TRUMAC ENGINEERING CO. P. LTD, MUMBAI V. ADDL CIT CIR 2(3), MUMBAI

ITA 3464/MUM/2010

• Counselvise Citation: 346419914 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 22-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Additional evidence; Revised return
• Section: 14A

Judgement Text

ITA NO 3464 OF 2010 TRUMAC ENGG CO P LTD MUMBAI PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3464/MUM/2010 (ASSESSMENT YEAR: 2005-06) TRUMAC ENGINEERING CO.PVT.LTD ADDITIONAL COMMISSIONER OF 43, DR.V.B.GANDHI MARG INCOME TAX, CIRCLE-2(3) FORT, MUMBAI 400001 AAYAKAR BHAVAN, MK MARG VS MUMBAI 400020 PAN AAACT 2153 N APPELLANT RESPONDENT APPELLANT BY: SHRI NITESH JOSHI RESPONDENT BY: SHRI D.S.SUNDER SINGH DATE OF HEARING: 22/11/11 DATE OF PRONOUNCEMENT: 25/11/11 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT (A)-6 MUMBAI DATED 06.01.2010. THE ASSESSEE HAS RAISED TW O GROUNDS ON THE ISSUE OF CLAIM OF SPECIAL DISCOUNT AND DISALLOW ANCE UNDER SECTION 14A. THESE ARE CONSIDERED AS UNDER: 2. GROUND NO.1. THE ISSUE IN GROUND NO.1 IS WITH REFE RENCE TO THE DENIAL OF THE CLAIM OF SPECIAL DISCOUNT OF ` 4,75,161/- STATED TO HAVE BEEN PAID IN ASSESSMENT YEAR 2006-07 AND AN AM OUNT OF ` 5,79,940/- PAID IN ASSESSMENT YEAR 2007-08 CLAIMED BEFORE THE ASSESSING OFFICER AS PERTAINING TO THE IMPUGNED ASS ESSMENT YEAR 2005-06. THE REASON FOR THE CLAIM IS ON THE BASIS T HAT THE ASSESSEE ALLOWED SPECIAL DISCOUNT OF 3% TO CERTAIN CUSTOMERS , IF THE QUANTUM SALE EXCEEDED ` 5 LAKHS DURING THE YEAR APRIL 2004 TO MARCH, 2005 AND 5% ON SALES EXCEEDING ` 10.00 LAKHS. ORIGINALLY THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION OF ` 4,75,161/- AT THE TIME OF FILING ITA NO 3464 OF 2010 TRUMAC ENGG CO P LTD MUMBAI PAGE 2 OF 6 RETURN AS THIS EXPENDITURE WAS CLAIMED IN THE NEXT FINANCIAL YEAR. THE ASSESSEE FILED REVISED RETURN OF INCOME CLAIMIN G THE AMOUNT AS PERTAINING TO THE YEAR UNDER CONSIDERATION. SUBSEQU ENTLY BY A LETTER FURTHER CLAIM OF ADDITIONAL DISCOUNT OF ` 6,15,516/- WAS CLAIMED. THE ASSESSING OFFICER EXAMINED THE CLAIM AND REJECTED O N THE REASON THAT THE ASSESSEE SUBMITTED THAT THE POLICY TO ALLO W THE SPECIAL DISCOUNT WAS TAKEN IN NEXT FINANCIAL YEAR. THEREFOR E, THE CLAIM DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. IT WAS ALSO THE CONTENTION THAT IF THE DISCOUNT WAS ALLOWED IN THE NEXT YEAR, THEN IT WOULD NOT HELP IN INCREASING THE TURNOVER OF THIS Y EAR. THEREFORE, THE CLAIM CANNOT BE ALLOWED AS PERTAINS TO THE BUSI NESS EXPENDITURE OF THE YEAR. ACCORDINGLY, HE DISALLOWED THE CLAIM M ADE BY THE ASSESSEE TO THE EXTENT OF ` 4,75,161/- IN THE REVISED RETURN AND DID NOT CONSIDER THE BALANCE CLAIM. BEFORE THE CIT (A) THE ASSESSEE ADMITTED THAT THEY HAD ERRONEOUSLY SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE DECISION OF GIVING DISCOUNTS WAS T AKEN IN ASSESSMENT YEAR 2006-07. IT WAS FURTHER SUBMITTED T HAT THE COMMUNICATION OF THE DISCOUNTS WAS SENT TO THE CUST OMERS DURING THE FINANCIAL YEAR 2004-05 RELEVANT FOR THE ASSESSM ENT YEAR 2005- 06 ITSELF AND IN SUPPORT FILED SAMPLE COPY OF THE L ETTER DATED 01-02- 2005. THE CIT (A), HOWEVER, DID NOT ADMIT THE ADDIT IONAL EVIDENCE AND REJECTED THE CLAIM ON THE REASON THAT HAVING MA DE A STATEMENT BEFORE THE ASSESSING OFFICER THAT THE DISCOUNTS WER E ANNOUNCED IN THE ASSESSMENT YEAR 2006-07, THE ASSESSEE CANNOT TA KE A DIFFERENT STAND AND THE REASONS FOR FILING THE ADDITIONAL EVI DENCE UNDER RULE 46A HAS NOT BEEN SUFFICIENTLY EXPLAINED. THEREFORE, HE REJECTED THE CLAIM ON THE REASON THAT THE DISBURSAL OF SUCH EX-G RATIA PAYMENT COULD NOT BE HELD TO BE FOR BUSINESS PURPOSES. THE ASSESSEE IS AGGRIEVED AND RAISED THE GROUND CLAIMING NOT ONLY T HE AMOUNT CLAIMED BEFORE THE ASSESSING OFFICER BY FILING THE REVISED RETURN BUT ALSO AN AMOUNT OF ` 5,29,570/-(ERRONEOUSLY STATED AS ` 6,15,516/- IN THE GROUND OF APPEAL BEFORE THE CIT (A)) CLAIMED BY WAY OF LETTER. ITA NO 3464 OF 2010 TRUMAC ENGG CO P LTD MUMBAI PAGE 3 OF 6 3. DRAWING OUR ATTENTION TO THE PAPER BOOK FILED AND P ARTICULARLY TO PAGE 27, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAD SOLE SELLING AGENT NAMELY ATE MARKETING (P) LTD WHO HAD ISSUED THE LETTER TO VARIOUS CUSTOMERS ABOUT THE SCHEME OF SPE CIAL DISCOUNT ON THE BASIS OF TURNOVER TO BE ACHIEVED IN FINANCIAL Y EAR 2004-05 FOR SPARES SUPPLIED FROM THE ASSESSEE COMPANY. HE THEN SUBMITTED THAT THE DISCOUNTS WERE ORIGINALLY CLAIMED IN THE F INANCIAL YEAR 2005-06 (ASSESSMENT YEAR 2006-07) TO THE EXTENT OF SALES ABOVE ` 5.00 LAKHS AND LATER ON REALIZING THAT DISCOUNT WAS TO BE ALLOWED ON THE ENTIRE TURNOVER, FURTHER AMOUNTS CLAIMED IN FINANCIAL YEAR 2006-07 (ASSESSMENT YEAR 2007-08) AND THE TOTAL AMO UNT CLAIMED WAS ON THE BASIS OF THE TURNOVER OF THE YEAR TO THE TUNE OF ` 10,55,100/-. WHILE ADMITTING THE AMOUNT OF ` 4,75,161/- WAS CLAIMED BY FILING REVISED RETURN, THE BALANCE CLAIM COULD NOT BE CLAIMED BY WAY OF REVISED RETURN AS THE TIME HAS LA PSED TO FILE ANOTHER REVISED RETURN BUT IT WAS SUBMITTED THAT TH E ENTIRE DISCOUNT WAS GIVEN ON THE TOTAL TURNOVER OF THE YEAR IN THE CASES EXCEEDING ` 5.00 LAKHS DURING THE FINANCIAL YEAR 2004-05 RELEVA NT FOR THE ASSESSMENT YEAR. REFERRING TO PAGES 6 TO 9 PLACED I N THE PAPER BOOK, HE SUBMITTED THAT THE DETAILS OF TURNOVER AND THE DISCOUNT ALLOWED, REGION-WISE WAS FURNISHED TO THE ASSESSING OFFICER AND ALSO TO THE CIT (A) BUT UNFORTUNATELY DUE TO THE MISSTAT EMENT MADE, IT WAS CONSIDERED THAT THE SCHEME OF DISCOUNT WAS ALLO WED AFTER CLOSURE OF THE BOOKS OF ACCOUNT, BUT THE FACT IS TH AT THE SCHEME WAS OPEN DURING THE YEAR AND THE ASSESSEE HAS PASSED ON THE DISCOUNT TO VARIOUS CUSTOMERS. THEREFORE, THE SAME IS AN ALL OWABLE EXPENDITURE. 4. FOR A QUERY RAISED WHETHER THERE WAS ANY RESOLUTION S PASSED OR SCHEME PREPARED BY THE ASSESSEE COMPANY AS THE S CHEME DETAILS FILED IN THE PAPER BOOK PERTAINS TO THE LETTER ISSU ED BY THE SOLE SELLING AGENT M/S ATE MARKETING (P) LTD AND WHETHER THE DISCOUNT ITA NO 3464 OF 2010 TRUMAC ENGG CO P LTD MUMBAI PAGE 4 OF 6 IS ASSESSEES LIABILITY OR THAT OF SOLE SELLING AGE NT AND WHAT EVIDENCE WITH REFERENCE TO THE ENTRIES PASSED IN THE BOOKS O F ACCOUNT WAS AVAILABLE, THE LEARNED COUNSEL HAS NO OBJECTION FOR PROPER VERIFICATION OF THE ABOVE DETAILS BY THE ASSESSING OFFICER. 5. LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, OBJECT ED TO THE CONTENTIONS STATING THAT THE ASSESSEE ITSELF HA S NOT CLAIMED THE DISCOUNT ON TURNOVER IN THE BOOKS OF ACCOUNT IN THE YEAR ITSELF AND THIS FACT INDICATE THAT THE SCHEME WAS PREPARED SUB SEQUENTLY TO CLAIM BUT THE SAME CANNOT BE ALLOWED AS DEDUCTION O F THE YEAR. HE SUPPORTED THE ORDERS OF THE CIT (A) AND THE ASSESSI NG OFFICER IN THIS REGARD. 6. WE HAVE CONSIDERED THE ISSUE AND RIVAL SUBMISSIONS. AS SEEN FROM THE DOCUMENTS PLACED ON RECORD, THERE SEEMS TO BE SPECIAL DISCOUNT SCHEME ALLOWING ADDITIONAL DISCOUNT ON THE TURNOVER TO VARIOUS CUSTOMERS. ADDITIONAL EVIDENCE IN THE FORM OF DOCUMENT PLACED BEFORE THE CIT (A) IS A COMMUNICATION BY THE ATE MARKETING TO ONE OF THE CUSTOMERS ABOUT THE SPECIAL DISCOUNT TO BE ALLOWED FOR THE TURNOVER OF THE YEAR UNDER CONSIDERATION. HOWEV ER, THE ASSESSEE HAD NOT PLACED ANYTHING ON RECORD TO ESTABLISH THAT M/S ATE MARKETING (P) LTD, WAS AUTHORIZED TO COMMUNICATE/AL LOW THE SPECIAL DISCOUNT ON BEHALF OF THE ASSESSEE COMPANY TO THE C USTOMERS AND NOTHING WAS PLACED ON RECORD TO ESTABLISH THAT IT I S THE LIABILITY OF THE ASSESSEE COMPANY. EVEN THOUGH IT WAS STATED THA T THE CREDIT NOTES WERE ISSUED REGARDING THE ADDITIONAL/ SPECIAL DISCOUNT ALLOWED, DETAILS OF THE CREDIT NOTES AND THE ACTUAL AMOUNT ALLOWED WERE NOT PLACED ON RECORD EXCEPT MAKING THE CLAIM A ND GIVING TABULATED STATEMENT FOR THE TURNOVER AND WORKING OF THE DISCOUNT. MOREOVER IT IS ALSO NOT EXPLAINED WHY PART OF THE D ISCOUNT WAS CLAIMED IN ASSESSMENT YEAR 2006-07 AND BALANCE IN A SSESSMENT YEAR 2007-08 IN THE BOOKS OF ACCOUNT AND WHY THE SA ME WAS NOT MADE IN THE YEAR ITSELF, IF THE SCHEME WAS IN OPERA TION DURING THE ITA NO 3464 OF 2010 TRUMAC ENGG CO P LTD MUMBAI PAGE 5 OF 6 YEAR. THESE DETAILS WERE NOT FILED EITHER BEFORE TH E ASSESSING OFFICER OR BEFORE THE CIT (A) OR BEFORE US TO CONSIDER THE CLAIM IN ITS CORRECT PERSPECTIVE. CONSIDERING THE FACT THAT THE ASSESSEE HAD FILED THE REVISED RETURN TO THE EXTENT OF ` 4,75,161/- AND FURTHER CLAIM BY WAY OF LETTER BEFORE THE ASSESSING OFFICER, WE ARE OF T HE OPINION THAT THE ISSUE CAN BE REEXAMINED BY THE ASSESSING OFFICER TO ESTABLISH WHETHER THE ASSESSEE HAS INDEED FORMULATED THE SCHE ME FOR THE SPECIAL DISCOUNT AND HOW THE LIABILITY AROSE TO TH E ASSESSEE. CONSIDERING THE INCOME DECLARED BY THE ASSESSEE, TH E ADDITIONAL DISCOUNT SEEMS TO BE SMALL PERCENTAGE BUT THE CLAIM S ARE TO BE EXAMINED PROPERLY BY THE ASSESSING OFFICER. THEREFO RE, WE ARE OF THE OPINION THAT THE ISSUE CAN BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO SHOULD EXAMINE THESE ASPECTS, WITHOUT P REJUDICE TO THE STAND ALREADY TAKEN BY HIM AND DETERMINE THE CLAIMS AFRESH AND DECIDE ACCORDINGLY. THEREFORE, THE ORDERS OF THE AS SESSING OFFICER AND CIT (A) TO THAT EXTENT ARE SET ASIDE AND MATTER RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICE R IS FREE TO MAKE NECESSARY ENQUIRIES AND THE ASSESSEE IS FREE TO SUB MIT THE NECESSARY DOCUMENTS IN SUPPORT OF THE CLAIM. THE AS SESSEE SHOULD BE GIVEN PROPER OPPORTUNITY BY THE AO BEFORE DECIDI NG THE ISSUE. WITH THESE DIRECTIONS THE ISSUE OF GROUND NO.1 IS R ESTORED TO THE FILE OF THE ASSESSING OFFICER. 7. GROUND NO.2 PERTAINS TO THE ISSUE OF DISALLOWANCE U NDER SECTION 14A. THE ASSESSEE HAS EARNED A DIVIDEND INC OME OF ` 51,46,651/- CLAIMING AS EXEMPT UNDER SECTION 10(34) , AND ` 12,75,081/- U/S 10(38) (LONG TERM CAPITAL GAIN). TH E ASSESSEE SUO MOTO CONSIDERED AN AMOUNT OF ` 1,02,933/- BEING 2% OF THE DIVIDEND INCOME AS EXPENDITURE AND MADE THE DISALLO WANCE U/S 14A WHILE FILING THE RETURN OF INCOME. THE ASSESSING OF FICER INVOKING THE RULE 8D DETERMINED THE DISALLOWANCE UNDER SECTION 1 4A AT ` 5,29,570/-. THE CIT (A) CONFIRMED THE SAME ON THE B ASIS OF THE ITA NO 3464 OF 2010 TRUMAC ENGG CO P LTD MUMBAI PAGE 6 OF 6 DECISION OF THE SPECIAL BENCH OF ITAT MUMBAI IN THE CASE OF M/S DAGA CAPITAL MANAGEMENT PVT. LTD. 8. IT WAS SUBMITTED THAT THE DECISION OF THE SPECIAL B ENCH WAS NOT ACCEPTED BY THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE LTD. MFG. CO. LTD 328 ITR 81 (BOMBAY ) AND THE ISSUE IS TO BE RE-DETERMINED IN ESTIMATING THE REASONABL E AMOUNT FOR DISALLOWANCE UNDER SECTION 14A, WITHOUT INVOKING RU LE 8D WHICH IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. AC CORDINGLY, ISSUE IN GROUND NO.2 PERTAINING TO DISALLOWANCE UNDER SECTIO N 14A IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER TO DE TERMINE THE NECESSARY AMOUNT AS PER THE GUIDELINES PRESCRIBED B Y THE HON'BLE BOMBAY HIGH COURT (SUPRA) OR ANY OTHER JUDGMENTS OF THE HIGHER FORUM ON THE ISSUE. GROUND NO.2 IS ALSO ACCORDINGLY RESTORED TO THE FILE OF THE ASSESSING OFFICER. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER 2011. SD/- SD/- (D.K.AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER VNODAN/SPS MUMBAI, DATED 25 TH NOVEMBER, 2011. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI