Toshiba Machine (Chennai) Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1185/CHNY/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6912 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO
• Keywords: Set aside
• Section: 14A; 40(a)(ia)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !', $ '% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1185/CHNY/2017 ' (' / ASSESSMENT YEAR : 2012-13 M/S TOSHIBA MACHINE (CHENNAI) PRIVATE LIMITED, NO.65, CHENNAI-BANGALORE HIGHWAY, CHEMBARAMKAKKAM, CHENNAI, TAMIL NADU 600 123. PAN : AAACL 6155 E V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. SP. CHIDAMBARAM, ADVOCATE ,-*+ . / / RESPONDENT BY : DR. M. SRINIVASA RAO, CIT 0 . 1$ / DATE OF HEARING : 07.02.2019 23( . 1$ / DATE OF PRONOUNCEMENT : 01.03.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -13, CHENN AI, DATED 28.02.2017 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.1185/CHNY/17 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE I NCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. SH. SP. CHIDAMBARAM, THE LD.COUNSEL FOR THE ASSE SSEE, REFERRING TO THE COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERATION, SUBMITTED THAT INTEREST ON MSME VEND ORS WAS DISALLOWED BY THE ASSESSEE ITSELF, THEREFORE, THERE CANNOT BE ANY FURTHER DISALLOWANCE BY THE ASSESSING OFFICER. IN THIS CASE, ACCORDING TO THE LD. COUNSEL, EVEN THOUGH THE ASSES SEE DISALLOWED INTEREST ON MSME VENDORS, THE ASSESSING OFFICER ALS O DISALLOWED, THEREFORE, IT IS A DOUBLE DISALLOWANCE. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE MATTER MAY BE REMITTED BACK TO THE ASSESSING OFFICER FOR RECONSIDERATION. 4. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF CST LIABILITY. 5. SH. SP. CHIDAMBARAM, THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT CST LIABILITY WAS INCURRED AND PAID DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FOUND T HAT IT WAS PERTAINING TO PRECEDING YEAR, THEREFORE, IT CANNOT BE ALLOWED DURING 3 I.T.A. NO.1185/CHNY/17 THE CURRENT YEAR. ACCORDING TO THE LD. COUNSEL, IT IS PERTAINING TO CURRENT YEAR, THEREFORE, IT HAS TO BE ALLOWED. 6. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT. 7. SH. SP. CHIDAMBARAM, THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE TOTAL COMMISSION PAYMENT IS ABOU T 1,05,27,286/-, OUT OF WHICH, 55,43,890/- WAS PAID TO DOMESTIC VENDORS. THE BALANCE AMOUNT OF 49,83,396/- WAS PAID TO OVERSEAS VENDORS. AS FAR AS OVERSEAS VENDORS ARE CONCERNED, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE BY PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. FAIZAN SHOES (P) LTD. (2014) 367 ITR 155. THE DEPA RTMENT HAS NOT FILED ANY APPEAL. WITH REGARD TO COMMISSION PA ID TO DOMESTIC VENDORS TO THE EXTENT OF 55,43,890/-, THE ASSESSING OFFICER HAS NOT DISALLOWED THE SAME. THEREFORE, THE CIT(APPEALS) I S NOT JUSTIFIED IN MAKING THE DISALLOWANCE. 8. ON THE CONTRARY, DR. M. SRINIVASA RAO, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT AS FAR AS DISALLOWAN CE MADE UNDER SECTION 14A OF THE ACT IS CONCERNED, THE MATTER MAY BE REMITTED 4 I.T.A. NO.1185/CHNY/17 BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER THE INTEREST ON MSME VENDORS ARE DISALLOWED AS CLAIMED BY THE AS SESSEE. 9. WITH REGARD TO CST LIABILITY, THE LD. D.R. SUBMI TTED THAT THE ASSESSING OFFICER SPECIFICALLY FOUND THAT THE EXPEN DITURE IS RELATING TO PRECEDING ASSESSMENT YEAR, THEREFORE, THE CIT(AP PEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER. 10. WITH REGARD TO DISALLOWANCE OF 55,43,890/- TOWARDS COMMISSION PAYMENT TO THE VENDORS, THE LD. D.R. SUB MITTED THAT THE ASSESSEE IS EXPECTED TO DEDUCT TAX WHILE MAKING COM MISSION PAYMENT TO THE DOMESTIC VENDORS, THEREFORE, THE CIT (APPEALS) HAS RIGHTLY MADE THE DISALLOWANCE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS FAR AS DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT IS C ONCERNED, THE ASSESSEE CONTENDED BEFORE THIS TRIBUNAL THAT INTERE ST ON MSME VENDORS IS CONCERNED, THE SAME WAS DISALLOWED BY TH E ASSESSEE ITSELF WHILE COMPUTING THE TAXABLE INCOME. AS RIGH TLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE AND THE LD. D.R., T HIS NEEDS TO BE VERIFIED BY THE ASSESSING OFFICER. ACCORDINGLY, TH E ENTIRE 5 I.T.A. NO.1185/CHNY/17 DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT IS S ET ASIDE AND THE MATTER IS REMITTED BACK TO THE FILE OF THE ASSE SSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND B RING ON RECORD WHETHER THE INTEREST ON MSME VENDORS WAS DISALLOWED BY THE ASSESSEE ITSELF AND THEREAFTER DECIDE THE ISSUE AFR ESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 12. THE ISSUE WITH REGARD TO DISALLOWANCE OF CST LI ABILITY IS CONCERNED, THE REVENUE CLAIMS THAT THE CST LIABILIT Y PERTAINS TO PRECEDING ASSESSMENT YEAR. HOWEVER, THE ASSESSEE C LAIMS THAT IT PERTAINS TO CURRENT ASSESSMENT YEAR. THIS FACT ALS O CAN BE VERIFIED BY THE ASSESSING OFFICER. THEREFORE, THE ORDERS OF BOTH THE AUTHORITIES BELOW WITH REGARD TO CST LIABILITY ARE SET ASIDE AND THE MATTER IS REMITTED BACK TO THE FILE OF THE ASSESSIN G OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE AFRESH ON THE BASIS OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND THER EAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 13. THE ISSUE WITH REGARD TO DISALLOWANCE OF COMMIS SION PAID TO THE EXTENT OF 55,43,890/- IS CONCERNED, THE ASSESSEE ADMITTEDLY 6 I.T.A. NO.1185/CHNY/17 PAID TOTAL COMMISSION OF 1,05,27,286/-, OUT OF WHICH, 49,83,396/- WAS PAID TO OVERSEAS VENDORS. THE CIT(APPEALS) IN FACT DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AS FAR A S COMMISSION PAID TO OVERSEAS VENDORS. THE REVENUE HAS NOT FILE D ANY APPEAL AGAINST THIS ORDER OF THE CIT(APPEALS). THEREFORE, THE ORDER OF THE CIT(APPEALS) WITH REGARD TO COMMISSION PAID TO OVER SEAS VENDORS ATTAINED FINALITY. 14. NOW, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF COMMISSION PAID TO DOMESTIC VENDORS TO THE EXTEN T OF 55,43,890/-. ACCORDING TO THE LD. COUNSEL, THE ASS ESSING OFFICER HAS NOT MADE ANY DISALLOWANCE, THEREFORE, THE CIT(A PPEALS) IS NOT JUSTIFIED IN MAKING DISALLOWANCE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THIS FACT ALSO NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER AND BRING ON RECORD THE NATURE OF PAYMENT O F COMMISSION. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BEL OW ARE SET ASIDE AND THE ISSUE OF COMMISSION PAID TO DOMESTIC VENDOR S IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASS ESSING OFFICER SHALL RE-EXAMINE THE MATTER AND THEREAFTER DECIDE T HE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE O PPORTUNITY TO THE ASSESSEE. 7 I.T.A. NO.1185/CHNY/17 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 ST MARCH, 2019 AT CHENNAI. SD/- SD/- (. !') ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 1 ST MARCH, 2019. KRI. . ,167 87(1 /COPY TO: 1. *+/ APPELLANT 2. ,-*+/ RESPONDENT 3. 0 91 () /CIT(A)-13, CHENNAI 4. PRINCIPAL CIT-3, CHENNAI-34 5. 7: ,1 /DR 6. ' ; /GF.