BHIMAAS ENGINEERING AND PROJECTS PRIVATE LIMITED, CHENNAI V. DCIT CORPORATE CIRCLE 1(2), CHENNAI

ITA 2907/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4422 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV KUMAR SHAH
• Keywords: Business expenditure
• Section: 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2907/CHNY/2018 & '& / ASSESSMENT YEAR : 2015-16 M/S BHIMAAS ENGINEERING AND PROJECTS PRIVATE LIMITED, NO.50, VIVEKANANDA COLONY, PALANI ANDAVAR KOIL STREET, VADAPALANI, CHENNAI - 600 034. PAN : AAFCB 7970 G V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SH. SANJIV KUMAR SHAH, CA +,)* - . / RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL.CIT / - 0# / DATE OF HEARING : 28.02.2019 12' - 0# / DATE OF PRONOUNCEMENT : 21.03.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, CHENNAI, D ATED 18.07.2018 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2 I.T.A. NO.2907/CHNY/18 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF COMMISSION PAID TO THE EXTENT OF 41,78,779/-. 3. SHRI SANJIV KUMAR SHAH, THE LD. REPRESENTATIVE F OR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE ENGAGED THE SERVICE OF M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD. FOR PR OCURING ORDERS FOR EXPORT. IN FACT, AS PER THE AGREEMENT, COPY OF WHI CH IS AVAILABLE AT PAGES 13 AND 15, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS TO PAY COMMISSION AT THE RATE OF 6% OF THE EXPORT TURNOVER . THE ASSESSEE HAS PRODUCED COPY OF COMMISSION AGREEMENT AND EMAIL COM MUNICATION RECEIVED FROM THE AGENT BEFORE THE ASSESSING OFFICE R AS WELL AS THE CIT(APPEALS). HOWEVER, ACCORDING TO THE LD. REPRES ENTATIVE, BOTH THE AUTHORITIES BELOW DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUPPO RT THE CLAIM OF SERVICE SAID TO BE PROVIDED BY THE AGENT FOR PAYMEN T OF COMMISSION. 4. SHRI SANJIV KUMAR SHAH, THE LD. REPRESENTATIVE F OR THE ASSESSEE, FURTHER SUBMITTED THAT THE ASSESSEE, IN FACT, ENTER ED INTO COMMISSION AGREEMENT AND THE EXPORT WAS MADE ON THE BASIS OF T HE ORDERS PROCURED BY THE AGENT. ACCORDING TO THE LD. REPRESENTATIVE, THE LETTER OF CREDIT WAS FORWARDED TO THE ASSESSEE BY THE AGENT AND THE ASSESSEE ALSO PRODUCED ALL THE EMAIL COMMUNICATIONS. INSPITE OF THAT, ACCORDING TO THE LD. REPRESENTATIVE, THE CIT(APPEALS) FOUND THAT THE RE WAS NO EVIDENCE TO 3 I.T.A. NO.2907/CHNY/18 SHOW THAT THE AGENT HAS RENDERED ANY SERVICE. ON A QUERY FROM THE BENCH, WHEN THE SERVICE WAS SAID TO BE RENDERED BY M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD., WHY T HE PAYMENT WAS MADE TO OTHER THREE PERSONS, ONE OF THEM SAID TO BE EMPL OYEE OF M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD.? THE LD. REPRESENTATIVE CLARIFIED THAT THE TOTAL CONSIDERATION DOES NOT EXC EED 6% AS AGREED. THERE ARE ONLY EXPORT TRANSACTIONS TO ONE PARTY AND THE PAYMENT OF COMMISSION DOES NOT EXCEED 6%. THEREFORE, ACCORDIN G TO THE LD. REPRESENTATIVE, EVEN THOUGH THE PAYMENTS WERE MADE TO FOUR DIFFERENT PERSONS, THE SAME CANNOT BE DISALLOWED. 5. ON THE CONTRARY, SHRI R. CLEMENT RAMESH KUMAR, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THERE I S NO EVIDENCE TO SHOW THAT THE AGENT HAS RENDERED ANY SERVICE. ON A QUERY FROM THE BENCH, THE LD. D.R. SUBMITTED THAT THE PAYMENTS WER E MADE TO COMPANY AS WELL AS THE EMPLOYEE OF THE COMPANY THAT CREATED A DOUBT WITH REGARD TO NATURE OF SERVICE RENDERED BY THE AGENT. REFERR ING TO THE ORDER OF THE CIT(APPEALS), THE LD. D.R. CLARIFIED THAT THE ASSES SEE HAS PRODUCED COPIES OF THE COMMISSION AGREEMENT AND OTHER EMAIL COMMUNICATIONS. HOWEVER, THE CIT(APPEALS) FOUND THAT THESE DOCUMENT S DO NOT INSPIRE ANY CONFIDENCE. THEREFORE, ACCORDING TO THE LD. D. R., THE CIT(APPEALS) DISALLOWED THE CLAIM OF THE ASSESSEE. 4 I.T.A. NO.2907/CHNY/18 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT COMMISSION WAS PAID AT THE RATE OF 6% TO FOUR PERSONS INCLUDING M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD. ADMITTEDLY, THERE IS ONE EXPORT TO ONE PARTY OUTSIDE THE COUNTRY. THERE FORE, IT IS NOT KNOWN WHY THE COMMISSION WAS PAID TO FOUR DIFFERENT PERSO NS? THE ASSESSEE CLAIMS THAT THE COMMISSION PAYMENT DOES NOT EXCEED 6% AS AGREED. HOWEVER, WE ARE UNABLE TO ACCEPT THE CLAIM OF THE A SSESSEE. WHEN THE COMMISSION WAS PAID TO THE COMPANY M/S SIERRA ENGIN EERING & CONSTRUCTION (INDIA) PVT. LTD. TO THE EXTENT OF 9,50,000/-, WHY 16,66,667/- WAS PAID TO THE EMPLOYEE OF THE SAID CO MPANY? THE EMPLOYEE OF THE COMPANY IS EXPECTED TO WORK FOR THE COMPANY AND WHATEVER COMMISSION PAID TO THE COMPANY MAY BE FOR THE PURPOSE OF PROCURING ORDER. BUT, THE PAYMENT MADE TO EMPLOYEE OF THE COMPANY CANNOT BE CONSIDERED FOR THE PURPOSE OF PROCURING O RDERS. 7. MOREOVER, THERE IS NO EXPLANATION WITH REGARD TO PAYMENT MADE TO ONE MRS. A. VILASHINI AND TRR AUTOMOTIVE. IN VI EW OF THIS FACTUAL SITUATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE PAYMENT MADE TO M/S SIERRA ENGINEERING & CONSTRUCTION (INDI A) PVT. LTD. TO THE EXTENT OF 9,50,000/- MAY BE FOR PROCURING THE EXPORT ORDER. IN FACT, THE ASSESSEE EXPORTED GOODS AND PAYMENT OF 9,50,000/- WAS ALSO MADE TO 5 I.T.A. NO.2907/CHNY/18 M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD. THEREFORE, THE PAYMENT OF 9,50,000/- TO M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD. TOWARDS COMMISSION HAS TO BE ALLOWED. HO WEVER, IN RESPECT OF THE PAYMENTS MADE TO THE EMPLOYEE SHRI ARULTHAKSHAN AN TO THE EXTENT OF 16,66,667/- AND TO MRS. A. VILASHINI TO THE EXTENT OF 7,02,222 AND TO TRR AUTOMOTIVE CANNOT BE CONSIDERED TO BE PAYMENT M ADE FOR BUSINESS PURPOSE. IN THE ABSENCE OF EXPLANATION WHY THE PAY MENTS WERE MADE TO ABOVE SAID THREE PERSONS, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE PAYMENTS MADE TO SHRI A. ARULTHAKSHANAN, MRS. A . VILASHINI AND TRR AUTOMOTIVE CANNOT BE TREATED AS BUSINESS EXPENDITUR E. THEREFORE, THE SAME CANNOT BE ALLOWED. IN OTHER WORDS, THE PAYMEN T MADE TO M/S SIERRA ENGINEERING & CONSTRUCTION (INDIA) PVT. LTD. ALONE HAS TO BE CONSIDERED AS BUSINESS EXPENDITURE. OTHER PAYMENTS CANNOT BE CONSIDERED TO BE EXPENDITURE FOR BUSINESS. ACCORDI NGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE MODIFIED. THE ASSESSING OFFICER IS DIRECTED TO ALLOW A SUM OF 9,50,000/- PAID TO M/S SIERRA ENGINEERING & CONSTRU CTION (INDIA) PVT. LTD. AS BUSINESS EXPENDITURE WHILE COM PUTING TAXABLE INCOME. HOWEVER, DISALLOWANCE MADE BY THE ASSESSIN G OFFICER WITH REGARD TO PAYMENTS MADE TO SHRI A. ARULTHAKSHANAN, MRS. A. VILASHINI AND TRR AUTOMOTIVE IS CONFIRMED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 6 I.T.A. NO.2907/CHNY/18 ORDER PRONOUNCED IN THE COURT ON 21 ST MARCH, 2019 AT CHENNAI. SD/- SD/- (. !) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 21 ST MARCH, 2019. KRI. - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-1, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.