M/S. INDIA PISTONS LTD., vs. THE ASSISTNAT COMISSIONER OF

TCA.Nos.931 and 932 of 2019 In the High Court of Judicature at Madras Dated : 14.10.2020 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.931 and 932 of 2019 M/s.India Pistons Ltd., Huzur Garden, Sembium, Chennai – 600 011 PAN: AAACI1439E ...Appellant

in both appeals -vs- The Assistant Commissioner of Income Tax, Company Range-II(3), Chennai. ...Respondent in both appeals APPEALs under Section 260A of the Income Tax Act, 1961 against the order dated 30.09.2016 in ITA.Nos.2186/Mds/2011 & 1948/Mds/2011 on the file of the Income Tax Appellate Tribunal, Madras 'D' Bench for the assessment year 2006-07 and 2007-08. For Appellant in both appeals : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan For Respondent in both appeals : Mr.R.Karthik Ranganathan Senior Standing Counsel 1/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 Common Judgment was delivered by

T.S.Sivagnanam,J

These appeals, filed by the assessee under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] are directed against the common order dated 30.09.2016 in ITA.Nos.2186/Mds/2011 & 1948/Mds/2011 on the file of the Income Tax Appellate Tribunal, Madras 'D' Bench for the assessment year 2006-07 and 2007-08. 2.The following substantial questions of law have been raised for consideration: “1.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that 20% of commission & discounts paid to customers was disallowable? 2.Whether, the Tribunal was right in law in holding that 10% of expenditure incurred towards marketing incentives amounting to Rs.24,16,262/- was disallowable? 3.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that 2/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 export promotion expenses Rs.17,58,965/- reimbursed to Holding Company was disallowable?” 3.We have heard Mr.R.Vijayaraghavan, learned counsel appearing for the appellant and Mr.R.Karthik Ranganathan, learned Senior Standing Counsel appearing for the respondent. 4.The first submission of the learned counsel for the appellant is that the assessee before the Tribunal sought for a fresh opportunity to produce relevant materials before the Assessing Officer to establish that they had incurred expenditure for payment of commission and discounts to the customers and if sufficient time is granted, they would be able to produce the entire records though they had produced sample records before the Assessing Officer. Similar submission is made with regard to the marketing incentives which were claimed by the assessee but disallowed by the Assessing Officer. 5.We find from the impugned order passed by the Tribunal that the Tribunal has recorded the submission of the assessee seeking for one more 3/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 opportunity to establish these two issues. With regard to the third issue, namely, export promotion expenses, it is submitted that the Tribunal negatived the case of the assessee on the ground that the assessee could not produce any evidence towards expenditure by the said London Liason Office. It is submitted that no expenditure is incurred by the assessee in this regard, but the assessee reimburses the Holding Company which has established its office at London which is used by all the Group Companies in the Amalgamation group and this procedure is being followed ever since 1971 with the approval of the Central Government. It is submitted that this issue was considered by the Tribunal in the assessee's own case in I.T.A.No.56/Mds/2013 for the assessment year 2008-09 and the Tribunal by order dated 12.06.2015 has remanded the matter back to the Assessing Officer for fresh consideration. Further, it is submitted that for the assessment year 2010-11, in respect of export promotion expenses, the Tribunal by order dated 26.09.2019 in I.T.A.Nos.2383 & 2384/Chny/2017 has remanded the matter to the Assessing Officer to enable the assessee to prdouce sufficient records to establish their case. It is further submitted that for the said assessment years, namely, 2010-11 and 2011-12, there was no 4/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 disallowance by the Assessing Officer with regard to the commission and discounts and marketing incentives. 6.It is the argument of Mr.Karthik Ranganathan, learned Senior Standing Counsel that the Assessing Officer, DRP as well as the Tribunal have appreciated the facts brought on record and rendered a finding and it is not a case where there is non-consideration of the material placed by the assessee but it is on account of failure on the part of the assessee to produce records and this Court may not upset the factual finding recorded by the Tribunal. 7.After elaborately hearing the learned counsels on either side, we are of the view that since all the three issues in the instant case as raised in the substantial questions of law are recurrent issues, according to the assessee for the assessment years 2010-2011 and 2011-2012, there was no disallowance with regard to the commissions and discounts as well as the marketing expenses. This submission is predicated on the fact that the assessee was able to convince the Assessing Officer with records to show 5/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 that they have given commission and discounts and also expended substantial amount of funds as marketing incentives. That apart, with regard to the export promotion expenses, the Tribunal in the assessee's own case for the assessment years 2008-09, 2010-11 and 2011-12 has remanded the matter to the Assessing Officer for fresh consideration. It appears that the Assessing Officer did not doubt the bonafides of the claim made by the assessee with regard to the commission and discounts and marketing incentives, but however, disallowed 20% of the commission and discounts and 10% of the marketing incentives. 8.Thus, if the assessee is given one more opportunity and if they are able to produce records to substantiate those expenses, there would be a fair chance for the assessee to succeed before the Assessing Officer. That apart, the issue with regard to export promotion expenses having already been remanded to the Assessing Officer for fresh consideration, we deem it appropriate to remand these issues also to the Assessing Officer with a direction to the assessee to produce all records and thereafter, the Assessing Officer to re-do the assessment in accordance with law. 6/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 9.For the above reasons, the tax case appeals are allowed, the impugned orders are set aside and the substantial questions of law raised for consideration are left open. No costs. (T.S.S., J.) (V.B.S, J.) 14.10.2020 Index: Yes/No Internet: Yes Speaking Order/Non-Speaking Order cse To The Income Tax Appellate Tribunal, Madras 'D' Bench 7/8 http://www.judis.nic.in TCA.Nos.931 and 932 of 2019 T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. cse TCA.Nos.931 and 932 of 2019 14.10.2020 8/8 http://www.judis.nic.in