HILTON FORGE, MUMBAI V. JTCIT RG 25(3), MUMBAI

ITA 1228/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78847 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 19-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: RAHUL K HAKANI; DR K SHIVARAM
• Keywords: Additional evidence; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 1228/MUM/2009 (ASSESSMENT YEAR: 2005-06) M/S. HILTON FORGE 701 PALM SPRING NEXT TO D-MART, LINKING ROAD MALAD (W) MUMBAI-400 064. VS. JT. COMMISSIONER OF INCOME TAX RANGE- 25(3) PRATYAKSHAKAR BHAVAN C-11, 3 RD FLOOR, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. : AADFH 0939 E ASSESSEE BY : D R . K. SHIVARAM & SHRI RAHUL K. HAKANI REVENUE BY : SHRI B.P.K. PANDA DATE OF HEARING : 19 /0 5 /2014 DATE OF PRONOUNCEMENT : 1 9/0 5 /2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22/12/2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-0 6. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS ALONG WITH FORM-36 . 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.8,32,544 /- BEING DISCOUNT (BONUS) PAID TO DAMSTAHL GMBH GERMANY U/S.40(A)(IA) OF THE INCOME TAX ACT IN SPITE OF THE FACT THAT THE SAME IS NOT APPLICABLE IN THIS CASE. ITA NO.1228/M/09 AY:05-06 2 2. THE LD. CIT(A) HAS FURTHER ERRED IN NOT AGREEING WITH THE REMAND REPORT FILED BY ASSESSING OFFICER WHEREIN HE HIMSELF HAS CONFIRMED THAT THE PROVISION OF SECTION 195 ARE NOT APPLICABLE IN THE PRESENT CASE AND AS SUCH THERE WI LL BE NO ADDITION OF RS.8,32,544/- U/S. 40(A)(IA) OF THE INC OME TAX ACT. 1.1 THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS ALONG WITH THE APPLICATION FOR ADMITTING THE ADDITIONAL GROUND. TH E ADDITIONAL GROUNDS READ AS UNDER :- 1. THE LD. CIT(A) ERRED IN HOLDING THAT BONUS OF R S.8,32,544/- PAID BY THE APPELLANT TO DAMSTAHL A/S WAS PRIOR PER IOD EXPENSES WITHOUT AFFORDING REASONABLE OPPORTUNITY T O THE ASSESSEE TO EXPLAIN THAT THE BONUS PAYMENT WAS RIGH TLY CLAIMED AS DEDUCTION IN ASSESSMENT YEAR 2005-06 AND HENCE THE ORDER OF CIT(A) MAY BE QUASHED. 1.1 WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) ERRE D IN HOLDING THAT BONUS OF RS.8,32,544/- PAID BY THE APP ELLANT TO DAMSTAHL A/S WAS PRIOR PERIOD EXPENSES WITHOUT APPRECIATING THAT AS THE EXPORT REALIZATION OF EXPO RTS RELATING TO MARCH, 2003 TO FEB. 2004 WAS COMPLETED IN ASSESS MENT YEAR 2005-06, BONUS PAYMENT ACCRUED IN ASSESSMENT Y EAR 2005-06 AND HENCE ORDER OF CIT(A) DISALLOWING THE S AID PAYMENT IS BAD IN LAW. 2. THE LD. CIT(A) ERRED IN HOLDING THAT APPELLANT F AILED TO PROVE THE SERVICES RENDERED BY DAMSTAHL A/S WAS OF SALE OF GOODS ON PRINCIPAL TO PRINCIPAL BASIS AND HENCE, OR DER OF CIT(A) DISALLOWING BONUS PAYMENT MAY BE SET ASIDE. 1.2 THOUGH THE ORIGINAL GROUNDS AS WELL AS ADDITION AL GROUNDS ARE IN RESPECT OF DISALLOWANCE OF RS.8,82,544/- PAID BY T HE ASSESSEE TO M/S. DAMSTAHL GMBH, GERMANY, HOWEVER THE ADDITIONAL GROU ND IS ONLY FOR TAKING A PLEA WHICH WAS NOT RAISED IN THE ORIGINAL GROUNDS. 2. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE AND THE LD. DR ON THE ISSUE OF ADMISSION OF ADDITIONAL GROUND. WE NOT E THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE DO NOT PERTAIN TO RAI SING A NEW ISSUE, BUT ITA NO.1228/M/09 AY:05-06 3 IT IS ONLY A PLEA RAISED IN RESPECT OF THE SAME ISS UE RAISED IN THE ORIGINAL GROUND. THEREFORE, IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN THE INTEREST OF JUSTICE WE ADMIT THE ADDITIONAL GROUNDS RAISED BY ASSESSEE. 3. THE BRIEF FACTS GIVING RISE TO THE SOLITARY ISSU E RAISED BY THE ASSESSEE IN THIS APPEAL ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF STEEL FORGINGS. DURING THE YEAR THE ASS ESSEE HAS SHOWN TURNOVER OF RS.32.17 CRORES INCLUSIVE OF OTHER INCO ME. THE ASSESSEE HAS DEBITED A SUM OF RS.8,32,544/- AS DISCOUNT/BONUS ON EXPORT PAID TO M/S. DAMSTAHL GMBH, GERMANY. THE AO ASKED THE ASSES SEE TO FURNISH THE DETAIL ON THIS TRANSACTION AND AS TO WHY THE TA X AT SOURCE HAS NOT BEEN DEDUCTED ON THIS PAYMENT. THE ASSESSEE SUBMITT ED THAT THE PAYMENT WAS MADE AS PER THE AGREEMENT WITH THE SAID PARTY AND ON THE EXPORT MADE BY THE ASSESSEE TO THE SAID PARTY, THER EFORE, THIS WAS NOT SUBJECTED TO TDS UNDER THE PROVISIONS OF SECTION 19 5. AO DID NOT ACCEPT THE EXPLANATION AND CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAID AMOUNT OF RS.8,32,544/- U/S. 40(A)(IA) OF THE I.T. ACT FOR NON DEDUCTION OF TDS. 4. IN THE FIRST APPEAL CIT(A) ISSUED A REMAND ORDER AND AFTER RECEIVING THE REMAND REPORT CONFIRMED THE DISALLOWANCE IN QUE STION, HOWEVER, ON DIFFERENT REASONING. THE CIT(A) HAS HELD THAT THE A LLEGED PAYMENT PERTAINS TO ASSESSMENT YEAR 2004-05 AND NOT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THIS IS NOT ALLOWAB LE FOR THE YEAR UNDER CONSIDERATION BEING PRIOR PERIOD EXPENSES. 5. BEFORE US THE LD. AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE HAS SUBMITTED THAT THIS PAYMENT WAS MADE TO M/S. DAMSTA HL GMBH, GERMANY, AGAINST THE ORDER FOR EXPORT PLACED BY THE SAID PARTY AND ON REALIZATION OF EXPORT SALES, THEREFORE, THE SAID AM OUNT IS NOT A COMMISSION OR BONUS, IT IS IN THE NATURE OF A DISCO UNT WHICH WAS PAID BY THE ASSESSEE ON REALIZATION OF EXPORT SALE FROM THE SAME PARTY. HE HAS ITA NO.1228/M/09 AY:05-06 4 REFERRED TO THE REMAND REPORT AND SUBMITTED THAT AO HAS MENTIONED IN THE REMAND REPORT THAT AS PER CBDT CIRCULAR NO.786 DATED 07/02/2000 THE PAYMENT REMITTED DIRECTLY ABROAD TO A NON-RESID ENT OPERATING OUTSIDE THE COUNTRY, NO PART OF HIS INCOME ARISING IN INDIA , THEREFORE, NO TAX IS DEDUCTIBLE U/S. 195. 6. THE LD. AR HAS FURTHER SUBMITTED THAT THE CIT(A) HAS TAKEN A DIFFERENT VIEW WITHOUT GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PROVE THAT THE AMOUNT IN QUESTION PERTAINS TO THE YEAR UN DER CONSIDERATION. THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE BEFORE T HIS TRIBUNAL IN SUPPORT OF ITS CLAIM AND TO COUNTER THE FINDING OF THE CIT(A) THAT THIS AMOUNT IS PRIOR PERIOD EXPENDITURE. THE LD. AUTHORI ZED REPRESENTATIVE THUS SUBMITTED THAT THE ASSESSEE WAS NOT GIVEN AN A PPROPRIATE OPPORTUNITY TO PROVE THE FACT THAT THE EXPENDITURE PERTAINS TO THE YEAR UNDER CONSIDERATION AND CIT(A) DECIDED THE ISSUE ON AN ENTIRELY DIFFERENT REASON/GROUND WITHOUT SUCH OPPORTUNITY. 7. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT SINCE THE AMOUNT IN QUESTION WAS PAID SUBSEQUENT TO THE REALIZATION OF SALES, THEREFORE, IT WAS NOT A DISCOUNT ON SALE BUT A SUBSEQUENT PAYMENT MADE BY ASSESSEE. HE HAS FURTHER SUBMITTED THAT PAYMENT BY THE ASSESS EE TO NON ASSESSEE IS LIABLE FOR TDS AS PER PROVISIONS OF SECTION 195. HE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE AO DISALLOWED THE SUM OF RS.8,32,544/- BY TREATING THE SAME AS BONUS/COMMISS ION BY APPLYING PROVISION OF SECTION 40(A)(IA) FOR WANT OF TDS. IT IS PERTINENT TO NOTE THAT AS PER THE AGREEMENT BETWEEN THE PARTIES THE ASSESS EE WAS REQUIRED TO PAY 2% TO 5% OF THE ORDER PLACED BY M/S. DAMSTAHL G MBH, GERMANY, SUBJECT TO THE SHIPMENT AND PAYMENT OF THE SUPPLY R EALIZED BY ASSESSEE FOR THE YEAR 2003 TO 2006 RESPECTIVELY. THUS, IT IS CLEAR THAT THE PAYMENT ITA NO.1228/M/09 AY:05-06 5 IN QUESTION WAS ON RECEIPT OF ORDER PLACED BY M/S. DAMSTAHL GMBH, GERMANY, AND FURTHER SUBJECT TO SUPPLY AND REALIZAT ION OF EXPORT SALES BY THE ASSESSEE WHICH IS IN THE NATURE OF TRADE/CASH D ISCOUNT ON SALE THOUGH TERMED AS BONUS IN THE AGREEMENT, THE NOMENC LATURE USED IN THE AGREEMENT ALONE IS NOT SUFFICIENT TO DETERMINE THE NATURE OF PAYMENT WHEN THE PAYMENT IS DIRECTLY RELATED TO THE ORDER P LACED AND SUPPLY OF THE GOODS TO THE PARTY AND REALIZATION OF EXPORT SA LES. THIS PAYMENT AS IT IS CLEAR FROM THE AGREEMENT IS NOT FOR RENDERING OF ANY SERVICE BUT DIRECTLY RELATED TO EXPORT SALE AND REALIZATION OF AMOUNT. T HE CIT(A) HAS VIEWED THAT THIS AMOUNT PERTAINS TO THE ASSESSMENT YEAR 20 04-05 AND NOT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFO RE, NOT ALLOWABLE BEING PRIOR PERIOD EXPENDITURE. WE NOTE THAT NO SUC H QUERY WAS RAISED BY THE CIT(A) SO THAT THE ASSESSEE COULD HAVE EXPLA INED THE SAME WITH APPROPRIATE SUPPORTING EVIDENCE. THE ASSESSEE HAD F ILED ADDITIONAL EVIDENCE IN SUPPORT OF ITS CLAIM WHICH REQUIRES TO BE EXAMINED ON THIS POINT. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE WE, REMIT THIS ISSUE TO THE REC ORD OF CIT(A) TO RECONSIDER AND DECIDE THE SAME AFRESH AFTER CONSIDE RING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND GIVING APPROPRI ATE OPPORTUNITY OF HEARING TO ASSESSEE. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH MAY, 201 4. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 19/05/2014 JV. ITA NO.1228/M/09 AY:05-06 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.