ACIT, New Delhi V. M/s Maruti Insurance Distribution Services Ltd., New Delhi

ITA 2866/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1021 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 12-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Assessee Lawyers: ROHIT JAIN
• Keywords: Opportunity of being heard; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NO. 2866/DEL/09 ASSTT. YR: 2006-07 ACIT CIRCLE 6(1), VS. MARUTI INSURANCE DISTRIBUT ION SERVICES LTD., NEW DELHI. 11 TH FLOOR, JEEVAN PRAKASH BUILDING, 25, K.G. MARG, NEW DELHI. PAN/GIR NO. AADCM3497P ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI G.S. SAHOTA SR. DR RESPONDENT BY : SHRI ROHIT JAIN ADV. O R D E R PER A.D. JAIN, JUDICIAL MEMBER : THE APPEAL BY THE REVENUE ARISES OUT OF THE ORDER D ATED 26-3-2009 OF THE CIT(APPEALS)- IX, NEW DELHI FOR A.Y. 2006-07. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE, IN ITS APPEAL, IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 89,98,913/- MADE ON ACCOUNT OF EXCESSIVE PAYMENT OF REMUNERATION TO DEALERS. 3. THE AO RESTRICTED THE CLAIM OF DEDUCTION OF REMU NERATION PAID BY THE ASSESSEE TO ITS DEALERS AT 60% OF THE TOTAL COMMIS SION RECEIPTS AMOUNTING TO RS. 5,39,93,482/-. THE BALANCE PAYMENT OF REMUNERAT ION , AMOUNTING TO RS. ITA 2866/DEL/09 ACIT VS. M/S MARUTI INSURANCE DISTRIBUTION SERVICES LTD. 2 89,98,913/- WAS DISALLOWED ON THE BASIS THAT THE PA YMENT WAS UNREASONABLE AND EXCESSIVE. 4. BEFORE THE CIT(A), THE ASSESSEE PLACED RELIANCE ON THE FIRST APPELLATE ORDER FOR A.Y. 2005-06, WHEREIN THE CIT(A) HAD OBSE RVED AS FOLLOWS: 4.4. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED AR, I HAVE PERUSED THE TEXT OF THE JUDGMENTS ON WHI CH THE AR RELIED. RATIOS OF THESE JUDGMENTS ARE APPLICABLE TO THE FACTS OF THE INSTANT CASE AS THE AO HAS NO WHERE PROVED THAT THE EXPENDITURE HAD NOT BEEN INCURRED BY THE APPELLANT FOR THE BUSINESS PURPOSE. THE EXPENDITURE HAS NOT BEEN FOUN D TO BE EITHER CAPITAL IN NATURE OR PERSONAL OR BOGUS IN N ATURE. THE COMPARATIVE FIGURES GIVEN BY THE AR W.R.T. THEE INS URANCE COMMISSION RECEIVED, REMUNERATION PAID TO THE DEALE RS AND ITS %AGE TO THE COMMISSION RECEIVED, GP/NP RATIO FOR TH E LAST THREE YEARS ARE POINTERS TO THE FACT THAT OVER THE YEARS, THE APPELLANT HAS PAID LESSER %AGE OF REMUNERATION VIZ-A-VIZ RECE IPT OF COMMISSION AND THE AO HAS NO LOGICAL JUSTIFICATION TO RESTRICT THE AMOUNT OF REMUNERATION PAID TO THE DEALERS FROM 70.09% TO 60%. THE APPELLANT HAS DEDUCTED THE TDS ON THE PAY MENTS SHOWN TO THE DEALERS AND THE REQUIRED DETAILS OF TH ESE DEALERS LIKE THE ADDRESS ETC. HAVE BEEN PROVIDED TO THE AO BUT DISALLOWING PART OF THE REMUNERATION WITHOUT EFFECT ING ANY ENQUIRIES TO PROVE THE CASE OTHERWISE WILL DEFINITE LY NOT BE OF ANY HELP TO THE AO. THOUGH THE PRINCIPLE OF RES JU DICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS BUT DEFINI TELY, IF IN THE EARLIER YEARS, NO ADDITION HAD BEEN MADE BY THE DEP ARTMENT THEN WITHOUT BASING THE FINDINGS ON ANY OTHER CONCR ETE EVIDENCES, THERE IS NO JUSTIFICATION FOR THE DISALL OWANCE. IN VIEW OF THE ABOVE MENTIONED REASONS, I DO NOT SEE ANY RE ASON ON THE PART OF THE AO TO REJECT THE BOOKS OF ACCOUNTS AND DISALLOW RS. 60,10,118/- AND DIRECT THE AO TO DELETE THE SAID AD DITION SO MADE. THIS GROUND OF APPEAL IS ALLOWED TO THE APPEL LANT. ITA 2866/DEL/09 ACIT VS. M/S MARUTI INSURANCE DISTRIBUTION SERVICES LTD. 3 5. FOLLOWING HIS AFORESAID ORDER FOR A.Y. 2005-06 I N ASSESSEES OWN CASE, IN THE IMPUGNED ORDER, THE LEARNED CIT(A) HA S DIRECTED THE AO TO DELETE THE ADDITION MADE. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. 6. THE LEARNED DR, CHALLENGING THE IMPUGNED ORDER, HAS CONTENDED THAT THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT THE REMUNERATION PAID IN THE EARLIER YEARS WERE WRONGLY COMPARED WITH THAT OF T HE YEAR UNDER CONSIDERATION; THAT IN THE INITIAL YEARS, IN VIEW O F THE SETTING UP OF THE OUT LETS, THE PAYMENT OF REMUNERATION WAS MORE AND ACCO RDINGLY FOR THE YEAR UNDER CONSIDERATION, A DRASTIC DECLINE IN THE PAYME NT OF REMUNERATION WAS WARRANTED. THE LEARNED DR HAS DRAWN OUR ATTENTION TO THE AOS OBSERVATION TO THE EFFECT THAT FOR A.Y. 2005-06 THE AO HAD OBSE RVED THAT THE AGREEMENT DID NOT PROVIDE ANY BASIS FOR PASSING ON FIXED PERC ENTAGE AND THAT THE ACTION OF THE ASSESSEE WAS ARBITRARY AND EXCESSIVE; AND TH AT FOR THE YEAR UNDER CONSIDERATION ALSO THE FACTS HAD REMAINED THE SAME. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, PLACED RELIANCE ON TRIBUNALS ORDER DATED 9-10-2009 IN THE ASSESSEES OWN CASE FOR A.Y. 2005-06 IN ITA NO. 1590 & 1924/DEL/09 ( COPY OF ORDER HAS BEEN FILED), WHEREIN THE FINDINGS RECORDED BY THE LEARNE D CIT(A) HAD NOT BEEN CONTROVERTED ON BEHALF OF THE DEPARTMENT AND THE AP PEAL FILED BY THE DEPARTMENT WAS DISMISSED. ITA 2866/DEL/09 ACIT VS. M/S MARUTI INSURANCE DISTRIBUTION SERVICES LTD. 4 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE LEARNED CIT(A) HAS FOLLOWED HIS ORDER IN ASSESS EES OWN CASE FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. A.Y. 200 5-06, OBSERVING, INTER ALIA, THAT THE EXPENDITURE HAD NOT BEEN FOUND TO B E CAPITAL OR PERSONAL IN NATURE OR BOGUS; THAT THE REMUNERATION PAID BY THE ASSESSEE TO ITS DEALERS AND ITS PERCENTAGE TO THE COMMISSION RECEIVED, G.P./N.P . RATE FOR THE PRECEDING 3 YEARS INDICATING THAT OVER THE YEARS THE ASSESSEE HAD PAID LESSER PERCENTAGE OF REMUNERATION VIS A VIS RECEIPT OF COMMISSION; TH AT THE AO WAS NOT JUSTIFIED TO RESTRICT THE AMOUNT OF REMUNERATION PA ID FROM 70.09% TO 60%; THAT THE ASSESSEE HAD DEDUCTED THE TDS SHOWN TO THE DEALERS AND THE REQUIRED DETAILS OF THESE DEALERS HAD BEEN PROVIDED TO THE AO AND THE AO HAD DISALLOWED PART OF THE REMUNERATION WITHOUT MAK ING ANY INQUIRES. 9. HOWEVER, WE FIND SUBSTANCE IN THE SUBMISSION OF THE DEPARTMENT THAT IN THE INITIAL YEARS, IN VIEW OF THE SETTING UP OF THE OUTLETS THE PAYMENT OF THE REMUNERATION WAS SAME AND THAT BEING SO OVER THE YE ARS UNDER CONSIDERATION, A DRASTIC DECLINE IN THE PAYMENT OF REMUNERATION WA S WARRANTED. THIS HAS NO WHERE BEEN CONTROVERTED ON BEHALF OF THE ASSESSEE. AS SUCH, AS AGREED TO BY THE PARTIES, THE MATTER NEEDS TO BE REMITTED TO THE FILE OF THE AO, TO BE EXAMINED AND DECIDED AFRESH IN ACCORDANCE WITH LAW, AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THE AO SHALL DEAL AND ITA 2866/DEL/09 ACIT VS. M/S MARUTI INSURANCE DISTRIBUTION SERVICES LTD. 5 DECIDE THE ISSUE INDEPENDENT OF THE COMPARISON WITH THE REMUNERATION PAID IN THE EARLIER YEARS WITH THAT OF THE YEAR UNDER CO NSIDERATION. WE ORDER ACCORDINGLY. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL OF THE DEPARTMENT IS TREATED AS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30-11-2009. ( K.G. BANSAL ) (A.D. JAIN ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: _______12- 2009. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR