DCIT 10(3), MUMBAI V. TAJ AGRO COMMODITIES P.LTD, NAVI MUMBAI

ITA 7079/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0083 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK LD
• Assessee Lawyers: JITENDRA SINGH LD
• Keywords: Maximum Marginal Rate
• Section: 143(3); 37(1)

Judgement Text

ITA. NO. 7079/MUM/2013 TAJ AGRO COMMODITIES PRIVATE LIMITED ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.7079/MUM/2013 ( / ASSESSMENT YEAR: 2010-11) DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 10(3) ROOM NO. 451,4 TH FLOOR AAYKAR BHAVAN, M.K.ROAD MUMBAI 400 020 / VS. TAJ AGRO COMMODITIES PRIVATE LIMITED PLOT NO. 88 TRIMURTI GRANDUER SECTOR-19C, APMC MARKET II NAVI MUMBAI 400 703 ! ./ ./ PAN/GIR NO. AACCT-0880-A ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# / APPELLANT BY : DR. A.K.NAYAK, LD. DR $!# / RESPONDENT BY : JITENDRA SINGH, LD. AR / DATE OF HEARING : 05/06/2017 / DATE OF PRONOUNCEMENT : 21/06/2017 2 ITA. NO. 7079/MUM/2013 TAJ AGRO COMMODITIES PRIVATE LIMITED ASSESSMENT YEAR 2010-11 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2010-11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-22 [CIT(A)], MUMBAI DATED 03/09/2013 QUA DELETION OF CERTAIN ADDITION WITH RESPECT TO COMMISSION U/S 36(1)(II). 2. FACTS LEADING TO THE DISPUTE ARE THAT THE ASSESS EE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED AS TRADER / BROKER OF AGRICULTURAL PRODUCE, WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 09/02/2013 A T RS.2,75,58,940/- AFTER DISALLOWANCE OF RS.85,35,976/- U/S 36(1)(II) AS AGAINST RETURNED INCOME OF RS.1,90,22,968/- E-FILED BY ASSESSEE ON 28/09/2010. THE ASSESSEE REFLECTED TURNOVER OF RS.109.41 CRORES AND OTHER INCOME OF RS.38.64 LACS. 3. UPON PERUSAL OF TAX AUDIT REPORT, IT WAS NOTED T HAT AN AMOUNT OF RS.85,35,976/- WAS PAID AS COMMISSION TO A CONCERN NAMELY TRIMURTI ENTERPRISES, BEING AN ENTITY COVERED U/S 40A)(2)(B). THE SAID CO NCERN WAS PROPRIETORSHIP CONCERN OF HIMATLAL J.CHANDRA, A DIRECTOR OF THE COMPANY HOLDING 50% SHAREHOLDING IN THE ASSESSEE COMPANY. T HE ASSESSEE JUSTIFIED THE SAME ON THE GROUND THAT THE COMMISSION WAS PAID TO ACHIEVE HIGHER SALES AND DREW ATTENTION TO THE FACT THAT TURNOVER IN THE IMPUGNED AY IMPROVED SUBSTANTIALLY FROM RS.33.03 CRORES IN IMME DIATELY AY TO 3 ITA. NO. 7079/MUM/2013 TAJ AGRO COMMODITIES PRIVATE LIMITED ASSESSMENT YEAR 2010-11 RS.109.41 CRORES. FURTHER, THE ASSESSEE CONTENDED T HAT THE PROVISIONS OF SECTION 36(1)(II) WERE NOT APPLICABLE SINCE NO CORR ESPONDENCE PAYMENT WAS MADE TO THE OTHER DIRECTOR OF THE COMPANY WHO WAS A LSO HOLDING 50% SHARE IN THE COMPANY. HOWEVER, NOT CONVINCED, LD. AO DISA LLOWED THE SAME ON THE PREMISES THAT THE SAME WAS PAID IN LIEU OF DIVI DEND AND BY MAKING THE PAYMENT IN THIS MANNER, THE ASSESSEE AVOIDED PAYMEN T OF DIVIDEND DISTRIBUTION TAX U/S 115O. 4. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 03/09/2013 AND EXP LAINED THAT THE SAID PAYMENT WAS MADE AGAINST SERVICES RENDERED BY THE S AID PROPRIETORSHIP CONCERN OF THE DIRECTOR AND DUE TDS WAS DEDUCTED U/ S 194H. THE SAID CONCERN ASSISTED IN SALE / PURCHASES ACTIVITIES OF THE ASSESSEE TO THE TUNE OF RS.83.38 CRORES AND WAS PAID COMMISSION @1%. THE SAID CONCERN HAD VAST EXPERTISE AND KNOWLEDGE AND GOOD REPUTATION IN THE FIELD OF PULSES AND GRAIN MARKETS WHICH COULD BE GAUGED FROM THE FACT THAT THERE WAS MARKED IMPROVEMENT IN THE FINANCIALS OF THE COMPANY BY AVA ILING THESE SERVICES. FURTHER, THE RENDERING OF SERVICES WAS AN ADMITTED FACT BY LD. AO. THE CASE LAW RENDERED BY TRIBUNAL IN DALAL & BROCHA STOCK BROKING PVT. LTD. VS. ACIT [ITA NO. 5792/MUM/2009] AND RELIED UPON BY LD. AO WAS ALSO DISTINGUISHED ON THE FACTS. THE ATTENTION WAS FURTH ER DRAWN TO THE FACT THAT THE PROPRIETOR OF THE SAID CONCERN PAID TAX AT MAXI MUM MARGINAL RATE OF TAX AND EVEN FROM THAT ANGLE THERE WAS NO LOSS TO THE E XCHEQUER. 4 ITA. NO. 7079/MUM/2013 TAJ AGRO COMMODITIES PRIVATE LIMITED ASSESSMENT YEAR 2010-11 5. THE LD. CIT(A) WAS CONVINCED WITH VARIOUS CONTEN TIONS / SUBMISSIONS OF THE ASSESSEE AND NOTED THAT THE SERVICES WERE AC TUALLY RENDERED, SALES/PROFIT SHOWED MARKED IMPROVEMENT, THE QUANTUM OF COMMISSION WAS NOT HIT BY SEC. 40A(2)(B) AND NO SUCH PAYMENT WAS M ADE TO THE OTHER DIRECTOR WHO WAS HAVING SIMILAR SHAREHOLDING AND TH EREFORE, THE IMPUGNED PAYMENTS COULD NOT BE DISALLOWED U/S 36(1)(II) OR 4 0A(2)(B) RATHER THE SAME WERE AN ELIGIBLE EXPENDITURE U/S 37(1). ACCORDINGLY , THE LD. CIT(A) DELETED THE IMPUGNED ADDITION AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE CONCLUSION REACHED AT BY LD. AO AND CONTENDED THAT THE IMPUGNED PAYMENT WAS HIT BY THE PROVISIONS OF SECTION 36(1)( II) AS THE ASSESSEE EARNED HUGE PROFITS AND DISTRIBUTED THE SAME IN THE GUISE OF THE COMMISSION. 7. PER CONTRA, LD. AR PLACED RELIANCE ON THE ELABORATE DISCUSSION MADE BY LD. CIT(A) AND DREW OUR ATTENTION TO THE FACT TH AT THE SAID DIRECTOR PAID TAX AT MAXIMUM MARGINAL RATE OF TAX AND DUE TDS U/S 194H WAS DEDUCTED BY THE ASSESSEE. THE SAID CONCERN HAD VAST EXPERTIS E AND KNOWLEDGE IN THE BUSINESS LINE OF THE ASSESSEE AND WAS WORKING FOR S EVERAL OTHER ENTITIES AND EARNED HANDSOME COMMISSION. THE ATTENTION WAS A LSO DRAWN TO THE FACT THE FACTUM OF RENDERING OF SERVICES WAS NOWHER E DISPUTED BY THE LD. AO AND ADDITION HAS BEEN MADE MERELY ON THE BASIS O F SUSPICION WHICH WAS NOT JUSTIFIED. 5 ITA. NO. 7079/MUM/2013 TAJ AGRO COMMODITIES PRIVATE LIMITED ASSESSMENT YEAR 2010-11 8. AFTER APPRECIATING THE RIVAL CONTENTIONS AND PER USAL OF RELEVANT MATERIAL ON RECORD, WE FIND STRENGTH IN THE VARIOUS ARGUMENTS OF LD. AR. THE RENDERING OF SERVICES WAS NOWHERE IN DISPUTE AN D NO SUCH PAYMENT WAS MADE TO OTHER DIRECTOR HAVING SIMILAR SHAREHOLD ING AND THEREFORE, THE IMPUGNED PAYMENT WERE NOT AT ALL DISALLOWABLE UNDER SECTION 36(1)(II). DUE TDS ON THE IMPUGNED PAYMENTS U/S 194H HAS BEEN DEDU CTED AS NOTED BY LD. CIT(A) AND COMPLETE DETAILS OF SALE/PURCHASE ON WHICH COMMISSION HAS BEEN PAID HAS BEEN PLACED IN THE PAPER BOOK WHICH IS NOT CONTROVERTED BY THE REVENUE. THE CONCERN NAMELY TRIMURTI ENTERPRISES HAS EARNED COMMISSION OF RS.1.88 CRORES AND REFLECTED NET PROF IT OF RS.1.45 CRORES AS PER THE AUDITED FINANCIAL STATEMENTS PLACED BEFORE US WHICH SHOWS THAT THE SAID CONCERN WORKED FOR MANY OTHER ENTITIES ON COMM ISSION BASIS. THE DIRECTOR HAS REFLECTED TOTAL INCOME OF RS.1.52 CROR ES IN HIS RETURN OF INCOME AND PAID TAXES OF RS.47.51 LACS. THEREFORE, WE FIND THAT LD. CIT(A) AFTER ELABORATE DISCUSSION AND DUE APPLICATION OF MIND CL INCHED THE ISSUE IN THE RIGHT PERSPECTIVE THAT THE IMPUGNED PAYMENT WERE NO T HIT BY SECTION 36(1)(II). THE REVENUE HAS NOWHERE DISPUTED THE QUA NTUM / RATE OF PAYMENT HAVING REGARD TO MARKET RATES OF SUCH SERVICES AS P ER THE PROVISIONS OF SECTION 40A(2)(B) AND THEREFORE, THE IMPUGNED PAYME NTS ARE SQUARELY COVERED U/S 37(1) AND ALSO ALLOWABLE U/S 36(1)(II). THIS BEING THE CASE, FINDING NO SUBSTANCE IN REVENUES APPEAL, WE DISMIS S THE SAME. 6 ITA. NO. 7079/MUM/2013 TAJ AGRO COMMODITIES PRIVATE LIMITED ASSESSMENT YEAR 2010-11 9. IN NUTSHELL, THE REVENUES APPEAL STANDS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2017. SD/- SD/- (C. N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :21.06.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. '. , . , / DR, ITAT, MUMBAI 6. /0 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI