Chak Rader Farm Equipments Private Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(2), Hyderabad

ITA 528/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3390 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 26-04-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 19-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Diversion of income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 528/HYD/2018 ASSESSMENT YEAR: 2013-14 CHAK RADER FARM EQUIPMENTS PRIVATE LIMITED, HYDERABAD [PAN: AABCC5121G] VS DY.COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S.RAMA RAO, AR FOR REVENUE : SHRI SUNIL KUMAR PANDEY, DR DATE OF HEARING : 26-04-2021 DATE OF PRONOUNCEMENT : 11-06-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2013-14 ARISES FROM TH E CIT(A)-1, HYDERABADS ORDER DATED 15-12-2017 PASSED IN APPEAL NO.0041 / CIT(A)-1,HYD / 2016-17 / 2017-18, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [I N SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. COMING TO THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE CHALLENGING CORRECTNESS OF BOTH THE LOWER AUTHORITIES A CTION DISALLOWING ALLEGED COMMISSION PAYMENT OF RS.1,01,15 ,715/- TO ITS DIRECTOR MRS.P.VANI @6% OF THE MATERIAL SOLD IN D OMESTIC ITA NO. 528/HYD/2018 :- 2 -: MARKET, WE FIND THAT THE INSTANT ISSUE IS NO MORE RES INTEGRA AS THIS TRIBUNALS CO-ORDINATE BENCHS ORDER IN ASSESSEE S CASE ITSELF ITA NO.1192/HYD/2016, DT.25-01-2018 (AY.2012-1 3) HAS ACCEPTED THE VERY NATURE OF CLAIM AS UNDER: 13. AS REGARDS GROUNDS NO. 3 AND 4 AGAINST THE DIS ALLOWANCE OF COMMISSION PAID TO SMT. P. VANI TO THE EXTENT OF RS .1,15,00,000/- IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS REI TERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT SMT. P. VANI IS THE PROPRIETRESS OF M/S CHOWDHARY E NTERPRISES AND IS A WELL KNOWN FIGURE IN THE POULTRY EQUIPMENT BUSINE SS. HE HAS FILED THE TURNOVER OF M/S CHOWDHARY ENTERPRISES FOR THE A .YS 2003-04 TO 2011-12 TO DEMONSTRATE THAT THE SMT. P. VANI IS DOI NG GOOD BUSINESS AND SHE IS DERIVING HUGE PROFITS FROM SUCH BUSINESS . HE JUSTIFIED THE PAYMENT OF COMMISSION BECAUSE OF THE HUGE TURNOVER GENERATED BY THE ASSESSEE FROM SALES MADE THROUGH HER. HE SUBMIT TED THAT SHE HAS BECOME THE DIRECTOR OF THE COMPANY ONLY IN 2006 , AND THE BOARD RESOLUTION SUPPORTS PAYMENT OF COMMISSION TO HER @ 6% OF SALES THROUGH HER. HE HAS ALSO REFERRED TO THE BOARD RESO LUTION PLACED AT PAGE NO. 23 OF THE PAPER BOOK. HE SUBMITTED THAT TH ERE HAS BEEN NO DISALLOWANCE OF THE COMMISSION PAID TO HER IN THE E ARLIER OR SUBSEQUENT ASSESSMENT YEARS AND THEREFORE THE DISAL LOWANCE DURING THE RELEVANT ASSESSMENT YEAR IS NOT JUSTIFIED. HE A LSO FILED THE COPY OF THE RETURN OF INCOME OF SMT. P. VANI FOR THE A.Y 20 13-14 TO DEMONSTRATE THAT SHE HAS REFLECTED THE COMMISSION I NCOME IN HER RETURN OF INCOME. THEREFORE, ACCORDING TO HER THERE IS NO DIVERSION OF INCOME OR ESCAPEMENT OF TAX ON THE INCOME. 14. THE LD. DR, HOWEVER, SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW AND SUBMITTED THAT SMT P. VANI IS WIFE OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND THAT SHE IS ON LY AN SSLC PASSED AND THEREFORE SHE IS NOT WELL EDUCATED TO BE DOING THE BUSINESS OF THE ASSESSEE COMPANY AND TO EARN SUCH H UGE MARGINS AS COMMISSION. 15. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE INCOME OF M/S CHOWDHARY ENTERPRISE S, OF WHICH SMT. P. VANI IS THE PROPRIETOR IS ACCEPTED BY THE D EPARTMENT AND SMT. P. VANI HAS ALSO OFFERED THE COMMISSION INCOME IN H ER RETURN OF INCOME FOR THE A.Y 2012-13. IT IS ALSO NOT IN DISPU TE THAT SHE IS BEING PAID COMMISSION FROM THE A.Y 2003-04 ONWARDS AND NO DISALLOWANCE HAS BEEN MADE EITHER IN THE EARLIER OR SUBSEQUENT Y EARS. THE A.O IS ONLY RESTRICTING THE COMMISSION PAID TO 2.3% AS AGA INST 6% PAID BY THE ASSESSEE COMPANY. WE FIND THAT SMT P. VANI IS D OING GOOD BUSINESS AND THE PRODUCTS MANUFACTURED BY THE ASSES SEE COMPANY ARE BEING TRADED THROUGH HER AND SHE BEING THE PERS ON THROUGH WHOM ITA NO. 528/HYD/2018 :- 3 -: THE ASSESSEE IS SELLING MOST OF ITS GOODS, IS ENTIT LED TO THE COMMISSION AT A HIGHER RATE. IN VIEW OF THE SAME, WE DO NOT SE E ANY REASON TO RESTRICT THE COMMISSION PAID TO HER, THAN WHAT IS R ECEIVED BY HER. IN VIEW OF THE SAME, GROUNDS NO 3 AND 4 ARE ALLOWED. 3. THE REVENUE IS FAIR ENOUGH IN NOT BEING ABLE TO PI N POINT ANY DISTINCTION OF FACTS QUA THE ASSESSEES INSTANT COMMISSION PAYMENT MADE TO SMT.VANI IN THESE TWIN ASSESSMENT YEARS. 4. WE THUS ACCEPT THE ASSESSEES INSTANT SOLE GRIEVANCE IN PRINCIPLE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED COMMISSION PAYMENT DISALLOWANCE OF RS.1,01,15,715/- IN LIGHT OF THE TRIBUNALS DIRECTIONS IN AY.2012-13 QUA THE VERY ISSUE. 5. THIS ASSESSEES APPEAL IS TREATED AS ALLOWED IN AB OVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 11-06-2021 TNMM ITA NO. 528/HYD/2018 :- 4 -: COPY TO : 1.CHAK RADER FARM EQUIPMENTS PRIVATE LIMITED, 11-7- 265, POTLURI HOUSE, HUDA COMPLEX, SAROOR NAGAR, HYDERABA D. 2.THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD. 3.CIT(APPEALS)-1, HYDERABAD. 4.PR.CIT-1, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.