Commissioner Of Income Tax, Bhopal vs. M/S Godrej Foods Ltd.

O R D E R

13/08/2014

Even though this is an appeal under section 260-A of the Income Tax Act and a substantial question of law is proposed in the memorandum of appeal, but when the appeal was admitted on 23.3.2004, it is seen that no question of law has been framed. 2-

That apart, it is seen that notice by registered post acknowledgment due was sent, but till date notices have not been served. The notice sent to the respondent has been received back unserved. On 23.2.2005, the appellant was directed to pay fresh process fee, but there is nothing available on record to show that after 23.2.2005 any process fee was paid or notices have been sent. 3-

Even though in the order passed on 23.2.2005, it is indicated that if process fee is not paid, the appeal shall stand dismissed for want of prosecution, but the office has not dismissed the appeal. On the contrary, it is listed for final hearing today.

MAIT NO :: 82 / 2003

Commissioner of Income Tax, Bhopal Vs. M/s Godrej Foods Limited. 2 4-

Taking note of the totality of the circumstances, we propose to deal with the matter on merits. 5-

The appellant in the memorandum of appeal has proposed the following substantial question of law:-

“ Whether the Tribunal was justified in law in deleting the addition of Rs. 48,25,270/- made by the Assessing Officer on account of disallowance of discount payment to M/s Lipton India Limited, claimed by the assessee in absence of any written agreement entered into by the assessee and M/s Lipton India Limited. The payment was not warranted by any business expediency when the business relations with assessee and M/s Lipton India Limited were governed by written agreement which did not provide incurring of such huge expenditure by the assessee?.”

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In this appeal under section 260-A of the Income Tax Act, appellant/department calls in question tenability of an order-dated 22.7.2003 passed by the Income Tax Appellate Tribunal in the matter of deleting a sum of `48,25,270/-, which has been added by the Assessing Officer by disallowing certain payment made by the assessee company to M/s Lipton India Limited. 7-

For the assessment year 1990-91, the respondent company filed its return and in the return it claimed deduction of `48,25,270/- on account of discount made to M/s Lipton India Limited. The said deduction claimed has been deleted both by the Assessing Officer and the Commissioner (Appeals) on the ground that in the absence of their being any written agreement between the assessee company and M/s Lipton India Limited, granting of this deduction to the assessee is not permissible and the amount having been added to the income, this matter went to the Appellate Tribunal and the Tribunal having allowed the MAIT NO :: 82 / 2003

Commissioner of Income Tax, Bhopal Vs. M/s Godrej Foods Limited. 3 discount and deleted it from the income of the assessee, this appeal by the revenue. 8-

Assessee company entered into an agreement with M/s Lipton India Limited to lift certain minimum quantity of food-drinks manufactured by the assessee and marketed in the name of “Tree Top Drink”. As the market was fluctuating and M/s Lipton India Limited was unable to lift the minimum quantity due to its financial condition, it seems that a discount of `48,25,270/- on the sale proceeds was granted and when this was claimed as a rebate from addition of tax, the dispute has risen. The revenue raised a ground to say that in the absence of any written agreement between the parties, permitting such a discount, the deduction could not be permitted by considering the same to be business expenditure. It is stated that the amount could not be added as business expenditure and rebate claimed in the absence of their being any memorandum of agreement between the parties to that effect. 9-

Shri Sanjay Lal and Shri Bhamhore, learned counsel for the appellant, emphasized on the aforesaid aspect and placed reliance on two judgments in support of their contention. The cases are: Indian Steel & ITR 379 (CAL); and, Commissioner of Income Tax Vs. Indian Cements Limited, (1975) 98 ITR (MAD). 10-

We have considered the contentions advanced and we find from the record that the learned Appellate Tribunal in its detailed order impugned, has gone into all these question and found that even though in the original agreement entered into between the parties in the year 1987- 1988, there was no such stipulation for grant of any discount, but due to market fluctuation and competition, it seems that M/s Lipton India Limited suffered huge losses and they were unable to carry forward their commitment in pursuance to the agreement. As such parties negotiated the same and certain understanding was arrived at on 29.8.1990, by which initially a sum of `165 Lacs as full and final settlement of all past claims upto 31.3.1990 was agreed upon. Thereafter, for the subsequent

MAIT NO :: 82 / 2003

Commissioner of Income Tax, Bhopal Vs. M/s Godrej Foods Limited. 4 years the discount of `48,25,270/- was granted for lifting of the minimum quantity. 11-

The Tribunal found that in the record from page Nos.1 to 12, the agreement dated 18.9.1987 between the parties are available. Thereafter, there is a supplementary agreement dated 3.12.1987; another supplementary agreement dated 6.6.1988; a notice for termination of contract dated 1.1.1991; minutes of meeting dated 29.8.1990, wherein there are reference to the discount to be granted and a decision for grant of discount is also available. Taking note of all these factors alongwith the documents available on record, the learned Tribunal has found that there are enough material on record to indicate that the discount has been granted on the basis of an agreement between the parties. It is held that even though there may not be a specific agreement, but the documents available on record shows that the parties agreed for grant of discount based on the financial condition of M/s Lipton India Limited; the comparative chart showing the financial condition; the decrease in the quantity of drinks lifted; and, by taking note of all these factors in paragraph 6, the learned Tribunal found that even in the absence of a written agreement, based on the documents and circumstances available, an inference can be drawn that the discount was granted which was a genuine agreement and merely because a written agreement in exact terms is not available, the discount could not be disallowed. 12-

The reasons given by the Tribunal and the subjective satisfaction of the Tribunal with regard to genuineness of the discount granted by the assessee company to M/s Lipton India Limited is a reasonable assessment made on due appreciation of the facts and circumstances of the case and we find no error in the same warrant interference. 13-

Accordingly, we answer the substantial question framed by the revenue by saying that the learned Tribunal has not committed any error in allowing the discount inspite of there being no written agreement available on this count. Once the facts and the material available on record showed that the discount was genuinely granted by the assessee,

MAIT NO :: 82 / 2003

Commissioner of Income Tax, Bhopal Vs. M/s Godrej Foods Limited. 5 in allowing the discount by treating it to be business expenditure, no error has been committed by the Tribunal warranting reconsideration. 14-

The appeal is, therefore, dismissed.

( RAJENDRA MENON )

( ALOK VERMA ) J U D G E J U D G E

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