ACIT CEN CIR 29, MUMBAI V. PEST CONTROL (INDIA) P.. LTD, MUMBAI

ITA 2918/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79412 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: S V PIKALE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.2918/MUM/2013 (ASSESSMENT YEAR: 20010-11) ACIT CENTRAL CIRCLE - 29 ROOM NO.411, 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD, CHURCHGATE MUMBAI-400 020. VS. M/S. PEST CONTROL (INDIA) PVT LTD. 36, YUSUF BUILDING M.G. ROAD, FORT MUMBAI-400 001. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O. : AAACP 5994 K ASSESSEE BY : SHRI S.V. PIKALE REVENUE BY : S MT. PARMINDER DATE OF HEARING : 17/07/2014 DATE OF PRONOUNCEMENT : 25/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 19/02/2013 OF CIT(A) FOR THE ASSESSMENT YEAR 2010-1 1. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL :- 1 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS . 1,40,95,3751- MADE BY THE A.O. ON ACCOUNT OF COMMISSION PAYMENT M ADE TO THE DIRECTORS. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN JUSTIFYING THE PAYMENT OF C OMMISSION MADE BY THE ASSESSEE COMPANY TO ITS DIRECTORS EVEN THOUGH THE COMMISSION WAS AD- HOC AND NOT ON THE BASIS OF ANY SPECIFIC FINDINGS OF INCREASE IN SHARES & PROFITS OF THE COM PANY ATTRIBUTABLE TO THE DIRECTORS. 3 THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AN D TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. ITA NO. 2918/M/13 AY:10-11 2 4 THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUN DS STATED ABOVE, THE ORDER OF THE LD. CIT(A)-40, MUMBAI, MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. THE ONLY ISSUE ARISING IN THE APPEAL OF THE REVE NUE IS REGARDING DELETION OF THE ADDITION MADE BY AO ON ACCOUNT OF C OMMISSION PAID TO THE DIRECTORS. 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS IS A RECURRING ISSUE INVOLVED IN THE EARLIER ASSESSMENT YEARS 2006 -07 TO 2009-10. THE TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08 CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN ITA NO.5317/M/10 VIDE ORDER DATED 14/03/2012 IN PARA-6 AS UNDER :- 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECO RDS. THE LD. COUNSEL SUBMITS THAT COMPANY HAS BEEN PAYING THE DI RECTORS REMUNERATION AS A PROFIT COMMISSION AS PER THE PROV ISIONS OF THE COMPANIES ACT, 1956, AFTER DETERMINATION OF THE PRO FITS. THE ASSESSEE-COMPANY ALSO IS PERFORMANCE INCENTIVES TO THE MANAGERS. HE SUBMITTED THAT MR. S. RAO WAS CHAIRMAN & MANAGIN G DIRECTOR OF THE ASSESSEE COMPANY WHO WITHDREW FROM THE ACTI VE PARTICIPATION OF HE COMPANY'S BUSINESS AND MR. ANIL S. RAO WAS PAID A COMMISSION OF RS.81,39,200/- @ 8% OF THE PR OFIT WHICH AS PER THE RESOLUTION PASSED BY THE BOARD. WE HAVE ALS O HEARD LD. D.R. WE FIND THAT THE PROFIT COMMISSION WHICH IS PA ID TO THE DIRECTOR IS APPROVED IN THE GENERAL MEETING (G.M.) OF THE SHAREHOLDERS AND REQUIRED EVIDENCE WAS FILED BEFORE THE LD. CIT (A). WE FURTHER FIND THAT ASSESSEE HAS BEEN PAYING PROFIT COMMISSION TO THE MANAGING DIRECTOR IN PAST ALSO. E ARLIER, MR. S. RAO WAS PAID SAME COMMISSION AND AFTER HIS WITHDRAW AL FROM BUSINESS OF THE ASSESSEE, MR. ANIL RAO HAS BEEN PAI D, ENHANCING HIS PERCENTAGE TO 8%, THAT IS MERGING PERCENTAGE OF COMMISSION EARLIER PAID TO HIS FATHER. IN PAST A.O. HAS ALLOWE D SAID DEDUCTION AND NEVER RAISED ANY OBJECTION. AFTER GIVING OUR AN XIOUS CONSIDERATION TO THE FACTS ON RECORDS, IN OUR OPINI ON THERE WAS NO JUSTIFICATION TO THE A.O. TO DISALLOW THE COMMISSI ON PAYMENT TO THE DIRECTORS AND THE MANAGERS. WE FIND NO REASON T O TAKE A DIFFERENT VIEW FROM THAT OF LD. CIT (A), WE ACCORDI NGLY CONFIRM THE SAME AND ACCORDINGLY ISSUE IN ROUND 'B' ALSO STANDS DISMISSED. ITA NO. 2918/M/13 AY:10-11 3 4. THUS IT IS CLEAR THAT FOR THE ASSESSMENT YEAR 20 07-08 THE ISSUE OF COMMISSION PAID TO THE DIRECTORS WHICH WAS DISALLOW ED BY THE AO HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A ) AND FURTHER BY THIS TRIBUNAL . WE FURTHER NOTE THAT FOR THE ASSESSMENT YEAR 2008-09 THE TRIBUNAL AGAIN CONSIDERED AND DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSMENT YEAR 2007- 08. AGAIN FOR THE ASSESSMENT YEARS 2006-07 AND 2009 -10 THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE VIDE O RDER DATED 29/11/2013 IN PARA-7 AS UNDER :- 7. AS REGARDS THE APPEAL OF THE REVENUE FOR A.Y. 2 009-10 BEING ITA NO. 5953/MUM/2012, IT IS OBSERVED THAT THE ISSU ES INVOLVED THEREIN RELATING TO DELETION BY THE LD. CIT(A) OF THE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF UNEXPIRED SERVICE CONTRA CT AND DISALLOWANCE COMMISSION PAYMENT MADE TO THE DIRECTO RS ARE SIMILAR TO A.Y. 2006-07. ACCORDINGLY WE FOLLOW OUR CONCLUSION DRAWN IN A.Y. 2006-07 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDITIONS MADE BY THE A.O. ON A CCOUNT OF UNEXPIRED SERVICE CONTRACT AND DISALLOWANCE OF COMM ISSION TO DIRECTORS. APPEAL OF THE REVENUE FOR A.Y. 2009-10 I S THEREFORE DISMISSED. 4.1 AS IT IS CLEAR FROM THE EARLIER ORDER OF THIS T RIBUNAL THAT THIS ISSUE HAS BEEN CONSISTENTLY DECIDED IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE. ACCORDINGLY TO MAINTAIN THE RULE OF CONSIS TENCY AND FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL WE DECIDE THIS I SSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE . THE ORDER OF CI T(A) QUA THIS ISSUE IS UPHELD. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 25/07/2014. JV. ITA NO. 2918/M/13 AY:10-11 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.