DCIT, New Delhi V. M/s. Fourth Dimension Media Pvt. Ltd., New Delhi

ITA 2628/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6353 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .2628/DEL/2012 2628/DEL/2012 2628/DEL/2012 2628/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007- -- -08 0808 08 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -11(1), 11(1), 11(1), 11(1), NEW DEL NEW DEL NEW DEL NEW DELHI. HI.HI. HI. VS. VS. VS. VS. M/S FOURTH DIMENSION MEDIA M/S FOURTH DIMENSION MEDIA M/S FOURTH DIMENSION MEDIA M/S FOURTH DIMENSION MEDIA PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., 1, L.S.C., A 1, L.S.C., A 1, L.S.C., A 1, L.S.C., A- -- -3 BLOCK, 3 BLOCK, 3 BLOCK, 3 BLOCK, JANAK PURI, JANAK PURI, JANAK PURI, JANAK PURI, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 058. 110 058. 110 058. 110 058. PAN : AAACF7502P. PAN : AAACF7502P. PAN : AAACF7502P. PAN : AAACF7502P. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.H. SEMA, SR.DR. RESPONDENT BY : SHRI ASHWANI TANEJA, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XIII, NEW DELHI DATED 16 TH MARCH, 2012 FOR THE AY 2007- 08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.49,20,000/- MADE ON ACCOUNT OF DISALLOWANCE OF T RADE DISCOUNT. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED RELEVANT MATERIAL PLACED BEFORE US. THE ASSESSEE H AD GIVEN TRADE DISCOUNT OF ` 1.13 CRORES TO ITS SISTER CONCERN. AS PER ASSESSIN G OFFICER, THE TRADE DISCOUNT OF ` 1.13 CRORES WAS EXCESSIVE. HE, THEREFORE, APPLYING THE PROVISIONS OF SECTION 40A(2), DISALLOW ED THE BALANCE TRADE ITA-2628/DEL/2012 2 DISCOUNT AMOUNTING TO ` 49,20,000/-. ON APPEAL, LEARNED CIT(A) ALLOWED THE SAME. HENCE, THIS APPEAL BY THE REVENUE. 4. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF UNITED EXPORTS VS. CIT [2011] 330 ITR 549 WHEREIN THEIR LORDSHIPS HELD THAT SECTION 40A(2)(B) IS NOT APPLIC ABLE IN RESPECT OF TRADE DISCOUNT. THE RELEVANT OBSERVATIONS OF THEIR LORDSHIPS AT PARAGRAPH 11 OF THE JUDGMENT READ AS UNDER:- 11. 11. 11. 11. LASTLY, WE FAIL TO UNDERSTAND HOW THE PROVISION S OF SECTION 40A(2)(B) ARE, AT ALL, APPLICABLE IN THE FA CTS OF THE PRESENT CASE. SECTION 40A(2)(A) RUNS AS UNDER : '(2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTIO N, AND THE ASSESSING OFFICER IS OF OPINION THAT SUCH EXPENDITU RE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHIC H THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSI NESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVE D BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITU RE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASON ABLE SHALL NOT BE ALLOWED AS A DEDUCTION.' THIS PROVISION IN THE ACT PERTAINS TO DISALLOWANCE TO AN EXPENDITURE WHICH IS MADE BY THE ASSESSEE I.E., AN AMOUNT ACTUALLY SPENT BY THE ASSESSEE AS AN EXPENDITURE. T HE EXPRESSION USED IN THIS PROVISION IS 'INCURS ANY EX PENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MA DE TO ANY PERSON' [EMPHASIS SUPPLIED]. THE EMPHASIZED WOR DS CLEARLY SHOW THAT ACTUAL PAYMENT MUST BE MADE AND T HERE HAS TO BE AN EXPENDITURE INCURRED BEFORE THE PROVIS ION CAN BE SAID TO BE APPLICABLE. A TRADE DISCOUNT, AND ADM ITTEDLY IT IS NOT IN DISPUTE THAT THE SUBJECT-MATTER OF THE CLAIM IS A TRADE DISCOUNT, AND NOT AN EXPENDITURE, CLEARLY THE REFORE THERE DOES NOT ARISE THE QUESTION OF APPLICABILITY OF SECTION 40A(2)(B). ITA-2628/DEL/2012 3 5. THE RATIO OF THE ABOVE DECISION WOULD BE SQUAREL Y APPLICABLE TO THE CASE BEFORE US. RESPECTFULLY FOLLOWING THE SAM E, WE HOLD THAT SECTION 40A(2)(B) IS NOT APPLICABLE IN RESPECT OF T RADE DISCOUNT. THEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTE RFERE WITH THE ORDER OF LEARNED CIT(A). THE SAME IS SUSTAINED AND REVENUE S APPEAL IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2014. SD/- SD/- ( (( (ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 23.05.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TA X, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -11(1), NEW DELHI. 11(1), NEW DELHI. 11(1), NEW DELHI. 11(1), NEW DELHI. 2. RESPONDENT : M/S FOURTH DIMENSION MEDIA PVT.LTD. , M/S FOURTH DIMENSION MEDIA PVT.LTD., M/S FOURTH DIMENSION MEDIA PVT.LTD., M/S FOURTH DIMENSION MEDIA PVT.LTD., 1, L.S.C., A 1, L.S.C., A 1, L.S.C., A 1, L.S.C., A- -- -3 BLOCK, JANAK PURI, NEW DELHI 3 BLOCK, JANAK PURI, NEW DELHI 3 BLOCK, JANAK PURI, NEW DELHI 3 BLOCK, JANAK PURI, NEW DELHI 110 058. 110 058. 110 058. 110 058. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR