DCIT, CHENNAI V. Gimpex Limited, CHENNAI

ITA 2855/CHNY/2014

• Counselvise Citation: 285521714 RSA 2014
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 19-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: D ANAND
• Keywords: Commercial expediency
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2855/MDS/2014 ( )( / ASSESSMENT YEAR : 2003-04 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI - 600 034. V. M/S GIMPEX LIMITED, NO.181, LINGHI CHETTY STREET, CHENNAI - 600 001. PAN : AAACG 2482 P (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI A.B. KOLI, JCIT -.+, / 0 / RESPONDENT BY : SHRI D. ANAND, ADVOCATE 1 / 2% / DATE OF HEARING : 10.08.2015 3') / 2% / DATE OF PRONOUNCEMENT : 11.09.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNA I, DATED 05.06.2014 AND PERTAINS TO ASSESSMENT YEAR 2003-04. 2 I.T.A. NO.2855/MDS/14 2. SHRI A.B. KOHLI, THE LD. DEPARTMENTAL REPRESENTA TIVE, SUBMITTED THAT THE ASSESSEE HAS PAID KICKBACKS FOR SUPPLYING MATERIAL TO IRAQ UNDER FOOD FOR OIL PROGRAMME. A CCORDING TO THE LD. D.R., DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE EXPORT TO VARIOUS PARTIES UNDER FOOD FOR OIL PROGRAMME. THE UNITED NATIONS NOMINATED A COMMITTEE CALLED VO LKER COMMITTEE TO ENQUIRE INTO THE IRREGULARITIES IN F OOD FOR OIL PROGRAMME. THE ASSESSEE IS ALSO FOUND TO BE ONE O F THE COMPANIES PAID KICKBACKS TO IRAQI GOVERNMENT AND IT S AGENTS. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE BASIS OF THE VOLKER COMMITTEES REPORT, UNDER SECTION 37 OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). ON A QUERY FRO M THE BENCH WHETHER THE ASSESSING OFFICER MADE ANY INDEPENDENT ENQUIRY APART FROM VOLKER COMMITTEE REPORT, THE LD. D.R. VERY FAI RLY SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY OTHER THAN PLACING RELIANCE ON THE REPORT OF THE VOLKER C OMMITTEE. 3. ON THE CONTRARY, SHRI D. ANAND, THE LD.COUNSEL F OR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS PAID COMM ISSION OUTSIDE INDIA FOR THE SERVICES RENDERED OUTSIDE IND IA. IT IS NOT KICKBACKS TO ANY GOVERNMENT OR GOVERNMENTAL AGENCY. THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY, CAME TO A CONCLUSION 3 I.T.A. NO.2855/MDS/14 THAT THE ASSESSEE HAS PAID KICKBACKS. THE CIT(APPE ALS), AFTER CONSIDERING THE REPORT OF VOLKER COMMITTEE, FOUND T HAT TWO TYPES OF KICKBACKS WERE FOUND IN EXPORTING GOODS TO IRAQ UND ER FOOD FOR OIL PROGRAMME. ONE IS INLAND TRANSPORTATION FEE AND T HE ANOTHER IS AFTER SALES SERVICES FEE. THE CIT(APPEALS) FOUND T HAT THE PAYMENT OF COMMISSION MADE BY THE ASSESSEE IS IN LI NE WITH THE OTHER EXPORTERS PAID UNDER THE VERY SAME SCHEME. T HE LD.COUNSEL FURTHER SUBMITTED THAT THE PAYMENT OF COMMISSION CA NNOT BE EQUATED TO KICKBACKS OR BRIBE. EVEN THE VOLKER COM MITTEE HAS NOT USED THE WORD BRIBE. IT WAS USED KICKBACKS IN THE TRANSACTION. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT AN IDENTICAL ISSUE CAME BEFORE THE CALCUTTA HIGH COURT IN CIT V. RAJARANI EXPORTS (P.) LTD. (2014) 361 ITR 152. THE CIT(APPEALS), AFTER PLACING RELIANCE ON THE CALCUTTA HIGH COURTS DECISION AND KOLKATTA BENCHS DECISION IN TIL LTD. V. ACIT (16 S OT 33) AND THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN NSIL E XPORTS LTD. V. DCIT (2014) 63 SOT 43, FOUND THAT NO ILLEGALITY CAN BE ATTRIBUTED TO THE ASSESSEES PAYMENT OF COMMISSION OUTSIDE INDIA. ACCORDINGLY, THE CIT(APPEALS) DELETED THE ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. ADMITTEDL Y, THE ASSESSEE 4 I.T.A. NO.2855/MDS/14 HAS MADE PAYMENT IN THE COURSE OF EXPORT MADE TO IR AQ. THE ASSESSEE CLAIMS THAT THE PAYMENT WAS IN THE NATURE OF COMMISSION. HOWEVER, THE REVENUE CLAIMS THE SAME AS KICKBACKS T O THE AUTHORITIES OF IRAQI GOVERNMENT AND ITS AGENTS. TH E ASSESSING OFFICER HAS NOT MADE ANY INDIVIDUAL ENQUIRY WITH RE GARD TO THE NATURE OF PAYMENT MADE BY THE ASSESSEE. THE ASSESS ING OFFICER SIMPLY PLACED RELIANCE ON THE REPORT OF VOLKER COMM ITTEE. IN FACT, THE VOLKER COMMITTEE WAS NOMINATED BY UNITED NATION S FOR MAKING ENQUIRY WITH REGARD TO ALLEGED IRREGULARITIES. THE ASSESSEE, BEING BUSINESSMAN, WAS NECESSARILY REQUIRED TO PAY CERTAI N COMMISSION FOR AVAILING THE SERVICE OUTSIDE THE COUNTRY. WHET HER IT IS KICKBACK OR NOT HAS TO BE INDEPENDENTLY ENQUIRED BY THE ASSE SSING OFFICER. OF COURSE, REPORT OF THE VOLKER COMMITTEE MAY BE ON E OF THE RELEVANT FACTORS FOR PLACING RELIANCE BY THE ASSESS ING OFFICER. HOWEVER, THE ASSESSING OFFICER CANNOT PLACE RELIANC E EXCLUSIVELY ON THE REPORT OF THE VOLKER COMMITTEE FOR ARRIVING AT THE CONCLUSION THAT THE ASSESSEE HAS MADE PAYMENT TOWARDS KICKBACKS. I NCOME-TAX ACT, BEING A SPECIAL ENACTMENT AND THE ASSESSING OF FICER WAS ENTRUSTED WITH THE POWER TO MAKE ENQUIRY WITH REGAR D TO THE NATURE OF BUSINESS AND THE EXPENDITURE SAID TO BE INCURRED BY THE ASSESSEE, IN ADDITION TO THE REPORT OF VOLKER COMMI TTEE, THE ASSESSING OFFICER HAS TO NECESSARILY EXAMINE THE MA TERIAL AVAILABLE 5 I.T.A. NO.2855/MDS/14 ON RECORD APART FROM ENQUIRIES AND SHOULD COME TO A N INDEPENDENT CONCLUSION. THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT THE ASSESSING OFFICER, BEING A QUASI-JUDICIAL AUTHORITY UNDER THE PROVISIONS OF INCOME-TAX ACT, HAS TO COME TO AN IND EPENDENT CONCLUSION WITHOUT BEING INFLUENCED BY THE CONCLUSI ON REACHED BY ANY OF THE AUTHORITY EITHER IN OUR COUNTRY OR OUTSI DE THE COUNTRY. THE PRIMARY FUNCTION OF THE JUDICIAL AUTHORITY IN INDIA IS TO ADJUDICATE THE MATTER INDEPENDENTLY WITHOUT BEING INFLUENCED BY AN Y OF THE EXTERNAL FACTORS. IN THIS CASE, THE ASSESSING OFFICER HAS N OT MADE ANY ENQUIRY AT ALL OTHER THAN SIMPLY PLACING RELIANCE O N THE REPORT OF THE VOLKER COMMITTEE. 6. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF C ALCUTTA HIGH COURT IN RAJARANI EXPORTS (P.) LTD. (SUPRA). IN THE CASE BEFORE CALCUTTA HIGH COURT, AN IDENTICAL PAYMENT WAS MADE WHILE EXPORTING GOODS TO IRAQ. THE ASSESSING OFFICER MAD E ADDITION ON THE BASIS OF VOLKER COMMITTEES REPORT. THE TRIBUN AL FOUND THAT THE ASSESSEE IN FACT AVAILED THE SERVICE IN EXPORTING T HE GOODS. THEREFORE, THERE WAS A COMMERCIAL EXPEDIENCY IN MAK ING THE PAYMENT. ACCORDINGLY, THE KOLKATTA BENCH OF THIS T RIBUNAL FOUND THAT THE DISALLOWANCE UNDER SECTION 37 OF THE ACT, ON THE BASIS OF THE VOLKER COMMITTEES REPORT, IS NOT SUSTAINABLE. THE CALCUTTA 6 I.T.A. NO.2855/MDS/14 HIGH COURT FOUND THAT THE FINDINGS OF THE CIT(APPEA LS) AND THE TRIBUNAL ARE CORRECT AND ACCORDINGLY, CONFIRMED THE ORDER OF THE KOLKATTA BENCH. IN THIS CASE ALSO, AN IDENTICAL SI TUATION EXISTS AND THE ASSESSEE HAS PAID COMMISSION FOR AVAILING SERVI CE OUTSIDE INDIA. IN THE ABSENCE OF INDEPENDENT ENQUIRY CONDU CTED BY THE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. ACC ORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 11 TH SEPTEMBER, 2015 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 11 TH SEPTEMBER, 2015. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-II, CHENNAI 4. 1 92 /CIT II, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.