DCIT, Circle-Murshidabad, Murshidabad V. M/s Golden Motors, Murshidabad

ITA 409/KOL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0892 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 14-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Non-deduction of tax; Benefit of exemption

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.409/KOL/2012 ASSESSMENT YEAR:2005-06 DCIT, CIRCLE, MURSHIDABAD, 39, R.N. TAGORE ROAD, P.O BERHAMPRE, DIST. MURSHIDABAD PIN-742101 / V/S . M/S GOLDEN MOTORS NH-34, PANCHANANTALA, BERHAMPORE, MURSHIDABAD- 742101 [ PAN NO.AACFG 5505 G ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SAURABH KUMAR, ADDL. CIT-DR /BY RESPONDENT NONE /DATE OF HEARING 24-10-2017 /DATE OF PRONOUNCEMENT 06-12-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 02.11.201 1. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-MURSHIDABAD U/S 143(3)/147 OF THE I NCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 31.12.2010 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS RAISED BY THE ASSESSEE PE R ITS APPEAL ARE AS UNDER:- 2. AT THE OUTSET, IT WAS NOTICED THAT THIS APPEAL F ILED BY REVENUE IS DELAYED BY 38 DAYS. REVENUE HAS FILED CONDONATION PETITION SUPPOR TED BY AFFIDAVIT STATING THE ITA NO.409/KOL/2012 A.Y. 2 005-06 DCIT, CIR-MSD VS. M/S GOLDEN MOTORS PAGE 2 REASONS. IN VIEW OF ABOVE REASONS WE CONDONE THE D ELAY AND ADMIT THE APPEAL FOR HEARING. 3. NONE APPEARED FOR THE ASSESSEE. HOWEVER, AFTER G OING THROUGH THE RECORDS WE FIND THAT THE CASE IS VERY OLD AND ON EARLIER OCCAS IONS ALSO THE ASSESSEE FAILED TO APPEAR DESPITE THE FACT THAT VARIOUS NOTICES WERE ISSUE TO THE ASSESSEE. HENCE, AFTER HEARING THE SUBMISSIONS OF THE LD. DR WE ARE OF THE VIEW THAT T HE APPEAL CAN BE DISPOSED OFF WITHOUT THE APPEARANCE OF ASSESSEE OR BY LD. AR. TH EREFORE WE DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR. 4. FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR 31,96,986/- ON ACCOUNT OF NON- DEDUCTION OF TAX DEDUCTED AT SOURCE (TDS) U/S. 194- H OF THE ACT. 5. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PART NERSHIP FIRM AND ENGAGED IN TRADING BUSINESS OF MOTOR CYCLE AND TRACTOR. THE AS SESSEE IS MAINTAINING TWO DIVISIONS NAMELY MOTOR CYCLE AND OTHER TRACTOR DIVISION. THE ASSESSEE UNDER BOTH THE DIVISION HAS CLAIMED COMMISSION EXPENSE AS DETAILED UNDER:- MOTOR CYCLE DIVISION:- THE ASSESSEE HAD APPOINTED SUB-DEALERS FOR SALE OF MOTOR CYCLE AS WELL AS SPARE PARTS AND THESE SUB-DEALERS WERE PAID THE COMMISSIO N BY THE ASSESSEE AS DETAILED BELOW:- I) COMMISSION TO THE SUB-DEALERS FOR MOTOR CYCLE 17,64 ,650/- II) COMMISSION TO F.S.C/SUB-DEALERS 5,16,517/- TRACTOR DIVISION: THE ASSESSEE SIMILARLY HAS APPOINTED SUB-DEALERS FO R ITS TRACTOR DIVISION. THE SUB-DEALERS WERE PAID COMMISSION FOR 7,15,895/- ONLY OUT OF SALE OF TRACTORS. THE ASSESSEE IN RESPECT OF ABOVE EXPENSES SUBMITTED THAT IN NONE OF THE CASE ANY PAYMENT OF COMMISSION HAS BEEN MADE TO THE SUB-DEAL ERS. THE AMOUNT OF COMMISSION TO THE SUB-DEALERS REPRESENTS THE MARGIN GIVEN TO THEM. THE ASSESSEE USED TO SUPPLY THE MOTOR CYCLE AS WELL AS TRACTORS TO TH E SUB-DEALERS AT A MAXIMUM RETAIL PRICE (MRP) AND THESE SUB-DEALERS USED TO DEDUCT MA RGIN OUT OF THE MRP AMOUNT AND USED TO REMIT THE BALANCE AMOUNT TO THE ASSESSEE. I N TURN, THE ASSESSEE USED TO PROVIDE CREDIT NOTE TO THESE SUB-DEALERS. AS SUCH, THE AMOU NT OF COMMISSION REPRESENTS THE ITA NO.409/KOL/2012 A.Y. 2 005-06 DCIT, CIR-MSD VS. M/S GOLDEN MOTORS PAGE 3 MARGIN OF THE SUB-DEALERS. AS THE TRANSACTIONS BETW EEN THE ASSESSEE AND THE SUB- DEALERS REPRESENTS THE SALE AND PURCHASE AND THEREF ORE THERE IS NO QUESTION OF MAKING ANY PAYMENT AS COMMISSION. THUS, THE QUESTION FOR D EDUCTING THE TDS U/S. 194-H OF THE ACT DOES NOT ARISE. HOWEVER, THE ASSESSING OFFICER DISREGARDED THE CONT ENTION OF THE ASSESSEE BY OBSERVING THAT THE INCENTIVE WAS GIVEN TO THE SUB-D EALERS IN THE FORM OF COMMISSION / BROKERAGE. THE AO ALSO OBSERVED THAT THE ADJUSTMENT OF THE COMMISSION AMOUNT DOES NOT ENTITLE THE ASSESSEE TO MAKE THE PAYMENT WITHOU T TDS. THUS, THE AO MADE THE DISALLOWANCE OF THE COMMISSION AMOUNT FOR 31,96,986/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE PAYMENT MADE TO THE SUB-DEALERS OF HERO HONDA MOTOR CYCLE AND MAHINDRA TRACTOR WERE NOTHING BUT SHARE OF PROFIT TO THEM. THERE WAS NO CHEQUE OR CASH PAYMENT FOR THE IMPUGNE D COMMISSION. THE AMOUNT OF COMMISSION WAS ADJUSTED BY WAY OF CREDIT NOTE TO TH E SUB-DEALERS. THERE WAS NO RELATIONSHIP BETWEEN ASSESSEE AND SUB-DEALERS AS OF PRINCIPAL AND AGENT. AS SUCH, THE TRANSACTIONS WERE RECORDED BY BOTH THE PARTIES FOR THE SALE OF PRODUCTS AND PURCHASE OF THE PRODUCTS. LD. CIT(A) AFTER CONSIDERING THE SUBM ISSIONS MADE BY ASSESSEE DELETED THE ADDITION MAD BY THE AO BY OBSERVING AS UNDER:- 4.2. I HAVE DULY CONSIDERED THE SUBMISSION OF THE A R OF THE APPELLANT AND SEEN THE DETAILS FILED. AS PER THE PROFIT & LOSS A/C, THE AP PELLANT HAD PAID SALES COMMISSION OF RS.19,64,650 - AND COMMISSION FOR FREE SERVICE COUP ON (FSC) OF RS.5, 16,5171- FOR ITS MOTOR CYCLE DIVISION AND COMMISSION OF RS.7,15, 895/- FOR ITS TRACTOR DIVISION. AS IT APPEARS THAT DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAD EXPLAINED THAT ACTUALLY NO COMMISSION WAS PAID TO ANYBODY EITHER F OR MOTOR CYCLE DIVISION OR FOR TRACTOR DIVISION BUT AMOUNT DUE TO THE SUB- DEALERS FOR MOTOR CYCLE DIVISION AGAINST SHARE OF PROFIT [SINCE GOODS WERE SOLD AT M.R.P. RA TE] WAS ADJUSTED THROUGH CREDIT NOTES AS ' TRADE DISCOUNT '. FOR THE TRACTOR DIVISION, DISCOUNT WAS GIVEN TO THE ACTUAL PURCHASERS. THE AO HAS NOT DISPUTED THE FACTS THAT THE PAYMENTS WERE MADE TO THE SUB-DEALERS BY WAY OF CREDIT NOTES [FOR THE MOTOR C YCLE DIVISION AND DISCOUNT WAS GIVEN TO THE PURCHASERS FOR THE TRACTOR DIVISION, B UT OPINED THAT THE APPELLANT HAD PAID INCENTIVE TO THE SUB-DEALERS FOR BOOSTING TURNOVER AND THEREFORE, THE PAYMENTS MADE WERE IN THE NATURE OF COMMISSION AND THE APPELLANT HAD VIOLATED THE PROVISIONS OF SECTION 194 H OF THE ACT FOR NON-DEDUCTION OF TAX A T SOURCE ON SUCH PAYMENTS. 4.3. FOR THE PURPOSE OF SECTION 194 H OF THE ACT, C OMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR IND IRECTLY, BY-A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED OR F OR ANY SERVICES IN THE COURSE OF ITA NO.409/KOL/2012 A.Y. 2 005-06 DCIT, CIR-MSD VS. M/S GOLDEN MOTORS PAGE 4 BUYING OR SELLING OF GOODS .... GOING BY THIS EXPLA NATION, THERE HAS TO BE A 3RD PARTY WHO SHOULD PROVIDE SERVICE EITHER TO THE PURCHASER OR TO THE SELLER OR BOTH TO EARN COMMISSION. IN THIS CASE, THERE IS NO DISPUTE THAT THE ENTIRE AMOUNT IN QUESTION, WHETHER COMMISSION OR TRADE DISCOUNT, WERE PAID TO THE ACTUAL PURCHASERS. THERE WAS NO 3RD PARTY INVOLVEMENT AND THE PAYMENTS WERE MADE THROUGH CREDIT NOTES TO THOSE SUB-DEALERS WHO DIRECTLY AND REGULARLY PURCHASED MO TOR CYCLES. SIMILARLY ACTUAL PURCHASERS WERE ALLOWED DISCOUNT FOR PURCHASES OF T RACTORS BY THE APPELLANT. SINCE NO PAYMENT WAS MADE TO THE 3RD PARTY BUT CREDIT NOTES ISSUED TO THE ACTUAL PURCHASERS AGAINST TRADE DISCOUNT, SUCH PAYMENTS COULD NOT BE CONSTITUTED AS ' COMMISSION OR BROKERAGE ' AS PER PROVISIONS OF SECTION 194 H OF THE ACT. UN DER THE FACTS AND CIRCUMSTANCES, THE DISALLOWANCES MADE BY THE AO U/S . 40(A)(IA) OF THE ACT IS NOT MAINTAINABLE. THUS, THE ADDITIONS OF RS.19,64,650/- AND RS.5,16,517/- AND RS.7,15,895/- ARE DELETED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 7. LD. DR BEFORE US HEAVILY RELIED ON THE ORDER OF AO AND LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 8. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA LS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO DISALLOWED THE COMMISSION PAID BY THE ASSESSEE TO ITS SUB-DEALERS ON THE GROUND OF NON-DEDUCTION OF TDS U/S. 40(A)(IA ) OF THE ACT. HOWEVER, LD. CIT(A) OBSERVED THAT THERE WAS NO PAYMENT OF COMMIS SION PAID BY ASSESSEE TO ITS SUB-DEALERS. IN-FACT THE ASSESSEE HAS SOLD THE PROD UCTS AT THE MRP TO THE SUB-DEALERS ON PROFIT SHARING BASIS. THEREFORE, THE ADDITION WA S DELETED BY LD. CIT(A). NOW THE ISSUE BEFORE US ARISES FOR OUR ADJUDICATION WHETHER ASSESSEE HAS DEFAULTED FOR NOT DEDUCTING THE TDS ON THE AMOUNT OF COMMISSION EXPEN SES IN THE GIVEN FACTS & CIRCUMSTANCES. IN THIS REGARD, WE FIND THAT NO PAYM ENT OF COMMISSION WAS MADE BY THE ASSESSEE TO ITS SUB-DEALERS AS EVIDENT FROM THE ORDER OF AO WHICH READS AS UNDER:- ISSUE OF CREDIT NOTE IS JUST A MODUS OPERANDI FOR SETTLEMENT OF PAYMENT. HENCE THE ARGUMENT PLACED BY THE A.R EXPLAINING THA T THE COMMISSION IS ACTUALLY SHARING OF PROFIT MARGIN WITH SUB-DEALERS, CANNOT ACCEPTED. FROM THE ABOVE FINDINGS OF AO WE NOTE THAT THE ASSE SSEE HAS NOT PAID ANY AMOUNT OF COMMISSION TO ITS SUB-DEALERS RATHER THE CREDIT NOT E WAS ISSUED TO SUB-DEALERS AGAINST SALES MADE BY THE ASSESSEE. IN VIEW OF THE ABOVE, W E OPINE THAT THE TRANSACTIONS RECORDED BY ASSESSEE IN ITS BOOKS WITH ITS SUB-DEAL ERS ARE IN THE NATURE OF SALES AND PURCHASE. THEREFORE IN OUR CONSIDERED VIEW THE PROV ISION OF TDS CANNOT BE APPLIED IN THE INSTANCE FACTS OF CASE. THE ASSESSEE SIMPLY HAS RECORDED THE MARGIN GIVEN TO THE ITA NO.409/KOL/2012 A.Y. 2 005-06 DCIT, CIR-MSD VS. M/S GOLDEN MOTORS PAGE 5 SUB-DEALERS AS COMMISSION DOES NOT CHANGE THE CHARA CTER OF TRANSACTIONS. LD. DR HAS NOT BROUGHT ANY INFIRMITY IN THE ORDER OF LD. CIT(A ). HENCE, WE DO NOT FIND ANY REASONS TO INTERFERE IN THE ORDER OF LD. CIT(A). CO NSEQUENTLY, REVENUES GROUND IS DISMISSED. 9. SECOND ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 1,58,671/- ON ACCOUNT OF EXCISE DUTY. 10. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS OBSERVED THAT THE ASSESSEE HAS SHOWN EXCISE DUTY RECEIVABLE FOR 1,58,671/- ONLY IN ITS BOOKS OF ACCOUNT BUT NO CREDIT ENTRY FOR THE SAME WAS SHOWN IN THE P ROFIT AND LOSS ACCOUNT. THEREFORE, THE AMOUNT OF EXCISE DUTY RECEIVABLE FOR 1,58,671/- WAS TREATED AS UNDISCLOSED INCOME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 5. GROUND NO. 10 OF THE APPEAL RELATES TO ADDITION OF RS.L,58,6711- AS UNDISCLOSED INCOME, REPRESENTING RECEIVABLE AMOUNT FROM HERO HO NDA MOTORS LTD. (HHML). THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS EXTRACT ED BELOW: 'IN THE ASSET SIDE OF THE BALANCE SHEET AN AMOUNT O F RS.7,26,237.94 HAS BEEN SHOWN UNDER THE HEAD ' RECEIVABLE ACCOUNT '. FROM DETAILS OF SUCH ACCOUNT IT IS NOTICED THAT A SUM OF RS.L,58,671/- UNDER THE HEAD 'HERO HONDA MOTORS LTD. (EXEMPT OF EXCISE DUTY). ON VERIFICATION STATEMENT OF HHML A/C. PLACED IN RECORD IT IS FOUND THAT PRICE IS INCLUSIVE OF EXCIS E DUTY. HENCE, IF THE MANUFACTURER GETS THE BENEFIT OF EXEMPTION OF EXCIS E DUTY, THE BENEFIT IS ALSO RECEIVED BY THE DEALERS. IF THE ASSESSEE HAS SHOWN THE AMOUNT OF RS.1,58,671.48 IN THE RECEIVABLE A/C, THE ASSESSEE ALSO REQUIRES TO ACCOUNT FOR THE AMOUNT IN THE CORRESPONDING CREDIT SIDE OF THE P&L A/C. AS PER MERCANTILE SYSTEM OF ACCOUNTING, WHICH HAS NOT BEEN DONE. HENC E, THE AMOUNT OF RS.158,6711- IS TREATED AS UNDISCLOSED INCOME AND A DDED TO THE TOTAL INCOME.' 5.1. THE AR OF THE APPELLANT IN HIS WRITTEN SUBMISS ION STATED THAT THE SAID AMOUNT OF RS.L,58,6711- REPRESENTED THE AMOUNT RECEIVABLE FRO M HHML (EXEMPT OF EXCISE DUTY), WAS BROUGHT FORWARD BALANCE AS WOULD BE EVIDENT FRO M THE COPY OF THE BALANCE SHEET AS ON 31103/2004.' HAVING CONSIDERED THE SUBMISSION OF THE APPELLANT, I FIND THAT THE AO MADE THE ADDITION WITHOUT EVEN VERIFYING THAT TH E AMOUNT WAS A BROUGHT FORWARD BALANCE FROM EARLIER YEARS. THOUGH THE FINDING OF T HE AO IN THE MATTER APPEARS TO BE CORRECT, BUT NO ADDITION COULD BE MADE IN RESPECT O F BROUGHT FORWARD ACCOUNTS. THE ADDITION OF RS.L,58,6711- IS THEREFORE, DELETED. ITA NO.409/KOL/2012 A.Y. 2 005-06 DCIT, CIR-MSD VS. M/S GOLDEN MOTORS PAGE 6 THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 12. LD. DR BEFORE US HEAVILY RELIED ON THE ORDER OF AO. 13. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERI AL AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE AMOUNT OF EXCISE DUTY RECE IVABLE IS COMING FROM THE EARLIER YEARS. THEREFORE, THERE IS NO QUESTION OF TREATING THE SAME AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. CONSEQUENTLY, GRO UND OR REVENUE IS DISMISSED. 14. IN THE RESULT, APPEAL OF REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06/12/2017 SD/- SD/- (% ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 06/12/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE, MURSHIDABAD, 39, R.N. TAGO RE ROAD, P.O. BERHAMPORE, DIST. MURSHIDABAD, PIN-742101 2. /RESPONDENT-M/S GOLDEN MOTORS, NH-34, PANCHANANTALA , BERHAMPORE MURSHIDABAD-74 2101 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,