Sri Praveen V. Doddanavar, Belgaum V. Joint Comm. Of Income Tax (OSD), Belgaum

ITA 24/PAN/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5228 (ITAT-PANAJI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 13-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE
• Assessee Lawyers: P DINESH
• Keywords: Gift; Diversion of income; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 2 4/PNJ/2013 : (ASST. YEAR : 200 9 - 10 ) SRI PRAVEEN V. DODDANAVAR DODDANAVAR CORPORATE HOUSE, 738/1, KHANAPUR ROAD, (NEAR 3 RD RAILWAY GATE) BELGAUM (APPELLANT) PAN : AAMPD9793K VS. JOINT COMMISSIONER OF INCOME TAX (OSD) , CENTRAL CIRCLE - 2 , BELGAUM . (RESPONDENT) APPELLANT BY : P. DINESH, ADV. RESPONDENT BY : SMT. SONAL L. SONKAVDE, DR DATE OF HEARING : 06 /08/2013 DATE OF PRONOUNCEMENT : 06 /0 9 /2013 O R D E R PER D.T. GARASIA : 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY CIT( A) - VI, BANGALORE DT. 24.12.2012 FOR A.Y. 2009 - 10. THE FOLLOWING EFFECTIVE GROUNDS ARE RAISED BY THE APPELLANT IN THE APPEAL : 1. THE ORDER OF CIT(A) IS CONTRARY TO LAW. 2. THE CIT(A) ERRED IN AFFIRMING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/ S.143(3) INSPITE OF THERE BEING NO INFIRMITY WHATSOEVER IN THE CLAIM OF THE APPELLANT. 3. THE CIT(A) ERRED IN AFFIRMING THE ORDER OF THE ASSESSING OFFICER, IN SO FAR AS ADDING AN AMOUNT OF RS.38,24,780/ - RECEIVED BY THE APPELLANT ON ACCOUNT OF REIMBURSEMEN T OF EXPENDITURE INCURRED BY HIM FOR ACQUISITION OF INSURANCE POLICY. 4. THE CIT(A) ERRED IN BRUSHING ASIDE THE CASE OF THE APPELLANT BY NOT RELYING ON THE LETTERS ISSUED BY THE INSURANCE AGENT WHICH CLEARLY ESTABLISH 2 ITA NO. 24/PNJ/2013 (ASST. YEAR : 2009 - 10) THE FACT THAT THE IMPUGNED ADDITION IS I N THE NATURE OF REFUND OF ALLOCATION CHARGES. 5. A) MERELY BECAUSE THE TDS CERTIFICATE ISSUED BY THE INSURANCE AGENT AND NOT THE INSURER DOES NOT IPSO - FACTO FOLLOW THAT THE APPELLANT HAD DERIVED AN ADDITIONAL TAXABLE INCOME AND IT IS NOTEWORTHY TO STATE THAT THE INSURANCE AGENT IS ACTING ON BEHALF OF THE INSURER. B) THE BURDEN OF ESTABLISHING THE SAME BEING ON THE APPELLANT HAVING BEEN DISCHARGED, THE CIT(A) ERRED IN DISALLOWING THE SAME AND THE CONCLUSION DRAWN BEING BASED ON HUNCH IS LIABLE TO BE VACATED. 6. WITH GREAT RESPECT, THE APPELLANT SUBMITS THAT THE CIT(A) IN ALL FAIRNESS SHOULD HAVE EXAMINED THE LEGAL ASPECTS SPECIFICALLY RAISED IN MEMORANDUM OF GROUNDS VIS - - VIS WRITTEN SUBMISSIONS, INSTEAD OF BRUSHING THEM ASIDE BY TERMING THE TRANSACTION AS A PRE - MEDITATED, PRE - DECIDED BUSINESS DEAL. 7. IN ANY EVENT, THE CIT(A) ERRED IN SAYING THAT THE APPELLANT HAS COLLUDED WITH THE INSURANCE AGENT TO RECEIVE A PART OF OR A PERCENTAGE OF COMMISSION/PROFIT, WHEN SUCH ACT OF GIVING COMMISSION IS PROHIBITED BY LAW IS WITHOUT ANY EVIDENCE WHATSOEVER BY THE REVENUE TO SUBSTANTIATE SUCH A CONTENTIONS. 8. THE CIT(A) FAILED TO APPRECIATE THAT THE UNITS ALLOTTED TO THE APPELLANT WERE LESS AS AGAINST THE AMOUNT INVESTED. THE AMOUNT REFUNDED WAS ONLY IN THE NATURE OF ALLOCATION CHARGES AND THERE WAS NO INCREASE IN THE CAPITAL OF THE APPELLANT. AT ANY RATE, THE CLAIM OF THE CIT(A) EMANATING FROM THE IMPUGNED ORDER THAT THE REFUNDED AMOUNT IS A CASUAL RECEIPT FOR WHICH NO EX EMPTION IS AVAILABLE U/S. 10(3) (AFTER ITS OMISSION) IS BASED ON AN AFTER THOUGHT NOR CAN IT BE CONSTRUED AS GIFT U/S. 56(1)(VI) AS ALLEGED FOR THE REASON BEING THE REFUNDED AMOUNT REPRESENTED CAPITAL RECEIPT IN THE HANDS OF THE APPELLANT. 9. THE SWEEPING CO NCLUSION DRAWN BY THE CIT(A), AND IMPLIED AFFIRMATION OF THE VIEW POINT OF THE ASSESSING OFFICER IN THIS BEHALF IS LIABLE TO BE TERMED AS PERVERSE. 2. ALL THE GROUNDS ARE INTER - CONNECTED AND THEREFORE DISPOSED OFF BY THIS COMMON ORDER. 3. DURING THE CO URSE OF THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.38,24,780/ - FROM ONE 3 ITA NO. 24/PNJ/2013 (ASST. YEAR : 2009 - 10) SRI VINIT BICHU, AN INSURANCE AGENT ON WHICH TDS U/S 194H (RELEVANT TO COMMISSION INCOME) HAS BEEN DEDUCTED AND WHICH HA S NOT BEEN OFFERED TO TAX. THE AO HELD THAT THIS INCOME BEING IN THE NATURE OF COMMISSION WAS CHARGEABLE TO TAX AND AFTER ALLOWING THE CREDIT FOR TDS DEDUCTED ON IT, SAME WAS BROUGHT TO TAX U/S 143(3). 4. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DISMI SSED THE APPEAL. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD INVESTED RS. 3 CRORES IN ICICI PRUDENTIAL UNIT LINKED POLICIES CONSISTING OF 3 POLICIES OF RS. 1 CRORE EACH. THE INSURANCE COMPANY CHARGED RS. 36 LACS AS ALLOCATION CHARGES AND ALSO MORTALITY CHARGES AND TO THAT EXTENT UNITS ALLOCATED TO THE ASSESSEE WERE LESS AGAINST THE AMOUNT INVESTED. THIS MEANS THE UNITS WERE ALLOCATED AFTER REDUCING THE AMOUNT OF ALLOCATION CHARGES FROM THE AMOUNT OF INVESTMENT. THE POLICY WAS DONE THROUGH AN AGENT, SHRI VINIT BICHU WHO HAS AGREED THAT ALL THE CHARGES LEVIED BY THE INSURANCE COMPANY WILL BE REFUNDED TO THE ASSESSEE. ACCORDINGLY, HE REFUNDED THE AMOUNT OF RS.38,24,780/ - AFTER DEDUCTING TAX OF RS.4,33,348/ - . THE AO CONSIDERED THIS AMOUNT AS ASSESSEES INCOME AND ADDED RS.38,24,780/ - TO THE RETURNED INCOME. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS RECEIVED THIS AMOUNT FROM SHRI VINIT BICHU AND THE TDS CERTIFICATE ISSUED IN FORM 16A SHOWS THAT THE ASSESSEE HAS RE CEIVED THIS AMOUNT. SHRI BICHU HAS PAID THE AMOUNT TO THE ASSESSEE AND ISSUED A LETTER THAT SHRI VINIT BICHU IS REFUNDING THE ALLOCATION CHARGES TO THE ASSESSEE ON THE INVESTMENT MADE IN THE INSURANCE COMPANY. THEREFORE, THIS IS ONLY DIVERSION OF INCOME AND NOT APPLICATION OF INCOME. THE LD. AR SUBMITTED THAT SHRI VINIT BICHU HAS NOT PAID ANY COMMISSION TO THE ASSESSEE BUT ONLY THE ALLOCATION CHARGES HAVE BEEN REFUNDED. THEREFORE, THIS AMOUNT CANNOT BE TAXED AS INCOME. 6. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER OF THE CIT(A). 4 ITA NO. 24/PNJ/2013 (ASST. YEAR : 2009 - 10) 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE ASSESSEE HAS INVESTED RS. 3 CRORES IN ICICI PRUDENTIAL INSURANCE POLICIES THROUGH AN AGENT, SHRI VINIT BICHU. THE ASSESSEE IS A PARTNER IN FIRM, M/S. DODDANAVAR BROTHERS EOU DIVISION. THE ASSESSEE HAS RECEIVED A SUM OF RS. 5 CRORES FROM THE FIRM M/S. DODDANAVAR BROTHERS EOU DIVISION WHICH IS DEBITED TO HIS CAPITAL ACCOUNT IN THE FIRM. THE AMOUNT OF RS. 5 CRORES WITHDRAWN FROM THE FIRM ON 15.3.2008 IS CREDITED TO ASSESSEES S.B ACCOUNT IN ING VYSYA BANK. OUT OF THIS AMOUNT, THE ASSESSEE HAS INVESTED A SUM OF RS. 3 CRORES IN 3 INSURANCE POLICIES OF RS. 1 CRORE EACH ON 23.4.2008. ICICI PRUDENTIAL COMPANY HAS DEDU CTED AMOUNTS TOWARDS ALLOCATION CHARGES, FUND MAINTENANCE CHARGES AND MORTALITY CHARGES. THIS AMOUNT DECLARED BY THE COMPANY TOWARDS THE CHARGES IS AGREED TO BE REFUNDED BY THE AGENT, SHRI VINIT BICHU TO THE ASSESSEE. ACCORDINGLY, SHRI VINIT BICHU REFUND ED RS. 33,91,432/ - AFTER DEDUCTING TDS OF RS.4,33,348/ - . THE ASSESSEE, THEREFORE, CLAIMS TDS CREDIT SHOULD BE ALLOWED BY THE AO. THE ASSESSEE HAS REDUCED TH E AMOUNT OF RS. 33,91,432/ - REFUNDED BY SHRI VINIT BICHU FROM THE INVESTMENT MADE IN INSURANCE POL ICY BEING CAPITAL RECEIPT. DURING THE COURSE OF HEARING, LD. AR HAS FILED ALL THESE DOCUMENTARY EVIDENCES BEFORE US. WE FIND THAT THE ASSESSEE HAS GOT REFUND FROM THE AGENT WHICH WAS CHARGED BY THE INSURANCE COMPANY FROM THE AMOUNT INVESTED IN THE POLICI ES. THE ASSESSEE HAS FILED THE CONFIRMATION LETTER FROM SHRI VINIT BICHU THAT HE HAS REFUNDED THE MONEY TO THE ASSESSEE WHICH WAS TAKEN BY ICICI PRUDENTIAL INSURANCE COMPANY IN THE FORM OF ALLOCATION CHARGES. THAT REFUND WAS RETURNED BACK TO THE ASSESSEE . THE ASSESSEE HAS FILED EVIDENCE BEFORE US THAT THIS AMOUNT IS FROM HIS CAPITAL ACCOUNT. THE ASSESSEE HAS INVESTED MONEY FROM HIS CAPITAL ACCOUNT. THEREFORE, THERE CANNOT BE ANY CHARGE ON THIS INCOME. WE ARE OF THE VIEW THAT THE AO AND CIT(A) ARE NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS RECEIVED PAYMENT WHICH IS COMMISSION TO THE ASSESSEE. THEREFORE, WE REVERSE THE FINDING OF REVENUE AUTHORITIES AND DIRECT THE AO TO GIVE CREDIT OF TDS OF RS.4,33,348/ - TO THE ASSESSEE AS THE AMOUNT OF 5 ITA NO. 24/PNJ/2013 (ASST. YEAR : 2009 - 10) RS.36,24,78 0/ - IS NOT THE INCOME OF THE ASSESSEE. WE ARE OF THE VIEW THAT THE AMOUNT REFUNDED IS ONLY IN THE NATURE OF ALLOCATION CHARGES AND THERE WAS NO INCREASE IN THE CAPITAL OF THE ASSESSEE AND THE AMOUNT IS NOT A CASUAL RECEIPT. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 06 /0 9 /2013. SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER SD/ - (D.T.GARASIA) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 06 /0 9 / 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER , SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA