The ACIT, Circle-2, Surat V. M/s. Vikram International, Surat

ITA 2427/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6289 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 27-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K SINHA
• Keywords: Diversion of income; Third party statement
• Section: 80HHC; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 25/5/11 DRAFTED ON: 30/6/ 11 APPEAL(S) SL. NO(S). ITA NO(S) ASSESSMENT YEAR(S) APPELLANT (S) RESPONDENT(S) 1. 2427/AHD/2008 2004-05 ACIT CIRCLE-2 SURAT M/S.VIKRAM INTERNATIONAL B-3225 TO 3230 KOHINOOR MKT. RING ROAD, SURAT PAN :AACFV0053A 2. 2428/AHD/2008 2005-06 -DO- -DO- 3. 1799/AHD/2010 2003-04 ASSESSEE REVENUE 4. 1800/AHD/2010 2004-05 ASSESSEE REVENUE ASSESSEE BY : SHRI R.K. SINHA, CIT-D.R. REVENUE BY : SHRI HARDIK VORA, A.R. O R D E R PER BENCH :- ALL THESE APPEALS HAVE BEEN FILED AGAINST THE ORDE RS OF THE LD.CIT(APPEALS )-II, SURAT. 2. AT THE OUT SET, IT WAS INFORMED BY THE REGISTRY THAT ASSESSEES APPEALS FOR AYS 2003-04 AND 2004-05 ARE RESPECTIVEL Y BARRED BY LIMITATION BY 1258 DAYS AND 729 DAYS. A CONDONATIO N PETITION HAS BEEN MOVED AND IT WAS STATED AS UNDER: WE ADVISED OUR CLIENT TO FILE AN APPEAL FOR THE IS SUE DECIDED BY THE CIT(A) AGAINST HIM. ISSUE WAS IN CONNECTION WITH 80HHC ON DEPB ON THE BASIS OF DECISION OF SPECIAL B ENCH IN THE CASE OF TOPMAN EXPORTS VS. ITO REPORTED VIDE 31 8 ITR 87 ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 2 - (MUM) (SB)(AT). THEREFORE ASSESSEE HAS FILED APPEA L BELATEDLY AFTER DAY OF 1258 DAYS FOR A.Y. 2003-04 A ND 729 DAYS FOR A.Y. 2004-05 AS PER OUR ADVICE. ASSESSEE HAS NOT FILED APPEAL PREVIOUSLY AS AT THAT TIME HE WAS INSTRUCTED BY HIS CHARTED ACCOUNTANT NOT TO FILE APPEAL ON THAT ISSUE AS HE WAS NOT HOPEFUL FOR BENEFIT U/S .80HHC ON DEPB AS TURNOVER WAS MORE THAN TEN CRORE. ON THE BASIS OF ABOVE FACTS AND RECENT JUDGEMENT OF SUPREME COURT IN THE CASE OF IMPROVEMENT TRUST VS. UJAGAR SINGH (COPY ENCLOSED), WE REQUEST. THE HONOURABLE MEMBERS TO CONDONE THE DELAY. 3. ALMOST AN IDENTICAL SITUATION, ITAT G BENCH M UMBAI IN ITA NOS.2082/MUM/2010 & 2083/MUM/2010 (AYS 2003-04 AND 2004-05) IN THE CASE OF MR. GIRISH SONI, MUBAI VS. ITO VIDE AN ORDER DATED 13/04/2001 HELD AS UNDER: 2. BOTH THE YEARS INVOLVE COMMON GROUNDS. THE AP PEALS ARE ALSO DELAYED BY 3 YEARS AND 11 MONTHS. IT HAS BEEN STATED IN THE APPLICATION FOR CONDONATION OF THE DELAY FILED ALONG WITH THE MEMORANDUM OF APPEAL THAT THE ASSESSEE WAS MISL ED BY THE VARIOUS PROFESSIONALS WHO ALLEGEDLY STATED THAT THERE WAS NO NEED TO FILE ANY APPEALS AND THAT IT WAS ONLY MU CH LATER THAT THE ASSESSEE REALIZED THAT APPEALS OUGHT TO HA VE BEEN FILED IN ORDER TO SUCCESSFULLY CLAIM THE RELIEFS. CONSID ERING THE REASON ADVANCED, THE DELAY IS CONDONED AND THE APPE ALS ARE ADMITTED. ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 3 - 4. RESPECTFULLY FOLLOWING THE VIEW EXPRESSED B Y THE RESPECTED CO-ORDINATE BENCH, WE HEREBY CONDONE THE DELAY AND ADMIT THESE TWO APPEALS FOR ADJUDICATION. (A) ASSESSEES APPEALS, I.E. ITA NO.1799/AHD/2010 FOR A.Y. 2003-04 AND ITA NO.1800/AHD/2010 FOR A.Y. 2004-05 A COMMON GROUND IS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ER RED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING THE CLAIM OF ASSESSEE OF RS.1,63,06,075/-{ (FOR A.Y . 2003-04) AND RS.59,62,733/- (FOR A.Y.2004-05)}* U/S.80HHC O F THE I.T. ACT, 1961.( * INTRODUCED) 5. FOR BOTH THE YEARS, THE ISSUE WAS IN RESPECT OF REDUCTION OF 90% OF THE PROFIT ON THE TRANSFER OF DEBP CREDIT DEDUC TED BY THE A.O. FROM THE BUSINESS PROFITS OF THE ASSESSEE. FOR B OTH THE A.YS. 2003- 04 & 2004-05 THE APPELLATE AUTHORITY HAS AFFIRMED T HE ACTION OF THE A.O. THE FIRST APPELLATE AUTHORITY HAS SIMPLY SAID , WHILE DECIDING THE APPEAL FOR AY 2004-05, THAT THE ISSUE BEING SUB JUDICE BEFORE THE COURT THEREFORE UNTIL THEN THE ACTION OF THE AO MUS T NOT BE TREATED AS INVALID. HOWEVER, NOW THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS REPORTED A T [2010]328 ITR 451(BOM) HAS HELD THAT WHAT CONSTITUTES PROFIT U/S.28(IIID) IS THE AMOUNT RECEIVED ON TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT OF CREDIT WHICH THE ASSESSEE WAS ENTITLED TO ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 4 - UNDER THE DEBP SCHEME. THERE IS ANOTHER IMPORT ANT OBSERVATION THAT THE THIRD PROVISO PROVIDED THAT IN THE CASE OF AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS.10 CRORES, THE PROF ITS COMPUTED U/S.80HHC(3) IS TO BE INCREASED BY 90% OF THE SUM R EFERRED TO IN SECTION 28(IIID) OF THE ACT SUBJECT TO THE TWO COND ITION SET OUT THEREIN. FROM THE ORDER OF THE AUTHORITIES BELOW, IT IS EVIDENT THAT THE AFOREMENTIONED CONDITIONS HAVE NOT BEEN EXAMINE D. NATURALLY, AT THE TIME WHEN THE DECISION WAS TAKEN BY THE REVE NUE AUTHORITY THEY DID NOT HAVE THE BENEFIT OF THIS LAND MARK DEC ISION OF THE HONBLE BOMBAY HIGH COURT. IN THE INTEREST OF NATU RAL JUSTICE, WE THEREFORE RESTORE THIS ISSUE BACK TO THE STAGE OF T HE A.O. TO RE- COMPUTE THE DEDUCTION IN THE LIGHT OF THE AFORE CIT ED DECISION AND THE ASSESSEE IS DIRECTED TO FURNISH ALL THE REQUISITE D ETAILS. GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES ONLY. (B) REVENUES APPEALS, I.E. ITA NO.2427/AHD/2008 FOR A.Y. 04-05 AND ITA NO.2428/AHD/2008 FOR A.Y. 2005-06 A COMMON GROUND IS AS UNDER: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE & I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF DISALLOWANCE OF FOREIGN BUYERS AGENT COMMISSION ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 5 - U/S.37(R.W.S.93) FOR RS.6,30,36,125/- FOR ASSESSMEN T YEAR 2004-05 & RS.8,35,43,999/- FOR ASSESSMENT YEAR 2005 -06. 7. IN SHORT, FACTS OF THE CASE ARE THAT THE AO HAD NOTICED THAT THE ASSESSEE HAD PAID COMMISSION TO FOREIGN PARTIES. A DETAILED ENQUIRY WAS MADE, HOWEVER, THE EXPLANATION OF THE A SSESSEE WAS REJECTED. WHEN THE MATTER WAS CARRIED BEFORE THE F IRST APPELLATE AUTHORITY AFTER A DETAILED DISCUSSION, THE ACTION O F THE AO WAS CONFIRMED. 8. NOW BEFORE US PARTIES HAVE BEEN INFORMED THAT TH IS TYPE OF CONTROVERSY HAS ALREADY BEEN DECIDED BY THIS TRIBUN AL IN NUMBER OF APPEALS. 9. FROM THE SIDE OF THE REVENUE, IT IS CONTESTED TH AT THE MATTER IS SUBJUDICE BEFORE THE HIGHER JUDICIAL FORUM. IN AN Y CASE, AS FAR AS THE ITAT AHMEDABAD IS CONCERNED, THE ISSUE IS COVER ED BEING DECIDED BY A RESPECTED COORDINATE BENCH D IN THE CASE OF M/S.J.B.EXPORTS VS. ACIT BEARING ITA NO.1168/AHD/20 10 FOR ASSESSMENT YEAR 2006-07 ORDER DATED 04/05/2011, WHE REIN THE TRIBUNAL HAS ALLOWED THE ASSESSEES GROUND BY OBSER VING AS UNDER:- 2.1. ALL THE GROUNDS, I.E. GROUND NOS.1 TO 8 REVOLVE AR OUND A SINGLE ISSUE OF CLAIM OF ALLEGED COMMISSION EXPENSE S WHICH WAS ADDED BY THE AO VIDE ASSESSMENT ORDER PASSED U/S.14 3(3) OF THE ACT ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 6 - DATED 30/12/2008. IN ASSESSEES OWN CASE FOR A.Y. 2004-05 WE HAVE ALREADY TAKEN A VIEW IN ASSESSEES FAVOUR BEARING I TA NO.3206/AHD/2007 TITLED AS M/S.J.B. EXPORTS VS. ADDL.CIT VIDE ORDER DATED 29/04/2011. THE RELEVANT PORTION CONTA INED IN PARAGRAPH NOS.6 TO 10; REPRODUCED BELOW: 6. AFTER HEARING THE PLEADINGS OF BOTH THE SIDES, PRESENTLY THE POSITION IS THAT THE CONTENTIONS OF THE REVENUE HAV E DULY BEEN CONSIDERED AND DEALT WITH BY THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF ATMA PRAKASH BATRA IN TAX APPEAL NO.838 OF 2009 DATED 21/12/2010, WHEREIN THE FACTS WERE DISCUSSED VIDE PARA-13 OF THE JUDGEMENT; REPRODUCED BELOW:- 13. IN RELATION TO PROPOSED QUESTION NO.2, WHICH RELATES TO DELETION OF DISALLOWANCE OF CLAIM OF EXPORT COMMISS ION IN THE SUM OF RS.3,83,37,678/-, DURING THE ASSESSMENT PROC EEDINGS, FROM THE COPIES OF THE INVOICES FILED BY THE ASSESS EE, THE ASSESSING OFFICER FOUND THAT IN EXPORT SALE INVOICE S, THERE WAS A DEDUCTION UNDER THE HEAD COMMISSION OF 11.5% OR 1 2% AND AFTER DEDUCTING THE SAID AMOUNT, NET FIGURE OF SALE WAS WORKED OUT. THE TOTAL AMOUNT OF NET SALES WAS RS.28,74,85 ,387/, BUT AS PER ACCOUNTING STANDARDS, THE AMOUNT OF EXPORT COMM ISSION SHOULD HAVE BEEN REFLECTED ON THE CREDIT SIDE BY SH OWING GROSS SALES MINUS COMMISSION AND THE NET SALES WOULD BE I N AS OUTER COLUMN ON THE CREDIT SIDE OF THE MANUFACTURING ACCO UNT. THE ASSESSEE ALSO DID NOT FURNISH ANY AGREEMENT FOR PAY MENT SUCH COMMISSION NOR DID IT FILE ANY PROOF OF SUCH REMITT ANCE ROUTED THROUGH THE RESERVE BANK OF INDIA (RBI). THE FOREIGN AGENTS COMMISSION WAS ALLOWABLE UPTO 12% UNDER THE CENTRAL EXCISE & CUSTOMS RULES, WHILE GIVING DEPB BENEFIT, BUT THE S AME WAS REQUIRED TO BE PROVED BEYOND DOUBT AS REQUIRED BY T HE RBI GUIDELINES. FURTHER THE ASSESSEE RECEIVED PAYMENT FROM FOREIGN BUYERS AFTER SIX MONTHS AND THE ASSESSEE COULD NOT TAKE THE PLEA THAT THE FOREIGN AGENTS RECEIVED PAYMENT OF COMMISS ION DIRECTLY FROM THE BUYER, SINCE UNLESS THERE WAS A DUE FOR MA KING PAYMENT FOR PURCHASE, NO AMOUNT OF COMMISSION WOULD BECOME PAYABLE AND NO ONE WOULD PAY SUCH COMMISSION IN ADVANCE. T HE ASSESSING OFFICER FURTHER OBSERVED THAT NAMES AND A DDRESSES OF FOREIGN AGENTS DID NOT CONFIRM THE ACTUAL PAYMENT A ND THEREFORE, DISALLOWED THE CLAIM OF COMMISSION. ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 7 - 6.1. THE HONBLE COURT HAS ALSO DISCUSSED THE FINDINGS OF TH E TRIBUNAL IN THE FOLLOWING MANNER:- 20. THE TRIBUNAL AFTER CONSIDERING THE RIVAL SUBMI SSIONS AND AFTER APPRECIATING THE EVIDENCE ON RECORD FOUND THA T THE RECEIPT OF COMMISSION AMOUNT HAD BEEN DULY CONFIRMED BY THE AGENTS WHICH IN TURN MEANT THAT THE AMOUNT WHICH HAD BEEN DEDUCTED FROM THE INVOICE VALUE ACTUALLY REPRESENTED COMMISS ION PAYMENTS WHICH WERE FINALLY RECEIVED BY THE AGENT. THIS HAD BEEN DONE IN ACCORDANCE WITH THE TERMS AND CONDITIO NS AGREED UPON BETWEEN THE BUYERS AND THE SELLER, EVEN THOUGH THERE WAS NO FORMAL AGREEMENT. THE AGENTS HAD UNEQUIVOCALLY CONFIRMED AND RECONFIRMED THE NATURE OF THE TRANSACTIONS AND THAT THE ABSENCE OF ANY FORMAL AGREEMENT COULD NOT BE HELD T O BE A GROUND TO DISMISS THE CLAIM OF THE ASSESSEE. THERE WERE CLEAR CONTRA CONFIRMATIONS FROM THE AGENTS. THUS, ONCE T HE GENUINENESS OF THE COMMISSION AS WELL AS ITS JUSTIF ICATION OF HAVING BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS WAS ESTABLISHED, THE SAME BECOM ES ADMISSIBLE AS DEDUCTION UNDER SECTION 37(1) OF THE ACT. THE TRIBUNAL WAS OF THE VIEW THAT IT COULD NOT BE HELD THAT THE GROSS INVOICE AMOUNTS WERE WHAT HAD ACCRUED TO THE ASSESS EE, AND THAT THESE WERE THE AMOUNTS ON WHICH THE ASSESSEE SHOULD HAVE BEEN ASSESSED. ACCORDING TO THE TRIBUNAL, THE OUTGOING COMMISSION FROM THE INVOICE VALUES WOULD HAVE TO BE REDUCED FR OM THE GROSS AMOUNTS, AND THE NET AMOUNT WHICH WAS THE ACTUAL SU M RECEIVED BY THE ASSESSEE IN INDIA, AND WHICH WAS DULY CERTIF IED AND PERMITTED BY THE RBI AND ITS AUTHORIZED DEALER, WAS WHAT HAD BEEN EARNED BY THE ASSESSEE FROM SUCH TRANSACTIONS. THE TRIBUNAL FURTHER FOUND THAT THE COMMISSION WAS NOT DEDUCTED FROM THE EXPORT INVOICES IN AN AD HOC MANNER AND IT WAS CLEARLY UNDER AN AGREEMENT BETWEEN THE BUYER AND THE SELLER , AS ALSO BETWEEN THE BUYER AND THE AGENT. CONSEQUENTLY, THE ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT COMMISSION FROM T HE GROSS INVOICE VALUE. IN THE PRESENT CASE, THERE WAS A CO MPULSION TO DEDUCT THE COMMISSION FROM THE EXPORT INVOICES WHIC H WAS CLEARLY INDICATED IN THE CONFIRMATION LETTERS OF TH E AGENTS, AND THAT THE INGREDIENTS WHICH WERE NECESSARY FOR SUCH DEDUCTION OF COMMISSION TO BE TREATED AS DIVERSION OF INCOME BY OVER RIDING TITLE WAS CLEARLY PRESENT. IT WAS FURTHER FOUND TH AT IN THE PRESENT ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 8 - CASE, THE GROSS EXPORT PROCEEDS NEVER REACHED THE A SSESSEE, NO SUCH INCOME HAD THEREFORE ACCRUED TO THE ASSESSEE A ND THIS WAS BECAUSE OF AN OBLIGATION OR COMPULSION TO DEDUCT TH E COMMISSION FROM THE EXPORT INVOICES WHICH CLEARLY SHOWED THIS TO BE A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. THE AM OUNTS DEDUCTED FROM THE EXPORT INVOICES WERE THUS CLEARLY ALLOWABL E AS DEDUCTION. 6.2. THE HONBLE COURT HAS, THEREAFTER, PRONOUNCED THE JUDGMENT VIDE PARA-21 AND ALLOWED THE APPEAL IN FAVOUR OF T HE ASSESSEE; REPRODUCED BELOW:- 21. AS REGARDS THE FINDINGS OF THE LOWER AUTHORI TIES THAT THE CONFIRMATIONS ISSUED BY THE PARTIES WERE ON PLAIN P APER, THE TRIBUNAL AFTER APPRECIATING THE EVIDENCE ON RECORD HAS FOUND THAT EXCEPT ONE PARTY, NAMELY, MOHMED ABDULLA OF DU BAI, ALL OTHER COMMUNICATIONS WERE ON LETTER HEADS OF THE RE SPECTIVE PARTIES. IT WAS FURTHER FOUND THAT NONE OF THE PAY MENTS HAD COME BEYOND SIX MONTHS, BUT THE SAME WERE WITHIN SIX MON THS AS COULD BE VERIFIABLE FROM BANK REALIZATION CERTIFICATES EN CLOSED ANNEXED IN THE PAPER BOOK. THE TRIBUNAL RECORDED THAT EACH OF THE TRANSACTIONS BETWEEN THE ASSESSEE AS THE SELLER AND THE TWO BUYERS WERE MEDIATED BY AGENTS, WHOSE EXISTENCE3 WA S ESTABLISHED BEYOND DOUBT, BY THE CONFIRMATION LETTERS. SECONDLY, THERE WAS TENDERING OF SERVICES. THE AGENTS HAD CL EARLY WRITTEN THAT THEY HAD RENDERED SERVICES; IN PROCURING SAMPL ES, DECIDING THE ORDERS AND SETTLING ALL MATTERS BETWEEN THE BUY ERS AND SELLER INCLUDING PAYMENTS BY THE BUYERS TO THE SELLER. TH E EXISTENCE OF THE AGENTS AND THEIR FUNCTIONING WAS FOR THE BENEFI T OF THE ASSESSEE AS WELL. THE TRIBUNAL, ACCORDINGLY, WAS OF THE VIEW THAT THE CLAIM OF THE ASSESSEE TOWARDS COMMISSION P AYMENT DESERVES TO BE ALLOWED. 7. OUR ATTENTION HAS ALSO BEEN DRAWN ON THE JUDGEME NT OF RESPECTED CO-ORDINATE BENCH A AHMEDABAD PRONOUNCE D IN THE CASE OF SHRI SANJAY JAIN BEARING ITA NO.1533/AHD/2008 FOR AY 2004-05 ORDER DATED 16/12/2009, WHEREIN FACTS WERE THAT THE ASSESSEE HAD ACCOUNTED THE EXPORT SALES TURNOVER AT THE NET FIGU RE BUT ALSO CLAIMED DEPB BENEFIT ON THE GROSS AMOUNT OF TURNOVER. THE EXPLANATION OF THE ASSESSEE IN THAT DECISION WAS ALSO IN THE LIKE MANN ER THAT DISCOUNT WAS ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 9 - GIVEN TO FOREIGN BUYER BY WAY OF COMMISSION BY DIRE CTLY REDUCING FROM THE SALE INVOICE. IT WAS CLAIMED THAT THE SAID MET HOD WAS ADOPTED IN THE LIGHT OF THE REGULATIONS OF THE RBI. IT WAS PLEA DED THAT THE EXPORT & IMPORT POLICY AND THE RBI REGULATIONS APPROVED THIS METHOD. IN THAT CASE, THE TRIBUNAL HAS GIVEN A FINDING THAT THERE W AS NO DISPUTE REGARDING THE FACT THAT THE ASSESSEE HAS GIVEN COMM ISSION/DISCOUNT IN THE EXPORT INVOICES ITSELF IN FAVOUR OF THE FOREIGN BUYER. THERE WAS A CONFIRMATION FROM THE SIDE OF THE FOREIGN BUYER THA T THE SAID DISCOUNT WOULD BE DISTRIBUTED BY HIM TO THE INTENDING AGENTS ABROAD. AN ANOTHER FACT HAS ALSO BEEN ACKNOWLEDGED THAT THE AS SESSEE HAS RECEIVED ONLY THE NET AMOUNT AS THE EXPORT PROCEEDS BY WAY O F CONVERTIBLE FOREIGN EXCHANGE. THE TRIBUNAL BENCH HAS ALSO EXPR ESSED THAT WHEN THE INCOME ITSELF WAS NOT GENERATED, THERE WAS NO QUESTION OF SUCH INCOME BECOMING ACCRUED OR DUE. WHEN THE FACTUM OF ACTUAL RECEIPT OF SALE PROCEEDS TO THE EXTENT OF NET INVOICE AMOUN T WAS ESTABLISHED BEYOND ANY DOUBT, THERE WAS NO JUSTIFICATION IN OVE RLOOKING UPON THOSE SPEAKING FACTS ON THE TECHNICAL GROUND THAT T HE ASSESSEE HAS CLAIMED DEPB BENEFIT ON THE GROSS AMOUNT OF INVOICE . IT WAS CONCLUDED THAT THE REVENUE HAS NO CASE TO HOLD THAT THE ASSESSEE HAS EARNED THE IMPUGNED ADDITIONAL INCOME. 8. BEFORE US, THE ORDER OF THE TRIBUNAL IN THE CASE OF SAMIR BATRA AND ATMA PRAKASH BATRA HAS ALSO BEEN CITED WHICH HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT. SOME OF THE OBSERVATIO NS OF THE TRIBUNAL ARE ALSO WORTH TO REPRODUCTION. 25. THE OUTGOING COMMISSION FROM THE INVOICE VALUES WOULD HAVE TO BE REDUCED FROM THE GROSS AMOUNTS AND THE NET AMOUNT WHICH WAS THE ACTUAL SUM RECEIVED BY THE ASS ESSEE IN INDIA, AND WHICH WAS DULY CERTIFIED AND PERMITTED B Y THE RBI AND ITS AUTHORIZED DEALER WAS WHAT HAD BEEN EARNED BY T HE ASSESSEE FROM SUCH TRANSACTIONS. WE FIND THAT THE AO HIMSE LF HAD NOTED IN THE ASSESSMENT ORDER THAT THE AMOUNTS DEDUCTED A S COMMISSION FROM THE SALE INVOICES WERE NEITHER RECE IVED BY THE ASSESSEE DURING THE YEAR NOR WAS IT EVER GOING TO B E RECEIVED IN FUTURE. IF THIS WAS THE VIEW OF THE AO, THEN HE CO NTRADICTED HIMSELF BY TAXING AMOUNTS WHICH HAD NOT BEEN RECEIV ED AT ALL, NOR DID THE ASSESSEE HAVE ANY LEGAL RIGHT TO RECEIV E SUCH AMOUNTS. ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 10 - 26. WE FIND THAT THE COMMISSION WAS NOT DEDUCTED FROM THE EXPORT INVOICES IN AN ADHOC MANNER AND IT WAS CLEARLY UNDER AN AGREEMENT BETWEEN THE BUYER AND THE SELLER, AS ALSO BETWEEN T HE BUYER AND THE AGENT. CONSEQUENTLY, THE ASSESSEE WA S UNDER AN OBLIGATION TO DEDUCT COMMISSION FROM THE GROSS INVO ICE VALUES IN THE PRESENT CASE, THERE WAS A COMPULSION TO DEDUCT THE COMMISSION FROM THE EXPORT INVOICES WHICH WAS CLEAR LY INDICATED IN THE CONFIRMATION LETTERS OF THE AGENTS, THE INGR EDIENTS WHICH WERE NECESSARY FOR SUCH DEDUCTION OF COMMISSION TO BE TREATED AS DIVERSION OF INCOME BY OVERRIDING TITLE WAS CLEA RLY PRESENT. IN THE CASE OF CIT V. MADRAS RACE CLUB (2002) 255 ITR 98, THE HON.COURT OBSERVED THAT IN ORDER TO DECIDE WHETHER THERE HAS BEEN DIVERSION OF INCOME BY OVERRIDING TITLE THE TR UE TEST IS WHETHER THE AMOUNT SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACH THE ASSESSEE AS HIS INCOME. WHEREBY AN OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE. IT IS DEDUCTIBLE BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO D ISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSEE, THE SAME CONSEQUENCE IN LAW DOES NOT FOLLOW IN THE PRESENT C ASE THE GROSS EXPORT PROCEEDS NEVER REACHED ITS HANDS, NO SUCH IN COME HAD THEREFORE ACCRUED TO THE ASSESSEE AND THIS WAS BECA USE OF AN OBLIGATION OR COMPULSION TO DEDUCT THE COMMISSION F ROM THE EXPORT INVOICES WHICH CLEARLY SHOWED THIS TO BE A C ASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. THE AMOUN TS DEDUCTED FROM THE EXPORT INVOICES WERE THUS CLEARLY ALLOWABL E AS DEDUCTION. . . 27. FIRSTLY, EACH OF THE TRANSACTIONS BETWEEN THE ASSESSEE AS THE SELLER AND THE TWO BUYERS WERE MEDIATED BY A GENTS, WHOLE EXISTENCE WAS ESTABLISHED BEYOND DOUBT BY THE CONFI RMATION LETTERS. SECONDLY, THERE WAS RENDERING OF SERVICES . THE AGENT HAD CLEARLY WRITTEN THAT THEY HAVE RENDERED SERVICE S IN PROCURING SAMPLES DECIDING THE ORDERS AND SETTLING ALL MATTER S BETWEEN THE BUYERS AND SELLER INCLUDING PAYMENTS BY THE BUYERS TO THE SELLER. CONSIDERING THE NATURE OF SUCH SERVICES RENDERED BY THE AGENTS EVEN IF THEY WERE APPOINTED BY THE BUYERS, SERVICES WERE INDIRECTLY RENDERED TO THE ASSESSEE AS THE SELLERS WELL. THE SAMPLES WERE PRODUCED BY THEM FROM THE ASSESSEE. T HEY DECIDED ON THE QUANTUM OF THE ORDER AND THE PRICE, THEY SET TLED ALL DISPUTES BETWEEN THE BUYERS AND THE SELLER AND THEY ALSO ENSURED ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 11 - THE PAYMENTS TO THE SELLER. THE EXISTENCE OF THE A GENTS AND THEIR FUNCTIONING WAS FOR THE BENEFIT OF THE ASSESSEE AS WELL. THEREFORE, THE EVIDENCE PRODUCED BY THE ASSESSEE CA NNOT BE WISHED AWAY ON THE GROUND THAT THE AGENTS ONLY PROV IDED SERVICES TO THE BUYER AND NOT TO THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW T HAT THE COMMISSION PAYMENT IS TO BE ALLOWED TO THE ASSESSEE AND ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE, AN D THE ORDERS OF THE LOWER AUTHORITIES ARE REVERED. THIS ISSUE O F THE ASSESSEES APPEAL IS ALLOWED. 9. THERE IS ONE MORE DECISION OF THE TRIBUNAL D B ENCH AHMEDABAD IN THE CASE OF M/S.JAWAHAR BIO-TECH PVT.LTD.(SUPRA), WHEREIN A VIEW WAS TAKEN IN FAVOUR OF ASSESSEE VIDE FOLLOWING PARAGRAPHS:- 8. IN THE CASE UNDER CONSIDERATION, THERE IS NOTHI NG TO SUGGEST THAT THE AMOUNTS DEDUCTED AS COMMISSION FRO M THE SALE INVOICES WERE EITHER RECEIVED BY THE ASSESSEE DURIN G THE YEAR OR EVEN SUBSEQUENTLY NOR THE ASSESSEE HAS ANY LEGAL RI GHT TO RECEIVE SUCH AMOUNTS. THE AMOUNT HAS BEEN DEDUCTED UNDER A N ARRANGEMENT BETWEEN THE BUYERS AND THE ASSESSEE. T HUS, THE GROSS EXPORT PROCEEDS MENTIONED IN THE INVOICES NEV ER REACHED THE ASSESSEE NOR IT WAS INTENDED SO. THEREFORE, TH E AMOUNT EQUIVALENT TO COMMISSION DEDUCTED HAD NEVER ACCRUED TO THE ASSESSEE AND THIS WAS BECAUSE OF AN OBLIGATION OR C OMMISSION TO DEDUCT THE COMMISSION FORM THE AMOUNT INVOICED WHIL E EXPORTING THE GOODS. 9. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN A SIMI LAR CLAIM IN RESPECT OF COMMISSION IN THE PRECEDING ASSESSMEN T YEAR HAS BEEN ALLOWED BY THE AO HIMSELF AND THE EXPORT PRIC ES WERE DETERMINED WITH THE BUYERS IN CONSEQUENCE OF AN ARR ANGEMENT OF DEDUCTION OF COMMISSION PAYABLE BY THE FOREIGN BUYE RS TO THE FOREIGN AGENT FORM THE SALES INVOICES, WE ARE OF TH E OPINION THAT THERE WAS NO JUSTIFICATION FOR THE DISALLOWANCE OF THE AFORESAID AMOUNT OF COMMISSION. THEREFORE, GROUND NO.1 IS AL LOWED. 10. AS OBSERVED IN THE BEGINNING ITSELF THE ISSUE A PPEARS TO BE SQUARELY COVERED BY THE FOREGOING DECISIONS AND ON ALMOST ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 12 - IDENTICAL FACTS THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. RESULTANTLY, IN THE LIGHT OF THE FOREGOING DISCUSSI ON, ON FACTS AND LAW, WE HEREBY HOLD THAT THE ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE AND, HENCE, THE ASSESSEE IS ENTITLED FOR T HE CLAIM AND THE REVENUE DEPARTMENT HAD GONE WRONG IN HOLDING THAT T HERE WAS SUPPRESSION OF SALES ON THE PRESENT FACTS AND CIRCU MSTANCES OF THE CASE. GROUNDS ALLOWED. 10. GROUNDS OF THE REVENUE ARE HEREBY DISMISSED. RE SPECTFULLY FOLLOWING THE ABOVE DECISION, WE DISMISS THE APPEAL S OF THE REVENUE. 11. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES, WHEREAS REVENUES APPEALS ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30 TH JUNE, 2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 30/ 6 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NOS.2427, 2428/AHD/2008(REVENUE) & 1799 & 1800/AHD/2010(ASSESSEE) ACIT VS. M/S.VIKRAM INTERNATIONAL AYS 2004-05, 05-06, 03-04 & 04-05RESPECTIVELY - 13 - 1. DATE OF DICTATION.. 30.6.20111 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.6.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S30.6.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.6.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER