M/s Maruti Insurance Distribution Services Ltd., New Delhi V. ACIT, New Delhi

MA 75/DEL/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6023 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS MONA MOHANTY
• Keywords: Opportunity of being heard; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH FRIDAY-F DELHI) BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL MISC.APPLI. NO. 75(DEL)2010 (IN ITA NO. 2866(DEL)2009) ASSESSMENT YEAR: 2006-07 MARUTI INSURANCE DISTRIBUTION SERVICES LTD., AS STT.COMMISSIONER OF IT, JEEVAN PRAKASH BLD., KG MARG, N.DELHI. V. CIR. 6(1), NEW DELHI. (APPLICANT) (RES PONDENT) APPLICANT BY: SHRI AJAY VOHRA, ADVOCATE RESPONDENT BY: MRS. MONA MOHANTY, SR. DR ORDER PER A.D. JAIN, J.M . VIDE ORDER DATED 30.11.2009, THE APPEAL OF THE DEPA RTMENT FOR ASSESSMENT YEAR 2006-07 WAS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ISSUE REGARDING DELETION OF DISALLOWANCE OF ` 89,98,913/- MADE ON ACCOUNT OF EXCESSIVE PAYMENT OF REMUNERATION TO DEA LERS BY THE ASSESSEE, WHICH WAS THE ONLY ISSUE IN THE APPEAL, WAS REMITTE D TO THE FILE OF THE AO, TO BE DECIDED AFRESH. 2. THE AO HAD RESTRICTED THE CLAIM OF DEDUCTION OF REMUNERATION PAID BY THE ASSESSEE TO ITS DEALERS AT 6% OF THE TOTAL COMM ISSION RECEIPTS AMOUNTING TO ` 5,39,93,482/-. THE BALANCE PAYMENT OF ` 89,98,913/- WAS DISALLOWED, MA 75(DEL)2010 2 TREATING IT TO BE UNREASONABLE AND EXCESSIVE. THE LD. CIT(A) DIRECTED THE AO TO DELETE THE ADDITION, FOLLOWING THE FIRST APPE LLATE ORDER FOR ASSESSMENT YEAR 2005-06. 3. IN OUR ORDER DATED 30.11.2009(SUPRA) WE OBSERVED , INTER ALIA, THAT:- HOWEVER, WE FIND SUBSTANCE IN THE SUBMISSION OF TH E DEPARTMENT THAT IN THE INITIAL YEARS, IN VIEW OF THE SETTING U P OF THE OUTLETS, THE PAYMENT OF THE REMUNERATION WAS THE SAME AND THAT B EING SO OVER THE YEARS UNDER CONSIDERATION, A DRASTIC DECLINE IN THE PAYMENT OF REMUNERATION WAS WARRANTED. THIS HAS NO WHERE BEE N CONTROVERTED ON BEHALF OF THE ASSESSEE. AS SUCH, AS AGREED TO BY THE PARTIES, THE MATTER NEEDS TO BE REMITTED TO THE FILE OF THE AO, TO BE EXAMINED AND DECIDED AFRESH IN ACCORDANCE WITH LAW, AFTER AFFORD ING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE A O SHALL DEAL AND DECIDE THE ISSUE INDEPENDENT OF THE COMPARISON WITH THE REMUNERATION PAID IN THE EARLIER YEARS WITH THAT OF THE YEAR UND ER CONSIDERATION. WE ORDER ACCORDINGLY. 4. IN THE APPLICATION, THE ASSESSEE HAS CONTENDED T HAT AN ERROR HAS CREPT IN IN OUR ORDER DATED 30.11.2009, INASMUCH AS OUR OBS ERVATION THAT IN VIEW OF THE SETTING UP OF THE OUTLETS A DRASTIC DECLINE IN PAYMENT OF REMUNERATION WAS WARRANTED, IS FACTUALLY INCORRECT; THAT DURING THE YEAR, THE ASSESSEE CONDUCTED ITS BUSINESS THROUGH DEALER NET WORK CONSISTING OF 300 SALES OUTLETS AND 400 DEALERS WORKSHOPS; THAT THE NUMBER OF OUTLETS DURIN G THE YEAR WAS THE SAME AS THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEA R, I.E., ASSESSMENT YEAR 2005-06; THAT THESE FACTS ARE ALREADY ON RECORD; TH AT IT HAS NOWHERE BEEN DISPUTED THAT THE FACTS AND CIRCUMSTANCES FOR THE Y EAR UNDER CONSIDERATION MA 75(DEL)2010 3 WERE THE SAME AS THOSE IN ASSESSMENT YEAR 2005-06; THAT DURING THE YEAR, THE ASSESSEE HAD PASSED ON 70% OF THE COMMISSION RECEIV ED FROM THE INSURANCE COMPANY AGAINST VEHICLE INSURANCE THROUGH VARIOUS M ARUTI DEALERS NET WORK TO THE DEALERS; THAT THE PERCENTAGE OF REMUNERATION PAYABLE TO THE DEALERS BY THE ASSESSEE OUT OF COMMISSION FROM THE INSURANCE C OMPANY HAD NO CO- RELATION WITH NUMBER OF DEALERS; THAT IT HAD NEVER BEEN AGREED BY THE ASSESSEE THAT THE MATTER BE REMITTED TO THE FILE O F THE AO, RATHER THE MATTER WAS COVERED BY THE TRIBUNAL DECISION IN THE ASSESSE ES CASE FOR ASSESSMENT YEAR 2005-06; AND THAT THEREFORE, THE ORDER DATED 3 0.11.2009 BE SUITABLY MODIFIED, DISMISSING THE APPEAL OF THE REVENUE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS BROADLY REITERATED THE CONTENTS OF THE APPLICATION, AS ABOVE. THE LD. DR , ON THE OTHER HAND, HAS STRONGLY RELIED ON THE TRIBUNAL ORDER. 6. HAVING HEARD THE PARTIES AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT INDEED AN ERROR HAS CREPT IN IN OUR OR DER DATED 30.11.2009. IT IS A MATTER OF RECORD THAT THE ASSESSEE IS A ONE HUNDR ED PERCENT OWNED SUBSIDIARY OF MARUTI SUZUKI INDIA LTD. IT IS ENGA GED AS CORPORATE INSURANCE AGENT OF M/S. BAJAJ ALLIANZ GENERAL INSURANCE CO. L TD. DURING THE YEAR, IT CONDUCTED ITS BUSINESS THROUGH MARUTI DEALERS NETWO RK CONSISTING OF OVER 300 VEHICLE SALES OUTLETS AND 400 DEALERS WORKSHOPS SPREAD ALL OVER THE MA 75(DEL)2010 4 COUNTRY. IT INCURRED AN EXPENDITURE OF ` 6,29,92,395/- ON ACCOUNT OF REMUNERATION PAID TO ITS DEALERS. THIS REPRESENTE D 70% OF THE TOTAL RECEIPTS OF INSURANCE COMMISSION, WHICH WAS CLAIMED AS REVEN UE DEDUCTION, INCURRED FOR BUSINESS PURPOSES. THE AO RESTRICTED THE SAID CLAIM TO 60% OF THE SAID COMMISSION RECEIPTS, AMOUNTING TO ` 5,39,93,482/-. FOR DOING THIS, THE AO FOLLOWED THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2 005-06. THE LD. CIT(A) DELETED THE DISALLOWANCE, HOLDING THAT THE FACTS WE RE EXACTLY SIMILAR TO THOSE IN ASSESSMENT EYAR 2005-06. 7. WE, IN OUR ORDER, HAVE OBSERVED THAT SINCE IN TH E INITIAL YEARS, OUTLETS WERE SET UP, THE PAYMENT OF REMUNERATION WAS THE S AME AND SINCE THIS REMAINED SO IN THE YEAR UNDER CONSIDERATION, A DRAS TIC DECLINE IN THE PAYMENT OF REMUNERATION WAS WARRANTED. THIS OBSERVATION, AS POINTED OUT, IS A RESULT OF AN INADVERTENT MISTAKE APPARENT FROM RECORD, IN ASMUCH AS A PERUSAL OF THE ASSESSMENT RECORD SHOWS THAT DURING THE YEAR, T HE NUMBER OF OUTLETS WAS THE SAME AS IN ASSESSMENT YEAR 2005-06, I.E., THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE TRIBUNAL HAS NOTED SO, FOR T HAT YEAR. IN PARA 4 OF THE ORDER DATED 9.10.2009, IN ITA NOS. 1590 AND 1924(DE L)09 (COPY ON RECORD), THE TRIBUNAL HAS OBSERVED, INTER ALIA, AS FOLLOWS:- 4. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSES SEE FILED AN APPEAL BEFORE THE CIT(A) AND SUBMITTED BEFORE HIM THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF VEHICLE INSURANCE AS COR PORATE INSURANCE MA 75(DEL)2010 5 AGENT AND CONDUCTS HIS BUSINESS THROUGH MARUTI DEAL ERS NETWORK CONSISTING OF OVER 300 VEHICLE SALES OUTLETS AND 40 0 DEALERS WORKSHOPS SPREAD ALL OVER THE COUNTRY . THE ABOVE POSITION REMAINS UNDENIED. THEREFORE, O UR OBSERVATION THAT A DRASTIC DECLINE IN THE PAYMENT OF REMUNERATION WAS WARRANTED, IS A MISTAKE APPARENT FROM RECORD. 8. FURTHER, THERE IS ALSO AN ERROR APPARENT FROM RE CORD WHEN WE MENTION THAT OUR OBSERVATION THAT A DRASTIC DECLINE IN THE PAYMENT OF REMUNERATION WAS WARRANTED, WAS NOT CONTROVERTED ON BEHALF OF TH E ASSESSEE. AS OBSERVED ABOVE, THIS OBSERVATION ITSELF IS UNWARRANTED IN VI EW OF THE SITUATION THAT THE FACTS IN THE YEAR UNDER CONSIDERATION ARE NO DIFFER ENT FROM THOSE PRESENT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E., AS SESSMENT YEAR 2005-06. THEREIN, THE TRIBUNAL, VIDE THE AFORESAID ORDER DAT ED 9.10.2009, UPHELD THE CIT(A)S FACTUAL FINDING, WHICH IS AS FOLLOWS:- 4.4 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. AR. I HAVE PERUSED THE TEXT OF THE JUDGMENTS ON WHICH THE AR R ELIED. RATIOS OF THESE JUDGMENTS ARE APPLICABLE TO THE FACTS OF THE INSTANT CASE AS THE AO HAS NOWHERE PROVED THAT THE EXPENDITURE HAD NOT BEEN INCURRED BY THE APPELLANT FOR THE BUSINESS PURPOSE. THE EXPEN DITURE HAS NOT BEEN FOUND TO BE EITHER OF CAPITAL IN NATURE OR OF PERSO NAL OR BOGUS IN NATURE. THE COMPARATIVE FIGURES GIVEN BY THE AR W .R.T. THE INSURANCE COMMISSION RECEIVED, REMUNERATION PAID TO THE DEALE RS AND ITS %AGE TO THE COMMISSION RECEIVED, GP/NP RATIO FOR THE LAS T THREE YEARS ARE POINTERS TO THE FACT THAT OVER THE YEARS, THE APPEL LANT HAS PAID LESSER %AGE OF REMUNERATION VIZ-A-VIZ RECEIPT OF COMMISSIO N AND THE AO HAS NO LOGICAL JUSTIFICATION TO RESTRICT THE AMOUNT OF REMUNERATION PAID TO THE DEALERS FROM 70.09% TO 60%. THE APPELLANT HAS DEDUCTED THE MA 75(DEL)2010 6 TDS ON THE PAYMENTS SHOWN TO THE DEALERS AND THE RE QUIRED DETAILS OF THESE DEALERS LIKE THE ADDRESSES ETC. HAVE BEEN PRO VIDED TO THE AO BUT DISALLOWING PART OF THE REMUNERATION WITHOUT EFFECT ING ANY ENQUIRIES TO PROVE THE CASE OTHERWISE WILL DEFINITELY NOT BE OF ANY HELP TO THE AO. THOUGH THE PRINCIPLE OF RES JUDICATA IS NO T APPLICABLE TO THE INCOME TAX PROCEEDINGS BUT DEFINITELY, IF IN THE E ARLIER YEARS, NO ADDITION HAD BEEN MADE BY THE DEPARTMENT THEN WITHO UT BASING THE FINDINGS ON ANY OTHER CONCRETE EVIDENCES, THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE. IN VIEW OF THE ABOVE MENTIONED REASONS, I DO NOT SEE ANY REASON ON THE PART OF THE AO TO REJECT THE BOOKS OF ACCOUNTS. 9. IT HAS ALSO BEEN CONTENDED THAT THOUGH THE ASSES SEE NEVER AGREED TO REMAND THE MATTER TO THE AO, IT HAS BEEN SO OBSERVE D IN OUR ORDER. THIS CONTENTION IS ALSO FOUND TO BE CORRECT. THERE IS NOTHING ON RECORD TO SHOW ANY SUCH CONCESSION ON THE PART OF THE ASSESSEE AND THIS OBSERVATION IS ALSO AN ERROR APPARENT FROM THE FACE OF THE RECORD. 10. THEREFORE, OUR ORDER DATED 30.11.2009 IS RECA LLED. 11. ACCORDINGLY, PARA 9 OF OUR ORDER DATED 30.11.20 09 SHALL NOW STAND SUBSTITUTED BY THE FOLLOWING PARAGRAPH:- 9. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). THE TRIBUNAL, FOR ASSESSMENT YEAR 200-06 VIDE ORDER DAT ED 9.10.2009, UNDER SIMILAR CIRCUMSTANCES, HAS UPHELD THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF ` 60,10,118/- MADE BY THE AO ON ACCOUNT OF EXCESSIVE PAYMENT OF REMUNERATION TO THE DEALERS, IN THE DEPARTMENTS APPEAL IN ITA NO1590(DEL)09. THERE HA S NOT BEEN SHOWN TO BE ANY DIFFERENCE IN THE FACTS AND CIRCUMS TANCES IN THE YEAR UNDER CONSIDERATION. THEREFORE, RESPECTFULLY FOLL OWING THE SAID TRIBUNAL ORDER IN THE ASSESSEES CASE FOR ASSESSMEN T YEAR 2005-06, THE ORDER OF THE LD. CIT(A) IS CONFIRMED. THE GR IEVANCE OF THE DEPARTMENT IS REJECTED. MA 75(DEL)2010 7 12. PARA 10 OF THE ORDER WILL NOW READ AS FOLLOWS:- 10. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 13. IN THE RESULT, THE APPLICATION FILED BY THE ASS ESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.01.2011 . SD/- SD/- (K.G. BANSAL) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.01.2011 *RM COPY FORWARDED TO: 1. MARUTI INSURANCE DISTRIBUTION SERVICES LTD., JEEVAN PRAKASH BLD., KG MARG, N.DELHI. 2. ACIT, CIR. 6(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR