D.H. PATKAR & CO., MUMBAI V. ITO 15(2)1, MUMBAI

ITA 4524/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3454 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND RAMLAL NEGI , (JM) ./ I.T.A. NO. 4524 / MUM/20 13 ( / ASSESSMENT YEAR - 200 9 - 10 ) M/S D H PATKAR AND CO., 301, BEACH WOOD TOWERS, OFF YARI ROAD, VARSOVA, MUMBAI - 400061 / VS. INCOME TAX OFFICER 15(2)(1), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN : AAKFM4328H / APPELLANT BY SHRI JIGNESH R SHAH / RSPONDENT BY SHRI B S BIST / DATE OF HEARING : 23.2. 201 6 / DATE OF PRONOUNCEMENT : 18. 3. 2016 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 13 - 03 - 2013 PASSED BY LD CIT(A) - 26, MUMBAI FOR ASSESSMENT YEAR 2009 - 10. AT THE TIME OF HEARING, THE LD A.R DID NOT PRESS GROUND NO.2 RELATING TO THE DISALLOWANCE O F RS.1,67,633/ - . HENCE THE SAME IS DISMISSED AS NOT PRESSED. THE REMAINING GROUNDS GIVE RISE TO A SINGLE ISSUE, VIZ., DISALLOWANCE OF COMMISSION PAYMENT OF RS.34,60,000/ - . 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN CLEARING AND FORWARDING AGENCY BUSINESS. THE ASSESSEE CLAIMED EXPENDITURE TOWARDS COMMISSION PAYMENT ITA NO. 4 524/ UM/ 20 13 2 TO THE TUNE OF RS.34,60,000/ - . THE ASSESSEE DID NOT FURNISH THE RELEVANT DETAILS, BUT SUBMITTED THAT IT REPRESENTS SPEED MONEY PA ID TO THE DOCK WORKERS ON BEHALF OF ITS CLIENTS. HOWEVER, THE AO TOOK THE VIEW THAT THESE PAYMENTS ARE IN THE NATURE OF BRIBES AND HENCE THE SAME CANNOT BE ALLOWED AS DEDUCTION AS PER THE EXPLANATION GIVEN UNDER SEC. 37(1) OF THE ACT. ACCORDINGLY HE DISA LLOWED THE SAME AND THE LD CIT(A) ALSO CONFIRMED THE SAME. 3. THE LD A.R SUBMITTED THAT THESE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE ON BEHALF OF ITS CLIENTS AND HENCE IT DOES NOT CONSTITUTE ITS OWN EXPENSE. HE SUBMITTED THAT THE ASSESSEE HAS ROUT ED ALL THE EXPENSES THROUGH ITS PROFIT AND LOSS ACCOUNT AND HENCE IT APPEARS THAT IT REPRESENTS ASSESSEES OWN EXPENSES. THE LD A.R INVITED OUR ATTENTION TO THE COPIES OF BILLS RAISED UPON ITS CLIENTS TO SUPPORT THIS CONTENTION THAT IT WAS INCURRED ON BEH ALF OF ITS CLIENTS. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS CONSTRAINED TO INCUR THESE EXPENSES UPON THE INSTRUCTIONS OF ITS CIENTS IN ORDER TO GET THEIR JOB OF LOADING AND UNLOADING DONE QUICKLY. HE SUBMITTED THAT IT IS A PREVAILING PRACTICE TO INCENT IVIZE THE DOCK WORKERS BY PAYING SOME EXTRA CHARGES TO GET THE JOB DONE QUICKLY. HE SUBMITTED THAT THESE KIND OF PAYMENTS ARE NOT PROHIBITED BY LAW AND HENCE THE TAX AUTHORITIES ARE NOT JUSTIFIED IN INVOKING THE EXPLANATION TO SEC. 37(1) OF THE ACT TO DIS ALLOW THE CLAIM OF THE ASSESSEE. 4. ON THE CONTRARY, THE LD D.R PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE TAX AUTHORITIES. 5. HAVING HEARD RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE IMPUGNED DISALLOWANCE MERITS DELETION ON THE FOLLOWING REA SONS: - ITA NO. 4 524/ UM/ 20 13 3 (A) FIRST AND FOREMOST OF THE ALL, THESE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE ON BEHALF OF ITS CLIENTS AND HENCE THE SAME DOES NOT CONSTITUTE ITS OWN EXPENDITURE. (B) EVEN THOUGH THE ASSESSEE HAS ROUTED THE EXPENDITURE AND REIMBURSEMENT RECEIV ED FROM ITS CLIENTS THROUGH THE PROFIT AND LOSS ACCOUNT, YET IT IS SETTLED PRINCIPLE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE THE SOLE DETERMINATIVE FACTOR TO DECIDE ABOUT THE NATURE OF EXPENDITURE. (C) ACCORDING TO THE ASSESSEE, THE COMMISSI ON PAYMENTS HAVE BEEN MADE TO THE WORKERS AS AN INCENTIVE TO GET THE WORK DONE QUICKLY. EVEN THOUGH THE AO HAS INVOKED THE PROVISIONS OF EXPLANATION TO SEC. 37(1), HE HAS NOT CITED THE RELEVANT LAW, WHICH PROHIBITS SUCH KIND OF PAYMENTS. ACCORDING TO THE LD A.R, IT IS A PREVAILING TRADE PRACTICE AND SUCH PAYMENTS ARE NOT PROHIBITED BY ANY LAW. (D) THE ASSESSEES CLAIM THAT IT WAS PAID TO THE WORKERS HAVE NOT BEEN DISPROVED. EVEN OTHERWISE, WE HAVE NOTICED EARLIER THAT THE SAME REPRESENTS PAYMENTS MADE ON BEHALF OF ITS CLIENTS AND HENCE THE DISALLOWANCE OF THE SAME IS NOT CALLED FOR IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE FOREGOING, WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN BY THE LD CIT(A) ON THIS ISSUE. ACCORDINGLY, WE SET ASIDE HIS ORDER ON T HIS ISSUE AND DIRECT THE AO TO DELETE THIS DISALLOWANCE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 18TH MARCH, 2016 . 18TH MARCH, 2016 SD SD ( RAMLAL NEGI ) ( B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 18TH MARCH, 201 6 . . . ./ SRL , SR. PS ITA NO. 4 524/ UM/ 20 13 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CO NCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI