DCIT 9(1), MUMBAI V. AXIS ELECTRICAL COMPONENTS INDIA P. LTD, MUMBAI

ITA 2702/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7839 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: PARAS S SAVLA

Judgement Text

1 ITA NO.2702/MUM/2010 ASSTT. YEAR : 2007-08. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER. I.T.A. NO. 2702/MUM/2010 ASSESSMEN T YEAR : 2007-08. DY. COMMISSIONER OF INCOME-TAX, M/S AXIX ELECTRICAL COMPONENTS RANGE-9(1), MUMBAI. VS. INDIA PVT. LTD., PLOT NO. 104C, GOVT. INDL. ESTATE, KANDI VALI(W), MUMBAI 400067. PAN AAACA691C. APPELLANT RESPONDENT. APPELLANT BY : SHRI JAGDISH. RESPONDENT BY : SHRI PARAS S. SAVLA. O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-19, MUMBAI DATED 27-01-2010, ON THE FO LLOWING EFFECTIVE GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.30,88,654/- ON ACCOUNT OF DISALLOWANCE U/S 40A(2 )(B) BEING 25% OF LABOUR CHARGES PAID TO SISTER CONCERN M/S PARAMOUNT COMMERCIAL CORPORATION. 2. WE HAVE HEARD MR. JAGDISH, THE LEARNED DR AND MR . PARAS S. SALVA, LEARNED COUNSEL FOR THE ASSESSEE. THE FACTS ARE BROUGHT OUT BY THE CIT(APPEALS) AT PARA 5 OF HIS ORDER, WHICH ARE EXTRACTED BELOW FOR READY REFE RENCE. 2 ITA NO.2702/MUM/2010 ASSTT. YEAR : 2007-08. 5. GROUND 2 IS AGAINST DISALLOWANCE OF AN AMOUNT O F RS.30,88,654/- BEING 25% OF LABOUR CHARGES PAID TO SISTER CONCERN , M/S PARAMOUNT COMMERCIAL CORPORATION (I) LTD. M/S PARAMOUNT COMME RCIAL CORPORATION (I) LTD. IS AN ASSOCIATE CONCERN WHICH UNDERTAKES J OB WORKS. THE APPELLANT PAID AN AMOUNT OF RS.1,23,54,618/- FOR SUCH JOB WOR KS GOT DONE. THE AO INVOKED THE PROVISIONS OF S. 40A(2)(B) FOR THE FOLL OWING REASONS :- A. BOTH APPELLANT AND ASSOCIATE CONCERN ARE IN THE SAM E LINE OF BUSINESS. B. THE APPELLANT HAD INCURRED EXPENDITURE ON FOREIGN T RAVEL OF ITS DIRECTORS BUT THE SKILL AND EXPERTISE GAINED ON ACCOUNT OF SU CH TRAVEL DOES NOT APPEAR TO BE SHARED WITH THE ASSOCIATE CONCERN THOU GH IT IS ARGUED THAT THE APPELLANT WHICH IS IN THE BUSINESS OF EXPORT OF ELE CTRICAL TRANSMISSION ACCESSORIES NEED TO MAINTAIN HIGH STANDARD OF QUALI TY WHICH IS THE REASON FOR ITS TRANSACTIONS WITH ITS SISTER CONCERN. C. THOUGH THE ASSESSEE HAS CITED COMPARABLE CASES TO E VIDENCE THAT THE PAYMENT IS REASONABLE, IT HAS NOT FURNISHED EXACT NATURE OF LABOUR JOBS ITEMS / SIZE / QUANTITY ETC. THE CIT(APPEALS) AT PARA 5.2 HELD AS FOLLOWS : 5.2 I FIND THAT SIMILAR ISSUE ARISING FROM THE SAM E SET OF FACTS AND CIRCUMSTANCES HAD ARISEN IN EARLIER YEARS I.E. A.Y. 2005-06 AND 2006-07, WHEREIN THE HON. CIT(A) HAD ALLOWED THE GROUND HOLD ING THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO PROVE THAT PAYMENTS MADE ARE EXCESSIVE. REFERENCE IS MADE TO ORDER IN APPEAL NO. CIT(A)IX/DC.9(1)/IT- 220/2008-09 DATED 27.5.2009. IT HAS ALSO BEEN BROUG HT TO MY NOTICE BY THE APPELLANT THAT SIMILAR ISSUE HAD COME UP BEFORE THE HON.TRIBUNAL, MUMBAI BENCH A IN ITA NO. 377/MUM/2007 FOR A.Y. 2003-04 WHEREIN THE HONBLE TRIBUNAL HAD CONCURRED WITH THE FINDINGS OF THE CIT(A) THAT THERE IS NOTHING TO SHOW THAT EXCESSIVE PAYMENTS ARE MADE. T HE FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE TRI BUNAL, THIS GROUND STANDS ALLOWED. THE DISALLOWANCE OF RS.30,88,654/ IS DELET ED. THIS GROUND IS ALLOWED. 3 ITA NO.2702/MUM/2010 ASSTT. YEAR : 2007-08. 3. THE ORDERS OF THE CIT(APPEALS) FOR THE ASSESSMEN T YEARS 2005-06 AND 2006- 07 WERE UPHELD BY THE A-BENCH OF THE TRIBUNAL VIDE ORDER DATED 9 TH FEB., 2010. THUS WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A PPEALS) AND UPHELD THE SAME. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH , 2011. SD/- SD/- (R.S.PADVEKAR) (J. SUD HAKAR REDDY) JUDICIAL MEMBER. ACCOUNT ANT MEMBER WAKODE MUMBAI, DATED: 30 TH MARCH, 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, A-BENCH (TRUE COPY) BY ORDER ASSTT. REGISTR AR, ITAT, MUMBAI. WAKODE