VENUS EXPORTS, MUMBAI V. ACIT 13(2), MUMBAI

ITA 311/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1117 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2017
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: MAMTA PARMAR
• Keywords: Rectification of order
• Section: 143(3); 154

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 311 /MUM/ 201 7 (ASSESSMENT YEAR 20 07 - 08 ) M/S. VENUS EXPORTS 5, JJV CHAMBERS KESHAVJI NAIK ROAD MUMBAI - 400 004. VS. ACIT 13(2) MUMBAI ( APPELLANT ) ( RESPONDE NT ) PAN NO . AABFV6748H ASSESSEE BY MISS MAMTA PARMAR DEPARTMENT BY M IS S BEENA SANTOSH DATE OF HEARING 2 . 5. 201 7 DATE OF PRONOUNCEMENT 2 .5 . 201 7 O R D E R THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 29 - 09 - 2016 PASSED B Y LD CIT(A) - 28, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF BILL DISCOUNTING CHARGES OF RS.28,91,256/ - MADE BY THE AO BY TREATING THE SAME AS NOT RELATING T O THE YEAR UNDER CONSIDERATION. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE LD A.R SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF DIAMONDS. THE LD A.R SUBMITTED THAT THE SALES INVOICES RAISED BY THE ASSESSEE WERE DISCOUNT ED WITH THE BANK AND THE DISCOUNTING CHARGES OF THE BANK WERE INCLUDED UNDER THE HEAD BANK INTEREST/CHARGES. THE ASSESSING OFFICER INITIALLY COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ALLOWING THE ABOVE SAID CLAIM OF THE ASSESSEE. HOWEVER, THE AUDI T PARTY SEEMS TO HAVE EXPRESSED THE VIEW THAT THE DISCOUNTING CHARGES DO NOT PERTAIN TO THE PERIOD UNDER CONSIDERATION, SINCE THE REALISATION OF BILLS EXTENDED TO THE NEXT YEAR. ACCORDINGLY THE AUDIT PARTY HAS EXPRESSED THE M/S. VENUS EX PORTS 2 VIEW THAT THE DISCOUNTING CHARG ES SHOULD BE CONSIDERED AS ADVANCE PAYMENTS FOR THE SUCCEEDING YEAR. BASED ON THE VIEW TAKEN BY THE AUDIT PARTY, THE AO PASSED A RECTIFICATION ORDER U/S 154 OF THE ACT BY DISALLOWING THE EXPENDITURE RELATED TO DISCOUNTING CHARGES. THE LD CIT(A) ALSO CON FIRMED THE SAME ON THE REASONING THAT THE ASSESSEE HAS DISCLOSED THE SAME AS BANK INTEREST AND CHARGES AND THE AUDITORS ALSO ACCEPTED THE SAME. 3. THE LD A.R PLACED RELIANCE ON THE CIRCULAR NO.065 DATED 02 - 09 - 1971 ISSUED BY THE CBDT, WHEREIN IT WAS S TATED THAT THE DISCOUNTING CHARGES IS NOT IN THE NATURE OF INTEREST AND HENCE TAX IS NOT REQUIRED TO BE DEDUCTED AT SOURCE U/S 194A OF THE ACT. THE LD A.R PLACED RELIANCE ON THE FOLLOWING OBSERVATIONS MADE BY THE CBDT IN THE ABOVE SAID CIRCULAR: - ...WHER E THE SUPPLIER OF GOODS MAKES OVER THE USANCE BILL/HUNDI TO HIS BANK WHICH DISCOUNTS THE SAME AND CREDITS THE NET AMOUNT TO THE SUPPLIERS ACCOUNT STRAIGHTAWAY WITHOUT WAITING FOR REALISATION OF THE BILL ON DUE DATE, THE PROPERTY IN THE USANCE BILL - HUNDI P ASSES ON TO THE BANK AND THE EVENTUAL COLLECTION ON DUE DATE IS A RECEIPT BY THE BANK ON ITS OWN BEHALF AND NOT ON BEHALF OF THE SUPPLIER. FOR SUCH CASES OF IMMEDIATE DISCOUNTING THE NET PAYMENT MADE BY THE BANK TO THE SUPPLIER IS IN THE NATURE OF A PRICE PAID FOR THE BILL. SUCH PAYMENT CANNOT TECHNICALLY BE HELD AS INCLUDING INTEREST AND THEREFORE NO TAX NEED BE DEDUCTED AT SOURCE FROM SUCH PAYMENTS BY THE BANK... THE LD A.R SUBMITTED THAT THE ASSESSEE IS DISCOUNTING THE SALES INVOICES AND THE FACTS AR E IN THE NATURE EXPLAINED BY THE CBDT. ACCORDINGLY SHE SUBMITTED THAT THE DISCOUNT EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF ONE TIME EXPENDITURE AND THE SAME CANNOT BE APPORTIONED IN THE RATIO OF TIME PERIOD AS PRESUMED BY THE AO/AUDIT PAR TY. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN FOLLOWING IDENTICAL ACCOUNTING PRACTICE FOR THE PAST SEVERAL YEARS. THE LD A.R ALSO SUBMITTED THAT THE AO HAD MADE IDENTICAL DISALLOWANCE IN THE ASSESSEES SISTER CONCERN NAMED M/S JECHAND JASRAJ VORA IN AY 2007 - 08. IN THE M/S. VENUS EX PORTS 3 APPEAL FILED BY THE SISTER CONCERN, THE LD CIT(A) - 46, MUMBAI HAS ALLOWED THE CLAIM OF THE ASSESSEE, VIDE ITS ORDER DATED 27 - 01 - 2017. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER HAS FOUND THE EXPENDITURE AS RELATING TO THE SUCCEEDING YEAR AND HENCE HE HAS DISALLOWED THE CLAIM OF THE ASSESSEE. 5. HAVING HEARD RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE TAX AUTHORITIES HAVE DISALLOWED THE CLAIM OF THE ASSESSEE WITHOUT PROPERLY APPRECIATING THE NATURE OF E XPENDITURE CLAIMED BY THE ASSESSEE. I NOTICE THAT THE ASSESSEE HAS BEEN CONSISTENTLY ACCOUNTING THE DISCOUNT CHARGES UNDER THE HEAD BANK INTEREST/CHARGES. IT IS SETTLED PROPOSITION THAT THE ENTRIES MADE IN THE BOOKS OF ACCOUNT ARE NOT RELEVANT FOR COMP UTING THE TOTAL INCOME AND THE EXACT NATURE OF EXPENDITURE NEEDS TO BE CONSIDERED TO DECIDE ABOUT ITS DEDUCTIBILITY. THE LD A.R HAS TAKEN THE SUPPORT OF THE CIRCULAR ISSUED BY CBDT IN ORDER TO EXPLAIN THE NATURE OF DISCOUNTING CHARGES. I ALSO NOTICE TH AT AN IDENTICAL DISALLOWANCE MADE BY THE AO IN THE ASSESSEES SISTER CONCERNS CASE HAS SINCE BEEN DELETED BY THE LD CIT(A). UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY I SET ASI DE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE NATURE OF DISCOUNT CHARGES CLAIMED BY THE ASSESSEE IN TERMS OF CBDT CIRCULAR CITED ABOVE AND ALSO THE DECISION RENDERED BY HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. CARGILL GLOBAL TRADING P LTD (ITA NO.331 OF 2011 & ITA 204 OF 2011 DATED 17 - 02 - 2011, WHICH CASE WAS ALSO RELIED UPON BY LD A.R. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE DETAILS RELATING TO THE CLAIM AS MAY BE CALLED FOR BY THE AO. IF THE DISCOUNT CHARGES ARE NOT IN THE NATURE OF INTEREST AS DISCUSSED IN THE CIRCULAR, I DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. M/S. VENUS EX PORTS 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL P URPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 . 5 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 2 / 5 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI