ITO, CHENNAI V. Lipi Marketing Pvt. Ltd., CHENNAI

ITA 1326/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86311 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: MAMMEN MATHEWS; J C JACOB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO. 1326/MDS/2014 & C.O.NO.130/MDS/2014 (IN ITA NO.1326/MDS/2014) ( / ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER, COMPANY WARD-II(1) ROOM NO.515, 5 TH FLOOR NEW BLOCK, 121, M.G.ROAD, CHENNAI-600 034. VS M/S. LIPI MARKETING PVT. LTD., 32, FIRST LINK STREET, NEHRU NAGAR, KOTTIVAKKAM, CHENNAI-600 041. PAN: AAACL6709L ( /APPELLANT) (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. MAMMEN MATHEWS, C.A. & MR. J.C.JACOB, A.R. /DATE OF HEARING : 23 RD FEBRUARY, 2015 /DATE OF PRONOUNCEMENT : 25 TH FEBRUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNA I DATED 27.12.2013 FOR THE ASSESSMENT YEAR 2010-11. THE ONL Y GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDIT ION MADE TOWARDS PRIOR PERIOD EXPENDITURE ON COMMISSION PAYM ENTS. 2. BRIEF FACTS ARE THAT ASSESSING OFFICER WHILE COM PLETING ASSESSMENT NOTICED THAT ASSESSEE DEBITED SALES COMM ISSION OF ` 60,81,304./- DURING THIS ASSESSMENT YEAR. ON VERI FICATION 2 ITA NO.1326/MDS/2014 & C.O.NO.130/MDS/2014 OF THE DETAILS CALLED FOR, THE ASSESSING OFFICER F OUND THAT COMMISSION OF ` 22,84,000/- RELATES TO THE SALES MADE DURING THE ASSESSMENT YEARS 2007-08 TO 2009-10. THE ASSESS ING OFFICER WAS OF THE VIEW THAT THIS SALES COMMISSION SHOULD HAVE CLAIMED AS EXPENDITURE IN THE RESPECTIVE ASSES SMENT YEARS ON ACCRUAL BASIS. THEREFORE, HE DISALLOWED TH E SAID COMMISSION AS NOT RELATED TO THIS ASSESSMENT YEAR. ON APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) AL LOWED THE APPEAL OF THE ASSESSEE HOLDING THAT AS PER TERM S AND CONDITIONS, THE COMMISSION IS PAYABLE ONLY WHEN THE ASSESSEE REALIZES THE ENTIRE SALE PROCEEDS. THE COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE DELE TED THE DISALLOWANCE FOR THE REASON THAT SINCE THE ENTIRE S ALES WERE REALIZED DURING THIS YEAR, THE COMMISSION PAID BY THE ASSESSEE THOUGH RELATES TO EARLIER YEAR IS ALLOWABL E DURING THIS ASSESSMENT YEAR, AS THE EXPENDITURE CRYSTALLI ZED DURING THIS ASSESSMENT YEAR. THE REVENUE IS IN APPEAL BEF ORE US. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING COMMI SSION ON THE GROUND THAT EXPENDITURE DID NOT ACCRUE DURING T HIS ASSESSMENT YEAR. 3 ITA NO.1326/MDS/2014 & C.O.NO.130/MDS/2014 4. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED TH E DISALLOWANCE OBSERVING AS UNDER:- 4.1.1 BEFORE THE UNDERSIGNED, THE ASSESSEE COMPANY SUBMITTED THAT AS PER THE TERMS AND CONDITIONS BETWEEN THE ASSESSEE AND THE COMMISSION AGENT (SRI D. ARUNKUMAR), THE COMMISSION IS PAYABLE ONLY AFTER THE RECEIPT OF THE SALE PROCEEDS FROM THE DEBTORS FOR WHICH SHRI ARUNKUMAR CANVASSED FOR. THOUGH THE SALES WERE MADE IN THE EARLIER YEARS, THE SALE PROCEEDS ARE FINALLY REALIZED DURING THE F.Y.2009-10 AND HENCE SHRI ARUNKUMAR IS ACTUALLY ENTITLED FOR THE SALES COMMISSION ONLY IN THE F.Y.2009-10. ACCORDINGLY THE AMOUNT WAS PAID TO SHRI ARUNKUMAR IN F.Y.2009-10 AND CLAIMED AS EXPENDITURE IN A.Y.2010-11. HENCE THE ASSESSEE CLAIMED THAT ITS CLAIM IS AS PER THE ACCOUNTANCY PRINCIPLES AND THE PROVISIONS OF THE ACT. 4.1.2 I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS AS WELL AS THE CONTENTS OF THE ASSESSMENT ORDER. AS PER THE TERMS AND CONDITIONS BETWEEN THE ASSESSEE AND THE COMMISSION AGENT (SRI D. ARUNKUMAR), THE COMMISSION IS PAYABLE ONLY AFTER THE RECEIPT OF THE SALE PROCEEDS BY THE ASSESSEE. SHRI ARUNKUMAR CANVASSED FOR SALES IN THE EARLIER FINANCIAL YEARS AND AS AND WHEN THE SALES WERE EFFECTED BY THE ASSESSEE HE RAISED BILLS (FOR COMMISSION CLAIMS) ON THE ASSESSEE. HOWEVER, SINCE THE PAYMENT OF COMMISSION TO SHRI ARUNKUMAR IS SUBJECT TO THE REALIZATION OF THE CONCERNED SALE PROCEEDS, THE ASSESSEE PAID THE COMMISSION TO SHRI ARUNKUMAR IN F.Y.2009-10 AS THE SALE PROCEEDS ARE REALIZED IN F.Y.2009-10. THUS, THOUGH SALES 4 ITA NO.1326/MDS/2014 & C.O.NO.130/MDS/2014 COMMISSION HAS BECOME DUE TO SHRI ARUNKUMAR IN THE EARLIER YEARS, IT BECAME PAYABLE ONLY IN F.Y.2009-10 AND HENCE THE ASSESSEE HAS RIGHTLY CLAIMED THE SAME AS EXPENDITURE IN THE FINANCIAL YEAR 2009-10 RELEVANT TO THE A.Y.2010-11. THEREFORE, THE ADDITIONS MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF DISALLOWANCE OF 'COMMISSION PAYMENTS' OF RS.22,84,000/-, ARE NOT JUSTIFIED AND DELETED. 6. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) WE FIND THAT ON THE TERMS AND CONDITIONS BETWEEN THE ASSESSEE AND COMMISSION AGEN TS, THE COMMISSION IS PAYABLE ONLY AFTER THE RECEIPT OF SALE PROCEEDS BY THE ASSESSEE. THE ASSESSEE PAID COMMISS ION TO THE AGENTS IN THE CURRENT ASSESSMENT YEAR FOR THE S ALES CANVASSED BY HIM IN EARLIER YEARS, AS THE SALE PROC EEDS REALIZED IN THE CURRENT ASSESSMENT YEAR. WE THEREFO RE AGREE WITH THE VIEW OF THE COMMISSIONER OF INCOME TAX (A PPEALS) THAT THOUGH SALES COMMISSION HAS BECOME DUE TO AGEN TS IN EARLIER YEARS, IT BECAME PAYABLE ONLY IN THE CURRE NT ASSESSMENT YEAR AS PER THE TERMS AND HENCE THE A SSESSEE HAS RIGHTLY CLAIMED THE SAME AS EXPENDITURE IN THE CURRENT ASSESSMENT YEAR. IN THE CIRCUMSTANCES, WE UPHOLD T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJ ECT THE GROUNDS RAISED BY THE REVENUE. 5 ITA NO.1326/MDS/2014 & C.O.NO.130/MDS/2014 7. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS ). SINCE THE APPEAL OF THE REVENUE IS DISMISSED, THE CROSS O BJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND THE S AME IS DISMISSED ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE REVENUE AND THE CRO SS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 25 TH FEBRUARY, 2015 SOMU 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .