DCIT CEN CIR 29 CEN RG 7, MUMBAI V. PEST CONTROL (INDIA) P.LTD, MUMBAI

ITA 3755/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2414 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: G S PIKALE
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, J M AND SHRI JASON P. BOAZ , AM ./ I.T.A. NO. 3755/MUM/2014 ( / ASSESSMENT YEAR: 2011 - 12 ) DY. CI T, CENTRAL CIRCLE - 29, R. NO. 409, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAAD, CHURCHGATE, MUMBAI - 400 020 / VS. PEST CONTROL (INDIA) PVT. LTD. 5 TH FLOOR, JAGDAMBA HOUSE, PERU BAUG, GOREGAON (E), MUMBAI - 400 063 ./ ./ PAN/GIR NO. AAACP 5994 K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI O. P. MEENA / RESPONDENT BY : SHRI G. S. PIKALE / DATE OF HEARING : 23.11.2015 / DATE OF PR ONOUNCEMENT : 24 .11.2015 / O R D E R PER JASON P. BOAZ , A. M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 40 , MUMBAI (CIT(A) FOR SHORT) DATED 27.03.2014 FOR THE ASSESSMENT YEAR (A.Y.) 2011 - 12. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: 2 . 1 T HE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF PEST CONTROL SERVICES (MANUFACTURING AND RE - SELLING) FILED ITS RETURN OF INCOME FOR THE YEAR 2011 - 12 ON 2 ITA NO. 3755/MUM/2014 (A.Y. 2011 - 12) DY. CIT VS. PEST CONTROL (INDIA) PVT. LTD. 29.09.2011 DECLARING INCOME OF RS.16,83 ,74,386/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) VIDE ORDER DATED 30.12.2013 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.18,37,13,290/ - IN VIEW OF THE FOL LOWING ADDITIONS/DISALLOWANCES: I) COMMISSION ON PROFITS - RS.1,50,00,000/ - II) DISALLOWANCE U/S.14A R/W RULE 8D - RS.3,38,899/ - 3. AGGRIEVED BY THE ORDER OF ASSESSMENT FOR A.Y. 2011 - 12 DATED 30.12.2013, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) - 40, MUMBAI. THE LD. CIT(A) DISPOSED OFF THE ASSESSEES APPEAL VIDE ORDER DATED 27.03.2014 ALLOWING THE ASSESSEE PARTIAL RELIEF. IN THIS ORDER, THE LD. CIT(A), FOLLOWING THE DECISION OF THE CO - ORDINATE BENCHES OF THIS TRIBUNAL FOR A.YS. 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10, DELETED THE DISALLOWANCE OF COMMISSION PAYMENTS TO DIRECTORS , MADE BY THE ASSESSING OFFICER (AO). 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) - 40, MUMBAI DATED 27.03.2014 FOR A.Y. 2011 - 12, HAS FILED THIS APPEAL RAISING THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,50,00,000/ - MADE BY THE A. O . ON ACCOUNT OF COMMISSION PAYMENT MADE TO THE DIRECTORS? 2. WHETHE R ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN JUSTIFYING THE PAYMENT OF COMMISSION MADE BY THE ASSESSEE COMPANY TO ITS DIRECTORS EVEN THOUGH THE COMMISSION WAS AD - HOC AND NOT ON THE BASIS OF ANY SPECIFIC FINDINGS O F INCREASE IN SHARES AND PROFITS OF THE COMPANY ATTRIBUTABLE TO THE DIRECTORS? 3. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND / OR TO ALTER ANY OF T HE GROUNDS OF APPEAL, IF NEED BE. 3 ITA NO. 3755/MUM/2014 (A.Y. 2011 - 12) DY. CIT VS. PEST CONTROL (INDIA) PVT. LTD. 4. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, T HE ORDER OF THE LD. CIT(A) - 40, MUMBAI, MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3.2 THE ONLY ISSUE FOR ADJUDICATION IN THIS APPEAL OF REVENUE IS REGARDING THE DELETION OF THE ADDITION MADE BY THE A.O. ON ACCOUNT OF PAYMENT OF COMMISSIO N TO DIRECTORS. IN THIS REGARD, WE HAVE HEARD BOTH THE LD. DR FOR REVENUE AND THE AR FOR THE ASSESSEE. WE FIND THAT THIS ISSUE IS A RECURRING ONE INVOLVED IN TH E EARLIER A.YS. 2006 - 07 TO 2010 - 11 IN THE CASE ON RECORD. THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER FOR A.Y. 2010 - 11 HAS CONSIDERED AND DECIDED ON IDENTICAL ISSUE IN ITA NO. 2918/MUM/2013 VIDE ORDER DATED 25.07.2014 WHEREIN AT PARA 3 TO 4.1 THEREOF IT HAS BEEN HELD AS UNDER: 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS IS A RECURRING ISSUE INVOLVED IN THE EARLIER ASSESSMENT YEARS 2006 - 07 TO 2009 - 10. THE TRIBUNAL FOR THE ASSESSMENT YEAR 2007 - 08 CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN ITA NO.5317/M/10 VIDE ORDER DATED 14/03/2012 IN PARA - 6 AS UNDER : - 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORDS. THE LD. COUNSEL SUBMITS THAT COMPANY HAS BEEN PAYING THE DIRECTORS REMUNERATION AS A PROFIT COMMISSION AS PER THE PROVISIONS OF THE COMPANIES ACT, 1956, A FTER DETERMINATION OF THE PROFITS. THE ASSESSEE - COMPANY ALSO IS PERFORMANCE INCENTIVES TO THE MANAGERS. HE SUBMITTED THAT MR. S. RAO WAS CHAIRMAN & MANAGING DIRECTOR OF THE ASSESSEE COMPANY WHO WITHDREW FROM THE ACTIVE PARTICIPATION OF HE COMPANY'S BUSINES S AND MR. ANIL S. RAO WAS PAID A COMMISSION OF RS.81,39,200/ - @ 8% OF THE PROFIT WHICH AS PER THE RESOLUTION PASSED BY THE BOARD. WE HAVE ALSO HEARD LD. D.R. WE FIND THAT THE PROFIT COMMISSION WHICH IS PAID TO THE DIRECTOR IS APPROVED IN THE GENERAL MEETIN G (G.M.) OF THE SHAREHOLDERS AND REQUIRED EVIDENCE WAS FILED BEFORE THE LD. CIT (A). WE FURTHER FIND THAT ASSESSEE HAS BEEN PAYING PROFIT COMMISSION TO THE MANAGING DIRECTOR IN PAST ALSO. EARLIER, MR. S. RAO WAS PAID SAME COMMISSION AND AFTER HIS WITHDRAWA L FROM BUSINESS OF THE ASSESSEE, MR. ANIL RAO HAS BEEN PAID, ENHANCING HIS PERCENTAGE TO 8%, THAT IS MERGING PERCENTAGE OF COMMISSION EARLIER PAID TO HIS FATHER. IN PAST A.O. HAS ALLOWED SAID DEDUCTION 4 ITA NO. 3755/MUM/2014 (A.Y. 2011 - 12) DY. CIT VS. PEST CONTROL (INDIA) PVT. LTD. AND NEVER RAISED ANY OBJECTION. AFTER GIVING OUR ANXIO US CONSIDERATION TO THE FACTS ON RECORDS, IN OUR OPINION THERE WAS NO JUSTIFICATION TO THE A.O. TO DISALLOW THE COMMISSION PAYMENT TO THE DIRECTORS AND THE MANAGERS. WE FIND NO REASON TO TAKE A DIFFERENT VIEW FROM THAT OF LD. CIT (A), WE ACCORDINGLY CONFIR M THE SAME AND ACCORDINGLY ISSUE IN ROUND 'B' ALSO STANDS DISMISSED. 4. THUS IT IS CLEAR THAT FOR THE ASSESSMENT YEAR 2007 - 08 THE ISSUE OF COMMISSION PAID TO THE DIRECTORS WHICH WAS DISALLOWED BY THE AO HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE C IT(A) AND FURTHER BY THIS TRIBUNAL . WE FURTHER NOTE THAT FOR THE ASSESSMENT YEAR 2008 - 09 THE TRIBUNAL AGAIN CONSIDERED AND DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSMENT YEAR 2007 - 08. AGAIN FOR THE ASSE SSMENT YEARS 2006 - 07 AND 2009 - 10 THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 29/11/2013 IN PARA - 7 AS UNDER : - 7. AS REGARDS THE APPEAL OF THE REVENUE FOR A.Y. 2009 - 10 BEING ITA NO. 5953/MUM/2012, IT IS OBSERVED THAT THE ISS UES INVOLVED THEREIN RELATING TO DELETION BY THE LD. CIT(A) OF THE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF UNEXPIRED SERVICE CONTRACT AND DISALLOWANCE COMMISSION PAYMENT MADE TO THE DIRECTORS ARE SIMILAR TO A.Y. 2006 - 07. ACCORDINGLY WE FOLLOW OUR CONCLUSI ON DRAWN IN A.Y. 2006 - 07 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF UNEXPIRED SERVICE CONTRACT AND DISALLOWANCE OF COMMISSION TO DIRECTORS. APPEAL OF THE REVENUE FOR A.Y. 2009 - 10 IS THEREFORE DISMI SSED. 4.1 AS IT IS CLEAR FROM THE EARLIER ORDER OF THIS TRIBUNAL THAT THIS ISSUE HAS BEEN CONSISTENTLY DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY TO MAINTAIN THE RULE OF CONSISTENCY AND FOLLOWING THE EARLIER ORDER OF THIS TR IBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE . THE ORDER OF CIT(A) QUA THIS ISSUE IS UPHELD. 3.3 FROM THE AFORESAID ORDER OF THE CO - ORDINATE BENCH (SUPRA) IT IS CLEAR THAT FROM A.Y. 2007 - 08 ONWARDS THE ISSUE OF COMMISSIO N PAID TO THE DIRECTORS WHICH WAS DISALLOWED BY THE A.O. HAS BEEN CONSISTENTLY DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCHES OF ITS TRIBUNAL IN THE CASE ON HAND. FOLLOWING THE DECISIONS OF THE 5 ITA NO. 3755/MUM/2014 (A.Y. 2011 - 12) DY. CIT VS. PEST CONTROL (INDIA) PVT. LTD. CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE O N HAND FOR A.Y. 2010 - 11 IN ITA NO. 2918/MUM/2013 DATED 25.7.2014, AND EARLIER YEARS, AND TO MAINTAIN THE RULE OF CONSISTENCY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. CONSEQUENTLY , WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE. 4. IN THE RESULT, THE R EVENUE S APPEAL FOR A.Y. 2011 - 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 24 TH , 201 5 SD/ - SD/ - ( JOGINDER SINGH ) ( JASON P. BOAZ ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 24 . 11 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI