LAXMI OIL ENGINES P LTD, Kolhapur V. ASST. CIT,

ITA 886/PUN/2008

• Counselvise Citation: 88624514 RSA 2008
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 18-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K AMBASHTA
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 218/PN/2007 AND 886 TO 888/PN/2008 A.Y. 2003-04, 2002-03, 2004-05 AND 2005-06 LAXMI OIL ENGINES PVT. LTD. D-26 MIDC SHIROLI, KOLHAPUR 416 122. APPELLANT VS. ASSTT. CIT CIR. 2 KOLHAPUR RESPONDENT APPELLANT BY: SHRI M.K. KULKARNI RESPONDENT BY: SHRI S.K. AMBASHTA DATE OF HEARING: 17-8-2011 DATE OF PRONOUNCEMENT: ORDER PER SHAILENDRA KUMAR YADAV, JM THESE FOUR APPEALS RELATE TO THE SAME ASSESSEE ON T HE ISSUE OF ALLOWABILITY OF COMMISSION. THEREFORE, THE Y WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN A.Y. 2003-04, THE MAIN ISSUE IS WITH REGARDS TO DISALLOWANCE OF COMMISSION OF RS. 39,95,475/- PAID TO REX POLYEXTRUSION LTD., IN RESPECT OF STATE GOVERNMENT CONTRACT. THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD PAID COMMISSION TO THE ABOVE COMPANY FOR LIASONING WORK IN RESPECT OF AWARD OF CONTRACTS FROM GOVERNMENT AGENC IES. 2 ITA NO. 218, 886 TO 888/PN/2008 LAXMI OIL ENGINES WHEN THE ASSESSING OFFICER MADE INQUIRY WITH CONCER NED GOVERNMENT AGENCY, IT WAS REVEALED THAT NO SUCH LIA SONING WORK WAS DONE BY THEM ON BEHALF OF THE ASSESSEE. I T WAS CLAIMED BY THE ASSESSEE THAT THE LIASONING WORK FOR THE COMPANY WAS DONE BY ONE SHRI S.K. BANERJEE, WHO WAS AN EMPLOYEE OF M/S. REX POLYEXTRUSION LTD. HOWEVER, T HERE WAS NO EVIDENCE OF ANY SUCH WORK DONE BY SAID MR. BANERJEE. HE ACCORDINGLY MADE A DISALLOWANCE OF RS. 39,95,474/- ON ACCOUNT OF COMMISSION PAID TO M/S. R EX POLYEXTRUSION LTD., BY INVOKING EXPLANATION TO SECT ION 37(1) OF THE ACT WHICH WAS CONFIRMED BY THE CIT(A). THE SAME HAS BEEN CHALLENGED BEFORE US BY THE ASSESSEE. 3. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT SIMILAR THIS CAME UP FOR CONSIDERATION BEFORE CO-ORDINATE BENCH OF THE TRIBU NAL IN ASSESSEES OWN CASE IN ITA NO. 682/PN/2006 FOR A.Y. 2001- 02 WHEREIN THE ISSUE HAS BEEN DECIDED AS UNDER: THE ASSESSEE AS WELL AS THE PAYEE HAS NOT PRODUCED ANY EVIDENCE TO SHOW AND ESTABLISH THAT THE PAYEE H AD ACTED FOR AND ON BEHALF OF THE ASSESSEE WITHIN THE PARAMETERS OF THE NORMS AND GUIDELINES FORMULATED B Y THE GOVERNMENT FOR THE PURPOSE OF THE SUPPLYING OF THE ENGINES TO THE VARIOUS AUTHORITIES, ORGANIZATIONS O R THE DEPARTMENTS. THE ASSESSEE HAS NOT PLACED ANY EVIDENCE TO SHOW AND ESTABLISH THAT THE ULTIMATE PURCHASERS MADE ANY REPRESENTATION TO THE ZILLA PARISHAD FOR PURCHASING THE PRODUCT OF THE ASSESSEE AND BEING SATISFIED WITH ANY DEMONSTRATIONS MADE BY THE ASSESSEES SELLING AGENT. NO EVIDENCE OR DOCUM ENT HAS BEEN PRODUCED SHOWING THAT ASSESSEES AGENT HAD VISITED THE ULTIMATE PURCHASER AND CONVINCED THEM T O MAKE DEMAND OF ASSESSEES PRODUCT ONLY, NO IOTA 3 ITA NO. 218, 886 TO 888/PN/2008 LAXMI OIL ENGINES OF EVIDENCE WAS PRODUCED AS TO THE INVOLVEMENT OF M/S. REX POLYEXTRUSION LTD., COMMUNICATING WITH TRIBAL DEVELOPMENT CORPORATION OR ANY OTHER GOVERNMENT ORGANIZATION TO PLACE THE ORDER OF SUPPL Y FOR ASSESSEES PRODUCTS ONLY THE CIT(A) HAD CORREC TLY APPRECIATED THE ACTS AND HAS RIGHTLY CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROVE BY ANY ADEQUATE OR PROPER EVIDENCES THAT ANY SERVICES EVER RENDERED BY THE COMMISSION AGENT M/S. REX POLYEXTRUSION LTD.). FURTHER ASSESSEE HAS NOT GIVEN ANY EVIDENCE AS TO WHETHER TRIBAL DEVELOPMENT CORPORATION LTD., HAS ALLOWED FOR ANY LIAISON AGENC Y TO BE INTRODUCED ON RECORD FOR PLACING THE ORDERS OF PURCHASING THE ASSESSEES PRODUCT. ANY LIAISON WOR K FAVOURING ANY PARTICULAR SUPPLIER OF GOODS WOULD CERTAINLY BE AGAINST PUBLIC POLICY AND THUS ANY EXPENDITURE INCURRED IN CONNECTION THERETO WOULD NO T BE FIT TO BE ALLOWED S DEDUCTION IN THE ASSESSMENT OF THE INCOME UNDER THE INCOME-TAX ACT. 4. FACTS BEING SIMILAR, SO FOLLOWING THE SAID ORDER OF THE TRIBUNAL FOR A.Y. 2001-02 IN ITA NO. 682/PN/2006 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) I N CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 39,95 ,475/- FOR THE YEAR UNDER CONSIDERATION AGAIN BY INVOKING EXPLANATION TO SECTION 37(1) OF THE ACT. ACCORDINGL Y, SAME WAS RIGHTLY REJECTED BY THE AUTHORITIES BELOW. WE U PHOLD THE SAME. SIMILAR ISSUE AROSE IN OTHER THREE YEARS. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, THE ORDERS OF THE CIT(A) WITH REGARDS TO ALLOWABILITY OF COMMI SSION IN QUESTION, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDERS OF THE CIT(A) WHO HAS DISALLOWED THE COMMISSION PAID T O M/S. REX POLYEXTRUSION LTD. THE SAME ARE UPHELD. 4 ITA NO. 218, 886 TO 888/PN/2008 LAXMI OIL ENGINES 5. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDIT IONAL GROUNDS OF APPEAL. 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF PAYMENT OF REFERRAL COMMISSION TO REX POLYEXTRUSION LTD., WHEN THE RECIPIENT OF THE COMMISSION HAS INCLUDED THIS IN IT S TAXABLE INCOME. THE DISALLOWANCE BE DELETED. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN MAKI NG DISALLOWANCE OF COMMISSION PAID TO REX POLYEXTRUSIO N LTD., INVOKING EXPLANATION TO SEC. 37(1) OF THE ACT . THE FACTS SHOW THAT THE COMMISSION WAS PAID IN RESPECT OF REFERRALS MADE FOR SUPPLIES TO SEMI-GOVERNMENT ORGANIZATIONS. THE DETAILS ALSO SHOW THAT THE REX POLYEXTRUSION LTD., PROVIDED LEADS AND SUCH LEADS W ERE SUCCESSFULLY CONVERTED INTO ORDERS. THE PAYMENT OF COMMISSION TO REX POLYEXTRUSION IS BEING NOT HIT BY EXPLANATION TO SEC. 37(1) OF THE ACT THE DISALLOWAN CE MADE BE DELETED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW IT IS UNDISPUTED FACT THAT THE ASSESSEE COMPANY HAS BEEN ISSUED CERTIFICATE UNDER SEC. 197( 1) OF THE ACT BY THE CONCERNED A.O., NOT TO DEDUCT TAX ON IT. IN SUCH CIRCUMSTANCES IT CANNOT BE ARGUED THAT THE PAYMENT OF COMMISSION WAS NOT GENUINE AND WAS HIT BY EXPLANATION TO SEC. 37(1) OF THE ACT. THE DISALLOWANCE BE DELETED. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND SINCE THE MAHARASHTRA STATE CO-OP. TRIBAL DEVELOPMENT CORPORATION LTD., A SEMI GOVERNMENT ORGANIZATION HAS CONFIRMED BY ISSUE OF SEPARATE CERTIFICATE ABOUT THE EXTENT OF SERVICES O FFERED BY PAYER OF THE COMMISSION THAT IS ASSESSEE AND THE PAYEE THAT IS REX POLYEXTRUSION LTD. IN SUCH CIRCUMSTANCES THE APPLICABILITY OF EXPLANATION TO S EC. 37(1) IS A REMOTE POSSIBILITY. IN VIEW OF THIS AND IN VIEW OF THE FACT THAT THE SERVICES OFFERED FOR PAYM ENT OF COMMISSION HAVE BEEN PROVED BEYOND DOUBT NO DISALLOWANCE IS CALLED FOR INVOKING THE EXPLANATION TO SEC. 37(1) AND THE DISALLOWANCE BE DELETED. 5) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 39,95,475/- ON ACCOUNT OF COMMISSIO N 5 ITA NO. 218, 886 TO 888/PN/2008 LAXMI OIL ENGINES PAID TO M/S. REX POLYEXTRUSION LTD., ON THE GROUND THAT THE ASSESSEE COULD NOT ESTABLISH THE RENDERING OF SERVICES BY THE SAID PARTY. 6) THE LD. CIT(A) FAILED TO APPRECIATE THAT M/S. RE X POLYEXTRUSION LTD., HAD RENDERED SERVICES TO THE ASSESSEE COMPANY WHICH WAS ALSO CONFIRMED BY THE DIRECTOR OF REX POLYEXTRUSION LTD., AND ACCORDINGLY , THERE WAS NO REASON TO DISALLOW THE EXPENDITURE OF RS. 39,95,475/-. 7) THE LD. CIT(A) ERRED IN NOT GRANTING FURTHER OPPORTUNITY TO THE ASSESSEE COMPANY TO PRODUCE EVIDENCES IN SUPPORT OF ITS CLAIM. 6. ALL THESE GROUNDS ARE BASICALLY NOTHING BUT REPE TITION OF THE STAND TAKEN BY THE ASSESSEE. WITHOUT PREJUD ICE TO ABOVE, WE FIND THAT BY WAY OF FIRST ADDITIONAL GROU ND, THE ASSESSEE HAS OPPOSED THE DISALLOWANCE ON THE GROUND THAT COMMISSION TO REX POLYEXTRUSION LTD., HAS BEEN OFFE RED TO TAX. THIS WILL NOT CHANGE THE DECISION OF TRIBUNAL S DECISION FOR A.Y. 2001-02 BEING RELIED UPON BY US B ECAUSE OFFERING OF INCOME TO TAX BY RECIPIENT WILL NOT CHA NGE ITS ALLOWABILITY IN THE HANDS OF THE ASSESSEE AS THE SA ME HAS BEEN MADE TO RECIPIENT BY ASSESSEE IN VIOLATION OF EXPLANATION TO SECTION 37(1) OF THE ACT. THIS HAS BEEN TAKEN CARE OF IN THE MAIN GROUND WHICH HAS BEEN ADDRESSED BY US IN PRECEDING PARAGRAPHS. 6.1 THE NEXT ISSUE BY WAY OF ADDITIONAL GROUND IS W ITH REGARDS TO ISSUANCE OF CERTIFICATE U/S 197(1) BY TH E CONCERNED ASSESSING OFFICER NOT TO DEDUCT TAX ON COMMISSION IN QUESTION. EVEN THE CERTIFICATE ISSUED U/S 197(1) WILL NOT CHANGE THE SITUATION WITH REGARDS T O ALLOWABILITY OF COMMISSION IN QUESTION BECAUSE THER E IS A CLEARLY COVERED BY THE PROVISIONS OF EXPLANATION TO SECTION 37(1) OF THE ACT. ACCORDINGLY, THE SAME HAS RIGHTLY BEEN DISALLOWED BY THE CIT(A). 6 ITA NO. 218, 886 TO 888/PN/2008 LAXMI OIL ENGINES 6.2 THE NEXT ISSUE IS WITH REGARDS TO CONFIRMATION ISSUED BY MAHARASHTRA STATE CO-OP. TRIBAL DEVELOPMENT CORPORATION LTD., WITH REGARDS TO SERVICES OFFERED BY REX POLYEXTRUSION LTD. EVEN THE ACKNOWLEDGEMENT BY WAY OF LETTER ISSUED BY MAHARASHTRA STATE CO-OP. TRIBAL DEVELOPMENT CORPORATION LTD., ABOUT THE EXTENT OF S ERVICES OFFERED BY THE PAYEE I.E. REX POLYEXTRUSION LTD., T HE SITUATION WILL NOT CHANGE IN VIEW OF CLEAR CUT FIND ING BY THE TRIBUNAL IN ITS ORDER FOR A.Y. 2001-02 AS DISCUSSED ABOVE TRANSACTION IN QUESTION IS CLEAR CUT VIOLATION OF E XPLANATION TO SECTION 37(1) OF THE ACT. 6.3 THE NEXT ISSUES RAISED IN GROUNDS NO. 5 AND 6 O F ADDITIONAL GROUNDS HAVE ALREADY BEEN TAKEN CARE BY THE ORDER OF THE TRIBUNAL FOR A.Y. 2001-02 AS DISCUSSED ABOVE. IN VIEW OF THE ABOVE, ALL THE ADDITIONAL GROUNDS RA ISED ABOVE ARE DISMISSED. ACCORDINGLY PRAYER FOR ADMISSI ON OF ADDITIONAL GROUND IN THIS REGARD IS ALSO REJECTED. WE FIND THAT NO ARGUMENT WAS RAISED WITH REGARDS TO OTHER G ROUNDS RAISED BY THE ASSESSEE IN DIFFERENT YEARS WHICH AMO UNTS TO NON-PRESSING THE SAME. SO THE SAME ARE ALSO DISMIS SED AS NOT PRESSED. 7. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST 2011. S D/ - (G.S. PANNU) ACCOUNTANT MEMBER S D/ - SHAILENDRA KUMAR YADAV JUDICIAL MEMBER PUNE DATED THE 29 TH AUGUST 2011 ANKAM 7 ITA NO. 218, 886 TO 888/PN/2008 LAXMI OIL ENGINES COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)- KOLHAPUR 4. THE CIT KOLHAPUR 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, PUNE.