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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-32, Mumbai [in short CIT(A)], Appeal No. CIT(A)-32/IT-144/ITO-20(2)(1)/16-17 vide order dated 15.06.2017. The Assessment was framed by the Income Tax Officer Ward 20(2)(1), Circle-20(2)(1) (in short ‘ITO/ AO’) for the A.Y. 2013-14 vide ITAs No. 5612/Mum/2017
order dated 14.03.2016 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) allowing the claim of expenditure on account of commission paid to M/s Majithia Housing LLP and to Mr. Mohammad Rashid, the assessee has raised the following ground: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief of ₹ 85,18,378/- on account of commission paid to M/s Majithia Housing LLP and ₹ 85,000/- paid commission to Mahammad Rashid.”
3. Briefly stated facts are that the assessee firm is engaged in the business of buying and selling of old and new industrial plants and machinery. During the course of assessment proceedings for AY 2013- 14, the AO noticed that the assessee has disclosed the commission receipt of Rs. 1,73,65,315/-. As against this receipt of commission the assessee has paid the commission amounting to Rs. 86,03,378/-. Out of the commission paid, a sum of Rs. 85,18,378/- commission was paid to Majithia Housing LLP and balance of Rs. 85,000/- was paid to one Mr. Mohammad Rashid. There was a memorandum of outstanding between the assessee and Majithia Housing LLP and as per MOU the commission is to be share between both the parties at the rate of 15% each. This MOU was entered into between two parties on 18.08.2012. The AO require to prove the payment of commission to both i.e. Majithia Housing LLP and to Mr. Mohammad Rashid. The AO issue notices under section 133(6) of the Act to Mr. Mohammad Rashid and Majithia Housing LLP for ITAs No. 5612/Mum/2017 confirmation of commission paid by assessee. The notice issued returned unserved by postal authorities. The AO noticed that Majithia Housing LLP could not attend nor Mr. Mohammad Rashid and accordingly the AO treated the commission paid of Rs. 85,18,378/- as unexplained expenditure and added to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) after considering the submissions and evidences allow the claim of the assessee. Aggrieved, Revenue came in appeal before Tribunal.
4. Before us, the learned Counsel for the assessee repeated the same contention as made before CIT(A). On the other hand, the learned Sr. DR heavily relied on the assessment order.
We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee explained the nature of business activity of the assessee and stated that he is dealing in huge thermal plants equipments and sugar mills machinery. The assessee submitted the nature of business activities in Annexure 1 and the same read as under: - “1) We are dealing in used Thermal Power Plant equipments, Sugar Mill Machineries and other used machineries since last more than 40 years. The firm was incorporated in the year 1966. 2) The equipments consist of steam boilers, turbines, gear boxes and generators along with their auxiliaries and accessories such as ejectors, coolers, control panels, pumps with ITAs No. 5612/Mum/2017 motors used for generation of electricity, and also other used machineries.
3) We come to know about sellers and buyers of such equipments & machineries mainly through brokers, press advertisements, our own network and also through our website www.corponite.com.
4) sometimes, we act as commission agents for export and import of big size power plants & machineries if we find suitable clients.
5) In the nature of our business activities we routinely pay commission to various parties who can locate such buyers/ sellers for us. We have paid/ received commission to/from various parties in the past as well as in future.
6) Our clientele include many reputed companies such various sugar factories listed on stock exchange (Ponni Sugars Ltd., Sakthi Sugars Ltd., Athani Sugars Ltd., Ramdev Sugars Ltd., etc.) paper Mills such as Seshasayee Paper & Boards Ltd. Indo-Afrique Paper Mills, Chemical plants such as India Glycols Ltd., etc.”
The leaned Counsel for the assessee further explained that the AO disallowed the commission paid during the year to the following parties: - 1) M/s Majithia Housing LLP ₹ 85,18,378/- ITAs No. 5612/Mum/2017 2) Mr. Rashid Mohammed ₹ 85,000/-
During 2012-13, we were informed by one Mr. Tahir Majithia of M/s Majithia Housing LLP, 201, abde Villa, 2nd Floor, Above ICICI Banks, S.V. road, Khar (West), Mumbai 400 052 that there are certain used machineries and other equipments available for sale with M/s Reliance Industries Ltd, at their Kurkumbh Plant, Maharashtra. We found this proposal of interest and hence, our inspection of the Plant at Kurkumbh was arranged.
Since we were interested in this proposal and asked to arrange inspection of the Plant, a commercial understanding was arrived at with Mr. Tahir Majithia of M/s Majithia Housing LLP. It was not possible for us to buy the Plant and Equipments of M/s Reliance Industries Ltd. outrightly on our own since the value was running in cross of rupees.
Therefore, the best way to see the equipments was on commission basis…………..was discussed and we arrived at an understanding with Mr. Tahir Majithia………….on 10.08.2012 on a stamp paper of ₹ 100/- Since the equipments could be sold M/s Reliance Industries Ltd. paid commission to us, which was shared between us and M/s Majithia ITAs No. 5612/Mum/2017 Housing LLP as per the terms of the above MOU.”
The assessee filed the following documents to prove his contention: - “a) The MOU on ₹ 100/- stamp paper executed between us and M/s Majithia Housing LLP. b) Invoice raised by M/s Majithia Housing LLP on us. c) Bank statement of M/s Majithia Housing LLP showing receipt of commission by RTGS from us after TDS deduction. d) the comparative statement showing receipt of funds by us from M/s reliance Industries and payments made to M/s Majithia e) The PAN card copy of M/s Majithhia Housing LLP showing incorporation on 03.03.2010. f) The Service Tax Registration Certificate of M/s Majithia Housinog LLP. g) Application given by M/s Majithia Housing LLP on the Service Tax dated 24.12.2013. ITAs No. 5612/Mum/2017 h) The TDS challan & certificate for the 10% TDS deducted by us on the RTGS commission payments made to M/s Majithia Housing LLP. i) His present location with photographs which we found by searching on the internet.”
From the above facts, we find that the assessee made all the payments by RTGS to Majithia Housing and deducting TDS on the same. Further, the assessee has relied on the information provided by various brokers and commission was accordingly paid. This commission was decided to share on the basis of memorandum of understanding between the assessee and Majithia Housing LLP. It is also a fact that Majithia Housing LLP have filed an application with service tax department on 24.12.2013 and also produced the evidence that service tax was paid on service provided for an amount of Rs. 85,19,378/-. The assessee has deducted TDS on commission paid and also issued TDS certificates. All the payments are made through RTGS in the banking account of Majithia Housing LLP. In view of the above details, we find that the CIT(A) also allowed the claim of the assessee. Before us, now the learned Sr. DR could not pointed out any discrepancy in the evidences filed which were filed before AO as well as before CIT(A). Hence, we are of the view that Revenue could not prove that the commission paid to Majithia Housing LLP is unexplained. Hence, we confirm the order of CIT(A) allowing the claim of commission.