Asstt. Commissioner of Income Tax, Lucknow V. Smt. Indira Didwania, Lucknow

ITA 709/LKW/2014

• Counselvise Citation: 70923714 RSA 2014
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 08-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S NEGI
• Keywords: Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.709/LKW/2014 ASSESSMENT YEAR:2010-11 ACIT RANGE V LUCKNOW V. SMT. INDIRA DIDWANIA 12/16, SRI RAM ROAD AMINABAD, LUCKNOW TAN/PAN:ACXPD5804B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. S. NEGI, D.R. RESPONDENT BY: NONE DATE OF HEARING: 16 04 2015 DATE OF PRONOUNCEMENT: 05 06 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 2,22,834/- ACCEPTING THE SUBMISSION OF THE ASSESSEE AND WITHOUT GIVING ANY FINDING ON THE ISSUE. FURTHER, THE CIT(A) FAILED TO APPRECIATE THAT THE ADDITION WAS MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE COMMISSION INCOME SHOWN IN THE RETURN OF INCOME AND 26AS DETAILS OF THE ASSESSEE. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN ALLOWING THE EXPENSES CLAIMED UNDER THE HEAD LATE FEES OF RS.11,10,720/- TO LIFT THE SUGAR WITHOUT APPRECIATING THE FACTS THAT THE PENALTY IS NOT AN ALLOWABLE EXPENDITURE. :- 2 -: 3. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.19,82,643/- MADE ON ACCOUNT OF COMMISSION PAID, WHEN THE ASSESSEE DID NOT PRODUCE ANY SUBSTANTIAL DOCUMENT, DURING THE ASSESSMENT PROCEEDINGS, IN SUPPORT OF THE EXPENSES INCURRED UNDER THE HEAD COMMISSION PAID. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.39,080/- WITHOUT APPRECIATING THE FACTS THAT THE CHECK RETURNING CHARGES ARE PENAL IN NATURE, WHICH ARE CHARGED BY THE BANK AND THEREFORE, DISALLOWABLE. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, WRITTEN SUBMISSION WAS FILED. WE, THEREFORE, HEARD THE APPEAL EX-PARTE QUA THE ASSESSEE AND THE REVENUE WAS HEARD. 3. APROPOS GROUND NO.1, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.2,22,834/- TAKING THE DIFFERENCE BETWEEN THE COMMISSION AS PER FORM NO.16 AND THE AMOUNT OF COMMISSION SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS NOT REALIZED THAT THE SERVICE TAX IS TO BE PAID BY THE RECIPIENT OF SERVICE TO THE SERVICE PROVIDER. THE SERVICE TAX BEING INDIRECT TAX WHICH HAS TO BE COLLECTED BY THE SERVICE PROVIDER FROM THE SERVICE RECIPIENT AND HAS TO BE DEPOSITED WITH CENTRAL EXCISE DEPARTMENT. IN THE PRESENT CASE ALSO THE ASSESSEE HAS COLLECTED THE SERVICE TAX FOR RS.2,22,833/- AND DEPOSITED THE SAME WITH THE CENTRAL EXCISE DEPARTMENT. HE HAS FILED THE PHOTOCOPY OF THE SERVICE TAX CHALLAN AND LEDGER OF THE SERVICE TAX PAYABLE ACCOUNT BEFORE THE LD. CIT(A). THE LD. CIT(A) RE-EXAMINED THE SAME IN THE LIGHT OF THE DETAILS FURNISHED BEFORE HIM AND WAS CONVINCED THAT THERE WAS NO DIFFERENCE AS STATED BY THE :- 3 -: ASSESSING OFFICER. HE ACCORDINGLY HELD THAT THE ASSESSEE HAS EXPLAINED THAT PAYEE COMPANIES FROM WHOM COMMISSION WAS RECEIVED BY THE ASSESSEE DEDUCTED ONLY TDS AND NOT SERVICE TAX. IT WAS, THEREFORE, CLARIFIED THAT SERVICE TAX WAS DULY DEPOSITED IN THE GOVERNMENT ACCOUNT. THE LD. CIT(A) ACCORDINGLY DELETED THE ADDITION. 5. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL, BUT COULD NOT POINT OUT ANY DEFECT IN THE ORDER OF THE LD. CIT(A). SINCE THE LD. CIT(A) HAS RECONCILED THE STATEMENTS WITH THE ACCOUNTS AND SERVICE TAX CHALLANS BEFORE ALLOWING RELIEF TO THE ASSESSEE, NO INTERFERENCE IS CALLED FOR IN HIS ORDER. WE ACCORDINGLY CONFIRM THE SAME. 6. APROPOS GROUND NO.2, IT IS NOTICED THAT THE ASSESSING OFFICER HAS DISALLOWED THE LATE FEES IN LIFTING 67667 BAGS OF SUGAR WITHIN THE PERIOD 1.4.2009 TO 30.9.2009 AS PENALTY AND DISALLOWED THE SAME, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THIS PAYMENT IS IN THE NATURE OF DAMURRAGE AND NOT PENALTY AS MENTIONED IN THE DEBIT NOTE ISSUED BY DCM SRIRAM CONSOLIDATED LTD. THESE CHARGES ARE IN THE NATURE OF DEMURRAGE AND IN OTHER WORDS THESE CHARGES ARE PAID AS RENT FOR USING THE SPACE FOR KEEPING THE SOLD STOCK FOR WHICH THE PRINCIPLE SELLER CHARGES FROM THE BUYER. THEREFORE, LATE FEES CANNOT BE TREATED AS PENALTY TO THE ASSESSEE IN ANY CASE OR IN ANY MANNER EVEN IF THE WORD PENALTY HAS BEEN USED IN ANY DOCUMENT. THE LD. CIT(A) RE-EXAMINED THE CLAIM OF THE ASSESSEE AND, BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, HAS DELETED THE SAME. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- I HAVE EXAMINED THE FINDING GIVEN BY A.O. IN ASSESSMENT ORDER ON THIS ISSUE AND THE WRITTEN SUBMISSION OF APPELLANT FILED DURING APPELLATE PROCEEDINGS. I FIND THAT THE LATE FEES PAID BY APPELLANT DUE TO DELAY IN LIFTING OF GOODS/ STOCK OF SUGAR FROM DIFFERENT SUGAR MILLS CANNOT BE TREATED ANY KIND OF OFFENCE OR INFRINGEMENT OF ANY LAW BUT THE LATE FEES PAYMENT WAS IN THE NATURE OF BUSINESS EXPENDITURE IN :- 4 -: THE NORMAL COURSE OF APPELLANT BUSINESS. THE LATE FEES IN DELAY IN LIFTING OF GOODS IS BUSINESS REVENUE EXPENDITURE AND SAME IS ALLOWABLE AS PER PROVISIONS OF I.T. ACT. THE A.O HAS NOT JUSTIFIED IN MAKING THE DISALLOWANCES OF RS.11,10,720/- UNDER THE HEAD LATE FEES EXPENSES DEBITED IN P&L ACCOUNT. CONSIDERING THE ABOVE FACTS & CIRCUMSTANCES, I HOLD THAT THE EXPENSES INCURRED AND DEBITED IN THE ACCOUNT UNDER THE HEAD LATE FEES OF RS.11,10,720/- IS ALLOWABLE BUSINESS REVENUE EXPENDITURE. THE ADDITION MADE BY THE ASSESSING OFFICER DESERVE TO BE NOT SUSTAINED. THUS THE ADDITION OF RS.11,10,720/- MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. THUS THE APPELLANT GETS RELIEF OF RS.11,10,720/-. 7. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE ASSESSEE THROUGH ITS WRITTEN SUBMISSION HAS CONTENDED THAT IT WAS ONLY A DEMURRAGE CHARGE FOR NOT LIFTING THE GOODS IN TIME FROM THE SELLERS PREMISES. THEREFORE, IT CANNOT BE CONSIDERED TO BE A PENALTY. SINCE IT WAS COMPENSATORY NATURE FOR THE USE OF THE PREMISES, THE SAME MAY BE ALLOWED. 8. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE LATE FEES ARE PAID FOR DELAY IN LIFTING OF THE GOODS FROM THE SELLERS PREMISES. THEREFORE, IT CAN ONLY BE IN THE FORM OF RENT FOR USE OF THE SPACE FOR NOT LIFTING THE GOODS IN TIME. IT IS NOT IN THE FORM OF PENALTY FOR INFRACTION OF ANY LAW AND THE SAME CANNOT BE DISALLOWED ONLY ON THE SIMPLE PREMISE THAT IN THE DEBIT NOTE THE WORD PENAL IS USED. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE CONFIRM THE SAME. 9. APROPOS GROUND NO.3, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE ADDITION OF RS.19,28,641/- HAVING DISALLOWED THE COMMISSION PAID TO SUB-BROKERS BY THE ASSESSEE, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE :- 5 -: LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE FACTS AND TO UNDERSTAND THE NATURE OF THE BUSINESS OF THE ASSESSEE THAT THE ASSESSEE IS DOING TWO TYPES OF BUSINESS AND ASSESSEE IS FIRSTLY A WHOLESALE TRADER OF SUGAR AND SECONDLY COMMISSION AGENT OF VARIOUS SUGAR MILLS. THE ASSESSING OFFICER HAS CONSIDERED THAT THE COMMISSION PAID OF RS.19,28,641/- IS OUT OF COMMISSION RECEIVED OF RS.21,63,432/- WHEREAS THE ASSESSEE HAS PAID COMMISSION ON SALE OF RS.23,46,11,675/- THROUGH SUB-BROKERS WHICH COMES EVEN LESS THAN 1% OF THE TOTAL SALE OF THE ASSESSEE. THE ASSESSEE HAS PAID COMMISSION THROUGH ACCOUNT PAYEE CHEQUES AFTER DEDUCTING TDS, THEREFORE, THE SAME CANNOT BE TREATED TO BE THE INCOME OF THE ASSESSEE AS OBSERVED BY THE ASSESSING OFFICER. HE HAS ALSO FURNISHED THE DETAILS OF COMMISSION PAID TO THE SUB- BROKERS. BESIDES, COPY OF THE LEDGER ACCOUNTS WERE ALSO PRODUCED WHICH WERE EXAMINED BY THE LD. CIT(A) AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- I HAVE EXAMINED THE FINDING GIVEN BY A.O. IN ASSESSMENT ORDER AND WRITTEN SUBMISSION BY APPELLANT AS MENTIONED SUPRA AND I FIND THAT THE APPELLANT HAS CLAIMED AND SHOWN COMMISSION PAYMENT TO DIFFERENT PARTIES/PERSONS ON SALES EFFECTED BY HER OWN TRADING (SALES OF SUGAR) DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE SALES ON WHICH COMMISSION WAS PAYABLE OF RS.19,82,643/- HAVE DULY RECORDED IN HER BOOKS OF ACCOUNTS AND SHOWN AS SALES TRADING ACCOUNT. THE COMMISSION PAYMENT DID NOT MAKE OWN COMMISSION RECEIPTS OF APPELLANT SHOWN IN HER BOOKS OF ACCOUNTS. THE A.O. HAS MISUNDERSTOOD THAT THE APPELLANT HAS CONVERTED HER COMMISSION INCOME FOR PAYMENT OF COMMISSION TO DIFFERENT PERSONS TO THE EXTENT OF RS.19,82,643/-. ON PERUSAL OF TRADING CUM P&L ACCOUNT THE APPELLANT HAS SHOWN PURCHASE AND SALE OF SUGAR AS OWN TRADING AND EARNED PROFIT THEREON. THESE SALES WERE OBVIOUSLY EFFECTED THROUGH :- 6 -: COMMISSION AGENTS TO WHOM COMMISSION PAID/PAYABLE OF RS.19,82,643/- IN LIEU OF SERVICES RENDERED BY THESE COMMISSION AGENTS TO APPELLANT. THEREFORE, IN THE LIGHT OF THESE FACTS & CIRCUMSTANCES IT CANNOT BE SAID THAT NON GENUINE, EXPENSES UNDER THE HEAD OF COMMISSION PAID/PAYABLE DEBITED BY APPELLANT TO REDUCE HER TAXABLE INCOME. THESE EXPENSES ARE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES OF APPELLANT AND SAME ARE ALLOWABLE AS PER PROVISION OF I.T. ACT. IT HAS BEEN ALSO MENTIONED BY APPELLANT THAT THE APPELLANT HAS DULY DEDUCTED TDS ON COMMISSION PAYMENT TO DIFFERENT PERSONS AND ALL THESE PERSONS (AGENTS) ARE VISITING ASSESSEE AND THEIR PAN NO. ALSO MENTIONED COMPLETE POSTAL ADDRESSES. THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD WHICH COULD JUSTIFY THE ADDITION MADE UNDER THIS HEAD. THE ASSESSING OFFICER HAS DISALLOWED THE COMMISSION EXPENSES OF RS.19,82,643/- WITHOUT PROPER APPRECIATION OF FACTS OF APPELLANT CASE. 10. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE ASSESSEE HAS FURNISHED THE DETAILS BEFORE US WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS MISUNDERSTOOD THE FACTS OF THE CASE AND HAS FORMED A VIEW THAT THE ASSESSEE HAS MADE PAYMENT OF COMMISSION TO THE SUB- BROKERS OUT OF COMMISSION RECEIVED WHEREAS HE HAS PAID COMMISSION ON ITS SALE. THE LD. CIT(A) HAS PROPERLY APPRECIATED THE FACTS OF THE CASE WHILE DELETING THE ADDITION. 11. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS IN FACT MISUNDERSTOOD THE FACTS AND WAS OF THE VIEW THAT THE ASSESSEE HAS MADE COMMISSION PAYMENT TO THE SUB-BROKERS OUT OF COMMISSION RECEIVED WHEREAS THE FACTS ARE OTHERWISE. THE ASSESSEE HAS PAID COMMISSION ON ITS SALE TO VARIOUS SUB-BROKERS THROUGH ACCOUNT PAYEE CHEQUE AFTER DEDUCTING TDS. THE DETAILS WERE FILED BEFORE THE LD. CIT(A). HAVING EXAMINED THE :- 7 -: ORDER OF THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS RIGHTLY ADJUDICATED THE ISSUE IN CORRECT PERSPECTIVE. SINCE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WE CONFIRM THE SAME. 12. APROPOS GROUND NO.4, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF BANK CHARGES ON RETURN OF CHEQUES, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS HELD THAT BANKING CHARGES CANNOT BE HELD TO BE PENAL CHARGES, THEREFORE, IT IS AN ALLOWABLE REVENUE EXPENDITURE. WE DO NOT FIND ANY INFIRMITY IN THIS FINDING OF THE LD. CIT(A). ACCORDINGLY, WE CONFIRM THE SAME. 13. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH JUNE, 2015 JJ:29-3004 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR