M/s. I.P. Rings Ltd., CHENNAI V. DCIT, CHENNAI

MA 376/CHNY/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6711 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER M .P. NO S . 376 AND 377 / CHNY /2017 [IN I.T.A. NO S . 2667 & 2668 / CHNY /20 1 6 ] ASSESSMENT YEAR: 20 10 - 11 & 2011 - 12 M/S. I.P. RINGS LTD., NO. 24, ARJAY APEX CENTRE, COLLEGE ROAD, CHENNAI 600 006. [PAN: AAACI0908C] VS. THE DEPUTY COMMIS SIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI 600 006. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI AR.V. SREENIVASAN , J CIT / DATE OF HEARING : 16 .03.2018 / DATE OF P RONOUNCEMENT : 12 . 0 6 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE MISCELLANEOUS PETITION S ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 . THE GRIEVANCE OF THE ASSESSEE IS THAT THE TR IBUNAL IN I.T.A. NOS. 2667 & 2668/CHNY/2016 DATED 28.07.2017 PASSED THE ORDER WITH REGARD TO THE ISSUE OF CONFIRMATION OF DISALLOWANCE TOWARDS MARKETING SERVICE FEES PAID TO INDIAN PISTON LIMITED (IPL) ERRONEOUSLY. THE LD. AR O F THE ASSESSEE SUBMITTED THAT DURING THE M.P. NO S . 376 & 377 /CHNY/2017 2 RELEVANT PREVIOUS YEAR S , THE ABOVE SERVICE FEE WAS PAID TO THE IPL, THE PROMOTER OF THE ASSESSEE COMPANY TOWARDS PROMOTING AND MARKETING OF ASSESSEE S PRODUCTS. IPL GUIDES THE ASSESSEE IN PROMOTING AND SECURING ORDER ON BEHALF OF THE ASSESSEE A ND THE ABOVE AMOUNT PAID WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND IT SHOULD BE ALLOWED AS A DEDUCTION. AS PER THE LD. AR, WHILE DECIDING THE ISSUE, THE TRIBUNAL RELIED ON THE DECISION FOR THE ASSESSMENT YEARS 1999 - 2000, 2003 - 04 TO 200 5 - 06 IN ITA NOS. 1716 TO 1719/MDS/2010 VIDE ORDER DATED 25.02.2011 WHILE DISPOSING THE APPEALS. IT WAS FURTHER SUBMISSIONS OF THE LD. COUNSEL THAT BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 1999 - 2000, 2003 - 04 TO 2005 - 06, THE ISSUE WAS ALLOWANCE OF ADDITIO NAL PAYMENT OF .56,58,538/ - OVER AND ABOVE THE 5% ON SALES PAID FOR SERVICES RENDERED BY IPL. THE 5% ON SALES PAID TO IPL AS PER AGREEMENT WAS NEVER DISALLOWED. THE AMOUNT CLAIMED BY THE ASSESSEE WAS PAYMENT OF 3% UNDER THE AGREEMENT (REDUCED FROM 5% FOR EARLIER YEARS) AND THEREFORE, THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1999 - 2000, 2003 - 04 TO 2005 - 06 DOES NOT COVER OR DECIDE THE ISSUE ON APPEAL, WHICH IS APPARENT ON RECORD AND PRAYED FOR RECALLING AND RECTIFYING THE MISTAKE. 2. ON THE OTH ER HAND, THE LD. DR DID NOT SERIOUSLY OBJECT TO THE SUBMISSIONS OF THE LD. COUNSEL. M.P. NO S . 376 & 377 /CHNY/2017 3 3. WE HAVE HEARD BOTH SIDES, PERUSED THE ORDERS OF THE TRIBUNAL AS WELL AS ORDERS PASSED BY THE TRIBUNAL RELEVANT TO THE ASSESSMENT YEARS 1999 - 2000, 2003 - 04 TO 2005 - 06. W HILE ADJUDICATING THE ISSUE FOR THE ASSESSMENT YEARS 2010 - 11 & 2011 - 12, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 5. THE NEXT COMMON GROUND RAISED IN BOTH THE APPEALS OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF THE M ARKETING SERVICE FEES PAID TO INDIA PISTON LIMITED. THE LD. CIT(A) HAS CONFIRMED THE SAID DISALLOWANCE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS. WE ALSO GONE THROUGH THE ORDERS OF TRIBUNAL AND FIND THAT ON SIMILAR FACTS IN AN IDENTICAL ISSUE IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 1999 - 2000, 2003 - 04 TO 2005 - 06 IN I.T.A. NOS. 1716 TO 1719/MDS/2010 VIDE ORDER DATED 25.02.2011, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 8.4 WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATERIAL ON RECORD AS WELL AS RELEVANT PORTION OF THE ORDERS OF AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS CLAIMED A SUM OF .56,58,538/ - AS SALES PROMOTION EXPENSES IN ADDITION TO THE TECHNICAL CONSULTANCY FEE PAYABLE AT 5% OF THE TURNOVER TO THE IPL. IT IS ALSO NOT IN DISPUTE AS PER AGREEMENT WITH IPL THAT THERE IS NO STIPULATION IN THE AGREEMENT BETWEEN THE ASSESSEE AND IPL ABOUT PAYMENT OF SUCH AMOUNT AND IT IS ALSO NOT IN DISPUTE THAT SUCH TYPE OF CLAIM WAS EVER MADE IN THE IMMEDIATE PREVIOUS YEAR WHEN SUCH A HUGE PAYMENT IS STATED TO HAVE BEEN MADE ON THE BASIS OF SO CALLED ORAL COMMITMENT WITHOUT PLACING ANY MATERIAL OR E VIDENCE TO PROVE THE EXPEDIENCY OF SUCH EXPENDITURE WITH THE BUSINESS OF THE ASSESSEE OR ANY NEXUS OF THE EXPENDITURE WITH BUSINESS IN THIS REGARD. THE PLEA OF THE ASSESSEE IS THAT IT IS A TIE - UP WITH M/S. IPL FOR USING THEIR SALES DEPOT AND SALES NETWORK THROUGHOUT THE COUNTRY AND IPL BY VIRTUE OF THERE PRESENCE IN THE MARKET FOR MORE THAN 60 YEARS GUIDE THE ASSESSEE IN INTRODUCING THE NEW PRODUCT AND ACQUIRING ORDER FOR THE ASSESSEE ETC. WHEREAS, THE IP RINGS LTD. DOES NOT HAVE ANY MARKET SET UP IN ITS O WN AND WHEN SPECIFICALLY POINTED OUT THAT THERE IS ALREADY CLAUSE IN THE AGREEMENT FOR PAYMENT TECHNICAL CONSULTANCY FEE PAYABLE AT 5%, THE ASSESSEE S COUNSEL M.P. NO S . 376 & 377 /CHNY/2017 4 ASSERTED FURTHER THAT THERE WAS A DIRE NEED FOR SUCH EXPENDITURE AND IT HAS BEEN USED FOR LAUNCHI NG OF THE NEW PRODUCT WITHOUT WHICH THE ASSESSEE COULD NOT APPROPRIATELY MARKET THE NEW PRODUCT. BUT, WHEN ASKED TO SUPPLY CERTAIN DATA IN DETAILS ABOUT JUDGMENT AND OTHER DETAILS, THE ASSESSEE WAS UNABLE TO DO SO. CONSIDERING THE ENTIRETY OF FACTS, CIRCUM STANCES, MATERIAL ON RECORD, WE ARE INCLINED TO CONCUR WITH THE CONCLUSION AS DRAWN BY THE LD. CIT(A), WHO IS FOUND TO HAVE CONSIDERED EACH AND EVERY ASPECT OF THE ISSUE BEFORE ARRIVING AT THE CONCLUSION DRAWN BY HIM WHEN NO CONTRARY MATERIAL HAS BEEN PROV IDED BY THE ASSESSEE IN THIS REGARD AND DISMISS THIS GROUND OF APPEAL OF 1999 - 2000. 6. SINCE THE LD. CIT(A) HAS FOLLOWED THE ABOVE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL WHILE DECIDING THE ISSUE RAISED BY THE ASSESSEE, WE FIND NO INFIRMITY I N THE ORDER PASSED BY HIM AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED FOR BOTH THE ASSESSMENT YEARS. 4. ON PERUSAL OF THE ABOVE FINDINGS OF THE TRIBUNAL, WE FIND THAT FOR THE ASSESSMENT YEAR 1999 - 2000, 2003 - 04 TO 2005 - 06, THE ISSUE WAS ALLOWANCE OF ADDITIONAL PAYMENT OF .56,58,538/ - OVER AND ABOVE THE 5% ON SALES PAID FOR SERVICES RENDERED BY IPL, WHEREAS, FOR THE ASSESSMENT YEAR 2010 - 11 & 2011 - 12, THE ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO MARKETING SERVICE FEES PAID TO IP L. SINCE THE TRIBUNAL HAD NO OCCASION TO ADJUDICATE THE ABOVE ISSUE IN THE ASSESSMENT YEAR 1999 - 2000, 2003 - 04 TO 2005 - 06, WE ARE OF THE CONSIDERED OPINION THAT THERE IS MISTAKE APPARENT IN THE ORDER OF THE TRIBUNAL. THUS, WE RECALL THE ORDER OF THE TRIBUNA L DATED 28.07.2017 FOR LIMITED PURPOSE TO ADJUDICATE THE ISSUE OF CONFIRMATION OF DISALLOWANCE OF THE MARKETING SERVICE FEES PAID TO IPL RAISED IN BOTH THE APPEALS. ACCORDINGLY, T HE REGISTRY IS DIRECTED TO FIX THE M.P. NO S . 376 & 377 /CHNY/2017 5 APPEAL S IN I.T.A. NO S . 2667 & 2668/CHNY/20 16 FOR HEARING IN DUE COURSE AFTER GIVING NOTICE TO THE PARTIES. 5 . IN THE RESULT, THE MP FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON THE 12 TH JUNE , 201 8 AT CHENNAI. SD/ - SD/ - ( ABRAHAM P. GEORGE ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 12. 0 6 . 201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.