Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 0427 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-12-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
1996-1997
Appeal Filed On
24-12-2014
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2285/PN/2014 '% % / ASSESSMENT YEAR : 1996-97 D CIT, C IRCLE - 8 , PUNE . / APPELLANT V/S ATLAS COPCO (INDIA) LTD., (EARLIER KNOWN AS CHICAGO PNEUMATIC (I) LTD., MUMBAI-PUNE ROAD, DAPODI, PUNE 411012 PAN : AAACA4074D . /RESPONDENT / APPELLANT BY : SHRI SUHAS KULKARNI / RESPONDENT BY : SHRI NITESH JOSHI / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 25-09-2014 OF THE CIT(A)-V, PUNE RELATING TO ASSES SMENT YEAR 1996-97. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF R S.64,44,534/- BEING THIRD PARTY COMMISSION PAID BY THE ASSESSEE ONLY R ELYING UPON THE DECISIONS OF JUDICIAL AUTHORITIES GIVEN IN ASSESSEES O WN CASE FOR DIFFERENT YEARS, WHEN FOR THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS TO ESTABLISH THAT THE THIR D PARTY COMMISSION HAS BEEN PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE O F BUSINESS. / DATE OF HEARING :05.12.2016 / DATE OF PRONOUNCEMENT:06.12.2016 2 ITA NO.2285/PN/2014 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF R S.64,44,534/- WHEN THE PARTIES TO WHOM COMMISSION CLAIMED TO HAVE BE EN PAID DENIED OF RECEIVING ANY COMMISSION FROM THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF AIR COMPRESSORS, PNEUMATIC MAC HINES, DRILL RODS AND OTHER ACCESSORIES. IT FILED ITS RETURN OF INCO ME ON 30-11-1996 DISCLOSING TOTAL INCOME OF RS.5,85,31,550/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE HAS PAID THIRD PARTY COMMISSION TO ITS DISTR IBUTORS. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE A SSESSING OFFICER NOTED THAT THE DISTRIBUTORS, WHO ARE ALSO WORKING A S COMMISSION AGENTS, HAVE MADE DIRECT SALES OF RS.21.7 CRORES AND THE COMMISSION OF R S . 40.75 LAKHS IS SHOWN TO BE PA Y ABLE ON THE SALE OF RS . 9 . 51 CRORES ONL Y . FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE THE AO FOUND THAT THE RATE OF SALES COMMISSION IS VARYING FROM 2 . 5% TO 10%. HOWEVER, VIDE LETTER DATED 14-11-95 THE ASSESSE E SUBMITTED THAT ON REGULAR AUTHORIZED STOCKIEST, THEY ARE NOT OFFERIN G MORE THAN 1 % COMM I SSION. THE ASSESSING OFFICER THER E FORE CON C LUDED THAT W H A TE VE R THIRD PART Y COMMISSION IS BEING PAID, IS BASICALL Y TO TAKE CARE OF THE SECRET COMMISSION. ON GOING THROUGH THE INC OME TAX RETURN OF SOME OF THE PERSONS WHO HAV E RECEIVED THIRD PART Y COMMISSION, THE ASSESSING OFFICER FOUND THAT THESE PERSONS ARE BASICALL Y SMALL PEOPLE W ITH NO S E T UP. E V EN THE TOTAL INCOME REFLECTED IN THE RETURN IS MUCH LOWER THAN THE COMMISSION RECEIPTS. THE ASSESSING OFFICER ALSO NOTICED THAT AS PER THE THIRD PARTY COMMISSION AGREEMENT, THE THIRD PART Y COMMISSION IS PA Y ABLE ONLY W HEN FULL PA Y MENT IS RECEI V ED FROM CU S TOMERS. HOWE V ER, HE NOTED 3 ITA NO.2285/PN/2014 THAT THE ASSESSEE HAD S HO W N PROVISION FOR THIRD PARTY COMMISSION AS ON 31-03-96 AND THIS PROVISION WA S BA S ED ON THE PA Y MENTS TO BE RECEI V ED FOR THE SALES MADE THROUGH THESE THIRD PART Y COMM I SSION AGENTS . REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSE E AND FOLLOWING THE ORDER FOR PRECEEDING YEARS, THE ASSESSING OFFICE R DISALLOWED THE THIRD PART Y COMMISSION AMOUNT TO RS . 64 , 44,534/ - AND ADDED BACK TO THE TOTAL INCOME OF THE AS S ESSEE. 4. BEFORE CIT(A) IT WAS SUBMITTED THAT IDENTICAL ISSUE HAS B EEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR DIFFEREN T ASSESSMENT YEARS. THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE AS GENUINE EXPENDITURE. IT WAS SUBMITTED TH AT EVEN FOR A.Y. 2001-02 THE APPEAL FILED BY THE REVENUE AGAINST THE O RDER OF THE TRIBUNAL HAS BEEN DISMISSED BY THE HONBLE BOMBAY HIGH COURT. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND CONSIDERING THE FACT THAT IN ASSESSEES OWN CASE AN IDEN TICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AND UPHELD BY THE HON BLE BOMBAY HIGH COURT, THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ALT HOUGH THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE , HOWEVER, THE DEPARTMENT HAS NOT PREFERRED ANY SLP AG AINST THE ORDER OF THE HONBLE BOMBAY HIGH COURT BEFORE THE HONB LE SUPREME COURT BECAUSE OF LOW TAX EFFECT. HE SUBMITTED THAT EVERY ASSESSMENT YEAR IS SEPARATE AND DISTINCT AND A FACT BASED FINDING CAN NOT BE FOLLOWED WITHOUT DRAWING THE EXISTENCE OF SIMILARITY OF FACTS AN D LAW. 4 ITA NO.2285/PN/2014 HE SUBMITTED THAT SINCE THE REVENUE HAS NOT ACCEPTED THE DECISION OF HONBLE BOMBAY HIGH COURT FOR A.Y. 2000-01 IN PRINCIPLE, THEREFORE, THE SAME NEED NOT BE FOLLOWED. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF TH E ASSESSING OFFICER BE ALLOWED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN AS SESSEES OWN CASE FOR A.Y. 1986-87, 1988-89, 1991-92 TO 1995-96. REFERRING TO PAGES 90 TO 97 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE ORDER OF THE TR IBUNAL IN ITA NO.1043/PN/2014 DATED 20-01-2016 FOR A.Y. 1997-98 AND SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE TR IBUNAL IN ASSESSEES OWN CASE BY FOLLOWING THE DECISION OF THE TRIBUN AL FOR DIFFERENT ASSESSMENT YEARS. HE ACCORDINGLY SUBMITTED THA T THIS BEING A COVERED MATTER IN FAVOUR OF THE ASSESSEE THE S AME SHOULD BE FOLLOWED AND THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 9. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1997-9 8. THE TRIBUNAL VIDE ORDER DATED 20-01-2016 IN ITA NO.1043/PN/2 014 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISSED THE GROUNDS RAISED BY THE REVENUE BY OBSERVING AS UNDER : 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. THE ISSUE ARISING IN THE PRESENT APPEALS IS SQUARELY COVER ED BY THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 1986-87, 1988-89, 1991-92, 1992-93, 1993-94 AN D 1995-96 IN ITA NOS.5141, 5142/MUM/1994, ITA NOS.7280 TO 7282/MUM /1995, 5 ITA NO.2285/PN/2014 1978/MUM/1997, 3315/MUM/1999 & 152/MUM/2003 AND ITA NO.4335/MUM/2004 RELATING TO ASSESSMENT YEAR 2000-01. FURTHER, PUNE BENCH OF TRIBUNAL IN ITA NO.409/PN/2010 IN CRO SS APPEALS WITH LEAD ORDER IN ITA NO.448/PN/2010 I.E. APPEAL FILED BY THE ASSESSEE VIDE ORDER DATED 30.01.2012 CONSIDERED THE FACTUAL ASPECTS AND HELD AS UNDER:- 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ASSESSEES WRITTEN SUBMISSIONS AND OTHER MATERIAL P LACED ON RECORD, WHICH HAS BEEN REFERRED TO IN THE COURSE OF THE HEARING BEFORE US. BRIEFLY PUT, AS PER THE MATERIAL ON RECO RD, IT EMERGES THAT THE ASSESSEE COMPANY HAS CUSTOMERS SPREAD ALL OVER INDIA AND IN ORDER TO SERVE SUCH CUSTOMERS AT VARIOUS LOCATIONS, ASSESSEE APPOINTS DEALERS FOR ITS VARIOUS PRODUCTS, NAMELY, COMPRESSORS, CONSTRUCTION AND MINING EQUIPMENT, SPARES AND ACCES SORIES. IT HAS BEEN EXPLAINED THAT THE DEALERS ALSO UNDERTAKE DIRE CT SALES AND ORDERS ARE ALSO BOOKED BY THE DEALERS 12 AND PRODUC TS ARE INVOICED/SUPPLIED TO THE CUSTOMERS. ON THE LATTER A CTIVITIES OF THE DEALER, ASSESSEE PAYS COMMISSION. IT HAS ALSO BEEN EXPLAINED THAT THE DEALERS ARE MAINLY RESPONSIBLE FOR FOLLOW UP FO R THE QUOTATIONS AND TO HELP THE COMPANY IN PROCURING THE ORDERS AND ALSO FOR EFFECTING RECOVERIES AND COLLECTION OF C FORM ETC . EVEN WITH REGARD TO THE GOVERNMENT CUSTOMERS, ASSESSEES PERSONNEL A T THE REGIONAL OFFICES ARE SUPPORTED BY THE NETWORK OF DE ALERS WHO ARE BASED AT A CLOSER LOCATION TO THE CUSTOMERS SITE. IN SUCH CASES, THE RESPONSIBILITY OF THE DEALER IS TO PROVIDE NECESSAR Y LOGISTIC AND COMMUNICATION SUPPORT TO THE ASSESSEES STAFF. THE WARRANTY SERVICES OF THE PRODUCT, WHICH INCLUDE REGULAR SERV ICE VISITS TO ENSURE SMOOTH OPERATION OF THE EQUIPMENT AT THE CUS TOMERS SITE IS ALSO ARRANGED THROUGH THE DEALER-ENGINEER AND AS A PART OF THE APPOINTMENT TERMS OF THE DEALERS, THEY ARE REQUIRED TO STOCK SUFFICIENT PARTS AT THEIR END, SO THAT TIMELY DELIV ERY OF PARTS AND SERVICES IS OFFERED. IN ORDER TO COMPENSATE THE DEA LER FOR THE ABOVE SERVICES, THE ASSESSEE GIVES SERVICE COMMISSION TO COVER ALL THE COSTS THAT THE DEALER INCURS TOWARDS TRAVELLING, BO ARDING AND LODGING, STOCKING OF PARTS AS WELL AS TRAINING OF THE PERSON NEL. 24. ALL THE AFORESAID FACTUAL ASPECTS OF THE MATTER HAVE NOT BEEN FOUND TO BE NON- EXISTENT BY THE EITHER OF THE AUTH ORITIES BELOW DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE COMMISSION EXPENSES HAVE NOT BEEN REGULARLY INCURRED BY THE ASSESSEE AS IN THE PAST YEARS. IN F ACT, ONE OF THE POINTS RAISED BY THE ASSESSING OFFICER IS WITH REGA RD TO THE COMMISSION PAID TO DEALERS WHERE THE CUSTOMERS INCL UDE GOVERNMENT AGENCIES. IN THIS REGARD, WE FIND THAT T HE ASSESSEE SPECIFICALLY EXPLAINED IN ITS WRITTEN SUBMISSIONS, COPY OF WHICH HAS BEEN PLACED 182-183 OF THE PAPER BOOK, THAT GENERAL LY THE ORDERS RECEIVED FROM THE GOVERNMENT AGENCIES ARE FROM THE REMOTE LOCATIONS, VIZ. BORDER ROADS ORGANIZATION OR MINING CUSTOMERS FROM REMOTE LOCATIONS. THE COMPANY HAS ITS REGIONAL OFFI CES WITH ITS TEAM OF 13 SALES AND SERVICE PERSONNEL WHO LOOK AFTER A LARGE AREA COVERING 4 TO 5 STATES AND THIS TEAM IS SUPPORTED B Y THE NETWORK OF DEALERS WHO ARE LOCATED CLOSE TO THE REMOTE SITES O F THE CUSTOMERS. IN THIS SITUATION, THE DEALER RESPONSIBILITY FOR SU CH GOVERNMENT CUSTOMER IS TO PROVIDE LOGISTICS AND COMMUNICATION SUPPORT FOR FOLLOW UP AND SECURING THE ORDERS FROM THE VARIOUS DEPARTMENTS, ETC. WE DO NOT FIND ANY MATERIAL ADVERSE TO THE AFO RESAID EXPLANATION OF THE ASSESSEE. EVEN OTHERWISE, IT HAS BEEN POINTED OUT THAT COMMISSION PAYMENT TO DEALERS WITH RESPECT TO THE ORDERS 6 ITA NO.2285/PN/2014 FROM A GOVERNMENT AGENCY WAS A SUBJECT MATTER OF CO NSIDERATION BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 1985- 86 VIDE ITA NO 114/M/03 DATED 25.7.2007. IN THIS PR ECEDENT, THE TRIBUNAL HAS ALLOWED THE DEDUCTION AFTER BEING SATI SFIED OF THE PRACTICE OF COMMISSION PAYMENT. IN THIS BACKGROUND OF THE MATTER, AND WITH NO ADVERSE MATERIAL ON RECORD, WE DO NOT F IND ANY MERIT IN THE OBJECTIONS RAISED BY THE ASSESSING OFFICER WITH REGARD TO COMMISSION PAYMENT TO DEALERS RELATING TO THE ORDER S FROM THE GOVERNMENT AGENCIES. AT THIS POINT, WE MAY ALSO OBS ERVE THAT EVEN WITH REGARD TO THE VERIFICATION EXERCISE CARRIED OU T BY THE ASSESSING OFFICER, WE FIND NOTHING ADVERSE SO AS TO INFER THA T THE IMPUGNED COMMISSION PAYMENTS WERE INGENUINE. THE ASSESSING O FFICER ISSUED SUMMONS TO 17 RANDOMLY SELECTED PARTIES, OUT OF WHICH 12 REPLIES WERE RECEIVED AND 4 SUMMONS CAME BACK UNSER VED. IN RELATION TO ONE PARTY, NO RESPONSE WAS RECEIVED IN- SPITE OF SERVICE OF SUMMONS. WITH REGARD TO SUCH SOLITARY PARTY, LEARNE D COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 215 OF THE PAPER BOOK WHE REIN NECESSARY CONFIRMATION HAS BEEN PLACED, THOUGH THE PARTY HAD NOT RESPONDED TO THE SUMMONS ISSUED BY THE ASSESSING OF FICER. IN FACT THE FACTUAL SCENARIO OF THE VERIFICATION EXERCISE W OULD REVEAL THAT OVERWHELMING NUMBER OF PARTIES RANDOMLY CHOSEN BY T HE ASSESSING OFFICER HAS ACKNOWLEDGED THE COMMISSION PAYMENTS AN D IN ANY CASE, THERE IS NO DENIAL OF THE PAYMENT IN ANY OF T HE CASE. CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTA NCES OF THE 14 INSTANT YEAR AS ALSO THE PRECEDENT IN THE ASSESSEE S OWN CASE WHEREIN THE PRACTICE OF PAYING COMMISSION TO DEALER S/AGENTS, STAND ESTABLISHED, WE FIND NO REASONS TO INTERFERE WITH T HE ULTIMATE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEA LS) OF HAVING DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER. RESULTANTLY, GROUND NOS. 1 & 2 ARE DISMISSED. 7. THE ISSUE IN THE PRESENT SET OF APPEALS BEFORE US IS ID ENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN EARLIER YEARS AND FOL LOWING THE SAME PARITY OF REASONING AND APPLYING THE RATIO LAID DOWN BY THE TRIBUNAL IN ITA NO.409/PN/2010, VIDE ORDER DATED 30.01.2012, WE UPHOLD THE ORDER OF CIT(A). FURTHER, THE HONBLE BOMBAY HIGH COURT HAS UPHELD THE ORDER OF TRIBUNAL RELATING TO ASSESSMENT YEARS 2000- 01 AND 2001- 02 VIDE SEPARATE ORDERS BOTH DATED 01.02.2013. FOLL OWING THE ORDERS OF JURISDICTIONAL HIGH COURT AND THE SAME PARITY OF REASO NING LAID DOWN BY THE TRIBUNAL, WE DISMISS THE GROUNDS OF APPEAL NO.1 AN D 2 RAISED BY THE REVENUE IN RELATION TO THIRD PARTY COMMISSION IN ALL THE APPEALS. 10. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO T HE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CAS E, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTI CE BY THE LD. DEPARTMENTAL REPRESENTATIVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION BY FOLLOWING THE DEC ISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. ACCORDINGLY, THE S AME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7 ITA NO.2285/PN/2014 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 06-12-2016. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; ' DATED : 06 TH DECEMBER, 2016. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. $ ''( , ( , / DR, ITAT, A PUNE; 6. + / GUARD FILE. / BY ORDER, // TRUE COPY // // $ ' //TRUE COPY // -. ' ( / SR. PRIVATE SECRETARY ( , / ITAT, PUNE
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