M/s Ranee Enterprises, Pune V. Dy. CIT Cir 2 Pune., Pune

ITA 698/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85028 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUKESH DOUGALL
• Keywords: Opportunity of being heard; Services rendered outside India
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.698/PN/2012 (A.Y:2007-08) M/S. RANEE ENTERPRISES 94, SAHANEY SUJAN PARK, PUNE 40 PAN: AACFR3523K APPELLANT VS. DCIT, CIRCLE-2, PUNE RESPONDENT APPELLANT BY : SHRI MUKESH DOUGALL RESPONDENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 16.09.2014 DATE OF PRONOUNCEMENT : 22.09.2014 ORDER PER SHAILENDRA KUMAR YADAV : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE D ATED 28.12.2011 FOR A.Y.2007-08 ON THE FOLLOWING GROUNDS . 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.31,65,299/- ON ACCOUNT OF DISALLOWANCE OF COMMISSION EXPENSES, WHICH IS NOT JUSTIFIABLE AT AL L AND IS BAD IN LAW. 1.1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE VI EW OF THE LD. AO IN RESPECT OF THE GENUINENESS OF THE COMMISS ION EXPENSES PAID TO MR. RANJIT DHILLON IGNORING THE FOLLOWING EVIDENCES AND FACTS FURNISHED IN SUPPORT OF THE CLAIM- A. DETAILED ADDRESS, TELEPHONE, EMAIL IDS AND OTHER PARTICULARS OF THE FOREIGN AGENT ITA NO.698/PN/12 M/S. RANEE ENTERPRISES B. CERTIFICATE FROM PUNJAB NATIONAL BANK INDICATING THAT ALL THE PAYMENTS HAVE BEEN MADE BY FOREIGN DRAFTS C. RECEIPTS & CONFIRMATION LETTER FORM MR. DHILLON CONFIRMING COMMISSION PAYMENTS D. COPY OF LETTER OF UNDERSTANDING DATED 24.04.1998 EXECUTED BETWEEN DHILLON OF THE BARMAR GROUP AND M/S. RANEE ENTERPRISES E. LIST OF ROLES/SERVICES TO BE PERFORMED BY THE FO REIGN AGENT IN ABROAD F. STATEMENT OF TRANSACTION OF FAX, MESSAGES SEND & RECEIVED, CALL LOGS ALONGWITH THE DETAILS OF NUMBER S CALLED ETC. G. E-MAIL CORRESPONDENCE BETWEEN FOREIGN AGENT & APPELLANT INDICATING WORK EXECUTED 1.2] THE LEARNED CIT(A) THEREFORE ERRED IN CONFIRM ING THE DISALLOWANCE EVEN WHEN THE IDENTITY OF THE AGENT AN D PAYMENT OF COMMISSION WAS ESTABLISHED IN RESPECT OF SERVICES RENDERED WHOLLY FOR THE PURPOSE OF EXPORT BUSINESS OF THE APPELLANT. 2] THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC T THAT THE SIMILAR DISALLOWANCES MADE FOR THE EARLIER YEARS BY THE ASSESSING OFFICER WERE SUBSEQUENTLY ACCEPTED BY HIS PREDECESSOR AS A GENUINE COMMISSION PAID FOR THE SERVICES RENDERED BY THE FOREIGN AGENT. 2.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THE F ACTS THAT THE APPELLANT HAS BEEN CONSISTENTLY CLAIMING THE COMMIS SION EXPENSES FOR THE AY 1998-99 TO 2000-01 EVEN WHEN TH E DEDUCTION U/S 80HHC WAS ALLOWABLE @ 100% FROM AY 1998-99 TO 2000-01. IT IS THEREFORE NOT A BOGUS EXP ENSE CLAIMED TO EVADE THE TAXES. 2.2] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FINDINGS OF HIS PREDECESSOR IN THE ORDER FOR A.Y. 2004-05 TH AT THE COMMISSION PAYMENT WAS MADE IN THE CHARACTER OF AN EXPORTER AND THAT THE PAYMENT WAS WHOLLY FOR THE PURPOSES OF BUSINESS EVIDENCED BY OVERWHELMING CORRESPONDENCE AND CONSIDERED AS ALLOWABLE EXPENDIT URE WHEN SUCH COMMISSION WAS BEING ALLOWED FOR A PERIOD OF MORE THAN 8 YEARS IN THE PAST. ITA NO.698/PN/12 M/S. RANEE ENTERPRISES 3] THE LEARNED CIT(A) ERRED IN RELYING ON THE FACT S THAT THE AMOUNT OF COMMISSION IS LYING UNPAID IN THE BOOKS WITHOUT APPRECIATING THE FOLLOWING- A. THAT THE ASSESSEE IS FOLLOWING THE ACCRUAL SYSTE M OF ACCOUNTING AS PER WHICH IT IS REQUIRED TO ACCOUNT FOR EXPENSES AS WHEN IT ACCRUES BASED ON THE SALES. B. THAT THE OUTSTANDING AMOUNT AS APPEARING IN THE NAME OF RECIPIENT IS CARRIED FORWARD FROM LAST SEVERAL YEARS. C. THAT OUT OF THE OUTSTANDING AMOUNT, CERTAIN ON ACCOUNT PAYMENTS ARE MADE EVERY YEAR BASED ON THE COLLECTION AND OTHER ASPECTS. D. THAT DURING THE YEAR UNDER CONSIDERATION THE OUTSTANDING AMOUNT IS IN FACTS REDUCED AS COMPARED TO THE EARLIER YEAR EVEN AFTER CREDITING T HE COMMISSION FOR THIS YEAR. 4] THE LD. CIT(A) FAILED TO APPRECIATE THE CONTENTI ON OF APPELLANT IN RESPECT OF IDS THAT- A. THE COMMISSION PAID TO MR. RANJIT DHILLON, FOREI GN AGENT, IS BY NATURE AN EXPORT COMMISSION PAID TO WARDS THE SERVICES RENDERED OUTSIDE INDIA B. SUCH COMMISSION IS NOT CHARGEABLE TO TAX IN IN DIA AND NO TDS IS REQUIRED TO BE DEDUCTED IN VIEW OF THE PROVISIONS OF SECTION 195 OF THE ACT AS WELL AS CBDT CIRCULAR NO. 23 DT. 23.07.1969 AND 786 DT. 07.02.2000, WHEREIN IT IS DIRECTED THAT NO PART OF THE COMMISSION INCOME OF THE FOREIGN AGENT CAN BE DEEMED TO BE ARISING AND ACCRUING IN INDIA. C. ALL THE SERVICES RENDERED BY FOREIGN AGENT ARE RENDERED FROM THE PLACE OUTSIDE INDIA. NONE OF THE FUNCTION OF THE AGENT IS DIRECTLY INCURRED IN INDIA . D. THE FOREIGN AGENT IS NOT INVOLVED IN THE EXECUTI ON PART OF THE ORDER, WHICH IS DONE IN INDIA AS STATED IN THE APPELLATE ORDER IN PARA 3.9 IN THE ORDER FOR EARLIER YEARS AND DISCUSSED BY THE CIT (A) IN THE PRESENT ORDER. E. IT IS ONLY APPELLANT WHO, IS CONCERNED FOR EXECU TION OF ORDER AND NOT FOREIGN AGENT. ITA NO.698/PN/12 M/S. RANEE ENTERPRISES 5] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 2. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THE ISSUE AT HA ND IS COVERED BY THE ORDER OF ITAT FOR A.Y. 2006-07 IN ITA NO.1323/P N/2010, WHEREIN, ON SIMILAR ISSUE, THE TRIBUNAL HAS SET ASI DE THE MATTER TO THE ASSESSING OFFICER BY OBSERVING AS UNDER: 2. AT THE OUTSET OF HEARING, THE LD. A.R. POINTED OUT THAT ON AN ISSUE UNDER SIMILAR SET OF FACTS RAISED IN THE C ASE OF ASSESSEE FOR THE A.YS. 2004-05, 2000-01 TO 2002-03 IN ITA NOS.1055, 1516 TO 1518/PN/ 2008 I.E. THE APPEALS PR EFERRED BY THE REVENUE, THE PUNE BENCH OF THE TRIBUNAL VIDE ITS ORDER DATED 31 ST JANUARY 2011 HAS RESTORED THE MATTER TO THE FILE O F THE A.O WITH DIRECTION TO DECIDE THE ISSUE AS PER F ACT AND LAW AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE A SSESSEE. 3. THE LD. D.R. DID NOT DISPUTE THE ABOVE SUBMISSI ONS MADE ON BEHALF OF THE ASSESSEE BUT SHE PLACED RELIANCE O N THE ASSESSMENT ORDER. 4. HAVING GONE THROUGH THE SAID ORDER DATED 31 ST JANUARY 2011 OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE A.YS. 2004-05, 2001-02 TO 2002-03 (SUPRA), WE FIND THAT O N THE ISSUE OF CLAIMED PAYMENT OF COMMISSION TO SHRI RANJ IT DHILLON FOR THE CLAIMED SERVICES RENDERED BY HIM FO R PROCUREMENT OF PURCHASE ORDERS FOR THE ASSESSEE, TH E TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE A.O TO DECIDE THE ISSUE AFRESH AS PER FACT AND LAW AFTER P ROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE F ACTS AND ISSUE RAISED DURING THE YEAR ARE IDENTICAL TO THE A SSESSMENT YEARS UNDER CONSIDERATION, IN THE CASE OF ASSESSEE ITSELF BEFORE THE TRIBUNAL, WE FOLLOWING THE SAID ORDER DATED 31 ST JANUARY 2011 OF THE TRIBUNAL RESTORE THE MATTER TO THE FILE OF THE A.O TO DECIDE THE ISSUE DE NOVO AS PER FACT AND LAW AFT ER PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GRO UND INVOLVING THE ISSUE IS ACCORDINGLY ALLOWED FOR STAT ISTICAL PURPOSES. 2.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING WE RESTORE THE MATTER TO THE ASSESSING OF FICER WITH A SIMILAR DIRECTION. ITA NO.698/PN/12 M/S. RANEE ENTERPRISES 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF SEPTEMBER, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 22 ND SEPTEMBER, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) THE DEPARTMENT 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, PUNE.