DCIT 13(1), MUMBAI V. HOMA ENGINEERING WORKS, MUMBAI

ITA 6720/MUM/2013

• Counselvise Citation: 672019914 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 20-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Business income
• Section: 143(3)

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ./ I.T.A. NO. 6720 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10 DCIT 13(1), ROOM NO. 418, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES, MUMBAI 400 020. / VS. M/S HOMA ENGINEERING WORKS, 504-506-512, TRAPINEX HOUSE, 15, SHOLAPUR STREET, MASJID BUNDER, MUMBAI-400 003. ./ PAN : AAAFH0860K ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI JEETENDRA KUMAR R E SPONDENT BY : NONE / DATE OF HEARING : 15-04-2015 / DATE OF PRONOUNCEMENT : 28-04-2015 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS IS AN APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) -24, MUMBAI DATED 27-08-20 13 FOR THE A.Y. 2009-10 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INC OME TAX ACT, 1961. ! 2. AT THE TIME OF HEARING, NOBODY FROM ASSESSEES SIDE HAS APPEARED INSTEAD OF GIVING NOTICES TO THE ASSESSEE. THE BENC H, THEREFORE DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. D.R. AN D CONSIDERING THE MATERIAL PLACED ON RECORD. ITA 6720/M/13 2 3. WE HAVE CONSIDERED THE CONTENTIONS OF THE LD. D .R. AND FOUND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF ENGINEERING SUPPLIES AND SHIP REPAIRING. ASSESSMENT U/S 143(3) OF THE INCOME TAX, 1961 WAS FINALISED ON 30/11/2011 ON A TOTAL INCOME OF RS. 65,77,410/- WHE REIN ADDITIONS OF RS. 13,00,000/- ON ACCOUNT OF COMMISSIONS AND RS. 1,28, 243/- ON ACCOUNT OF OTHER EXPENSES WERE MADE TO THE TOTAL INCOME OF THE ASSESSEE. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF RS. 13,00,000/- AFTER OBSERVING AS UNDER:- 4.3.1 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE. FIRST GROUND OF APPEAL BRIEFLY STA TES THAT ASSESSING OFFICER ERRED IN DISALLOWING THE COMMISSION OF RS. L3,00,000/- AND HOLDING THAT THE AUTHORISED REPRESENTATIVES OF THE APPELLANT IS MIDDLEMEN IN THE DEALS/TRANSACTIONS INVOLVING THE GOVERNMENT DEPARTMENTS/BODIES AND DISALLOWING THE COMMISSION ON THE GROUND THAT T HE SAME IS AGAINST THE POLICY OF THE GOVT. OF INDIA. 4.3,2 IT APPEARS FROM THE RECORDS THAT ASSESSING OF FICER DISALLOWED ASSESSEE'S CLAIM FOR DEDUCTION OF COMMISSION/PROFES SIONAL CHARGES OF RS. 13,00,000/- ON THE GROUND THAT (1) CORPORATE ALLIAN CE - THE PAYEE OF THE COMMISSION OF RS. 13,00,000/- WHO ACTED AS ASSESSEE 'S AUTHORIZED REPRESENTATIVE TO LIAISE ON BEHALF OF ASSESSEE WITH COAST GUARD IN NEW DELHI WAS NOT JUSTIFIED BECAUSE IT WAS THE POLICY O F THE GOVT. OF INDIA NOT TO HAVE MIDDLEMEN FOR NEGOTIATING ANY DEALS. ASSESS EE IS IN APPEAL AGAINST THE ORDER ON THIS ISSUE AND HAS SUBMITTED T HAT ASSESSEE REGULARLY PARTICIPATES IN GOVT. TENDERS AND REQUIRE S SERVICES OF A PROFESSIONAL TO DO THE FOLLOW UP WORK WITH THE CONC ERNED GOVT. AGENCIES AT NEW DELHI AND HAS UTILISED THE SERVICES OF CORPO RATE ASSOCIATES A FIRM AT NEW DELHI WHICH IS HEADED BY A RETIRED COAST GUA RD OFFICIAL AND THE COMMISSION/PROFESSIONAL CHARGES OF RS. 13,00,000/- HAVE BEEN PAID FOR THE SAME. THE REMUNERATION HAS BEEN FIXED AT 3.5% OF THE CONTRACT VALUE AND THE SAME HAS BEEN PAID AFTER DEDUCTION OF TAX A T SOURCE. ASSESSEE HAS ALSO FILED EVIDENCE BY WAY OF TELEGRAMS AND FAX MESSAGES SHOWING THAT CORPORATE ASSOCIATES, NEW DELHI HAD PARTICIPAT ED IN THE TENDERING PROCESS AND HAD CARRIED SUBSEQUENT FOLLOW UP WORK O F LIASING WITH THE COAST GUARD AUTHORITIES AND THE COST GUARD AUTHORIT IES HAD THEMSELVES ACKNOWLEDGED THE SERVICES RENDERED BY CORPORATE ASS OCIATES AT NEW DELHI. MOREOVER THERE IS AN AGREEMENT DATED DECEMB ER 2007 ENTERED INTO BY THE TWO PARTIES SPECIFYING THE TERMS AND CO NDITIONS OF THE NATURE OF SERVICES TO BE RENDERED BY THE PAYEE TO THE ASSE SSEE AND NON- MENTIONING OF THE WORDS COAST GUARD IN THE AGREEMEN T DOES NOT EITHER INVALIDATE THE AGREEMENT OR MAKE IT PER SE ILLEGAL. MOREOVER, CORPORATE ASSOCIATES HAVE RENDERED SERVICES TO THE ASSESSEE A ND THERE IS NO DOUBT ABOUT IT. THEREFORE, THE COMMISSION PAYMENT OF RS. 13,00,000/- MADE ITA 6720/M/13 3 BY THE ASSESSEE TO CORPORATE ASSOCIATES IS FULLY JU STIFIED AND ALLOWABLE AS A DEDUCTION WHILE THE BUSINESS INCOME. GROUND O F APPEAL OF THE ASSESSEE IS ALLOWED. 4. WE HAVE CONSIDERED THE CONTENTIONS OF THE LD. D. R. AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT COMMISSION WAS PAID TO CORPORATE ENTITIES WHO ACTED AS ASSESSEES AUTHORIZED REPRESENTATIVE FOR LIAISON WITH COAST GUARD, DELHI. THE COMMISSION WAS PAID AT 3.5% OF THE CONTRACT VALUE AND THE SAME HAS BEEN PAID AFTER DEDUCTION OF TAX AT SOURCE. THE ASSESSEE HAS ALSO FILED EVIDENC E BY WAY OF TELEGRAMS AND FAX MESSAGES SHOWING THAT CORPORATE ASSOCIATES, NEW DELHI HAD PARTICIPATED IN THE TENDERING PROCESS AND HAD CARRIED SUBSEQUENT LIAISON WITH THE COAST GUARD AUTHORITIES AND THEY THEMSELVES HAD ACKNOWLED GED THE SERVICES RENDERED BY CORPORATE ASSOCIATES. MERELY ON THE PLE A THAT AS PER THE POLICY OF GOVT. OF INDIA NO MIDDLEMEN WERE PERMITTED FOR NEGO TIATING ANY DEALS/TRANSACTIONS, THE A.O. HAS DISALLOWED THE COM MISSION. FROM THE RECORD WE FOUND THAT THE A.O. HAS NOT DISPUTED THE RENDERI NG OF SERVICES BY THE CORPORATE ASSOCIATES AND THERE WAS ALSO WRITTEN AGR EEMENT DATED DECEMBER, 2007 SPECIFYING THE TERMS AND CONDITIONS OF THE NAT URE OF SERVICES TO BE RENDERED BY THE PAYEE TO THE ASSESSEE. SINCE THE CO MMISSION WAS PAID FOR THE SERVICES RENDERED LIKE NEGOTIATION AND FURTHER FOLL OW UP, THERE WAS NO VALID REASON FOR DISALLOWING THE SAME. THE DETAILED FINDI NG RECORDED BY THE LD. CIT(A) AT PARA 4.3.1 TO 4.3.2. HAVE NOT BEEN CONTRO VERTED BY THE LD. D.R. BY BRINGING ANY POSITIVE MATERIAL ON RECORD, WE THEREF ORE DO NOT FIND ANY REASON TO DEVIATE THE FINDING RECORDED BY THE LD. CIT(A) R ESULTING INTO DELETION OF DISALLOWANCE OF COMMISSION AMOUNTING TO OF RS. 13,0 0,000/- PAID TO THE CORPORATE ASSOCIATES. 5. NEXT GRIEVANCE OF REVENUE RELATES TO THE DELETIO N OF ADHOC DISALLOWANCE OF RS. 1,28,243/-. THE ASSESSING OFFICER DISALLOWED RS. 1,28,243/- REPRESENTING DIFFERENCE BETWEEN 20% OF EXPENSES OF RS. 7,04,213/- AND AMOUNT OFFERED FOR PBT' OR RS.'5,75,970/- WHILE COM PUTING THE BUSINESS' ITA 6720/M/13 4 INCOME. WE FOUND THAT ASSESSEE HAD' ALREADY OFFERED A SUM OF RS. 1,50,235/- FOR DISALLOWANCE IN ADDITION TO SUM OF RS. 5,75,970 /- OFFERED FOR FBT. ASSESSING OFFICER DISALLOWED AN ADDITIONAL SUM OF R S. 1,28,243/- ON THE GROUND THAT PERSONAL USE/ENJOYMENT OF FACILITIES BY THE PARTNERS/EMPLOYEES CANNOT BE RULED OUT AND DISALLOWED A SUM OF RS. 1,2 8,243/- ON AD HOC BASIS WITHOUT MAKING ANY VERIFICATION OR ANY OTHER EFFORT BY BRINGING ANY EVIDENCE CONTRARY TO THE CLAIM MADE BY THE ASSESSEE. ASSESS EE HAS ALREADY OFFERED A SUM OF RS. 1,50,235/- FOR DISALLOWANCE AND A SUM OF RS. 5,75,970/- HAS ALREADY BEEN CONSIDERED FOR FBT. THERE IS NO JUSTIF ICATION FOR THE ADHOC DISALLOWANCE SO MADE BY THE A.O. AFTER RECORDING H IS FINDING AT PARA 5 OF HIS APPELLATE ORDER, THE LD. CIT(A) HAD DELETED THE DIS ALLOWANCE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETI NG THE ADHOC DISALLOWANCE OF RS. 1,28,243/-. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL, 2015. !' # $% &! ' 28-04-2015 ( ) SD/- SD/- (D. MANMOHAN) (R.C. SHARMA) VICE PRESIDENT ACCOUNTANT MEMBER $ 4 MUMBAI ; &! DATED 28-04-2015 .5../ RK RKRK RK , SR. PS ITA 6720/M/13 5 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 6 () / THE CIT(A) CONCERNED, MUMBAI 4. 6 / CIT -CONCERNED, MUMBAI 5. 9:( 55;< , ;< , $ 4 / DR, ITAT, MUMBAI J BENCH 6. (>? @ / GUARD FILE. ' / BY ORDER, 9 5 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 4 / ITAT, MUMBAI