M/s. K.L. Steels Pvt. Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 4861/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69670 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI J. S. REDDY , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4861 /DEL/2012 ASSESSMENT YEAR: 2009 - 10 K.L. STEELS PVT. LTD. Z - 18, NARAINA, LOHA MANDI, NEW DELHI PAN AAACK0237C VS. ADDL. CIT, RANGE - 5, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AS H WANI KUMAR , CA RESPONDENT BY: S. N. BHATIA , DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD CIT(A) VIII, NEW DELHI DATED 16.07.2012 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE GROUNDS OF APPEAL READS AS UNDER: - 1. THAT THE ORDER DATED 16.07.2012 PASSED U/S 250 OF THE INCOME - TAX A CT, 1961 BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) VIII, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ADDL. COMMISSIONER - TAX, RANGE - 5, NEW DELHI IN MAKING DISALLOWANCE OF RS . 1,07,00,000/ - BEING COMMISSION ON PROFITS PAID ON MANAGING DIRECTOR SHRI RAJ KUMAR BARDEJA AS PART OF HIS SETTLED REMUNERATION BY FOLLOWING THE FINDINGS ARRIVED AT FOR ASSESSMENT YEARS 2005 - 06 , 2006 - 07 AND 2007 - 08 AND IN ADDITION BY HOLDING THAT THE SAME IS NOT ALLOWABLE AS PER THE PROVISIONS OF SECTION 36(1)(II) OF THE INCOME - TAX ACT, 1961. 2. THAT THE ORDER DATED 16.07.2012 PASSED U/S 250 OF THE INCOME - TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) VIII, NEW DELHI IS AGAINST LAW AND F ACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ADDL. COMMISSIONER OF INCOME - TAX, RANGE - 5, NEW DELHI IN MAKING DISALLOWANCE OF RS. 1,07,00,000/ - BEING COMMISSION ON PROFITS PAID TO MANAGING DIRECTOR SHRI RAJ KUMAR BA RDEJA AS PART OF HIS SETTLED REMUNERATION BY IGNORING THE DECISION OF JURISDICTIONAL HIGH COURT OF DELHI IN PAGE NO. 2 ITA NO. 4861/DEL/2012 THE CASE OF COMMISSIONER OF INCOME TAX V. CAREER LAUNCHER INDIA LIMITED (2012) 207 TAXMAN 28 (DELHI) . 3. THAT THE ORDER DATED 16.07.2012 PASSED U/S 250 OF THE INCOME - TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) VIII, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ADDL. COMMISSIONER OF INCOME - TAX, RANGE - 5, NEW D ELHI IN MAKING DISALLOWANCE OF RS. 41,808/ - IN RESPECT OF EXEMPT INCOME I.E. DIVIDEND EARNED BY THE APPELLANT COMPANY DURING THE YEAR BY RESORT TO THE PROVISIONS OF SECTION 14A OF THE INCOME - TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME - TAX RULES. 3. THE ASSESSEE IS A PVT LTD COMPANY AND FOR THE ASSESSMENT YEAR 2009 - 10 HAD FILED THE RETURN OF INCOME DECLARING NET TAXABLE INCOME OF RS. 17,24,34,820/ - . THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER DATED 12.12.2011WAS PASSED. THE ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF STEEL. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OBSERVED THAT A N AMOUNT OF RS. 1,07,00,000/ - HAD BEEN PAID TO SHRI RAJ BARDEJA, MD OF THE COMPANY IN VIOLATION OF SECTION 36(1)(II) OF THE IT ACT (HEREIN AFTER , THE ACT) AND TH I S AMOUNT SHOULD BE DISALLOWED. ACCORDINGLY, ADDITION OF RS. 1,07,00,000/ - WAS MADE. 4. AGGRIEVED BY THE ORDER OF THE LD ASSESSING OFFICER THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE LD CIT(A) , WHO BY THE IMPUGNED ORDER DATED 12.12.2011 FOLLOWED THE DECISION AND REASONING GIVEN BY HIS PREDECESSOR HELD THAT THE COMMISSION PAYMENT OF RS. 1,07,00,000/ - MADE TO SHRI RAJ BARDEJA WOULD NOT BE ALLOWED AS AN EXPENDITURE FOR WANT OF DEDUCTION OF TAX AT S OURCE UNDER 194H OF THE ACT AND DISMISSED THIS GROUND OF APPEAL PREFERRED BY THE ASSESSEE. 5. AGGRIEVED BY THE SAID ORDER THE ASSESSEE IS BEFORE US. 6. AT THE OUTSET ITSELF THE LD AR HAS BROUGHT TO OUR NOTICE THE DECISION OF THE DELHI HIGH COURT REPORTED IN AMD METPLAST LTD. V. DCIT (2012) 341 ITR 563 AND ALSO THE DECISION BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08 AND 2008 - 09. 7. THE LD DR RELIED UPON THE ASSESSING OFFICERS ORDER AND THE CIT(A)S ORDER. 8. WE HAVE GONE THROUGH T HE RECORDS AND HAVE STUDIED THE CASE S CITED BY BOTH THE PARTIES AND THE OPERATING PORTION OF THE ASSESSEES CASE DECIDED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2007 - 08 , WHEREIN THE ASSESSING OFFICER DISALLOWED THE COMMISSION BY APPLYING THE PROVISIONS OF SECT ION 36(1)(II) OF THE ACT . THE TRIBUNAL HELD AS FOLLOWS: - PAGE NO. 3 ITA NO. 4861/DEL/2012 1 0 . FROM THE ABOVE, IT IS EVIDENT THAT THE ONLY CONTENTION OF THE REVENUE THAT THE PAYMENT OF COMMISSION WAS NOT FOR THE SERVICES RENDERED BY SHRI RAJ KUMAR BARDEJA HAS BEEN CONSIDERED AND ADJUDICAT ED UPON BY THE CIT(A), ITAT AS WELL AS HONBLE JURISDICTIONAL HIGH COURT IN THE PRECEDING TWO YEARS. ADMITTEDLY, THE FACTS OF THE YEAR UNDER CONSIDERATION ARE IDENTICAL. IN VIEW OF THE ABOVE, WE HOLD THAT THE RATIO OF THE ABOVE DECISION OF HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF AMD METPLAST P. LTD (SUPRA) WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. THE LEARNED DR HAS RELIED UPON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DALAL BROACHA STOCK BROKING (P) LTD (SUPRA). HOWEVER, IT IS A SETTLED LAW THAT THE DECISION OF THE HIGH COURT IS BINDING ON ALL THE SUBORDINATE COURTS AND TRIBUNALS WORKING WITHIN THE JURISDICTION OF SUCH HIGH COURT. THEREFORE, THE DECISION OF HONBLE DELHI HIGH COURT WOULD BE BINDING ON US. WE, THER EFORE, RELYING UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AMD METPLAST P. LTD. (SUPRA), HOLD THAT THE DISALLOWANCE OF COMMISSION PAID TO SHRI RAJ KUMAR BARDEJA WAS NOT JUSTIFIED. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED. 9. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL WE FIND THAT THE DISALLOWANCE OF COMMISSION PAID TO SHIR RAJ KUMAR BARDEJA WAS NOT JUSTIFIED, ACCORDINGLY, GROUND NO. 1 AND 2 OF THE ASSESSEE ARE ALLOWED. 10. COMING TO THE NEXT G ROUND NO. 3 THE LD AR DOES NOT PRESS THE SAME , THEREFORE , THE GROUND PREFERRED BY THE ASSESSEE IS DISMISSED. 11. IN VIEW OF THE ABOVE THE APPEAL PREFERRED BY THE ASSESSEE IS PARTY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 .12.2013. - SD/ - - SD/ - ( J.S. REDDY ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 20 / 12 /2013 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI