THE DCIT, (IT), CIR-1(2), KOLKATA, Kolkata V. M/s Michel Bau GmbH & Co. KG, Kolkata

ITA 395/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9450 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 06-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2016
• Court: TRIBUNAL
• Department Lawyers: S K TULSIYAN
• Keywords: Business expenditure; Rule of consistency; Permanent establishment
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM] I.T.A NOS.395 & 396/K OL/2016 ASSESSMENT YEARS : 2010-11 & 2011-12 D.C.I.T.(INTERNATIONAL TAXATION) -VS.- M/S. MICHEL BAU GMBH & CO.KG CIRCLE-1(2), KOLKATA KOLKATA [PAN : AAFCM6013 K] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.K.TULSIYAN, ADVOCA TE FOR THE RESPONDENT : NONE (ADJOURNMENT REQUES T REJECTED. ) DATE OF HEARING : 06.02.2017. DATE OF PRONOUNCEMENT : 08.02.2017. ORDER PER V.V.VASUDEVAN, JM BOTH THESE APPEALS FILED BY THE ASSESSEE ARE AGA INST COMMON ORDERS DATED 23.12.2015 OF CIT(A)-22, KOLKATA RELATING TO A.Y 2 010-11 AND 2011-12. 2. THE COMMON ISSUE THAT ARISES FOR CONSIDERATIO N IN THESE TWO APPEALS IS AS TO WHETHER CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON MADE BY THE AO BY DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF COMMISSI ON PAID TO M/S. ATIRATH COMMERCIAL (P)LTD. (ACPL) AND M/S. IMACO PROJEKTENTWICKLUNGS G MBH, AUSTRIA (IMACO). THE ISSUE ARISES FOR CONSIDERATION UNDER IDENTICAL FACT S AND CIRCUMSTANCES FOR BOTH THE ASSESSMENT YEARS. WE THEREFORE DEEM IT CONVENIENT TO PASS A COMMON ORDER. 3. THE ASSESSEE IS A COMPANY INCORPORATED IN GE RMANY. THE ASSESSEE IS MAINLY ENGAGED IN ACTIVITIES OF REHABILITATION OF SEWER LI NES BY LINING/COATING METHOD WITHIN THE CIVIL ENGINEERING AND CONSTRUCTION SEGMENT. THE COMPANY WAS AWARDED A CONTRACT BY THE KOLKATA MUNICIPAL CORPORATION (KMC) FOR CONS TRUCTION WORK OF UP GRADATION 2 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 2 (REFURBISHMENT & REHABILITATION) OF MAN ENTRY SEWER ALONG LENIN SARANI AND ADDITIONAL CONTRACT FOR CONSTRUCTION WORK OF UP GRA DATION (REFURBISHMENT & REHABILITATION) OF MAN ENTRY SEWER ALONG NIMTOLA GH AT UNDER JAWAHARLAL NEHRU NATIONAL URBAN RENEWAL MISSION (JNNURM) OF THE GOVE RNMENT OF INDIA IN THE MINISTRY OF URBAN DEVELOPMENT. THE ASSESSEE COMMENC ED THE PERFORMANCE AND EXECUTION OF THE WORK UNDER THE SAID CONTRACTS DURI NG THE FISCAL YEAR 2008-09 AND FISCAL YEAR 2009-10 BY ESTABLISHING A PROJECT OFFICE AT KO LKATA. 4. FOR A.Y.2010-11 AND 2011-12 THE ASSESSEE WHILE COMPUTING ITS INCOME FROM BUSINESS HAD CLAIMED AS A DEDUCTION EXPENDITURE ON ACCOUNT OF AGENCY COMMISSION AS FOLLOWS : ASSESSMENT YEAR ATIRATH COMMERCIAL PVT. LTD. (RS.) M/S. IMACO PROJEKTENTWICKLUNGS GMBH,AUSTRIA(RS.) TOTAL (RS.) 2010-11 3,90,80,776/- 49,54,838/- 4,40,35,614/- 2011-12 3,23,56,510/- 36,66,875/- 3,60,23,385/- 5. THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT T HE COMMISSION IN QUESTION WAS PAID FOR SERVICES RENDERED BY THE RECIPIENTS FILED THE FOLLO WING DOCUMENTS :- COMMISSION PAID TO ACPL: 1. AGREEMENT BETWEEN THE ASSESSEE AND ATIRATH COMMERCI AL PVT. LTD. DT. 21.09.2007 2. BANK STATEMENT EVIDENCING PAYMENT TO ATIRATH COMME RCIAL PVT. LTD. 3. LEDGER OF ATIRATH COMMERCIAL PVT. LTD IN THE BOOKS OF ASSESSEE 4. INVOICES RAISED BY ATIRATH COMMERCIAL PVT. LTD. ON THE ASSESSEE THE NATURE OF SERVICES PROVIDED BY M/S. ATIRATH COM MERCIAL PVT. LTD. AS FOLLOWS :- A) ASSISTANCE AND PERSONAL ADVICE IN ALL STAGES OF THE OFFER, THE CONTRACT NEGOTIATIONS AND IN COMPLETION OF ALL FORMALITIES PRIOR TO SIGNATURE OF THE CONTRACT AND DURING THE PERFORMANCE OF THE WORK UPTO THE FINAL COMPLETION OF THE PROJEC T. B) ASSISTANCE AND PERSONAL ADVICE IN SECURING AND A RRANGING OF THE NECESSARY IMPORT LICENCES, VISAS, WORKING AND RESIDENCE PERMITS OR A NY OTHER LOCAL PERMIT REQUIRED FOR THE PERSONNEL OF MICHEL BAU 3 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 3 C) PROVIDING ALL NECESSARY ASSISTANCE REQUIRED TO F ULFILL ALL GOVERNMENTAL FORMALITIES DURING NEGOTIATIONS, AT SIGNATURE OF CONTRACT, DURING THE EXECUTION AND UP TO THE FINAL COMPLETION OF THE PROJECT. D) TO ASSIST TO FOLLOW UP AND TO ARRANGE WITH THE K MC ALL CONTRACTUAL DOCUMENTS LIKE INSPECTION REPORTS, ACCEPTANCE CERTIFICATES, PROGRE SS REPORTS ETC WHICH ARE TO BE LAWFULLY AND CONTRACTUALLY PROVIDED BY KMC. E) TO ASSIST MB FOR SETTING UP OF A LOCAL OFFICE AS MAY BE REQUIRED BY INDIAN LAW AND TO ARRANGE FOR ALL THE FORMALITIES AS MAY BE REQUIRED. ALL EXPENSES FOR THE SAME WOULD BE BORNE BY MB. F) ASSISTANCE IN SECURING THE PAYMENT FROM KMC/FINA NCE BANK, UNTIL RECEIPT TO THE FINAL PAYMENT AND RELEASE OF THE CORRESPONDING BANK GUARA NTEES. G) ASSISTING MB IN HAVING A SMOOTH RELATIONSHIP WIT H KMC. 6. AS FAR AS THE PAYMENT MADE TO IMACO IS CONCERNE D THE ASSESSEE PROVIDED THE FOLLOWING DOCUMENTS TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION:- 1. AGREEMENT BETWEEN THE ASSESSEE AND IMACO PROJECKTEN TWICKLUNGS GMBH DT. 28.01.2008 TOGETHER WITH INVOICES RAISED BY THE AGE NT ON THE ASSESSEE. 2. LEDGER OF IMACO AND JOURNAL VOUCHERS IN THE BOOKS O F ASSESSEE 3. EVIDENCE OF PAYMENT MADE TO IMACO IN THE INVOICES RAISED BY IMACO ON THE ASSESSEE THE DESCRIPTION OF THE AMOUNT PAYABLE BY THE ASSESSEE ARE DESCRIBED AS CONSULTANCY SERVI CES AND IS ALSO DESCRIBED AS PAYABLE BASED ON THE PAYMENTS RECEIVED BY THE ASSESSEE FROM KMC. 7. THE AO EXAMINED SHRI ADITYA MARDA, ONE OF THE D IRECTORS OF ACPL. THE AO HAD ALSO ISSUED A QUESTIONNAIRE ALONG WITH SUMMONS U/S 131 OF THE INCOME TAX ACT, 1961 (ACT) CALLING UPON ACPL TO PRODUCE SEVERAL DOCUMENT S. IN THE EXAMINATION OF SHRI ADITYA MARD HE CONFIRMED THE FACT THAT HE RECEIVED COMMISSION FROM THE ASSESSEE FOR SERVICES RENDERED AND ALSO EXPLAINED THE NATURE OF SERVICES RENDERED BY HIM. THE AO HOWEVER WAS OF THE VIEW THAT ACPL DID NOT HAVE ANY SPECIFIC POWER TO REPRESENT OR NEGOTIATE ON BEHALF OF THE ASSESSEE. WITH REFERENCE TO ACPL HAVING RENDERED HELP TO THE 4 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 4 ASSESSEE FROM TIME TO TIME WHEN TENDERS ARE PUBLISH ED TILL THE END OF THE CONTRACT, THE AO WAS OF THE VIEW THAT THERE WAS NO EVIDENCE OF TH E ASSESSEE HAVING RENDERED ANY SUCH AT THE TENDERING STAGE PRODUCED. SIMILARLY THE AO WAS ALSO OF THE VIEW THAT THE SERVICES RENDERED BY ACPL OF DOING SURVEY OF RATES PREVAILING FOR SIMILAR CONTRACT IN THE COUNTRY, WAS NOT SUBSTANTIATED BY ANY DOCUMENTA RY EVIDENCE. THE AO ALSO HELD THAT NO EVIDENCE WAS FILED TO PROVE COORDINATION BY SHRI ADITYA MARD WITH KMC. THE AO WAS ALSO OF THE VIEW THAT ACPL DID NOT HAVE SUFFIC IENT WORK FORCE TO CARRY OUT THE JOB LIAISON. THE AO ALSO WENT THROUGH VARIOUS E-MAIL EX CHANGED BETWEEN ACPL AND THE ASSESSEE AND WAS OF THE VIEW THAT THE ASSESSEE WAS PROVIDING ONLY MENIAL SERVICE OF TRANSFERRING INFORMATION FROM KMC TO THE ASSESSEE. THE AO WAS ALSO OF THE VIEW THAT ACPL DID NOT HAVE ANY TECHNICAL PERSON ON ITS ROLL AND THEREFORE IT WAS IMPOSSIBLE FOR THEM TO PROVIDE ANY ASSISTANCE ON MATTERS OF TENDER ING WHICH REQUIRES TECHNICAL EXPERTISE. THE AO ALSO REFERRED TO THE INSPECTORS R EPORT DEPUTED BY HIM TO VERIFY THE CREDENTIALS OF ACPL IN WHICH THE INSPECTOR HAD REPO RTED THAT THE MAIN PREMISES OF THE ASSESSEE WAS HARDLY 100SQ.FT AND THAT ON ENQUIRY IT TRANSPIRED THAT THE OFFICE REMAINED OPEN ONCE IN A FEW DAYS AND ONLY FOR THE PURPOSE OF COLLECTING MAILS. 8. AFTER MAKING ALL THE ABOVE OBSERVATIONS, THE AO FINALLY CONCLUDED AS FOLLOWS :- CONSIDERING THE ABOVE FACTS AND DISCUSSION, IT IS ABUNDANTLY CLEAR THAT ATIRATH POSSESSED NO SPECIAL EXPERTISE AND MICHEL BAU WAS, AND IS STI LL, ITS FIRST SUCH CLIENT. THE NUMBER OF EMPLOYEES AND THE NATURE OF MINIMAL SERVICES RENDER ED, ALL POINT TO THE INFERENCE THAT THERE WAS NOTHING THAT ENTITLED ATIRATH TO AN AGENC Y COMMISSION OF 8% OF CONTRACT VALUE. THUS THE WHOLE TRANSACTION IS EITHER SHAM OR BOGUS OR IS UNDERTAKEN TO CAMOUFLAGE SOME SUCH EXPENSES WHICH ARE NOT LEGALLY ADMISSIBLE BEIN G IN CONTRAVENTION OF THE LAWS OF THE LAND. HENCE THE ENTIRE AMOUNT OF AGENCY COMMISSION PAID TO ATIRATH IS BEING DISALLOWED AS NOT BEING GENUINE IN NATURE AND ADDED BACK TO TH E TOTAL INCOME OF THE ASSESSEE. TOTAL INCOME AS SHOWN IN RETURN: 4,46,40,970/- ADD:- AGENCY COMMISSION AS DISCUSSED ABOVE 4,40,35 ,614/- TOTAL TAXABLE INCOME 8,86,76,584/- 9. IT CAN BE SEEN FROM THE ABOVE OBSERVATIONS OF THE AO AND FROM A READING OF THE ENTIRE ORDER OF AO THE AO HAS NOT MADE ANY ENQUIRIE S WITH REGARD TO THE PAYMENT OF 5 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 5 COMMISSION TO IMACO. NEVERTHELESS THE COMMISSION PA ID TO IMACO HAS ALSO BEEN DISALLOWED BY THE AO. AS FAR AS A.Y.2011-12 IS CONC ERNED THE FACTS ARE ALMOST IDENTICAL AND FOR ALMOST IDENTICAL REASONS THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF COMMISSION EXPENSES. 10. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT IN RESPECT OF IDENTICAL PAYMENTS MADE TO ACPL THE AO HAD DISALLOWED COMMISSION EXPENSES F OR A.Y.2009-10 FOR ALMOST IDENTICAL REASONS AS WERE GIVEN IN THE ORDER OF ASS ESSMENT FOR A.Y.2010-11 AND 2011- 11. THE CIT(A) IN THE APPELLATE ORDER FOR A.Y.2009 -10 AFTER CONSIDERING ALL THE EVIDENCE ON RECORD DELETED THE ADDITION MADE BY AO OBSERVING AS FOLLOWS :- 4.4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE APPELLANT IS A FOREIGN COMPANY WITHOUT ANY PERMANENT ESTABLISHMENT IN INDIA. IT BI D FOR AND SECURED CIVIL ENGINEERING CONTRACT FROM KOLKATA MUNICIPAL CORPORATION. THE AG ENCY COMMISSION PAID TO ATIRATH COMMERCIAL PVT LTD IS STATED TO BE FOR COMPREHENSIV E LOCAL SUPPORT SUCH AS ADMINISTRATIVE, LIAISON, TECHNICAL, REGULATORY ETC. IN KOLKATA. IT HAS BEEN STATED THAT WITHOUT SUCH LOCAL SUPPORT, IT WOULD HAVE BEEN VERY DIFFICU LT FOR A FOREIGN COMPANY TO BID, SECURE AND EXECUTE A COMPLICATED GOVT. PROJECT ESPECIALLY BECAUSE THE APPELLANT WAS ENTERING IN INDIA FOR THE FIRST TIME FOR CARRYING OUT SUCH BUSI NESS. COPY OF AGREEMENT WITH ATIRATH COMMERCIAL PVT. LTD WAS ALSO PRODUCED IN THIS REGAR D. THE ASSESSING OFFICER WAS, HOWEVER, OF THE VIEW THAT ATIRATH COMMERCIAL PVT. L TD HAD NOT PROVIDED ANY REAL SERVICES TO THE APPELLANT. IN THIS REGARD, THE APPELLANT HAS PRODUCED A SERIES OF CORRESPONDENCE, MOSTLY THROUGH E-MAIL, BETWEEN ATIRATH COMMERCIAL P VT. LTD AND ITSELF. IN HIS COMMENTS ON THE SAME, THE ASSESSING OFFICER HAS HOWEVER STAT ED THAT THESE WERE MOSTLY REGARDING STAY ARRANGEMENT FOR THE EXECUTIVES, HOTEL BOOKING ETC. AND DO NOT POINT OUT ANY SUBSTANTIAL WORK. AFTER CONSIDERING THE FACTS AND S URROUNDING CIRCUMSTANCES, I AM INCLINED TO AGREE WITH THE APPELLANT, THAT NORMALLY A FOREIG N COMPANY WOULD NEED SUBSTANTIAL LOCAL ASSISTANCE TO CONDUCT THE KIND OF BUSINESS TH E APPELLANT HAS DONE. IT IS COMMON KNOWLEDGE THAT BIDDING FOR AND EXECUTION OF CONTRAC T WITH A MUNICIPAL BODY IN INDIA WOULD REQUIRE A LOT OF PROCEDURAL AND LIAISON WORK AT LOCAL LEVEL. IT IS UNDISPUTED THAT THE APPELLANT IS A FOREIGN COMPANY WITHOUT ANY ESTABLIS HMENT IN INDIA. THEREFORE, IT IS QUITE UNDERSTANDABLE THAT IT REQUIRED ASSISTANCE FROM A L OCAL PARTY IN ORDER TO CARRY OUT ITS WORK AND THE APPELLANT HAD TO PAY SOME CHARGES FOR THE S AME. THE CORRESPONDENCE PRODUCED BY THE APPELLANT SHOWS THAT AT LEAST SOME SERVICES WER E BEING RENDERED BY THE ATIRATH COMMERCIAL PVT. LTD TO THE APPELLANT. THE ASSESSING OFFICER HAS ALSO, ALBEIT IN AN INDIRECT WAY, ACCEPTED THIS, THOUGH HE IS OF OPINION THAT TH E SERVICES WERE MINOR ONES WHICH DID NOT CALL FOR PAYMENT OF SUCH SUBSTANTIAL AMOUNT. HO WEVER, IT IS WELL SETTLED THAT IT AUTHORITIES ARE NOT SUPPOSED TO SIT OVER JUDGMENT R EGARDING THE QUANTUM OF PAYMENT MADE BY AN ASSESSEE IN COURSE OF HIS BUSINESS. A BUSINES S MAN IS GENERALLY PRESUMED TO BE THE BEST JUDGE OF HIS BUSINESS AFFAIRS. AS LONG AS IT I S ESTABLISHED, THAT SOME SERVICES WERE 6 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 6 BEING RENDERED AND THE PAYMENT WAS BEING MADE FULLY AND RESPONSIVELY FOR PURPOSE OF BUSINESS, THE SAME IS TO BE ALLOWED AS DEDUCTION. T HE RATIO OF THE SUPREME COURT'S DECISION IN THE CASE OF SASSOON J. DAVID & CO. P. L TD. V CIT 118 ITR 261 CITED BY THE APPELLANT ALSO SUPPORTS THIS PROPOSITION. IN FACT, THERE IS A PLETHORA OF JUDGMENTS WITH RATIO. THAT ONCE THE FACT OF THE EXPENDITURE HAVING BEEN I NCURRED FOR BUSINESS PURPOSE IS ESTABLISHED, THE REVENUE CAN NOT ASSUME THE ROLE OF ASCERTAINING HOW MUCH IS IS THE REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMS TANCES OF THE CASE. SOME SUCH DECISIONS ARE IN THE CASES OF BENGAL ENAMEL WORKS L TD. V. CIT 77 ITR 119 (SC), CIT V. RAMAN & RAMAN LTD. 71 ITR 345 (MAD.), CIT V. VIJAYA LAKSHMI MILLS LTD.94 ITR 173 (MAD.), SUBODHCHANDRA POPATLAL V. CIT 24 ITR 566 (B ORN.) ETC. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER, THAT THE APPELLANT AND ATIRA TH COMMERCIAL PVT. LTD ARE RELATED IN ANY MANNER OR THERE IS SOME NON- BUSINESS ASSOCIATION O R NEXUS BETWEEN THEM. THE ASSESSING OFFICER HAS, IN HIS ORDER, ALSO OBSERVED THAT ATIRA TH COMMERCIAL PVT. LTD HAD, AFTER RECEIVING AGENCY COMMISSION FROM THE APPELLANT, DEB ITED HUGE PAYMENTS, PURPOSE FOR WHICH HAS NOT BEEN CLARIFIED. A DOUBT HAS BEEN RAIS ED THAT SUCH PAYMENTS MIGHT BE FOR SUCH PURPOSE WHICH OTHERWISE WOULD HAVE BEEN AN OFF ENCE PROHIBITED BY LAW. FIRST AND FOREMOST, SUCH ALLEGATION IS BASED ON MERE SUSPICIO N BECAUSE NO MATERIAL HAS BEEN BROUGHT ON RECORD TO INDICATE, MUCH LESS ESTABLISH, THAT ANY PAYMENT FOR SUCH PURPOSE HAD ACTUALLY BEEN MADE BY ATIRATH COMMERCIAL P'VT.. LTD . IT IS JUST A GUESS WORK BASED ON CONJECTURE AND SURMISE. AS HELD IN THE DECISION IN THE CASE OF CIT VS. RAM NARAIN GOEL 224 ITR 180 (P&H) AND VARIOUS OTHER CASES, SUSPICIO N, HOWEVER STRONG, CANNOT SUBSTITUTE FOR EVIDENCE FOR MAKING ADDITION. AS HELD IN THE CA SES OF JINDAL SAW PIPES LTD. (SUPRA), SURYA FOODS & AGRO LTD. (SUPRA), DRESSER VALVE INDI A (P) LTD. (SUPRA) ETC. CITED BY THE APPELLANT, MERELY BECAUSE THE ORDER IS FROM A GOVT. / SEMI- GOVERNMENT BODY, IT DOES NOT FOLLOW, THAT ANY PAYMENT TO AGENT IN CONNECTION TO THE SAME IS AGAINST PUBLIC POLICY. SECONDLY, EVEN IF THIS WERE INDEED THE CASE, THAT W OULD ATTRACT DISALLOWANCE IN THE HANDS OF ATIRATH COMMERCIAL PVT. LTD WHICH PRESUMABLY MAD E SUCH PAYMENTS. SO FAR AS THE PAYMENT MADE BY THE APPELLANT IS CONCERNED, THERE I S NO MATERIAL, WHATSOEVER, TO SUGGEST THAT PAYMENT TO ATIRATH COMMERCIAL PVT. LTD WAS FOR SOME SUCH NEFARIOUS PURPOSE. SO' FAR AS THE APPELLANT IS CONCERNED, IT HAS PAID AGEN CY COMMISSION TO ATIRATH COMMERCIAL PVT. LTD. ON THE BASIS OF A WRITTEN AGREEMENT FOR T HE SERVICES RENDERED IN RELATION TO CONTRACT WORK CARRIED OUT BY IT. THE PAYMENT HAD BE EN MADE THROUGH BANKING CHANNEL AFTER DEDUCTING TAX AT SOURCE. MATERIAL HAS ALSO BE EN BROUGHT ON RECORD BY THE APPELLANT TO INDICATE THAT ATIRATH COMMERCIAL PVT. LTD HAD INDEE D RENDERED SOME SERVICES TO IT. ON THE OTHER HAND, NO MATERIAL, WHATSOEVER, HAS BEEN BROUG HT ON RECORD BY THE ASSESSING OFFICER TO, SUGGEST THAT TO ESTABLISH THAT PAYMENT WAS NOT FOR THE PURPOSE AS STATED BY THE' APPELLANT. IN MY OPINION, THE APPELLANT HAD DISCHAR GED ITS ONUS TO CLAIM AGENCY COMMISSION AS BUSINESS EXPENDITURE. CONSIDERING ALL THESE FACTS, I DELETE THE DISALLOWANCE OF RS.47,26,352/-. 12. IN A.Y.2009-10 THERE WAS NO PAYMENT OF COMMIS SION TO IMACO AND THE COMMISSION WAS PAID ONLY TO ACPL. IN A.Y.201-11 AND 2011-12 THE ASSESSEE DREW ATTENTION TO THE CONCLUSIONS OF CIT(A) IN HIS FOR A .Y.2009-10. THE CIT(A) WAS OF THE 7 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 7 VIEW THAT THE AO HAD NOT GIVEN ANY REASONS FOR DISA LLOWING COMMISSION PAYMENT TO IMACO AND THEREFORE THE DISALLOWANCE OF COMMISSION PAID TO IMACO CANNOT BE SUSTAINED. HOWEVER IN THE REMAND REPORT FILED BEFOR E CIT(A) THE AO HAD SOUGHT TO RAISE DISPUTE REGARDING THE GENUINENESS OF THE AGREEMENT BETWEEN THE ASSESSEE AND IMACO. THE CIT(A) WAS OF THE VIEW THAT THE AGREEMENT BETWE EN THE ASSESSEE AND IMACO WHICH WAS AN AUSTRIAN COMPANY HAD BEEN MADE IN GERM ANY AND WAS IN GERMAN LANGUAGE WHICH WAS DULY TRANSLATED INTO ENGLISH LAN GUAGE BY A COMPETENT PERSON AND PRODUCED BEFORE HIM. HE THEREFORE WAS OF THE VIEW T HAT GENUINENESS OF THE AGREEMENT CANNOT BE DISPUTED. APART FROM THE ABOVE THE CIT(A) ALSO HELD THAT THE ASSESSEE AND IMACO WERE UNRELATED PARTIES AND EVIDENCE OF IMACO HAVING RENDERED CONSULTANCY SERVICES WAS LAID BEFORE AO BUT THE SAME HAS NOT BE EN REJECTED BY THE AO ON ANY SOUND BASIS OR COGENT MATERIAL. THE CIT(A) THEREFORE HELD THAT THE DISALLOWANCE OF COMMISSION PAID TO IMACO CANNOT BE SUSTAINED. IN TH IS REGARD CIT(A) ALSO REFERRED TO THE FACT THAT TAX HAD BEEN DEDUCTED AT SOURCE AND P AID TO THE CREDIT OF GOVT. OF INDIA. 13. AS FAR AS COMMISSION PAID TO ACPL IS CONCERNED , THE CIT(A) WAS OF THE VIEW THAT THE FACTS IN A.Y.2010-11 AND 2011-12 WERE IDENTICA L TO THE FACTS AS IT PREVAILED IN A.Y.2009-10. HE ALSO FOUND THAT THE REASONS FOR DIS ALLOWING COMMISSION WAS ALSO IDENTICAL IN ALL THE ASSESSMENT YEARS. IN THESE CIR CUMSTANCES, HE WAS OF THE VIEW THAT THE CONCLUSION DRAWN BY THE CIT(A) AND WHILE DECIDING T HE APPEAL OF THE ASSESSEE FOR A.Y.2009-10 WERE PROPER AND ACCEPTABLE. THE CIT(A) HELD THAT THE DISALLOWANCE OF COMMISSION PAID TO ACPL CANNOT ALSO BE SUSTAINED. A GGRIEVED BY THE AFORESAID ORDERS OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APP EALS BEFORE THE TRIBUNAL. 14. THE LD. DR FILED AN APPLICATION PRAYING FOR AN ADJOURNMENT. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT ORDER OF CI T(A) FOR A.Y.2009-10 HAS BEEN ACCEPTED BY THE REVENUE. IN THIS REGARD OUR ATTENTI ON WAS DRAWN TO PAGE 170 FOR 8 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 8 A.Y.2010-11 WHEREIN THE AO HAS RECOMMENDED THAT ORD ER OF CIT(A) HAD TO BE ACCEPTED. THE FOLLOWING WERE THE RELEVANT RECOMMEND ATIONS OF THE AO :- TO THE JDIT (INTL.TAXN.) RANGE-2, KOLKATA AAYAKAR BHAWAN, POORVA, KOLKAYA. SIR, SUB : RECOMMENDATION OF THE RANGE HEAD ON THE SCRUT INY REPORT OF THE AO IN THE CASE OF M/S. MICHEL BAU GMBH & CO. KG, IN APPEAL NO .04/CIT(A)-VI/ADIT(IT) -2(1)/12-13/KOL DATED 27.11.2013 IN RELATION TO A.Y .2009-10 RE. KINDLY REFER TO THE ABOVE. 2. THE LD. DIT(IT &TP) , KOLKATA SUGGESTED AS FOL LOWS : PERUSED WE HAVE NOT BEEN ABLE TO ADDUCE ADEQUATE E VIDENCE. IN VIEW OF THIS, GRACEFULLY, WE ACCEPT ORDER OF CIT(A). NO FURTHER A PPEAL. 3.THE FILE SENT IS RETURNED HEREWITH. IT WAS SUBMITTED BY HIM THAT THOUGH THE PRINCIPLE O F RES JUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS, BUT THE RULE OF CONSISTENCY HAS TO BE FOLLOWED. IT WAS HIS SUBMISSION THAT WHEN THE FACTS AND CIRCUMSTANCES TH AT PREVAILED IN 2009-10 AS WELL AS A.Y.2010-11 AND 2011-12 ARE IDENTICAL AND WHEN THE REASONS ADDUCED FOR MAKING THE DISALLOWANCE OF COMMISSION WERE ALSO IDENTICAL, IT WOULD NOT BE PROPER TO ALLOW THE REVENUE TO CHALLENGE THE ORDER OF CIT(A) FOR A.Y.20 10-11 AND 2011-12. ACCORDING TO HIM SINCE THE ISSUE IS SQUARELY COVERED BY CIT(A) F OR A.Y.2009-10 THE APPEAL SHOULD BE TAKEN UP FOR HEARING AS A SETTLED ISSUE. 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE SUBMISSIONS OF THE LD.COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE ISSUE NOW IN SO FAR AS IT RELATES TO THE PAYMENT OF COMMISSION IS SETTLED IN THE CASE OF THE ASSESSEE BY THE REVENUES ACTION IN NOT FILING THE APPEAL ON AN IDENTICAL ISSUE ARISING ON IDENTICAL FACTS AND CIRCUMSTANCES IN A.Y.2009-10. IT IS ALSO PERTINENT TO MENTION THAT T HE NON FILING OF APPEAL FOR A.Y.2009- 9 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 9 10 WAS NOT DUE TO ANY ORDERS OR INSTRUCTIONS OR DIR ECTIONS ISSUED U/S 119 OF THE ACT R.W.S. 268A(1) OF THE ACT. THEREFORE IT IS OPEN TO THE ASS ESSEE TO CONTEND IN TERMS OF SECTION 268A (3) OF THE ACT THAT THE INCOME TAX AUTHORITY H AS ACQUIESCED IN THE DECISIONS ON THE DISPUTED ISSUE BY NOT FILING AN APPEAL. WE THEREFOR E REJECT THE REQUEST FOR ADJOURNMENT AND PROCEED TO DECIDE THE APPEAL AFTER HEARING THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 16. FROM THE EVIDENCE ON RECORD AND THE ORDER OF C IT(A) IT IS CLEAR THAT THE ASSESSEE HAS ESTABLISHED THAT THE PAYMENT OF COMMISSION WAS FOR SERVICES RENDERED BY ACPL AS WELL AS IMACO. NO CONTRARY EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO DISALLOW THE EXPENDITURE ON ACCOUNT OF COMMISSION. THE OBSERVATI ONS OF THE AO IN THE ORDER OF ASSESSMENT THAT THE TRANSACTIONS IS BOGUS OR SHAM A ND WAS UNDERTAKEN TO CAMOUFLAGE SOME EXPENSES WHICH ARE NOT LEGALLY ADMISSIBLE BEIN G IN CONTRAVENTION OF THE LAWS OF THE LAND, IS PURELY A SURMISE. THERE IS NO EVIDENC E BROUGHT ON RECORD TO COME TO THIS CONCLUSION. ON THE OTHER HAND, THE EVIDENCE ON RECO RD AS NOTICED BY THE AO IN THE ORDER OF ASSESSMENT ITSELF CLEARLY GOES TO PROVE THAT THE LIAISON ACTIVITIES WERE IN FACT RENDERED BY ACPL. AS RIGHTLY HELD BY CIT(A) IN HIS APPELLATE ORDER FOR A.Y.2009-10, THE AO SEEMS TO HAVE PROCEEDED ON THE BASIS THAT THE PAYME NT OF COMMISSION WAS NOT COMMENSURATE WITH THE SERVICES RENDERED BY THE RECI PIENTS. THE CIT(A) HAS RIGHTLY PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF SASSOON J.DAVID & CO.P.LTD. VS CIT. (SUPRA) TO COME TO THE CONCLUSION THAT THE REVENUE CANNOT ASSUME THE ROLE OF ASCERTAINING HOW MUCH THE IS REA SONABLE EXPENDITURE HAVING REGARD THE CIRCUMSTANCES OF THE CASE. THE CIT(A) HAS ALSO DULY TAKEN NOTE OF THE FACT THAT ACPL AND THE ASSESSEE WERE NOT RELATED PARTIES AND THAT ALL THE PAYMENT HAVE BEEN MADE THROUGH BANKING CHANNELS AFTER DUE DEDUCTION O F TAX AT SOURCE. IN OUR VIEW THESE CONCLUSIONS ARE PROPER AND APPLICABLE TO A.Y.2010-1 1 AND 2011-12 AS WELL. WE ARE ALSO OF THE VIEW THAT THE RULE OF CONSISTENCY IS APPLICA BLE AND THE REVENUE SHOULD NOT BE ALLOWED TO TAKE A DIAGONALLY OPPOSITE STAND ON ISSU ES ARISING IN IDENTICAL FACTS AND 10 ITA NOS. 395&396/KOL/2016 M/S.MICHEL BAU GMBH & CO.KG A.YR.2010-11 & 2011-12 10 CIRCUMSTANCES. WE THEREFORE FIND NO GROUNDS TO INTE RFERE WITH THE ORDER OF CIT(A). CONSEQUENTLY BOTH THE APPEALS OF THE REVENUE ARE DI SMISSED. 17. IN THE RESULT BOTH THE APPEALS BY THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED IN TH E COURT ON 08.02.2017. SD/- SD/- [DR.ARJUN LAL SAINI] [ N.V.VASUDE VAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.02.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/.S. MICHEL BAU GMBH & CO.KG, HOUSE NO.DA-195, SECTOR-I, SALT LAKE CITY, KOLKATA-700064. 2. D.C.I.T. (INTERNATIONAL TAXATION),CIRCLE-1(2), K OLKATA. 3. CIT(A)-22, KOLKATA 4. CIT- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES