ACIT, New Delhi V. Harsh Vardhan Lal, New Delhi

ITA 1698/DEL/2012

• Counselvise Citation: 169820114 RSA 2012
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: ARVIND KUMAR NAIR
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI D.K. SRIVASTAVA ITA NO. 1698/DEL/2012 ASSTT. YR: 2008-09 ACIT CIRCLE 23(1), VS. HARSH VARDHAN LAL, NEW DELHI. C-192, SARVODYA ENCLAVE, NEHRU PLACE, NEW DELHI. PAN: AAAPL 0811 C ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI SATPAL SINGH SR. DR RESPONDENT BY : SHRI ARVIND KUMAR NAIR CA O R D E R PER R.P. TOLANI, J.M: : THIS IS REVENUES APPEAL AGAINST THE ORDER OF CIT (A)-XXIII, NEW DELHI DATED 16-12-2011 RELATING TO A.Y. 2008-09. SO LE GROUND RAISED IS AS UNDER: ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 81,39,639 /- 2. FACTS IN BRIEF ARE: THE AO RECEIVED AIR INFORMA TION THAT AN AMOUNT OF RS. 81,39,639/- WAS RECEIVED BY THE ASSESSEE FRO M ONE M/S KALEAST BOTTLING PVT. LTD. (KBPL) ON WHICH TDS @ 2% WAS D EDUCTED. IT WAS FOUND THAT THIS AMOUNT WAS NOT OFFERED FOR TAXATION IN THE RETURN OF INCOME FOR A.Y. 2008-09. DURING THE SCRUTINY ASSESSMENT PR OCEEDINGS REQUISITE QUESTION WAS ASKED. THE ASSESSEE REPLIED THAT THIS AMOUNT WAS RECEIVED BY THE ASSESSEE FOR DISTRIBUTION OF INCENTIVES TO WHOL ESALERS UNDER THE COMPANY 2 SALE PROMOTION SCHEME. FOR THIS ENGAGEMENT WITH THE COMPANY, HE RECEIVED A RETAINER-SHIP FEE OF RS. 3,00,000/- FOR DISTRIBUT ION OF INCENTIVES, WHICH WERE DISTRIBUTED ONLY BY CHEQUES. THUS A SUM OF RS. 3,00,000/- BEING RETAINER-SHIP FEE WAS OFFERED TO TAX AND THE SAID A MOUNT OF RS. 81,39,639/- HAD NO ELEMENT OF INCOME FOR THE ASSESSEE AS IT WAS MEANT ONLY FOR DISTRIBUTION ON BEHALF OF KBPL. THE TDS WAS DEDUCTE D BY KBPL U/S 194C AS A MATTER OF ABUNDANT CAUTION BECAUSE OF THE CON TRACT. DEDUCTION OF TDS HAS NO EFFECT TO HOLD THE AMOUNT AS INCOME. 2.1. THE ASSESSEE PRODUCED CONFIRMATORY LETTER ISSU ED BY KBPL IN THIS BEHALF. BESIDES, THE EXPENDITURE INCURRED BY ASSESS EE FOR DISTRIBUTION OF INCENTIVES WAS ALSO REIMBURSED BY KBPL, WHICH ALSO INDICATES ITS CORRECT NATURE. ASSESSING OFFICER, HOWEVER, HELD THAT ACTUA L DISBURSEMENT OF THE MONEYS, WAS NOT VERIFIABLE AS THERE WERE NUMEROUS P ARTIES. THE CONFIRMATION ISSUED BY KBPL WAS STEREOTYPED AND SIG NED BY EMPLOYEE AND REIMBURSEMENT OF EXPENSE BY KBPL DID NOT DEMONSTRAT E THAT IT WAS NOT THE INCOME OF THE ASSESSEE. THE ADDITION WAS MADE. 2.2. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL WHE RE IT WAS PLEADED THAT KBPL WAS A LEADING LIQUOR DISTRIBUTOR IN THE STATE OF ORISSA. THE DISTRIBUTION INVOLVED VARIOUS SALES PERSONNEL TO PROMOTE THE SAL E WHICH WAS INCENTIVE LINKED. IN PAST KBPL REALIZED THAT THE INCENTIVE AM OUNTS COULD NOT REACH THE RECIPIENT IN TIME WHICH CREATED PROBLEMS IN THE BUS INESS. SO, AN AGENCY WAS HIRED IN THE FORM OF THE ASSESSEE PROPRIETARY CONCE RN M/S ZEBAISH TO DISTRIBUTE THE INCENTIVES AND INSURE THE SAME. FOR SUCH SERVICES THE ASSESSEE WAS ENGAGED FOR A REMUNERATION OF RS. LACS PER ANN UM. IN DISCHARGE OF SERVICES, ASSESSEE HAD TO COLLECT THE DATA OF SALES FROM SALE DEPOT PERSONNEL, 3 CORRELATE THE SAME WITH THOSE OF WHOLESALERS AND PR ESENT THE RELEVANT DATA TO KBPL TO WORK OUT THE CORRECT AMOUNT OF INCENTIVES T O BE AWARDED TO THE RECIPIENT AND DISTRIBUTED BY THE ASSESSEE. THE ASSE SSEE CARRIES ON THIS ACTIVITY IN THE NAME OF M/S ZEBAISH, THE AMOUNT WAS BY KBP L TO ZEBAISH WHICH IN TURN ISSUED CHEQUES FROM ITS ACCOUNT TO THE RECI PIENTS AS PER THE AGREED POLICY. IN THIS BACKDROP THE SAID AMOUNT WAS RECEIV ED IN THIS ASSESSMENT YEAR FOR ONWARD DISTRIBUTION. THE ASSESSEE ALSO PR ODUCED MONTHLY STATEMENT OF DATA. THE NECESSARY PROOF OF PAYMENT BEFORE THE ASSESSING OFFICER, BESIDES THE CONFIRMATION FROM KBPL, CONFIRMING THIS ARRANGE MENT, ENGAGEMENT AND ONWARD PAYMENT OF INCENTIVES WAS ALSO PRODUCED. IT WAS FURTHER ARGUED THAT THE ASSESSEE PAID RS. 81,39,639/- AGAINST WHICH IT RECEIVED FOLLOWING AMOUNTS FROM KBPL (I) BY CHEQUE RS. 79,76,846/- (II) TDS RS. 1,84,446/- THE REMAINING AMOUNT OF TDS HAS BEEN PAID BY THE A SSESSEE OUT OF THE TAXABLE INCOME DECLARED AT RS. 3 LACS. IT WAS ALSO PLEADED THAT IF THE AMOUNT OF RS. 81,39,639/- WAS TO BE TREATED AS INCOME OF T HE ASSESSEE IN THAT CASE THE EXPENDITURE OF RS. 81,39,639/- INCURRED IN THIS BEHALF AND REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS TO BE ALLOWED. 2.3. LD. CIT(A) REFERRED TO THE AGREEMENT BETWEEN K BPL AND ZEBAISH AND DELETED THE ADDITION BY FOLLOWING OBSERVATIONS : DURING THE APPELLATE PROCEEDINGS, AS A TEST CHECK, THE REIMBURSEMENTS MADE FOR THE QUARTER ENDING 30-06-20 07, HAVE BEEN RECONCILED WITH THE BANK ACCOUNT OF M/S ZEBAIS H AND WITH THE BANK STATEMENT OF M/S KBPL. THE LEDGER ACC OUNT OF THE REIMBURSEMENTS SHOWS THAT N TEEN A RUPEE IS RETAINE D OUT OF RS. 81,39,639/-. I AM UNABLE TO AGREE WITH THE ASSESSIN G OFFICER THAT 4 THE DISBURSAL IS NOT VERIFIABLE, AS ACKNOWLEDGMENT OF RECEIPTS HAS BEEN MAINTAINED IN RESPECT OF EACH PAYMENT. MOR EOVER, CLAIMING CREDIT FOR THE TAX DEDUCTED DOES NOT MAKE THE APPELLANT BOUND TO PAY TAX ON THESE RECEIPTS, UNL ESS SUCH RECEIPTS CONSTITUTE INCOME IN HIS HANDS. THE ALTERN ATIVE ARGUMENT IS ALSO NOT WITHOUT MERIT, NAMELY THAT IF THE RECEIPTS ARE CONSIDERED TAXABLE IN HIS CASE, THEN HE MUST BE GRANTED DEDUCTION OF THE MATCHING EXPENDITURE. AFTER CONSID ERING ALL THE ABOVE FACTS, THE ADDITION MADE OF UNDISCLOSED RECEI PTS OF RS. 81,39,639/- IS DELETED. 2.4. AGGRIEVED. REVENUE IS BEFORE US. 3. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 4. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS, WHICH, IN PARTICULAR ARE AS UNDER: (I) THE ROLE OF THE ASSESSEE TO DISBURSE THE INCENT IVES ON BEHALF OF KBPL IS DEMONSTRATED BY THE AGREEMENT AND CONFIRMAT ION PRODUCED FROM KBPL. (II) THERE IS NO ALLEGATION THAT ASSESSEE DID NOT D ISTRIBUTE THE AMOUNT OF INCENTIVES TO VARIOUS RECIPIENTS AS THEY ARE THROUGH A/C PAYEE CHEQUES. (III) IT HAS NO WHERE BEEN HELD THAT THE ARRANGEMEN T WAS NOT GENUINE OR SHAM. THE DISALLOWANCE HAS BEEN MADE ONLY ON THE ASSUMPTION THAT THE RECIPIENTS WERE NUMEROUS AND IT WAS NOT POSSIBL E TO VERIFY THEM AND TDS IS DEDUCTED BY KBPL. FOR THIS NARRATION N O FAULT CAN BE ATTRIBUTED TO THE ASSESSEE AS THE RELEVANT BANK DET AILS WERE FURNISHED AND TDS HAS NO DECISIVE ROLE IN ACTUAL NATURE OF RE CEIPT. 5 (IV) IN ANY CASE IF THE AMOUNT RECEIVED FROM KBPL I S TO BE TAKEN AS INCOME, THEN DISBURSEMENT MADE BY THE ASSESSEE IS T O BE ALLOWED ON MATCHING PRINCIPLE AS THE EXPENDITURE. ORDER OF CIT (A) IS RELIED UPON. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. FROM THE RECORD IT CLEARLY EME RGES THAT THE ASSESSEE PRODUCED BOOKS OF A/CS ABOUT ITS RETAINER SHIP BUSI NESS; AGREEMENT AND CONFIRMATION FROM KBPL. ITS ACTIVITY AS A RETAINER- SHIP WHICH INCLUDES DISTRIBUTION OF INCENTIVES IS NOT DENIED. THE ARRAN GEMENT HAS NOT BEEN HELD TO BE NON-GENUINE OR SHAM. IN VIEW OF ALL THESE FAC TS WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) WHICH IS UPHELD. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 30-4-2014. SD/- SD/- ( D.K. SRIVASTAVA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30-04-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR