Vritti Impex P.Ltd, Mumbai vs Department Of Income Tax

आयकर अपीलीय अधिकरण, मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES 'F' MUMBAI सर्वश्री आय.पी. बंसल, न्यायिक सदस्य एवं श्री राजेन्द्र, , लेखा सदस्य के समक्ष BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI RAJENDRA , ACCOUNTANT MEMBER

ITA NO.6407/MUM/2013(A.Y. 2010-11)

The Dy. Commissioner of Income Tax- 8(3), Room No.217, Aaykar Bhavan, MK Marg, Mumbai 400 020 (Appellant )

Vs. M/s.Vritti Impex P. Ltd., Flat No.202, Flora Apartments, 2nd Floor, 13th Road, Khar (West), Mumbai 400052 PAN: AAABCV3176C

(Respondent)

Appellant by : Shri Pawan Kumar Beerla Respondent by : None

Date of hearing 23/03/2015 Date of pronouncement 23/03/2015

ORDER

PER I.P.BANSAL, J.M:

This is an appeal filed by the Revenue and it is directed against order passed by Ld. CIT(A)-18, Mumbai dated 16/08/2013 for assessment year 2010-11. Grounds of appeal read as under:

(i) "On the facts and in the circumstances of the case and in law, the Ld. C!T(A)has erred in allowing deduction for payment made to Mr. J.B. Smith without appreciating that the assessee had failed to substantiate the allowability of the said expenditure in terms of section 37(1) of the Income Tax Act, 1961."

(ii) "On the facts and in the circumstances of the case and in law, and without prejudice to the Revenue's stand that the impugned expenditure claimed by the assessee on account of payment to Mr. J.B. Smith, is not allowable as a deduction, the Ld. C!T(A) failed to appreciate that as evident from the agreement executed between the assessee and the payee, Mr. J.B. Smith, the impugned payment is in the nature of fees for technical services as envisaged in section 9(1)(vii) of the Act read with Explanations thereof and therefore, the Assessing Officer was justified in disallowing the said deduction in terms of section 40(a)(i) of the Act for failure on the assessee's part to deduct tax at source there from."

(iii) "The appellant prays that the order of the C!T(A) on the above ground be set aside and that of the A.O. be restored."

(iv) "The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."

2. The has AO disallowed commission of Rs.1,13,24,831/- paid to Mr. John Smith on the basis that similar disallowance was made in respect of A.Y 2008-09 and 2009-10. Relief was granted to the assessee by Ld. CIT(A) in respect of those years and Revenue had filed further appeals in the Tribunal and appeals filed by the Revenue before the Tribunal were dismissed. Following the said order of the Tribunal, Ld. CIT(A) has deleted the disallowance for the year under consideration also. The Revenue is aggrieved, hence, has filed aforementioned grounds of appeals.

3. Notice of hearing was sent to the assessee. However, none was present in behalf of the assessee. It is seen that the issue raised by the Revenue is covered in favour of the assessee by the earlier order of the Tribunal dated 03/7/2013 passed in ITA No.661/Mum/2012 in respect of assessment year 2008-09. Copy of this order was placed on our record by Ld. DR. Relevant portion of the order of the Tribunal has also been reproduced in the order passed by Ld. CIT(A). In these circumstances we proceed to decide the Departmental appeal ex-parte qua the assessee.

4. We have heard Ld. DR, who has relied upon the order passed by AO. After careful consideration of the facts and submissions of Ld. DR and also aforementioned decision of Tribunal, since AO has followed the earlier year order and Ld. CIT(A) following the order of the Tribunal in respect of same year has granted the relief to the assessee, therefore, we decline to interfere in the relief granted by Ld. CIT(A). For the sake of completeness the relevant portion of the order of Tribunal which is reproduced in the order of Ld.CIT(A) and has been relied upon by him is reproduced below.

"1.5. I have considered the submissions of the Ld Counsel, the remand report of the AO and the reply of the assessee to the remand report of the AO and in this case, it is clear that he appellant has made the payment of Rs. 1,13,24,831/- to the said Mr. John Victor Smith / Jonathan Smith and all the payments have been made through banking channel - which during the course of appellate proceedings, the assessee proved by filing the copy of the bank statements in question - which was made available to the AO for his comments and it is seen that the payments have been credited in the bank account of Mr. John Victor Smith / Jonathan Smith and therefore, the fact of payments having been made by the appellant and having been received by Mr. John Victor Smith/ Jonathan Smith stands prove beyond doubt. Further, the fact that it is a percentage of the sale is also not disputed the amount of Rs. 1,13,24,831/- is 12% of the total export sales. This clearly shows that Mr. John Victor Smith / Jonathan Smith has received the payment of Rs. 1,13,24,831/- as a fixed percentage of the sale - there is a direct correlation and nexus between the export sales made by the appellant and the commission paid by the appellant to Mr. John Victor Smith / Jonathan Smith. Thus, the objections of the AO are unwarranted on the given facts of the case - since, both the payment and the receipt of this amount in Canada stands clearly established. Thus, when the genuineness of the payment cannot be impeached - then it has to be allowed u/s 37 because the necessity of making of this payment cannot be examined by the AO. Once, its genuineness is established as above. Hence, I direct the AO to allow this payment of commission of Rs. 1,13,24,831/- u/s 37 of the IT Act. 5 The objection of the AO as to admission of the details relating to identity of Mr. John Victor Smith / Jonathan Smith and the bank account details is overruled because it is the settled law that an Appellate Authority can always entertain evidence which is necessary to decide the issue in appeal - especially evidence which has a direct bearing on the dispute:- (i) CIT vs. Smt. Prabhavati Shah 231 ITR 1 (Bom) (ii) CIT vs. Suretech Hospital & Research Centre Ltd [2007] 293 ITR 53 (Bom) Thus, the same has been admitted and considered. Hence, this ground of appeal is allowed, as stated above."

5. In this view of the situation the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 23/03/2015 आदेश की घोषणा खुले न्यायालय में 23/03/2015 को की गई । Sd/- Sd/- (राजेन्द्र, /RAJENDRA ) (आय.पी. बंसल / I.P. BANSAL) लेखा सदस्य /ACCOUNTANT MEMBER न्यायिक सदस्य / JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated 23/03/2015 आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file.

आदेशानुसार/ BY ORDER, सत्यापित प्रति //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अधिकरण, मुंबई / ITAT, Mumbai व.नि.स./Vm, Sr. PS

Details Date Initials Designation 1 Draft dictated on 23/03/2015

Sr.PS/PS 2 Draft Placed before author 23/03/2015

Sr.PS/PS 3 Draft proposed & placed before the Second Member

JM/AM 4 Draft discussed/approved by Second Member

JM/AM 5. Approved Draft comes to the Sr.PS/PS

Sr.PS/PS 6. Kept for pronouncement on

Sr.PS/PS 7. File sent to the Bench Clerk

Sr.PS/PS 8 Date on which the file goes to the Head clerk

9 Date of Dispatch of order

PAGE 4 ITA NO.6407/MUM/2013(A.Y. 2010-11)