THE OCEANIC SHIPPING AGENCY P .L TD, V. DCIT CEN CIR 36,

MA 179/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6423 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 1999-2000
• Appeal Filed On: 22-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR ABHAY KANTA NAYAK
• Assessee Lawyers: PHEROZE A DHANBHOORA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI D. MANMOHAN, VICE-PRESIDENT AND SHRI P .M. JAGTAP, AM M.A.NO.179/MUM/2010 (ARISING OUT I.T.A.NO.775/MUM/2003) ASSESSMENT YEAR : 1999-2000 THE OCEANIC SHIPPING AGENCY PVT. LTD., DARABSHAW HOUSE, 4 TH FLOOR, S.V. MARG, BALLARD ESTATE, MUMBAI 400 001. PAN: AAACT 1544 A VS. THE DY.COMMISSIONER OF INCOME-TAX, CENT. CIRCLE-36, PRATYAKSHA KAR BHAVAN, BKC, BANDRA (E), MUMBAI 400 051. (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI NISHANT THAKKAR & SHRI PHEROZ E A. DHANBHOORA RESPONDENT BY : DR. ABHAY KANTA NAYAK O R D E R PER P.M. JAGTAP, AM: BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE IS SEEKING RECTIFICATION OF THE MISTAKES ALLEGED TO HAVE CREPT IN THE ORDER OF THE TRIBUNAL DATED 23 RD MARCH, 2006 PASSED IN I.T.A. NO. 775/MUM/2003. 2. THE ASSESSEE IN THE PRESENT CASE HAD ENTERED INT O AN AGENCY AGREEMENT WITH CROATIA LINE, THE FOREIGN PRINCIPAL. AS PER T HE SAID AGREEMENT, BROKERAGE PAYABLE TO INDIAN EXPORTERS/BROKERS FOR PROVIDING E XPORT ORDERS WAS PAYABLE BY THE FOREIGN PRINCIPAL. THE BROKERAGE SO PAYABLE WAS BEING DEDUCTED BY THE ASSESSEE FROM THE GROSS FREIGHT COLLECTED ON BEHAL F OF THE FOREIGN PRINCIPAL AND THE AMOUNT SO DEDUCTED WAS CREDITED TO THE BROKERAGE P AYABLE ACCOUNT, FROM WHICH FURTHER PAYMENTS WERE BEING MADE TO INDIAN EXPORTER S/BROKERS. M/S. CROATIA LINE WAS DECLARED BANKRUPT AND THE AMOUNT LYING IN THE B ROKERAGE PAYABLE ACCOUNT WITH THE ASSESSEE AMOUNTING TO RS. 6,51,510/- WHICH HAD REMAINED UNPAID WAS ADDED BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAID ADDITION AND THE TRIBUNAL VIDE ITS ORDER DATED 23.0 3.2006 (SUPRA) UPHELD THE ORDER MA NO.179/M/2010 THE OCEANIC SHIPPING AGENCY P. LTD. . . 2 OF THE LEARNED CIT(A) ON THIS ISSUE FOR THE FOLLOWI NG REASONS GIVEN IN PARA 7 OF ITS ORDER: WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH TH E SIDES, MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BE LOW. ADMITTEDLY THE ASSESSEE HAS CLAIMED THAT AMOUNT APPEARING UNDE R THE HEAD BROKERAGE PAYABLE IS TO MEET LIABILITY OF THE PRINC IPAL IN FUTURE. IT IS ALSO NOTED THAT THE ASSESSEE HAS HIMSELF WRITTEN OF F A SUM OF RS.6,50,000/- OUT OF SUCH ACCOUNT. NO DETAILS OF EX PENSES PAYABLE ON BEHALF OF TRIBUNAL HAVE BEEN GIVEN TO THE REVENU E AUTHORITIES. THE ASSESSEE HAS NOT PRODUCED SUCH DETAILS EVEN AT THIS STAGE. WE FIND THAT IN SIMILAR CIRCUMSTANCES THE TRIBUNAL IN THE CASE OF APL(I) P. LTD. (SUPRA) DIRECTED THE ASSESSING OFFICER TO V ERIFY THE FACTS OF LIABILITY TO BE MET BY THE ASSESSEE SUBSEQUENTLY, A ND IF SO, THEN SUCH PORTION SHOULD BE REDUCED FROM THE LIABILITIES AND ONLY UNPAID LIABILITIES COULD BE BROUGHT TO CHARGE OF TAX. IT WAS FURTHER HELD THAT IN ANY CASE IF ON ANY TIME IN FUTURE THE ASSESSEE W AS COMPELLED TO WITH THAT ANY PORTION OF LIABILITIES TREATED AS INC OME CHARGEABLE U/S. 28(IV) OF THE INCOME-TAX ACT, THE ASSESSEE COULD CL AIM DEDUCTION OF THE SAME UNDER THE PROVISIONS OF THE I.T. ACT. IN THE PRESENT CASE, IT IS CLEAR THAT THESE MONEYS ARE HELD BY THE ASSES SEE FOR THE PURPOSE OF INCURRING EXPENSES AT A FUTURE DATE. HO WEVER, THE ASSESSEE HAS SNOT MAINTAINED RECORD OR ANY DETAILS ABOUT THE PERSONS TO WHOM SUCH LIABILITIES ARE PAYABLE BY WAY OF DISBURSEMENT OF ANY EXPENSES. THESE AMOUNTS ARE IN THE NATURE O F TRADING RECEIPTS SINCE BEGINNING ALTHOUGH THE SAME HAVE BEE N SHOWN AS LIABILITIES. AGAINST THIS RECEIPTS THE CLAIM IS THA T CERTAIN EXPENSES ARE TO BE PAYABLE IN FUTURE HOWEVER IF SUCH EXPENSES AR E NEVER PAID AND THE ASSESSEE HAS NO RECORD TO SUBSTANTIATE THAT SUC H EXPENSES ARE ACTUALLY PAYABLE IN FUTURE, ULTIMATELY THE SURPLUS IS GOING TO REMAIN WITH THE ASSESSEE AND FOR ALL PRACTICAL PURPOSES, I T IS TO BE TREATED AS ASSESSEES INCOME CHARGEABLE TO TAX U/S.28(IV) OF T HE IT ACT. HAVING STATED SO, WE ARE OF THE FURTHER VIEW THAT IF, AT A NY POINT OF TIME IN FUTURE, THE ASSESSEE MAKES ANY PAYMENT TOWARDS BROK ERAGE ETC. CONNECTED WITH THIS AMOUNT THE SAME CAN BE CLAIMED AS DEDUCTION AS PER THE PROVISIONS OF LAW. IN THIS VIEW OF THE M ATTER THESE GROUNDS OF THE ASSESSEE ARE REJECTED. 3. AS SUBMITTED BY THE ASSESSEE IN THE PRESENT MISC ELLANEOUS APPLICATION AND FURTHER REITERATED BY THE LEARNED COUNSEL FOR T HE ASSESSEE AT THE TIME OF HEARING BEFORE US, THE BENEFIT IN RESPECT OF THE AM OUNT OF RS. 6,51,510/- LYING IN THE BROKERAGE PAYABLE ACCOUNT HAD BEEN RECEIVED BY THE ASSESSEE IN CASH AND THE SAME, THEREFORE, WAS NOT COVERED BY THE PROVISIONS OF SECTION 28(IV) AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA VS. CIT (261 ITR 501)(BOM.). IT HAS BEEN SUBMITTED THAT THE ORDER O F THE TRIBUNAL DATED MA NO.179/M/2010 THE OCEANIC SHIPPING AGENCY P. LTD. . . 3 23.03.2006 CONFIRMING THE ADDITION MADE ON ACCOUNT OF BROKERAGE PAYABLE BY APPLYING THE PROVISIONS OF SECTION 28(IV) THUS IS N OT IN CONFORMITY WITH THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF MAHINDRA & MAHINDRA (SUPRA), WHICH IS A BINDING PRECEDENT. RELYING ON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O ACIT VS. SAURASHTRA KUT CH STOCK EXCHANGE LTD. (305 ITR 227 (SC), IT IS CONTENDED THAT THE SAID ORDER T HUS SUFFERS FROM A MISTAKE WHICH IS APPARENT FROM RECORD AND THE SAME IS LIABLE TO B E RECTIFIED U/S.254(2) OF THE ACT. HOWEVER, AS RIGHTLY POINTED OUT BY THE LEARNED DEPA RTMENTAL REPRESENTATIVE FROM THE RELEVANT PORTION OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA), WHILE DECIDING THE ISSUE RELATING TO THE APPLICABILITY OF SECTION 28(IV) TO THE FACTS OF TH E SAID CASE, IT WAS CLARIFIED BY THEIR LORDSHIPS THAT THE DECISION BEING RENDERED BY THEM WAS CONFINED TO THE FACTS OF THAT CASE. MOREOVER, GOING BY THE NATURE OF AMOUNT WHICH WAS LYING IN THE BROKERAGE PAYABLE ACCOUNT, IT IS DIFFICULT TO SAY C ERTAINLY THAT THE BENEFIT ARISING TO THE ASSESSEE IN RESPECT OF THE SAID LIABILITY WAS I N CASH AND NOT IN KIND. THE APPLICABILITY OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) TO THE FACTS OF THE ASS ESSEES CASE THUS IS A HIGHLY DEBATABLE ISSUE AND THE SAME, IN OUR OPINION, IS BE YOND THE SCOPE OF RECTIFICATION PERMISSIBLE UNDER SECTION 254(2) OF THE ACT. WE, T HEREFORE, FIND NO MERIT IN THIS MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE AND DISMISS THE SAME BEING DEVOID OF ANY MERIT. 4. IN THE RESULT, THE MISCELLANEOUS APPLICATION FI LED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS _27 TH DAY OF APRIL 2011. SD. SD. (D. MANMOHAN) (P.M. JAGTAP) VICE-PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED THE 27 TH APRIL, 2011. KN MA NO.179/M/2010 THE OCEANIC SHIPPING AGENCY P. LTD. . . 4 COPY TO: 1. THE ASSESSEE 2. THE ITO-16(1)(1), MUMBAI 3. THE CIT, CITY XVI, MUMBAI 4. THE CIT(A)-XVI, MUMBAI 5. THE DR B BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI