M/s Sadana Brothers Sales P. Ltd., Indore V. The Addl. CIT, Range-3, Indore

ITA 237/IND/2013

• Counselvise Citation: 23722714 RSA 2013
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Gift; Corroborative evidences
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAFCS3426E I.T.A.NO. 237 /IND/201 3 A.Y. : 2008-09 M/S.SADANA BROTHERS SALES P.LTD., A. B. ROAD, INDORE. VS. ADDL. CIT, RANGE 3, INDORE APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI R.A.VERMA, SR. DR DATE OF HEARING : 10 . 10 .201 3 DATE OF PRONOUNCEMENT : 11 . 10 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A), DATED 30.01.2013 FOR THE ASSE SSMENT YEAR 2008-09 IN THE MATTER OF ORDER PASSED U/S 143( 3)/147 OF THE INCOME-TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - -: 2: - 2 1. THE LD. CIT (A) HAS ERRED IN MAINTAINING THE ADDITI ON OF RS. 14,64,013/- BEING THE DIFFERENCE BETWEEN THE COMMISSION RECEIVED. 1.1 IT WAS PROVED BEFORE THE LD. AO & LD. CIT(A) TH AT THE SERVICE TAX DEDUCTED HAS BEEN CREDITED TO A SEPARAT E ACCOUNT AND AS SUCH THERE WAS DIFFERENCE IN THE COMMISSION RECEIVED. 1.2 THE ADDITION OF RS. 14,64,013/- MAY PLEASE BE DELETED. 2. THE LD. CIT(A) HAS ERRED IN MAINTAINING A DISALLOWA NCE OF RS. 3,07,418/BEING THE COMMISSION PAID TO DIFFER ENT PARTIES. THE ADDITION MADE MAY PLEASE BE DELETED. 3. THE LD CIT (A) ERRED IN MAINTAINING THE DISALLOWANC E OF RS. 15,15,608/- BEING THE EXPENSES OF BUSINESS PROMOTION. THE EXPENSES ARE INCURRED FOR THE PURPOS ES OF BUSINESS HENCE THE ADDITION MAY PLEASE BE DELETE D. 4. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWA NCE OF RS. 1,41,250/FROM THE INTEREST PAYABLE. THE ADDI TION -: 3: - 3 MAY PLEASE BE DELETED. 3. THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY AND IS A C & F AGENT/SALES DISTRIBUTOR/SUPER STOCKI ST OF LIQUOR FOR THE DISTILLERY UNIT I.E. M/S. KHODAY IND IA LIMITED, BANGALORE FOR THE M.P. AND CHHATISGARH REGIONS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO FURNISH ORIGINAL TDS CERTIFIC ATES AND RECONCILE TDS VS-VS INCOME. THE ASSESSEE HAS RECEIV ED COMMISSION FROM KHODAY INDIA LTD. AND COMMISSION INCOME HAS BEEN SHOWN IN ITS RETURN. AS PER CERTIFI CATE ASSESSEE HAS RECEIVED COMMISSION FROM M/S. KHODAY INDIA LTD. AS UNDER : AMOUNT PAID TDS DEDUCTED RS. 33,59,456/- RS.3,47,728/- RS. 92,81,200/- RS.9,60,144/- RS. 6,71,939/- RS. 76, 244/ - TOTAL RS.1,33,12,595/- RS.13,84,L16/- -: 4: - 4 THE ASSESSING OFFICER OBSERVED THAT TOTAL COMMISSIO N RECEIVED BY THE ASSESSEE AS PER TDS CERTIFICATE WAS RS. 1,33,18,595/- WHEREAS ASSESSEE HAS SHOWN COMMISSION OF RS. 1,18,54,582/ONLY. ASSESSEE HAS ALSO RECEIVED INCENTIVE OF RS. 9,24,720/- FROM M/S. KHODAY INDIA LTD. ON WHICH NO TDS WAS DEDUCTED. TOTAL INCOME ON ACCOUNT OF INCENTIVE AND COMMISSION WAS SHOWN BY ASSESSEE RS.1,26,77,589/- WHICH INCLUDES COMMISSION OF RS. 9,24,720/- ON WHICH NO TDS DEDUCTED. ASSESSEE WAS ASKED TO RECONCILE THE DIFFERENCE IN COMMISSION INCOME AS PER TDS CERTIFICATE AND AS DISCLOSED BY I T. ASSESSEE VIDE ITS REPLY DATED 03.12.2010 SUBMITTED AS UNDER : 'THE CHART FOR RECONCILIATION OF INCOME CREDITED TO THE P & L A/C VIS-A-VIS TDS DEDUCTED IS ENCLOSED. IT WOULD BE SEEN THAT THE DIFFERENCE IN THE TDS CERTIFICATE AND THE AMOUNTS CREDITED TO THE P & L A/C IS BECAUSE OF THE SERVICE TAX ELEMENT IN THE TDS CERTIFICATES. THE PAYER HAS -: 5: - 5 INCLUDED THE AMOUNT OF SERVICE TAX IN THE TDS CERTIFICATE WHILE THE ASSESSEE FOLLOWS THE SYSTEM OF SEPARATE ACCOUNTING FOR SERVICE TAX. THE SERVICE TAX INCLUDED IN THE BILL IS CREDITED TO THE SEPARATE ACCOUNT UNDER THE HEAR SERVICE TAX AND DOES NOT CREDIT IT TO THE P & L A/C. THE RECONCILIATION CHART IS ENCLOSED.' 5. HOWEVER, THE ASSESSING OFFICER DID NOT CONVINCE WITH THE ASSESSEES REPLY AND BY OBSERVING THAT THE ASSESSEE DID NOT FURNISH ANY SUPPORTING EVIDENCE IN SUPPORT OF THE SAID RECONCILIATION CHART, MADE AN ADDITION OF RS. 14,64,013/- BEING THE DIFFERENCE BETWEEN COMMISSION RECEIVED. BY THE IMPUGNED ORDER, THE LD. CIT(A) CON FIRMED THE ACTION OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE IS A C & F AGEN T FOR KHODAY INDIA LIMITED AND DURING THE YEAR ASSESSEE H AD RAISED BILLS FOR INCENTIVE/COMMISSION RECEIVABLE. O N THE BILLS SO RAISED, THE ASSESSEE HAS CHARGED SERVICE TAX. ON THE -: 6: - 6 PAYMENT SO MADE, M/S. KHODE INDIA LIMITED DEDUCTED TAX AT SOURCE. THUS, THE TDS WAS DEDUCTED ON THE WHOLE AMO UNT OF COMMISSION PLUS SERVICE TAX. IN ITS BOOKS OF ACCOUN T, THE ASSESSEE HAS CREDITED THE BILL IN THE COMMISSION AC COUNT AND SEPARATELY CREDITED THE SERVICE TAX AND WHEN SERVIC E TAX SO COLLECTED WAS PAID TO GOVERNMENT ACCOUNT, THE SAME WAS DEBITED TO SERVICE TAX ACCOUNT AND WAS NOT CLAIMED SEPARATELY IN THE PROFIT AND LOSS ACCOUNT. FROM THE ACCOUNT OF SERVICE TAX PAYMENT, WE FOUND THAT ENTIRE AMOUNT OF SERVICE TAX SO COLLECTED HAS BEEN SEPARATELY CREDITED IN THE SERVI CE TAX ACCOUNT. ACCORDINGLY, THE ASSESSING OFFICER, WAS NO T JUSTIFIED IN HOLDING THAT AMOUNT PAID BY THE ASSESSEE ON ACCO UNT OF SERVICE TAX WAS ASSESSEES INCOME, WHICH HE HAS NOT DISCLOSED. WE HAD ALSO VERIFIED THE CERTIFICATE ISS UED BY KHODAY INDIA LIMITED DATED 27.1.2012, AS PLACED IN PAPER BOOK, WHICH INDICATED AMOUNT OF RS. 15,65,607/- PAI D TO THE ASSESSEE ON ACCOUNT OF SERVICE TAX AND RS. 1,26,77 ,589/- ON ACCOUNT OF COMMISSION. THUS, ON TOTAL SUM OF RS. 1,42,43,196/-, TDS WAS DEDUCTED. THE ASSESSEE HAS SEPARATELY ACCOUNTED FOR COMMISSION AND INCENTIVE, AND ALSO -: 7: - 7 THE AMOUNT RECEIVED ON ACCOUNT OF SERVICE TAX, WHIC H WAS FINALLY PAID TO THE GOVERNMENT ACCOUNT. ACCORDINGLY , THERE IS NO MERIT IN THE ADDITION OF RS. 14,64,013/- MADE BY THE ASSESSING OFFICER ON ACCOUNT DIFFERENCE BETWEEN THE COMMISSION RECEIVED, WHICH WAS ON ACCOUNT OF SERVIC E TAX COLLECTED BY THE ASSESSEE AND DID NOT FORM PART OF ITS INCOME. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO D ELETE THE SAME . 7. THE ASSESSING OFFICER HAS ALSO DISALLOWED COMMISSION PAYMENT OF RS. 3,07,418/- BY OBSERVING T HAT THE ASSESSEE HAD PAID COMMISSION TO DIFFERENT PARTIES B UT DID NOT FURNISH DETAILS LIKE THEIR COMPLETE ADDRESSES, CONF IRMATION, TYPE OF SERVICES RENDERED BY THEM. IN THE ABSENCE O F THESE DETAILS, THE ASSESSING OFFICER DISALLOWED THE COMMI SSION PAYMENT AND ACTION OF THE ASSESSING OFFICER WAS CON FIRMED BY THE LD.CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE PAYS VARIOUS IN CENTIVE COMMISSION TO THE LOCAL DEALERS TO PROMOTE THE SALE S AT VARIOUS LOCATIONS. SUCH COMMISSION IS PAID @ RS. 1 0/- TO RS. -: 8: - 8 15/- PER BOX. ON THE BASIS OF THE PERFORMANCES MADE BY THESE DEALERS, THE COMMISSION IS PAID. WE FOUND THA T ALL THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES AND THE TDS IS ALSO DEDUCTED AND PAID ON ALL SUCH COMMISSION PAYME NTS. SINCE IT IS AN INCENTIVE TO BOOST UP THE SALES OF T HIS BRAND, THE COMMISSION IS PAID. ALL THE DEALERS ARE ' INCOME TA X PAYEES AND THE PAN NOS, WERE FURNISHED TO THE LD. ASSESSIN G OFFICER. HOWEVER, THE ASSESSEE HAS NOT FURNISHED COMPLETE AD DRESSES OF THE RECIPIENT OF COMMISSION, THEREFORE, THE ASSE SSING OFFICER COULD NOT MAKE INQUIRY WITH REGARD TO THE GENUINENESS OF COMMISSION EXPENDITURE HAVING BEEN INCURRED. IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS GROUND BACK TO THE FILE OF THE A.O. AND ASSESS EE IS DIRECTED TO FURNISH COMPLETE ADDRESSES OF PERSONS W HO HAVE RECEIVED THE COMMISSION ALONGWITH THEIR CONFIRMATIO N. THE ASSESSING OFFICER IS TO DECIDE THE ISSUE AFRESH AFT ER CONSIDERING ALL THESE DOCUMENTS. WE DIRECT ACCORDIN GLY. 9. THE ASSESSING OFFICER HAS DISALLOWED RS. 15,15,608/- BEING EXPENSES OF BUSINESS PROMOTIONS. THESE EXPENSES RELATE TO PAYMENT MADE TO THE HOTELS, FIGT ITEMS, -: 9: - 9 COINS, JEWELLERY ETC. THE ASSESSEE WAS ASKED TO FUR NISH COMPLETE DETAILS OF PARTIES TO WHOM THESE GIFT ITEM S WERE GIVEN. 10. ASSESSEE VIDE ITS REPLY DATED 03.12.2010 SUBMITTED AS UNDER: - REGARDING THE EXPENSES ON ACCOUNT OF BUSINESS PROMOTION AS SUBMITTED EARLIER THE SAME ARE ON ACCOUNT OF VARIOUS SALES PROMOTION SCHEME OF THE COMPANY. TO PROMOTE THE BRAND OF THE ITEM TRADED THE ASSESSEE HAS LAUNCHED VARIOUS SALES PROMOTION SCHEDULE SUCH AS WALL PAINTINGS. MARKED TWO WHEELER TYRE COVERS CADS FROM PRESS WITH BRANCH EMBOSSED. SILVER/ GOLD COINS ON ACHIEVING THE TARGET PERFORMANCE, CHAIRS/TALES SUPPLIED TO VARIOUS BAR'S TO PROMOTE THE SALES OF THAT BRAND ETC. THE EXPENDITURE INCURRED ON MEETING WITH DISTRIBUTORS AND VARIOUS CUSTOMERS ON HOTELS ETC. HAVE ALSO BEEN GROUPED UNDER THIS HEAD. THUS, ALL THESE SCHEMES WERE RUN SIMULTANEOUSLY TO PROMOTE THE SALES OF THE ASSESSEE. BESIDES, THE FBT HAS BEEN DULY PAID ON SUCH EXPENDITURE. FURTHER, FROM THE COMPARATIVE CHART FIELD, IT WOULD BE SEEN THAT THE GROSS RECEIPTS OF THE ASSESSEE HAVE INCREASED BY ALMOST 30.14% I.E. FROM 103.94 LACS TO 135.32 LACS. -: 10: - 10 THE NET PROFIT HAS ALSO GROWN BY ALMOST 51.56 I.E. FROM 66.28 LACS FROM 43.73 LACS. THIS GROWTH WAS ONLY POSSIBLE BECAUSE OF THE VARIOUS SALES PROMOTION SCHEMES/INCENTIVES GIVEN TO VARIOUS CUSTOMERS. THE COMPLETE LEDGER ACCOUNT OF THE BUSINESS PROMOTION EXPENSES HAS ALREADY BEEN FILED ON RECORD. IT WOULD BE SEEN THAT MOST OF THE AMOUNT HAVE BEEN PAID THROUGH ACCOUNT PAYEE CHEQUES. 12. THE ASSESSING OFFICER DID NOT CONVINCE WITH THE ASSESSEES EXPLANATION AND HELD THAT THESE EXPENSES WERE PERSONAL IN NATURE AND ASSESSEE COULD NOT PROVE THE BUSINESS EXPEDIENCY FOR INCURRING THESE EXPENDITURE. 13. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THEREFORE, THE ASS ESSEE IS IN FURTHER APPEAL BEFORE US. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT BUSINESS PROMOTION EXPENSES OF RS. 15,15,608/- WERE PERTAINING TO THE DISTRIBUTION OF THE GIFT ARTICLES AND OTHER EXPENSES FOR SALES PROMOTION. SI NCE THE ASSESSEE WAS REQUIRED TO ENHANCE OF SALES AND CANVA SS THE -: 11: - 11 BRAND, THE ASSESSEE LAUNCHES VARIOUS SALES SCHEMES LIKE DISTRIBUTION OF COINS, WALL PAINTINGS, MARKED TWO W HEELER COVERS ETC. SUCH EXPENDITURE IS INCURRED EVERY YEAR . THE ASSESSEE IS GETTING COMMISSION AND INCENTIVE TO THE TUNE OF RS. 1.30 TO 1.40 CRS. FROM THE PRINCIPAL COMPANY. THE A SSESSEE THUS IS REQUIRED TO PROMOTE THE BRAND IN THE REGION AND AS SUCH LAUNCHES THESE VARIOUS SCHEMES. THE DISALLOWAN CE HAS BEEN MADE ONLY ON THE GROUND THAT EACH AND EVERY IT EM DISTRIBUTED IS NOT PROVED WITH THE NAMES. 15. FROM THE RECORD, WE FOUND THAT THESE ITEMS WERE DISTRIBUTED THROUGH SHOPKEEPERS AND SALESMEN FOR PR OMOTING BRANDS AND ACHIEVING THE TARGET. THUS, WE FOUND THA T THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR ASSESSEE S BUSINESS. HOWEVER, KEEPING IN VIEW THE NATURE OF IT EMS SO DISTRIBUTED AS GIFT, WE DIRECT FOR RESTRICTING DISA LLOWANCE TO 5% OF SUCH EXPENSES ON ACCOUNT OF PERSONAL AND NON-VER IFIABLE NATURE OF SOME OF THE EXPENSES. WE DIRECT ACCORDING LY. 16. THE ASSESSING OFFICER HAS ALSO DISALLOWED INTEREST OF RS. 1,41,250/- OUT OF INTEREST EXPENDITURE. FROM TH E RECORD, WE FOUND THAT APART FROM PAYING INTEREST TO THE BAN K, THE -: 12: - 12 ASSESSEE WAS IN RECEIPT OF HIGHER INTEREST INCOME, WHICH HAS BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT. THE ASSE SSEE WAS ALSO HAVING HUGE INTEREST FREE FUNDS AVAILABLE WITH IT. THE ASSESSING OFFICER HAS DISALLOWED INTEREST BY TAKING THE ADVANCES GIVEN IN EARLIER YEARS, THE OPENING BALANC E OF WHICH WAS SHOWN IN THE BALANCE SHEET. SINCE ASSESSEE WAS HAVING HIGHER INTEREST INCOME AS WELL AS SUFFICIENT INTERE ST FREE FUNDS AVAILABLE WITHIN IT, THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF INTEREST ON AD HOC BASIS OUT OF OLD ADVANCES BROUGH T TO THE CURRENT YEAR. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 11 TH OCTOBER, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :11TH OCTOBER, 2013. CPU* 1011