ACIT, New Delhi V. M/s. Mosaic India (P) Ltd., New Delhi

ITA 3435/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6347 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHASHANT BAJPAI; SHARD AGARWAL
• Keywords: Transfer pricing; International transaction
• Section: 142(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 3435/DEL/2014 A.Y. : 2007-08 ACIT, CIRCLE 5(1), ROOM NO. 317-B, CR BUILDING, NEW DELHI - 2 VS. M/S MOSAIC INDIA (P) LTD., Y-65, GROUND FLOOR, HAUZ KHAS, NEW DELHI 16 (PAN: AACCC4033C) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. RAJESH KUMAR, SR. DR ASSESSEE BY : SH. SHASHANT BAJPAI, ADV. & SH. SHARD AGARWAL, ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMP UGNED ORDER DATED 24.3.2014 PASSED BY THE LD. CIT(A)-V, NEW DEL HI RELEVANT TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF DISCOUNT TO CUSTOMERS OF RS. 6,86,40,844/- MADE B Y THE AO AS THE ASSESSEE COMPANY FAILED TO FILE ANY DOCUMENT ARY EVIDENCE TO THE AO? 2. THAT ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 2 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FOREGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE AT THE T IME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 31.10.2007 AT AN INCOME OF RS.3,07,66,126/-. TH E CASE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICE U/S. 143(2 ) & 142(1) OF THE I.T. ACT, 1961 WERE ISSUED AND SERVED UPON THE ASSE SSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF IMPO RTS / EXPORTS, DOMESTIC TRADING, DISTRIBUTION OF FERTILIZERS, STEV EDORING AND WAREHOUSING ETC. THE ASSESSEE COMPANY FILED THE R ETURN DECLARING THE LOSS FROM BUSINESS AMOUNTING TO RS. 3,30,71,029/- A ND INCOME UNDER THE HEAD OTHER SOURCES RS. 23,04,903/-. THE ASSESSEE COMPANY HAD ENTERED INTO INTERNATIONAL TRANSACTIONS. THE C ASE WAS REFERRED TO THE TPO, U/S. 92CA OF THE I.T. ACT, 1961. THE ORDE R OF THE TPO HAS BEEN RECEIVED AND NO ADVERSE INFERENCE IS DRAWN IN RESPECT OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSES SEE. AO FOUND THAT THAT AMONG THE PROVISIONS / PAYABLES, THERE WAS AN OUTSTANDING LIABILITY OF RS. 6,86,40,844/- CLASSIFIED AS DISCO UNT TO CUSTOMERS. THE ASSESSEE WAS ASKED TO PROVIDE DESCRIPTION AND D ETAILS ABOUT THE SAME. IN RESPONSE TO THE ASSESEE HAS SUBMITTED THA T THE SAID ACCRUAL IS TOWARDS THE DISCOUNT GIVEN BY MPIL TO ITS VARIO US CUSTOMERS ON THE SALES MADE TO THEM DURING THE YEAR. AFTER CONSIDERI NG THE SAME AO WAS NOT SATISFIED WITH IT AND MADE THE ADDITION OF RS. 6,86,40,844/- AND MADE THE ASSESSMENT AT RS. 3,99,19,350/- U/S. 1 43(3) OF THE I.T. ACT, 1961 VIDE ORDER DATED 22.12.2010. 4. AGAINST THE SAID ORDER OF THE LD. AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 24.3. 2014 HAS ALLOWED THE APPEAL OF THE ASSESSEE. 3 5. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD . CIT(A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND STA TED THAT THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITION. 7. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE VIDE PARA NO. 8.2 WHICH READS AS UNDER:- 8.2 ON PERUSAL OF THE ASSESSMENT ORDER AND SUBMISS IONS MADE BY THE APPELLANT ON THE SUBJECT MATTER, IT IS SEEN THAT THE APPELLANT HAS GIVEN A DISCOUNT OF RS 6,84,50,27 4 ONLY TO A SINGLE PARTY I.E. M/S TATA CHEMICALS LIMITED, TO WHOM SUCH DISCOUNT WAS GIVEN IN F.Y.2004-05 &2005-06 TOO , THOUGH AT A LOWER RATE. FURTHER, THE APPELLANT HAS PAID THE DISCOUNT AMOUNT AT VARIOUS DATES STARTING FROM 26.1 1.2007 TO 30.10.2009. OUT OF THIS AN AMOUNT OF RS. 5,67,79 ,482/-- HAS BEEN PAID VIDE CHEQUE NO. 309179 AND THE BALANC E THROUGH RTGS / CASH SWEEP TO M/S TATA CHEMICALS LIM ITED (TCL). WITH REGARD TO THIS DISCOUNT GIVEN BY THE AP PELLANT, THE RECIPIENT M/S TATA CHEMICALS HAS ALSO FURNISHED CERTIFICATE TO THE EFFECT THAT THEY HAVE RECOGNIZED THE AMOUNT OF DISCOUNT OF RS. 6,84,50,274 IN THEIR FINANCIALS FOR 2006- 07. MOREOVER EVEN IN THE COPY OF LEDGER ACCOUNT FOR DISCOUNT THE NAME OF THE PARTY I.E. TCL IS CLEARLY SEEN AND THEREFORE THE OBSERVATION OF THE AO THAT THE NAMES OF THE PAR TIES TO 4 WHOM DISCOUNT HAS BEEN GIVEN HAVE NOT BEEN DISCLOSE D IS NOT CORRECT. CONSIDERING THE ABOVE FACTS IN TOTALIT Y AND THE BUSINESS MODEL OF THE APPELLANT WHEREBY BULK DISCOU NT HAS BEEN OFFERED TO TCL ON THE SALE OF DAP THE DISALLOW ANCE MADE BY THE AO ON ACCOUNT OF DISCOUNT OF RS 6,84,50 ,274 TO M/S TATA CHEMICALS LIMITED IS DIRECTED TO BE DELETE D AND THE GROUND OF APPEAL IS ALLOWED. 8.1 ON PERUSING THE ABOVE FINDING OF THE LD. CIT(A) , WE FIND THAT THE ASSESSEE HAS GIVEN A DISCOUNT OF RS 6,84,50,274 ONL Y TO A SINGLE PARTY I.E. M/S TATA CHEMICALS LIMITED, TO WHOM SUCH DISCO UNT WAS GIVEN IN F.Y.2004-05 &2005-06 TOO, THOUGH AT A LOWER RATE. F URTHER, THE ASSESSEE HAS PAID THE DISCOUNT AMOUNT AT VARIOUS DA TES STARTING FROM 26.11.2007 TO 30.10.2009. OUT OF THIS AN AMOUNT OF RS. 5,67,79,482/- HAS BEEN PAID VIDE CHEQUE NO. 309179 AND THE BALANC E THROUGH RTGS / CASH SWEEP TO M/S TATA CHEMICALS LIMITED (TCL). W ITH REGARD TO THIS DISCOUNT GIVEN BY THE ASSESSEE, THE RECIPIENT M/S T ATA CHEMICALS HAS ALSO FURNISHED CERTIFICATE TO THE EFFECT THAT THEY HAVE RECOGNIZED THE AMOUNT OF DISCOUNT OF RS. 6,84,50,274 IN THEIR FINA NCIALS FOR 2006-07. MOREOVER EVEN IN THE COPY OF LEDGER ACCOUNT FOR DIS COUNT THE NAME OF THE PARTY I.E. TCL IS CLEARLY SEEN AND THEREFORE TH E OBSERVATION OF THE AO THAT THE NAMES OF THE PARTIES TO WHOM DISCOUNT H AS BEEN GIVEN HAVE NOT BEEN DISCLOSED IS NOT CORRECT. CONSIDERING THE ABOVE FACTS IN TOTALITY AND THE BUSINESS MODEL OF THE ASSESSEE WHE REBY BULK DISCOUNT HAS BEEN OFFERED TO TCL ON THE SALE OF DAP THE DISA LLOWANCE MADE BY THE AO ON ACCOUNT OF DISCOUNT OF RS 6,84,50,274 TO M/S TATA CHEMICALS LIMITED WAS RIGHTLY DIRECTED TO BE DELETE D AND ACCORDINGLY GROUND OF APPEAL WAS ALLOWED BY THE LD. CIT(A), WH ICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 5 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/03/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICI AL MEMBER DATE 22/3/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES