ANAND I-POWER LTD, MUMBAI V. DCIT RG 5(2)(1), MUMBAI

ITA 1560/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0678 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KARTHIK NATARAJAN
• Keywords: TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER ITA NO. 1560 /MUM/201 7 (A.Y: 2012 - 13 ) M/S. ANAND I - POWER LIMITED {FORMERLY KNOWN AS PERFECT CIRCLE INDIA LTD.} 10, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI 400 004 PAN: AAACP 0482 E V. D.C.I.T, RANGE 5(2)(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KARTHIK NATARAJAN DEPARTMENT BY : SHRI ANOOP HIWASE DATE OF HEARING : 23 .08.2018 DATE OF PRONOUNCEMENT : 19 .11 .2018 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 10, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A) ] DATED 17.11.2016 FOR THE ASSESSMENT YEAR 2012 - 13. 2. GROUND NO.1 OF GROUNDS OF APPEAL OF THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF .15 LAKHS BEING PROVISION MADE TOWARDS COMMON MARKETING EXP ENSES. 2 ITA NO.1560/MUM/2017 (A.Y: 2012 - 13) M/S. ANAND I POWER LIMITED 3. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOT ICED THAT ASSESSEE HAS DEBITED CERTAIN EXPENDITURE TO P & L ACCOUNT UNDER THE HEAD SHARE OF COMMON MARKETING EXPENSES . ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THIS SHOULD NOT BE DISALLOWED BEING THE PROVISIONS IN NATURE. ASSESSEE SUBMITTED THAT , IT IS FOLLOWING THE MERCANTILE METHOD OF ACCOUNT ING AND AS PER COMMERCIAL TERMS AGREED BY THE ASSESSEE WITH M/S. VECTOR GASKETS INDIA LTD [FOR SHORT VGIL] THE SAID EXPENDITURE WHICH WAS INCURRED BY VGIL TOWARDS TRAVELLING AND SALARY WERE SHARED AND THE SAID EXPENDITURE IS NEITHER PROVISIONAL NOR CONTINGENT IN NATURE AND THE SAME IS CRYSTALLIZED DURING THE YEAR. HOWEVER NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE , THE ASSESSING OFFICER DISALLOWED THE SAID EXPENSES. ON APPEAL THE LD.CIT(A) CONFIRMED THE SAME. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS BOOKED MARCH MONTH EXPENSES ON MERCANTILE BASIS, THEREFORE, THE SAME SHOULD BE ALLOWED. 4. LD . DR STRONGLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A CAREFUL READING OF THE ORDERS OF THE AUTHORITIES, WE OBSERVE THAT ENTIRE FAC T S ON THE ISSUE ARE NOT BROUGHT ON RECORD WITH REFERENCE TO THE AGREEMENT BETWEEN THE PARTIES AND THEIR SERVICES. WE ARE OF THE VIEW THAT THIS MATTER HAS TO GO BACK TO THE FILE OF THE ASSESSING 3 ITA NO.1560/MUM/2017 (A.Y: 2012 - 13) M/S. ANAND I POWER LIMITED OFFICER FOR FRESH ADJUDICATION. HENCE THE SAME IS RESTORED TO THE FILE OF THE ASSESSING O FF ICER FOR FRESH ADJUDICATION. 6. GROUND NO.2 OF GROUNDS OF APPEAL RELATES TO CONFIRMATION OF DISALLOWANCE OF EXPENSES ON ACCOUN T OF TDS ON EXPORT COMMISSION. 7. BRIEFLY STARTED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED T DS OF 1,21,834/ - CLAIMED BY THE ASSESSEE AS EXPENDITURE UNDER THE HEAD EXPORT COMMISSION. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS NO REPLY WAS FURNISHED BY THE ASSESSEE. B EFORE THE LD.CIT(A) IT WAS SUBMITTED THAT INADVERTENTLY COMMISSION AND TDS WAS SHOWN SEPARATELY IN THE BOOKS , H OWEVER, IT WAS GROSS AMOUNT WHICH WAS PAID TO THE PARTY. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 8. LD. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE ARE OF THE VIEW THAT THE LD.CIT(A) RIGHTLY DISALLOWED THE SAME , OBSERV ING AS UNDER: - 5.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. IT IS SEEN FROM THE FACTS OF THE CASE THE APPELLANT HAD DEBITED EXPORT COMMISSION EXPENSES WHICH INCLUDES TDS AMOUNT. IN OTHER WORDS, THE APPELLANT HAS PAID GROSS AMOUNT OF EXPORT COMMISSION EXPENSES INCLUDING TDS APPLICABLE ON SUCH AMOUNT. THIS PRACTICE OF PAYING THE COMMISSION ALONG WITH THE APPLICABLE TDS AMOUNT, GRASSED UP, IS NOT ACCEPTABLE UNDER THE LAW. THE PURPOSE FOR MAKING TDS IS TO SEE THAT THE AMOUNT PAYABLE TO A PERSON WITHIN THE PROVISIONS OF TDS, THE AMOUNT HAS TO BE SUBJECTED TO TDS AT THE TIME OF MAKING PAYMENT OR CREDITING TO THE ACCOUNT OF THE DEDUCTEE. THE ARGUMENT THAT IT WAS INADVERTENTLY SEPARATED 4 ITA NO.1560/MUM/2017 (A.Y: 2012 - 13) M/S. ANAND I POWER LIMITED BUT THE ENTIRE AMOUNT WAS INCURRED FOR THE PURPOSE OF BUSINESS IS ALSO NOT ACCEPTABLE WHEN THE PROVISIONS OF TDS ARE GROSSLY VIOLATED. IN V IEW OF THE ABOVE, I HOLD THAT THE DISALLOWANCE MADE BY THE AO IS IN ORDER AND THE SAME IS CONFIRMED. THE GROUND IS DISMISSED. 10. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN SUSTAINING THE DISALLOWANCE. THE SAME IS CONFIR MED. THIS G ROUND IS DISMISSED. 11. GROUND N O . 3 TO 5 RELATES TO ADHOC DISALLOWANCE 20% MADE BY THE ASSESSING OFFICER IN RESPECT OF PROFESSIONAL FEE , ADVERTISEMENT AND PUBLICITY , AND DISCOUNT ON SALES . 12. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR DISALLOWANCE WAS DELETED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2011 - 12. COPY OF THE ORDER IS PLACED ON RECORD. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL IN ITA.NO. 2281/MUM/2016 DATED 13.03.2018, WE F IND THAT THE TRIBUNAL DELETED THE ADHOC DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF LEGAL AND PROFESSIONAL FEE , ADVERTISEMENT AND PUBLICITY AND DISCOUNT ON SALES HA S BEEN DELETED BY THE TRIBUNAL . FOLLOWING THE SAME , WE DIRECT THE ASSESSING OF FICER TO DELETE THE ADHOC DISALLOWANCE MADE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. 13. THE LAST GROUND OF APPEAL IS IN RESPECT OF ADDITION MAD E U/S. 41 (1) OF THE ACT. 5 ITA NO.1560/MUM/2017 (A.Y: 2012 - 13) M/S. ANAND I POWER LIMITED 14. BRIEFLY STATED THE FACTS ARE THAT, WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN TRADE PAYABLE S AS OF 04.03.2015 AND THERE ARE CERTAIN LIABILIT IES OUTSTANDING FOR LONG AND NOT PAID TILL THE F.Y. 2013 - 14 AMOUNTING TO 3,26,852/ - . SINCE THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS OR EXPLANATION AS TO WHY THE SAID AMOUNT SHOULD NOT BE TREATED AS INCOME OF THE ASSESSEE , THE ASSESSING OFFICER ADDED THE SAID AMOUNT AS CESSATION ON LIABILITY U/S. 41 (1) OF THE ACT. BEFORE THE LD.CIT(A) IT WAS CONTENDED THAT AMOUNTS ARE REFLECTED AS UNCLAIMED CREDITORS AN D THEY WERE NOT WRITTEN BACK. IT WAS CONTENDED THAT THE SAID EXPENDITURE WAS INCURRED IN CONNECTION WITH THE BUSINESS ACTIVITY AND THE AMOUNT WAS NOT PAID DUE TO VARIOUS COMMERCIAL CONSIDERATIONS AGREED AMONG THE PARTIES. THE LIABILITY DOES NOT CEASE TO EXIST. MERELY BECAUSE THE PAYMENT WAS NOT MADE THE SAME CANNOT BE A CESSATION OF LIABILITY. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE LD.CIT(A) SUSTAINED THE ADDITION. 15. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NONE OF THE PA RTIES ARE RELATED TO THE ASSESSEE AND THERE IS NO CESSATION OF LIABILITY. SIMPLY BECAUSE PAYMENT WAS NOT MADE IT CANNOT BE TREATED AS CESSATION OF LIABILITY ESPECIALLY WHEN THESE AMOUNTS WERE NOT WRITTEN BACK BY THE ASSESSEE. 16. LD. DR STRONGLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 6 ITA NO.1560/MUM/2017 (A.Y: 2012 - 13) M/S. ANAND I POWER LIMITED 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY REASON FOR DISALLOWANCE BY ASSESSING OFFICER APPEARS TO BE IS THAT THE AMOUNTS ARE OUTSTANDING FROM F.Y. 2009 - 10 TILL F.Y. 2013 - 14 . THIS CANNOT BE THE REASON FOR TREATING THE SAID AMOUNTS AS CESSATION OF LIABILITY. ASSESSEE ALSO DID NOT WRITE BACK THE LIABILITY AND THERE IS NO EVIDENCE TO SHOW THAT THE LIABILITY CEASED. NO EVIDENCE WAS BROUGHT ON RECORD TO SUGGEST THAT THE LIABILITY CEASED TO EXIST. IN THE CIRCUMSTANCES, WE HOLD THAT THE ADDITION CANNOT BE MADE SIMPLY BECAUSE THE ASSESSEE HAS NOT MADE THE PAYMENTS TO THE CREDITORS. THUS, WE DIRECT THE ASSESSING OFFICER THE DELETE THE ADDITION MADE U/S. 41 OF THE ACT. THIS GROUND I S ALLOWED . 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 19 TH NOVEMBER , 2018 SD/ - SD/ - ( R AJESH KUMAR ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 19 / 11 / 2018 GIRIDHAR , SR. PS 7 ITA NO.1560/MUM/2017 (A.Y: 2012 - 13) M/S. ANAND I POWER LIMITED COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM