JCIT, New Delhi V. M/s. Maruti Insurance Business Agency Ltd., New Delhi

ITA 311/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74372 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 12-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI) BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 311 /DEL/2012 (ASSESSMENT YEAR 2008-09) JCIT (OSD), VS. M/S. MARUTI INSURANCE BUSINESS CIRCLE 6(1), NEW DELHI AGENCY LTD., (FORMERLY KN OWN AS MARUTI INSURANCE BROKERS LTD., PLOT NO.1, NELSON MANDELA ROAD, VASANT KUNJ, NEW DELHI-110070 PAN/GIR NO.: AADCM3496N (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI AJAY VOHRA, ADV. DEPARTMENT BY: SHRI KEYUR PATEL, SR. DR ORDER PER U B S BEDI, JUDICIAL MEMBER: THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - IX, NEW DELHI DATED 19.10.2011 RELEVAN T TO ASSESSMENT YEAR 2008-09 IN WHICH FOLLOWING TWO EFFECTIVE GROUNDS HA VE BEEN RAISED: THE ORDER OF LD. CIT(A) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING HT ADDITION B ALLOWING THE ASSESSEE TO REDUCE THE COMMISSION INCOME OF THE YEAR UNDER CONS IDERATION BY A SUM OF RS.1,06,20,332/- BY CLAIMING THAT THIS AMOUNT RELATED TO THE EXCESS COMMISSION INCOME BOOKED IN T HE PREVIOUS ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2007-08. 1.1 THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT T HAT THE ASSESSEE HAD SUFFICIENT TIME AND COULD HAVE VERY WE LL FILED A REVISED RETURN OF INCOME FOR THE SAME YEAR WHEN IT BECAUSE I.T.A. NO. 311/DEL/2012 2 AWARE THAT ITS ACTUAL COMMISSION WOULD BE LESS BEC AUSE OF NEW IRDA GUIDELINES REGARDING RECEIPT OF COMMISSION. 1.2 THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT UNDE R THE MERCANTILE SYSTEM OF ACCOUNTING CLAIMED TO HAVE FOL LOWED BY THE ASSESSEE, EACH ITEMS OF INCOME AND EXPENDITURE IS TO BE BOOKED IN ACCORDANCE WITH THE ESTABLISHED PRINCIPLE OF ACCOUNTING AND SHIFTING OF INCOME OR EXPENDITURE TO OTHER YEAR IS NOT ALLOWABLE UNLESS SPECIFICALLY PROVIDED IN TH E LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF ADVERTISEMENT EXPENSES AMOUNTING TO RS.27,76,651/- (50% OF ADVERTISEMENT E XPENSES) EVEN THOUGH THE ASSESSEE COULD NOT PROVE THAT THE S AID EXPENDITURE WAS INCURRED FOR THE WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF ITS OWN BUSINESS. 2.1 THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT T HE ADVERTISEMENT EXPENSES WERE PRIMARILY INCURRED FOR DEVELOPMENT AND PROMOTION OF THE BRAND MARUTI OWN ED BY ITS HOLDING COMPANY AND NOT FOR THE PURPOSE OF ITS INSURANCE BUSINESS. 2. AS REGARDS THE FIRST ISSUE, LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT HE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT, DELHI BENCH IN THE CASE OF SISTER CONCERN OF THE AS SESSEE NAMELY DCIT VS MARUTI INSURANCE DISTRIBUTION SERVICES LTD. IN I.T. A. NO. 5479/DEL/2012 DATED 18 TH OCT., 2013 WHERE, THE ISSUE INVOLVED WAS THE SAME AND THE FACTS WERE ALSO IDENTICAL. THEREFORE, IT WAS PLEADED FOR CONFIRMATION OF THE ORDER OF LD. CIT(A) AS LD. CIT(A) HAS TAKEN THE SAME VIE W. ON THIS PLEA OF THE LD. COUNSEL FOR THE ASSESSEE, LD. D.R. DID NOT OBJE CT BUT RELIED UPON THE ORDER OF THE A.O. 4. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE MATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE RAISED IN THIS APPEAL WAS SIMILAR TO THE ISSUE DECIDED BY E BENCH OF THE TRIBUNAL IN ASSESSEES SISTER CONCERN; DCIT VS I.T.A. NO. 311/DEL/2012 3 MARUTI INSURANCE DISTRIBUTION SERVICES LTD., WHICH DEALT WITH IT AS PER PARA 6 AND THE SAME IS REPRODUCED AS UNDER: WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE AS SESSEE COMPANY IS AN INSURANCE AGENT OF BAJAJ ALLIANZ INSURANCE COMPA NY AND WAS GETTING COMMISSION INCOME. THE COMMISSION INCOME O F THE COMPANY WAS ACCOUNTED FOR ON ACCRUAL BASIS. LD. A.R. SUBMI TTED THAT W.E.F. 1 ST JANUARY 2007, THE INSURANCE REGULATORY DEVELOPMENT AUTHORITY (IRDA) CHANGED THE REGULATION ON COMMISON FOR CORPORATE INSURANCE AGENTS. HOWEVER, TO REVISE THE COMMISSION STRUCTURE, NEGOTIATIONS WERE ON BETWEEN THE ASSESSE E AND INSURANCE COMPANY FOR THE CORPORATE AGENCY COMMISSION. THIS ISSUE WAS SETTLED IN MAY, 2007. PENDING NEGOTIATIONS FOR THE ACCRUAL OF THE COMMISSION FOR THE PERIOD JANUARY 2007 TO MARCH 2007 PART OF T HE FINANCIAL YEAR 2006-07, THE ASSESSEE OFFERED THE INCOME AS PER THE THEN PREVAILING RATES (10% OF THE NET PREMIUM) AND WHEN THE ISSUE W AS FINALLY SETTLED AT THE LOWER RATE THE ASSESSEE SOUGHT THE REDUCTION IN THE INCOME BY RS.16,86,477/-. THIS ISSUE OF REVISION WAS SETTLED ONLY ON MAY 2007 IN FINANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09 WHICH IS THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSES SEE HAS WRITTEN OFF THIS BALANCE AMOUNT DURING THE YEAR AND IT IS ALSO CLAIMED THAT IT IS AN ALLOWABLE DEDUCTION U/S 36(1)(VII) OF THE I. T. ACT , 1961. IN OUR CONSIDERED VIEW, THIS WAS ALSO A BUSINESS LOSS WHIC H COULD NOT BE RECOVERED DURING THE YEAR AND WHICH HAS BEE SETTLED BY NEGOTIATIONS WITH THE INSURANCE COMPANY PURSUANT TO THE IRDA NOT IFICATIONS DURING HT PERIOD RELEVANT TO ASSESSMENT YEAR UNDER CONSIDE RATION. CONSIDERING ALL THESE FACTS, WE AGREE WITH THE ORDE R OF THE CIT(A) FOR DELETING THE SAME. 5. SINCE THE ISSUE IS IDENTICAL AND FACTS ARE SIMIL AR WHEN NO DISTINGUISHING FEATURES HAVE BEEN POINTED OUT OR NO TICED, THE LD. CIT(A) HAS CORRECTLY TAKEN SIMILAR VIEW, THEREFORE WHILE FOLLO WING THE ABOVE SAID DECISION, WE DISMISS THIS GROUND OF THE APPEAL OF T HE REVENUE. 6. AS REGARDS THE 2 ND ISSUE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF HON'BLE I.T.A. NO. 311/DEL/2012 4 SUPREME COURT IN THE CASE OF SASSON J. DAVID AND CO . P. LTD. VS CIT 118 ITR 261, WHICH HAS BEEN FOLLOWED IN VARIOUS OTHER D ECISIONS AS MENTIONED IN ITEM 308 OF THE PAPER BOOK AS DETAILED BELOW: 3. NESTLE INDIA LTD. VS DCIT; 337 ITR 103 (DEL.) 4. CIT VS ADIDAS INDIA MARKETING (P) LTD; 195 TAXM AN 256 5. CIT VS AGRA BEVERAGES CORPORATION (P) LTD; 200 TAXMAN 43 6. SONY INDIA (P) LTD. VS DCIT; 315 ITR 150 / 114 ITD 448 7. STAR INDIA (P) LTD; 311 ITR 235 8. DCIT VS JUBILANT FOODWORKS PVT. LTD. ; I.T.A. N O. 183/D/2011 7. IT WAS THUS PLEADED FOR CONFIRMATION OF THE ORDE R OF LD. CIT(A) IN THIS REGARD AS THE SAME IS IN CONFORMITY WITH THESE DECI SIONS INCLUDING THE DECISION OF HONBLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS JUBILANT FOODWORKS PVT. LTD. (SUPRA). 8. LD. D.R. DID NOT RAISE NAY SERIOUS OBJECTION AND PLEADED THAT THE MATTER MAY BE DECIDED IN ACCORDANCE WITH LAW AND PR ECEDENT RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE. 9. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MAT ERIAL ON RECORD AND FIND THAT THE ISSUE UNDER CHALLENGE RELATES TO DELE TION OF DISALLOWANCE OF ADVERTISEMENT EXPENSES AMOUNTING TO RS.27,76,651/- 50% OF THE ADVERTISEMENT EXPENSES AS THE ASSESSEE COULD NOT P ROVE THAT THE SAID EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR I TS BUSINESS PURPOSE. HOWEVER, THE SAME IS INCURRED FOR DEVELOPMENT AND P ROMOTION OF BRAND MARUTI OWNED BY ITS HOLDING COMPANY AND NOT FOR T HE PURPOSE OF INSURANCE BUSINESS. AFTER HAVING GONE THROUGH THE ARGUMENTS OF BOTH THE SIDES IN THE LIGHT OF THE PRECEDENTS RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE, WE FIND THAT THE ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE AND NO DISTINGUISHING FEATURES HAVE BEEN POINTED OU T OR NOTICED, THEREFORE, I.T.A. NO. 311/DEL/2012 5 WE DO NOT FIND ANY REASONABLE BASIS TO INTERFERE IN THE ORDER OF LD. CIT(A) WHICH IS FOUND TO BE IN ACCORDANCE WITH THE PRECEDE NTS RELIED UPON. AS SUCH, THE ORDER OF LD. CIT(A) IS CONFIRMED AND THIS GROUND OF THE APPEAL OF THE DEPARTMENT IS ALSO DISMISSED. 10. AS A RESULT, APPEAL OF THE DEPARTMENT GETS DISM ISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2014. SD./- SD./- (T. S. KAPOOR) (U.B.S.BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 21 ST MARCH, 2014. SP. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXV, NEW DELHI AR, ITAT, 5. CIT(ITAT), NEW DELHI NEW DELHI