M/s. The Alchemists Ark Private Limited, Pune V. Income tax Officer,

ITA 98/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5867 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , ! BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO.98/PUN/2017 / ASSESSMENT YEAR : 2012-13 M/S. THE ALCHEMISTS ARK PRIVATE LIMITED, B-101, SIGNET CORNER BUILDING, BANER ROAD, BANER, PUNE 411 007 PAN : AABCT5190J /APPELLANT VS. ITO, WARD-7(5), PUNE . / RESPONDENT / APPELLANT BY : SHRI RAMAKRISHNAN / RESPONDENT BY : SHRI SANJEEV GHEI / DATE OF HEARING : 31.01.2019 / DATE OF PRONOUNCEMENT: 31.01.2019 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF C IT(A)-5, PUNE, DATED 09-09-2016 IN RELATION TO THE ASSESSMENT YEAR 201 2-13. 2. BRIEFLY STATED, RELEVANT FACTS INCLUDE, THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANAGEMENT CONSULTANT. ASSES SEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.74,80,940/-. IN THE ASSESSMENT, THE AO NOTICED THAT THE ASSESSEE PAID RS.24 LAKHS (RS.12 LAKHS EACH) TO THE DIRECTORS, NAMELY MR. RAYMOND MOSES A ND MR. THIAGARAJAN SRIRAM AS VARIABLE PAY. AO OPINED THAT, IF THE VARIABLE PAY OF THESE TWO DIRECTORS IS ADDED, THEN THE PROFIT OF THE ASSE SSEE WOULD RISE. THUS, RELYING ON THE DECISION OF SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF ITA NO.98/PUN/2017 THE ALCHEMIST ARK PVT. LTD., 2 DALAL BROACHA STOCK BROKING (P) LTD. VS. ADDL.CIT 131 ITD 36 (ITAT MUM- SB), AO DISALLOWED THE SAME BEING IN THE NATURE OF DIVIDEND IN VOKING THE PROVISIONS OF SECTION 36(1)(II). AO ALSO MADE ADDITION OF RS.2,23,97 5/- ON ACCOUNT OF LATE PAYMENT OF TDS. IN THE FIRST APPEAL, THE CIT(A) AFFIRMED THE VIEWS OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 3. NOW THE ASSESSEE HAS APPROACHED THE TRIBUNAL RAISING THE FOLLOWING EFFECTIVE GROUND : 1. THE LD. CIT(A) ERRED IN DISALLOWING VARIABLE PAY DEFINED AS PERFORMANCE BONUS PAID TO THE DIRECTORS TO THE EXTENT OF RS.24 LAKHS . 4. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE INVOLVED IN THIS APPEAL RELATES TO THE TREATMENT OF DISALLOWA NCE OF VARIABLE PAY DEFINED AS PERFORMANCE BONUS PAID TO THE DIRECTORS. THIS IS A REC URRING ISSUE. THE TRIBUNAL, IN THE ASSESSEES OWN CASE, IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR 2011-12 REMANDED THE ISSUE TO THE FILE OF AO WITH CERTAIN DIRECTIONS. THE AO, IN THE REMAND PROCEEDING S DATED 22-11-2018, GIVING EFFECT TO THE ORDER OF TRIBUNAL, DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF BONUS PAID TO THE DIRECTO RS. A COPY OF THE ORDER OF TRIBUNAL ORDER IN ITA NO.755/PUN/2016, DATED 09- 05-2018 HAS BEEN PLACED ON RECORD. THUS, IT IS NOW A SETTLED ISSUE THA T THE CLAIM OF THE ASSESSEE IN RESPECT OF BONUS PAID TO THE DIRECTORS IS A N ALLOWABLE EXPENDITURE. THUS, LD. COUNSEL PRAYED FOR ALLOWING THE APP EAL OF THE ASSESSEE. 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON T HE ORDERS OF THE AO/CIT(A). 6. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF T HE AUTHORITIES BELOW. WE ALSO PERUSED THE ORDER OF TRIBUNAL IN ITA NO.755/ PUN/2016, ITA NO.98/PUN/2017 THE ALCHEMIST ARK PVT. LTD., 3 DATED 09-05-2018 FOR THE A.Y. 2011-12. ON PERUSAL OF TH E SAME, WE FIND THE TRIBUNAL, ON SIMILAR ISSUE, REMANDED THE MATTER TO THE FILE OF AO WITH FOLLOWING DIRECTIONS : 10. COMING TO THE SPECIAL BENCH DECISION OF MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF M/S. DALAL BROACHA STOCK BROK ING PVT. LTD. VS. ACIT (SUPRA), WE FIND THE AO NEED TO EXAMINE THIS ASPEC T AFTER COMPARING THE FACTS AS WELL AS THE NATURE OF PAYMENTS MADE TO THE TWO DIRECTORS. FURTHER, IT IS THE CASE OF THE ASSESSEE TH AT HIS CASE IS COVERED BY THE DECISIONS OF THE PUNE BENCH IN THE C ASE OF MAHAFEED SPECIALITY FERTILIZERS (INDIA) PVT. LTD. VS. ACIT AND IN THE CASE OF ARIHANTAM INFRAPROJECTS PVT. LTD. VS. JCIT (SUPRA). THERE FORE, THERE IS A REQUIREMENT OF COMPARING THE FACTS ON THE ISSUE TO THAT OF THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE ABOVE DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL EXPLAIN THE PROVISIONS RELATING TO SECTION 36(1)(II) OF THE ACT WHICH HELP THE AO TO COME TO PROPER APPRECIATION OF LEGAL POSITION QUA THE FACTS OF THE CASE. ACCORDINGLY, AS DISCUSSED IN OPEN COURT, WE ARE OF THE OPINION THAT THE REQUEST OF THE LD. COUNSEL FOR THE ASSESSEE FOR REMANDING THE ISSUE TO THE FILE OF AO NEED TO BE CONSIDERED FAVOURABLY. ACCORDINGLY, WE REMAND THE ISSUE TO THE FILE OF AO. AO SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDA NCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. AO SHALL EXAMINE THE JUDG MENTAL LAWS AND THE FACTS ON THE ISSUE AND PASS A SPEAKING ORDER . THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTIC AL PURPOSES. 6.1 BASED ON THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE R EMAND PROCEEDINGS, THE AO VIDE HIS ORDER DATED 22-11-2018, DELE TED THE ADDITION. FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THE RELEVANT COMPUTATION MADE BY THE AO AND THE SAME READS AS UNDER : 4. ON VERIFICATION OF THE VARIOUS DETAILS THAT HAVE BEEN PROVIDED BY THE ASSESSEE, THE ASSESSEE IS HEREBY COMPLETED AS UNDER : SL.NO. PARTICULAR AMOUNT (IN RS.) 1 INCOME AS PER 143(3) DATED 28/03/2014 51,64,222/- 2 RELIEF ALLOWED BY CIT(A) ON THE ISSUE OF REMITTANCE TO NON-RESIDENT (AFTER VERIFICATION) 4,34,133/- BONUS PAID TO DIRECTOR ITATS ORDER DATED 09/06/2018 30,00,000/- 3 ASSESSED INCOME 17,30,089/- ITA NO.98/PUN/2017 THE ALCHEMIST ARK PVT. LTD., 4 6.2 FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE GOT RELIEF IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THEREFORE, WE DIR ECT THE AO TO ADOPT SIMILAR REASONING AND ALLOW THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION TOO. THUS, THE ASS ESSEE SUCCEEDS ON THIS SOLITARY ISSUE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JANUARY, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 31 ST JANUARY, 2019 SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-5, PUNE 4. / THE PR.CIT-4, PUNE 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE. ITA NO.98/PUN/2017 THE ALCHEMIST ARK PVT. LTD., 5 DATE 1. DRAFT DICTATED ON 31-01-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 31-01-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.