DCIT, BHILWARA V. M/s. Sarvodaya Suitings Limited, BHILWARA

ITA 200/JODH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5253 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 02-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S L MOURYA
• Keywords: Business expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A.NO.144 & 200/JODH/2014 ASSESSMENT YEAR: 2009-10 AND 2010-11 THE DY. COMMISSIONER OF INCOME- TAX, CIRCLE, SHASTRI NAGAR, BHILWARA, RAJASTHAN VS. M/S. SARVODAYA SUITINGS LTD., SARVODAYA MANSION, NR. CIRCUIT HOUSE, BHILWARA RAJASTHAN. PAN :AABCS9952K APPELLANT RESPONDENT I.T.A.NO.321/JODH/2014 ASSESSMENT YEAR: 2009-10 AND 2010-11 THE DY. COMMISSIONER OF INCOME- TAX, CIRCLE, SHASTRI NAGAR, BHILWARA, RAJASTHAN VS. M/S. FASHION SUITINGS PVT. LTD., RCM WORLD, SPL-6, RIICO GROWTH CENTRE, SWAROOPGANJ, BHILWARA, RAJASTHAN PAN :AACF3294L APPELLANT RESPONDENT REVENUE BY SHRI S. L. MOURYA, D.R. APPELLANT BY SHRI RAJENDRA JAIN, AR DATE OF HEARING: 09.03.2016 DATE OF PRONOUNCEMENT: 09.03.16 O R D E R PER: GEORGE MATHAN, J.M. : THE APPEAL IN ITA NO.144/JODH/2014 IS FILED BY THE REVENUE IN THE CASE OF M/S. SARVODAYA SUITINGS LTD. AGAINST THE OR DER OF LEARNED CIT (A), AJMER DATED 18-12-2013 PASSED IN APPEAL NO.442/2011 -2012 FOR ASSESSMENT 2 ITA NO.144, 200 & 321/JODH/2014 YEAR 2009-10. THE APPEAL IN ITA NO.200/JODH/2014 IS FILED BY THE REVENUE IN THE CASE OF M/S. SARVODAYA SUITINGS LTD. AGAINST T HE ORDER OF THE LEARNED CIT (A), AJMER DATED 10-03-2014 PASSED IN APPEAL NO.697 /2012-2013 FOR ASSESSMENT YEAR 2010-2011 AND THE APPEAL IN ITA NO. 321/JODH/2014 IS FILED BY THE REVENUE IN THE CASE OF M/S. FASHION SUITINGS PVT. LTD. AGAINST THE ORDER OF THE LEARNED CIT (A), AJMER DATED 11-03-201 4 PASSED IN APPEAL NO.701/2012-13 FOR ASSESSMENT YEAR 2010-2011. 2. SHRI S. L. MOURYA REPRESENTED ON BEHALF OF THE R EVENUE AND SHRI RAJENDRA JAIN REPRESENTED THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LEARNED DR THAT THE MAI N ISSUE IN ALL THE REVENUES APPEALS WAS AGAINST THE ACTION OF THE LEA RNED CIT (A) IN DELETING THE DISALLOWANCE OF THE COMMISSION. IT WAS A SUBMIS SION THAT THE ASSESSEE IS DOING MANUFACTURING OF SYNTHETIC FABRICS AND ALSO D ERIVING INCOME FROM COMMISSION FROM MULTI LEVEL MARKETING BUSINESS. IT WAS A SUBMISSION THAT AS PER THE MULTI LEVEL MARKETING BUSINESS, EVERY AGENT OF THE ASSESSEE HAD TO MAKE A CHAIN OF COMMISSION AGENTS AND SUCH AGENTS H AVE TO MAKE ANOTHER CHAIN OF MEMBERS AND SO ON AND SO FORTH. EACH AND E VERY MEMBER IN THE CHAIN TO ACT AS AN AGENT AND HE HAS OTHER AGENTS UN DER HIM. THE LEARNED ASSESSING OFFICER HELD THAT A VERY LITTLE PART OF T HE COMMISSION PAID ACTUALLY GOES TO THE PERSONS WHO HAVE ACTUALLY SOLD THE PROD UCTS AND THE REST TO THE ENTIRE CHAIN WHO HAD NOT RENDERED ANY SERVICES IN R EGARD TO SALE. 3 ITA NO.144, 200 & 321/JODH/2014 FURTHER, THE ASSESSING OFFICER ON THE GROUND THAT T HE ASSESSEE HAD FAILED TO SPECIFY THE SERVICES RENDERED BY THESE AGENTS AND T HE RATE AT WHICH COMMISSION HAS BEEN PAID TO THEM, DISALLOWED THE CL AIM OF COMMISSION PAYMENT U/S 37(1) OF THE IT ACT. IT WAS A FURTHER S UBMISSION OF THE LEARNED DR THAT ON APPEAL THE LEARNED CIT (A) HAD DELETED T HE DISALLOWANCE OF COMMISSION FOLLOWING THE DECISION OF THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. FASHION SUITINGS PVT. LTD. IN ITA NO.375/JODH/2012 WHICH IS EXTRACTED IN PAGE 22 PARA 10 OF HIS ORDER IN THE CA SE OF M/S. SARVODAYA SUITINGS LTD. FOR THE ASSESSMENT YEAR 2009-10. IT W AS A SUBMISSION THAT AS THE REVENUE HAS FILED APPEAL BEFORE THE HON'BLE JUR ISDICTIONAL HIGH COURT OF RAJASTHAN, THE APPEALS WERE FILED ONLY TO KEEP THE ISSUE ALIVE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 4. IN REPLY, THE LEARNED AR DREW OUR ATTENTION TO P AGE 16 OF THE ORDER OF THE LEARNED CIT (A) WHEREIN THE ASSESSEES SUBMISSI ON HAS BEEN EXTRACTED AND IT HAS BEEN CATEGORICALLY SUBMITTED THAT THE CO MMISSION TO DISTRIBUTORS WAS NOT PAID FOR THE FIRST TIME DURING THE YEAR AND THE NATURE OF THE BUSINESS ALSO REMAIN THE SAME FOR SO MANY YEARS EXCEPT THE I NCREASE OF THE VOLUME OF THE BUSINESS AND AGENTS. IT WAS FURTHER SUBMITTED T HAT THE ASSESSMENT U/S 143 (3) OF THE ACT HAD BEEN COMPLETED AND THE SAME HAVE ALSO BECOME FINAL WHEREIN THE COMMISSION PAYMENT TO THE DISTRIBUTORS WAS ALLOWED IN ALL THE YEARS AFTER EXAMINING THE BUSINESS METHOD OF THE AS SESSEE-COMPANY. IT WAS 4 ITA NO.144, 200 & 321/JODH/2014 A SUBMISSION THAT THE FINDING OF THE LEARNED CIT (A ) FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F M/S. SARVODAYA SUITINGS LTD. WAS LIABLE TO BE UPHELD. 5. IN REGARD TO THE OTHER GROUNDS IN THE REVENUES APPEAL IN ITA NO.144/JODH/2014 FOR ASSESSMENT YEAR 2009-10, NO SE RIOUS ARGUMENTS WERE MADE BY THE LEARNED DR. IN RESPECT OF THE REVENUES APPEAL IN ITA NO.200/JODH/2014 IN THE CASE OF M/S. SARVODAYA SUIT INGS LTD. FOR ASSESSMENT YEAR 2010-11, IT WAS SUBMITTED THAT THE REVENUE HAS ALSO CHALLENGED THE DELETION OF DISALLOWANCE OF THE SALE S INCENTIVE BY THE LEARNED CIT (A). IT WAS A SUBMISSION THAT THE SALES INCENTI VE WAS NOT NECESSARY TO BE PAID ESPECIALLY WHEN COMMISSION HAD BEEN PAID. HE V EHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. IN REPLY, THE LEARNED A R SUBMITTED THAT THE SAL ES INCENTIVE WAS PAID FOR INCREASE OF THE BUSINESS AND WAS LIABLE TO BE A LLOWED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITT EDLY, THE MAIN ISSUE REGARDING DISALLOWANCE OF THE COMMISSION BY THE ASS ESSING OFFICER AND THE FINDINGS OF THE LEARNED CIT (A) ON THIS ISSUE IS SQ UARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. FASHION SUITINGS PVT. LTD. IN ITA NO.357 AND 407/JODH/2012 DATED 11-02-2013 WHICH IS ALSO REPORTED IN 154 TTJ (JODH) 1. AS IT IS NOTI CED THAT THE ISSUE IS SQUARELY 5 ITA NO.144, 200 & 321/JODH/2014 COVERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL A ND AS IT IS NOTICED THAT THE LEARNED CIT (A) HAS FOLLOWED THE PRINCIPLE OF JUDIC IAL DISCIPLINE IN FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT (A). CONSEQUENTLY, GROUND NO.1 OF THE APPEAL OF THE REVENUE IN ITA NO.144/JODH/201 4, GROUND NO.1 IN ITA NO.200/JODH/2014 AND GROUNDS NO.1 AND 2 OF THE REVE NUES APPEAL IN ITA 321/2014 STAND DISMISSED. 4. COMING TO THE GROUNDS NO.2, 3, 4, 5 AND 6 OF THE REVENUES APPEAL IN ITA NO.144/JODH/2014, ON PERUSAL OF THE ORDER OF TH E LEARNED CIT (A) SHOWS THAT THE LEARNED CIT (A) HAS ADJUDICATED THE ISSUES AFTER GOING THROUGH THE FACTS AS HAS BEEN BROUGHT OUT IN THE ASSESSMENT ORD ER AND SUBMISSION OF THE ASSESSEE. IN RESPECT OF THE ISSUE OF DELETION OF SA LES INCENTIVE WHICH IS GROUND NO.2 IN ITA NO.144/JODH/2014 AND GROUND NO.2 IN ITA NO.200/JODH/2014 IT IS NOTICED THAT THE LEARNED CIT (A) HAS IN PAGE 39 PARA 9.3 OF HIS ORDER RECOGNIZED THAT THE ASSESSEE HAS I NCURRED THE ABOVE EXPENDITURE FOR PROMOTING THE SALES OF THE ASSESSEE AND THE NAME AND ID CODE OF VARIOUS AGENTS WERE MADE AVAILABLE BEFORE T HE ASSESSING OFFICER FOR VERIFICATION. THE ASSESSING OFFICER HAS NOT SHOWN T HAT THESE EXPENDITURE WERE NOT INCURRED OR THE SAME WERE NON-GENUINE EXPE NSES OR NON-BUSINESS EXPENDITURE WHICH FINDINGS OF THE LEARNED CIT (A) H AS NOT BEEN DISLODGED BY THE REVENUE. 6 ITA NO.144, 200 & 321/JODH/2014 9. WITH REGARD TO GROUND NO.3 IN ITA NO.144/JODH/20 14 FOR ASSESSMENT YEAR 2009-10 REGARDING OFFICE EXPENSES, IT IS NOTIC ED THAT THE LEARNED CIT (A) IN PARA 13.3 OF HIS ORDER HAS TAKEN INTO CONSIDERAT ION THE FACT THAT THE PAYMENTS HAVE BEEN CONFIRMED BY THE RECIPIENTS THRO UGH VOUCHERS AND THE EXPENSES HAVE NOT BEEN SHOWN TO BE BOGUS, NON-GENUI NE OR EXCESSIVE. THIS FINDING OF THE LEARNED CIT (A) HAS ALSO NOT BEEN DI SLODGED BY THE REVENUE. THE SAME IS ALSO THE POSITION IN RESPECT OF THE ADM INISTRATIVE EXPENSES AS ALSO THE DISALLOWANCE OF THE INTEREST EXPENSES. IN RESPECT OF DELAYED PAYMENT OF ESI IT IS NOTICED THAT THE ISSUE IS SQUA RELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VINAY C EMENT LTD. 313 ITR (ST) 1 (HON'BLE SUPREME COURT). IT IS NOTICED THAT THE L EARNED CIT (A) HAS DELETED THE ADDITION BY FOLLOWING THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA) AND CONSEQUENTLY, NO INTERFERENCE IS CALLED FOR. 10. AS A RESULT, GROUNDS NO.1 TO 6 RAISED BY THE RE VENUE IN ITS APPEAL IN ITA NO.144/JODH/2014 STAND DISMISSED, GROUNDS NO.1 AND 2 IN REVENUES APPEAL IN ITA NO.200/JODH/2014 STAND DISMISSED AND GROUNDS NO.1 AND 2 IN THE REVENUES APPEAL IN ITA 321/JODH/2014 STAND DIS MISSED. 11. NO OTHER GROUNDS HAVE BEEN SPECIFICALLY ARGUED IN THE ABOVE APPEALS OF THE REVENUE. 7 ITA NO.144, 200 & 321/JODH/2014 12. IN THE RESULT, ALL THE THREE APPEALS OF THE REV ENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.03.2016. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, DATED: 09 TH MARCH, 2016 LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA DEKA/ DEKA/ DEKA/ DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1 . THE APPELLANT 2. THE RESPONDENT 3. CIT CONCERNED 4. CIT (A) CONCERNED 5. DR, ITAT, JODHPUR 6. GUARD FILE BY ORDER, SR. PRIVATE SECRETARY DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 09.03.16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 10.03.16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 10.03.16 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 10.03. 16 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS NA SR.PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER