M/s. Metalloyds, Angul V. ITO, Angul Ward, Angul

ITA 23/CTK/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3821 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 18-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.23/CTK/2017 ASSESSMENT YEAR : 2012 - 2013 M/S. METALLOYDS, 1 ST FLOOR, M.R.TOWERS, MAIN ROAD, ANGUL VS. ITO, ANGUL WARD, ANGUL PAN/GIR NO. AAHFM 9629 E (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI BINOD AGARWAL, AR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 17 /05/ 2017 DATE OF PRONOUNCEMENT : 17 /05 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 2, BHUBANESWAR , DATED 21.10.2016 , FOR THE ASSESSMENT YEAR 2012 - 2013 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.6,00 ,000/ - PAID AS COMMISSION TO HUF OF TWO PARTNERS. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED TO HAVE PAID COMMISSION OF RS.6,00,000/ - TO 2 ITA NO.23/CTK/2017 ASSESSMENT YEAR : 2012 - 2013 BIKRAM AGARWAL (HUF) AND BINAY AGARWAL (HUF) OF RS.3,00,000/ - EACH. THE ASSESSING OFFICER HELD THAT BIKRAM AGARWAL AND BINAY AGARWAL ARE WORKING PART NERS IN THE FIRM AND THEY ARE ENTITLED TO DRAW SALARY @ RS.20,000/ - PER MONTH FROM THE FIRM. HE FURTHER FOUND THAT BIKRAM AGARWAL IS THE KARTA OF BIKRAM AGARWAL (HUF) AND BINAY AGARWAL IS THE KARTKA OF BINAY AGARWAL (HUF). HE RELIED ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF K.S.SUBBIAH PILLAI VS CIT, 237 ITR 11 (SC) AND HELD THAT BIKRAM AGARWAL AND BINAY AGARWAL CANNOT TAKE ANY COMMISSION FOR DOING ANY BUSINESS OF THE PARTNERSHIP FIRM AS PER TERMS OF PARTNERSHIP DEED. CONSEQUENTLY, HE DISALL OWED DEDUCTION FOR COMMISSION PAYMENT OF RS.6,00,000/ - . 4. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE FILED LEDGER COPY OF COMMISSION ACCOUNT, COPY OF INCOME TAX RETURN OF BIKRAM AGARWAL (HUF) AND BINAY AGARWAL (HUF) AND COPY OF TDS CERTIFICATE ISSUED BY TH E ASSESSEE. THE ASSESSEE HAS ALSO FILED ORDER OF THE CIT(A) - II, BHUBANESWAR IN THE CASE OF SHREE BALAJEE ISPAT WHERE SUCH COMMISSION HAS BEEN ALLOWED AS EXPENSES. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT THE FACT THAT BIK RAM AGARWAL AND BINAY AGARWAL ARE WORKING PARTNERS OF THE ASSESSEE IS NOT DISPUTED. THEY ARE KARTA OF THEIR RESPECTIVE HUF IS NOT DISPUTED. DURING THE COURSE OF APPEAL PROCEEDINGS ON 18.10.2016, THE 3 ITA NO.23/CTK/2017 ASSESSMENT YEAR : 2012 - 2013 ASSESSEE HAS FILED THE FOLLOWING AGENT COMMISSION AGREEMENTS OF THE ASSESSEE WITH BIKRAM AGARWAL (HUF) AND BINAY AGARWAL (HUF): SI NO. NAME DATE COMMISSION ACCOUNT OF 01 BINAY AGRAWAL(HUF) 01.04.2011 L&T 02 BIKRAM AGRAWAL (HUF) 01.12.2011 SAGAR SALES COPRORATION 03 BIKRAM AGRAWAL(HUF) 39.04.2011 GAYATRI CONSTRUCTION 04 BIKRAM AGRAWAL (HUF) 15.04.2011 JAGANNATH PROJECTS (P) LTD THE TEXT OF THE AGREEMENT IS SAME IN ALL THE FOUR AGREEMENT, WHICH IS REPRODUCED BELOW: 'VINAY AGARWAL(HUF) SHANKAR CINEMA ROAD, ANGUL - 759122(ODISHA) DEAR SIR, WE ON BEHALF OF THE PARTNERSHIP FIRM M/S. METALLOYDS. MAIN ROAD, ANGUL ARE PLEASED TO INFORM YOU THAT YOU HAVE BEEN APPOINTED AS COMMISSION AGENT WITH EFFECT FROM I S ' APRIL, 2011 TILL 31 S ' MARCH, 2012 UNDER THE FOLLOWING TERMS AND CONDITIONS: 1. YOU SHALL CANVAS SALES, LIASON AND PROCURE ORDERS FROM M/S. LARSEN & TOUBRO LTD., VARIOUS SITES ON OUR BEHALF FOR THE ITEMS DEALT BY US LIKE WELDING ELECTRODES, SPECIAL ELECTRODES, WIRES & FLUXES, INDUSTRIAL GASES, EQUIPMENT , PPE PRODUCTS, PAINTS, LUBRICANTS, GRINDING/CUTTING WHEELS, ETC. 2. YO U SHALL BE PAID A COMMISSION OF 1 % ON EVERY COMPLETED CRORE WORTH OF ORDER PROCURED & MATERIALS SUPPLIED TO THE ABOVE MENTIONED PARTY DURING THE FINANCIAL YEAR. 3. YOU SHALL MAKE ALL EFFORTS FOR EARLY PAYMENT OF PENDING BILLS, COLLECTION OF FORMS, IF ANY FROM THE CUSTOMER. 4. YOU SHALL BE BOUND TO MAINTAIN THE SECRECY OF THE FIRM. 5. THE MANAGEMENT SHALL BE AT LIBERTY TO REVOKE YOUR APPOINTMENT WITHOUT ASSIGNI NG ANY REASON WHAT SO - EVER. 6. ANY DISPUTES WHAT SO - EVER ARISING OUT OF THE ABOVE WITH THE FIRM ITSELF SHALL BE SUBJECT TO ANGUL JURISDICTION. YOU ARE REQUESTED TO KINDLY SIGN THE DUPLICATE IF THIS LETTER AS A TOKEN OF ACCEPTANCE OF THE ABOVE TERMS & CONDITIONS IMMEDIATELY ON RECEIPT OF THE SAME. THANKING YOU, YOURS FAITHFULLY, FOR METTALLOYDS 4 ITA NO.23/CTK/2017 ASSESSMENT YEAR : 2012 - 2013 6. THE CIT (A) FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO FILED THE FOLLOWING CHART REGAR DING THE WORKING OF THE COMMISSION. SI NO COMMISSION PAID TO AMOUNT COMMISSION ON A/C. OF BUSINESS DURING THE F.Y. 2011 - 12 COMMISSION BASIS COMMISSIO N TOTAL COMMISSI O N 01 VINAY AGARWAL(HUF) 300000.00 L&T LTD 33107455.3 3 1 LAKH OF EVERY COMPLETED CRORE 300000.00 300000.0 0 02 BIKRAM AGARWAL 300000.00 JAGANNATH CORPN. PROJECT (P) LTD 8560045.93 2.5% OF EVERY COMPLETED LAKH 212500.00 300000.00 GAYATRI CONSTRUCTION S 1452832.85 3% OF EVERY COMPLETED 50 K 43500.00 SAGAR SALES CORPORATION 2188061.93 2% PER LAKH 44000.00 7. THE CIT( A) FURTHER OBSERVED THAT HON'BLE SUPREME COURT IN THE CASE OF K.S. SUBBIAH PILLAI (SUPRA) HAS HELD THAT WHEN COMMISS ION WAS EARNED BY THE KARTA OF THE HUF ON ACCOUNT OF HIS PERSONAL QUALIFICATIONS AND EXERTIONS NOT ON ACCOUNT OF THE INVESTMENT OF THE FAMI LY FUNDS, SUCH INCOME WILL BE TAXED IN THE HAND S OF INDIVIDUAL AND NOT IN THE HANDS OF HUF. THEREFORE, HE CONFIRMED THE ADDITION OF RS.6 LAKHS ON ACCOUNT OF DISALLOWANCE OF COMMISSION MADE BY THE ASSESSING OFFICER. 8. BEFORE ME, LD A.R. OF THE ASSESSEE ARGUED THAT THE ASSESSEE HAD FILED COMMISSION AGREEMENT BEFORE THE CIT(A). HE FURTHER ARGUED THAT BOTH THE ASSESSING OFFICER AS WELL AS THE CIT (A) HAS NOT EXAMINED THE SERVICES RENDERED BY THE HUF TO THE ASSESSEE FIRM. HE ARGUED TH AT THE ASSESSEE HAS DETAILED E VIDENCE I N THE FORM OF SALE INVOICES EVIDENCING THE SALES 5 ITA NO.23/CTK/2017 ASSESSMENT YEAR : 2012 - 2013 PROCURED BY THE HUF IN CONSIDERATION OF WHICH THE COMMISSION PAYMENT WAS MADE. HE FURTHER ARGUED THAT SIMILAR COMMISSION PAYMENT HAS BEEN ALLOWED IN THE CASE OF SHREE BALAJEE ISPAT BY THE CIT(A) - II, BHUBANESWAR, WHICH WAS THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE CIT(A) BUT THE CIT(A) HAS NOT GIVEN ANY REASONING AS TO WHY THE SAID DECISION WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE BEFORE CONFIRMING THE ADDITI ON. THEREFORE, HE PRAYED THAT IN THE INTEREST OF JUSTICE, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATING THE ISSUE AFRESH AFTER CONSIDERING ALL THE EVIDENCE S ON THE ISSUE. 9. LD D.R. HAD NO OBJECTION TO THE ABOV E SUBMISSION OF LD A.R. OF THE ASSESSEE. 10. I FIND THAT THE ASSESSEE HAS RELIED ON THE DECISION OF CIT(A) - II, BHUBANESWAR IN THE CASE OF SHREE BALAJEE ISPAT BEFORE THE CIT(A). THE CIT(A) HAS NOT GIVEN WHY THE SAID DECISION IS NOT APPLICABLE TO THE ASSESSE ES CASE. THE CIT(A) HAS NOT EXAMINED THE EVIDENCE OF SERVICES RENDERED BY TWO HUFS FOR W HICH COMMISSION PAYMENT WAS PAID BY THE ASSESSEE FIRM. IN MY CONSIDERED OPINION, THIS HAS TO BE EXAMINED AND CONSIDERED BY THE CIT( A) WHILE ADJUDICATING THE APPEAL OF THE ASSESSEE WHICH HAS NOT BEEN DONE. THEREFORE, IN ORDER TO RENDER SUBSTANTIAL JUSTICE, I SET ASIDE THE ORDER OF THE CIT(A) AND REMAND THE MATTER BACK TO HIS FILE FOR ADJUDICATION OF THE ISSUE AFRESH IN THE LIGHT OF TH E DISCUSSION MADE HEREINABOVE. NEEDLESS TO MENTION THAT THE CIT(A) SHALL ALLOW REASONABLE 6 ITA NO.23/CTK/2017 ASSESSMENT YEAR : 2012 - 2013 AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 /05/2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 17 /05/2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : M/S. METALLOYDS, 1 ST FLOOR, M.R.TOWERS, MAIN ROAD, ANGUL 2. THE RESPONDENT. ITO, ANGUL WARD, ANGUL 3. THE CIT(A) - 2, BHUBANESWAR 4. PR.CIT - 2, BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//