NUTRON PHARMACEUTICALS P. LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 2632/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48645 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Assessee Lawyers: V C SHAH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R.S. SYAL R.S. SYAL R.S. SYAL R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 2632/MUM/2010 ASSESSMENT YEAR-2006-07 M/S. NUTRON PHARMACEUTICALS PVT. LTD., 401, ERTH SAMPPAN, 198/200, KETWADI MAIN ROAD, 4 TH FLOOR, MUMBAI-400 004 PAN-AAACN 9128K VS. THE DCIT 5(2), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V.C. SHAH RESPONDENT BY: SHRI HARI GOVIND SINGH O R D E R O R D E R O R D E R O R D E R PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24.3.2010 PASSED BY THE LD. CIT(A)-9 FOR THE ASSESSMENT YEAR 2006-07. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY I S IN THE BUSINESS OF TRADING IN CHEMICALS AND PHARMACEUTICAL PRO DUCTS. THE ASSESSEE COMPANY CLAIMED DEDUCTIONS OF `. 3,00,000/- ON ACCOUNT COMPENSATION PAID TO M/S. ADANI EXPORTS LTD. THE ASSESSIN G OFFICER ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF THIS DEDUCTIO N. THE ASSESSEE VIDE LETTER DT. 15.12.2008 EXPLAINED TO THE ASSE SSING OFFICER THAT IT HAS RECEIVED DEBIT NOTE DT. 1.10.2005 FROM M /S. ADANI EXPORTS LTD WHICH IS SELF EXPLANATORY. THE ASSESSEE CLAIMED TH AT IT HAS BOOKED SUPPLIES BUT SAME WAS CANCELLED AS PRICE HAD FALLEN DO WN AND COMPENSATION WAS PAID. THE ASSESSEE SUBMITTED THAT IT SUFFE RED LOSSES ITA NO. 2632/M/2010 2 DUE TO FALL IN THE PRICE OF ANILINE OIL AND THE LOSS WAS SUFFERED IN THE BUSINESS OF THE ASSESSEE COMPANY. THE ASSESSEE CLAIMED THAT T HE SAME IS ALLOWABLE WHILE COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE EXPLANATION O F THE ASSESSEE HOLDING THAT THE ASSESSEE HAS NOT FILED ANY DETAILS IN RESPECT OF ORDER FOR SUPPLIES AND CANCELLATIONS OF ORDERS. THE REFORE, DEDUCTION CLAIMED WAS NOT ALLOWED. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE L D. CIT(A) AND SUBMITTED AS FOLLOWS: IN THE APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE FI LED WRITTEN SUBMISSIONS WHICH HAVE BEEN PLACED ON RECORD. THE APPELLANT CLAIMED THAT IT PAID DURING THE YEAR A SUM OF `. 3,00,000/- TO M/S. ADANI EXPORTS LTD., WHICH IS PAYAB LE TO IT AS PER DEBIT NOTE DT. 1.10.2005. THE APPELLANT EXPLAI NED THAT IT HAS CONTRACTED WITH M/S. ADANI EXPORTS LTD. FOR THE SUPPL Y OF 20MT OF ANILINE OIL ON 19.5.2005 AND PLACED ORDER FOR THE SA ME. THE APPELLANT SUBMITTED THAT DUE TO FALL IN THE PRICES OF ANILINE OIL IT DECIDED NOT TO GO AHEAD WITH THE CONTRACT AND THIS O RDER WAS CANCELLED ON 15.6.2005. THE APPELLANT SUBMITTED THA T IT PAID COMPENSATION OF `. 3,00,000/- TO M/S. ADANI EXPORTS LT D FOR NOT PURCHASING THE ANILINE OIL. THE APPELLANT FILED FOL LOWING SUBMISSIONS ON THIS ISSUE: THE PARTY TO WHOM THE PAYMENT IS MADE IS AN EXPORT HOUSE WHICH IMPORTS THE MATERIAL IN BULK. IT WAS FOUN D ECONOMICAL TO PURCHASE AND HENCE ORDER WAS PLACED. THEREAFTER THE PRICE OF THE MATERIAL IN THE MARKET HAS FALLEN DOWN AND YOUR APPELLANT DID NOT GET ANY ORDE R FOR SUPPLY OF THAT MATERIAL AND HENCE IT CHOSE NOT TO PUR CHASE AND PAID THE DAMAGES. SUCH PAYMENT OF DAMAGES IS NORMAL INCIDENCE IN BUSINESS. THIS WAS DONE WITH A VIEW TO ARREST/LIMIT THE BUSINESS LOSSES THEREOF. THE CONTRACT WA S ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS AND COMPENSATION WAS ALSO PAID TO SAVE FURTHER DAMAGES. THE PAYMENT WAS NOT OF CAPITAL NATURE AND IT WAS NOT A PERSONAL EXPENDITURE. IT IS INCURRED WHOLLY AND EXCL USIVELY IN THE COURSE OF AND FOR THE PURPOSE OF BUSINESS. ITA NO. 2632/M/2010 3 THE ASSESSEE ALSO RELIED ON THE FOLLOWING JUDGEMENTS: CIT VS INDIAN COMMERCIAL COMPANY PVT. LTD. 106 ITR 465 (BOM) CIT VS JAYDWAR TEXTILES 202 ITR 569 (BOM) 4. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. T HE APPELLANT IS NOT REGULAR DEALER IN ANILINE OIL. THE APPELLANT IS ALSO NOT REGULARLY DEALING WITH M/S. ADANI EXPORTS L TD.,. THE APPELLANT HAS ALSO NOT PAID ANY ADVANCE AT THE TI ME OF PLACING PURCHASE ORDER ON M/S. ADANI EXPORT. M/S. ADA NI EXPORTS LTD. WILL NOT BOOK AND IMPORT THE OIL WITHO UT GETTING ANY ADVANCE FROM NON REGULAR CUSTOMERS. THE APPELLAN T ALSO COULD NOT FILE ANY EVIDENCE THAT IT WAS REQUIRED TO PAY COMPENSATION IF IT DOES NOT PURCHASE THE ORDERED QUANT ITY OF OIL. THERE IS NO BASIS FOR CALCULATING THE COMPENSA TION TO BE PAID AND THE APPELLANT HAS ALSO NOT BEEN ABLE TO SH OW THAT IT WAS UNDER ANY OBLIGATION TO PAY THE COMPENSAT ION. IN VIEW OF THESE FACTS, CLAIM OF THE APPELLANT THAT I T PAID THE COMPENSATION IS NOT GENUINE AND THE SAME CANNOT B E ALLOWED ON THE BASIS OF DEBIT NOTE ISSUED BY M/S. ADAN I EXPORTS LTD. THE ACTION OF THE ASSESSING OFFICER IS UPH ELD. THIS GROUND OF APPEAL IS NOT ALLOWED. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE US A ND REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). WE FIND THAT THE ASSESSEE COMPANY HAD PLACED ORDER FOR SUPPLY OF ANIL INE OIL 20 METRIC TONS ON 19 TH MAY, 2005. THE RATE AGREED WAS `. 100/- PER KG AS EVIDENT IN THE ORDER. THE MARKET PRICE IN WHOLE SAL E MARKET ON THAT DAY WAS ` 105/- PER KG. THEREAFTER THE PRICE HAD F ALLEN DOWN AND THE MARKET PRICE CAME TO `. 85/- PER KG. THE ASSESSEE COM PANY MEANWHILE COULD NOT GET ANY ORDER FOR SUPPLIES. THE TERMS OF ORDER PROVIDED THAT THE STORAGE FACILITY WOULD BE AVAILABL E FOR 60 DAYS FREE OF CHARGE AND THEREAFTER THE STORAGE CHARGES HAD TO BE P AID. AS THE MARKET PRICE HAD FALLEN DOWN, THE ASSESSEE COMPANY DEC IDED TO CANCEL THE ORDER VIDE LETTER DT. 15 TH JUNE, 2005. THE ASSESSEE COMPANY CHOSE TO PAY THE COMPENSATION AS OVERALL IT WAS ECONOMICAL TO PAY THE SAME RATHER THAT INCURRING LOSS AND FURTHER LOSS BY WAY OF ST ORAGE CHARGES. THE ASSESSEE COMPANY HAD GIVEN THE MARKET PRICE AS QUOTE D IN THE ITA NO. 2632/M/2010 4 CHEMICAL WEEKLY. THE ASSESSEE HAS PRODUCED CERTIFIED COP Y OF THE MARKET PRICE QUOTATION ISSUED BY THE PUBLISHERS OF MAGA ZINE CHEMICAL WEEKLY. HENCE WE ALLOW THE SUM OF `. 3,00,000/- PAID AS COMPENSATION FOR CANCELLATION OF PURCHASE COMMITMENT. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 27 TH APRIL, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2632/M/2010 5 DATE INITIALS 1 DRAFT DICTATED ON: 1 8 .0 4. 2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 1 9 .0 4 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______