VST AUTO AGENCY LIMITED,CHENNAI vs. ACIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Chennai, dated 17.03.2018 and pertains to assessment year 2011-12.

The first issue arises for consideration is disallowance of ₹18,04,249/- towards discount said to be offered by the assessee to the customers.

Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee offered discounts during the year under consideration to the extent of ₹93,46,405/-, out of which, a sum of ₹75,42,156/- was reimbursed by TATA Motors Ltd. The difference between the actual discount given by the assessee and the amount reimbursed by TATA Motors Ltd. was taken as income of the assessee. The Assessing Officer, according to the Ld. counsel, found that the assessee would not have offered discount over and above the discount given by TATA Motors Ltd. In fact, the discount was given to the customers. According to the Ld. counsel, the assessee has filed details of customers to whom the discount was said to be given by it. On a query from the Bench, whether the so- called discount offered by the assessee over and above the discount given by TATA Motors Ltd. reflected in the invoices raised by the assessee? The Ld.counsel very fairly submitted that the discount given over and above the discount given by TATA Motors Ltd. was not reflected in the invoices raised by the assessee since the same was not offered to others. The Ld.counsel further submitted that the matter may be examined by the Assessing Officer whether the assessee has offered discount or not.

We heard Shri AR.V. Sreenivasan, the Ld. Departmental Representative also. The assessee claims that it offered discount to the customers who are purchasing the cars of TATA Motors Ltd. to the extent of ₹93,46,405/-. In fact M/s TATA Motors Ltd. reimbursed the discount to the extent of ₹75,42,156/-. The question arises for consideration is whether the assessee offered discount over and above the discount given by M/s TATA Motors Ltd. to the extent of ₹18,04,249/-? It is also necessary to find out whether such discount given by the assessee over and above to the discount given by TATA Motors Ltd. is allowable business expenditure. The assessee has now filed the details of customers to whom the discount was said to be given over and above the discount given by M/s TATA Motors Ltd. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter in the light of the details furnished by the assessee and find out whether the assessee, in fact, gave discount to the customers over and above the discount given by M/s TATA Motors Ltd. and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

The next issue arises for consideration is disallowance made by the Assessing Officer under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act').

Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that M/s TATA Motors Ltd. has developed a web enabled software for uploading all marketing related information. According to the Ld. counsel, the assessee has to contribute for development and management of software. In fact, the software developed by M/s TATA Motors Ltd. enables the dealers to upload the data / information relating to marketing so that the dealers can generate reports to monitor the salesmen efficiency, product movement, etc.

On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that there is no evidence to indicate that the recipient M/s TATA Motors Ltd. has paid the taxes.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee now claims that the recipient M/s TATA Motors Ltd. paid the taxes on the amount received from the assessee. Therefore, this Tribunal is of the considered opinion that the matter needs to be re- examined. Accordingly, the orders of both the authorities below are set aside and the disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and also find out whether the recipient M/s TATA Motors Ltd. has paid the taxes on the amount received by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.