ETCO INDUSTRIES PRIVATE LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 9(2)(2), MUMBAI

ITA 4517/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2468 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 17-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAURYA PRATAPLD
• Assessee Lawyers: ANUJ KISHNADWALA LD
• Keywords: Non-deduction of tax; Set aside
• Section: 143(3); 201

Judgement Text

ETCO INDUSTRIES PRIVATE LIMITED ASSESSMENT YEARS :2012-13 & 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4517/MUM/2018 ( / ASSESSMENT YEAR:2012-13) & ./ I.T.A. NO.4516/MUM/2018 ( / ASSESSMENT YEAR:2014-15 ) ETCO INDUSTRIES PRIVATE LIMITED UNIT NO. S-13 & S-14, 2 ND FLOOR, PINNACLE BUSINESS PARK, SHANTI NAGAR, MIDC MAHAKALI CAVES ROAD NEAR AHURA CENTRE, ANDHERI (E) MUMBAI-400 093. / VS. A CIT - 9( 2 ) (2) ROOM NO.665A AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. !' ./ ./PAN/GIR NO. AAACE-1393-H ( '$ /APPELLANT ) : ( %'$ / RESPONDENT ) ASSESSEE BY : SHRI ANUJ KISHNADWALA-LD. AR REVENUE BY : SHRI MAURYA PRATAP-LD. DR / DATE OF HEARING : 04/12/2019 / DATE OF PRONOUNCEMENT : 04/12/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. IN THE AFORESAID APPEALS FOR ASSESSMENT YEARS [I N SHORT REFERRED TO AS AY] 2012-13 & 2014-15, THE GRIEVANCE OF THE AS SESSEE IS COMMON ETCO INDUSTRIES PRIVATE LIMITED ASSESSMENT YEARS :2012-13 & 2014-15 2 I.E. DISALLOWANCE OF OVERSEAS COMMISSION FOR RS.6.1 3 LACS IN AY 2012- 13 & RS.14.29 LACS IN AY 2014-15. 2. THE LEARNED AUTHORIZED REPRESENTATIVE FOR ASSESS EE (AR), AT THE OUTSET, SUBMITTED THAT THE STATED ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL FOR AYS 2009-10 & 2011-12, ITA NOS. 4221-2 2/MUM/2016 COMMON ORDER DATED 18/06/2018. THE SAID ORDER HAS S UBSEQUENTLY BEEN FOLLOWED IN AY 2013-14 ITA NO.630/MUM/2018 ORDER DA TED 05/10/2018. THE COPIES OF THE ORDERS HAVE BEEN PLACED ON RECORD . THE LD. DR COULD NOT CONTROVERT THE SAME BUT SUPPORTED THE STAND TAK EN BY LOWER AUTHORITIES. 3. FACTS IN AY 2012-13 ARE THAT THE ASSESSEE WAS SA DDLED WITH DISALLOWANCE OF OVERSEAS COMMISSION FOR RS.6.13 LAC S IN AN ASSESSMENT FRAMED U/S 143(3) ON 19/01/2015 IN VIEW OF THE FACT THAT THE ASSESSEE FAILED TO FURNISH THE REQUISITE DOCUMENTAR Y EVIDENCES TO SUBSTANTIATE THE RENDERING OF SERVICES AND ALSO ALT ERNATIVELY FOR WANT OF DEDUCTION OF TAX AT SOURCE. 4. DURING APPELLATE PROCEEDINGS, THE ASSESSEE SUBMI TTED THAT THE COMMISSION WAS PAID AGAINST GOODS EXPORTED TO M/S A RAD TEXTILES INDUSTRIES LTD. AS PER THE CONTRACTUAL TERMS. IT WA S AGREED THAT M/S ARAD TEXTILES INDUSTRIES LTD. WILL PAY 2% COMMISSION ON FOB VALUE OF GOODS TO LOCAL AGENTS AND REMIT THE NET PROCEEDS AFTER DE DUCTION THE SAID COMMISSION. HOWEVER, IN ITS BOOKS OF ACCOUNTS, THE ASSESSEE CREDITED THE FOB VALUE ON GROSS BASIS AND DEBITED THE COMMIS SION EXPENDITURE SEPARATELY. THEREFORE, THE SAME WAS AN ALLOWABLE DE DUCTION. IT WAS ALSO SUBMITTED THAT SINCE THE SERVICES WERE RENDERED OUT SIDE INDIA, NO TAX WAS DEDUCTIBLE AT SOURCE. HOWEVER, LEARNED CIT(A), FOLLOWING THE ETCO INDUSTRIES PRIVATE LIMITED ASSESSMENT YEARS :2012-13 & 2014-15 3 APPELLATE ORDER FOR AY 2013-14 CONFIRMED THE DISALL OWANCE. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 5. AS STATED BY LD. AR, WE FIND THAT THE ISSUE STOO D COVERED IN ASSESSEES FAVOR BY THE CITED DECISIONS OF THIS TRI BUNAL FOR AYS 2009-10, 2011-12 & 2013-14. THE LEARNED CIT(A) HAS FOLLOWED THE ORDER OF ITS PREDECESSOR FOR AY 2013-14 WHICH HAS BEEN REVERSED BY THE TRIBUNAL BY OBSERVING AS UNDER: - 5. THE LEARNED AUTHORISED REPRESENTATIVE REITERATIN G THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT THE ASSESSE E HAS EXPORTED GOODS TO M/S. ARAD TEXTILE INDUSTRIES LTD., ISRAEL, AND AS PER TH E TERMS OF AGREEMENT, THE SAID CUSTOMER WAS ENTITLED TO DEDUCT 2% OF SALE VALUE TO WARDS COMMISSION EXPENSES. HE SUBMITTED, THE PAYMENT MADE TO PRAMPTEX AGARWAL INC., PERU, IS ALSO UNDER SIMILAR TERMS AND CONDITION. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 200910 AND 201112, IN ITA NO. 4222/MUM./2016 AND ITA NO. 4221 /MUM./2016, DATED 18TH JUNE 2018, THE TRIBUNAL HAS DELETED THE DISALLOWANC E MADE BY THE ASSESSING OFFICER. THUS, HE SUBMITTED, THE AFORESAID DECISION OF THE TRIBUNAL SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OF FICER. 7. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. IT IS THE CASE OF THE ASSESSEE THAT AS PER THE TERMS OF THE A GREEMENT, WHAT THE ASSESSEE ACTUALLY RECEIVES FROM THE FOREIGN CUSTOMER IS 98% OF THE INVOICE VALUE AFTER DEDUCTION OF 2% COMMISSION AMOUNT. FOR E.G., IF THE INVOICE RAISED BY THE ASSESSEE IS FOR RS.100, IT ACTUALLY RECEIVES RS.98 FROM THE FOREIGN CUSTOMER. NOTABLY, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 200910 AND 201112, THE TRIBUNAL, IN THE ORDER REFERRED TO ABO VE, HAS DELETED SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATION: 7. HAVING HEARD RIVAL CONTENTIONS, WE FIND MERIT I N THE CONTENTIONS OF THE ASSESSEE. THE INVOICE RAISED BY THE ASSESSEE AS WEL L AS THE LETTER OF CREDIT OBTAINED BY THE CUSTOMER OF THE ASSESSEE FROM BANK CLEARLY SHOW THAT 2% COMMISSION WAS PAYABLE TO LOCAL AGENTS. IT WAS SUBM ITTED THAT THE SAME WAS PAID AS PER TERMS AND CONDITIONS ENTERED BETWEEN TH E PARTIES. IN EFFECT, WHAT THE ASSESSEE REALISED WAS ONLY 98% OF THE INVOICE V ALUE. EVEN IF THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE NATURE OF SERVICES PROVIDED BY THE LOCAL AGENTS, THE SHORTAGE IN REALISATION IS ALLOWA BLE AS NORMAL BUSINESS DEDUCTION. SINCE THE IMPUGNED PAYMENT IS NOT CHARGE ABLE TO TAX IN INDIA IN THE HANDS OF RECIPIENTS, THE PROVISIONS OF SEC. 40( A)(I) WILL NOT APPLY. HENCE WE ARE OF THE VIEW THAT THERE IS NO REASON TO DISAL LOW THE EXPENSES OF RS.6,26,926/- CLAIMED BY THE ASSESSEE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.6,26,926/- REFERRED ABOVE. ETCO INDUSTRIES PRIVATE LIMITED ASSESSMENT YEARS :2012-13 & 2014-15 4 8. WE SHALL NOW TAKE UP THE APPEAL FILED FOR AY 201 1-12. THE FIRST ISSUE URGED THEREIN RELATES TO THE DISALLOWANCE OF COMMISSION E XPENSES. DURING THE YEAR RELEVANT TO AY 2011-12, THE ASSESSEE PAID COMMISSIO N TO ISRAEL PARTIES AND ALSO CERTAIN OTHER PARTIES. THE AO DISALLOWED A SUM OF RS.23.34 LAKHS FOR NON-DEDUCTION OF TAX AT SOURCE. THE LD CIT(A) CONFI RMED THE SAME BY FOLLOWING THE DECISION RENDERED BY HIM IN AY 2009-1 0. 9. IN THE PRECEDING PARAGRAPHS, WE HAVE DELETED THE DISALLOWANCE OF COMMISSION EXPENSES ON THE REASONING THAT THE ASSES SEE HAS REALISED ONLY NET AMOUNT AND FURTHER THE IMPUGNED PAYMENTS ARE NO T LIABLE FOR DEDUCTION OF TAX AT SOURCE, SINCE THE SAME IS NOT TAXABLE IN IND IA IN THE HANDS OF RECIPIENTS. FOLLOWING THE SAME, WE SET ASIDE THE ORDER PASSED B Y LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS. 23.34 LAKHS, REFERRED ABOVE. 8. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING TH E AFORESAID DECISION OF THE TRIBUNAL, I DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS). GROUNDS RAISED ARE ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. FACTS ARE PARI-MATERIA THE SAME IN THIS AY. NO DISTINGUISHING FACT / FEATURE HAS BEEN BROUGHT ON RECORD. NOTHING ON RECO RD WOULD INDICATE THAT THE AFORESAID RULINGS ARE NOT APPLICABLE TO TH E FACT OF THE YEAR UNDER CONSIDERATION. THEREFORE, KEEPING IN LINE WITH THE EARLIER DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE, WE DELETE ADDITION S FOR BOTH THE YEARS. 6. RESULTANTLY, BOTH THE APPEALS STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH DECEMBER, 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04/12/2019 SR.PS, JAISY VARGHESE 23456736 / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %'$ / THE RESPONDENT ETCO INDUSTRIES PRIVATE LIMITED ASSESSMENT YEARS :2012-13 & 2014-15 5 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./ ' 0 , 0 , / DR, ITAT, MUMBAI 6. /123 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.