India Pistons Limited, CHENNAI V. DCIT Corporate Circle 2(2), CHENNAI

ITA 2602/CHNY/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2542 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-05-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 30-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Keywords: Gift; Depreciation; Transfer pricing; Earning of tax free income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2602/CHNY/2017 /ASSESSMENT YEAR: 2005-06 M/S.INDIA PISTONS LTD., C/O. M/S.SUBBARAYA AIYAR, PADMANABHAN & RAMAMANI, ADVOCATES, NEW NO.75 (OLD NO.105), DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-4. VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), CHENNAI-34. [PAN: AAACI 1439 E ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR. SAROJ KUMAR PARIDA, ADV. *+) , /RESPONDENT BY : MR. R.CLEMENT RAMESH- KUMAR, ADDL.CIT , /DATE OF HEARING : 30.07.2019 , /DATE OF PRONOUNCEMENT : 20.08.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9 , CHENNAI, DATED 31.07.2017 FOR THE AY 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY, M/S.INDIA PISTONS LTD., IS DULY REGISTERED UNDER TH E PROVISIONS OF ITA NO.2602/CHNY/2017 :- 2 -: COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING PISTONS, PISTON ASSEMBLIES, LINERS, ETC. THE RETUR N OF INCOME FOR THE AY 2005-06 WAS FILED ON 31.10.2005 DISCLOSING TOTAL IN COME OF RS.4,62,96,600/- AND THE SAME WAS REVISED ON 21.08. 2006 AT TOTAL INCOME OF RS.3,06,76,464/-. AGAINST THE SAID RETURN OF IN COME, THE ASSESSMENT CAME TO BE COMPLETED BY THE AO VIDE AN ORDER DATED 01.12.2008 PASSED U/S.143(3) OF THE ACT AT TOTAL INCOME OF RS.5,78,99 ,150/- AFTER MAKING THE FOLLOWING ADDITIONS TO THE RETURNED INCOME: 1. ADDITION OF ARMS LENGTH PRICE RS.34,65,790/- 2. DISALLOWANCE ON CASH DISCOUNTS RS.17,94,317/- 3. DISALLOWANCE ON CRICKET EXPENSES RS.17,95,178/- 4. DISALLOWANCE ON EXPORT PROMOTION EXPENSES RS.22,67, 560/- 5. DISALLOWANCE ON REPAIRS & MAINTENANCE RS.24,16,262/ - 6. DISALLOWANCE ON COMMITMENT CHARGES RS.16,61,047/- 7. DISALLOWANCE ON ROYALTY OF RS.16,60,657/- 8. DISALLOWANCE ON GIFTS RS.94,900/- 9. DISALLOWANCE ON EXPENDITURE ON EXEMPT INCOME RS.3,1 2,403/- 10.DISALLOWANCE ON DEPRECIATION ON ELECTRICAL INSTA LLATIONS RS.3,54,065/- 3. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO VIDE IMPUGNED ORDER PARTLY ALLOWED THE APPEAL BY CONFIRMING THE DISALLOWANCE O F CASH DISCOUNT OF RS.17,94,317/- AND EXPORT PROMOTION EXPENSES RS.22, 67,560/- AND ALSO DISALLOWANCE ON MARKETING EXPENDITURE, INCENTIVE UN DER THE HEAD REPAIRS & MAINTENANCE OF RS.24,16,262/- BY FOLLOWING THE DE CISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2006-07. THE LD.CIT(A) GRANTED RELIEF IN RESPECT OF THE DISALLOWANCE OF ROYALTY OF RS.16,60,657/- AND DISALLOWANCE OF GIFT EXPENSES OF RS.94,900/-, ETC. THUS, THE APPEAL FILED BY THE ASSESSEE IS CAME TO BE PARTLY ALLOWED. ITA NO.2602/CHNY/2017 :- 3 -: 4. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD.COUNSEL HAS FAIRLY CONCEDED THAT THE ISSUES IN T HE PRESENT APPEAL ARE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NOS.2186/MDS/2010 & 1948/MDS/2011 FOR THE AYS 2006-07 & 2007-08 DATED 30.09.2016. THE ISSUE IN GROUND NO.2 OF APPEAL RELATES TO THE DISALLOWANCE OF 20% O F CASH DISCOUNTS. THE AO AS WELL AS THE LD.CIT(A) MADE THE ADDITION FOR W ANT OF EVIDENCE. THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE IN T HE ASSESSEES OWN CASE, REFERRED TO SUPRA, WHEREIN, IT HAS BEEN HELD AS UND ER: .24. VIDE GROUND 5, THE GRIEVANCE RAISED BY THE ASSESSEE IS DISALLOWANCE OF 20% OF COMMISSION AND DISCOUNTS PAID TO CUSTOMERS. 25. LD. AR SUBMITTED THAT ASSESSEE HAD CLAIMED DIS COUNT(OTHERS) OF RS.3,19,55,499/-, COMMISSION ON EXPORTS OF RS.10,18,845/-, SALES COMM ISSION OF RS.16,52,365/- AND DISCOUNT ON HUNDIES OF RS.8,12,170/-. AS PER THE LD. A.R ASSESSEE HAD FURNISHED FULL INFORMATION AND DETAILS REGARDING THE ABOVE CLAIM. DESPITE THAT, ASSESSING OFFICER HAD MADE DISALLOWANCE OF 20% OF THE AMOUNT OF RS.3,19,5 5,499/-. AS PER THE LD. AR, THESE WERE DISCOUNTS OFFERED TO CUSTOMERS BASED ON TURNOV ER TARGETS AND IT WENT TO REDUCE THE AMOUNTS PAYABLE BY THE AGENTS. FURTHER, AS PER THE LD. AR, THE DETAILS OF DISCOUNTS/COMMISSION TOTALLING TO RS.1,75,48,192 WAS SUBMITTED BEFORE THE LOWER AUTHORITIES BUT WERE BRUSHED ASIDE. LD. AR FURTHER SUBMITTED THAT IF GIVEN AN OPPORTUNITY, ASSESSEE WOULD BE ABLE TO SHOW THAT THE EXPENDITURE WAS PROPERLY VOUCHED. 26. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 27. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT ASSESSEE HAD CLAIMED DISCOUNT OF RS.3,19,55,499/-. THE DETAILS FILED BY THE ASSESSEE WAS ONLY IN RELATION TO 11 PARTIES TOTALLING TO RS.1,75,48,192/- . ASSESSEE WAS GIVEN NUMBER OF OPPORTUNITIES BY T HE ASSESSING OFFICER AS WELL AS DRP FOR PROVING ITS CLAIM OF DISCOUNT OF RS.3,19,55,499/-. IN OUR OPINION, CLAIM OF THE LD. AR THAT ASSESSING OFFICER DID NOT CALL FOR THE DETAILS TO PR OVE THE EXPENDITURE IS INCORRECT. THIS IS BECAUSE OF THE REASON THAT ASSESSING OFFICER HAD SPE CIFICALLY REQUIRED THE ASSESSEE TO GIVE DETAILS OF THE CLAIM IN THE FORMAT PROVIDED BY HIM, BUT ASSESSEE FAILED TO FURNISH IT. IN SUCH CIRCUMSTANCES, WE FIND THAT THE LOWER AUTHORIT IES WERE JUSTIFIED IN MAKING THE DISALLOWANCE OF 20% OF SUCH DISCOUNT. WE DO NOT F IND ANY REASON TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER. GROUND NO.5 IS DISMI SSED. 5. SIMILARLY, GROUND NO.3 OF THE ASSESSEES APPEAL CH ALLENGES THE DISALLOWANCE OF EXPORT PROMOTION EXPENSES RS.22,67, 560/-. THIS ISSUE IS ITA NO.2602/CHNY/2017 :- 4 -: SQUARELY COVERED AGAINST THE ASSESSEE IN THE ASSESS EES OWN CASE, REFERRED TO SUPRA, WHEREIN, IT HAS BEEN HELD AS UND ER: 28. VIDE GROUND NO.6, GRIEVANCE RAISED BY THE ASSESSEE IS DISALLOWANCE OF EXPORT PROMOTION EXPENSES OF RS.17,58,965/-. 29. LD. AR SUBMITTED THAT THE CLAIM WAS WITH REGARD TO COMMON EXPENDITURE INCURRED BY THE LONDON OFFICE WHICH WAS REIMBURSED BY THE ASSESSEE . AS PER THE LD. AR, FOREIGN BRANCH LIAISON REPRESENTATIVE WAS ACTING ON BEHALF OF ALL GROUP COMPANIES AND THE EXPENDITURE INCURRED BY THE REPRESENTATIVE WAS SHARED BY THE GR OUP COMPANIES. ACCORDING TO HIM, THE LOWER AUTHORITIES ERRED IN DISALLOWING THE CLAIM. 30. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 31. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. THE DISALLOWANCE OF SHARE OF EXPENDITURE OF LONDON LIAISON OFFICE WAS MADE BY THE LOWER AUTHORITIES FOR THE REASON THAT ASSESSEE COU LD NOT PRODUCE ANY EVIDENCE TOWARDS EXPENDITURE BY THE SAID LONDON LIAISON OFFICE. EXP LANATION OF THE ASSESSEE WAS THAT LIAISON OFFICE WORKED ON BEHALF OF ALL THE GROUP COMPANIES AND M/S AMALGAMATIONS PVT LTD ONE OF THE GROUP COMPANIES MADE PAYMENT TO LONDON LIAISON OFFI CE AND RECOVERED SHARE OF EXPENDITURE FROM THE INDIVIDUAL COMPANIES. WE ARE OF THE OPINI ON THAT EXCEPT FOR GIVING THIS EXPLANATION, WHICH WAS NOT SUPPORTED BY ANY EVIDENCE, ASSESSEE HAD NOT GIVEN ANY DETAILS OF THE SERVICES RENDERED BY THE LONDON LIAISON OFFICE NOR ANY CORRE SPONDENCE WITH THEM. ASSESSEE ALSO COULD NOT SHOW THE NEED OF LIAISON OFFICE AND WHY T HE PAYMENTS WERE ROUTED THROUGH A HOLDING COMPANY. IN SUCH CIRCUMSTANCES, THE DISALL OWANCE WAS RIGHTLY MADE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWE R AUTHORITIES. GROUND NO.6 IS DISMISSED. 6. SIMILARLY, GROUND NO.4 OF THE ASSESSEES APPEAL RE LATES TO THE DISALLOWANCE OF MARKETING INCENTIVES UNDER THE HEAD REPAIRS & MAINTENANCE RS.24,16,262/-. THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE IN THE ASSESSEES OWN CASE, REFERRED TO SU PRA, WHEREIN, IT HAS BEEN HELD AS UNDER: 32. VIDE GROUND NO.7 GRIEVANCE OF THE ASSESSEE IS THAT THE LOWER AUTHORITIES DISALLOWED 10% OF THE EXPENDITURE OF `2,41,62,616/- INCURRED TOWARDS MARKETING INCENTIVES. 33. LD. AR SUBMITTED THAT ASSESSEE HAD PRINTED MAR KET INCENTIVE COUPONS VALUED AT ` 2,41,62,616/- AND DISTRIBUTED AMONGST ITS DEALERS D URING THE RELEVANT PREVIOUS YEAR. AS PER THE ASSESSEE, THE ULTIMATE CUSTOMER WHO OPENED THE PR ODUCT AND OBTAINED THESE COUPONS WERE REIMBURSED BY ITS DEALERS TO THE EXTENT OF VALUE OF THE COUPONS. WHEN THE COUPONS WERE PRODUCED BY THE DEALERS, AS PER THE LD. AR, CREDIT NOTES WER E GIVEN TO SUCH DEALERS. THIS AS FOR THE LD.AR WAS PURELY A CUSTOMER CENTRIC MARKET EXPENDITURE AND TH E LOWER AUTHORITIES ERRED IN MAKING THE DISALLOWANCE. 34. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 35. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. CLAIM OF THE ASSESSEE THAT EVERY PACK CONTAINING A SET OF PISTONS WERE PASTED WITH A COUPON WHICH WOULD GIVE THE BUYERS A RIGHT TO A CASH DISC OUNT. AS PER THE ASSESSEE, DEALER WAS REQUIRED ITA NO.2602/CHNY/2017 :- 5 -: TO GIVE THE CASH DISCOUNT TO SUCH CUSTOMERS. THOUG H THE ASSESSEE CLAIMED THAT IT WAS HAVING EVIDENCE IN THIS REGARD IT COULD NOT PRODUCE DE ALERWISE DETAILS OF THE REIMBURSEMENT AND HOW THE SUM OF ` 2,41,62,616/- WAS ARRIVED AT. WHEN NO EVIDENCE IN SUPPORT OF THE CLAIM WAS PRODUCED BY THE ASSESSEE, LOWER AUTHORITIES, IN OUR OPINIO N, WAS JUSTIFIED IN MAKING A DISALLOWANCE OF 10%. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ERS OF THE LOWER AUTHORITIES. GROUND NO.7 IS DISMISSED. 36. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2006-07 IS PARTLY ALLOWED. 7. THUS, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF A PPEAL. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE S TANDS DISMISSED. ORDER PRONOUNCED ON THE 20 TH AUGUST, 2019 IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 20 TH AUGUST, 2019. TLN , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF