ACIT, NEW DELHI vs. M/S. MOSAIC INDIA (P) LTD., NEW DELHI

ORDER PER H.S. SIDHU : JM

The Revenue has filed this Appeal against the impugned Order dated 24.3.2014 passed by the Ld. CIT(A)-V, New Delhi relevant to assessment year 2007-08.

“1. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of “Discount to Customers” of Rs. 6,86,40,844/- made by the AO as the assessee company failed to file any documentary evidence to the AO?

2. That order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.

4. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of hearing.

3. The brief facts of the case are that the return of income was filed on 31.10.2007 at an income of Rs.3,07,66,126/-. The case was selected for scrutiny under CASS. Notice u/s. 143(2) & 142(1) of the I.T. Act, 1961 were issued and served upon the assessee. The assessee company is engaged in the business of imports / exports, domestic trading, distribution of fertilizers, stevedoring and warehousing etc. The assessee company filed the return declaring the Loss from Business amounting to Rs. 3,30,71,029/- and income under the head other sources Rs. 23,04,903/-. The assessee company had entered into international transactions. The case was referred to the TPO, u/s. 92CA of the I.T. Act, 1961. The order of the TPO has been received and no adverse inference is drawn in respect of the international transactions undertaken by the assessee. AO found that that among the provisions / payables, there was an outstanding liability of Rs. 6,86,40,844/- classified as “Discount to Customers”. The assessee was asked to provide description and details about the same. In response to the assesee has submitted that the said accrual is towards the discount given by MPIL to its various customers on the sales made to them during the year. After considering the same AO was not satisfied with it and made the addition of Rs. 6,86,40,844/- and made the assessment at Rs. 3,99,19,350/- u/s. 143(3) of the I.T. Act, 1961 vide order dated 22.12.2010.

4. Against the said order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 24.3.2014 has allowed the appeal of the assessee.

5. Aggrieved with the aforesaid order of the Ld. CIT(A), Revenue is in appeal before the Tribunal

7. On the contrary, Ld. Counsel of the assessee relied upon the order of the Ld. CIT(A).

“8.2 On perusal of the assessment order and submissions made by the appellant on the subject matter, it is seen that the appellant has given a discount of Rs 6,84,50,274 only to a single party i.e. M/s Tata Chemicals Limited, to whom such discount was given in F.Y.2004-05 &2005-06 too, though at a lower rate. Further, the appellant has paid the discount amount at various dates starting from 26.11.2007 to 30.10.2009. Out of this an amount of Rs. 5,67,79,482/-- has been paid vide cheque No. 309179 and the balance through RTGS / cash sweep to M/s Tata Chemicals Limited (TCL). With regard to this discount given by the appellant, the recipient M/s Tata Chemicals has also furnished certificate to the effect that they have recognized the amount of discount of Rs. 6,84,50,274 in their financials for 2006- 07. Moreover even in the copy of ledger account for discount the name of the party i.e. TCL is clearly seen and therefore the observation of the AO that the names of the parties to whom discount has been given have not been disclosed is not correct. Considering the above facts in totality and the business model of the appellant whereby bulk discount has been offered to TCL on the sale of DAP the disallowance made by the AO on account of discount of Rs 6,84,50,274 to M/s Tata Chemicals Limited is directed to be deleted and the ground of appeal is allowed.”

8.1 On perusing the above finding of the ld. CIT(A), we find that the assessee has given a discount of Rs 6,84,50,274 only to a single party i.e. M/s Tata Chemicals Limited, to whom such discount was given in F.Y.2004-05 &2005-06 too, though at a lower rate. Further, the assessee has paid the discount amount at various dates starting from 26.11.2007 to 30.10.2009. Out of this an amount of Rs. 5,67,79,482/- has been paid vide cheque No. 309179 and the balance through RTGS / cash sweep to M/s Tata Chemicals Limited (TCL). With regard to this discount given by the assessee, the recipient M/s Tata Chemicals has also furnished certificate to the effect that they have recognized the amount of discount of Rs. 6,84,50,274 in their financials for 2006-07. Moreover even in the copy of ledger account for discount the name of the party i.e. TCL is clearly seen and therefore the observation of the AO that the names of the parties to whom discount has been given have not been disclosed is not correct. Considering the above facts in totality and the business model of the assessee whereby bulk discount has been offered to TCL on the sale of DAP the disallowance made by the AO on account of discount of Rs 6,84,50,274 to M/s Tata Chemicals Limited was rightly directed to be deleted and accordingly ground of appeal was allowed by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the order of the Ld. CIT(A) on the issue in dispute and accordingly, the Appeal filed by the Revenue stands dismissed. 4