ITO, Ward-6(3), Hyderabad V. M/s A.P.Marketers, Hyderabad

ITA 916/HYD/2013

• Counselvise Citation: 91622514 RSA 2013
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: V SIVA KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.916/HYD/2013 ASSESSMENT YEAR 2009-2010 ITO, WARD 6(3) HYDERABAD VS. M/S. A.P. MARKETERS HYDERABAD PAN AAPFA-8034P (APPELLANT) (RESPONDENT) FOR REVENUE : MR. B. YADAGIRI FOR ASSESSEE : MR. V. SIVAKUMAR DATE OF HEARING : 24.04.2014 DATE OF PRONOUNCEMENT : 29.04.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS REVENUE APPEAL AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD. THE ISSUE IN THIS APPEAL IS W HETHER DISALLOWANCE UNDER SECTION 40(A)(IA) IS REQUIRED OF AN AMOUNT OF RS.1,90,23,039/- STATED TO BE REIMBURSEMENT OF EXPENDITURE. 2. ASSESSEE CLAIMED EXPENDITURE UNDER THE HEAD DISPLAY AND REIMBURSEMENTS AT RS.1,90,23,039/- AN D SUBMITTED BEFORE THE A.O. THAT THIS EXPENDITURE WAS REIMBURSEMENT OF EXPENDITURE. IT WAS EXPLAINED THAT ASSESSEE FIRM WAS CREATED WITH THE OBJECTIVE OF MARKETING TH E PRODUCTS OF ITS PRINCIPAL COMPANY VIZ., M/S. JAGATJIT INDUST RIES LTD. (IN SHORT JIL) AND THAT IT WAS IN RECEIPT OF THE FOLL OWING AMOUNTS FROM JIL : 2 ITA.NO.916/HYD/2013 M/S. AP MARKETERS, HYDERABAD. A. COMMISSION BASED ON VOLUME OF STOCK LIFTED BY RETAILERS FROM M/S. APBCL. B. REIMBURSEMENT OF INTER-DEPOT EXPENSES INCURRED B Y IT. C. REIMBURSEMENT OF ANY TRADE SCHEMES IMPLEMENTED B Y JIL. 2.1. ASSESSEE SUBMITTED THAT OUT OF THE ABOVE THRE E, ONLY ITEM NO.1 WAS ITS REMUNERATION FOR ITS SERVICE S, WHILE THE OTHERS WERE PURELY REIMBURSEMENT OF EXPENSES. THE A SSESSEE SUBMITTED THAT IT RECEIVED VARIOUS CLAIMS FROM THE RETAILERS, DEPOT WISE AND MONTH WISE, THAT SUCH CLAIMS WERE MA DE BY THEM BEFORE JIL THROUGH DEBIT NOTES AND WERE DISBUR SED BY THEM TO THE RETAILERS AND THAT JIL WAS USING IT AS A ROUTING AGENCY ONLY FOR DISBURSEMENT OF VARIOUS SCHEMES SET TLEMENTS. THE ASSESSEE CLAIMED THAT SINCE THE AMOUNTS WERE IN THE NATURE OF REIMBURSEMENTS, TDS PROVISIONS WERE NOT A PPLICABLE. IT ALSO RELIED ON SEVERAL JUDICIAL DECISIONS IN ITS SUPPORT. 3. THE A.O. HELD THAT THE FACTS IN THE ASSESSEES CASE WERE DIFFERENT FROM THOSE IN THE CITED CASE LAWS. H E NOTED THAT IN THESE DECISIONS, THE TDS PROVISIONS WERE HELD TO BE NOT APPLICABLE IN RESPECT OF REIMBURSEMENT OF EXPENDITU RE AND THAT THE ASSESSEE ON THE OTHER HAND, HAD DEBITED THE EXP ENDITURE IN THE P & L ACCOUNT AND FURTHER, JIL HAD DEDUCTED TDS WHILE MAKING PAYMENTS TO THE ASSESSEE. A.O. CONCLUDED THA T THIS CLEARLY SHOWED THAT JIL HAD DEBITED THE RELEVANT AM OUNTS IN ITS P & L ACCOUNT AND CONSIDERED IT TO BE EXPENDITURE O N WHICH TDS PROVISIONS ARE APPLICABLE AND THE SAME LOGIC WA S APPLICABLE TO THE ASSESSEE. ACCORDINGLY, A.O. CONCL UDED THAT THE PAYMENTS OF RS.1,90,23,039/- ATTRACTS THE PROVI SIONS OF SECTION 40(A)(IA) AND DISALLOWED THE SAME. 3 ITA.NO.916/HYD/2013 M/S. AP MARKETERS, HYDERABAD. 4. BEFORE CIT(A), ASSESSEE FILED COPY OF THE AGREE MENT WITH M/S. JAGAJIT INDUSTRIES LTD. AND SUBMITTED THA T ASSESSEE WAS TO BE PAID FIXED REMUNERATION FOR QUANTITY OF S TOCK LIFTED BY RETAILERS WHEREAS THE OTHER SERVICES ARE RENDERE D BY THE RETAIL DEALERS WHICH ARE REIMBURSED BY JIL FROM TIM E TO TIME AND ASSESSEE ACTS ONLY AS AN AGENT FOR RECEIVING TH E AMOUNTS TO BE PASSED-ON TO THE RETAILERS. THEREFORE, PROVIS IONS OF TDS DO NOT APPLY. FURTHER, IT WAS CONTENDED THAT ITO HA S NOT SATISFIED THE PARTICULAR PROVISION UNDER WHICH, TDS SHOULD HAVE BEEN DEDUCTED BY IT THAT PROVISIONS OF SECTION 40(A)(IA) WERE ATTRACTED ONLY WHEN ASSESSEE WERE SHOWN TO BE LIABLE TO DEDUCT TAX. ASSESSEE RELIED ON THE FOLLOWING CASES BEFORE THE LD. CIT(A): I. UNITED HOTELS LTD. VS. ITO 93 TTJ 882 (DEL.) II. ITO VS. DR. WILLMAR SCHWAVE INDIA P. LTD. 1 SOT 71 III. JB BODA SURVEYORS P. LTD. VS. ACIT (ITA.NO.4252/MUM/2009) IV. DCIT VS. LAZARD INDIA P. LTD. (2010) 41 SOT 72 (MUM.) V. DCIT VS. CHOICE SANITARYWARE INDUSTRIES (2011) 9 TAXMANN.COM 120 (RAJKOT ). 5. ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ANALYZING THE CASE LAW RELIED UPON BY THE CIT(A ) LD. CIT(A) ULTIMATELY HELD THAT DISALLOWANCE UNDER SECTION 40( A)(IA) IS NOT ATTRACTED. THE ORDER OF LD. CIT(A) VIDE PARA 10 IS AS UNDER : 10. IN THE APPELLANTS CASE, THE RETAILERS HAD INC URRED CERTAIN EXPENSES ON BEHALF OF JIL. THE APPELLANT HA D COLLECTED DETAILS OF THESE EXPENSES AND RAISED DEBI T NOTES ON 4 ITA.NO.916/HYD/2013 M/S. AP MARKETERS, HYDERABAD. JIL. JIL HAD MADE PAYMENT TO THE APPELLANT OF THESE AMOUNTS WHICH WERE IN TURN DISBURSED BY THE APPELLA NT TO THE RETAILERS. IT IS CLEAR FROM THE FACTS THAT THE PAYMENTS ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED . INDEED, THE EXPENSES HAVE NOT EVEN BEEN INCURRED BY THE APP ELLANT BUT BY THE RETAILERS AND THE APPELLANT HAS MERELY A CTED AS A CONDUIT FOR THE PRINCIPAL TO MAKE PAYMENT TO THE RE TAILERS. FOLLOWING THE RATIO OF THE DECISIONS CITED ABOVE, T HE DISALLOWANCE U/S.40(A)(IA) IS SET ASIDE AND THE APP EAL IS ALLOWED. 6. LEARNED D.R. HOWEVER, SUBMITTED THAT LD. CIT(A) WAS WRONG IN DELETING THE ADDITION WITHOUT ANALYZIN G THE FACTS. IT WAS SUBMITTED THAT ASSESSEE HAS CLAIMED THE EXPE NDITURE AS ITS EXPENDITURE AND TDS WAS ALSO MADE BY JIL ON THE BILLS RAISED TO THE COMPANY AND THESE TWO ASPECTS WERE NO T CONSIDERED BY THE LD. CIT(A). ACCORDINGLY, GROUNDS ARE RAISED BY THE REVENUE ON THE ABOVE FACTS. 7. LD. COUNSEL PLACED ON RECORD THE AGREEMENT AND SUBMITTED THAT THESE AMOUNTS ARE REIMBURSEMENT ONLY . HE RELIED ON THE ORDERS OF THE CIT(A). HE ALSO EXPLAIN ED THE METHOD OF ACCOUNTING AND THE BILLS RAISED TAKING MO NTH OF OCTOBER, 2008 AS A SAMPLE. 8. WE HAVE PERUSED THE ORDERS AND DOCUMENTS PLACED ON RECORD. AS PER THE AGREEMENT WITH M/S. JAGATJIT INDUSTRIES LTD. DATED 1 ST JULY, 2008 THE ASSESSEE FIRM WAS APPOINTED FOR THE PERIOD EFFECTIVE FROM 1 ST JULY, 2008 TO 31 ST MARCH, 2009 FOR OFFERING THE SERVICES FOR THE BRANDS ARISTOCRAT PRE MIUM WHISKY AND ARISTOCRAT FINEST INDIAN WHISKY. THE AREA OF OP ERATION WAS ANDHRA PRADESH. THERE ARE 21 CLAUSES IN THE AGREEME NT. CLAUSE 13 IS PROVIDING REMUNERATION AS PER ANNEXURE -I WHICH INDICATE THAT ASSESSEE WAS TO GET RS.2/- PER CASE F OR ARISTOCRAT 5 ITA.NO.916/HYD/2013 M/S. AP MARKETERS, HYDERABAD. PREMIUM WHISKY AND RS.5/- PER CASE FOR ARISTOCRAT F INEST INDIAN WHISKY. HOWEVER, CLAUSE-14 STATES THAT EXPEN SES FOR INTER-DEPOT TRANSFER AND EXPENSES INCURRED TO FULFI LL THE CONDITIONS OF THE ABOVE CLAUSES WILL BE REIMBURSED ACCORDINGLY. CLAUSE-15 IS WITH REFERENCE TO STATEMENT OF THE COM MISSION AND PAYMENT WITHIN 30 DAYS FROM THE DATE OF SUBMISS ION OF DEBIT NOTES. CLAUSE-16 IS WITH REFERENCE TO TRADE S CHEMES. THIS EXPENDITURE ALSO WILL BE SETTLED WITHIN 30 DAYS FRO M THE DATE OF RECEIPT OF THE DEBIT NOTES DULY SUPPORTED WITH ALL VOUCHERS SIGNED BY THE RETAIL DEALERS WITH THEIR SEAL AND AL SO THE APBCL INVOICE TO VOUCH THEIR LIFTING (OF STOCKS). CLAUSE- 17 IS THAT ALL CASH PAYMENTS SETTLED BY THE ASSESSEE TO RETAIL DEA LERS AS PER CASH SCHEMES WILL BE SETTLED WITHIN 15 DAYS FROM D ATE OF RECEIPT OF THE DEBIT NOTE AT THE BRANCH SUPPORTED B Y ALL VOUCHERS SINGED BY THE RETAIL DEALERS. 9. EVEN THOUGH THE ABOVE CLAUSES STATE THAT EXPENS ES INCURRED BY THE ASSESSEE IN THE COURSE OF ITS OPERA TIONS WILL BE REIMBURSED BY THE COMPANY, CLAUSE-14 PERTAINS TO TH E EXPENDITURE INCURRED BY THE ASSESSEE FOR INTER-DEPO T TRANSFERS AND ALSO TO FULFILL THE CONDITIONS OF SERVICE. THIS MEANS, THIS EXPENDITURE MAY BE DIRECTLY INCURRED BY THE ASSESSE E OR ON BEHALF OF RETAIL DEALERS. WHEREAS, CLAUSES 16 AND 1 7 PERTAIN TO THE AMOUNTS TO BE SETTLED BY THE COMPANY JIL FOR TH E TRADES/SCHEMES WITH RETAIL DEALERS FOR WHICH ASSESS EE HAS TO SUBMIT ALL VOUCHERS DULY SIGNED BY THE RETAIL DEALE RS. 10. EVEN THOUGH ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THESE AMOUNTS ARE REIMBURSEMENT AND ALS O LD. CIT(A) ACCEPTED THE SAME, WE ARE OF THE OPINION THA T THIS ISSUE WAS NOT EXAMINED IN CORRECT PERSPECTIVE. IF THE AM OUNTS ARE TO 6 ITA.NO.916/HYD/2013 M/S. AP MARKETERS, HYDERABAD. BE SPENT BY THE RETAIL DEALERS, ASSESSEE HAS TO SU BMIT SEPARATE DEBIT NOTES DULY SUPPORTED BY THE INDIVIDUAL VOUCH ERS OF THE RETAIL DEALERS. IN THAT CASE, THE ORIGINAL EXPENDIT URE BEING INCURRED BY THE RETAILERS, ASSESSEE ACTS AS AN AGEN T. HOWEVER, ASSESSEE SUBMITTED THE MONTHLY DEBIT NOTES (DATED 2 2 ND NOVEMBER, 2008 WAS SUBMITTED AS A SAMPLE) AS A CONS OLIDATED BILL RAISED ON THE MAIN COMPANY. THIS DEBIT NOTE MI GHT BE FOR DIRECT EXPENDITURE INCURRED BY THE ASSESSEE AS THE COMPANY DEDUCTED TAXES ON WHICH THERE IS NO DISPUTE. ASSESS EE ALSO SHOWED THIS AS RECEIPT IN THE P & L ACCOUNT. IT IS AOS CONTENTION THAT HAVING PAID THE AMOUNTS TO VARIOUS RETAILERS, ASSESSEE SHOULD HAVE DEDUCTED TAX ON THIS AMOUNT, A S THE ASSESSEE ITSELF GOT THE AMOUNT AFTER TDS BY THE MAI N COMPANY. THIS CONTENTION HAS NOT BEEN EXAMINED CORRECTLY BY THE LD. CIT(A). AS PER THE AGREEMENT ASSESSEE HAS TO FORWAR D THE INDIVIDUAL VOUCHERS SIGNED BY THE RETAIL DEALERS WI TH THEIR SEAL AND ALSO WITH APBCL INVOICE FOR REIMBURSEMENT OF TH E EXPENDITURE TO THE RETAIL DEALERS. NO SUCH EVIDENCE WAS PLACED BEFORE US NOR BEFORE THE LD. CIT(A) THAT WHAT ASSES SEE GOT FROM THE COMPANY WAS REIMBURSEMENT OF EXPENDITURE INCURR ED BY THE RETAILERS. THEREFORE, WHETHER THAT IS ASSESSEE S EXPENDITURE WHICH WAS REIMBURSED AS PER CLAUSE-14 OR WHETHER RE TAILERS EXPENDITURE REIMBURSED UNDER CLAUSE-16/ CLAUSE17 IS TO BE EXAMINED. IN ORDER TO DECIDE WHETHER THIS IS A REIM BURSEMENT OF EXPENDITURE, SINCE COMPLETE FACTS ARE NOT EXAMIN ED BY THE LD. CIT(A), ORDER OF THE CIT(A) ACCEPTING THE ASSES SEES CONTENTION AND FOLLOWING VARIOUS PRINCIPLES OF LAW AS DECIDED IN VARIOUS CASES IS NOT APPROPRIATE AS FACTS OF EACH C ASE DIFFER SO THAT COMMON PRINCIPLES CANNOT BE APPLIED WITHOUT EX AMINING THE FACTS OF THE CASE. THEREFORE, WE ARE OF THE OPI NION THAT THIS 7 ITA.NO.916/HYD/2013 M/S. AP MARKETERS, HYDERABAD. ISSUE REQUIRES RE-EXAMINATION BY THE A.O. ASSESSING OFFICER IS DIRECTED TO ESTABLISH WHETHER THE AMOUNT IS EXPENDI TURE BY THE ASSESSEE OR REIMBURSEMENT OF EXPENDITURE ON BEHALF OF THE RETAILERS AND IN CASE, IF IT IS AN EXPENDITURE BY T HE ASSESSEE, WHETHER PROVISIONS OF TDS ARE ATTRACTED AND IF SO, TO WHAT EXTENT OF THE PAYMENTS MADE BY THE ASSESSEE TO VARI OUS DEALERS. IN ORDER TO EXAMINE THESE ASPECTS ON FACTU AL BASIS, MATTER IS RESTORED TO THE FILE OF THE A.O. FOR WHIC H THE ORDERS OF A.O. AND LD. CIT(A) ARE SET ASIDE. REVENUE GROUNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. NEEDL ESS TO MENTION THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNI TY TO EXPLAIN THE NATURE OF EXPENDITURE AND ALSO WHETHER PROVISIONS OF TDS ARE ATTRACTED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH APRIL, 2014 VBP/- COPY TO : 1. ITO, WARD 6(3), HYDERABAD. 2. M/S. A.P. MARKETERS, 8-2-541, ROAD NO.7, BANJARA HILLS, HYDERABAD. 3. CIT(A)-IV, HYDERABAD 4. CIT-III, HYDERABAD 5. D.R. ITAT, B BENCH, HYDERABAD.