A.C.I.T.-12(3), MUMBAI V. M/S. SHAMROCK, MUMBAI

ITA 5619/MUM/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59818 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 07-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARVIND H DALAL
• Keywords: Opportunity of being heard; Additional evidence
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, E BENCH, MUMBAI. BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A NO.5619/ MUM/2008 ASSESSMENT YEAR: 2005-06 ACIT 12(3) .. APPELLANT ROOM NO.121, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 VS SHAMROCK, .. RESPONDEN T 1305, RAHEJA CENTRE, NARIMAN POINT, MUMBAI-21. PA NO.AAAFS 0834 F APPEARANCES: P.C.MAURYA, FOR THE APPELLANT ARVIND H. DALAL , FOR THE RESPONDENT DATE OF HEARING : 7.2.2012 DATE OF PRONOUNCEMENT : 10 .2.2012 O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE ORDER OF THE CIT(A)-XII, MUMBAI DATED 10 .6.2008. 2. GROUND NO.1 OF THE APPEAL IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING THAT SINCE THE PROVISIONS O F EXPLANATION (2) TO SECTION 80IB(2) ARE DIRECTLY APPLICABLE TO THIS CAS E, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IB IGNORING THE FACT THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS AS LAID DOWN U/S.80IB( 2)(I) OF THE ACT. I.T.A NO.5619/ MUM/2008 ASSESSMENT YEAR: 2005-06 2 3. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LI KE THIS. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT. HOWEVER, T HE ASSESSING OFFICER STATED THAT THE ASSESSEE DID NOT FULFILL THE CONDITIONS AS LAID DOWN UNDER THE PROVISIONS OF SECTION 80IB OF THE ACT AS THE ASSESSEE HAD MERELY RELOCA TED ITS EXISTING BUSINESS TO A NEW PLACE. THE ASSESSING OFFICER STATED THAT THE ABOV E FACT WAS CONSIDERED IN THE EARLIER ASSESSMENT YEARS AND ON THAT BASIS, THE AO HELD TH AT THE CLAIM OF THE ASSESSEE THAT TOTAL NEW PLANT AND MACHINERY IS WORTH MORE THA N 80% OF THE TOTAL COST IS NOT ACCEPTABLE , AND, ACCORDINGLY, DENIED THE CLAIM OF DEDUCTION U/S.80IB OF THE ACT. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS THE THIRD YEAR OF THE CLAIM OF THE A SSESSEE ON THE SAME UNIT AND THE SAME VERY ISSUE HAD BEEN CONSIDERED IN THE ASSESSMENT YEAR S 2003-04 AND 2004-05, WHEREIN, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80I B HAD BEEN ALLOWED. THE DEPARTMENT HAS FILED THIS APPEAL DISPUTING THE ABOVE O RDER OF THE CIT(A). 4. AT THE TIME OF HEARING, LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THE SAME VERY ISSUE HAD BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 IN THE APPEALS FILED BY THE DEPARTMENT BEING ITA NO.4297 & 4298/M/2007 AND THE TRIBUNAL BY ITS ORDER DATED 22.5.2009 HELD THAT THE ASSESSEE ACQUIRED THE NEW PLANT AND MACH INERY MORE THAN 80% AND ALSO INSTALLED NEW ELECTRICAL INSTALLATIONS AND THE OTH ER INSTALLATIONS AND CONFIRMED THE ORDER OF THE CIT(A) THAT THE ASSESSEE HAD SATISFIED A LL THE CONDITIONS LAID DOWN UNDER SECTION 80IB OF THE ACT AND THUS THE ASSESSEE IS ENT ITLED FOR DEDUCTION UNDER THE SAID SECTION. IN SUPPORT OF HIS CONTENTION, THE LD A.R. REFERRED TO PAGES 35 TO 43 OF THE PAPER BOOK, WHICH CONTAINS THE COPY OF THE SAI D ORDER OF THE TRIBUNAL. 5. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENT ATIVE COULD NOT CONTROVERT THE SUBMISSIONS OF THE LEARNED COUNSEL FOR T HE ASSESSEE SAVE AND EXCEPT RELYING ON THE ORDER OF THE AO. I.T.A NO.5619/ MUM/2008 ASSESSMENT YEAR: 2005-06 3 6. ON PERUSAL OF THE ORDER OF THE TRIBUNAL DATED 22. 5.2009 FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 AND CONSIDERING THE ORDERS O F THE AUTHORITIES BELOW, WE HOLD THAT THE CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS LAID DOWN UNDER SECTION 80IB OF THE ACT AND THUS THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. SINCE THE SAME VERY ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE SAME UNIT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) AND, ACCORDING LY, WE REJECT GROUND NO.1 TAKEN BY THE REVENUE. 7. IN GROUND NOS.2 & 3, THE DEPARTMENT HAS DISPUTED TH E ORDER OF THE CIT(A) IN ALLOWING DEDUCTION OF SALES COMMISSION EXPENSES OF RS.32,1 1,878 PAID TO A NON- RESIDENT SRI RONALD CHALON IN ADMITTING THE ADDITION AL EVIDENCE IN CONTRAVENTION OF RULE46A(3) OF THE I.T.RULES, 1962. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAS INCURRED SALES COMMISSION OF RS.32,11,8 78. IN REPLY TO SHOW CAUSE NOTICE BY THE ASSESSING OFFICER, THE ASSESSEE STATED AS UNDER: SALES COMMISSION PAID TO SALES PERSONS AT OUR NEW Y ORK BRANCH IS ON WEEKLY BASIS. THEY ARE THE EMPLOYEES OF THE COMPAN Y. THEY GET THE ORDERS FROM THE BUYERS FOR THE COMPANY. THERE IS N O AGREEMENT OR DEBIT NOTE ISSUED FOR THE SAME. EVEN THOUGH THERE IS NO SALES ORDERS DURING THE MONTH WE HAVE TO PAY THEM. 9. THE ASSESSING OFFICER STATED THAT NO DOCUMENTARY EVI DENCE IS AVAILABLE FOR THE SAID COMMISSION, MOREOVER SUCH COMMISSION WAS NOT CLA IMED IN EARLIER YEARS AND, ACCORDINGLY, DISALLOWED THE CLAIM OF THE ASSESSEE O F RS.32,11,878 BY CONSIDERING IT AS NOT GENUINE CLAIM. BEING AGGRIEVED , THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 10. DURING THE COURSE OF HEARING BEFORE THE LD CIT(A ), THE ASSESSEE CONTENDED THAT THE ASSESSEE IS MAINTAINING BRANCH AT NEW YORK BUT THE IN-HOUSE MANAGER WAS NOT ABLE TO BOOK ANY ORDERS FOR THE EXPORT OF GOODS U PTO THE LAST ASSESSMENT YEAR. I.T.A NO.5619/ MUM/2008 ASSESSMENT YEAR: 2005-06 4 THEREFORE, THE ASSESSEE ASSIGNED THE JOB OF BOOKING ORDER S ON BEHALF OF THE ASSESSEE FOR SALES IN USA TO MR RONALD CHALON. IT WAS SUBMITTE D THAT MR RONALD CHALON IS NOT AN EMPLOYEE OF THE ASSESSEE FIRM. HE IS IN FACT A SALESM AN TO PROMOTE THE PRODUCTS OF THE ASSESSEE FIRM ON COMMISSION BASIS AND HAD TO BE PAID IN ADVANCE IN THE FORM OF WEEKLY PAYMENTS. IT WAS CONTENDED THAT ALL THE AD VANCE PAYMENTS WERE SUBSEQUENTLY ADJUSTED AGAINST FINAL COMMISSION PAYMENTS WO RKED OUT ON THE BASIS OF ACTUAL ORDERS RECEIVED FROM THE PARTIES CONCERNED. IT WAS ALSO CONTENDED THAT THE SAID COMMISSION WAS PAID ON ACCOUNT OF HIS SERVICES RENDER ED TO THE ASSESSEE. THE ASSESSEE ALSO FILED BEFORE THE CIT(A) DOCUMENTS OF SHIPMEN T OF GOODS AMOUNTING TO RS.1,13,26,238 AND SUBMITTED THAT ACTUAL SALES OF GOODS IN USA AMOUNTING TO RS.84,71,286. IT WAS FURTHER CONTENDED THAT IN SUBSEQU ENT YEAR, I.E. AY 2006-07, THE ASSESSEE WAS ABLE TO MAKE A SHIPMENT OF GOODS AMOUNTING T O RS.73,50,285 TO USA. IT WAS ALSO CONTENDED THAT MR RONALD CHALON HAD ACTUA LLY RENDERED DIRECT SERVICES TO THE ASSESSEE FIRM RESULTING INTO PROMOTION OF THE ASSESSE ES PRODUCTS. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO O BSERVING THAT THE ASSESSEE PAID THE COMMISSION TO OTHER AGENTS NAMELY; AME LIA SOZZO, MILANO, (SIDAS BUYING AGENTS, ITALY) AND ROBIN SWAFFIELD, KOWLOON, (ZEPLIN LTD., HONGKONG), WHICH WERE ACCEPTED BY THE ASSESSING OFFICER, THUS, HOLD THAT THERE WAS NO REASON TO DISALLOW THE COMMISSION CLAIMED TO HAVE BEEN PAID BY T HE ASSESSEE TO MR RONALD CHALON, USA. ACCORDINGLY, THE CIT(A) DELETED THE D ISALLOWANCE OF RS.32,11,878. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUN AL. 11. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THA T THE CIT(A) CONSIDERED THE ADDITIONAL EVIDENCE AND OTHER DOCUMENTS WITHOUT SEEKING THE REMAND REPORT FROM THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE HAD TAKEN CONTRADICTORY STAND BEFORE THE CIT(A) VIS--VIS BEFORE THE AO TO TH E EFFECT THAT THE ASSESSEE STATED BEFORE THE CIT(A) THAT THE RECIPIENT OF THE COMMISSIO N WAS NOT AN EMPLOYEE OF THE ASSESSEE WHEREAS BEFORE THE AO, IT WAS STATED THAT THE REC IPIENT WAS AN EMPLOYEE. 12. ON THE OTHER HAND, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE SAID COMMISSION WAS PAID PURSUANT TO AGREEMENTS ENTERED INTO BY THE A SSESSEE AND MR RONALD I.T.A NO.5619/ MUM/2008 ASSESSMENT YEAR: 2005-06 5 CHALON, USA, COPIES OF WHICH ARE PLACED AT PAGES 1-3 AND 4 TO 6 OF THE PAPER BOOK. HE CONCEDED THAT THE SAID AGREEMENTS WERE NOT FURNISHE D BEFORE THE ASSESSING OFFICER AND HE HAS NO OBJECTION IF THE MATTER IS RESTO RED TO THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE DETAILS AS MAY BE FILED BEFORE HIM BY THE ASSESSEE. 13. IN VIEW OF ABOVE SUBMISSION OF LEARNED REPRESENTA TIVES AND CONSIDERING THE FACT, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS I SSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE SAME AFRESH AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND CONSIDER ING SUCH EVIDENCES AS MAY BE FILED BEFORE HIM BY A SPEAKING ORDER. 14. GROUND NOS.2 & 3 IS THUS ALLOWED FOR STATISTICAL PUR POSES. 15. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2012 SD/- (T.R. SOOD) ACCOUNTANT MEMBER SD/- (B.R.MITTAL) JUDICIAL MEMBER MUMBAI, DATED 10 TH FEBRUARY, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XII, MUMBAI 4. COMMISSIONER OF INCOME TAX XII, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI