JAYA MARKETING, V. ADDL CIT 12(3),

MA 142/MUM/2015

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 5013 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2003-2004
• Appeal Filed On: 30-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJNEESH K ARVINDDR
• Assessee Lawyers: J D MISTRY; NITESH JOSHIARS

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMA RJIT SINGH, JUDICIAL MEMBER / MA NO.142 ,143 & 144/MUM/2015 (ARISING OUT OF / ITA NO.6474 , 6475& 5131/MUM/2011) /ASSESSMENT YEAR-2003-04 , 2004-05 AND 2005-06) M/S. JAYA MARKETING VTM BUILDING, GALA NOS.2,3 AND 4 MEHRA COMPOUND, ANDHERI KURLA COMPOUND,MUMBAI-400 056. PAN:AADFJ 5774 D VS. ADDL. CIT-12(3) AAYAKAR BHAVAN, 2ND FLOOR M.K. ROAD, CHURCHGATE MUMBAI-400020. REV ENUE BY: SHRI RAJNEESH K. ARVIND-DR ASS ESSEE BY: SHRI J.D. MISTRY & NITESH JOSHI-ARS / DATE OF HEARING: 23.09.2016 / DATE OF PRONOUNCEMENT: 14.10.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , ! / PER RAJENDRA A.M. - VIDE ITS APPLICATION,DATED 03.05.2016,THE ASSESSEE- COMPANY HAS STATED THAT THERE WERE CERTAIN MISTAKES IN THE ORDER OF THE TRIBUNAL,THAT SAME WER E TO BE RECTIFIED AS PER PROVISIONS OF SECTION 254(2) OF THE ACT.IN ITS APPLICATION,THE AS SESSEE CONTENDED THAT IT HAD ENTERED INTO A DISTRIBUTORSHIP AGREEMENT (24.7.02) WITH BDA LTD.(B DAL),THAT AS PER THE AGREEMENT IT HAD TO PURCHASE THE IMFL PRODUCTS FROM BDAL AT RATES CH ARGED BY THE SUPPLIERS, THAT IT HAD TO SELL THE SAID PRODUCTS AT SALE PRICE DECIDED BY BDA L,THAT AS PER THE AGREEMENT THE ASSESSEE WAS ENTITLED TO GET DISTRIBUTION CHARGES AND CERTAI N REIMBURSEMENT CHARGES, THAT EXCESS OF SALE PRICE-OVER PURCHASE PRICE OF IMFL PRODUCTS PURCHASE D FROM BDAL AND SOLD TO THE DISTRIBUTORS-DID NOT BELONG TO THE ASSESSEE, THAT T HE GOODS BELONGED TO BDAL AS PER CL.7(D) OF THE AGREEMENT, THAT THE SPECIAL AUDITOR, IN HIS REP ORT,HAD ACCEPTED THAT POSITION OF THE ASSESSEE WAS THAT OF THE A DISTRIBUTOR, THAT THE AS SESSEE HAD FURNISHED CONFIRMATION, DT. 30. 11.12,FROM BDAL WHEREIN IT WAS CONFIRMED THAT BDAL HAD RECEIVED MARKETING SERVICE CHARGES/ROYALTY FROM THE ASSESSEE,THAT BDAL HAD REF LECTED THE ROYALTY RECEIPT IN ITS BOOKS OF ACCOUNT, THAT THE TRIBUNAL HAD HELD THAT THE ASSESS EE HAD TO PROVE THAT THE ROYALTY PAID BY IT TO BDAL HAD BEEN OFFERED TO TAX BY THE RECEIPIENT,THAT THE ADDITION MADE BY THE AO AND UPHELD BY THE TRIBUNAL WAS A MISTAKE APPARENT FROM RECORD, THAT NON CONSIDERATION OF SUCH A CRUCIAL EVIDENCE RESULTED IN DISMISSING THE APPEAL OF THE A SSESSEE,THAT WHILE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT AS PER THE PROVISIONS OF SECTIO N 145(3) OF THE ACT, THE TRIBUNAL HAD OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED ANY STOCK REGISTER, THAT TREATMENT GIVEN TO MA/142 & 143/M/15-JAYA MARKETING 2 ROYALTY AMOUNT RECEIVED BY BDAL IN ITS BOOKS OF ACC OUNT WAS NOT AVAILABLE ON RECORD, THAT AO HAD TO GIVE THE REASONS FOR REJECTING THE BOOKS OF ACCOUNT, THAT THE FAA HAD SUPPLEMENTED THE REASONS FOR INVOKING THE PROVISION S OF SECTION 145(3) OF THE ACT AND THE TRIBUNAL HAD UPHELD THE ORDER, THAT THE TRIBUNAL HA D MISTAKENLY HELD THAT PAYMENT OF ROYALTY TO BDAL BY THE ASSESSEE WAS NOT SUPPORTED BY ANY MA TERIAL OR WAS NOT CONFIRMED BY BDAL,THAT IT HAD MAINTAINED A DETAILED STOCK REGIS TER AS REQUIRED BY THE EXCISE REGULATION ON DAILY BASIS (FORM-FLR-1) AND MONTHLY BASIS (FORM FL R-2),THAT THOSE DOCUMENTS CONTAINED THE INFORMATION REGARDING OPENING STOCK,PURCHASES,S ALES AND CLOSING STOCK,THAT THE SPECIAL AUDITOR HAD SCRUTINISED THE STOCK REGISTERS, THAT T HE TRIBUNAL VIDE ORDER SHEET NOTING DT.09. 05. 12 HAD DIRECTED THE ASSESSEE TO PRODUCE DETAILS OF LICENCE PROCURED ALONGWITH DETAILS WITH TCS COLLECTED BY BDAL AND THE COPY OF ASSESSMENT OR DER IN CASE OF BDAL,THAT THE ASSESSEE HAD FILED THE COPY OF LICENCE PROCURED BY IT FOR MA RKETING THE IMFL PRODUCTS, THAT THE DETAILS OF TCS COLLECTED BY BDAL FROM THE ASSESSEE WERE FIL ED BY THE CIT-(DR) BEFORE THE TRIBUNAL ON 29. 06.12,THAT THE ASSESSEE COULD NOT FILE THE A SSESSMENT ORDER OF BDAL,THAT IT HAD NO ACCESS TO THE SAME,THAT THERE WAS NO KNOWN COMPLIAN CE ON BEHALF OF THE ASSESSEE WITH REGARD TO THE DIRECTIONS GIVEN BY THE TRIBUNAL ON 09.05.12 ,THAT THE TRIBUNAL HAD HELD THAT DISTRIBUTION CHARGES WERE NOT AS PER THE DISTRIBUTORSHIP AGREEME NT AND THAT IN EARLIER YEARS THE ASSESSEE HAD ACCEPTED DISTRIBUTORSHIP CHARGES AT 27% OF INTE REST FREE DEPOSIT PLACED BY IT WITH BDAL,THAT THERE WAS NO MIS-MATCH BETWEEN THE FIGURE S APPEARING AS PER THE DISTRIBUTION AGREEMENT AND THE BOOKS OF ACCOUNT MAINTAINED BY IT WITH REGARD TO ROYALTY PAYMENT, THAT IT HAD PURCHASED AND SOLD THE IMFL PRODUCTS AND HAD CO MPLIED WITH THE REGULATORY REQUIRE- MENTS OF SALES TAX LAW,THAT THE ASSESSEE WAS ONLY E NTITLED TO DISTRIBUTORSHIP CHARGES AS WELL AS REIMBURSEMENT OF SPECIFIED EXPENSES, THAT THE AGREE MENT STIPULATED THAT EXCESS OF SALE PRICE REALIZED BY THE ASSESSEE FROM THE SALE OF IMFL PROD UCTS WERE TO BE PASSED ON TO THEM AND SAME WAS REFERRED TO AS ROYALTY, THAT DISTRIBUTION CHARGES RECEIVED BY THE ASSESSEE FROM BDAL WERE NOT THE DECIDING FACTOR FOR ALLOWING THE ROYALTY, THAT IT HAD RECEIVED DISTRIBUTION CHARGES OF RS.2.49 CRORES FOR THE YEAR UNDER CONSID ERATION, THAT THE SAID AMOUNT WAS REFLECTED IN THE RETURN OF INCOME,THAT THE REVENUE AUTHORITIE S HAD NOT ALLEGED THAT IT HAD RECEIVED MORE THAN RS.2.49CRORES OR HAD A RIGHT TO RECEIVE AN AMO UNT IN EXCESS OF THE SAID AMOUNT, TAT THE TRIBUNAL HAD WRONGLY HELD THAT DISTRIBUTION CHARGES WERE NOT IN CONFORMITY WITH THE AGREEMENT. 2. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR), REITERATED THE SUBMISSIONS MADE IN THE APPLICATION.HE FURTHER ARGU ED THAT BDAL HAD SHOWN THE AMOUNT MA/142 & 143/M/15-JAYA MARKETING 3 RECEIVED FROM THE ASSESSEE IN THE BOOKS OF ACCOUNT FOR THE RELEVANT AY.S, THAT THE LEDGER ACCOUNT OF THE ASSESSEE AS WELL AS BDAL WERE AVAILA BLE ON THE FILE OF THE TRIBUNAL,THAT IT HAD RECEIVED CERTAIN AMOUNTS FOR REIMBURSEMENT AND SUPP LY BY BDAL,THAT THERE WAS NO DISCREPANCY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE BDAL WITH REGARD TO ROYALTY PAYMENT/ DISTRIBUTION CHARGES RECEIVED, THAT IT WAS A CASE OF DOUBLE TAXATION.HE REFERRED TO PARTY-WISE DETAILS OF MARKETING SERVICES INCOME OF BDAL, ANNUAL REPORT OF BDAL AND STATED THAT TRIBUNAL HAD IGNORED THE BASIC FACT OF OFFERI NG INCOME BY BDAL.THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETIO N OF THE BENCH. 3. CONSIDERING THE FACT THAT THE ASSESSEE HAD ARGUED THAT BDAL HAD OFFERED THE AMOUNT IN QUESTION FOR TAXATION AND IT WAS A CASE OF DOUBLE T AXATION IT WAS DECIDED TO FIND OUT THE FACTUAL REPORT FROM THE AO. VIDE ITS LETTER DT.21.9.16, THE AO HAD INFORMED THAT IT HAD CALLED FOR THE DETAILS WITH RESPECT TO PAYMENTS MADE/RECEIPTS TO/F ROM BDAL WITH REFERENCE TO ROYALTY FOR THE PERIOD 2003-04 TO 2005-06,THAT BDAL WAS ALSO DI RECTED TO FURNISH COPIES OF THE INCOME TAX RETURN,COMPUTATION OF INCOME AND AUDIT REPORT F OR THE ABOVE MENTIONED 3 AY.S, THAT THE PERUSAL OF THE DETAILS REVEALED THAT THE ASSESSEE H AD MADE PAYMENT OF RS.7.31 CRORES (AY.2003-04),RS.10.33 CRORES(AY. 2004-05) AND RS.7 .80 CRORES (AY.2005-06) RESPECTIVELY TO BADL,THAT THE ABOVE FIGURES WERE REFLECTED IN TH E LEDGER ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF BDAL, THAT BDAL HAD RECEI VED ROYALTY OF RS.98.46 CRORES (AY.2004-05)AND RS.78.69 CRORES (AY.2005-06) RESPEC TIVLEY,THAT IN SUPPORT OF THE PAYMENT RECEIVED FROM THE ASSESSEE BDAL HAD FURNISHED COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN ITS BOOKS OF ACCOUNT SHOWING THE RECEIPT OF ROYALTY . 4. WE FIND THAT,WHILE DECIDING THE ISSUE,THE TRIBUNAL HAD UPHELD THE DISALLOWANCE OF ROYALTY PAYMENT MADE BY THE APPLICANT TO BDAL,THAT IT WAS A LSO HELD THAT THERE WAS NO EVIDENCE OF PAYMENT OF ROYALTY TO BDAL,THAT AT THE TIME OF PASS ING THE ORDER THE DETAILS OF PAYMENT MADE TO THE ASSESSEE UNDER THE HEAD ROYALTY WERE NOT MA DE AVAILABLE,THAT THE ASSESSEE AT THE TIME OF HEARING OF THE ORIGINAL APPEAL HAD ARGUED THAT T HE ROYALTY PAYMENT AND DISTRIBUTION CHARGES RECEIVED WERE DIFFERENT TRANSACTIONS. CONSIDERING T HE FACT-THAT THE ASSESSEE HAD SHOWN DISTRIBUTION CHARGES IN ITS RETURN OF INCOME AND TH E AO HAD STATED THAT BDAL HAD OFFERED THE ROYALTY RECEIPT FOR TAXATION-WE ARE OF THE OPINION THAT MATTER NEEDS TO BE REHEARD AFRESH.THE REPORT OF THE AO SUPPORTS THE CONTENTIONS RAISED BY THE ASSESSEE IN ITS APPLICATION. THEREFORE, WE ARE OF THE OPINION THAT IT IS A FIT CASE TO RE-C ALL OUR ORDER FOR THE ABOVE MENTIONED THREE AY.S.REGISTRY IS DIRECTED TO FIX THE MATTER TO BE HEARD DE-NOVO BY THE REGULAR BENCH. MA/142 & 143/M/15-JAYA MARKETING 4 AS A RESULT, MISCELLANEOUS APPLICATIONS FILED BY TH E ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2016. !'#$ 14 %&' , 2016 ()* SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14. 10.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.