Maharashtra Solvent Extraction Pvt. Ltd., Jalgaon V. Joint Commissioner of Income-tax,

ITA 301/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7138 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-11-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 301 /P U N/201 5 / ASSESSMENT YEAR : 20 11 - 1 2 MAHARASHTRA SOLVENT EXTRACTION PVT. LTD., C/O S.K. OIL INDUSTRIES COMPOUND, SHIVAJI NAGAR, JALGAON 425001 . / APPELLANT PAN: AADCM8466G VS. THE JT. COMMISSIONER O F INCOME TAX, RANGE 2, JALGAON . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 08 . 11 . 2017 / DATE OF PRONOUNCEMENT: 29 . 11 .201 7 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 2 , NASHIK , DATED 1 5 . 0 1 .201 5 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE AS SESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL : - 1) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.9,71,240/ - ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAID TO SHRI RAVI SANJAY AGRAWAL. ITA NO. 301 /P U N/20 1 5 MAH SOLVENT EXTRACTION P LTD. 2 1 . 1 ) ON THE FACTS AND IN LAW THE CIT(A) HA S NOT APPRECIATED THE FACT THAT SHRI RAVI SANJAY AGRAWAL IS A QUALIFIED MBA, HAS EXPERIENCE OF EXPORT FIELD OF LAST 3 / 4 YEARS AND MADE HUGE EXPORTS AND PROFIT SINGLE HANDEDLY FOR THE COMPANY AND THE MARKET VALUE OF SAID SERVICES RENDERED IS MUCH HIGHER T HAN THE REMUNERATION AND COMMISSION PAID TO SANJAY AGRAWAL, EVEN NEWLY PASSED MBA'S ARE ALSO GRANTED SUCH REMUNERATION IN CAMPUS INTERVIEWS. 2) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.4,00,000/ - ON ACCOUNT O F SALARY PAID TO MRS.SANTOSH SANJAY AGRAWAL. 2.1) ON THE FACTS AND IN LAW THE C I T(A) HAS NOT APPRECIATED THE QUANTUM OF SERVICES RENDERED BY SMT.SANTOSH AGRAWAL, THE QUALIFICATION AND EXPERIENCE OF SANTOSH AGRAWAL AND ALSO THE RATIO LAID DOWN BY VARIOUS D ECISIONS ON THE ISSUE UNDER APPEAL. 3) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.9,58,105/ - ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAID TO SANJAY V. AGRAWAL - HUF, WITHOUT APPRECIATING THE BASIS AND REASONS FO R WHICH THE COMMISSION HAS BEEN PAID. 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE ARISING IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS. 4 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FAIRLY ACCEPTED THE STAND OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY, IN THE FACTS OF THE CASE, TH E ASSESSEE WAS ENGAGED IN RUNNING SOLVENT EXTRACTION PLANT. THE ASSESSEE FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7,25,77,813/ - . THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND VARIOUS ADDITIONS WERE MADE BY THE ASSESSING OFFICER AN D THE INCOME WAS ASSESSED AT RS.7,85,07,606/ - . IN THE APPEAL FILED BY THE ASSESSEE, WE ARE CONCERNED WITH FOLLOWING ADDITIONS: - A) COMMISSION PAID TO MR. RAVI SANJAY AGRAWAL OF RS.9,71,240/ - ; B) SALARY PAID TO SMT. SANTOSH SANJAY AGRAWAL OF RS.4 LAKHS; AND C) DISALLOWANCE OF COMMISSION PAID TO MR. SANJAY AGRAWAL, HUF OF RS.9,58,105/ - ITA NO. 301 /P U N/20 1 5 MAH SOLVENT EXTRACTION P LTD. 3 6. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PAID SALARY OF RS.15 LAKHS TO MR. RAVI SANJAY AGRAWAL PLUS COMMISSION OF RS.9,71,240/ - . THE ASSESSEE WAS ASKED TO PRODUCE THE KIND OF WORK DONE BY HIM TO EARN THE COMMISSION. IN RESPONSE, THE ASSESSEE EXPLAINED THAT HE HANDLED ALL THE EXPORT BUSINESS OF THE COMPANY AND IN ADDITION, HANDLED ALL CARGO MANAGEMENT OF THE COMPANY. HOWEVER, THE ASSESSING OFFICER DISALL OWED THE COMMISSION PAID TO HIM SINCE HIGH SALARY WAS BEING PAID TO HIM FOR SAME SORT OF WORK. THE ASSESSING OFFICER ALSO RELIED ON THE ORDER OF THE COMMISSIONER IN ASSESSMENT YEAR 2010 - 11 TO DISALLOW THE SAME. THE ASSESSING OFFICER ALSO WAS OF THE VIEW THAT SALARY PAID TO SMT. SANTOSH SANJAY AGRAWAL AT RS.15 LAKHS WAS HIGH AND UNREASONABLE AND HE ALLOWED 50% OF SALARY AS DEDUCTION AND THE BALANCE WAS ADDED TO HIS INCOME. IN RESPECT OF COMMISSION TO MR. SANJAY AGRAWAL, HUF OF RS.9,58,165/ - , THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE OF SERVICES GIVEN BY THE HUF AND ALSO THAT THE HUF WAS IN A REPRESENTATIVE CAPACITY, WHEREIN NO PERSON COULD USE HIS SKILL, HENCE COMMISSION OF RS.9,58,165/ - WAS DISALLOWED. 7. THE CIT(A) CONSIDERED THE PLEA OF ASSESSEE THAT ITS EXPORT TURNOVER HAD INCREASED FROM RS.313.19 CRORES TO RS.414.23 CRORES BECAUSE OF EFFORTS OF SHRI RAVI SANJAY AGRAWAL. HOWEVER, IN VIEW OF EARLIER ORDERS IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11, THE CIT(A) HELD TH AT COMMISSION PAID TO SHRI RAVI SANJAY AGRAWAL WAS UNJUSTIFIED AND HENCE, ADDITION OF RS.9,71,240/ - WAS CONFIRMED. IN RESPECT OF SALARY PAID TO SMT. SANTOSH SANJAY AGRAWAL, DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS.7,50,000/ - WAS RESTRICTED TO RS.4 LAKHS AND IN RESPECT OF COMMISSION PAID TO SHRI SANJAY AGRAWAL, HUF, ADDITION OF RS.9,58,105/ - WAS CONFIRMED. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). ITA NO. 301 /P U N/20 1 5 MAH SOLVENT EXTRACTION P LTD. 4 9. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10 AND THE TRIBUNAL HAD DELIBERATED ON ALL THE THREE ADDITIONS. SO, WE REFER TO THE ORDER OF THE TRIBUNAL TO DECIDE THE PRESENT ISSUE S RAISED BEFORE US. 10 . THE FIRST ISSUE WHICH IS RAISED BY THE ASSESSEE IS AGAINST COMMISSION PAID T O SHRI RAVI SANJAY AGRAWAL OF RS.9,71,240/ - . AS IN THE CURRENT YEAR, THE ASSESSEE IN PREVIOUS YEAR PAID SALARY AND COMMISSION TO THE SAID PERSON WHO WAS HANDLING TOTAL EXPORT AND LOGISTIC BUSINESS OF THE ASSESSEE. THE TRIBUNAL VIDE PARAS 23 TO 25 VIDE OR DER DATED 16.08.2017 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE AND HELD THAT THE ASSESSEE WAS THE BEST JUDGE OF ITS AFFAIRS AND ONCE IT HAD AGREED TO PAY THE SAID COMMISSION, THEN THE SAME EXPENDITURE IS TO BE ALLOWED IN ENTIRETY UNDER SECTION 37(1) OF THE A CT. 1 1 . THE SECOND ASPECT OF THE ISSUE OF RECIPIENT HAVING INCLUDED THE SAID COMMISSION IN ITS RETURN OF INCOME AND PAYING TAXES AND THERE BEING NO LOSSES TO THE EXCHEQUER, WHERE THE RATES OF TAXES PAID BY THE ASSESSEE AND RECIPIENT ARE THE SAME, THEN T HE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (2009) 310 ITR 306 (BOM) WAS APPLIED AND EXPENDITURE WAS ALLOWED IN ENTIRETY IN THE HANDS OF ASSESSEE. FOLLOWING THE SAME PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO ALLOW EXPENDITURE OF RS.9,71,240/ - UNDER SECTION 37(1) OF THE ACT. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 1 2 . NOW, COMING TO THE ISSUE VIDE GROUND OF APPEAL NO.2 I.E. SALARY PAID TO SMT. SANTOSH SANJAY AGRAWAL, PART OF WHICH WAS DISALLOWED I.E. TO THE EXTENT OF RS.4 LAKHS BEING UNREASONABLE. ITA NO. 301 /P U N/20 1 5 MAH SOLVENT EXTRACTION P LTD. 5 1 3 . THE TRIBUNAL VIDE PARAS 14 TO 17 CONSIDERED THE ALLOWABILITY OF SAID EXPENDITURE AND IN THE ABSENCE OF THE ASSESSEE HAVING BROUGHT ON RECORD THE NECESSARY EV IDENCE OF HER HAVING REQUISITE QUALIFICATIONS TO CARRY OUT THE WORK AND SINCE IN ASSESSMENT YEAR 2008 - 09 ONLY SALARY OF RS.4 LAKHS WAS PAID AS AGAINST RS.9,60,000/ - IN ASSESSMENT YEAR 2009 - 10, THE TRIBUNAL UPHELD THE DISALLOWANCE OF SUM OF RS.5 LAKHS. THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA) WAS HELD TO BE NOT APPLICABLE BECAUSE THE RATES OF TAXES WERE DIFFERENT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FAIRLY POINTED OUT THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL AND FOLLOWING THE SAME PARITY OF REASONING AS IN EARLIER YEARS, WE UPHOLD THE DISALLOWANCE OF RS.4 LAKHS IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS, DISMISSED. 1 4 . THE THIRD ISSUE WHICH HAS BEEN RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF COMMISSION PAID TO SHRI SANJAY AGRAWAL, HUF AT RS.9,58,165/ - . 1 5 . THE TRIBUNAL HAD DELIBERATED UPON THIS ISSUE VIDE PARAS 12 AND 13, WHICH READ AS UNDE R: - 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED IS AGAINST THE CLAIM OF COMMISSION PAID TO SANJAY AGRAWAL - HUF WHO WAS ARRANGING PURCHASE OF SOYA SEEDS ON BEHALF OF THE ASSESSEE. THE TOTAL COMMISSION PAID TO THE SAID HUF WAS RS.8,80,047/ - . THE FIRST ISSUE WHICH IS RAISED AGAINST THE ASSESSEE IS THAT IT HAD NOT PROVED SERVICES RENDERED BY THE HUF. HOWEVER, WE FIND THAT SIMILAR SERVICES WERE AVAILED BY THE ASSESSEE IN EARLIER YEARS AND NO DISALLOWANCE WAS MADE OUT OF C OMMISSION PAID TO HIM. IN SUCH CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE SAID PERSON HAS NOT RENDERED ANY SERVICES TO THE ASSESSEE. 13. THE OTHER ASPECT OF THE ISSUE IS THAT THE COMMISSION PAID TO HUF HAS BEEN INCLUDED IN ITS RETURN OF INCOME AND CO NSEQUENTLY, THERE IS NO LEAKAGE OF REVENUE. IN SUCH SCENARIO, THE EXPENDITURE MERITS TO BE ALLOWED IN THE HANDS OF ASSESSEE IN LINE WITH THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA). WE HO LD SO. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.8,80,047/ - . ITA NO. 301 /P U N/20 1 5 MAH SOLVENT EXTRACTION P LTD. 6 1 6 . THE ISSUE ARISING IN THE PRESENT APPEAL IS SIMILAR TO THE ISSUE BEFORE THE TRIBUNAL IN EARLIER YEAR AND FOLLOWING THE SAME PARITY OF REASONING AND APPLYING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA), WE ALLOW THE CLAIM OF ASSESSEE OF COMMISSION AT RS. 9 , 5 8, 165 / - . HENCE, THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 1 7 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF NOVEMBER , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 29 TH NOVEMBER , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE A PPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 2 , NASHIK ; 4. / THE CIT - 2 , NASHIK ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / B Y ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE