ITO 2(1)(2), MUMBAI V. CITY CAT OVERSEAS CHEMICALS LTD, MUMBAI

ITA 5791/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1727 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 20-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 23-12-2015
• Court: TRIBUNAL
• Department Lawyers: SAMBIT MISHRA
• Assessee Lawyers: D V LUHARUKA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.5791/M/2015 (ASSESSMENT YEAR: 2011 - 2012 ) ITO - 2(1)(2), R.NO. 543, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / VS. M/S. CITY CAT OVERSEAS CHEMICALS LTD., 195, SAHEB BUILDING, 5 TH FLOOR, ABOVE CENTRAL CAMERA, FORT, MUMBAI - 01. ./ PAN : AAACC8123B ( / APPELLANT) .. ( / RESPONDENT ) C.O.NO.97/M/2016 (ARISING OUT OF I.T.A. NO. 5791/M/2015 (ASSESSMENT YEAR: 2011 - 2012 ) M/S. CITY CAT OVERSEAS CHEMICALS LTD., 195, SAHEB BUILDING, 5 TH FLOOR, ABOVE CENTRAL CAMERA, FORT, MUMBAI - 01. / VS. ITO - 2(1)(2), R.NO. 543, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AAACC8123B ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI D.V. LUHARUKA / REVENUE BY : SHRI SAMBIT MISHRA, SR. DR / DATE OF HEARING : 29.11 .2016 / DATE OF PRONOUNCEMENT : 09 .12.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THE CAPTIONED APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011 - 12. BOTH THESE APPEALS ARE FILED AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 21.9.2015 FOR THE ASSESSMENT YEAR 2011 - 2012. SINC E, THE ISSUES RAISED IN THESE APPEALS ARE INTER - CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OFF IN 2 THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. F IRSTLY WE SHALL TAKE UP THE REVENUES APPEAL ITA NO.5791/M/2015. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DIRECTING THE AO TO DELETE TH E DISALLOWANCE OF RS. 76,39,431 / - MADE U/S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS CLAIMED THE SAID EXPENDITURE IN THE BOOKS OF ACCOUNT AND THEREFORE, AS PER THE PROVISIONS OF SECTION 195 OF THE ACT, THE ASSESSEE I S LIABLE TO MAKE TDS ON THE SAID PAYMENTS FAILING WHICH PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WAS APPLICABLE TO IT. 2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE D ISALLOWANCE U/S 40(A)(IA) OF THE ACT AMOUNTING TO RS. 76,39,431/ - WITHOUT APPRECIATING THE FACT THAT IF THE PROVISIONS OF SECTION 195 OF THE ACT WAS NOT APPLICABLE ON THE SAID PAYMENTS THEN THE CLAIM OF THE SAID AMOUNT AS BUSINESS EXPENDITURE IN THE BOOKS WAS NOT ALLOWABLE TO THE ASSESSEE. 3. IN THIS APPEAL, REVENUE RAISED THE ISSUE RELATING TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTION 195 OF THE ACT IN RESPECT OF THE PAYMENTS MADE BY THE ASSESSEE TOWARDS CERTAIN EXPENDITU RE RELATING TO THE SALES. IN THE ASSESSMENT PROCEEDINGS, AO IS OF THE OPINION THAT THE PAYMENT MADE BY THE ASSESSEE TOWARDS FOREIGN AGENT COMMISSION ATTRACTS THE PROVISIONS OF SECTION 195 OF THE ACT THEREBY, FOR FAILURE ON PART OF THE ASSESSEE, AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND MADE ADDITION AMOUNTING TO RS. 76, 39,431/ - . CIT (A) GRANTED RELIEF TO THE ASSESSEE RELYING ON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2010 - 2011 VIDE ITA NO.5854/M/2013, DATED 7 .8.2015 AND OTHER ORDERS OF THE TRIBUNAL IN THE CASE OF ACIT VS. VILAS N. TAMHANKAR IN ITA NO. 4522/M/2013 (AY 2009 - 2010), DATED 21.11.2014. 4. BEFORE US, LD COUNSEL FOR THE ASSESSEE FILED COPIES OF THE CITED ORDERS OF THE TRIBUNAL (SUPRA) AND MENTIONED TH AT SIMILAR EXPENDITURE WAS INCURRED INVOLVING THE NON - RESIDENTS TOWARDS THE SAME ACCOUNTS AND THE SAME WAS ALLOWED BY THE TRIBUNAL FOR THE AY 2010 - 2011. THEREFORE, THE MATTER CONSTITUTES A COVERED ONE IN FAVOUR OF THE ASSESSEE. IN THIS REGARD, BRINGING O UR ATTENTION TO THE CONTENTS OF PARAS 3.4 AND 3.5 OF THE CIT (A)S ORDER, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A)S ORDER DOES NOT CALL FOR ANY INTERFERENCE. 3 5. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED DECISIONS OF THE TRIBUNAL WE FIND, THE SAID PARAS 3.4 AND 3.5 OF THE CIT (A)S ORDER ARE RELEVANT TO THE ISSUE UNDER CONSIDERATION. CONSIDERING THE SIGNIFICANCE OF THE SAID PARAS AND FOR THE SAKE OF COMPLETENESS OF THIS OR DER, THE SAID PARAS 3.4 AND 3.5 ARE EXTRACTED AS UNDER: - 3.4. FURTHER, ON APPEAL BY THE DEPARTMENT, HONBLE ITAT HAS CONFIRMED THE ABOVE FINDING OF THE CIT (A) IN THE BACKGROUND OF DECISION IN THE CASE OF ACIT VS. VILAS N. TAMHANKAR IN ITA NO.4522/MUM/201 3, DATED 21.11.2014 AND VIDE APPELLANTS OWN CASE BEARING ITA NO.5854/MUM/2013, DATED 7.8.2015. 3.5. RESPECTFULLY FOLLOWING THE DECISION OF MY LEARNED PREDECESSOR (SUPRA) AND HONBLE ITAT CONFIRMING THE FINDING OF THE CIT (A) AND DISMISSING THE APPEAL OF T HE DEPARTMENT. AO IS HEREBY DIRECTED TO DELETE THE DISALLOWANCE OF COMMISSION EXPENSE OF RS.76,39,431/ - . 6. FURTHER, WE HAVE ALSO PERUSED THE RELEVANT PARAS FROM THE SAID ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2010 - 11 (SUPRA), WHER EIN THE TRIBUNAL FOLLOWED THE COORDINATE BENCH DECISION IN THE CASE OF VILAS N TAMHANKAR (SUPRA), AND FIND, THE FOLLOWING LINES ON PAGE 10 OF THE SAID TRIBUNALS ORDER ARE RELEVANT WHICH READ AS UNDER: - ........ BY FOLLOWING THE ABOVE DECISION OF THE COORD INATE BENCH (IN THE CASE OF VILAS N TAMHANKAR (SUPRA) AND IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT (A). THE SAME IS UPHELD. THE REVENUES APPEAL IS DISMISSED. 7. THE ABOVE DECISION OF THE TRIBUNAL WAS GIVEN IN THE CONTEXT OF IDENTICAL PAYMENT OF THE ASSESSEE TOWARDS COMMISSION PAID TO NON - RESIDENTS OUTSIDE INDIA. SINCE, THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR 2010 - 2011, THEREFORE, THE RATIO LAID DOWN BY THE TRIBUNAL IN THE SAID ASSESSEES OWN CASE (SUPRA) ARE APPLICABLE TO THE INSTANT CASE TOO. CONSIDERING THE SAME, THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 9. NOW, WE SHALL TAKE UP THE CRO SS OBJECTION (CO) RAISED BY THE ASSESSEE. IN THIS CO, ASSESSEE RAISED THE ISSUE RELATING TO THE COMPENSATION PAID OF PRIOR PERIOD EXPORT SALES ARE DISMISSED AS AGREED BY THE LD COUNSEL FOR THE ASSESSEE IN THE COURT. THUS, CO RAISED BY THE ASSESSEE IS DIS MISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE AND THE CO RAISED BY THE ASSESSEE ARE DISMISSED. 4 ORDER PRONOUN CED IN THE OPEN COU RT ON 0 9 T H DECEMBER, 2016. S D / - S D / - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 09 .12.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI