DCIT RG 8(3), MUMBAI V. VALIA IMPEX P. LTD, MUMBAI

ITA 1963/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7653 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 26-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.VP AND SHRI B.RAMAKOT AIAH, AM I.T.A. NO.1963/MUM/2009 (ASSESSMENT YEAR : 2006-07) THE DEPUTY COMMISSIONER OF INCOME TAX, RANGE-8(3), R.NO.204, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400 020. VS. VALIA IMPEX P.LTD. GROUND FLOOR, A WING, KAILASH TOWER, STC COLONY, WESTERN EXPRESS ROAD, ANDHERI(E), MUMBAI-400 069. PAN:AAACV1301L (APPELLANT) (RESPONDENT) APPELLANT BY : MR. VIRENDRA OJHA, DR RESPONDENT BY : MR.HIRO RAI O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THIS APPEAL BY THE REVENUE RELATES TO THE ASSESSMENT YEAR 2006-07 AND THE ONLY GROUND TAKEN IS THAT THE CIT(A) ERRED IN DELETING T HE DISALLOWANCE OF RS.8,40,099/- MADE BY THE ASSESSING OFFICER, BEING RETAINERSHIP FEES WHICH ACCORDING TO THE ASSE SSING OFFICER WAS NOT PAID FOR THE PURPOSE OF THE BUSINESS. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY CARRY ING ON BUSINESS AS DEL-CREDERE AGENT OF RELIANCE INDUSTRIE S LTD. AND INDIAN PETROCHEMICALS CORPORATION LTD. IN THE RETUR N, THE ASSESSEE CLAIMED DEDUCTION OF RS.12,17,899/- AS RET AINERSHIP FEES WHICH INCLUDED RS.8,40,099/- PAID TO FOUR PART IES, THE NAMES OF WHOM ARE MENTIONED IN PARAGRAPH 3 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS CALLED UPON TO J USTIFY THE CLAIM. THE ASSESSEE FURNISHED THE RELEVANT DETAILS AS WELL AS THE AGREEMENTS. THE ASSESSING OFFICER WAS HOWEVER NOT S ATISFIED THAT THE RETAINERSHIP CHARGES WERE PAID FOR SERVICE S RENDERED BY THE FOUR PARTIES. ACCORDING TO HIM, THEY WERE REGUL AR CUSTOMERS OF THE ASSESSEE NOT ENTITLED TO ANY COMMISSION OR B ROKERAGE ON ITA NO.1963/MUM/09 2 THE SALES. IN THIS VIEW OF THE MATTER, HE DISALLOWE D THE AMOUNT OF RS.8,40,099/-. 3. ON APPEAL, THE CIT(A) FOLLOWING THE ORDERS OF HI S PREDECESSORS FOR THE ASSESSMENT YEARS 2003-04 TO 2 005-06 DELETED THE DISALLOWANCE OBSERVING THAT FACTS OF TH E CASE ARE IDENTICAL FOR THE YEAR UNDER APPEAL. IT IS AGAINST THE DECISION OF THE CIT(A) THAT THE REVENUE HAS PREFERRED THE PRESE NT APPEAL. 4. AT THE TIME OF THE HEARING IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE DIRECTIONS ISSUED BY THE TRIB UNAL IN ITS ORDER DATED 10 TH SEPTEMBER, 2009 IN ITA NOS.2125, 2294 AND 7028/MUM/2007 RELATING TO THE ASSESSMENT YEARS 2003 -04 & 2004-05 AND AS MODIFIED BY THE TRIBUNALS ORDER DAT ED 8 TH FEBRUARY, 2010 IN M.A.NO.770/MUM/2009 SHOULD BE FOL LOWED IN THE PRESENT YEAR ALSO. A PERUSAL OF THE AFORESA ID ORDERS SHOWS THAT IN THE ORDER DATED 10 TH SEPTEMBER, 2009, THE TRIBUNAL CATEGORIZED THE PAYMENT OF RETAINERSHIP F EES INTO THREE CATEGORIES NAMELY (A) INSTANCES WHERE THE CONCESSI ON HAS BEEN OFFERED TO THE VERY SAME PERSON WHO IS THE PURCHASE R OF GOODS FROM RIL VIRTUALLY, FOR THE CUSTOMER THIS IS IN T HE NATURE OF DISCOUNT WHICH HE ENJOYS AGAINST PURCHASE PRICE (DE SCRIBED AS SELF) (B) INSTANCES WHERE THE BENEFIT WAS PASSED ON TO ONE OF THE GROUP CONCERNS OF THE PURCHASER GROUP. OFTEN ENOUGH , THE GROUP CONCERN IS THE MAIN CONCERN WHEREAS THE OTHER CONCERNS ARE PERCEIVED TO THE SATELLITE UNITS VIZ THE CONCER NS WHICH WORK FOR THE MAIN CONCERN. INDEED THESE ARE THE INTERNAL DETAILS OF THE PURCHASER, WHERE HAVE NO BEARING ON THE APPELLANT. (DESCRIBED AS PARTLY SELF & PARTLY SATELLITE CONCERNS). (C) IN STANCES WHERE A COMMISSION AGENT WOULD HAVE IN THE COURSE OF HIS BU SINESS, ASSISTED THE APPELLANT IN SECURING CERTAIN ORDERS F ROM THE PURCHASERS. (DESCRIBED AS THIRD PARTY CONCERN). A FTER MAKING THE ABOVE CATEGORISATION, THE TRIBUNAL CAME TO THE CONCLUSION THAT THE MATTER SHOULD BE SET ASIDE. IT THUS SET AS IDE THE ASSESSMENT AND DIRECTED THE ASSESSING OFFICER TO EX AMINE THE ITA NO.1963/MUM/09 3 RECIPIENT OF THE COMMISSION AND ESTABLISH THE CASE REGARDING THE GENUINENESS OF THE TRANSACTION, BUSINESS PURPOSE OF THE PAYMENT AND THE NATURE OF THE SERVICES. THESE DIRE CTIONS WERE GIVEN IN PARAGRAPH 13 OF THE ORDER. THE ASSESSEE TH EREAFTER FILED M.A.NO.770/MUM/2009 TO POINT OUT THAT IN RESPECT OF CATEGORY C ABOVE, IT IS POSSIBLE TO CALL UPON THE ASSESSE E TO ESTABLISH THE SERVICES RENDERED BY THE PERSON TO WHOM RETAINERSH IP FEE HAS BEEN PAID BUT IN RESPECT OF THE OTHER TWO CATEGORIE S I.E. (A) & (B), IT WAS NOT POSSIBLE TO ESTABLISH THE NATURE OF SERVICES RENDERED BECAUSE THE RETAINERSHIP FEE WAS PAID NOT FOR SERVICES RENDERED BUT FOR RETAINING LOYALTY. IT WAS THEREFOR E POINTED OUT THAT THE DIRECTIONS GIVEN BY THE TRIBUNAL WERE NOT CAPABLE OF BEING COMPLIED WITH SO FAR AS CATEGORIES (A) & (B) ARE CONCERNED AND THAT THESE DIRECTIONS WERE GIVEN BY THE TRIBUNA L DISREGARDING THE FACTUAL BASIS ON WHICH THE ASSESSM ENT WAS MADE. THE ASSESSEE ACCORDINGLY PRAYED FOR APPROPRIA TE MODIFICATION OF THE ORDER OF THE TRIBUNAL. 5. AFTER CONSIDERING THE ASSESSEES PRAYER IN THE MISCELLANEOUS APPLICATION, THE TRIBUNAL PASSED THE FOLLOWING ORDER ON 8 TH FEBRUARY, 2010:- 7. WE HAVE CONSIDERED THE CONTENTIONS ON BEHALF OF THE ASSESSEE. WE ARE OF THE VIEW THAT DIRECTIONS CONTAINED IN PARA 13 OF THE ORDER OF THE TRIBUNAL I N SO FAR AS IT CALLED UPON THE ASSESSING OFFICER TO EXAMINE THE NATURE OF SERVICES RENDERED WITH REGARD TO CATEGORY (A) & (B) OF PERSONS TO WHOM RETAINERSHIP FEE WAS PAID BY THE ASSESSEE IS ERRONEOUS. AFORESAID DIRECTIONS WILL BE VALID ONLY WITH REGARD TO PAYMENT OF RETAINERSHIP FEES TO THIR D PARTY CONCERNED CATEGORIZES IN CATEGORY (C) ABOVE. TO THIS EXTENT, DIRECTIONS CONTAINED IN PARA 13 OF THE TRIBUNAL SHALL BE DEEMED TO HAVE BEEN MODIFIED. THE OTHER DIRECTIONS OF THE TRIBUNAL WILL REMAIN TH E SAME. 8. IN THE RESULT, MISCELLANEOUS APPLICATION IS ALLOWED. ITA NO.1963/MUM/09 4 6. AFTER GOING THROUGH THE ABOVE, WE SET ASIDE THE ORDERS OF THE DEPARTMENTAL AUTHORITIES ON THE POINT OF DISALL OWANCE OF RETAINERSHIP FEE AND RESTORE THE MATTER TO THE ASSE SSING OFFICER WHO SHALL TAKE A FRESH DECISION REGARDING THE ALLOW ABILITY OF THE RETAINERSHIP FEES IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL IN THE ORDERS CITED ABOVE. 7. THE APPEAL OF THE REVENUE IS THUS ALLOWED BUT ON LY FOR STATISTICAL PURPOSES. NO COSTS. ORDER PRONOUNCED ON THIS 1 1 TH DAY OF MARCH, 2010. SD/- (B. RAMAKOTAIAH) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 11 TH MARCH , 2010. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-8 MUMBAI. 4. THE CIT(A)-XXIX, MUMBAI 5. THE DR F BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI