Appeal Details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 9386 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 6 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-01-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
17-01-2017
Assessment Year
2009-2010
Appeal Filed On
26-06-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1386/AHD/2012 (ASSESSMENT YEAR: 2005-06) M/S. DANIEL MEASUREMENT SOLUTIONS PVT. LTD. 299- 300, GIDC ESTATE, MAKARPURA, BARODA V/S ADDL. CIT RANGE-1, VADODARA (APPELLANT) (RESPONDENT) PAN: AACCD5920F APPELLANT BY : SHRI M.K. PATEL, AR RESPONDENT BY : SHRI K. MADHUSUDAN, SR. D.R. ( )/ ORDER DATE OF HEARING : 17 -01-201 7 DATE OF PRONOUNCEMENT : 19 -01-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-I, BARODA DATED 30.04.2012 PERTAI NING TO A.Y. 2009-10 BY RAISING THE FOLLOWING SUBSTANTIVE GROUND OF APPEAL. ITA NO. 1386 /AHD/2012 . A.Y. 2009-10 2 1. THE LD. CIT (A) -1 HAS WRONGLY UPHELD THE ORDER OF ADDL. COMMISSIONER OF INCOME TAX, RANGE - 1, VADODARA, THE ASSESSING OFFI CER. THE APPELLANT COMPANY HAD BOOKED THE COMMISSION OF RS.50 LACS PAYABLE TO THE COMMISSION AGENT AS PER THE MERCANTILE SYSTEM OF ACCOUNTING AND THE NEC ESSARY TDS THEREON WAS DEDUCTED AT SOURCE AND PAID TO THE GOVT. TREASURY T OO. THE ACCRUAL OF THE EXPENSE AND THE PAYMENT THEREOF ARE DIVERSE MATTER TO BE LOOKED AT FROM TWO DIFFERENT PERSPECTIVES. THE ACCRUAL OF THE EXPENSE ENJOINS A LIABILITY OF PAYMENT WHICH HAS TO BE ACCOUNTED FOR AS PER THE PRINCIPLES OF MERCANTILE SYSTEM OF ACCOUNTING. 2. THE APPELLANT COMPANY FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARING ITS TAXABLE INCOME AT RS. 10,13,49,000/-. 3. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF NATURAL GAS AND LIQUID FLOW MEASUREMENT PRO DUCTS AND ENGINEERED METERING SYSTEMS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT THE ASSESSEE HAS M ADE PAYMENTS TOWARDS COMMISSION EXPENSES. THE A.O. FURTHER FOUND THAT TH ERE WAS NO COMMISSION EXPENSES CLAIMED IN THE IMMEDIATELY PREC EDING YEAR. IT WAS EXPLAINED BY THE ASSESSEE THAT DURING THE YEAR THE TURNOVER HAS INCREASED FROM RS. 14 CRORES TO RS. 72 CRORES AND FURNISHED T HE NECESSARY DETAILS RELATING TO THE PAYMENT OF COMMISSION. ITA NO. 1386 /AHD/2012 . A.Y. 2009-10 3 5. ON PERUSING THE DETAILS, THE A.O. NOTICED THAT THE AGENT HAS RAISED ITS FIRST BILL ON 02.07.2009 AND THE PAYMENT HAS BEEN MADE ON 13.07.2009. 6. ON THE BASIS OF THESE DETAILS, THE A.O. WAS OF THE OPINION THAT NEITHER THE BILL WAS RECEIVED DURING THE YEAR UNDER CONSIDERATI ON NOR THE PAYMENT HAS BEEN MADE DURING THE YEAR UNDER CONSIDERATION. THE A.O. WAS OF THE FIRM BELIEF THAT THE CLAIM OF COMMISSION EXPENSES IS VAL ID FOR A.Y. 2010-11 AS THE LIABILITY TO PAY CRYSTALLIZED IN THAT YEAR AND PAYM ENT WAS ALSO MADE IN THAT YEAR. THE A.O. DISALLOWED THE COMMISSION EXPENSE OF RS. 50 LACS. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT SINCE THE ASSESSEE HAS BOOKED THE ENTIRE SALES DURING THE YEA R ITSELF, THEREFORE, ON THE PRINCIPLES OF THE MERCANTILE SYSTEM OF ACCOUNTI NG, THE RELATED EXPENDITURE SHOULD BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF NAGRI MILLS COMPANY LTD. 33 ITR 681. 9. PER CONTRA, THE LD. D.R. STRONGLY RELIED UPON THE F INDINGS OF THE A.O. IT IS THE SAY OF THE LD. D.R. THAT EVEN IN THE AGREEMENT WITH THE AGENT IT HAS BEEN PROVIDED THAT THE COMMISSION SHALL BE PAID ON RECEI VING THE FULL PAYMENT UNDER THE CONTRACT. THE LD. D.R. FURTHER POINTED TH AT THE AGENT RAISED THE BILL IN THE SUBSEQUENT FINANCIAL YEAR AND THE PAYME NT HAS ALSO BEEN MADE IN THE SUBSEQUENT FINANCIAL YEAR. ITA NO. 1386 /AHD/2012 . A.Y. 2009-10 4 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY CONSIDERED THE DECISI ON OF THE HONBLE HIGH COURT OF BOMBAY (SUPRA) RELIED UPON BY THE LD. COUN SEL. 11. THERE IS NO DISPUTE THAT THE SALES HAVE BEEN BOOKED DURING THE YEAR UNDER CONSIDERATION ITSELF. THERE IS ALSO NO DISPUTE RELA TING TO THE GENUINENESS OF THE PAYMENT OF THE COMMISSION. THE ONLY DISPUTE REL ATES TO THE YEAR OF ALLOWABILITY OF THE COMMISSION EXPENSES. 12. IT WOULD BE PERTINENT TO REFER TO THE OBSERVATIONS OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF NAGRI MILLS CO. LTD. (SUPR A) AND THE SAME READ AS UNDER:- WE HAVE OFTEN WONDERED WHY THE INCOME-TAX AUTHORIT IES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBVIOUSLY A PERMISSIBLE DEDU CTION UNDER THE INCOME-TAX ACT, RAISE DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOU LD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY BE MATER IAL WHEN THE RATE OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEARS IS DIFFERENT ; BUT IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WH ETHER THE DEDUCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO THE DEPARTM ENT; AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT FRITTER AWAY ITS ENER GIES IN FIGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, JUDGING FROM THE REFERENCES THAT CO ME UP TO-US EVERY NOW AND THEN, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPA RTMENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER. ITA NO. 1386 /AHD/2012 . A.Y. 2009-10 5 13. A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE T HE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF ADANI ENTERPRISES LTD. IN TA X APPEAL NO. 573 OF 2016 WHERE THE HONBLE HIGH COURT WAS SEIZED WITH THE FO LLOWING QUESTION FOR CONSIDERATION: '(A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN CONFIRMING OF DISALLOWANCE OF PRIOR PERIOD EXPENDITURE OF RS.3,07,53,106/- BY THE LD. CIT(A)? 14. AND THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READS AS UNDER:- INSOFAR AS QUESTION (A) IS CONCERNED, IN A SEPARATE TAX APPEAL BEING TAX APPEAL NO.566/2016, AGAINST THE SAME ASSESSEE, WE MADE THE FOLLOWING OBSERVATIONS: '2. MAIN QUESTION IS SUM OF RS.67.88 LACS(ROUNDED OF F) WHICH THE ASSESSING OFFICER AND CIT(APPEALS) DISALLOWED TREAT ING THE EXPENDITURE AS A PRIOR PERIOD EXPENDITURE. THE TRIBUNAL REVERSED T HE FINDINGS OF THE REVENUE AUTHORITIES PRIMARILY ON TWO GROUNDS THAT T HE ASSESSEE BEING A COMPANY UNIFORMLY FOR ALL YEARS AND WOULD THEREFORE , HAVE NO REVENUE IMPLICATION OR WHETHER THE EXPENDITURE WAS RECOGNIZ ED IN THIS ASSESSMENT YEAR OR EARLIER YEAR. THE SECOND GROUND WAS THAT IN ANY CASE, THE REVENUE HAD RECOGNIZED THE PRIOR PERIOD INCOME. IF THAT BE SO, ACCORDING TO THE TRIBUNAL, IT WOULD BE UNFAIR NOT TO RECOGNIZE THE E XPENDITURE ALSO OF THE PRIOR PERIOD. 3. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES AND HAVING PERUSED THE DOCUMENTS ON RECORD, WE SEE NO REASON TO INTERFERE. FIRSTLY, THE EXPENDITURE OF RS. 67.88 LACS IS A FRACTION OF THE TOTAL INCOME OF THE ASSESSEE COMPANY DECLARED AT RS. 105.88 CRORES. FUR THER, EVEN THE REVENUE DOES NOT DISPUTE THAT THE COMPANY WOULD BE TAXED AT THE SAME RATE IN THE PRESENT ASSESSMENT YEAR OR DURING EARLI ER YEAR. IT IS ALSO NOT DISPUTED THAT PRIOR PERIOD INCOME WAS DECLARED BY T HE ASSESSEE DURING THE CURRENT YEAR WHICH IS ALSO ACCEPTED BY THE REVENUE. NO QUESTION OF LAW THEREFORE, ARISES. ITA NO. 1386 /AHD/2012 . A.Y. 2009-10 6 15. CONSIDERING THE FACTS OF THE CASE IN HAND, IN THE L IGHT OF THE AFORE-STATED JUDICIAL DECISIONS, WE DO NOT FIND ANY MERIT/JUSTIF ICATION FOR DISALLOWING THE IMPUGNED COMMISSION EXPENSE. AS THE A.O. HIMSELF HA S OBSERVED AT PARA 7 OF HIS ASSESSMENT ORDER THAT THE CLAIM IS ELIGIBLE FOR A.Y. 2010-11. SINCE THE SALES HAVE BEEN BOOKED DURING THE YEAR UNDER CONSID ERATION ITSELF, ON THE PRINCIPLES OF THE MERCANTILE SYSTEM OF ACCOUNTING, THE RELATED ALLOWABILITY SHOULD ALSO BE ALLOWED DURING THE YEAR UNDER CONSID ERATION ITSELF. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT( A) AND DIRECT THE A.O. TO DELETE THE IMPUGNED ADDITION OF RS. 50 LACS. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 19 - 01- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 19 /01/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD
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