Transcar India Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2278/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96373 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-09-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: N C PRABHAKAR
• Keywords: Onus to prove
• Section: 143(3)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . , ! ' . #$ , % & BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2278/MDS./2014 ( / ASSESSMENT YEAR :2007-08) M/S.TRANSCAR INDIA PVT. LTD., NO.5, MOORES ROAD, CHENNAI 600 006. VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), CHENNAI 600 034. PAN AAACT 4164 H ( '( / APPELLANT ) ( )*'( / RESPONDENT ) / APPELLANT BY : MR.N.C.PRABHAKAR,ADVOCATE / RESPONDENT BY : MR.A.B.KOLI, JCIT D.R / DATE OF HEARING : 21.09.2015 /DATE OF PRONOUNCEMENT : 13.11.2015 + / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-III, CHEN NAI DATED 26.06.2014 IN ITA NO.1043/2013-14 PASSED UNDER SEC. 143(3) READ WITH SECTION 115WE(2) & SEC. 250 OF THE ACT. ITA NO. 2278/MDS/14 2 2. THE ASSESSEE HAS RAISED SIX ELABORATE GROUNDS I N HIS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT ( A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF DISCOUNT ON SALE OF CAR TO VARIOUS CUSTOMERS AMOUNTING TO ` 18,61,507/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY, ENGAGED IN THE BUSINESS AS A DEALER OF MERCEDES BEN Z CAR & ITS SPARES AND ACCESSORIES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 22.10.2007 ADMITTING TOTAL INCOME O F ` 64,24,538. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND A SSESSMENT WAS COMPLETED U/S.143(3) R.W.S 115WE(2) OF THE ACT, WHE REIN THE LD. ASSESSING OFFICER AMONGST ONE OF THE DISALLOWANCES, DISALLOWED THE CLAIM OF DISCOUNT GRANTED TO THE CUSTOMERS OF THE A SSESSEE ON THE SALE OF SOME ITS CARS AGGREGATING TO ` 18,61,507/-. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DISCOUNT WAS GIVEN TO CERT AIN CUSTOMERS DUE TO THE FOLLOWING REASONS:- I) IN ORDER TO MITIGATE THE COMPETITIVE PRESSURE F ROM OTHER CAR MANUFACTURES. ITA NO. 2278/MDS/14 3 II) TO RETAIN THE EXISTING CUSTOMERS WITHIN THE BRA ND FOLD BY OFFERING LOYALTY DISCOUNT. III) AS A MEASURE OF BUSINESS PROMOTION. IT WAS FURTHER EXPLAINED THAT THE SALES TAX AND REG ISTRATION AUTHORITIES DO NOT PERMIT TO INVOICE THE SALE OF CAR BELOW THE MRP PRICE AND HENCE, ON THE TOTAL MRP PRICE THE DISCOUNT WAS GRAN TED TO THE BUYERS OF THE CAR. HOWEVER, THE LD. ASSESSING OFFICER REJE CTED THE SUBMISSIONS OF THE ASSESSEE BY HOLDING THAT THE DIS COUNTS WERE NOT SUPPORTED BY EVIDENCE IN THE FORM OF VALID DOCUMENT S AND THUS THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THE CLAIM OF DISCOUNT. 4. ON APPEAL, THE LD. CIT (A) UPHELD THE VIEW OF T HE LD. ASSESSING OFFICER BY FURTHER REASONING AS FOLLOWS:- I) AS PER NORMAL ACCOUNTING PRACTICE AND STANDARD S, THERE CANNOT BE ANY DISCOUNT AFTER THE AMOUNTS ARE ENTERED IN TH E BOOKS AND THE BUYERS GET THE POSSESSION OF THE GOODS. ITA NO. 2278/MDS/14 4 II) THE DISCOUNT IS NOT OFFERED TO ALL THE CUSTOMER S FOR SIMILAR MODELS. III) THE CUSTOMERS WHO CAN AFFORD TO BUY SUCH LUXUR Y BRANDS ARE NEITHER LIKELY TO ASK FOR DISCOUNTS NOR THEY WOULD BE GIVEN A DISCOUNT ESPECIALLY AFTER FINALIZATION A PARTICULAR PRIZE. IV) NORMALLY VEHICLES ARE GIVEN DELIVERY ONLY AFTER THE ENTIRE SALE PRICE IS PAID BY THE BUYER AND HENCE THERE IS NO SC OPE FOR GRANTING DISCOUNTS. V) THE MANUFACTURER OF CAR DOES NOT ALLOW THE DEALE RS TO GRANT DISCOUNT FOR THEIR PRODUCTS. 5. BEFORE US, THE LD. A.R. REITERATED THE SUBMISSI ONS MADE BEFORE THE REVENUE AUTHORITIES AND ARGUED BY STATING AS FO LLOWS:- A) THE APPELLANT HAS ENTERED INTO AN AGREEMENT WITH THEIR PRINCIPALS, NAMELY DAIMLER CHRYSLER INDIA FOR SELLING MERCEDES BENZ CA RS IN INDIA AND IN THE STATE OF TAMIL NADU EXCEPTING COIMBATORE AND PONDICHERRY. B) AS PER THE AGREEMENT, THE APPELLANT HAS TO SELL THE VEHICLES BEFORE THE CREDIT PERIOD OF 37 DAYS GIVEN BY THE APPELLANTS PRINCIPA LS NAMELY DAIMLER CHRYSLER INDIA AS OTHERWISE THEY WILL CHARGE INTEREST @ 1.5% PER MONTH. ITA NO. 2278/MDS/14 5 C) THEREFORE, THE APPELLANT WAS FORCED TO BORROW MO NIES FROM THE FINANCIAL INSTITUTIONS AND BANKS IN ORDER TO DISCHARGE THIS L IABILITY TO THE PRINCIPALS. BUT IN DOING SO, THE APPELLANT, THOUGHT IN ORDER TO AVOID PAYING HUGE INTEREST AMOUNTS TO THE BANKS, YOUR APPELLANT OFFERED DISCOUNTS TO THE CUSTOMERS FOR FACILITATING SPEEDY DISPOSAL OF THE VEHICLES. BUT, IN THE PROCES S, THE APPELLANT COULD NOT MENTION THESE DISCOUNTS IN THE INVOICES SINCE THE V EHICLES WERE DELIVERED AFTER THE SALES OF THE VEHICLES AND IN ORDER TO AVOID PAP ER WORK PROBLEMS WITH THE TRANSPORT DEPARTMENT NAMELY THE REGISTERING AUTHORI TY (I.E. RTO) AND SALES TAX DEPARTMENT. D) IF THE VEHICLES REMAINED UNSOLD, THEY WILL BECO ME DEBT STOCK AND THE APPELLANT WILL INCUR FURTHER LOSS. IN ORDER TO AVOI D THIS SITUATION, THEREFORE IT WAS ESSENTIAL TO OFFER DISCOUNT TO POTENTIAL BUYERS WHO HAD EXPRESSED THEIR DESIRE TO BUY A CAR. IT WAS THEREFORE PLEADED BY THE LD. A.R. THAT THE D ISCOUNT GRANTED TO THE BUYERS OF THE CAR SOLD BY THE ASSESSEE MAY BE A LLOWED AS DEDUCTION. ON THE OTHER HAND, THE LD. D.R ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE. ITA NO. 2278/MDS/14 6 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. IT IS A NORMAL PRACT ICE IN THE BUSINESS OF SELLING NEW CARS BY THE DEALERS OF THE CAR TO GR ANT DISCOUNT IN ORDER TO OFF-LOAD STOCK AND ALSO TO MEET THE TARGET FIXED BY THE MANUFACTURERS OF THE CAR. THE DISCOUNT IS OFFERED ACCORDING TO THE MARKET TRENDS, COMPETITION BY THE OTHER CAR MANUFAC TURERS AND ALSO DUE VARIOUS OTHER MARKETING STRATEGY AND FINANCIAL POLICIES OF THE ASSESSEE. IT IS THE PREROGATIVE OF THE ASSESSEE TO DECIDE AS TO HOW IT HAS TO CONDUCT ITS BUSINESS IN ORDER TO SURVIVE AND FLOURISH IN THE MARKET WHICH CANNOT BE QUESTIONED BY THE REVENUE. T HE REVENUE CANNOT DICTATE TERMS TO THE ASSESSEE ON THE ISSUE O F GRANTING DISCOUNT AND MAKING DISALLOWANCE UNLESS THE GENUINE NESS OF THE TRANSACTIONS IS DOUBTED OR ESTABLISHED TO BE SHAM. IN THE GIVEN CASE BEFORE US THAT THE ASSESSEE HAD GRANTED DISCOUNT TO VARIOUS CUSTOMERS ON THE SALE OF SEVERAL MODEL OF THE CARS TRADED BY THE ASSESSEE. THESE TRANSACTIONS CANNOT BE HELD AS SHAM OR NOT GENUINE. THE REVENUE HAS NOT BROUGHT OUT ANY CONVIN CING REASONS TO TREAT THESE TRANSACTIONS AS NOT GENUINE. THEREFORE , WE DO NOT SUBSCRIBE TO THE VIEW OF THE REVENUE FOR MAKING SUC H DISALLOWANCES. ITA NO. 2278/MDS/14 7 HENCE, WE HEREBY DIRECT THE LD. ASSESSING OFFICER T O DELETE THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF DISCOU NT GRANTED TO THE CLIENTS OF THE ASSESSEE FOR ` 18,61,507/-. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 13 TH NOVEMBER, 2015 AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( DUVVURU RL REDDY ) ( . ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH NOVEMBER, 2015. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE