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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Revenue and cross objection filed by the Assessee are directed against the common order of ld.Commissioner of Income Tax (Appeal)-1 [ld.CIT(A)], Kolhapur dated 20.11.2018 for A.Y.2015-16 emanating from assessment order under section 143(3) dated 28.12.2017. Also, the assessee is before us as a Cross-Objector for the aforementioned year. The Revenue in has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case, and in law, the CIT(A) has erred in deleting the addition on account of excessive commission paid by the assessee.
2. On the facts and in the circumstances of the present case, the CIT(A) erred in not appreciating that the facts of present case and the facts in the case of CIT vs National Rayon Commercial Co Ltd. are different.
3. The appellant prays that the order of the Ld.CIT(A) be vacated and that of the Assessing Officer’s order may be restored.
4. The appellant craves leave to add, alter, amend, modify any of the grounds or raise any other ground at the time or proceedings before the Hon'ble Tribunal which may please be granted.”
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
The assessee in Cross Appeal No.23/PUN/2021 has raised the following grounds of appeal : “CROSS-OBJECTION I : On the facts and the circumstances of the case and in law, the Cross objector prays that the ld. Assessing Officer be directed to treat export incentives under Market Linked Focus Product Scheme, Focus Product Scheme and Focus Market Scheme as capital receipt not chargeable to tax both under the normal provisions of the Act and while computing Book profit u/s 115JB of the Act.
CROSS-OBJECTION II : The Cross objector prays leave to add to, amend and/or alter all or any of the above Cross-Objections.”
(Revenue Appeal) : Brief Facts of the Case : 3. As per the Assessment Order, the Assessee company electronically filed return of Income for AY 2015-16 on 30/11/2015 declaring total income of Rs.3,32,77,893/-, subsequently it claimed brought forward losses and shown total income at NIL.
3.1 The assessee had claimed Commission Expenditure of Rs.5,59,58,270/- in the Profit and Loss Account. The details of C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited) these expenditure as appearing in the assessment order are as under :
Agent Name Status Commission Commission Percentage Amount Rs. J.S.Fashion Resident 6% 4,76,67,453/- Nathan Co NRI 2% 35,21,161/- Amy Keats NRI 3% 13,70,179/- Gerald Kremster NRI 3% 41,090/- Eric Orliange NRI 5% 31,09,551/- K.C.Lee & CO NRI 6% 2,48,837/- Total 5,59,58,270/-
The Assessing Officer(AO) held that these commission expenditure were excess. The AO compared the commission payments with Sales Commission of Century Textile & Industries Ltd, Zodiac Clothing’s Co. Ltd. The AO disallowed commission of Rs.2,52,01,964/-. AO also made another Ad hoc disallowance of Rs.16,47,367/- out of various expenditures. Aggrieved by the Assessment Order the Assessee filed appeal before the Ld.Commissioner of Income Tax (Appeal). The ld.CIT(A) allowed the appeal of the Assessee. The relevant paragraph of the Ld.CIT(A) is reproduced as under :
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited) C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited) C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
Aggrieved by the Order of the ld.CIT(A) the Revenue has filed this appeal.
Submission of Ld.AR: 6. Ld.AR filed paper book. Regarding Commission payments, Ld.AR repeated the submission which was made before the ld.CIT(A). Ld.AR relied on the order of the Hon’ble Bombay High Court in the case of CIT Vs. National Rayon Corporation Ltd 193 ITR 744(Bom).
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
6.1 Regarding the grounds raised in the cross objection the Ld.AR relied on following case laws :
Peter Vaz vs CIT 436ITR 616(Bom) Small Industries development Bank of India Ltd Vs DCIT PCIT v Nitin Spinners Ltd 283taxman2(SC) PCIT v Nitin Spinners Ltd 116Taxman.com 26(Rajasthan HC)
Submission of Ld.DR: 7. Ld.DR relied on the order of the AO.
Findings and Analysis : 8. We have heard both the parties and perused the records.
Commission Paid : 9. It is observed that the assessee has paid commission to unrelated parties during the course of business of the assessee. The AO has not challenged the genuineness of the commission. The AO has not challenged the Genuineness of the parties to whom the commission is paid. The ld.CIT(A) has observed that the commission has been paid through banking channel. Thus, genuineness is not in doubt. It is also an admitted fact that the C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited) commission was paid wholly and exclusively for the business of the assessee. In these facts and circumstances, the AO cannot dictate the assessee the rate of commission to be paid. The AO has referred to the Annual Reports of Century Textiles and Zodiac Clothing CO. Ltd., to analyse the rate of Sale Commission paid by these companies as appearing in their Profit and Loss account. However, the AO has not referred to the terms of the Commission paid by these comparable companies. The AO has not proved that the terms of the Commission payment, scope of work was same in the Comparables and the assessee. The onus was on AO to prove the same. Therefore, the comparison made by the AO is lacking the basic data and hence cannot be considered. The rate of Commission paid by the assessee depends on various factors as analysed by the Ld.CIT(A). The DR failed to explain how the case of CIT Vs. National Rayon Corporation Ltd., 193 ITR 744 (BOM) relied by the Ld.CIT(A) is not applicable in the case of the assessee. It is observed that the assessee’s case for AY 2014-15 was selected to verify Excess Commission expenses in addition to other issues. No addition has been made for A.Y.2014-15. Similarly, no addition was made for A.Y.2013-14. Therefore, in these facts
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited) and circumstances of the case, we uphold the order of the Ld.CIT(A). Accordingly, the grounds of appeal of the revenue are dismissed.
In the result, appeal of the Revenue is Dismissed.
Cross Objection No.23 of 2021 by Assessee : 11. The Assessee has filed Cross objection. In the CO assessee has raised the ground that the “Export Incentive” shown by the Assessee in the Profit and Loss Account as Revenue Receipt be treated as Capital receipt. In this case, it is a fact that the Assessee itself has shown the Export Incentive of Rs.1,00,05,906/- as Revenue Receipt in the Schedule 18 of the Profit and Loss Account. The relevant part scanned and reproduced here as under :
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
11.1 The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs Commissioner Of Income Tax, 229 ITR 383 (SC) has held as under : Quote, “But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.” Unquote. (emphasis supplied)
11.2 Thus, Hon’ble Supreme Court has held that Tribunal has power to consider the question of law raised for the first time provided the question of law arises from the facts on records. It is important that the question of law shall arise from the Facts on the Assessment record. It means the assessee can raise a question of law for the first time before the Tribunal only and only if the question of law arises from the facts on Assessment record. It means all the facts should be on the record of the AO. When we apply the proposition of law laid down by Hon’ble SC (supra) to the case under consideration, it is observed that the facts regarding the so called “Export Incentive” are not on record. We have carefully studied the submission filed by the Assessee before the Assessing Officer, however, we could not clearly
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited) observe the facts related to so called “Export Incentive”. As per Assessee’s own paper book, it is an admitted fact by the Assessee that Break up of “export incentive”, copy of Foreign trade Policy was never filed by the assessee before the AO and ld.CIT(A). The index of the paper book is scanned as under :
11.3 The break up of amounts shown under the Broad Head “Export Incentive”, which has been admittedly filed for the first time before this Tribunal. The break up of the so called “Export Incentive” as filed in the Paper Book by the Assessee for the first time is as under :
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
11.4 These facts were never before the AO and Ld.CIT(A). Similarly, the assessee has filed copy of the Foreign Trade Policy for the first time before this Tribunal. Whether the Export Incentive is revenue receipt or Capital receipt is a question of fact. Therefore, all the facts have to be on the records of the lower authorities.
The assessee has relied on the decision of the Hon’ble Bombay High Court in the case of Peter Vaz 436 ITR 616 (Bom). In the case of Peter Vaz the issue of Jurisdiction u/s.153C was raised for the first time. In that case all the facts were on record. Whereas, in the case of the assessee, the details of Export incentives were admittedly never filed before the C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
lower authorities, thus it was not on record. Hence the decision is distinguishable on facts.
Even in earlier year A.Y.2014-15, assessee has shown Export Incentive as revenue receipt. The assessment order for AY 2014-15 was passed u/s 143(3). Thus, assessee consistently shown Export Incentive as revenue Receipts. In these facts now after more than 8 years the assessee cannot change the stand taken by it consistently.
The Assessee has relied on the Decision of the Hon’ble Bombay High Court in the case of Ultra Tech Cement Ltd 408 ITR 500(Bom). The Hon’ble Bombay High Court in the said case has held as under : Quote, “27. There can be no dispute that whether or not to allow an additional ground to be raised before the appellate authority is to be decided by the appellate authority in exercise of its discretion considering the facts and circumstances of the case before it. Where only a pure question of law arises from facts which are already on record, then there is no reason why the appellate authority should not consider the question of law so as to determine the correct tax liability of an assessee in accordance with law. However, where evidence is to be examined and that is not on record, then it will be considered only if the parties seeking to raise the additional ground C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
satisfies the authority concerned that for good and sufficient reasons, the ground could not be raised before the lower authorities. In the present facts, no such ground has been made out by the assessee before the Tribunal. In the present facts, as pointed out above and being reiterated once more, the additional ground, which is raised, is not a pure question of law, but would depend upon the satisfaction of the authority as to the facts existing in the subject assessment year for allowing the benefit of Section 80IA of the Act. The additional ground is being raised for the first time before the Tribunal without relevant evidence being on record.
In the above view, the substantial question of law is answered in the negative i.e. in favour of the respondent- revenue and against the appellant-assessee” Unquote. (emphasis supplied)
Thus, the Hon’ble High Court in the case of Ultratech Cement Ltd has held in favour of revenue as the Additional Ground raised for the first time without relevant evidence being on record was rejected.
15.1 Therefore, the proposition of law as laid down by the Hon’ble Supreme Court and the Hon’ble High Court is that the Additional ground can be admitted if it is pure question of law. If the facts are not on record the additional ground cannot be admitted.
C.O.No.23/PUN/2021 Soktas India Private Limited (Grasim Industries Limited)
15.2 In the fact and circumstances of the case, since the facts related to the so called “Export incentive” were not on record of the lower authorities, respectfully following the Hon’ble Supreme Court and the Hon’ble Bombay High Court (supra), we reject the ground raised by the assessee in its CO No.23/PUN/2021 for the first time before this Tribunal.
The other case laws relied by the assessee are distinguishable on facts. Hence, not applicable in the case of the assessee. Accordingly, the grounds raised in Cross Objection are dismissed.
In the result, Cross Objection appeal of the assessee is dismissed.
To sum up, appeal of the Revenue is Dismissed and Cross Objection appeal of the assessee is Dismissed.
Order pronounced in the open Court on 27th June, 2023.