Buhler (india) Private Limited, Bangalore V. DCIT, Bangalore

ITA 434/BANG/2012

• Counselvise Citation: 43421114 RSA 2012
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA.434/BANG/2012 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.434/BANG/2012 (ASSESSMENT YEAR : 2007-08) M/S. BUHLER (INDIA) P. LTD, NO.13D, KIADB INDUSTRIAL AREA, ATTIBELE, BANGALORE 560 107 ..APPELLANT PAN : AAACB5987A V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -11(2), BANGALORE ..RESPONDENT ASSESSEE BY : SHRI. CHAVALI NARAYAN, CA REVENUE BY : SHRI. SUNIL KUMAR AGARWALA, JCIT HEARD ON : 19.08.2015 PRONOUNCED ON : 26.08.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT ASSAILS DISALL OWANCE OF COMMISSION EXPENDITURE OF RS.1,14,30,754/- MADE BY THE AO WHIC H WAS CONFIRMED BY THE CIT (A). 02. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN MANU FACTURE AND DISTRIBUTION OF FOOD PROCESSING MACHINES HAD FILED ITS RETURN OF IN COME DECLARING INCOME OF RS.15,31,55,764/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY ITA.434/BANG/2012 PAGE - 2 THE AO THAT ASSESSEE HAD DONE A PROVISIONING FOR CO MMISSION OF RS.1,25,46,819/- PAYABLE TO AGENTS FOR PROCURING BUSINESS. AS PER T HE AO ASSESSEE HAD ACTUALLY INCURRED RS.9,64,631/- ONLY DURING THE YEAR. AO WA S OF THE OPINION THAT ASSESSEE WAS UNABLE TO SUBSTANTIATE THE CLAIM OF PROVISION. AFTER ADJUSTMENT OF THE EARLIER YEAR PROVISION THE EFFECTIVE CLAIM WAS RS.1,14,30,7 54/-. THIS WAS DISALLOWED. 03. ON APPEAL CIT (A) CONFIRMED THE DISALLOWANCE FO R A REASON THAT THERE WAS NO SCIENTIFIC STUDY DONE BY THE ASSESSEE FOR JUSTIF YING THE PROVISIONING. 04. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THIS TRIBUNAL. THIS TRIBUNAL HELD THAT THE BULK OF THE PROVISIONING RELATED TO O NE PARTY, NAMELY, M/S. PATINUM CORPORATION. AS PER THIS TRIBUNAL, THE INVOICES RA ISED PERTAINED TO A SUBSEQUENT ASSESSMENT YEAR. TRIBUNAL CONFIRMED THE ORDER OF C IT (A). ASSESSEE THEREAFTER FILED A MISCELLANEOUS PETITION STATING THAT IT HAD PRODUCED THE INVOICE FROM M/S. PLATINUM CORPORATION IN SUPPORT OF THE PROVISIONING DONE. HOWEVER THE TRIBUNAL DISMISSED THE MP. 05. AGGRIEVED ASSESSEE MOVED IN FURTHER APPEAL BEFO RE THE HONBLE JURISDICTIONAL HIGH COURT. HONBLE JURISDICTIONAL HIGH COURT IN ITS JUDGMENT DT.19.08.2014 HELD AS UNDER AT PARA 2 : ITA.434/BANG/2012 PAGE - 3 ITA.434/BANG/2012 PAGE - 4 ITA.434/BANG/2012 PAGE - 5 06. NOW BEFORE US LD. AR SUBMITTED THAT PROVISIONIN G FOR COMMISSION DONE BY THE ASSESSEE WAS BASED ON AN INVOICE RAISED BY M /S. PLATINUM CORPORATION DT.12.06.2006 PLACED AT PAPER BOOK PAGE.95. AS PER THE LD. AR ASSESSEE HAD FILED DETAILS OF THE PROVISION CREATED INCLUDING TH E PROVISION OF RS.1,14,00,000/- RAISED BY M/S. PLATINUM CORPORATION FOR THE SALES E FFECTED THROUGH THEM. LD. AR SUBMITTED THAT TOTAL PROVISIONING FOR THE YEAR C AME TO RS.1,25,46,890/-. AGAINST THE INVOICE RAISED BY M/S. PLATINUM CORPORA TION ASSESSEE HAD PAID RS.98,67,500/- IN THE VERY NEXT YEAR. AS PER LEARN ED AR DESPITE ALL THESE DETAILS PLACED, PROVISION WAS DISALLOWED AS UNASCERTAINED. FURTHER ACCORDING TO HIM A SUM OF RS.6,58,734/- INCLUDED IN THE TOTAL AMOUNT O F RS.1,14,30,754/- DISALLOWED BY THE AO, WAS ALREADY INCLUDED IN PRIOR PERIOD EXPENDITURE WHICH WAS AGAIN THE SUBJECT OF A DISALLOWANCE. THEREFORE ACCORDING TO HIM, THERE WAS A DOUBLE DISALLOWANCE OF SUCH AMOUNT. 07. PER CONTRA, LD. DR SUBMITTED THAT THE BILL PLAC ED BY THE ASSESSEE AT PAPER BOOK PAGE 70 DT.12.12.2006 MENTIONED THE COMMISSION AS USD 2,50,000/-. AS PER THE LD. DR ONCE THE INVOICE WAS RAISED BY M/S. PLATINUM CORPORATION ASSESSEE SHOULD HAVE ACCOUNTED IT AS COMMISSION EXP ENDITURE AND CREDITED THE SAID PARTYS ACCOUNT. INSTEAD OF THIS ASSESSEE HAD SHOWN IT AS PROVISION. THIS REQUIRED VERIFICATION. AS PER THE LD. DR SIMILARLY THE SUM OF RS.6,60,734/- STATED AS ALREADY DISALLOWED UNDER PRIOR PERIOD EXP ENDITURE ALSO REQUIRED VERIFICATION BY THE AO. ITA.434/BANG/2012 PAGE - 6 08. WE HAVE PERUSED THE MATERIALS ON RECORD AND HEA RD THE RIVAL SUBMISSIONS. DETAILS OF THE PROVISION CREATED BY THE ASSESSEE FO R COMMISSION DUES HAS BEEN PLACED AT PAPER BOOK PAGE 10. WE FIND THAT THE BUL K OF THE AMOUNT OF PROVISIONING RELATED TO M/S. PLATINUM CORPORATION A ND THIS CAME TO RS.1,14,00,000/-. IN SUPPORT ASSESSEE HAS PLACED AN INVOICE DT.12.12.2006 RAISED BY M/S. PLATINUM CORPORATION FOR US $ 2,50,000/-. AS STATED BY THE LD. DR SINCE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF A CCOUNTING IT SHOULD HAVE DEBITED THE COMMISSION AMOUNT ON RECEIPT OF THE INV OICE AND CREDITED M/S. PLATINUM CORPORATION AS THE CREDITOR FOR THE SAID AMOUNT. AS AGAINST THIS, ASSESSEE HAD CREATED A PROVISION OF RS.1,14,00,000/ -. IN OUR OPINION TWO ASPECTS REQUIRE VERIFICATION. ONE IS WHETHER THE PROVISION OF RS.1,14,00,000/- MADE BY THE ASSESSEE IS BASED ON THE INVOICE DT.12.12.2006 OF M/S. PLATINUM CORPORATION. THIS IS FOR THE REASON THAT INVOICE IS FOR US$ 2,50 ,000/- WHEREAS THE PROVISION CREATED IS FOR INR 1,14,00,000/-. FURTHER IT IS AL SO REQUIRED TO VERIFY WHETHER ON RECEIPT OF INVOICE FROM M/S. PLATINUM CORPORATION , WHICH WAS RAISED DURING THE CURRENCY OF THE RELEVANT PREVIOUS YEAR, ASSESS EE HAD DEBITED THE COMMISSION ACCOUNT AND SHOWN M/S. PLATINUM CORPORATION AS A CR EDITOR. IN OTHER WORDS WHETHER THERE IS DUPLICATION OF CLAIM ALSO NEEDS TO BE VERIFIED. WE ALSO FIND THAT AO HAD DISALLOWED A SUM OF RS.6,54,734/- AS PRIOR P ERIOD EXPENDITURE TREATING IT AS COMMISSION EXPENSES AND NOT RELATING TO THE IMPU GNED ASSESSMENT YEAR. AS PER THE ASSESSEE THIS WAS ALSO INCLUDED IN THE SUM OF RS.1,14,30,754/- DISALLOWED. THIS ASPECT ALSO REQUIRES VERIFICATION . WE ARE THEREFORE OF THE OPINION THAT THE CLAIM OF PROVISION OF RS.1,14,00,0 00/- AGAINST BILL RAISED BY ITA.434/BANG/2012 PAGE - 7 M/S. PLATINUM CORPORATION AS WELL AS THE QUESTION O F DUPLICATION OF DISALLOWANCE OF COMMISSION EXPENDITURE TO EXTENT OF RS.6,54,734/ - REQUIRES FRESH VERIFICATION BY THE AO. HOWEVER WE MAKE IT CLEAR THAT IF ASSESS EE IS ABLE TO SHOW THAT THE INVOICE RAISED BY M/S. PLATINUM CORPORATION IS THE BASIS FOR PROVISIONING OF RS.1,14,00,000/-, IT HAS TO BE CONSIDERED AS AN ASC ERTAINED LIABILITY AND ALLOWED, PROVIDED IT IS NOT ALREADY CLAIMED AS COMMISSION EX PENDITURE. WE, THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THIS ISSUE BACK TO THE FILE OF AO FOR VERIFICATION AFRESH. 09. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF AUGUST, 2015. SD/- SD/- (N. V. VASUDEVAN) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR