TRUETZCHLER INDIA PVT. LTD.(FORMERLY KNOWN AS M/S. TRUMAC ENGINEERING CO. PVT. LTD.), MUMBAI V. ADDL.C.I.T. RG. 2(3), MUMBAI

ITA 4469/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75205 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 09-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RISHIKES OJHA; NITESH JOSHI GOPAL BHORA
• Keywords: Transfer pricing; Earning of tax free income; Retrospective amendment; Permanent establishment; Revised return
• Section: 143(3); 14A; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI I.P.BANSAL , JM & SHRI N.K.BILLAIYA , AM ITA NO. 4433 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 7 - 0 8 ) ADCIT 2(3), MUMBAI - 20 VS. M/S TRUETZSCHLER INDIA PVT. LTD., 43, DR. V.B. GANDHI MARG, MUMBAI - 400 001 PAN/GIR NO. : A AA C T 2153 N ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 4469 / MUM/20 1 2 ( ASSESSMENT YEAR :2007 - 0 8 ) M/S TRUETZSCHLER INDIA PVT. LTD., 43, DR. V.B. GANDHI MARG, MUMBAI - 400 001 VS. ADCIT 2(3), MUMBAI - 20 PAN/GIR NO. : A AACT 2153 N ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. NITESH JOSHI, GOPAL BHORA & MR. RISHIKES OJHA /REVENUE BY : MS. NEER A JA PRADHAN DATE OF HEARING : 9 TH JANUARY , 201 4 DATE OF PRONOUNCEMENT : 9 TH JANUARY , 201 4 O R D E R PER I.P.BANSAL ( J .M.) : TH ESE ARE CROSS APPEALS DIRECTED AGAINST ORDER DATED 30 - 4 - 2012 , PASSED BY LEARNED CIT(A) - 15, MUMBAI FOR ASSESSMENT YEAR 2007 - 08. ITA NOS.4433&4469/2012 2 2 . GROUNDS OF APPEAL BY THE ASSESSEE ARE AS UNDER : - 1 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] HAS ERRED IN CONFIRMING THE ACTION OF THE TPO/AO IN DETERMINING ARM'S LENGTH PRICE IN RESPECT OF SALE OF HP CARDS MACHINE BY THE APPELLANT TO TRUETZSCHLER TEXTILE MACHINERY (SANGHAI) CO. LTD. (T TMS) AT RS. 89,62,717/ - AS AGAINST RS. 79,87,822/ - DETERMINED BY THE APPELLANT UNDER COMPARABLE UNCONTROLLED PRICE (CUP) METHOD. ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED CI T(A) OUGHT TO HAVE ACCEPTED THE ARM'S LENGTH PRICE FOR SALE OF HP CARDS MA CHINE AT RS.79,87,822/ - . 2. LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE U/S.14A OF RS.17,03,344/- AS AGAINST DISALLOWANCE OF RS. 10 ,21,517 / - AS PER THE APPELLANT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ADDITIONAL DI SALLOWA NCE OF RS.6,81 ,827/- MADE U/S.14A OUGHT TO BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 1,70,18,0001 - TO THE INCOME PURPORTEDLY U / S 145A OF THE ACT, BEING DIFFERENCE BETWEEN UNUTILIZED CENVAT CREDIT OF RS. 2,63,86,0001 - PERTAINING TO OPENING STOCK AND UNUTILIZED CENVAT CREDIT OF RS. 4,34,04,0001 - PERTAINING TO CLOSING STOCK. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, ADDIT ION OF RS. 1,70,18,0001 - OUGHT TO BE DELETED. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS. 79,19,408/- U/S AO(A)(I) OF THE ACT BEING COMMISSION PAID TO TRUETZSCHLER GMBH & CO. KG, GERMANY (T GC) ON THE GROUND THAT NO TDS U/ S 195 HAS BEEN DEDUCTED BY THE APPELLANT FOR SERVICE RENDERED OUTSIDE INDIA IN RESPECT OF EXPORT OF MACHINES BY THE APPELLANT. WHILE CONFIRMING THE DISALLOWANCE, LEARNED CIT(A) HAS ERRED IN OBSERVING/HOLDING THAT: APPELLANT IS CONCEDING THE POINT THAT ASSOCIA TED ENTERPRISE IS HAVING PERMANENT ESTABLISHMENT IN INDIA. APPELLANT HAS RECEIVED THE SERVICES IN INDIA ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE ACCEPTED THAT PAYMENT UNDER CONSIDERATION IS NOT LIABLE TO TDS U / S 195 AND CONSEQUENTLY, DISALLOWANCE OF RS. 79,19,4081 - MADE U/S AO(A)(I) OUGHT TO BE DELETED. GROUNDS OF APPEAL BY THE DEPARTMENT ARE AS UNDER : - ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1 . (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) ERRED IN FOLLOWING THE DECISION OF THE HONBLE BOM BAY HIGH ITA NOS.4433&4469/2012 3 COURT IN THE CASE OF M/ S. GODREJ & BOYCE MFG. CO. LTD., WHEN THE DEPARTMENT HAS NOT ACCEPTED THE RATIO OF TH IS JUDGMENT. ( B ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCES U/S.14A IGNORING THE FACT THAT A REASONABLE AMOUNT WAS DISALLOWED BY THE A. O . CONSIDERING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 14,35,592/ - DISREGARDING THE FACT THAT T HESE EXPENSES WERE NOT CRYSTALL IZED DURING THE YEAR AND NOT DEBITED TO THE P&L ACCOUNT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DE LETING THE DISALLOWANCE OF COMMISSION AMOUNTING TO RS. 11,68.00,000 / - IGNORING THE FACT THAT THE ASSESSEE HAS FAILED TO GIVE EVIDENCES REGARDING THE SPECIFIC SERVICES RECEIVED FOR WHICH COMMISSION WAS PAID. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. ASSESSEES APPEAL & GROUND NO.1 OF DEPARTMENTS APPEAL : 3 . GROUND NO.1 IS REGARDING TP ADJUSTMENT OF RS.9,74,895/ - . DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD 5 HP CARD MACHINES TO TRUETZSCHELER TEXTILE MAHCINERY (SHANGHAI) CO. LTD. (TTMS) FOR A TOTAL CONSIDERATION OF RS.79,87,822/ - . THE ASSESSEE HAD SOLD SIMILAR MACHINES TO INDEPENDENT PARTIES LOCALLY AND ALSO INTERNATIONA L MARKET. THE ASSESSEE APPLIED CUP METHOD FOR BENCHMARKING THE TRANSACTION AS MOST APPROPRIATE METHOD AND COMPARED THE SAID PRICE WITH INDIAN CUSTOMERS AFTER MAKING ADJUSTMENTS ON FOLLOWING GROUNDS : - I) PAYMENT OF ROYALTY AT AN AVERAGE RATE OF 3.62% ON SA LE VALUE AMOUNTING TO RS.0.68 LACS. HOWEVER, ROYALTY IS NOT PAID ON SALES TO AES. II) COMMISSION TO SELLING AGENT @ 5% ON SALE VALUE AMOUNTING TO RS.0.94 LACS. III) WARRANTY COST @ 0.5% OF SALES VALUE AMOUNTING TO RS.0.09 LACS. WHILE SELLING THE SAID MA CHINE TO CUSTOMERS IN INDIA, THE ITA NOS.4433&4469/2012 4 MACHINE WAS PROVIDED ALONG WITH THE COVER, WHICH COSTS RS.0.83 LACS PER MACHINE . HOWEVER, THE TPO DID NOT ACCEPT SUCH SUBMISSION OF THE ASSESSEE AND AFOREMENTIONED ADJUSTMENTS WERE NOT GRANTED. HE COMPUTED THE ARMS LENGTH PRICE OF THE TRANSACTION PER MACHINE AT RS.18,76,979/ - AGAINST ACTUAL PRICE OF THE ASSESSEE AT RS.16,28,000/ - PER MACHINE. DIFFERENT PER MACHINE WAS WORKED OUT AT RS.1,94,979/ - AND APPLYING IT TO 5 MACHINES, THE TOTAL ADDITION OF RS.9,94,895/ - WAS MADE VID E ORDER DATED 28 - 9 - 2010. 4 . IT MAY BE MENTIONED HERE THAT SIMILAR ADJUSTMENT WAS MADE BY THE TPO FOR ASSESSMENT YEAR 2006 - 07 WHEN THE MATTER WAS SET ASIDE BY THE TRIBUNAL TO DRP AND THE ASSESSEE SOUGHT SIMILAR ADJUSTMENTS, WHICH WERE GRANTED BY THE DRP T O THE ASSESSEE. REFERENCE IN THIS REGARD CAN BE MADE TO THE DIRECTIONS OF DRP DATED 20 TH DECEMBER, 2013 FOR ASSESSMENT YEAR 2006 - 07. COPY OF THE DIRECTIONS ARE PLACED ON RECORD AND WAS ALSO GIVEN TO LEARNED DR. THE RELEVANT OBSERVATIONS OF DRP IN THIS REGA RD ARE AS UNDER : - 1.1 IN PURSUANCE TO THE ORDER OF THE IT AT, NOTICE OF HEARING WAS ISSUED IN RESPONSE TO WHICH MR. GOPAL BOHRA, FCA PARTNER OF N.A. SHAH ASSOCIATES ATTENDED THE HEARING ARGUED THE CASE AND FILED SUBMISSION. THE OBJECTIONS RAISED ARE DISP OSED AS UNDER : - 2.GROUND NO.1 LEARNED ASSISTANT COMMISSIONER OF INCOME TAX (ACIT) HAS ERRED IN PROPOSING ADDITION OF RS.3,84,640/ - ON ACCOUNT OF ADJUSTMENT IN TRANSFER PRICE CHARGED TO ASSOCIATE ENTERPRISE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E PROPOSED ADDITION OUGHT TO BE DELETED. 2.1 DURING THE YEAR, ASSESSEE HAS SOLD ONE HIGH PRODUCTION CARD - DK 800 MACHINE FOR RS.12.70 LAKHS TO TRUETZSCHELER TEXTILE MACHINERY (SHANGHAI) CO. LTD. (TTMS), AN ASSOCIATED ENTERPRISE (AE). THE ASSESSEE HAD SOLD SIMILAR DK 800 CARDS TO INDEPENDENT END CUSTOMERS IN INDIA. THE MACHINE UNDER CONSIDERATION WAS TRANSFERRED TO TTMS FOR EXHIBITION PURPOSE. PURPOSE OF TRANSFERRING TO TTMS WAS TO PROMOTE AND INCREASE THE DEMAND OF DK 800 CARDS ITA NOS.4433&4469/2012 5 IN CHINA. THE TRANSACTION WAS NOT A COMMERCIAL TRANSACTION. ACCORDINGLY, THE PRICE CHARGED FROM TTMS CANNOT STRICTLY BE COMPARED WITH THE PRICE CHARGED TO THE INDEPENDENT PARTIES WHICH WERE THE END CUSTOMERS. THE TPO HAS NOT ACCEPTED THE EXPLANATION AND MA DE AN ADJUSTMENT OF RS. 3,84,640/ - BEING DIFFERENCE IN PRICE CHARGED TO INDEPENDENT PARTIES. 2.2 THE AUTHORISED REPRESENTATIVE SUBMITTED THAT THE PRICE CHARGED TO AE IS COMPARABLE WITH THE PRICE CHARGED TO INDEPENDENT PARTIES AFTER MAKING CERTAIN ADJUSTM ENTS IN RESPECT TO SELLING EXPENSES, COVER COST, FREIGHT CHARGES, DUTY SAVINGS ETC. AND HAVING DUE REGARD FOR THE PURPOSE FOR WHICH THE DK 800 MACHINE WAS SENT TO TTMS. THEREFORE, THE TRANSFER PRICE CHARGED TO TTMS IS AT ARM'S LENGTH PRICE. IT WAS POINTED OUT THAT ASSESSEE HAD ALSO VIDE LETTER DATED 16.10.2009 SUBMITTED THE SUPPORTING DOCUMENTS TO TPO JUSTIFYING THE ABOVE CLAIM. A STATEMENT SHOWING COMPARABLE PRICE CHARGED BY ASSESSEE TO ITS ASSOCIATE ENTERPRISE AND ITS INDEPENDENT PARTIES WAS ALSO FILED BE FORE THE TPO. THE ASSESSEE HAD SAVING IN ROYALTY, COMMISSION AND WARRANTY COST WHILE SELLING THE MACHINES TO ITS AE. THE REASONS FOR SUCH SAVINGS WERE AS UNDER COMMISSION : - THE ASSESSEE HAS PAID COMMISSION TO ITS SOLE SELLING AGENT AT.E ENTERPRISE PRIVAT E LIMITED AT 5% ON SALES MADE TO INDEPENDENT PARTIES. HOWEVER, AS PER THE TERMS OF THE BUSINESS IT IS NOT REQUIRED TO PAY COMMISSION ON THE SALES AFFECTED TO ITS AE. ROYALTY : - ASSESSEE HAS PAID ROYALTY @ 5% ON SALES MADE TO INDEPENDENT PARTIES. HOWEVER, AS PER THE TERMS, NO ROYALTY IS PAYABLE ON SALES MADE TO ITS AE. WARRANTY COST : - AS PER THE TERMS OF THE TRADE, ASSESSEE IS UNDER OBLIGATION TO REPLACE DEFECTIVE PARTS FREE OF COST DURING THE WARRANTY PERIOD. HOWEVER, IN RESPECT OF SALES MADE TO AE NO SUCH WARRANTY FOR REPLACE OF PARTS IS REQUIRED. DUTY SAVING : - IN CASE OF EXPORT, AS PER FOREIGN TRADE POLICY, UNDER EXPORT PROMOTION SCHEME (ADVANCE LICENSE), PARTS INTENDED FOR USE IN MANUFACTURING MACHINE TO BE EXPORTED CAN BE IMPORTED DUTY FREE. THUS WHEN THE MACHINES ARE EXPORTED TO AE THERE IS DUTY SAVING ON ACCOUNT OF IMPORT. FURTHER, IT WAS ARGUED THAT SIMILAR TRANSACTION EXISTED IN THE EARLIER ASSESSMENT YEAR I.E. A Y 2005 - 06. THE ASSESSEE HAD MADE SIMILAR SUBMISSION BEFORE THE TPO IN A Y 2005 - 06 WHICH WERE ACCEPTED BY THE TPO AND NO ADJUSTMENTS WERE MADE IN THE EARLIER ASSESSMENTS. THE AR HAS FILED COPY OF SUBMISSION ALONG WITH ITS ENCLOSURES MADE BEFORE THE TPO IN A Y 2005 - 06 AND ORDER II] S 92CA(3) OF THE INCOME TAX ACT, 1961 DATED 21.04.2008 PASSED BY TPO. 2.3 DIRECTIONS OF DRP: - THE SUBMISSION OF ASSESSEE HAS BEEN CONSIDERED AND ORDER OF TPO PERUSED. THE CONTENTION OF THE ASSESSEE HAS MERIT. THE TPO HAS NOT ELABORATED THE REASONS FOR REJECTING THE EXPLANATION ESPECIALLY IN VIEW OF THE FA CT THAT SIMILAR TRANSACTION FOR EARLIER YEAR WAS ACCEPTED. IN THE CIRCUMSTANCES THE TPO / ASSESSING OFFICER IS DIRECTED TO DELETE THE ADJUSTMENT. ITA NOS.4433&4469/2012 6 5 . LEARNED AR SUBMITTED THAT SIMILAR ADJUSTMENTS ARE SOUGHT BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT AS THE DEPARTMENT HAS NOW GRANTED SUCH ADJUSTMENTS IN RESPECT OF IMMEDIATE PRECEDING ASSESSMENT YEAR, THE CLAIM OF THE ASSESSEE SHO ULD BE ACCEPTED. 6. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER PASSED BY THE LEARNED CIT(A) AND CONTENDED THAT LEARNED CIT(A) AFTER WELL - REASONED ORDER HAS REJECTED SUCH CLAIM OF THE ASSESSEE AND THE CLAIM OF THE ASSESSEE SHOULD NOT BE ACCEPTED. 7 . WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. KEEPING IN VIEW OF THE FACT THAT THE DEPARTMENT IN THE ORDER FRAMED IN PURSUANCE OF THE DIRECTION OF THE ITAT, HAS GRANTED SUCH ADJUSTMENTS TO THE ASSESSEE. THE RELEVANT OBSERVATIONS HAVE ALREADY BEEN RE PRODUCED IN THE ABOVE PART OF THIS ORDER. ACCORDINGLY, WE ALLOW THE BENEFIT TO THE ASSESSEE. SINCE, THE CALCULATION OF THE ASSESSEE HAS NOT BEEN DISPUTED, THEREFORE, WE DELETE THE ADJUSTMENT. GROUND NO.1 IS ALLOWED. 8 . GROUND NO.2 OF ASSESSEES APPEAL AND GROUND NO.1 OF THE DEPARTMENTAL APPEAL, BOTH HAVE RAISED COMMON ISSUE I.E. REGARDING DISALLOWANCE UNDER SECTION 14A. ADMITTEDLY, RULE 8D IS NOT APPLICABLE TO THE PRESENT ASSESSMENT YEAR. 8.1 THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.80,95,213/ - ON SHARES AND RS. 39,596/ - ON US 64 BONDS, WHICH WERE CLAIMED TO BE ITA NOS.4433&4469/2012 7 EXEMPTED. THE ASSESSEE ITSELF HAS DISALLOWED A SUM OF RS.10,21,517/ - AS FOLLOWS : - PARTICULARS RS. 2% OF DIVIDEND INCOME OF RS.46,13,700/ - 92,274 2% OF INTEREST ON US 64 BONDS OF RS.39,596/ - 792 PMS EXPENSES 9,28,451 TOTAL 10,21,517 HOWEVER, THE AO DID NOT ACCEPT SUCH SUBMISSION OF THE ASSESSEE AND COMPUTED THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. THE DISALLOWANCE, AS PER RULE 8D, WAS CALCULATED AT RS.29,54,957/ - . AFTER REDUCING THE DISALLOWANCE MADE BY THE ASSESSEE, THE NET ADDITION OF RS.19,33,350/ - WAS MADE. 9 . LEARNED CIT(A) PROPOSED SOME FORMULA TO THE ASSESSEE AND ACCORDING TO THAT FORMULA, TOTAL DISALLOWANCE WAS WORKED OUT AT RS.17,03,344/ - . ACCORDINGLY, THE ADDITION OF RS.12,51,613/ - WAS UPHELD. THE ASSESSEE IS A GGRIEVED WITH THE SUSTENANCE OF ADDITION OF RS.6,81,827/ - AND THE REVENUE IN ITS APPEAL IS AGITATING THE DELETION OF RS.12,51,613/ - . 10 . BEFORE US, IT WAS PLEADED THAT THIS ISSUE IS COVERED BY THE EARLIER DECISION OF THE ITAT FOR ASSESSMENT YEAR 2005 - 06 , WHEN THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO VIDE ORDER DATED 25 - 11 - 2011. IN PURSUANCE OF THE SAID ORDER OF THE TRIBUNAL, AN ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL HAS BEEN PASSED BY THE AO, WHICH IS DATED 26 - 11 - 2012. COPY OF THIS OR DER IS ALSO FILED AT PAGES 69 - 77 OF THE PAPER ITA NOS.4433&4469/2012 8 BOOK, WHERE THE DISALLOWANCE IS RESTRICTED TO 5% OF THE DIVIDEND INCOME, BEING REASONABLE. 10 . 1 FOR ASSESSMENT YEAR 2006 - 07, SIMILAR APPROACH HAS BEEN ADOPTED BY THE LEARNED DRP ALSO WITH THE FOLLOWING OBSERVATIONS : - 3.3 DIRECTIONS OF DRP : - THE ASSESSEE HAS IN COMPUTATION OF INCOME OFFERED 2% OF DIVIDEND INCOME (RS.1,08,965/ - ) AND PAYMENT OF RS. 2,28,328/ - BEING PMS AS DISALLOWANCE U/S. 14A. CONSIDERING THE FACT THAT 5% OF DIVIDEND INCOME HAS BEEN A DOPTED AS REASONABLE ESTIMATE OF DISALLOWANCE U/ S. 14A FOR 2005 - 06, THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE DISALLOWANCE U/ S. 14A FOR THE RELEVANT YEAR AT 5% OF DIVIDEND INCOME IN ADDITION TO PMS EXPENSES DIRECTLY RELATABLE TO EXEMPT INCOME. 11 . IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE BY TAKING 5% OF THE DIVIDEND INCOME AND 5% OF US 64 BONDS IN PLACE OF 2% TAKEN BY THE ASSESSEE + PMS EXPENSES OF RS.9, 28 ,451/ - . WE DIRECT ACCO RDINGLY. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED AND GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE DISMISSED. 1 2 . APROPOS GROUND NO.3 OF THE ASSESSEES APPEAL, IT WAS SUBMITTED THAT IF THE PROVISION OF SECTION 145A IS TO BE APPLIED IN ITS RIGHT PERSPECTIVE, THEN THERE WILL BE NO ADDITION TO THE INCOME RETURNED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE AO HAS EXCLUDED UNUTILIZED CENVAT CREDIT FROM THE CLOSING STOCK AND IGNORED OPENING STOCK AND THE SIMILAR EFFECT HAS ALSO NOT BEEN GIVEN TO THE PURCHASE AND SALES MADE BY THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE IF SIMILAR TREATMENT IS GIVEN TO THE OPENING STOCK AS WELL AS SALES & P URCHASES OF THE ITA NOS.4433&4469/2012 9 ASSESSEE, THEN THERE WILL BE NO ADDITION. IT WAS SUBMITTED THAT THE CALCULATION IN THIS REGARD IS FURNISHED AT PAGE 83 OF THE PAPER BOOK AND THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. MAHALAXMI GLASS WORKS P. LTD. , REPORTED IN 318 ITR 116 (BOM) , WHEREIN IT HAS BEEN HELD THAT TO GIVE EFFECT TO SECTION 145 A, IF THERE IS ANY CHANGE IN THE CLOSING STOCK AT THE END OF THE YEAR, THEN THERE MUST BE NE CESSARILY TO BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK OF THAT YEAR AND IT IS NECESSARY TO COMPUTE THE TRUE AND CORRECT PROFIT FOR THE PURPOSE OF THE ASSESSMENT. 13 . IN THIS VIEW THE SITUATION, AFTER HEARING BOTH THE PARTIES, WE RESTORE THI S ISSUE TO THE FILE OF THE AO TO VERIFY THE CONTENTION OF THE ASSESSEE AND REDETERMINE THIS ISSUE AS PER LAW AFTER KEEPING IN VIEW OF THE AFOREMENTIONED DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF H EARING ON THIS ISSUE. WE DIRECT ACCORDINGLY. THIS GROUND IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. 1 4 . APROPOS GROUND NO.4 . DURING THE COURSE OF ASSESSMENT PROCEEDING, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PAID COMMISSION OF RS. 79,19,408/ - TO M/S TRUETZSCHELER GMBH & CO. KG. (TGC) , WHICH IS AN ASSOCIATE CONCERN OF THE ASSESSEE. THE ASSESSEE WAS REQUIRED TO FILE EVIDENCE REGARDING TAX DEDUCTED AT SOURCE. VIDE LETTER DATED 1 - 12 - 2010, IT WAS SUBMITTED THAT THE ASSOCIATE ITA NOS.4433&4469/2012 10 CONCERN OF TH E ASSESSEE TO WHOM COMMISSION HAS BEEN PAID DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA, THEREFORE, NO TAX WAS LIABLE TO BE DEDUCTED UNDER SECTION 195. HOWEVER, THE AO REJECTED SUCH CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAID AMOUNT UNDER THE PRO VISIONS OF SECTION 40 ( A ) (IA) . THE DISALLOWANCE WAS AGITATED IN AN APPEAL FILED BEFORE THE CIT(A) AND THIS ISSUE HAS BEEN DISCUSSED BY THE CIT(A) IN PARA 9. IT WAS SUBMITTED THAT COMMISSION HAS BEEN PAID BY THE ASSESSEE TO THE SAID ASSOCIATE CONCERN IN RESPECT OF EXPORT OF MACHINES BY THE ASSESSEE AND TGC HAS RENDERED SERVICES TO LOCATING THE PARTY IN EXPORT OF MACHINES OUTSIDE INDIA. IT WAS SUBMITTED THAT SINCE SERVICES WERE RENDERED OUTSIDE INDIA AND ENTIRE INCOME OF TGC HAS ACCRUED OUTSIDE INDIA, THEREFORE, THE COMMISSION PAID TO TGC WAS NOT CHARGEABLE TO TAX IN INDIA . SINCE IT WAS NOT CHARGEABLE TO TAX IN INDIA, SECTION 195 WAS NOT APPLICABLE. REFERENCE WAS MADE TO CIRCULAR NO. 23 DATED 23 - 7 - 1969 AND THE CBDT CIRCULAR NO. 786, DATED 7 - 2 - 2000 TO CONTEND THAT WHERE NON - RESIDENT AGENT OPERATES OUTSIDE COUNTRY, NO PART OF INCOME WILL ARISE IN INDIA , T HEREFORE, THE TAX IS NOT DEDUCTIBLE UNDER SECTION 195. HOWEV ER, THE CIRCULAR WAS WITHDRAWN BY CIRCULAR NO. 7/2009, DATED 22 - 10 - 2009 AND WITHDRAWAL WAS NOT APPLICABLE TO THE RELEVANT ASSESSMENT YEAR. REFERENCE WAS MADE TO SEVERAL DECISIONS TO CONTEND THAT DISALLOWANCE SHOULD NOT HAVE BE EN MADE. HOWEVER, LEARNED CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT FROM THE SUBMISSION OF THE ASSESSEE, IT WAS FOUND THAT THE ASSOCIATE ENTERPRISE WAS NOT ONLY HAVING PE IN INDIA BUT WAS HAVING ITA NOS.4433&4469/2012 11 INTEREST IN CONTROL AND MANAGEMEN T OF THE COMPANY AS IT WAS A HOLDING COMPANY. LEARNED CIT(A) OBSERVED THAT SECTION 9 OF THE ACT WOULD COME INTO PLAY AND TAX WAS LIABLE FOR DEDUCTION. ACCORDINGLY, HE UPHELD THE ADDITION. 1 5 . BEFORE US, THE SUBMISSIONS MADE BEFORE LEARNED CIT(A) WERE REI TERATED. IT WAS SUBMITTED THAT THE CIRCULARS RELIED UPON BY THE ASSESSEE BEFORE THE CIT(A) WERE CLEARLY APPLICABLE AND WITHDRAWAL WAS NOT RETROSPECTIVE. REFERENCE WAS MADE TO FOLLOWING DECISIONS TO CONTEND THAT THE AFOREMENTIONED CIRCULARS WILL APPLY BEFOR E THEY WERE WITHDRAWN AND WITHDRAWAL WILL NOT BE HAVING RETROSPECTIVE EFFECT : - I) CIT VS. ANGELIQUE INTERNATIONAL LTD., ( 2013) 38 TAXMANN.COM 425 (DELHI) ; AND II) CIT VS. MODEL EXIMS KANPUR, (2013) 38 TAXMANN.COM 319 ( ALLH.) . LEARNED AR ALSO RELIED UPON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. EON TECHNOLOGY PVT. LT D, REPORTED IN 343 ITR 366 (DELHI) , TO CONTEND THAT WHEN A NON RESIDENT AGENT OPERATES OUTSIDE COUNTRY, NO PART OF INCOME ARISES IN INDIA AND SINCE PAYMENT IS REMITTED DIRECTLY ABROAD AND MERELY BECAUSE AN ENTRY IN THE BOOKS OF ACCOUNTS IS MADE, IT DOES NOT MEAN THAT THE NON - RESIDENT HAS R ECEIVED ANY PAYMENT IN INDIA. IT WAS HELD THAT THE TAX WAS NOT DEDUCTIBLE AT SOURCE AND DISALLOWANCE UNDER SECTION 40(A)(IA) WAS NOT CALLED FOR. IT WAS ALSO HELD THAT WHEN A NON - RESIDENT AGENT OPERATES OUTSIDE COUNTRY, NO PART OF HIS INCOME ARISES IN INDIA AND SINCE ITA NOS.4433&4469/2012 12 PAYMENT IS REMITTED DIRECTLY ABROAD AND MERELY AN ENTRY IS MADE IN THE BOOKS OF ACCOUNT, IT DOES NOT MEAN THAT NON - RESIDENT AGENT HAS RECEIVED ANY PAYMENT IN INDIA. HE SUBMITTED THAT IN VIEW OF THE AFOREMENTIONED DECISION, AS PAYMENT IS DIRECTLY REMITTED ABROAD, NO INCOME CAN BE SAID TO HAVE ARISEN TO THE ASSOCIATE CONCERN IN INDIA AND, THEREFORE, SECTION 40(A)(IA) S HOULD NOT BE APPLIED. SIMILARLY, HE POINTED OUT THAT WHEN SUCH PAYMENT IS REMITTED DIRECTLY ABROAD, THEN THE SAID AMOUNT CANNOT BE CONSIDERED AS PAYMENT HAVE NOT BEEN RECEIVED BY THE NON - RESIDENT IN INDIA. THUS, HE PLEADED THAT DISALLOWANCE HAS WRONGLY BEE N SUSTAINED BY THE CIT(A). HE FURTHER SUBMITTED THAT LEARNED CIT(A) HAS WRONGLY ASSUMED THAT THE NON - RESIDENT AGENT HAS PE IN INDIA AND INCOME HAS ACCRUED TO THAT CONCERN IN INDIA. 1 6 . ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER PASSED BY THE AO A ND CIT(A). SHE RELIED UPON IN THE CASE OF SATELLITE TELEVISION ASIAN REGION LTD. VS. DCIT, (2006) 99 ITD 91 (MUMBAI) , WHEREIN IT HAS BEEN HELD THAT THE SECTION 195 MAKES IT CLEAR THAT THE SAID SECTION DOES NOT MAKE ANY DISTINCTION BETWEEN PAYMENT WITHIN INDIA AND THE PAYMENT OUTSIDE INDIA. THE SITUS OF THE PAYMENT OR THE SOURCE OF THE PAYMENT IS NOT A RELEVANT CONSIDERATION WHILE APPLYING THE PROVISIONS OF SECTION 19 5. IT WAS HELD THAT IF THE PAYMENT IS MADE TO NON - RESIDENT AGENT, WHETHER IT IS IN INDIA OR OUTSIDE INDIA OR IN ANY MANNER, THE PERSON MAKING THE PAYMENT IS LIABLE FOR DEDUCTING THE TAX AT SOURCE. ITA NOS.4433&4469/2012 13 SHE ALSO RELIED UPON THE DECISION IN THE CASE OF ASHAPURA M INICHEM LTD. VS. ADCIT (IT), REPORTED IN (2010) 131 TTJ 291 (MUM) TO CONTEND THAT THE UTILIZATION OF THE SERVICES IN INDIA IS ONLY TO ATTRACT LIABILITY TO TAX IN INDIA. THUS, IT WAS PLEADED BY LEARNED DR THAT THE ADDITION MADE BY THE AO SHOULD BE UPHELD. 1 7 . WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. RIGHT FROM THE BEGINNING, IT IS THE CASE OF THE ASSESSEE THAT THE NON - RESIDENT AGENT DOES NOT HAVE ANY PE IN INDIA, AND, THEREFORE, IT DOES NOT COME WITHIN THE PURVIEW OF SECTION 195. THE CIRCULARS RELIED UPON BY THE ASSESSEE ALSO PROVIDE THAT APPLICATION OF SECTION 195 WOULD ARISE IF THE PAYMENT OF COMMISSION TO THE NON - RESIDENT AGENT IS CHARGEABLE TO TAX IN INDIA. HOWEVER, THOSE CIRCULARS WERE WITHDRAWN LATER ON IN 2009. HONBLE DELHI HIGH COURT AND HONBLE ALLAHABAD HIGH COURT HAVE HELD THAT THE WITHDRAWAL WAS NOT RETROSPECTIVE. LEARNED CIT(A) HAS HELD THAT THE NON - RESIDENT AGENT WAS NOT ONLY HAVING PERMANENT ESTABLISHMENT BUT ALSO HAS ITS INTEREST IN CONTROL AND MANAGEMENT OF THE COMPANY. HOWEVER, SUCH FINDINGS OF THE LEARNED CIT(A) ARE NOT SUPPORTED BY ANY MATERIAL ON RECORD. IN THIS VIEW OF THE SITUATION, WE CONSIDER IT JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO READJUDICATE THE SAME DE NOVO AS PER THE PROVISIONS OF LAW AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING AND PLACING ALL T HE RELEVANT MATERIAL ON RECORD. WE DIRECT ACCORDINGLY. FOR STATISTICAL PURPOSES, THIS GROUND IS TREATED AS ALLOWED. ITA NOS.4433&4469/2012 14 DEPARTMENTS APPEAL : 1 8 . GROUND NO.1 HAS ALREADY BEEN ADJUDICATED WHILE CONSIDERING THE GROUND NO. 3 OF THE ASSESSEE S APPEAL , WHEREIN WE HAVE ALREADY DISMISSED THE GROUND NO.1 OF THE DEPARTMENTS APPEAL. 1 9 . APROPOS GROUND NO.2 . THIS ISSUE HAS BEEN DISCUSSED BY THE AO IN PARA 6.3. THE AO NOTICED FROM REVISED COMPUTATION OF TOTAL INCOME THAT A SUM OF RS. 14,35,592/ - WAS CLAIMED AS DEDUCTION ON THE GROUND THAT THE SAID AMOUNT WAS DISALLOWED BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2008 - 09. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED. IT WAS SUBMITTED THAT THE AFOREMENTIONED EXPENSES RELATED TO CURRENT YEAR BUT WERE PAID IN ASSESSMENT YEAR 2008 - 09 AND SUCH EXPENSES WERE ALLOWABLE DURING THE YEAR UNDER CONSIDERATION. THE AO DID NOT ACCEPT SUCH SUBMISSION ON THE GROUND THAT THE EXPENDITURE DID NOT CRYSTALLIZE DURING THE YEAR, THEREFORE, THEY CANNOT BE ALLOWED. 20 . LEARNED CIT(A) HAS DISCUSSED THIS ISSUE IN PARA 6.3. IT WAS POINTED OUT THAT THESE PRIOR PERIOD EXPENSES RELATED TO LEGAL FEES AND MATERIAL RETURNED AND OTHERS FEES AMOUNTING TO RS.10 ,34,000/ - & RS.4,02,298/ - , RESPECTIVELY. IT WAS SUBMITTED THAT RS. 10,34,000/ - BEING PROVISION FOR LEGAL FEES MADE FOR SERVICES AVAILED DURING THE YEAR FROM AGENTS IN REALIZING THE DUTY DRAW BACK INCENTIVE AMOUNT ON WHICH A N EXPENDITURE OF RS. 11,84,153/ - WAS INCURRED. THUS, IT WAS PLEADED THAT THE LIABILITY TO THAT EXTENT COULD NOT BE CONSIDERED TO BE UNASCERTAINED ITA NOS.4433&4469/2012 15 AND UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, SINCE THE SERVICES WERE AVAILED DURING THE YEAR , THE LIABILITY WAS INCURRED DURING T HE YEAR THOUGH IT WAS DISCHARGED AFTER THE END OF THE YEAR. WITH REGARD TO SUM OF RS. 4,02,298/ - , IT WAS SUBMITTED THAT MAJOR PORTION I.E. RS. 1,73,813/ - WAS IN RESPECT OF VALUE OF MATERIALS RETURNED TO LAKSHMI CARD CLOTHING (LCC). THE PURCHASE RETURN TO LCC WAS NOT ACCEPTED BY THE LCC FOR THE REASONS THAT THE MATERIALS WERE RUSTY AND COULD NOT BE USED. THE NEGOTIATIONS WERE CONCLUDED IN ASSESSMENT YEAR 2007 - 08. ACCORDINGLY, THESE WERE CLAIMED BY THE ASSESSEE IN THE YEAR 2007 - 08 IN THE REVISED RETURN. IT WAS ALSO SUBMITTED THAT THE ASSESSEE DID NOT CLAIM THE SAID EXPENSES IN A.Y. 2008 - 09, WHEN THE SAME WERE ACCOUNTED AS PRIOR PERIOD EXPENSES. THE SAME WERE DISALLOWED BY THE ASSESSEE IN ITS RETURN OF INCOME FILED FOR AY 2008 - 09. ACKNOWLEDGEMENT COPY OF RETURN O F INCOME FOR AY 2008 - 09 WAS ALSO FILED. THUS, IT WAS PLEADED THAT DISALLOWANCE HAS WRONGLY BEEN MADE. REFERENCE WAS MADE TO SEVERAL DECISIONS TO CONTEND THAT THE LIABILITY BEING RELATED TO THE YEAR UNDER CONSIDERATION, SHOULD BE ALLOWED. LEARNED CIT(A) AF TER VERIFYING ALL THESE CONTENTIONS OF THE ASSESSEE DELETED THE DISALLOWANCE AND A FINDING OF FACT HAS BEEN RECORDED BY HIM THAT THOSE EXPENDITURE WERE MENTIONED AS PRIOR PERIOD EXPENSES IN THE ACCOUNTING YEAR RELATING TO ASSESSMENT YEAR 2008 - 09. 2 1 . THE ABOVE FINDINGS OF FACT RECORDED BY THE LEARNED CIT(A) , HAVE NOT BEEN CONTROVERTED BEFORE US . IN THIS VIEW OF THE SITUATION, AFTER ITA NOS.4433&4469/2012 16 HEARING BOTH THE PARTIES, WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY THE LEARNED CIT(A) AND THIS GROUND OF THE REVEN UE IS DISMISSED. 2 2 . APROPOS GROUND NO.3 . THIS ISSUE HAS BEEN DISCUSSED BY THE AO IN PARA 6.4. HE NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE INCURRED COMMISSION EXPENSES TO THE TUNE OF RS. 14,34,19,000/ - , WHICH INCLUDE AN AMOUNT OF RS. 13 ,06,36,000/ - ON ACCOUNT OF SOLE AGENCY COMMISSION PAID BY THE ASSESSEE TO M/S ATE MARKETING PVT. LTD. (ATEMPL), WHICH IS A RELATED PARTY OF THE ASSESSEE. THE SAID COMMISSION WAS OVER AND ABOVE THE COMMISSION PAID TO OTHER AGENTS. IT WAS FURTHER NOTICED THA T NET PROFIT WAS SHOWN BY THE ASSESSEE COMPANY AT RS. 40.97 CRORES. IF THE SAME IS ADDED TO THE COMMISSION, THEN PROFIT OF THE ASSESSEE WILL BE AT RS. 55.33 CRORES. THE AMOUNT OF COMMISSION CONSTITUTE ABOUT 25.90% OF THE NET PROFIT (INCLUSIVE OF COMMISSION A MOUNT). THE AO RESTRICTED THE SAID COMMISSION TO 5% , THEREBY ALLOWING RS. 2.65 CRORES AND REST OF THE AMOUNT OF RS. 11,68,00,000/ - HAS BEEN DISALLOWED. THE DISALLOWANCE WAS AGITATED IN AN APPEAL FILED BEFORE THE CIT(A). IT WAS SUBMITTED THAT THE ATEMPL HAS RENDERED VARIOUS SERVICES IN TERMS OF AGREEMENT AND HAS PUT ENORMOUS TECHNICAL EFFORTS TO CONVINCE THE TEXTILE MILLS BY GIVING THEM TECHNO ECONOMIC VIABILITY, COST BENEFIT ANALYSIS OF PRODUCT MANUFACTURED BY ASSESSEE VIS - - VIS THE IMPORTED SECOND HAND MACHINES AND COMPETITORS MACHINERY. IN ORDER TO BOOS T UP SALES, ATEMPL HAS TO GIVE REPETITIVE VISITS TO CUSTOMERS AND CONVINCE THEM ABOUT HIGHER PRODUCTIVITY, ENERGY EFFICIEN T MACHINERY MANUFACTURED BY ITA NOS.4433&4469/2012 17 THE ASSESSEE. IT WAS SUBMITTED THAT THE SERVICES RENDERED BY ATEMPL HAVE RESULTED IN YEAR ON YEAR GROWTH IN TURNOVER OF THE ASSESSEE. THE RELEVANT FIGURES WERE PROVIDED TO SHOW THAT THERE WAS CONSIDERABL E RISE IN THE SALES OF T HE ASSESSEE EFFECTED THROUGH ATEMPL. THE LIST OF FUNCTIONS PERFORMED BY THE ATEMPL WAS ALSO GIVEN. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN PAYING THIS COMMISSION TO ATEMPL OVER THE YEARS AND SUCH PAYMENT OF THE COMMISSION HAS BEEN CONSISTENTLY ACCEPTED AND ALLOWED OVER THE YEARS IN THE ASSESSMENT S FRAMED UNDER SECTION 143(3). FOLLOWING CHART WAS SUBMITTED TO SHOW THAT SIMILAR COMMISSION WAS PAID IN EARLIER YEARS AND WAS HELD ALLOWABLE : - ASSESSMENT YEAR COMMISSION PAID (RS.IN LAKHS) SALES @ (RS . IN LAKHS) ASSESSMENT 1999 - 00 532.97 7,888.38 U/S143(3) 2000 - 01 602.12 9,544.70 U/S143( 1 ) 2001 - 02 561.58 7,749.84 U/S143(3) 2002 - 03 614.37 9,387.55 U/S143(3) 2003 - 04 528.97 6,688.74 U/S143(3) 2004 - 05 1084.97 14,896.56 U/S143(3) 2005 - 06 1153.31 17,051.12 U/S143(3) 2006 - 07 1306.36 19,827.86 U/S143(3) RELIANCE WAS PLACED ON VARIOUS DECISION TO CONTEND THAT DISALLOWANCE WAS NOT CALLED FOR. LEARNED CIT(A) AFTER CONSIDERING ALL THESE SUBMISSIONS, REFERRING TO THE PRECEDING ASSESSMENT YEARS, WHERE S IMILAR PAYMENTS OF COMMISSION WERE ACCEPTED BY THE REVENUE AND KEEPING IN VIEW THE HISTORY OF THE CASE AND PAYMENT BEING IN ACCORDANCE WITH THE EARLIER ARRANGEMENT, HAS ARRIVED AT A CONCLUSION THAT THE DISALLOWANCE WAS NOT CALLED FOR. THE REVENUE IS AGGRIE VED WITH ITA NOS.4433&4469/2012 18 SUCH FINDING S OF THE LEARNED CIT(A) AND HAS FILED THE AFOREMENTIONED GROUNDS. 2 3 . LEARNED DR RELYING UPON THE ORDER PASSED BY THE AO, SUBMITTED THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE. SHE SUBMITTED THAT EVERY YEAR IS INDEPENDENT YEAR AND BASED UPON EARLIER YEARS ACCEPTANCE OF CLAIM, RELIEF CANNOT BE GRANTED TO THE ASSESSEE. 2 4 . ON THE OTHER HAND, RELYING UPON THE ORDER PASSED BY THE LEARNED CIT(A), IT WAS SUBMITTED BY LEARNED AR THAT DISALLOWANCE HAS RIGHTLY BEEN DELETED. HE SUBMITTED THAT THE AO IN THE ASSESSMENT ORDER ITSELF HAS ACCEPTED THAT SIMILAR PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO THE SOLE SELLING AGENT AND HAS BEEN ALLOWED BY THE DEPARTMENT. HE, IN TH IS REGARD, REFERRED TO THE OBSERVATIONS OF THE AO AS CONTAINED IN PARA 6.4.2.1 ,WHICH READS AS UNDER : - ALTHOUGH, IN EARLIER YEARS, THE COMMISSION PAID TO THE SOLE SELLING AGENTS HAS BEEN ALLOWED BY THE VARIOUS ASSESSING OFFICERS OF THE DEPARTMENT YET, EVERY ASSESSMENT YEAR IS DIFFERENT AND RESJUDICA IS NOT APPLICABLE. IT IS THE WELL SETTLED PRINCIPLE OF LAW THAT PROVISIONS OF 'RES JUDICATA' IS NOT APPLICABLE TO THE ASSESSN.ENT PROCEEDINGS. IN THE CASES OF JOINT FAMILY OF UDAYAN CHINUBHAI VS. CIT (1967) 63 ITR 416 (SC) AND DWARKADAS KESARDEO MURARKA VS. CIT (1962) 44 ITR 529 (SC), IT WAS HELD BY THE APEX COUR T OF THE LAND THAT AN ASSESSMENT YEAR UNDER THE ACT IS A SELF - CONTAINED ASSESSMENT PERIOD AND A DECISION IN ONE ASSESSMENT YEAR DOES NOT ORDINARILY OPERATE AS 'RES JUDICATA' IN RESPECT OF THE MATTER DECIDED IN ANY SUBSEQUENT YEAR, FOR THE ASSESSING OFFICE R IS NOT A COURT AND HE IS NOT PRECLUDED FROM ARRIVING AT A CONCLUSION INCONSISTENT WITH HIS CONCLUSION IN ANOTHER YEAR. FURTHER RELIANCE CAN BE PLACED ON DECISION OF BOMBAY HIGH COURT IN THE CASE OF KOTAK MAHINDRA FINANCE LTD. 130 TAXMAN 422 (BOM ). IN THI S CASE, IT HAS BEEN HELD THAT EACH YEAR IS SEPARATE EVENT OF ASSESSMENT, AND PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE. IN VIEW OF THE ABOVE DECISION, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED. FOR THE REASONS GIVEN HEREUNDER, ITA NOS.4433&4469/2012 19 THE UNDERSIGNED INT ENDS TO DIFFER FROM THE VIEWS TAKEN BY THE PREDECESSORS IN EARLIER ASSESSMENT YEARS. LEARNED AR FURTHER SUBMITTED THAT IN SUBSEQUENT YEAR ALSO I.E. FOR A.Y. 2008 - 09, NO SUCH DISALLOWANCE HAS BEEN MADE . HE IN THIS REGARD REFERRED TO THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008 - 09, WHICH IS DATED 20 TH FEB, 2012, PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE IT ACT, WHERE NO SUCH ADDITION HAS BEEN MADE. THUS, IT WAS PLEADED BY LEARNED AR THAT DISALLOWANCE HAS RIGHTLY BEEN DELETED BY THE LEARNED CIT(A) . 2 5 . WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. THE DEPARTMENT HAS NOT ONLY ACCEPTED THE CLAIM OF THE ASSESSEE REGARDING PAYMENT MADE BY IT TO SOLE SELLING AGENCY I.E. ATEMPL IN SEVERAL PRECEDING ASSESSMEN T YEARS BUT ALSO IN THE SUBSEQUENT YEAR I.E. A.Y. 2008 - 09 . IT HAS NOT BEEN SHOWN THAT DURING THE YEAR UNDER CONSIDERATION, EITHER RATE OF COMMISSION WAS CHANGED OR THERE WAS ANY CHANGE IN THE FACTS OF THE CASE. IN ABSENCE OF ANY SUCH MATERIAL AND KEEPING I N VIEW THE FACT THAT THIS ISSUE HAS BEEN ACCEPTED BY THE REVENUE IN EARLIER YEARS AS WELL AS SUBSEQUENT YEAR, WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY THE LEARNED CIT(A). THIS GROUND OF THE REVENUE IS DISMISSED. 2 6 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE (ITA NO. 4469 /M/201 2 ) IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID AND THE APPEAL FILED BY THE DEPARTMENT (ITA NO. 4433 /M/201 2 ) IS DISMISSED. ITA NOS.4433&4469/2012 20 (ITA NO. 4469 /M/201 2 ) (ITA NO. 4433 /M/201 2 ) ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH JANUARY . 201 4 . 9 TH JAN,2014 SD/ - SD/ - ( ) ( N.K.BILLAIYA ) ( ) (I.P.BANSAL) / ACCOUNTANT MEMBER / JUDICIALMEMBER MUMBAI ; DATED 0 9 / 01/2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//