DEVSON PRIVATE LIMITED, JAMMU V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2, JAMMU

ITA 549/ASR/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4350 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 13-08-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GHANSHAM SHARMA
• Keywords: Opportunity of being heard; Commercial expediency; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 204/Asr/2019 Assessment Year: 2014-15 Devson Private Ltd. Chand Nagar, Jammu [PAN: AAACD 5815D] Vs. Asstt. Commissioner of Income Tax, Circle-2, Jammu (Appellant) (Respondent) I.T.A. No. 549/Asr/2019 Assessment Year: 2013-14 Devson Private Ltd. Chand Nagar, Jammu [PAN: AAACD 5815D] Vs. Dy. Commissioner of Income Tax, Circle-2, Jammu (Appellant) (Respondent) Appellant by : Sh. Vijay Dewan, Adv. Respondent by: Sh. Ghansham Sharma, Sr. DR Date of Hearing: 13.09.2022 Date of Pronouncement: 22.09.2022 ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 2 ORDER Per Dr. M. L. Meena, AM: These appeals have been filed by the assessee against the order dated 28.12.2018 & 10.04.2019 passed by the Ld. Commissioner of Income Tax (Appeals), Jammu, in respect of the Assessment Years 2013- 14 and 2014-15, wherein the assessee has challenged the order of ld. CIT(A) in upholding the addition on account of Sales Commission of Rs.3,54,311/- and 3,39,083/- in respective assessment year by the Assessing Officer. Since, there is sole issue of commission payment on identical facts, both the appeals were heard together and disposed off by this common order for brevity. 2. The assessee has raised the following grounds of appeal in ITA No. 204/Asr/2019: “1. The order passed by the Learned Commissioner of Income Tax (Appeals) is opposed to law and facts of the case. 2. The Learned Commissioner of Income Tax (Appeals) has erred in upholding the addition on account of Sales Commission amounting to Rs.3,54,31 1/- paid to employees of the company viz. Estate Officer, Store Keeper, Cashier, G.D. Clerk, Labour, Computer Operator, Accountant and Peon being not directly relating to Sales Department. ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 3 3. The Learned Commissioner of Income Tax (Appeals) has failed to appreciate that the Sales Commission has been paid to the employees of the company to incentivize them and is part and parcel of their Salary package. 4. The Learned Commissioner of Income Tax (Appeals) has failed to appreciate that all employees contribute to the progress of the company and are remunerated based on the sales of the company. 5. The Learned Commissioner of Income Tax (Appeals) has erred in not allowing opportunity of being heard to the Appellant. 6. Any other ground which may be allowed to be brought at the time of hearing of appeal. It is prayed, that the addition of Rs.3,54,311/- may please be deleted and appeal allowed.” 3. The assessee has raised the following grounds of appeal in ITA No. 549/Asr/2019: “1. The order passed by the Learned Commissioner of Income Tax (Appeals) is opposed to law and facts of the case. 2. The learned Commissioner of Income Tax (Appeals) has erred in upholding the order of Assessing Officer on account of Sales Commission amounting to Rs.3,39,083/- paid to employees of the company viz. Estate Officer, Store Keeper, Cashier, G.D. Clerk, Labour, Computer Operator, Accountant and Peon being not directly relating to Sales Department. 3. The Learned Commissioner of Income Tax (Appeals) has failed to appreciate that the Sales Commission has been paid to the employees of the company to incentivize them and is part and parcel of their Salary package. 4. The Learned Commissioner of Income Tax (Appeals) has failed to appreciate that all employees contribute to the progress of the company and are remunerated based on the sales of the company. ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 4 5. Any other ground which may be allowed to be brought at the time of hearing of appeal. It is prayed, that the addition of Rs.3,39,083/- may please be deleted and appeal allowed.” 4. At the outset, the ld. counsel for the assessee has submitted that the appellant has paid Sales Commission to the employees of the assessee company to incentivize them and is part and parcel of their salary package as per ground no. 3. He contended that the Commission has been paid to the employees of the company vis-à-vis Estate Officer, Store Keeper, Cashier, Asstt. Store Keeper, G.D. Clerks, Accountant, Computer Operator, Coolie and Peon although they were not directed related to the Sales Department. The counsel has filed a written note to buttress his contention raised at the time of hearing which reads as under: “1. Regarding Disallowance of Rs.3,54,311/- out of Sales Commission : The Assessing Officer has disallowed an amount of Rs.3,54,311/- out of total amount of Rs.5,00,041/- spent on account of Sales Commission paid to its employees on the ground that some of the employees to whom sales commission has been paid do not relate directly to sales department. The Dy. Commissioner of Income Tax, Circle - 2 has upheld the addition by relying on the order of the Assessing Officer. It is submitted that the Appellant is a wholesaler of liquor and purchases its supplies from different Distilleries/Breweries/ Wholesalers and sell the same to retailers. For running its business the Appellant had 27 employees on its pay rolls during the year. The pay package of these employees is also linked with the sales of the company. More the sales more will be sales incentive and in case of lesser sales the sale incentive will also reduce accordingly. The sales incentive is ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 5 part and parcel of their monthly pay package (list of employees given to Assessing Officer at the time of assessment is given at para 4 of the Assessment Order). The learned CIT (Appeals) has relied upon the order of the Assessing Officer who has ruled that sales incentive given to employees like Estate Officer, Store Keeper, Cashier, Asstt. Store Keeper, G.D. Clerks, Accountant, Computer Operator, Coolie and Peon are not directly related to sales department. The findings of the authorities below are not tenable. The business of the Appellant is sales/purchase of liquor and all these employees are directly or indirectly related to sales of the company. The Secretary is the overall in charge of sales operation whereas persons like Store Keeper, Cashiers, Asstt. Store Keeper, G.D. Clerk, Accountant, Computer Operator, Coolie and Peon are directly related to the conduct of the sales. Moreover it is for the Appellant to formulate the pay package of the employees which is beneficial to company both employees and employers. It has been held by the Hon’ble jurisdictional Amritsar ITAT bench in the case of ‘Subash Chander & Co. v. Income Tax Officer/ (2009)121TTJ 718 (copy enclosed) vide para 6 of the order that: “Moreover, as held in S.A Builders Lt vs. CIT (2006) 206 CTR (SC) 631: (2007) 288 ITR 1(SC), the Revenue cannot justifiably claim to put itself in the armchair of the businessman and assume the role to decide, as to how much the expenditure is reasonable having regard to the circumstances of the case; no businessman can be compelled to maximize his profit; the IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act; and that the authorities must not look at the matter from their view point, but that of a prudent businessman impelled by commercial expediency". The learned CIT (Appeals) has ignored the above judgment of the Hon’ble Tribunal without assigning any reason which is directly related to the case. Further the learned CIT (Appeals) did not grant personal hearing in the matter and decided the matter on the basis of written submissions submitted by the appellant. In view of the above submissions, it is requested that disallowance of Rs.3,54,311/- be allowed and appeal accepted.” ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 6 5. The learned additional CIT DR supported the impugned order. He contended that what is claimed by the assessee relates to incentives paid to its employees and no way related to the sales commission. The learned CIT appeal was therefore justified in confirming the bogus expenditure claimed by the appellant assessee under the head sales commission. He prayed that order of the CIT appeal may be sustained. 6. We have heard the learned counsel and additional CIT DR, perused the material on record and case law cited at the bar. Admittedly, the appellant assessee has paid sales incentives to its employees as part of the salary package where he was required to deduct TDS. Since the assessee has not deducted the TDS on such payments of incentives, therefore he has claimed, these expenses under the head sales commission payments vis-a-vis sales incentives being paid to the Estate Officer, Store Keeper, Cashier, Asstt. Store Keeper, G.D. Clerks, Accountant, Computer Operator, Coolie and Peon, which are directly or indirectly not related to sales department. At the time of hearing, the learned counsel asked whether the appellant assessee has furnished detailed information regarding the nature of payments of the expenses claimed as sales commission and whether direct whether any TDS has been directed on such payments before the authorities below. Since the ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 7 assessee has failed to furnish any information to establish that the payments were made towards the sales commission relating to promotion of sales and TDS the deduction on the sales commission thereof before the authorities below and in the present proceedings as well. Merely, the claim made by the assessee that the business of the Appellant is sales/purchase of liquor and all these employees are directly or indirectly related to sales of the company is not sufficient to hold that the findings of the authorities below are not tenable. In view of the matter, we do not find any infirmity or perversity in the observation and finding of the learned CIT appeal on the facts of the case. 7. The order of Hon’ble ITAT, Amritsar Bench in the case of Subash Chander & Co. v. ITO in ITA No. 568/Asr/2008, AY 2006-07(2009)121TTJ 718 dated 13th Jan., 2009 is not applicable to the facts of the present case of the assessee as in that case the Tribunal has dealt with the issue and genuineness and payments of 15% interest to the relatives u/s 40A(2) whereas in the present case, the issue is claim of payment of sales commission against sales incentives paid as part of salary package to the employees of the assessee company without deducting TDS. 8. Similarly, the judgement given by Hon’ble Apex Court in the case of ITA Nos. 204&549/Asr/2019 Devson Pvt. Ltd. v. Asstt./Dy.CIT 8 “S.A Builders Lt vs. CIT”, (2006) 206 CTR (SC) 631: (2007) 288 ITR 1(SC), on the issue of commercial expediency is of no help to the appellant assessee because, the issue involved is claim of sales commission without TDS deduction in violation of provisions of the section 194H of the Income Tax Act, 1961. 9. Considering factual matrix and legal intricacies, we find no merit and substance in the contentions of the appellants counsel and accordingly, the orders of the CIT(A) are sustained in upholding the addition on account of Sales Commission amounting to Rs. 3,54,311/- and Rs.3,39,083/- in ITA no 204/ASR/ 2019 and 549/ASR/2019 in respect of the Assessment Year 2014-15 and 2013-14 respectively. 10. In the result, both the appeals are dismissed. Order pronounced in the open court on 22.09.2022 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order