DCIT 6(1)(1), MUMBAI V. AARVI ENCON PRIVATE LIMITED, MUMBAI

ITA 2047/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5337 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 04-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDHYADHAR V
• Keywords: Business expenditure
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER IT A NO. 2 047 /MUM./2018 ( ASSESSMENT YEAR : 20 1 4 15 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 16(1)(1), MUMBAI . APP ELL ANT V/S AARVI ENCON PVT. LTD. UNIT NO.155, 1 ST FLOOR SHAH & NAHAR INDUSTRIAL ESTATE A 1, DHANRAJ MILL COMPOUND SITARAM JADHAV MARG, LOWER PAREL MUMBAI 400 013 PAN AAACA3640H . RESPONDENT REVENUE BY : SHRI VIDHYADHAR V. ASSESSEE BY : DR. K. SHIVARAM A/W MISS NEELAM JADHAV DATE OF HEARING 16.04.2019 DATE OF ORDER 29.05 .2019 O R D E R PER SAKTIJIT DEY. J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE ORDER DATED 4 TH JANUARY 2018 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 1 2, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2014 15. . 2 . THE REVENUE HAS FILED THIS APPEAL BEING AGGRIEVED WITH THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN DELETING THE ADDITION OF ` 1, 91,79 , 686 TOWARDS COMMISSION PAID TO EMPLOYEE DIRECTORS. 2 AARVI ENCON PVT. LTD. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31.10.2014 , DECLARING INCOME OF ` 8,09,35,090 . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WH ILE VERIFYING THE PROFIT & LOSS ACCOUNT NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 1, 91,79,686 , TOWARDS COMMISSION PAID TO TWO OF ITS DIRECTORS. HOWEVER, HE FOUND THAT PAYMENTS WERE ACTUALLY MADE TO THE DIRECTORS ON 03.09.2014 AND THE DIRECTORS H AVE OFFERED IT AS INCOME IN ASSESSMENT YEAR 2015 16 . BEING OF THE VIEW THAT THE COMMISSION PAYMENT PERT AINS TO THE ASSESSMENT YEAR 2015 16 , THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM . THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIR ST APPELLATE AUTHORITY. 4 . BEING CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, AND FOLLOWING HIS DECISION IN ASSESSEES CASE FOR ASSESSMENT YEAR 2013 14, LEARNED COMMISSIONER (APPEALS) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5 . WE HAVE CONSI DERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IDENTICAL DISPUTE ARISING IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2013 14 CAME UP FOR CONSIDERATION BEFORE THE CO ORDINATE BENCH IN ITA NO. 6495/MUM/2017 DATED 29.05.2019. WHILE DECIDING THE ISS UE THE BENCH HELD AS UNDER: 3 AARVI ENCON PVT. LTD. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. IT IS EVIDENT FROM THE FACTS AND MATERIAL ON RECORD, THE ASSESSING OFFICER DOES NOT DISPUTE THE FACT THAT THE COMMISSION PAID TO THE DIRECTORS IS ALLOWABLE AS BUSINESS EXPENDITURE. THE DISPUTE IS ONLY WITH REGARD TO THE ASSESSMENT YEAR IN WHICH SUCH EXPENDITURE IS ALLOWABLE. IT IS THE VIEW OF THE ASSESSING OFFICER THAT SINCE THE COMMISSION WAS AC TUALLY PAID TO THE DIRECTORS IN THE ASSESSMENT YEAR 2014 15, IT EXPENDITURE PERTAINS TO THE ASSESSMENT YEAR 2014 15, AND NOT THE IMPUGNED ASSESSMENT YEAR. HOWEVER, AS RIGHTLY OBSERVED BY LEARNED COMMISSIONER (APPEALS), THE COMMISSION WAS PAID TO THE DIRECT ORS ON THE TURNOVER OF SALES PERTAINING TO THE IMPUGNED ASSESSMENT YEAR. THAT IS WHY THE ASSESSEE MADE A PROVISION IN ITS BOOKS OF ACCOUNT TOWARDS COMMISSION PAYMENT WHICH WAS AN ASCERTAINED LIABILITY. THERE IS NO DISPUTE THAT THE PAYMENT OF COMMISSION TO THE DIRECTORS ON THE TURNOVER OF SALES PERTAINING TO THE FINANCIAL YEAR 2012 13 CRYSTALLIZED DURING THE YEAR. THEREFORE, ALL THE EXPENDITURES PERTAINING TO THE INCOME ACCRUING OR ARISING IN A PARTICULAR ASSESSMENT YEAR HAS TO BE ALLOWED. THAT BEING THE CAS E, ASSESSEES CLAIM OF DEDUCTION TOWARDS COMMISSION PAYMENT HAS TO BE ALLOWED SINCE IT PERTAINS TO THE TURNOVER OF SALES OF THE CURRENT YEAR, THE INCOME FROM WHICH WAS OFFERED IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, AS PER MATCHING CONCEPT, THE EXPENDI TURE PERTAINING TO THE INCOME OFFERED HAS TO BE ALLOWED AS DEDUCTION. MERELY BECAUSE THE ASSESSEE PAID THE COMMISSION AND DEDUCTED TAX IN THE SUCCEEDING ASSESSMENT YEAR IS NOT A REASON TO DISALLOW ASSESSEES CLAIM. IN ANY CASE OF THE MATTER, THE COMMISSION PAID TO THE DIRECTORS HAS TO BE ALLOWED AS DEDUCTION IF NOT IN THE IMPUGNED ASSESSMENT YEAR, THEN, IN THE ASSESSMENT YEAR 2014 15. WHEN THE TAX RATE PERTAINING TO BOTH THE ASSESSMENT YEARS ARE SAME AND LOSS TO THE REVENUE ON ACCOUNT OF ASSESSMENT YEAR 201 4 15 IS EITHER NIL OR MINIMAL, ASSESSEES CLAIM OF DEDUCTION CANNOT BE DISALLOWED IN THE IMPUGNED ASSESSMENT YEAR. IN THIS CONTEXT, WE RELY UPON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN EXCEL INDUSTRIES LTD. (SUPRA). IN VIEW OF THE AFORESAID, SE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GROUNDS RAISED ARE DISMISSED. 6 . FACTS BEING IDENTICAL, FOLLOWING THE AFORESAID DECISION OF THE CO ORDINATE BENCH WE UPHOLD THE DECISION OF LEARNED COMMISSIONER (APPEALS) . GROUNDS RAISED ARE DISMISSED. 4 AARVI ENCON PVT. LTD. 7 . IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 29.05.2019 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 29.05.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI