DCIT, Circle - 6, Kolkata, Kolkata V. GMMCO Ltd., Kolkata

ITA 1610/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9397 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2010
• Court: TRIBUNAL
• Keywords: Revised return

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : KOLKATA () BEFORE . . . . . . . . , , , , , !' !' !' !' /AND . .. . . .. .! !! ! , # ) [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C . D. RAO, AM] '$ '$ '$ '$ / I.T.A NO. 1610/KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, -VS- GMMCO LT D. CIRCLE-6, KOLKATA. (PA NO. AABCG 0949 C) (! /APPELLANT ) (+,-/ RESPONDENT ) FOR THE APPLICANT : SRI P. K. MISHRA FOR THE RESPONDENT : S/SRI R. N. BAJORIA & S. B ANDYPADHYAY . / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A), KOLKATA DATED 11.01.2010 FOR ASSESSMENT YEA R 2007-08 ON THE FOLLOWING GROUND : THAT LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FA CTS OF THE CASE IN NOT TREATING THE COST OF SPARES SUPPLIED BY THE ASSESSEE TO ITS PRI NCIPALS CUSTOMER AS SALES PROMOTION EXPENSES AND NOT INCLUDING SUCH COST OF SPARES IN COMPUTING THE FRINGE BENEFIT VALUE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE THROUGH REVISED RETURN DECLARED FBV OF RS.3,17,97,130/-. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER COMPUTED THE TOTAL FRINGE BENEFIT VALUE BY MAKING AN ADDITION OF RS.27,08,527/- BEING 20% OF RS.1,35,42,635/- SALES PROMOTION AND COMPUTED THE FRINGE BENEFIT TAX PAYABLE AT RS.1,17,70,108/-. IN APPEAL, THE LD. CIT(A) HAS HELD AS UNDER : THE APPELLANT HAS MADE A SIMILAR SUBMISSION IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2006-07. AFTER GOING THROUGH THE S UBMISSIONS OF THE APPELLANT AND ALSO THE ORDER OF THE A.O., I FIND THAT THE ISSUE H AS BEEN DECIDED IN FAVOUR OF THE APPELLANT FOR THE A.Y. 2006-07 IN APPEAL NO. 568/CI T(A)-VI/08-09/CIR.6. TAKING INTO CONSIDERATION THE SIMILAR FACTS OF FRINGE BENEFIT T AX, THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.27,08,528/- FROM THE TOTAL FRINGE BE NEFIT VALUE. THE GROUND OF APPEAL IS ALLOWED. AGGRIEVED BY THE SAID ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 2 3. AT THE TIME OF HEARING BEFORE US, THE LD. DR SUB MITTED THAT THE LD. CIT(A) HAS ERRED IN NOT TREATING THE COST OF SPARES SUPPLIED B Y THE ASSESSEE TO ITS PRINCIPALS CUSTOMER AS SALES PROMOTION EXPENSES AND NOT INCLUD ING SUCH COST OF SPARES IN COMPUTING THE FRINGE BENEFIT VALUE. HE ALSO CONTEN DED THAT THE ISSUE WAS EXAMINED IN ASSESSMENT YEAR 2006-07 ALSO. THE LD. CIT(A) HAS AL LOWED RELIEF TO THE ASSESEE BY OBSERVING THAT THE EXPENDITURE ON SUCH SPARES ARE N OT IN THE NATURE OF SALES PROMOTION AND THESE EXPENSES ARE NOT TO BE INCLUDED IN COMPUT ING THE FRINGE BENEFIT VALUE. THE DEPARTMENT HAS FILED APPEAL IN THE TRIBUNAL AGAINST THE SAID ORDER. HENCE, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE ASSESSEE S CONTENTION THAT SUCH SPARES SUPPLIED TO PRINCIPALS CUSTOMERS SHOULD NOT BE INC LUDED AS SALES PROMOTION EXPENSES FOR COMPUTING THE FBV AND INCLUDE RS.27,08,527/- IN THE FBV. HE LASTLY URGED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ACTION OF THE LD. CIT (A) MAY BE UPHELD AS THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY FOLLOWIN G HIS ORDER FOR ASSESSMENT YEAR 2006-07 AND THE REVENUE DID NOT FILE ANY APPEAL AGA INST THE SAID ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED ON RECORD. WE FIND THAT THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.27,08,528/- FROM THE TOTAL FRINGE BENEFIT VALUE BY FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2006-07. THE REVENUE DID FILE AN A PPEAL AGAINST THE SAID ORDER OF THE LD. CIT(A) BEFORE THE TRIBUNAL VIDE ITA NO. 2145/K/ 2009 FOR ASSESSMENT YEAR 2006- 07 AND THIS GROUND WAS ALSO TAKEN ALONG WITH OTHER GROUNDS BUT AT THE TIME OF HEARING PERMISSION WAS SOUGHT TO WITHDRAW THE SAME AND TO F ILE SEPARATE APPEAL IN RESPECT OF THIS ISSUE, WHICH WAS GRANTED. SUBSEQUENTLY NO APPE AL HAS BEEN FILED BY THE DEPARTMENT ON THIS GROUND FOR ASSESSMENT YEAR 2006-07. WE FUR THER FIND THAT THE LD. CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE FOR ASSESSMENT YEAR 2 006-07 HAS OBSERVED AS UNDER : 1 HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT AND ALSO THE ORDER OF THE A.O. THE A.O HAS ACCEPTED THAT THE SPARES SUPPLIED BY TH E APPELLANT ON SALE MADE BY HIM, ARE NOT TO BE CONSIDERED AS SALES PROMOTION EXPENSE S. THE A.O BROUGHT THE VALUE OF SPARES SUPPLIED BY THE APPELLANT ON EQUIPMENTS SOLD BY THE PRINCIPAL UNDER SALES PROMOTIONAL EXPENSES AND CHARGED FBT. THE APPELLANT IS THE DISTRIBUTOR/AGENT OF CATERPILLAR. THERE ARE TWO TYPES OF TRANSACTIONS OF SALES UNDERTAKEN BY GMMCO. 1). SALE BY GMMCO ITSELF 2) SALE BY PRINCIPALS AGAINST ORDER PROCURED BY GMMCO. IN THE CASE OF DIRECT SALES BY GMMCO ,THERE IS A ELEMENT OF PROFIT EMBEDDED IN THE SALE PRICE. IN THE CASE OF DIRECT SALE BY THE PRINCIPAL ,THERE IS AN E LEMENT OF COMMISSION TO THE APPELLANT. IN BOTH THE CASES NO SEPARATE BILLING IS DONE FOR T HE SPARES SUPPLIED BY THE APPELLANT. 3 THIS AMOUNTS TO SELLING EXPENSES. THE SPARES ARE SU PPLIED TO THE CUSTOMER ONLY WHEN HE PURCHASES THE EQUIPMENT EITHER FROM THE APPELLANT O R FROM THE PRINCIPAL. THE SUPPLY OF SPARES IS ACTUAL TRANSACTION BASED AND AMOUNTS TO S ELLING EXPENSES. THE APPELLANT IS RECEIVING COMMISSION ON THE SALE MADE BY THE PRINCI PAL ALSO. THE SALE BY THE PRINCIPAL IS ALSO THROUGH THE APPELLANT, SINCE THE APPELLANT IS THE DEALER. UNDER THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THE SPARES ARE SUPPLIED BY THE APPELLANT TO PROMOTE SALES ON BEHALF OF PRINCIPALS. THE CUSTOMERS OF THE PRINCIPAL ARE ALSO THE CUSTOMERS OF THE APPELLANT, BECAUSE FUTURE SERVICING AND MAINTEN ANCE IS THE JOB OF THE DEALER I .E THE APPELLANT. I HAVE ALSO GONE THROUGH THE CBDT CIRCUL AR NO.8/2005 WHERE IN CBDT HAS CLARIFIED THAT ACTUAL SELLING EXPENSES DO NOT FALL WITHIN THE MEANING OF SALES PROMOTION INCLUDING PUBLICITY. IN MY OPINION THE SPARE PARTS SUPPLIED COME UNDER SELLING EXPENSES AND ARE EXEMPT FROM THE PURVIEW OF FBT. HENCE I DIR ECT THE A.O TO DELETE THE AMOUNT OF RS. 37,70,629 FROM THE TOTAL FRINGE BENEFIT VALUE. THIS GROUND OF APPEAL IS ALLOWED. SINCE THE ABOVE FINDING OF THE LD. CIT(A) HAS NEITH ER BEEN CHALLENGED BY WAY OF FILING AN APPEAL BEFORE THE TRIBUNAL NOR THE SAME WAS CONT ROVERTED BY THE DR DURING THE HEARING OF THIS APPEAL FOR THIS YEAR BY WAY OF BRIN GING ANY THING ON RECORD TO THE CONTRARY TO REBUT THE SAME, WE ARE OF THE CONSIDERE D OPINION THAT THIS HOLDS GOOD FOR THIS YEAR ALSO AS THE FACTS FOR BOTH THE YEARS ARE IDENT ICAL. IN VIEW OF THIS, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THE APPEAL OF THE REVENUE IS, THEREFORE, DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21.1.20 11 SD/- SD/- . . ! , # . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( # # # #) )) ) DATED : 21 ST JANUARY, 2011 !/0 %&12 %3! JD.(SR.P.S.) . 4 +%%5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-6, KOLKATA. 2 +,- / RESPONDENT, M/S. GMMCO LTD., 9/1, R. N. MUKHERJEE ROAD, KOLKATA-700 001. 3 . %.& / THE CIT, KOLKATA. 4. %.& ( )/ THE CIT(A), KOLKATA. 5 . !=% +%& / DR, KOLKATA BENCHES, KOLKATA 5 +%/ TRUE COPY, .&>/ BY ORDER, ? '2 /DEPUTY REGISTRAR .