Appeal Details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 6810 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Assessment Year
2012-2013
Appeal Filed On
26-12-2017
Judgement Text
IN THE INCOME-TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7364/MUM/2017 (ASSESSMENT YEAR 2012-13) ITA NO. 7365/MUM/2017 (ASSESSMENT YEAR 2013-14) DCIT- 14(1)(1) ROOM NO. 481-B, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S TUSHACO PUMPS PVT. LTD. [NOW KNOWN AS M/S. ALLWEILER INDIA PVT. LTD.] 601, RAHEJA PLAZA-1, A-WING, LBS MARG, GHATKOPAR (WEST), MUMBAI- 400086. P AN: AABCT7703K APPELLANT RESPONDENT APPELLANT BY : SHRI D.G. PANSARI (DR) RESPONDENT BY : SHRI DEEPAK TIKEKAR (AR) DATE OF HEARING : 22.01.2019 DATE OF PRONOUNCEMEN T : 28.02.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE TWO APPEAL BY REVENUE UNDER SECTION 253 OF TH E INCOME-TAX ACT (THE ACT) ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSI ONER OF INCOME-TAX-6, MUMBAI (THE LD. CIT(A) DATED 25.10.2017 FOR ASSESSM ENT YEAR 2012-13 & 2013-14. IN APPEAL FOR BOTH THE ASSESSMENT YEARS, T HE REVENUE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL, THEREFORE, BOTH TH E APPEAL WERE HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRE CIATION OF FACTS APPEAL FOR ASSESSMENT YEAR 2012-13 IS TREATED AS LEAD CASE . IN APPEAL FOR ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 2 ASSESSMENT YEAR 2012-13, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE COMMISSION PAID TO AGENTS FOR OBTAINING ORDERS FROM GOVT. AGENCIES, WHEN SUCH PAYMENTS OF GOVT. AGENCIES IS P ROHIBITED BY LAW AND HENCE, NOT AN ALLOWABLE DEDUCTION U/S.37(1) OF THE ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTO RED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF POSITIVE DISPLACEMENT PUMPS, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 28.11.2012 DECLARING TOTAL INCOME AT RS. 19,49,24,580/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTIO N 143(3) ON 26.03.2016. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER DISALLOWED THE COMMISSION PAYMENT OF RS. 1.15 CRORE PAID BY ASSESSEE TO THREE PARTIES NAMELY BHALLA ASSOCIATES OF RS. 36,45 ,383/-, DENETTOINT OF RS. 77,82,922/- AND SHREEJI SALES OF RS. 1,41,013/-. DU RING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT DURING THE RELEVANT PE RIOD THE ASSESSEE HAS CLAIMED COMMISSION EXPENDITURE FOR AVAILING SALES C ONTRACT FROM BHARAT HEAVY ELECTRICALS LTD. (BHEL). THE ASSESSEE WAS SHO W-CAUSED AS TO WHY THE SALES COMMISSION SHOULD NOT BE DISALLOWED UNDER SECTION 37 AS COMMISSION PAYMENT FOR OBTAINING SALES CONTRACT FRO M GOVT. AGENCIES IS PROHIBITED. THE ASSESSEE FILED ITS REPLY AND CONTEN DED THAT THE PAYMENTS WERE MADE TO AGENTS FOR SUBMITTING TENDER AND REPRE SENTING THE ASSESSEE- ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 3 COMPANY AT THE TIME OF TENDER OPENING, ATTENDING CU STOMERS SITE, TO DEPUTE COMPETENT PERSON FOR SUPPORT SERVICES, TO ATTEND IN STALLATION AND COMMISSIONING OF PRODUCT SUPPLY AND TO FOLLOW UP RE GARDING INVOICE COLLECTION AND VARIOUS FORM UNDER INDIRECT TAX AS P ER THE INSTRUCTION OF ASSESSEE. THE CONTENTION OF ASSESSEE WAS NOT ACCEPT ED BY ASSESSING OFFICER. THE PAYMENT OF COMMISSION VARIES FROM 7.5% TO 13% O F BASIC VALUE OF THE SALES. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAYMENT ON TAKING VIEW THAT THE COPY OF BILL PRODUCED BY AS SESSEE SHOWS THAT THE BILL ISSUED BY BHEL DIRECTLY TO THE ASSESSEE AND THERE I S NO REFERENCE OF ANY SERVICES RENDERED BY THE AGENTS AS CLAIMED BY ASSES SEE. ON APPEAL BEFORE THE LD. CIT(A), ENTIRE DISALLOWANCE WAS DELETED. THE LD . CIT(A) DELETED THE DISALLOWANCE HOLDING THAT THE ASSESSEE HAS MADE THE PAYMENT OF COMMISSION TO OUTSIDE PARTY AND THE COMMISSION PAYMENT IS NOT PAID IN CONTRAVENTION OF LAW OF THE LAND AND CANNOT BE TREATED AS EXPENDITUR E INCURRED AGAINST THE PUBLIC POLICY. THE LD. CIT(A) ALSO CONCLUDED THAT O FFICE OF ASSESSEE IS SITUATED IN MUMBAI AND FACTORY AT DAMAN. THE ASSESS EE HAS NO OFFICE AT HARIDWAR AND IN ORDER TO OBTAIN CONTRACT OF SUPPLY OF GOODS, THE ASSESSEE ENGAGED SERVICES OF DENETTO INTERNATIONAL AND BHALL A & ASSOCIATE. THESE PARTIES ARE STILL RENDERING SERVICES TO THE ASSESSE E. THE LD. CIT(A) ALSO RELIED UPON THE DECISION OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2010-11 WHEREIN SIMILAR RELIEF WAS GRANTED TO THE ASSESSEE. AGGRIEV ED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BE FORE THE TRIBUNAL. ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 4 3. WE HAVE HEARD THE LD. DR FOR THE REVENUE AND LD. AR OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. D R FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. D R FOR THE REVENUE FURTHER SUBMITS THAT THE ASSESSEE HAS MADE PAYMENT TO BHEL, WHICH IS PUBLIC SECTOR UNDERTAKING (PSU) AND THE COMMISSION OF PAYM ENT MADE TO THE OFFICIAL OF PSU IS AGAINST THE PUBLIC POLICY. THE A SSESSEE HAS MADE THE PAYMENT OF COMMISSION OF 7.5% TO 13% OF THE CONTRAC T AMOUNT. 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE GROUND OF APPEAL RAISED BY REVENUE IS COVERED BY THE DECISION OF TRIBUNAL IN M/S ACRO ELECTRO TECHNOLOGIES PVT. LTD. VS. ACIT IN ITA NO. 7250/MUM/2010 DATED 15.02.2013 WHEREIN THE ASSESSEE-COMPANY IN THAT CAS E WAS SUPPLIED MATERIAL TO INDIAN RAILWAY AND BHEL. THE OFFICE OF THE ASSESSEE IN THAT CASE WAS SITUATED IN MUMBAI FOR PROCURING ORDERS, T HEY ENGAGED SERVICES OF CERTAIN AGENTS IN OTHER CITIES. THE ASSESSING OFFIC ER DISALLOWED THE SIMILAR PAYMENT MADE TO VARIOUS AGENTS THROUGH WHICH THE MA TERIAL/GOODS SUPPLIED TO BHEL. ON APPEAL BEFORE THE LD. CIT(A), THE ACTIO N OF ASSESSING OFFICER WAS CONFIRMED, HOWEVER, ON FURTHER APPEAL BEFORE TH E TRIBUNAL, IT WAS HELD THAT THE PAYMENT MADE BY THE ASSESSEE TO AGENTS WER E NOT AGAINST THE PUBLIC POLICY AND RATHER, IT WAS A PURE BUSINESS TRANSACTI ON. THE LD. AR OF THE ASSESSEE SUBMITS THAT FACTS OF THE CASE IN M/S ACRO ELECTRO TECHNOLOGIES PVT. LTD. (SUPRA) IS SIMILAR, THEREFORE, ON THE RAT IO LAID DOWN BY TRIBUNAL, THE ASSESSEE IS ENTITLED FOR DEDUCTION OF COMMISSION PA YMENT. IN SUPPORT OF HIS ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 5 SUBMISSION, THE LD. AR OF THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN CIT VS. TEXTOOL CO. LT D. (315 ITR 91, DECISION OF HONBLE DELHI HIGH COURT IN CIT VS. RAM PISTONS & RINGS LTD. 87 ITR 370, HONBLE GUJARAT HIGH COURT IN CIT VS. S UZLON ENERGY LTD. (354 ITR 630), HONBLE BOMBAY HIGH COURT IN RAMANAN D SAGAR VS. DCIT (256 ITR 134), HONBLE KERALA HIGH COURT IN ASPINWA L & CO. LTD. VS. DCIT (295 ITR 0553). 5. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT IN ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER HAS ACCEPTED THAT THE ASSESSEE HAS ASSOCIATED WITH THE DENETTO INTERNATIO NAL IN CONNECTION WITH THE TRANSACTION WITH BHEL AND THAT THE DENETTOINT I NTERNATIONAL RENDERED SERVICES WITH REGARD TO PURCHASE ORDER FROM BHEL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE ALS O DELIBERATED ON VARIOUS CASE LAWS RELIED BY LOWER AUTHORITIES. DURING THE A SSESSMENT, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF COMMISSION PAYMENT SOLELY ON THE BASIS THAT BILLS ISSUED BY BHEL, NOWHERE MENTIONED THAT A NY SERVICES WERE RENDERED BY VARIOUS PARTIES AS CLAIMED BY ASSESSEE. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE ENGAGED AGENT TO OB TAIN SALES ORDER FROM GOVERNMENT AGENCIES WHICH IS AGAINST THE PUBLIC POL ICY AND THAT SUCH PAYMENT CANNOT BE TREATED AS LEGITIMATE BUSINESS EX PENSES. THE ASSESSING OFFICER ALSO HELD THAT EXPLANATION TO SECTION 37(1) PRESCRIBED THAT ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 6 EXPENDITURE INCURRED FOR THE PURPOSE OF WHICH IS AN OFFENCE OR PROHIBITED BY LAW CANNOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND THAT NO DEDUCTION OR ALLOWANCE COULD BE MADE. 7. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT FACTORY OF THE ASSESSEE IS SITUATED IN DAMAN AND THEIR OFFICE IS SITUATED IN M UMBAI. THE ASSESSEE HAS TO PARTICIPATE IN TENDER FLOATED BY VARIOUS COMPANI ES ALL OVER THE INDIA. THE SETTING UP OF OFFICE ALL OVER INDIA IS NOT PRUDENT AND APPOINTING AGENT IS MORE PRACTICAL. MANY OF TIMES, THE TENDERS ARE PUBL ISHED IN LOCAL NEWSPAPER AND APPOINTING LOCAL AGENTS, THE ASSESSEE HAVE BETT ER ACCESS TO SUCH TENDERS. APPOINTING OF LOCAL AGENT IS WISE BUSINESS DECISION AND BY NO STRETCH OF IMAGINATION IT COULD BE TERMED AS OPPOSED TO PUBLIC POLICY. THE ASSESSEE ALSO CONTENDED THAT THEY HAVE FURNISHED THE DOCUMEN TARY EVIDENCES TO ESTABLISH THAT THE AGENTS HAVE RENDERED SERVICES TO THE ASSESSEE-COMPANY AND THE EXPENDITURE IS GENUINE AND ORDINARY BUSINESS EX PENSES. ON THE CONTENTION OF ASSESSEE, THE LD. CIT(A) EXAMINED THE DETAILS OF THE EXPENSES TO VARIOUS PARTIES AND THE AMOUNT OF COMMISSION PAI D TO THEM. THE LD. CIT(A) NOTED THAT SHREEJI SALES WAS PAID COMMISSION FOR PROCURING SALES FROM PARIKH SALES. THE SALES ARE TO A PRIVATE PARTY . THIS AGENT HAS NOT RENDERED ANY SERVICES IN RESPECT OF SALES CONTRACT WITH BHEL. THE ASSESSEE HAS PAID TOTAL COMMISSION OF RS. 2.60 CRORE OUT OF WHICH COMMISSION OF RS. 1.15 CRORE RELATES TO BHEL TRANSACTION, SHREEJI SAL ES WAS PAID COMMISSION OF RS. 1,41,013/-, WHICH WAS PAID FOR GETTING ORDER S FROM PRIVATE PARTY AND ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 7 NOT FROM BHEL. THEREFORE, NOT HIT BY EXPLANATION 37 OF THE ACT. FOR PARTIES NAMELY BHALLA & ASSOCIATE AND DENETTO INTERNATIONAL . THE LD. CIT(A) OBSERVED THAT THESE PARTIES ARE RENDERING SERVICES TO THE ASSESSEE IN RESPECT OF SALES TO BHEL FROM QUITE LONG TIME. THE PARTIES ARE STILL CONTINUING TO PROVIDE SERVICES TO THE ASSESSEE. BOTH THE PARTIES ARE BASED AT HARDWAR, WHERE BHEL PLANT IS SITUATED. THE CONTENTION OF THE ASSESSEE THAT THESE PARTIES ARE PERFORMING VARIOUS FUNCTIONS LIKE SUBMI SSION OF TENDER, REPRESENTING THE PARTIES AT THE TENDER OPENING MEET INGS. THESE PARTIES ARE ALSO ATTENDED DURING THE INSTALLATION AND COMMISSIO N OF THE PRODUCT SUPPLIED AND HELD IN JOINT INSPECTION REPORT. THE PAYMENTS T O THESE PARTIES ARE MADE THROUGH THE A/C PAYEE CHEQUE ON TAX WAS DEDUCTED AT SOURCE. THE ASSESSEE HAS ALSO FURNISHED THE NATURE OF SERVICES RENDERED BY THEM, COPY OF LETTER GENERATING ENQUIRY, COPY OF LETTER FROM GIVING TECH NICAL BID, MAKING A COPY TO THE REPRESENTATIVE, JOINT INSPECTION REPORT AND OTHER EVIDENCES TO SUBSTANTIATE ABOUT RENDERING SERVICES WHICH ESTABLI SHED THAT THESE PARTIES HAVE RENDERED SERVICES TO THE ASSESSEE IN PROCURING ORDER AND RENDERING OTHER SERVICES. THE LD. CIT(A) ALSO REFERRED AND RE LIED UPON THE DECISION OF M/S ACRO ELECTRO TECHNOLOGIES PVT. LTD. (SUPRA) WHE REIN THE ASSESSEE IN THAT CASE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING O F ELECTRICAL ITEM AND SUPPLIED MATERIAL TO INDIAN RAILWAY AND BHEL. THEIR OFFICE WAS SITUATED IN MUMBAI. THEY ENGAGED SERVICES OF CERTAIN AGENTS IN OTHER CITIES. THE AGENTS WERE HELPING THE ASSESSEE-COMPANY ABOUT PLACING ORD ER AND COLLECTING BILLS. ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 8 THE COMMISSION WAS PAID TO THE AGENTS THROUGH BANKI NG CHANNELS, ALL SUCH AGENTS WERE ACCESS TO TAX. THE TRIBUNAL HELD THAT C OMMISSION EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF BUSINESS. PAYMENTS WERE MADE BY ASSESSEE TO AGENTS WERE NOT AGAINST PU BLIC POLICY; RATHER IT WAS A PURE BUSINESS TRANSACTION. 8. WE HAVE NOTED THAT IN THE PRESENT CASE, NO COMMISSI ON PAYMENT IS MADE TO THE OFFICIAL OF PSU/BHEL, RATHER THE PAYMENTS WERE MADE TO THE AGENTS, AND THE AGENTS WERE WORKING FOR ASSESSEE. THEREFORE, TH E RATIO OF LAW LAID DOWN IN M/S ACRO ELECTRO TECHNOLOGIES PVT. LTD. (SUPRA) IS SQUARELY APPLICABLE ON THE FACTS OF PRESENT CASE. THE LD. CIT(A) ALSO OBSE RVED THAT THE SIMILAR ISSUE ON SIMILAR FACT WAS DECIDED BY HIS PREDECESSOR FOR A.Y. 2010-11 AND BY FOLLOWING THE PRINCIPLE OF CONSISTENCY, IT WAS HELD THAT THE PAYMENT MADE TO DENETTO INTERNATIONAL & BHALLA & ASSOCIATE CANNOT B E DISALLOWED. 9. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A), WHICH WE AFFIRM. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 7365/MUM/2017 FOR ASSESSMENT YEAR 2013-14 11. THE REVENUE HAS RAISED THE IDENTICAL GROUND OF APPE AL, FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION IS ALSO ALMOST SIMILAR AS IN APPEAL FOR A.Y. 2013-14, WHICH WE HAVE ALREADY DISMISSED, THEREFORE , FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE APPEAL FOR A.Y. 2013- 14 IS ALSO DISMISSED WITH SIMILAR OBSERVATION. ITA NO. 7364 & 7365 MUM 2017-M/S TUSHACO PUMPS PVT. LTD. 9 12. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2013- 14 IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/ 02/2019. SD/ SD/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 28.02.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI
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