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Income Tax Appellate Tribunal, “G”, BENCH
Before: SHRI PAWAN SINGH, JM & SHRI M.BALAGANESH, AM
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y. 2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-24/ITO-15(3)(3)/IT-78/2016-17 dated 02/06/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 21/03/2016 by the ld. Income Tax Officer – 15(3)(3), Mumbai (hereinafter referred to as ld. AO).
M/s. Shreecure Pharmaceuticals P.Ltd.
The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition made in respect of advances received from customers u/s.28(iv) of the Act in the facts and circumstances of the case.
The brief facts of this issue are that the assessee is engaged in the business of trading in pharmaceutical products and had derived income from business. During the year, the assessee had shown advance received from customers of Rs.71,88,275/-. The details were sought to be filed by the assessee before the ld. AO together with subsequent settlements of these advances with supporting evidences. The assessee made detailed statements before the ld. AO in the form of ledger copies and explained that in the subsequent year, the said parties cancelled the orders owing to changes in their local regulations. Accordingly, the said parties asked the assessee to adjust such advances against the outstanding amount due to the assessee from Exmek Pharmaceuticals S.A.C. for which Exmek Pharmaceuticals S.A.C. also consented for the said adjustment. The ld. AO however, did not accept the explanation of this adjustment on the ground that no exports were made by the assessee to these parties from whom advances were received. Accordingly, the ld. AO invoked provisions of Section 28(iv) of the Act by treating the value of advances received by the assessee during the course of business as benefit derived by the assessee and added the same to the total income of the assessee. The ld. CIT(A) deleted the addition. 4. Aggrieved, the revenue is in appeal before us. 5. We have heard rival submissions. We find that assessee had received advances for supply of goods from the following parties:-
M/s. Shreecure Pharmaceuticals P.Ltd.
2,394,411 Labex Corporation SAC 1,490,403 Vietnam Export Onport Commercial 3,303,461 Damass Company 7,188,275 5.1. Hence, on the date of balance sheet as on 31.3.13, the assessee had an obligation to supply goods to these parties so that the advances lying in their names could be adjusted. Subsequently in A.Y.2014-15, these parties cancelled the order consequent to changes in their local regulations. Hence, these parties refused to import goods from the assessee, which in turn, lead to a situation where the assessee could not export the goods to these parties and adjust the advances. Parallely, the assessee had amounts due from the group company of the aforesaid parties i.e. Exmek Pharmaceuticals S.A.C. to whom the assessee had made exports in earlier year but amounts were not recovered from them. In this scenario, the aforesaid three parties gave consent to the assessee to adjust the advances lying in their account with the amounts due from Exmek Pharmaceuticals S.A.C. for which necessary consent letters were given by all the parties to the assessee. These consent letters are enclosed in pages 4 to 9 of the paper book filed before us. The assessee had also made corresponding entries in its books by adjusting the advances received from the customers with the amounts due from Exmek Pharmaceuticals S.A.C. In other words, the amounts due to the assessee from Exmek Pharmaceuticals S.A.C. were in fact discharged by the aforesaid three parties out of the advances lying in their names. Hence, there cannot be any addition to income in the hands of the assessee for this particular transaction, when such adjustments have been carried out with the consent of all the parties who are related to each other, except the assessee. In our considered opinion, what the assessee had done in M/s. Shreecure Pharmaceuticals P.Ltd. the instant case by way of adjustment was nothing but any prudent business man would do in any precarious situation like this. No infirmity could be found in the action of the assessee in this regard. We find that the ld. CIT(A) had duly appreciated these contentions of the assessee together with the relevant documentary evidences placed on record which in our considered opinion, does not call for any interference. Accordingly, the grounds raised by the revenue are dismissed.
In the result, appeal of the revenue is dismissed. Order pronounced in the open court on this 21/06/2019