The DCIT, Circle-3(1)(1), Ahmedabad V. M/s. Plastene India Ltd., Ahmedabad

ITA 2816/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8244 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 26-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 3(1)(1), AHMEDABAD (APPELLANT) VS M/S. PLASTENE INDIA LTD. H.B. JIRAWALA HOUSE, 13, NAVBHARAT SOCIETY, OPP. PANCHSHIL BUS STOP, AHMEDA DA D PAN: AAAC03087C (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: S H RI ASTHA MANIAR , A.R. DATE OF HEARING : 20 - 03 - 2 018 DATE OF PRONOUNCEMENT : 10 - 05 - 2 018 / ORDER P ER : AMARJI T SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2008 - 09 , ARIS ES FROM ORDER OF THE CIT(A) - 9 , AHM EDABAD DATED 26 - 08 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RA ISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,96,33,029/ - MADE U/S.40(A)(IA) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD, COMMISSIONER OF INCOME TAX (A) OUGHT T O HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER TO THE ABOVE EXTENT. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. I T A NO . 2816 / A HD/20 16 A SSESSMENT YEAR 200 8 - 09 I.T.A NO. 2816 /AHD/20 16 A.Y. 2008 - 09 PAGE NO DCIT VS. M/S. PLASTENE INDIA LTD. 2 3. THE BRIEF FACT OF THE CASE IS THAT THE ORIGINAL ASSES SMENT U/S. 143(3) OF THE ACT IN THIS CASE WAS PASSED ON 28 TH MARCH, 2013 BY DETERMINING THE TOTAL INCOME OF RS. 6 , 82 , 35 , 270/ - . SUBSEQUENTLY, THE CASE WAS REOPENED U/S. 147 ON THE GROUND THAT ASSESSEE HAS NOT DED UCTED TDS U/S. 195 ON THE AMOUNT RELATING TO DISCOUNT CHARGE OF RS. 1 , 96 , 33 , 029/ - ON LETTER OF CREDIT. THE ASSESSEE HAS EXPLAINED THAT IT PURCHASES FROM SUPPLIER AND AS PER THE AGREED ARRANGEMENT , THE SUPPLIER DISCOUNT THE LE TTER OF CREDIT WITH THE BANK A ND THE BANK DEDUCT THE AMOUNT FOR EARLY PAYMENT AND TH E ASSES S E HAS TO REIMBURSE THE SUPPLIER SUCH CHARGES DEDUCTED BY T H E BANK . THEREFORE , THE ASSESSEE HAS CLAIMED THAT THE LC DISCOUNT CHARGES IS NOTHING BUT REIMBURSEMENT O F TOTAL EXPENSE S INCURRED BY T HE SUPPLIER UNDER AGREED COMMERCIAL ARRANGEMENT AND ITS ADDITIONAL COST TOWARDS PURCHASES OF GOODS. THE ASSESSING OFFICER HAS NOT AGREED WITH THE ASSESSEE A ND DISALLOWED THE AMOUNT OF RS. 1 , 96 , 33 , 029/ - U/S. 40(A)(IA) OF THE ACT. 4. AGGRIEVED ASSESSE E FILED APPEAL BEFORE HE LD. CIT(A). T HE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY STATING THAT ASSSSEEE HAS PURCHASED RAW MATERIAL FROM SUPPLIER ON CREDIT AND FOR DISCHARGING ITS PURCHASE COMMITMENTS , THE ASSESSEE OPENED LETTER OF CREDIT IN FA VOUR OF THE SUPPLIER . THE SUPPLIER EN CASHES THE LE TTER OF CREDIT WITH THE BANK AND THE BANK DEDUCT ED CERTAIN AMOUNT ON ACCOUNT OF NEGOTIATION, INTEREST BANK CHARGES ETC. THE Q UANTUM WHICH IS DEDUCTED BY BANK WHEN THE LC IS DISCOUNTED BY THE SUPPLIER WITH B ANK IS REIMBURSED BY THE ASSESSEE TO THE SUPPLIER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREF ULLY. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS DEBITED LETTER OF CREDIT (LC) DISCOUNT CHARGES FOR R S. 1 , 94 , 65 , 150/ - TO THE P & L A/C. T HE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE WAS REQUIRED TO DEDUCT TAX U/S. 195 OF THE ACT ON THE PAYMENT OF L C. INTEREST. THE ASSESSEE DEMONSTRATED WITH THE SUPPORTING MATERIAL TH AT L. C. DISCOUNT CHARGES IS THE REIMBURSEMENT OF COST /EXPENSES INCURRED B Y THE SUPPLIER OF GOODS I.T.A NO. 2816 /AHD/20 16 A.Y. 2008 - 09 PAGE NO DCIT VS. M/S. PLASTENE INDIA LTD. 3 WHICH IS ADDITIONAL COST TOWARDS PURCHASE OF GOODS. THE SUPPLIER OF GOODS DISCOUNTS THE L.C. WITH THE BANK AND THE BANK DEDUCT S DISCOUNTING CHARGES ON MAKIN G THE PAYMENT TO THE SUPPLIER ON BEHALF OF THE ASSESSEE. IN THIS TYPE OF COMMERCIAL ARRANGEMENT, THE BANK DISCHARGE THE PURCHASE COMMITMENTS AS PER THE TERMS/ CONDITIONS OF LETTER OF CREDIT OPENED B Y THE ASSESE E . THE ASSESSE REIMBURSE ITS SUPPLIER OF GOOD S THE DISCOUNTING CHARGES DEDUCTING BY THE BANK WHILE MAKING PAYMENT OF PURCHASE COMMITMENTS ON BEHALF OF THE ASSESSE AS PER THE TERMS OF LET T ER OF CREDIT. IT IS CLEAR FROM THE ABOVE FACTS THAT LC DISCOUNT CHARGE IS A REIMBURSEMENT OF THE EXPENSES TO THE SUPPLIERS OF GOODS AS ADDITIONAL COST TOWARDS PURCHASE OF GOODS. IN VIEW OF THE ABOVE FACTS AND FINDINGS , WE ARE INCLINED WITH THE DECISION OF LD. CIT(A) THAT THE ASSESSEE IS PAYING ONLY THE COST OF GOODS THAT IT HAS PURCHASED FROM THE SUPPLIERS BY WAY OF L C AN D SECONDLY BY REIMBURSING THE BANK CHARGES AND U/S., 194A(3)(III)(A) , THE PROVISION OF SECTION 194 ARE NOT APPLICABLE TO BANKING COMPANY REGULATED BY BANKING REGULATION ACT. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE A PPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 05 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 10 /05 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,