THE BUSINESS AND INCREASE IN SALE. IT IS ALSO NOT PROVED THAT THOSE PERSONS HAVE MADE ANY POSITIVE EFFORT S WHICH WOULD LEAD IN ENHANCEMENT OF SALES AND BUSINESS. IT IS ON THESE GROUND LD. ASSESSING OFFICER HAS DISALLOWED THE IMPUGNED AMOUNT. TH E DISALLOWANCE HAS BEEN CONFIRMED BY THE CIT (A) ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE. BEFORE CIT (A) COPIES OF APPOINTMENT LETTER OF THE ABOVE REFERRED AGENTS W ERE FILED AND CONFIRMATION WAS ALSO FILED. IT WAS SUBMITTED THAT THE ASSESSEE IN AN ATTEMPT TO INCREASE ITS SALE HAD APPOINTED THESE TWO PE RSONS AT BHILWARA AND JODHPUR TO INCREASE THE SALES AND ACCORDI NG TO THE AGREEMENTS THE AMOUNT TO BE PAID TO THEM WERE THE DI FFERENCE FO THE STOCKISTS AND DISTRIBUTORS PRICE ON EACH PRODUCT. HO WEVER, LEARNED CIT (A) HAS UPHELD THE ADDITION. THE ASSESSEE IS AGGRIEV ED, HENCE, IN APPEAL. ITA NO.1141/DEL/2011 3 3. THE LEARNED AR, AFTER NARRATING THE FACTS, SUBMITT ED THAT THE ASSESSEE HAD FILED TDS CERTIFICATES AND THE APPOINTMENT LETTERS OF THE AGENTS. THE ASSESSEE HAD MADE AN ATTEMPT TO INCREASE IT S SALE, HOWEVER, WHICH COULD NOT BE RESULTED IN A FRUITFUL A TTEMPT. HE SUBMITTED THAT FOLLOWING CLAUSE OF THE AGREEMENT WHIC H ARE IDENTICAL IN BOTH THE AGREEMENTS IS RELEVANT:- 2. YOU WILL BE APPOINTED COMMISSION AGENT IN THE BHIL WARA AREA OF RAJASTHAN FOR SALES AND THE COMMISSION PAY AP PLICABLE TO YOU WILL BE ON PRODUCT-WISE BASIS OF ETHICAL PRODU CT. YOU WILL GET MARGIN FOR DIFFERENCES OF STOCKIST AND DISTRIBUTOR P RICE ON EACH PRODUCT. 4. HE SUBMITTED THAT THIS WAS THE BASIS ON WHICH THE PAY MENT WAS MADE TO THE AGENTS. HE FURTHER SUBMITTED THAT PAYMEN T HAS ALSO BEEN MADE IN REGULAR COURSE AND FOR THIS HE RELIED UPON TH E CONFIRMATION OF ACCOUNTS FILED BY BOTH THE AGENTS COPY OF WHICH ARE F ILED AT PAGES 21 AND 25 OF THE PAPER BOOK. COPIES OF AGREEMENTS ARE F ILED AT PAGES 18 AND 19 WITH MR. MAHENDER UDAWAT AND AT PAGE NOS.22-2 3 OF SHRI C.S. MATHUR. THEREFORE, REFERRING TO THESE DOCUMENTS IT W AS SUBMITTED BY HIM THAT PAYMENT BY THE ASSESSEE OF THE COMMISSION WAS JU STIFIED AND THE SAME COULD NOT BE DISALLOWED. HE FURTHER SUBMITTE D THAT THERE WAS NO MOTIVE WITH THE ASSESSEE TO CLAIM THESE PAYMENTS AS THE ASSESSEE HAS ALREADY BEEN SUFFERING LOSS. 5. ON THE OTHER HAND, RELYING UPON THE GROUNDS ON WH ICH THE ASSESSING OFFICER HAS MADE THE ADDITION AND CIT (A) HAS C ONFIRMED THE ADDITION, IT IS THE CASE OF THE LEARNED DR THAT IN TH E ABSENCE OF THOSE FACTORS, LEARNED CIT (A) IS JUSTIFIED IN CONFIRMING TH E DISALLOWANCE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. AT THE OUTSET, IT MA Y BE MENTIONED THAT WE SEE NO JUSTIFICATION IN THE DISALLOWANCE OF TH E AMOUNT OF ITA NO.1141/DEL/2011 4 COMMISSION AS THE BASIS OF COMMISSION HAS BEEN STIPULATED IN THE AGREEMENT AND THE PAYMENT OF THE COMMISSION HAS ALSO BE EN MADE ON REGULAR BASIS. THERE IS NO MOTIVE BY THE ASSESSEE FOR RED UCTION OF TAX LIABILITY. THE ASSESSING OFFICER HAS NOT MADE ANY ATTEM PT TO EXAMINE THE PERSONS WHOSE NAMES AND ADDRESSES WERE MADE AVAILABLE BY THE ASSESSEE IN CASE THE ASSESSING OFFICER WAS OF THE VIEW THAT N O SERVICES WERE RENDERED BY THOSE PERSONS. HOWEVER, KEEPING IN V IEW THE SMALLNESS OF THE AMOUNT AND THE EVIDENCE AVAILABLE ON RECORD, IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT PRIMA FACIE PRO VED ITS CLAIM OF PAYMENT OF COMMISSION. THE MARGINAL DECREASE IN SAL ES CANNOT BE A FACTOR TO MAKE THE DISALLOWANCE. SIMILARLY, NON-P AYMENT OF COMMISSION IN PRECEDING YEAR ALSO CANNOT BE MADE BASIS F OR MAKING DISALLOWANCE AS, ACCORDING TO THE SUBMISSIONS MADE BY THE ASSESSEE, THESE TWO PLACES WERE NEWLY ADDED FOR PROMOTION OF SAL ES. THEREFORE, KEEPING IN VIEW THE ENTIRETY OF FACTS AND CIRCUMSTANC ES OF THE CASE, WE ARE OF THE OPINION THAT THE DISALLOWANCE UPHELD BY T HE CIT (A) IS NOT JUSTIFIED. THE ADDITION IS DELETED AND THE APPEAL FI LED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.20 11. SD/- SD/- [G.D. AGRAWAL] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 29.12.2011. DK ITA NO.1141/DEL/2011 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES