AMBER DISTILLERIES LTD, MUMBAI V. ITO 1(1)(1), MUMBAI

ITA 4091/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3901 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: SUBHODH RATNAPARKHI
• Section: 143(3); 142(1); 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR, ( AM ) ./ I.T.A. NO . 409 1 / MUM/20 12 ( / ASSESSMENT YEAR - 200 8 - 09 ) AMBER DISTILLERIES LIMITED, PLOT NO.A/47, ROAD NO.11, WAGLE INDUSTRIAL ESTATE, THANE - 400604 / VS. INCOME TAX OFFICER WARD 1(1)(1), ROOM NO.579, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AABCA349 2 J / APPELLANT BY: SHRI SUBHODH RATNAPARKHI / RESPONDENT BY SHRI A RAMCHANDRAN / DATE OF HEARING : 27. 7 .201 6 / DATE OF PRONOUNCEMENT : 08. 08 .2016 / O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 1 , MUMBAI D ATED 26.3.2012 PE RTAINING TO A.Y .2008 - 09 . 2. ONLY ISSUE RAISED IN THE GROUNDS OF APPEAL IS AGAINST THE UPHOLDING THE ADDITION OF RS.43,37,889/ - BY THE LD.CIT(A) MADE BY THE AO UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF DISALLOWANCE U/S 37(1) OF THE ACT IN RESPECT OF SHARE OF PROFIT TRANSFERRED BY THE ASSESSEE TO M/S NATIONAL INDUSTRIAL CORPORATION LTD , HEREINAFTER REFERRED TO AS NICOL ITA NO .4091 / M/1 2 2 PROPRIETOR OF AJUDHIA DISTILLERY UNDER A JOINT VENTURE AGREEMENT FOR MANUFACTURE AND SALE OF INDIAN MADE FOREI GN LIQUOR. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS E - RETURN OF INCOME ON 30.9.2008. THE RETURN WAS PROCESSED U/S 143( 1 ) OF THE ACT. THEREAFTER, SCRUTINY PROCEEDINGS WERE I N IT IATED AGAINST THE ASSESSEE AND STATUTORY NOTICES UNDER SECTION 143( 2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD PAID A SUM OF RS.43,37,889/ - TO M/S NATIONAL INDUSTRIAL CORPORATION LTD (NICOL) AS SHARE OF PROFIT TO THE SAID JO INT VENTURE FIRM UNDER JOINT VENTURE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S NATIONAL INDUSTRIAL CORPORATION LTD WHEREIN IT HAS BEEN PROVIDED THAT THE ASSESSEE WILL MANUFACTURE THE GOODS AS PER THEIR SPECIFICATIONS , ENTIRE PURCHASE S AND SALES WOULD BE UNDER THEIR INSTRUCTIONS. IT IS ALSO SUBMITTED BEFORE T HE AO THAT SEPARATE BANK ACCOUNT IN RESPECT OF JOINT VENTURE BUSINESS WAS MAINTAINED BY THE A S SES S EE AND SEPARATE PROFIT AND LOSS ACCOUNT AND B A LANC E SHEET WAS DRAWN AND IF ANY PROFIT IS LEF TOVER AFTER THE PROFIT TO BE RETAINED BY THE ASSESSEE COMPANY AS PER THE JOINT VENTURE AGREEMENT , THE EXCESS PROFIT WAS TO BE PAID BACK NICOL. THUS , THE AGREEMENT ENTERED INTO BY THE PARTIES IS ON PRINCIPAL TO PRINCIPAL BASIS AND NOT A PARTNERSHIP. THE A SSESSEE SHOWED THE PROFIT BELONG ING TO NICOL AS PAYMENT UNDER THE JOINT VENTURE OF THE PROFIT UNDER THE HEAD MARKETING EXPENSES. THE CONFIRMATION FROM NIKOL WAS ALSO PRODUCED BEFORE THE AO TO THE EFFECT THAT SAID PROFIT ITA NO .4091 / M/1 2 3 WAS INCLUDED BY SAID JOINT VE NTURE IN ITS RETURN OF INCOME AND DUE TAXES WERE PAID . T HE ASSESSEE SUBMI TT ED THAT THE SAID PAYMENT WAS NOT LIABLE TO DEDUCTION OF TAXES AT SOURCE AND WAS RIGHTLY CLAIMED BY THE ASSESSEE . THE AO DID NOT AGREE WITH THE SUBMISSIONS AND DISALLOWED THE CLA IM OF THE ASSESSEE AND MADE DISALLOWANCE U/S 40(A)(IA) OF THE ACT BY MAKING ASSESSMENT VIDE ORDER DATED 29.12.2010 PASSED UNDER SECTION 143(3) OF THE ACT BY ASSESSING THE INCOME AT RS.60,16,530/ - BY MAKING VARIOUS DISALLOWANCES INCLUDING THE PAYMENT IN Q UESTION WHICH IS BEFORE THE BENCH. AGGRIEVED BY THE ORDER OF AO , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AND OBSERVING AS UNDER : 3.6 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , SUBMISSION OF THE APPELLANT AND ASSESSMENT ORDER. THE TAX AUDITOR AFTER EXAMINING BOOKS OF ACCOUNTS AND SUPPORTING DETAILS HAD CATEGORIZED THE PAYMENT OF RS.23 , 02, 440/ - TO HOLDING COMPANY AS RO Y ALTY PAYMENT. THE APPELLANT COULD NOT SUBSTANTIATE BEFORE AO AND IN APPEAL ITS PLEA THAT T HE EXPENSES WERE IN THE NATURE OF ACTUA L REIMBURSEMENT. EVEN OTHERWISE IN THE CASE OF ASSOCIATION CEMENT CO. LTD. VS. CIT 67 TAXRNAN 346 (SC). H O N'BLE SUPREME COURT HAS HELD THAT TDS IS TO BE DEDUCTED EVE N ON IN REIMBURSEMENT OF EXPENSES. THUS THE DISALLOWANCE OF RS.23,02,440/ - I S CONFIRMED. 4 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW . THE LD. AR BROUGHT TO OUR NOTICE THAT NICOL WAS A JOINT VENTURE PARTNER AND SHARE OF PROFIT OF JOINT VENTURE WAS PAID UNDER JOINT VENTURE AGREEMENT WHICH WAS NOT LIABLE FOR TDS. THE LD. AR SUBMITTED THAT IN VIEW OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT TH E CONDITION IS FULFILLED BY TH E NICOL ITA NO .4091 / M/1 2 4 AS IT HAS DULY INCORPORATED THAT THE SHARE PROFIT RECEIVED FROM THE ASSESSEE IN I T S BOOKS OF ACCOUNT AND PAID DUE TAXES THEREON QU O WHICH FINDINGS WERE RECORDED BY THE AO IN THE ASSESSMENT ORDER TO THIS EFFECT AND THEREFORE, THE DISALLOWANCE U/ S 40(A)(IA) WAS REQUIRED BE DELETED. THE LD. DR , ON THE OTHER HAND , OBJECTED TO THE ARGUMENT OF THE LD.AR AND STRONGLY RELIED UPON THE ORDERS OF AUTHORITIES BELOW. FROM THE FACTS DISCUSSED ABOVE AND FINDINGS OF THE AO ON THE TAXABILITY IN THE HANDS OF M /S NICOL, WE ARE OF THE CONSIDERED VIEW THAT CONDITION AS LAID DOWN BY THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT WERE DULY SATISFIED AND ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT HE AO TO DELETE THE DISALLOWANCE. 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8TH AUG , 2016 . 8TH AUG, 2016 SD SD (JOGINDER SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 8TH AUG , 2016 . . . ./ SRL , SR. PS ITA NO .4091 / M/1 2 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. 6. , , / DR, ITAT, MUMBAI CONCERNED / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI