ITO, Bangalore V. Smt. Rita H.O., Bangalore

ITA 951/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5591 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARESH SAKA
• Assessee Lawyers: H N KHINCHA
• Section: 143(3)

Judgement Text

PAGE 1 OF 5 ITA NO.951/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.951/BANG/2010 (ASSESSMENT YEAR 2006-07) THE INCOME TAX OFFICER, WARD-1(2), BANGALORE. - APPELLANT VS SMT. RITA H.O., NO.104, SHAKTI BAZAR, COMMERCIAL STREET, BANGALORE-1. - RESPONDENT APPELLANT BY : SHRI NARESH SAKA, JCIT RESPONDENT BY : SHRI H N KHINCHA, C.A. ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT IS DIREC TED AGAINST THE ORDER OF LEARNED CIT(A)-I, BANGALORE DA TED 17/05/2010. THE ASST. YEAR CONCERNED IS 2006-07. 2. THE ISSUES INVOLVED IN THIS CASE ARE WHETHER TH E CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCES M ADE BY THE AO AMOUNTING TO RS.15,99,058/- AND RS.6,77,701/- BY INV OKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE I T ACT. PAGE 2 OF 5 ITA NO.951/BANG/2010 2 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS AN INDIVIDUAL. SHE WAS ENGAGED I N THE BUSINESS OF OUTDOOR CATERING. FOR THE CONCERNED AS ST. YEAR, RETURN OF INCOME WAS FILED ON 31.10.2006 DECLARING AN INCO ME OF RS.8,37,310/-. THE ASSESSMENT WAS TAKEN UP FOR SCR UTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. THE AO, IN THE COURSE OF SCRUTINY ASSESSMENT, NOTICED THAT THE BOOKS OF ACCOU NT REVEAL THAT THE ASSESSEE HAD DEBITED A SUM OF RS.15,99,058/- TO WARDS COMMISSION AND RS.6,77,701/- TOWARDS HANDLING CHARG ES. THESE WERE PAYMENTS EFFECTED TO KARNATAKA GOLF ASSOCIATION AND BANGALORE CLUB RESPECTIVELY. FOR THESE PAYMENTS, NO TAX HAS BEEN DEDUCTED AT SOURCE. ACCORDING TO THE AO, THE PROVI SIONS OF SECTION 40A(IA) HAS BEEN ATTRACTED AND DISALLOWED THE EXPEN DITURES CLAIMED AND BROUGHT THE SAME TO TAX WHILE COMPLETING THE SC RUTINY ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 1 2/12/2008. 4. AGGRIEVED BY THE SCRUTINY ASSESSMENT COMPLETED, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY. 5. IT WAS SUBMITTED BEFORE THE FIRST APPELLATE AUT HORITY WITH REFERENCE TO THE ADDITION OF RS.15,99,058/-, T HAT THE ENTIRE EARNING IS FROM KARNATAKA GOLF ASSOCIATION (KGA) WH EREIN THE ASSESSEE WAS PROVIDED WITH KITCHEN TO PREPARE FOOD AND TO SERVE THE MEMBERS OF KGA. THE KGA USED TO COLLECT THE BI LLS AND KEEP 15% THEREFROM AND PASS THE REST TO THE ASSESSEE ON MONTHLY BASIS. PAGE 3 OF 5 ITA NO.951/BANG/2010 3 IT WAS SUBMITTED THAT THE PAYER IS NOT THE ASSESSEE BUT THE KGA. THEREFORE, THE NATURE OF PAYMENT IS NOT COMMISSION B UT RECEIPT FOR THE SALE OF FOOD AND BEVERAGES BY THE ASSESSEE AND A T NO STRETCH OF IMAGINATION, WITHHOLDING OF 15% BY KGA CAN BE TER MED AS COMMISSION PAYMENT BY THE ASSESSEE. 5.1 IN RESPECT OF ADDITION OF RS.6,77,701, THE ASS ESSEE SUBMITTED THAT THE NATURE OF PAYMENT IS NOT COMMISSI ON BUT TRADE DISCOUNT AND HERE TOO, THE PAYER IS M/S BANGALORE CL UB AND THE PAYEE IS THE ASSESSEE FOR A SUM OF RS.6,77,701/-. 6. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE B Y HOLDING THUS:- I FIND THE ARGUMENTS MADE ABOVE HAVE MERITS AND STRENGTH. SUCH PAYMENTS CANNOT BE TERMED AS COMMISSION PAID BY THE APPELLANT AND THEREFORE NOT COVERED WITHIN THE AMBIT OF SEC.40(A)(IA) OF I T ACT. HENCE, ADDITIONS ARE DELETED. GROUND OF APPEAL IS ALLOWED. 7. THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE FIRST APPELLATE AUTHORITY IS IN APPEAL BEFORE US. 8. THE LEARNED DR SUBMITTED THAT THE CIT(A) HAS ER RED IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF EXPENDITURE INCURRED TOWARDS PAYMENT OF COMMISSION AMOUNTING TO RS.15,99,098/- AND RS.6,77,701/- ON ACCOUNT OF EXPE NDITURE INCURRED TOWARDS HANDLING CHARGES, WHICH WERE DEB ITED IN THE PAGE 4 OF 5 ITA NO.951/BANG/2010 4 PROFIT AND LOSS ACCOUNT. HE FURTHER SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THAT EVEN IF THE COMMISSION IS CONSIDERED AS RENT AS PER THE ARGUMENT OF THE ASSESSEE, THE PROVI SIONS OF SECTION 194I ARE ATTRACTED ON THE PAYMENT OF RS.15,99,098/- AND HENCE, THE AO HAS RIGHTLY MADE THE DISALLOWANCE U/S 40(A)(I A) OF THE ACT. HE WAS ARGUED THAT THE CIT(A) HAS ERRED IN CONSIDER ING THE EXPENDITURE OF RS.6,77,701/- AS DISCOUNT AS PER T HE ARGUMENT OF THE ASSESSEE INSTEAD OF HANDLING CHARGES. 9. THE LEARNED AR ON THE OTHER HAND SUPPORTED THE FINDINGS/CONCLUSION OF THE FIRST APPELLATE AUTHORIT Y. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. AT THE VERY OUTSET, WE WOULD LIKE TO POINT OUT THAT THE AUTHORITIES HAVE NOT PROPERTY ANALYSED THE I SSUES IN DEPTH. THE NATURE OF AMOUNTS RETAINED BY KGA AND BANGALORE CLUB HAS NOT BEEN EXAMINED. THE AGREEMENTS BETWEEN THE ASSESSEE AND THE KGA AND THE ASSESSEE WITH THE BANGALORE CLUB OUGHT TO HAVE BEEN PERUSED IN ORDER TO DETERMINE THE TRUE NATURE OF TH E AMOUNTS RETAINED BY THE KGA AND BANGALORE CLUB. IN THE ABSE NCE OF SUCH DOING, WE ARE OF THE OPINION THAT THE MATTER NEEDS FRESH LOOK BY THE AO. ACCORDINGLY, THESE ISSUES ARE REMITTED BAC K TO THE FILE OF THE AO, WHO SHALL DETERMINE THE NATURE OF AMOUNTS R ETAINED BY THE KGA AND THE BANGALORE CLUB AND WHETHER THE SAME WAR RANTS TAX DEDUCTION AT SOURCE. NEEDLESS TO SAY, THE ASSESSEE SHALL BE HEARD IN THE MATTER. THE ASSESSEE SHALL COOPERATE WITH T HE AO FOR PAGE 5 OF 5 ITA NO.951/BANG/2010 5 EXPEDITIOUS DISPOSAL AND FOR A PROPER FRAMING OF TH E ASSESSMENT ORDER. 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON TUESDAY, THE 31 ST DAY OF MAY, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/30/5. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.