PEST CONTROL (I) P.LTD, MUMBAI V. ACIT CC 29, MUMBAI

ITA 5272/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84579 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 11-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: G S PIKALE
• Section: 147

Judgement Text

, ( ), IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI . . , , . . , ! ' BEFORE SHRI H L KARWA, PRESIDENT, & SHRI B R BASKAR AN, AM ./ITA NO.5272/MUM/2011 ( # $ / ASSESSMENT YEAR : 2004-05) PEST CONTROL (I) P LTD. 36 YUSUF BLDG., M G ROAD, FORT, MUMBAI- 400 001 PAN :AAACP5994K THE ACIT CC-29, MUMBAI ( %& /APPELLANT) ( '(%& / RESPONDENT) ./ITA NO.5616/MUM/2011 ( # $ / ASSESSMENT YEAR : 2004-05) THE ACIT CC-29, MUMBAI PEST CONTROL (I) P LTD. 36 YUSUF BLDG., M G ROAD, FORT, MUMBAI- 400 001 PAN :AAACP5994K ( %& /APPELLANT) ( '(%& / RESPONDENT) FOR THE ASSESSEE : SHRI G S PIKALE FOR THE REVENUE : SHRI PREMANAND J DATE OF HEARING : 31.12.2014 DATE OF PRONOUNCEME NT : 31.12.2014 ' ) / O R D E R PER H L KARWA, PRESIDENT : THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) - 40, MUMBAI DATED 31.05.20 11 RELATING TO A.Y. 2004-05. 2. WE SHALL FIRST TAKE UP THE REVENUES APPEAL IN ITA NO.5616/MUM/2011. THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDE R: 2 PEST CONTROL (I) P LTD. 1.A WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDIT ION OF RS.1,39,66,816/- BEING THE EXCESS AMOUNT OF UNEXPIR ED SERVICE CONTRACTS HOLDING THAT SINCE THE SERVICE CONTRACT I S SPREAD OVER TWO ACCOUNTING YEAR THE RECEIPTS, ACTUALLY RECEIVED DUR ING THE YEAR, ALSO SHOULD BE TAXED IN TWO ACCOUNTING YEAR DESPITE THE FACT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. 3. AFTER HEARING THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL PASSED IN ASSESSEES OWN C ASE FOR A.Y. 2007-08 IN ITA NO. 5317/M/2010. WHILE DECIDING A SIMILAR ISSUE THE TR IBUNAL VIDE ITS ORDER DATED 14.03.2012 HELD AS UNDER: 3. NOW THE REVENUE IS IN APPEAL BEFORE US. WE HAV E HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT THE A.O. HIMSELF HAS ACCEPTED THAT THE SERVICE CONTRACT S IN MANY CASES ARE SPILL OVER TO TWO FINANCIAL YEARS. IN VIEW OF THE A .O., AT THE MOST, THE ASSESSEE CAN CARRY FORWARD 25% OF THE RECEIPTS FOR RECOGNISING THE INCOME IN THE NEXT YEAR AND THE ASSESSEE SHOULD HAV E RECOGNIZED TO THE EXTENT OF 75% OF ITS RECEIPTS IN THE PRESENT AS SESSMENT YEAR. THE LD. COUNSEL DEMONSTRATED THAT WHERE ALL THE SERVICE S ARE OVER IN A FINANCIAL YEAR, ENTIRE INCOME IS RECOGNIZED AND ONL Y IN THE CASES WHERE THE CONTRACTS ARE SPILL OVER IN THOSE CASES ONLY TH E PRO RATE REVENUE IS RECOGNIZED IN THE NEXT YEAR. WE FURTHER FIND THAT I N THE PAST THE ASSESSEE HAS CONSISTENTLY FOLLOWING THIS METHOD AND EVEN IN THE ASSESSMENT COMPLETED U/S.143(3) THE METHOD FOLLOWED BY THE ASSESSEE HAS BEEN ACCEPTED. WE FIND THAT THERE IS NO LOGIC I N THE APPROACH OF THE A.O. WE FIND NO REASON TO INTERFERE WITH THE OR DER OF THE LD. CIT (A) ON THIS ISSUE ACCORDINGLY THE SAME IS CONFIRMED . ACCORDINGLY, ISSUE IN GROUND A STANDS DISMISSED. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE LD. COUNSEL SUBMITS THAT COMPANY HAS BEEN PAYING THE DI RECTORS REMUNERATION AS A PROFIT COMMISSION AS PER THE PROV ISIONS OF THE COMPANIES ACT, 1956, AFTER DETERMINATION OF THE PRO FITS. THE ASSESSEE- COMPANY ALSO IS PERFORMANCE INCENTIVES TO THE MANAG ERS. HE SUBMITTED THAT MR. S. RAO WAS CHAIRMAN & MANAGING DIRECTOR OF THE ASSESSEE COMPANY WHO WITHDREW FROM THE ACTIVE PARTICIPATION OF THE COMPANYS BUSINESS AND MR. ANIL S. RAO WAS PAID A COMMISSION OF RS.81,39,200/- @ 8% OF THE PROFIT WHICH AS PER THE RESOLUTION PASS ED BY THE BOARD. WE HAVE ALSO HEARD LD. D.R. WE FIND THAT THE PROFIT COMMISSION WHICH IS PAID TO THE DIRECTOR IS APPROVED IN THE GENERAL MEETING (G.M.) OF THE SHAREHOLDERS AND REQUIRED EVIDENCE WAS FILED BEFORE THE LD. CIT (A). WE FURTHER FIND THAT ASSESSEE HAS BEEN PAYING PROFI T COMMISSION TO THE 3 PEST CONTROL (I) P LTD. MANAGING DIRECTOR IN PAST ALSO. EARLIER, MR. S. RAO WAS PAID SAME COMMISSION AND AFTER HIS WITHDRAWAL FROM BUSINESS O F THE ASSESSEE, MR. ANIL RAO HAS BEEN PAID, ENHANCING HIS PERCENTAG E TO 8%, THAT IS MERGING PERCENTAGE OF COMMISSION EARLIER PAID TO HI S FATHER. IN PAST A.O. HAS ALLOWED SAID DEDUCTION AND NEVER RAISED AN Y OBJECTION. AFTER GIVING OUR ANXIOUS CONSIDERATION TO THE FACTS ON RE CORDS, IN OUR OPINION THERE WAS NO JUSTIFICATION TO THE A.O. TO DISALLOW THE COMMISSION PAYMENT TO THE DIRECTORS AND THE MANAGERS. WE FIND NO REASON TO TAKE A DIFFERENT VIEW FROM THAT OF LD. CIT (A), WE ACCOR DINGLY CONFIRM THE SAME AND ACCORDINGLY ISSUE IN ROUND B ALSO STANDS DISMISSED. 4. FACTS OF THE PRESENT YEAR ARE SIMILAR TO THAT OF AY 2007-08 AND, THEREFORE, THE FINDINGS GIVEN IN AY 2007-08 ARE SQUARELY APPLICABL E TO THE ISSUE AND FACTS OF THE PRESENT YEAR. WE MAY ALSO ADD HERE THAT IN ASSESSE ES CASE IN ITA NO. 5673/M/11 RELATING TO A Y 2008-09, THE TRIBUNAL VIDE ITS ORDE R DATED 03.04.2013 HAS TAKEN SIMILAR VIEW AS THAT IN AY 2007-08. 5. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT I N THE REVENUES APPEAL AND CONSEQUENTLY WE DISMISS THE SAME. 6. ITA NO.5272/MUM/2011 IN THIS APPEAL THE ASSESSEE HAS RAISED AS MANY AS S EVEN GROUNDS OF APPEAL VIDE WHICH IT HAS CHALLENGED THE VALIDITY OF RE-OPE NING OF ASSESSMENT U/S. 147 OF THE IT ACT, 1961. 7. SINCE, ON MERITS, RELIEF HAS BEEN GIVEN TO THE A SSESSEE, WE DO NOT THINK IT NECESSARY TO DECIDE THE VALIDITY OF REOPENING OF AS SESSMENT. OTHERWISE ALSO THE DISCUSSION ON THIS ISSUE WOULD BE OF ACADEMIC INTER EST ONLY. 8. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF DECEMBER, 2014. SD/- SD/- (B R BASKARAN) (H L KARWA) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DT : 31 ST DECEMBER, 2014 SA 4 PEST CONTROL (I) P LTD. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, MUMBAI C BENCH BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI