JAY CHEMICAL INDUSTRIES PVT. LTD.,AHMEDABAD vs. THE DY.CIT, CIRCLE-2(1)(1), AHMEDABAD

2. The Ld. CIT(A) has erred in not admitting additional evidence in respect of Consultancy claim. He ought to have allowed the claim of Rs.2,80,900/-.

& 1916/Ahd/2024 A.Y. 2014-15 Page No 3 Jay Chemical Industries Pvt. Ltd. vs. Dy.CIT

ITA No. 1916/Ahd/2024 (Revenue Appeal)

1."Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting addition of Rs.4,43,18,315/- an account of disallowance of commission paid to non-residents, without appreciating the facts of the case?"

2. Whether on the facts and in the circumstances of the case and in law. the Ld.CIT(A) was justified in deleting addition of Rs.10,84,214/- on account of disallowance u/s 14A r.w.r 8D, without appreciating the facts of the case?"

“…..(c) The underlying issues have been carefully examined and it is noted that this issue of disallowance of commission payment to non- resident foreign parties/agents in terms of provisions of section 37 as well as provisions of section 40(a)(i) (on without prejudice basis) is a recurring issue in case of the assessee-appellant and the same is covered in its favour by the orders of- First Appellate Authority for AY 2010-11, AY 2011-12, AY 2012-13 and AY 2013-14.

& 1916/Ahd/2024 A.Y. 2014-15 Page No 4 Jay Chemical Industries Pvt. Ltd. vs. Dy.CIT

Hon'ble ITAT, Ahmedabad for AY 2010-11 & AY 2011-12 (in and 305/Ahd/2015 & CO Nos. 01 & 41/2015] and AY 2012-13 & AY 2013-14 [in & 2256/Ahd/2016 & 1725 & 2257/Ahd/2016) Hon'ble High Court, Gujarat for AY 2010-11 in R/Tax Appeal No. 610/2019 (decision dated 24.09.2019] and for AY 2011-12 in R/Tax Appeal No. 620/2020 (decision dated 17.02.2020] .” ........................ At this juncture it is pertinent to note that during the year under consideration there were 19 foreign agents to whom commission of Rs. 4,43,18,315/- has been paid and there is no dispute on these issues. Out of these 19 parties, barring three parties as mentioned above, remaining 16 parties are old parties i.e., parties which are covered in A.Y. 2012-13 & A.Y. 2013-14 and such 16 parties cover aggregate amount of Rs.4,25,37,348/-. The deliberation w.r.t. these old parties is as under (i) 16 Old parties which are covered in AY 2012-13 &AY 2013-14: In the orders for AY 2010-11 to AY 2013-14 the underlying issues in terms of provisions of section 40(a)(i) have been held in favour of the appellant by the First Appellate Authority as well as the Hon'ble ITAT, Ahmedabad after detailed discussion in the respective appellate orders. Similarly, the issues relating to provisions of section 37 have also been decided in favour of the appellant for AY 2012-13 and AY 2013-14 by the First Appellate Authority as well as the Hon'ble ITAT Ahmedabad after detailed discussion in the respective appellate orders. The Hon'ble High Court has also decided the appeals for AY 2010-11 and AY 2011-12 in favour of the appellant vide judgments dated 24.09.2019 and 17.02.2020 respectively. On the other hand, in the present year while making subject disallowance the Ld. AO has not brought on record any divergent factor as compared to the earlier years and contents of remand report [supra] also indicate that the same are in the nature of reiteration of the contents of impugned order and the same does not bear any material comments on the evidences available on record in the form of credit notes, payment details, emails details of respective foreign agents, etc. even though the decisions of the FAA and the Hon'ble ITAT, Ahmedabad in earlier years [supra) had duly considered such details while deciding the underlying issues in favour of the assessee w.r.t. provisions of section 37 and section 40(a)(i) of the Act. It has further been noticed that the Ld. AO has not brought anything on & 1916/Ahd/2024 A.Y. 2014-15 Page No 5 Jay Chemical Industries Pvt. Ltd. vs. Dy.CIT record to show that thee foreign agents/parties were having any permanent establishment in India or business connections in India. ……………………….. Hence, in absence of any divergent factors for the year under consideration and appreciating the fact that the Ld. AO has not doubted the corresponding payments made during the year under consideration to these 16 parties, as discussed above and after carefully considering the details available on record, respectfully following the binding decisions (supra) of the Hon'ble ITAT, Ahmedabad and Hon’ble High Court, Gujarat in appellant's own cases, the Ld. AO is directed to delete the disallowance w.r.t. commission payment made to the above mentioned 16 parties which are old parties.

5.1. Whereas the Ld. CIT(A) against remaining three parties, the commission amount aggregating Rs. 17,80,967/- was confirmed with detailed reasons. Thus the Ground No. 1 raised by the Revenue is devoid of merit and liable to be dismissed.

& 1916/Ahd/2024 A.Y. 2014-15 Page No 6 Jay Chemical Industries Pvt. Ltd. vs. Dy.CIT

The appellant submitted the copy of the Acknowledgement of the ITR filed for the year under consideration and the complete set of ITR is still awaited. Nevertheless, respectfully following the binding decisions of the Hon'ble High Court, Gujarat in the cases of the appellant as mentioned above, the Ld. AO is directed to delete the disallowance u/s 14A of Rs.10,84,214/- if the claim of the assessee that there was no exempt income during the year under consideration is found to be correct from its ITR filed for the year under consideration. Last but not the least, on the issue of whether the amendment by virtue of Finance Act, 2022 to the provisions of section 14A is prospective in nature and would be applicable for AY 2022-23 and onwards or it is retrospective in nature, the Hon'ble ITAT, Guwahati in the case of ACIT v. Williamson Financial Services Ltd. [2022] 140 taxmann.com 164 (Guwahati Trib.) has held it to be retrospective in nature. However, the Hon'ble Delhi High Court in the later decision in the case of PCIT (Central) v. Era Infrastructure (India) Ltd. [2022] 141 taxmann.com 289 (Delhi) has held it to be prospective in nature. Similarly, the Hon'ble ITAT, Mumbai has held it to be prospective in nature in the case of ACIT Vs. K Raheja Corporate Services Pvt. Ltd. in to 2527/Mum/2021.” 6.1. We do not find any infirmity in the above order, it is undisputed fact that the assessee has not received any dividend during the Financial Year. The Ld. CIT(A) has considered that the amended provisions of Section 14A will be applicable prospectively and relied upon various case laws. Therefore the order passed by the Ld. CIT(A) does not require any interference. Thus the Ground raised by the Revenue is devoid of merit and liable to be dismissed.

& 1916/Ahd/2024 A.Y. 2014-15 Page No 7 Jay Chemical Industries Pvt. Ltd. vs. Dy.CIT Whereas the transaction was actually in the nature of direct sale to the foreign party. The Ld. CIT(A) has considered the above submissions of the assessee and held as follows:

“…..In addition to this it is noted that the appellant has itself submitted that the underlying transaction actually represents direct sale and captioned amount represented discount expense and hence, as a corollary it was incumbent upon the appellant that the very claim of the amount of Rs.7,94,113/- as an expenditure item needed to be adequately substantiated by adducing relevant details duly backed by supporting evidences. However, the details on record clearly indicate that the appellant has merely mentioned that the same is nature of discount and no further specific details and evidences have been provided in support of such claims which would have enabled the process of ascertaining the correctness and veracity of such claim. Hence, in view of the above, the claim of expenditure of Rs.7,94,113/- hereto shown as Commission payment and now claimed as Discount on direct sale remains to be substantiated and hence CANNOT be accepted. Resulting in upholding the addition to the extent of Rs.7,94,113/-.” 8.1. Before us, Ld. Counsel filed a compilation of Paper Book running to 18 pages, whereas Ledger Account of M/s. Altoteks Tekstil, Copy of Invoices, Credit Notes and Form No. 15CA and 15CB filed by the Chartered Accountant are placed on record which were very much available before the lower authorities. However Ld. CIT(A) held that no documents are produced to substantiate the claim made by the assessee. Therefore in the Interest of Justice, we deem it fit to set aside the issue back to the file of Assessing Officer to verify the above documents and allow the same in accordance with law by providing opportunity of hearing to the assessee. Thus the Ground raised by the Assessee is partly allowed.

9.1. This judgment is clearly distinguishable since the assessee has filed additional evidences in support of the agreed addition made before lower authorities. Perusal of the additional evidences clearly makes out a case that the addition is not sustainable as confirmed by the Ld. A.O. in his Remand Report.

9.2. The Hon’ble Supreme Court in the case of Roop Kumar vs. Mohan Thedani AIR 2003 SC 2418 held as follows:

“….That it is not open to a party to turn around and take a plea that no concession was given, which would amount to a case of sitting on the fence, which should not be encouraged. It was again stated that if really there was no concession, the only course open to the party was to move the concerned Court and not by approaching the appellate court.

made on a wrong appreciation of the law and had led to gross injustice; but, he may not call in question the very fact of making the concession as recorded in the judgment." (Emphasis added) 16. The principles that emerge from the above decisions are:- a) Any concession made by a Counsel against the statutory provisions would be unauthorised and any order based on such erroneous concession should be recalled. (AIR 1998 SC 465); b) A wrong concession on a question of law made by a counsel is not binding on his client. Such concession cannot constitute a just ground for a binding precedent. (AIR 1998 SC 1681); c) If the learned counsel has made an admission or concession inadvertently or under a mistaken impression of law, it is not binding on his client and the same cannot enure to the benefit of any party, d) Courts are not to act on the basis of concessions but with reference to the applicable provisions; e) Any concession would have no acceptability or relevance while determining the rights and liabilities incurred or acquired in view of the axiomatic principle without exception, that there can be no estoppel against statute; f) Any wrong concession made by a counsel before the Court cannot bind the parties when statutory provisions clearly provide otherwise; g) A party may be allowed to revile and an Appellate Court may permit in rare and appropriate cases to resile from a concession made on a wrong appreciation of the law and had led to gross injustice though one may not call in question the very fact of making the concession as recorded in the judgment.”

9.3. Respectfully following the above judicial precedents, there is no adverse comment given by the Ld. A.O., the addition on account of Consultancy Charges is hereby deleted.

& 1916/Ahd/2024 A.Y. 2014-15 Page No 10 Jay Chemical Industries Pvt. Ltd. vs. Dy.CIT Order pronounced in the open court on 28-02-2025