ACIT, CIRCLE, BHILWARA vs. M/S. FASHION SUITINGS PVT. LTD. , BHILWARA

आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member): - 1. Aforesaid appeal by department for Assessment Year [in short referred to as ‘AY’] 2016-17, contest the order of Commissioner of Income-Tax (Appeals), Ajmer, [in short referred to as ‘CIT(A)’],

2 ITA No.283/Jodh/2019 M/s. Fashion Suitings Private Limited Assessment Year: 2016-17 Appeal No.476/2018-19, dated 10/06/2019 on following sole ground:- Deleting the addition made by the AO of Rs.2,14,46,481/- on account of Royalty Commission without appreciating the fact that the assessee paid the commission to the agents in the chain who have not rendered any services, thus, the same cannot be considered to have been paid wholly and exclusively for business purposes.

As evident, the revenue is aggrieved by deletion of addition of Rs.214.46 Lacs on account of Royalty Commission. 2. We have carefully heard the rival submissions and perused relevant material on record including written submissions and documents placed in the paper book. The judicial precedents as relied upon during the course of hearing have duly been deliberated upon. Our adjudication to the subject matter would be as given in succeeding paragraphs. 3. Facts on record would be that assessee being resident corporate assessee was assessed u/s. 143(3) on 28/12/2018 wherein it was saddled with disallowance u/s. 37(1) on account of royalty commission for Rs.214.46 Lacs. The assessee is stated to be engaged in the business of manufacturing of textiles, handloom & power-loom as well as of power generation. It is also involved in trading of goods through Multi-level Marketing distribution network all over India. The assessee paid distribution commission of Rs.117.05 Crores during the year under multilevel marketing which, inter-alia, included royalty commission of Rs.21.44 Crores. Considering assessee’s nature of business, Ld. AO opined that the entire commission was not incurred wholly and exclusively for

3 ITA No.283/Jodh/2019 M/s. Fashion Suitings Private Limited Assessment Year: 2016-17 business purposes. The assessee’s plea that the issue was recurring one and already decided in assessee’s favor by the Tribunal for AYs 2009-10 to 2012-13, was rejected by observing that the decision was challenged by the revenue before Hon’ble High Court and the same had not attained finality. Finally, Ld. AO estimated a disallowance of 10% against the same and added an amount of Rs.214.46 Lacs to the income of the assessee. 4. Upon further appeal, Ld. CIT(A) concurred with the plea that the said expenditure was allowed by Tribunal for AY 2009-10 vide ITA No.357/Jodh/2012 order dated 11/02/2013 which was followed by first appellate authority in AY 2010-11 & 2011-12 and therefore, facts being identical, the addition was to be deleted. Aggrieved, the revenue is in further appeal before us. 5. We find that the fact that the issue was covered squarely in assessee’s favor by the cited decision of this Tribunal for AY 2009- 10 remain uncontroverted before us. There is nothing on record which suggests that the aforesaid decision was ever reversed in any manner or the same was not applicable to the year under consideration. No change in facts has been demonstrated before us. In fact the aforesaid decision has subsequently been followed by coordinate bench of this Tribunal for AY 2010-11 (ITA No.321/Jodh/2014 dated 09/03/2016), AY 2011-12 (ITA No.300/Jodh/2015 dated 16/03/2016), AY 2012-13 (ITA No.89/Jodh/2016 dated 11/01/2017), AY 2014-15 (ITA No.477/Jodh/2017 dated 08/02/2018). Therefore, respectfully following the same, we confirm the stand of Ld. CIT(A).

ITA No.283/Jodh/2019 M/s. Fashion Suitings Private Limited Assessment Year: 2016-17 6. In nutshell, the appeal stands dismissed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (Sandeep Gosain) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member

मुंबई Mumbai; िदनांकDated : 21/12/2020 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Jodhpur 5. गाड�फाईल / Guard File 6.

आदेशानुसार/ BY ORDER,

उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, जोधपुर / ITAT, Jodhpur.