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

सु ी सुषमा चावला, या यक सद य एवं नरे कुमार ब लै या, लेखा सद य के सम

BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं/ I.T.A. No.4262/Mum/2013 ( नधारण वष / Assessment Year : 2009-10 The DCIT-8(3), बनाम/ M/s. Vritti Impex Pvt. Aayakar Bhavan, Ltd., Vs. Mumbai-400 020 202, Flora 13 t h Road, Khar (W), Mumbai-400 052 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABCV 3176C (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से/ Appellant by: Shri Pawan Kumar Beerla यथ क ओर से/Respondent by: None

सन ु वाई क तार ख / Date of Hearing :29.07.2015 घोषणा क तार ख /Date of Pronouncement :31.07.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This appeal by the Revenue is preferred against the order of the Ld. CIT(A)-18, Mumbai dated. 28.3.2013 pertaining to Assessment year 2009-10.

2. The sum and substance of the grievance of the Revenue is that the Ld. CIT(A) erred in deleting the disallowance of commission of Rs. 1,36,42,566/- by holding that the assessee is justified in making the 2 ITA. No.4262/M/2013

payment without TDS as the provisions of Sec. 40a(i) r.w.s 9, 195 and 200 of the I.T. Act do not apply to the facts of the case.

2.1. Briefly stated the facts of the case are that the assessee is engaged in the business of manufacturing of plywood. While scrutinizing the return of income, the Assessing officer found that the assessee has claimed payment of commission of Rs. 1,36,42,565/- to one Mr. John Smith. The AO further observed that a similar payment of commission of Rs. 1,13,24,831/- to the same Mr. John Smith was disallowed in assessment year 2008-09. The AO further noticed that in the year under consideration, the assessee has changed the nomenclature of the payment and has claimed the same under the head "technical testing and quality control charges". The AO was of the opinion that the assessee has camouflaged its transaction to claim the deduction. The assessee was asked to explain its stand. The assessee filed documents which included remittances, advices issued by Union Bank of India in respect of each remittance. The advice included the details of person to whom the payments were made and nature of payments. The AO found that none of these remittance and advices issued by the bankers reflected in the name of said Mr. John Smith but were in the following names:

1) Mrs. Nathalie Abate

2) Forest Timber Trade Ltd

3) MLE Sophie Krebs

4) Yossi Nagel

5) Van Den Haak Franciscus

2.2. The AO further found that in all these remittance and advices, the nature of payment is mentioned as commission. The AO was convinced that by making payment to the persons other than Mr. John Smith 3 ITA. No.4262/M/2013

absolutely did not provide any service to the assessee. The AO further noticed that the assessee has not complied with the provisions of TDS and therefore Sec. 40(a)(i) squarely apply on the facts of the case. The AO accordingly disallowed the sum of Rs. 1,36,42,566/-.

3. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) and reiterated its claim. It was explained that the payment made to the 5 persons was on the directions of Mr. John Smith. It was further pointed out to the Ld. CIT(A) that the provisions of TDS is not applicable as services are rendered outside India. It was also brought to the notice of the Ld. CIT(A) that the additions made in A.Y. 2008-09 were deleted by the Ld. CIT(A) on which basis the AO has made the addition.

3.1. During the course of the appellate proceedings, before the Ld. CIT(A) the assessee was asked to file the documents to prove the services rendered by Mr. John Smith. In response to which the assessee filed copies of the documents which were forwarded to the AO by the Ld. CIT(A) for his comments. The AO submitted his report vide letter dt. 10.1.2013, the gist of which reads as under:

"The assessee company had e-filed its return of income on 26.09.2009 declaring total income of Rs. 58,52. 130/-. The assessment was finalized u/s 143(3) of the I. T.Act. 1961 on 26.12 2011, after making disallowance of commission of Rs. 1.36,42.566/- and the income was assessed at Rs. 1,94,94,700/- .

During the remand proceedings, the assessee has produced additional evidence rather fresh evidence in contravention of Rule 46A. which deserves no cognizance

However without prejudice to the above report is submitted as under-

4 ITA. No.4262/M/2013 At the outset. it is submitted that the assessee's claim of commission payments to J .V Smith was denied in the light of facts and the circumstances elaborately discussed in para 3 of the assessment order. As mentioned in the assessment order (i) the assessee has not given any concrete evidence in support of his contention that J V Smith has rendered any services, (ii) No amount was remitted to J V Smith. It has been remitted to 5 persons menioned in the assessment order. The assessee during the appellate proceedings has claimed that the payments have been remitted to the persons at the instance of the J V Smith. However. the identity of J V Smith remain totally unproved for wants of any concrete evidence and therefore his so called letters/arguments has no authority except the assessee's claim. Further, assessees claim that Mrs. Nathelie Abate IS J V Smith's wife is also not proved.

In the light of above facts the assessee's claim of having paid commission to J V Smith remained unproved. Therefore, it is prayed that disallowance may kindly be sustained. At this juncture, it will not be out of place to mention that making of payments does not prove that the expenses were incurred for the purpose of business."

3.2. After considering the submissions and the remand report, the Ld. CIT(A) observed that the payment of commission to Mr. John Smith Is not for the first time but this is the 5th year. The Ld. CIT(A) further observed that the payment has been made on the basis of an agreement dated 13.11.2002. The Ld. CIT(A) further observed that the addition made on this account in A.Y. 2008-09 was deleted by the Ld. CIT(A).

3.3. It would not be out of place to extract the relevant factual findings of the Ld. CIT(A) which read as under:

" I have considered the submissions of the learned counsel and in view of the following decisions of Hon 'ble Supreme Court

i) CIT Vs. Toshuku Ltd. 125 ITR 525 (SC) 5 ITA. No.4262/M/2013

ii) GE India Technology Centre (P) Ltd. Vs. CIT & Anr. 327 ITR 456 (SC)

The issue stands clearly decided in favour of the appellant.

Further. the recent decision of the Hon 'ble Delhi High Court dated 08-11-2011 in the case of ClT-IV New Delhi Vs EON Technology P Ltd in Appeal No 1167/2011 is also in favour of the appellant

Also Circular No 786 Dated 07-02-2000 of CBDT is also in favour of the appellant

Hence, the plea of the appellant is accepted and it is clear that the provision of Section 40a(ia) r. w s. 9, 195 and 200 of them I .T Act do not apply in appellant's case and therefore, appellant was not required to make TDS on these payments, Hence, this ground of appeal is allowed"

Since the issue is covered by'the decision of my predecessor and there is no change in facts & circumstances except the payment was not made directly to Mr J V.Smith but on his directions, the payment was made to five persons includinq his wife and four others. The confirmations for making payments to all these persons were also submitted by the AR which were sent to AO for verification Since the assessee is exporting more than 90% of its manufactured product of plywood, definitely it requires some agents to compete in the international market. Since the payment has been made through normal banking channels and the assessee has also submitted the documents to prove that Mr J V.Smith has rendered services for which the payment has been made as cornmission. Therefore, in view of all these facts & circumstances and by relying the decision of my predecessor in the last year the addition made by the AO is not sustainable, hence deleted. 'Thus, the ground of appeal is allowed".

4. Aggrieved by this, the Revenue is before us.

6 ITA. No.4262/M/2013 5. The Ld. Departmental Representative supported the assessment order.

6. None appeared on behalf of the assessee inspite of the knowledge of the date of hearing as per our order sheet entries therefore we decide to proceed ex parte.

7. We have carefully perused the orders of the authorities below. The undisputed fact is that the AO has made the additions on the basis of the disallowances made in A.Y. 2008-09. It is also an admitted fact that the additions of A.Y. 2008-09 were deleted by the Ld. CIT(A). The Ld. DR could not bring any decision in favour of the Revenue. The findings of the Ld. CIT(A) as mentioned elsewhere are purely based on the facts of the case. We, therefore decline to interfere.

8. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 31st July, 2015

Sd/- Sd/ (SUSHMA CHOWLA ) (N.K. BILLAIYA) या यक सद य/JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मंब ु ई Mumbai; दनांक Dated : 31 July , 2015 st

व. न.स./ RJ , Sr. PS 7 ITA. No.4262/M/2013

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)-

4. आयकर आयु त / CIT

5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai