Damro Exports Private Limited , CHENNAI V. DCIT International Taxation 1(1), CHENNAI

ITA 1821/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5960 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 24-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Additional evidence

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1821/MDS/2017 ( )( / ASSESSMENT YEAR : 2014-15 M/S DAMRO EXPORTS PVT. LTD., C/O CNGSN & ASSOCIATES LLP, SWATHI COURT, FLAT C & D, NO.22, VIJAYARAGHAVA ROAD, T. NAGAR, CHENNAI - 600 017. PAN : AABCD 8514 G V. THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION 1(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. B. RAMAKRISHNAN, FCA -.+, / 0 / RESPONDENT BY : SMT. T.H. VIJAYALAKSHMI, CIT 1 / 2% / DATE OF HEARING : 19.09.2017 3') / 2% / DATE OF PRONOUNCEMENT : 13.10.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ASSESSMENT ORDER DATED 29.06.2017, CONSEQUENT TO TH E DIRECTION OF DISPUTE RESOLUTION PANEL UNDER SECTION 144C(5) OF T HE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2 I.T.A. NO.1821/MDS/17 2. SH. B. RAMAKRISHNAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT DURING THE YEAR UNDER CONS IDERATION, THE ASSESSEE HAS MADE PROVISION TO THE EXTENT OF ` 67,19,149/- IN RESPECT OF INCENTIVE TO DEALERS/FRANCHISEES. THE A SSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER AND THE TPO THAT THESE EXPENDITURES ARE ASCERTAINABLE LIABILITY FOR THE YE AR UNDER CONSIDERATION FOR PROMOTION OF BUSINESS. HOWEVER, THE ACTUAL AMOUNT WAS SPENT IN THE FOLLOWING YEAR. ACCORDING TO THE LD. REPRESENTATIVE, THE EXPENDITURE WAS INCURRED FOR PR OMOTING THE BUSINESS. SINCE THE LIABILITY WAS INCURRED DURING THE YEAR UNDER CONSIDERATION, ACCORDING TO THE LD. REPRESENTATIVE, EVEN THOUGH THE PAYMENTS WERE MADE IN THE SUBSEQUENT YEAR, THE PROV ISION MADE BY THE ASSESSEE HAS TO BE ALLOWED DURING THE YEAR U NDER CONSIDERATION. 3. REFERRING TO THE DIRECTION OF THE DRP, THE LD. R EPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE DRP HAS COMMITT ED AN ERROR IN OBSERVING THAT THE ASSESSEE IS AGENT OF THE FRANCHI SOR. REFERRING TO THE FRANCHISE AGREEMENT, MORE PARTICULARLY AT CLAUS E 2.2 AND 14.2, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS DOING BUSINESS AS PRINCIPAL TO PRINCIPAL AND NOT AS PRINC IPAL TO AGENT, 3 I.T.A. NO.1821/MDS/17 THEREFORE, THE INCENTIVE GIVEN TO THE DEALERS FOR P ROMOTING THE BUSINESS IS NOT LIABLE FOR TDS. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE FILED SOME ADDITIONAL MATERIAL BE FORE THE DRP TO SUBSTANTIATE THE CLAIM. HOWEVER, THE DRP REFUSED T O ADMIT THE ADDITIONAL MATERIAL FILED BEFORE THEM. ACCORDING T O THE LD. REPRESENTATIVE, THIS TRIBUNAL BEING THE FINAL FACT FINDING AUTHORITY, THE ISSUE HAS TO BE SETTLED WHETHER THE ASSESSEE IS ACT ING AS PRINCIPAL TO PRINCIPAL AND PRINCIPAL TO AGENT. IT IS ALSO TO BE DECIDED WHETHER THE LIABILITY INCURRED BY THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION IS EXPENDITURE FOR CARRYING OUT BUSIN ESS OR NOT. 5. ON THE CONTRARY, SMT. T.H. VIJAYALAKSHMI, THE LD . DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE IS ACTING AS AGENT OF FRANCHISOR. THEREFORE, WHAT WAS PAID B Y THE ASSESSEE IN THE GUISE OF FOREIGN TOUR IS NOTHING BUT COMMISS ION, HENCE, ACCORDING TO THE LD. D.R., THE DRP HAS RIGHTLY FOUN D THAT THE ASSESSEE IS LIABLE TO MAKE TDS. FURTHERMORE, THE D ETAILS OF SO- CALLED PAYMENT MADE ARE NOT AVAILABLE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE DISPUTE RESOLUTION PANEL. TH EREFORE, 4 I.T.A. NO.1821/MDS/17 ACCORDING TO THE LD. D.R., THE DRP HAS RIGHTLY REFU SED TO ADMIT THE ADDITIONAL EVIDENCE, HENCE, NO INTERFERENCE IS CALL ED FOR. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. A PERUSAL OF AGREEMENT, MORE PARTICULARLY CLAUSE 2.2 AND 14.2, C LEARLY SHOWS THAT THE ASSESSEE IS NOT AN AGENT OF FRANCHISEES. FOR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING BOTH THE CLAUSE 2.2 AND 14.2, WHICH READ AS FOLLOWS:- 2.2 THE FRANCHISEE MAY DESCRIBE HIMSELF AS THE FRANCHISORS AUTHORISED FRANCHISEE FOR THE PRODUC TS, BUT MUST NOT HOLD HIMSELF OUT AS THE FRANCHISORS AGENT FOR SALES OF THE PRODUCTS OR AS BEING ENTITLED TO BLIND THE FRANCHISOR IN ANY WAY. 14.2 IN THE EVENT, THE PRODUCTS ARE RETURNED BY THE FRANCHISEE ON ACCOUNT OF ABSENCE OF DEMAND FOR THEM TO THE FRANCHISOR WITHIN 3 (THREE) MONTHS FROM THE DATE THEY WERE DELIVERED TO THE FRANCHISEE, THE FRANCHISOR SH ALL REPAY THE PRICE WHERE THIS HAS BEEN PAID BY THE FRANCHISE E. PROVIDED THAT THE FRANCHISOR WILL NOT BE REQUIRED T O ACCEPT THE PRODUCTS RETURNED BY THE FRANCHISEE IF THE SAME ARE FOUND TO BE IN A DAMAGED CONDITION, WHICH IN THE FRANCHISORS SOLE DISCRETION IS DUE TO MISHANDLING BY THE FRANCHISEE. 7. IN VIEW OF THE ABOVE, IT IS OBVIOUS THAT THE PRO DUCTS/GOODS WERE SOLD BY THE ASSESSEE IN ITS INDIVIDUAL CAPACIT Y AND NOT AS AGENT OF FRANCHISOR. THEREFORE, THE ASSESSEE IS NO T AN AGENT OF 5 I.T.A. NO.1821/MDS/17 FRANCHISOR. HENCE, THE OBSERVATION MADE BY THE DRP THAT THE ASSESSEE IS ACTING AS AGENT OF FRANCHISOR IS NOT CO RRECT. 8. NOW COMING TO THE EXPENDITURE INCURRED BY THE AS SESSEE ON FOREIGN TOUR, THE DETAILS OF SUCH EXPENDITURE WERE NOT AVAILABLE EITHER BEFORE THE TPO OR BEFORE THE DRP. THE ASSES SEE ADMITTEDLY FILED ADDITIONAL MATERIALS, WHICH WERE NOT ADMITTED BY THE DRP. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE FACTS NEED TO BE FIRST ASCERTAINED WHETHER ANY EXPENDITUR E WAS INCURRED OR NOT. IT ALSO NEEDS TO BE EXAMINED WHETHER ANY L IABILITY WAS INCURRED DURING THE YEAR UNDER CONSIDERATION. 9. THIS TRIBUNAL BEING A FINAL FACT FINDING AUTHORI TY, EVEN THOUGH THERE WAS SOME DELAY IN FILING THE MATERIAL BEFORE THE LOWER AUTHORITY, THE SAME CANNOT BE REJECTED SO LIGHTLY S INCE THE TAX HAS TO BE LEVIED ONLY ON THE INCOME EARNED BY THE ASSESSEE . IN OTHER WORDS, THE LIABILITY TO PAY TAX BY THE ASSESSEE WOU LD BE ONLY ON THE BASIS OF LAW. A MERE DELAY IN FILING SOME DOCUMENT S BEFORE LOWER AUTHORITIES CANNOT BE A REASON TO TAX THE ASSESSEE IF IT IS NOT OTHERWISE TAXABLE AS PER LAW. THEREFORE, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE ADDITIONAL MATERIAL FIL ED BY THE ASSESSEE NEEDS TO BE EXAMINED. ACCORDINGLY, THE ORDERS OF T HE LOWER 6 I.T.A. NO.1821/MDS/17 AUTHORITIES ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REFER THE MATTER ONCE AGAIN TO THE TPO FOR RECONSIDERATION ON THE BA SIS OF ADDITIONAL MATERIAL FILED BY THE ASSESSEE. THE TPO SHALL EXAM INE THE MATTER ON THE BASIS OF ADDITIONAL MATERIAL FILED BY THE AS SESSEE AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVI NG A REASONABLE OPPORTUNITY TO THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 13 TH OCTOBER, 2017 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 13 TH OCTOBER, 2017. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. CIT(TP-2), BANGALORE 4. PRINCIPAL CIT-1, BANGALORE. 5. 79 -2 /DR 6. ( : /GF.