M/s. New Delhi Tyre House, New Delhi V. JCIT, New Delhi

ITA 2421/DEL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0746 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 24-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3986/DEL/2015 ASSESSMENT YEAR : 2011-12 ACIT, CIRCLE-54(1), NEW DELHI. VS. NEW DELHI TYRE HOUSE, 31-32, JANGPURA EXTN. MARKET, NEW DELHI. PAN: AAAFN2881J ITA NO.2421/DEL/2015 ASSESSMENT YEAR : 2011-12 NEW DELHI TYRE HOUSE, 31-32, JANGPURA EXTN. MARKET, NEW DELHI. PAN: AAAFN2881J VS. JCIT, RANGE-32, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KVSR KRISHNAN, CA DEPARTMENT BY : SHRI S.R. SENAPATI, SR. DR DATE OF HEARING : 04.10.2018 DATE OF PRONOUNCEMENT : 04.10.2018 ITA NOS.3986 & 2421/DEL/2015 2 ORDER PER R.S. SYAL, VP: THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY TH E CIT(A) ON 30.03.2015 IN RELATION TO THE ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN ITS APPE AL IS AGAINST THE DELETION OF ADDITION OF RS.62,03,670/- MADE BY THE ASSESSING OFFICER. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN TRADING OF AUTO PARTS, ACCESSORIES AND LUBRICANTS. ON PERUSAL OF THE RETURN FILED BY THE ASSESSEE, IT WAS OBSERVED BY THE ASSES SING OFFICER THAT THE ASSESSEE SHOWED TO HAVE RECEIVED A SUM OF RS.1,91,6 5,000/- FROM M/S EXXONMOBIL LUBRICANTS PVT. LTD., ON WHICH TAX OF RS .3,83,300/- WAS DEDUCTED AT SOURCE. THIS RECEIPT WAS NOT INCLUDED IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. ON BEING CALLED UPON TO E XPLAIN THE REASONS FOR NON-INCLUSION OF THIS AMOUNT, THE ASSESSEE STATED T HAT THE SUM OF RS.1.91 CRORE AND ODD WAS TAKEN AS LIABILITY WHICH WAS INCL UDED IN CREDITORS LIST BECAUSE THE AMOUNT RECEIVED WAS A CONTRACTUAL RECE IPT UNDER MARKETING ASSISTANCE PROGRAMME (MAP) AS PER AGREEMENT EXECUTE D BETWEEN IT AND ITA NOS.3986 & 2421/DEL/2015 3 EXXONMOBIL LUBRICANTS PVT. LTD. THE ASSESSEE SUBMIT TED THAT THIS AMOUNT WAS TO BE PASSED ON TO THE CUSTOMERS (SUB-DISTRIBUT ORS) AS INCENTIVE. IT WAS FURTHER EXPLAINED WITH REFERENCE TO THE MAP AGREEME NT THAT THE ASSESSEE WAS RECEIVING FINANCIAL ASSISTANCE AS UPFRONT PAYM ENT ON THE CONDITION THAT THE SAME WAS TO BE PASSED ON TO THE CUSTOMERS AND NO PART WAS TO REMAIN WITH IT AS INCOME. THE ASSESSEE STILL FURTH ER EXPLAINED THAT OUT OF RS.1.91 CRORE AND ODD, IT PAID A SUM OF RS.1,29,61, 330/- UNDER THE MAP AGREEMENT TO ITS SUB-DISTRIBUTORS AFTER DUE DEDUCTI ON OF TAX AT SOURCE. IT WAS STATED THAT NEITHER THE AMOUNT RECEIVED FROM EX ONNMOBIL LUBRICANTS PVT. LTD. WAS OFFERED FOR TAXATION NOR THE AMOUNT P AID TO THE SUB- DISTRIBUTORS WAS SEPARATELY CLAIMED AS DEDUCTION. T HE ASSESSING OFFICER HELD THE DIFFERENTIAL AMOUNT OF RS.62,03,670/- (RS. 1,91,65,000/- MINUS RS.1,29,61,330/-) AS INCOME OF THE ASSESSEE AND, H ENCE, INCLUDED THE SAME IN THE TOTAL INCOME. THE LD. CIT(A) GOT CONVINCED W ITH THE ARGUMENT OF THE ASSESSEE ON THIS ISSUE AND ORDERED TO DELETE THE AD DITION, AGAINST WHICH THE REVENUE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 4. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, WE FIND FROM RUNNING ACCOUNT OF THE ASSESSE E WITH M/S EXXONMOBIL ITA NOS.3986 & 2421/DEL/2015 4 LUBRICANTS PVT. LTD. THAT IT RECEIVED A SUM OF RS.1 ,91,65,000/- VIDE FOUR CHEQUES DATED 17.05.2010, 23.07,2010, 16.09.2010 AN D 30.12.2010. THESE FOUR AMOUNTS WERE AWARDED TO THE ASSESSEE UNDER FOU R DIFFERENT DISTRIBUTION MAP AGREEMENTS. COPY OF THE FIRST AGREEMENT FOR A S UM OF RS.10.60 LAC IS AVAILABLE IN THE PAPER BOOK, WHICH PROVIDES THAT EX XONMOBIL LUBRICANTS PVT. LTD. WANTED TO PROVIDE THE ASSESSEE WITH FUNDS TO ASSIST IT IN MARKETING OF MOBIL AND/OR ESSO PRODUCTS. CLAUSE 4 OF THE AGRE EMENT PROVIDES THAT: DISTRIBUTOR (THE ASSESSEE) SHALL AMORTIZE OR REPAY MAP PAYMENT IN ACCORDANCE WITH THE SECOND SCHEDULE. CLAUSE 6 OF T HE AGREEMENT, WHICH IS RELEVANT FOR OUR PURPOSE, READS AS UNDER:- 6. RIGHT TO DEMAND IMMEDIATE PAYMENT EMLPL MAY AT ITS OPTION DEMAND IMMEDIATE PAYMENT OF AN AMOUNT EQUAL TO THE UNAMORTIZED BALANCE MULTIPLIED BY THE AMORTI ZATION RATE, UPON THE HAPPENING OF ONE OR MORE OF THE FOLLOWING EVENTS: (A) IF DISTRIBUTOR CEASES TO TRADE; (B) EMLPL TERMINATES THE DISTRIBUTOR AGREEMENT FOR ANY REASON; (C) IF EMLPL DECIDES IN ITS SOLE AND UNFETTERED DISCRET ION NOT TO RENEW THE DISTRIBUTOR AGREEMENT FOR ANY REASON; (D) IF DISTRIBUTOR BREACHES THIS AGREEMENT OR THE DISTR IBUTOR AGREEMENT, AND IN RESPECT OF A BREACH CAPABLE OF BE ING REMEDIED, FAILS TO REMEDY SUCH BREACH WITHIN 7 DAYS OF WRITTE N NOTICE FROM EMLPL; ITA NOS.3986 & 2421/DEL/2015 5 (E) IF DISTRIBUTOR BECOMES BANKRUPT OR INSOLVENT, OR IS UNABLE TO PAY ITS DEBTS AS THEY FALL DUE, OR ENTERS INTO ANY ARRANGEM ENT OR COMPOSITION WITH ITS CREDITORS, OR HAS A WINDING UP PETITION PRESENTED AGAINST IT, OR A RECEIVER, RECEIVER/MANAG ER OR LIQUIDATOR IS APPOINTED, EITHER VOLUNTARILY OR COMPULSORILY, OTHE R THAN FOR THE PURPOSES OF RECONSTRUCTION; OR (F) IF DISTRIBUTOR DOES NOT PURCHASE THE ANNUAL TARGET VOLUME DURING A CONTRACT YEAR. 5. AS PER THE ABOVE CLAUSE, EXXONMOBIL LUBRICANTS PVT. LTD., HAS A RIGHT TO DEMAND IMMEDIATE PAYMENT IF THE CONDITIONS GIVEN HEREINABOVE ARE VIOLATED. FIRST SCHEDULE TO THE AGREEMENT PROVIDES THAT THE EFFECTIVE DATE OF MAP AGREEMENT IS 01.06.2010 AND THE MATURITY DAT E IS 31.05.2011. SIMILARLY, THERE IS NEXT AGREEMENT FOR RS.21.25 LAC , WHOSE EFFECTIVE DATE IS 1 ST JULY, 2010 AND MATURITY DATE IS 30 TH JUNE, 2011. SIMILAR IS THE POSITION IN SO FAR AS THE EFFECTIVE AND MATURITY DATES OF OTHER TWO AGREEMENTS ARE CONCERNED. TOTAL AMOUNT UNDER THESE FOUR AGREEMENT S COMES TO RS.1,91,65,000/-, WHICH PERTAINS TO PART OF THE YEA R UNDER CONSIDERATION AND THE REMAINING PART TO THE SUBSEQUENT YEAR. THE ASS ESSEE, IN TURN, IS PASSING OVER THE AMOUNT OF INCENTIVE GIVEN UNDER THE MAP AG REEMENT TO THE SUB- DISTRIBUTORS AT THE TIME OF THEIR LIFTING THE GOODS , WHICH PAYMENT, DURING THE YEAR, TOTALED AT RS.1.29 CRORE AND ODD. THE REMAIN ING AMOUNT OF RS.62.03 ITA NOS.3986 & 2421/DEL/2015 6 LAC WILL BE ADJUSTED AGAINST PAYMENT TO BE MADE IN THE SUBSEQUENT YEAR BY THE SUB-DISTRIBUTORS AT THE TIME OF THEIR FURTHER P URCHASE. IT IS RELEVANT TO NOTE THAT THE MAP PAYMENT RECEIVED BY THE ASSESSEE COMES WITH CERTAIN CONDITIONALITIES, SUCH AS, THE ASSESSEE HAS TO PROV IDE BANK GUARANTEE AND THERE IS AN OBLIGATION TO LIFT THE STOCKS. IN CASE THE ASSESSEE DOES NOT SUCCEED IN LIFTING THE STOCK ETC., THE PROPORTIONAT E PART WOULD NOT BE AVAILABLE TO IT FOR ONWARD PAYMENT TO SUB-CONTRACTO RS. THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THIS PRACTICE OF ACCOUN TING THE AMOUNTS UNDER MAP AGREEMENT AND THE SAME HAS BEEN ACCEPTED IN THE ASSESSMENTS COMPLETED U/S 143(3) FOR THE TWO IMMEDIATELY PRECED ING ASSESSMENT YEARS, NAMELY, 2009-10 AND 2010-11. THE LD. CIT(A) HAS RE CORDED A CATEGORICAL FINDING TO THIS EFFECT IN PARA 1.6 OF THE IMPUGNED ORDER, WHICH HAS NOT BEEN CONTROVERTED BY THE LD. DR. IN THE ABSENCE OF ANY F ACTUAL DIFFERENCE IN THE MANNER OF RECEIPT, DISBURSEMENT OR ACCOUNTING OF TH E MARKETING ASSISTANCE PAYMENT RECEIVED UNDER THE MAP AGREEMENTS IN THE PR ECEDING YEAR VIS-- VIS THE YEAR UNDER CONSIDERATION, WE ARE SATISFIED THAT THE LD. CIT(A) RIGHTLY APPRECIATED THE FACTS AND WAS JUSTIFIED IN DECIDING THIS ISSUE IN FAVOUR OF THE ASSESSEE. WE, THEREFORE, UPHOLD THE SAME. ITA NOS.3986 & 2421/DEL/2015 7 6. GROUND NO.1 OF THE ASSESSEES APPEAL IS AGAINST THE DISALLOWANCE OF A SUM OF RS.8 LAC PAID AS COMMISSION TO SMT. INDERJEE T KAUR AND SMT. PARVINDER KAUR. THE ASSESSEE CLAIMED TO HAVE PAID A SUM OF RS.4 LAC EACH AS COMMISSION TO TWO LADIES, NAMELY, SMT. INDERJEET KAUR AND SMT. PARVINDER KAUR, WHICH WAS DEBITED TO THE PROFIT & L OSS ACCOUNT. ON BEING CALLED UPON TO PRODUCE THE RECIPIENTS OF THE COMMIS SION, THE ASSESSEE FAILED TO PRODUCE THEM, WHICH RESULTED IN THE DISALLOWANCE OF RS.8 LAC. THE LD. CIT(A) UPHELD THE ASSESSMENT ORDER ON THIS ISSUE. 7. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS FOUND THAT THE ASSESSEE FAILED TO LEA D ANY EVIDENCE ABOUT THE GENUINENESS OF TRANSACTIONS OF PAYMENT TO THESE TWO LADIES. THE LD. AR EXPLAINED THE NATURE OF SUCH PAYMENTS BY EXPLAINING THAT SOME SUB- DISTRIBUTORS INSISTED ON MAKING PAYMENT TO THESE TW O LADIES AS A PART OF THEIR INCENTIVE UNDER THE MAP AGREEMENT. IT, THERE FORE, BECOMES MANIFEST THAT SUCH COMMISSION IS SIMPLY A PART OF THE PAYMEN T MADE TO THE DISTRIBUTORS WHICH WAS RECEIVED BY THE ASSESSEE UND ER THE MAP AGREEMENTS FROM EXXONMOBIL LUBRICANTS PVT. LTD. FOR ONWARD PAYMENT TO CUSTOMERS. SINCE THE ASSESSEE IS NEITHER OFFERING THE RECEIPT OF INCENTIVE ITA NOS.3986 & 2421/DEL/2015 8 FROM EXXONMOBIL LUBRICANTS PVT. LTD., AS INCOME, NO R PAYMENTS MADE TO SUB-DISTRIBUTORS AS EXPENSE, A PART OF SUCH PAYMENT , TERMED AS COMMISSION, TO THESE TWO LADIES CANNOT, THEREFORE, CANNOT HAVE A DIFFERENT SHADE FROM THE ANGLE OF DEDUCTIBILITY. IT IS FURTHER OBSERVED THA T THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE OF RENDERING OF SERVICES BY THE SE TWO LADIES, WHICH NECESSITATED IT TO MAKE SUCH PAYMENTS. WE, THEREFO RE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE. 8. THE OTHER TWO GROUNDS WERE NOT PRESSED BY THE LD . AR WHICH, THEREFORE, STAND DISMISSED. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE AS WE LL AS THE REVENUE ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 04.10.201 8. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 04 TH OCTOBER, 2018. DK ITA NOS.3986 & 2421/DEL/2015 9 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.