DCIT-14(1)(1), MUMBAI, MUMBAI vs. ALLWEILER INDIA PVT. LTD., MUMBAI

PDF · subscribers
ITA 722/MUM/2024Status: DisposedITAT Mumbai29 May 2024AY 2008-095 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the addition on account of commission paid to agents for obtaining orders from Government Agencies was to be deleted. The Tribunal noted that the payments were made to agents who were working for the assessee, and not directly to officials of Public Sector Undertakings (PSUs) or BHEL. The Tribunal relied on the ratio of law laid down in the case of M/s Acro Electro Technologies Pvt. Ltd. (supra) and the principle of consistency, as a Coordinate Bench had previously deleted similar additions on identical facts for A.Ys. 2012-13 & 2013-14 in ITA Nos. 7364 & 7365/MUM/2017. Consequently, since the addition was deleted, the penalty levied under Section 271(1)(c) of the Act was also held to have no basis and was therefore deleted. The Tribunal found no infirmity in the order passed by the Ld. CIT(A) and affirmed it. Both appeals by the Revenue were dismissed.

What were the facts?

The Revenue has filed two appeals (ITA Nos. 720 & 722/MUM/2024) against the orders of the National Faceless Appeal Centre, Delhi (Ld. CIT(A)) for Assessment Years (A.Ys.) 2011-12 and 2008-09. The common grievance pertains to the deletion of additions made on account of commission paid to agents for obtaining orders from Government Agencies. The Assessing Officer had disallowed these payments under Section 37 of the Income-tax Act, 1961, deeming them non-deductible as payments to government agencies are prohibited by law. Consequently, the penalty levied under Section 271(1)(c) of the Act was also deleted by the Ld. CIT(A). The Ld. CIT(A) had deleted similar additions for A.Y. 2011-12 and, following a Tribunal order for A.Ys. 2012-13 & 2013-14 on identical facts, deleted the addition for A.Y. 2008-09.

What were the issues?

1. Whether the addition on account of commission paid to agents for obtaining orders from Government Agencies is to be deleted, considering it was disallowed under Section 37 of the Income-tax Act, 1961, as payments to Government Agencies are prohibited by law? 2. Whether the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961, is to be deleted consequent to the deletion of the addition? Assessee's Contentions: The judgment does not record specific contentions from the assessee. However, it is implied that the assessee supported the deletion of additions and penalty by the Ld. CIT(A). Revenue's Contentions: The Revenue argued that commission paid to agents for obtaining orders from Government Agencies should not be allowed as a deduction under Section 37 of the Act because such payments to Government Agencies are prohibited by law. The Revenue also argued for the upholding of the penalty levied under Section 271(1)(c) of the Act.

Which sections of the Income-tax Act were involved?

Section 37,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE

For Appellant: Shri Ashish Thakurdesai
For Respondent: Shri Sunny Kachhwaha

O R D E R PER NARENDRA KUMAR BILLAIYA (AM) are two separate appeals by the revenue preferred against two separate orders of National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] pertaining to A.Ys. 2008-09 and 2011-12. & 722/MUM/2024 (A.Ys. 2011-12 & 2008-09 Allweiler India Pvt. Ltd. 2. Since the common grievance is involved, both the appeals were heard together and are disposed off by this common order, for the sake of convenience and brevity.

3.

The common grievance involved in both the appeals relates to the deletion of the addition on account of commission paid to agents for obtaining orders from Government Agencies, when such payments to Governments Agencies is prohibited by law and not allowable deduction under section 37 of Income-tax Act, 1961 (in short “Act”) and deleting the penalty levied by the Assessing Officer under section 271(1)(c) of the Act.

4.

Briefly stated the facts of the case are that the, assessee electronically filed its return of income on 10.09.2008 declaring total income of ₹.9,66,67,146/- under the normal provisions of the Act and book profit of ₹.8,45,53,093/-. The assessment was completed after making the addition to the amount of computer expenses and commission paid to agents.

5.

The additions were challenged before the Ld. CIT(A) and the Ld.CIT(A) found that similar disallowance on account of commission

ITA No. 720 & 722/MUM/2024 (A.Ys. 2011-12 & 2008-09 Allweiler India Pvt. Ltd. payments was made in A.Y. 2011-12 which were deleted by the Ld.CIT(A) vide order dated 19.11.2018. The Ld. CIT(A) further found that on identical facts the revenue has challenged the order of the Ld.CIT(A) for the A.Ys. 2012-13 & 2013-14 before the Tribunal and the Tribunal in & 7365/MUM/2017 vide order dated 28.02.2019 has deleted the addition on account of commission payments. Following the order of the Tribunal the Ld. CIT(A) deleted the addition.

6.

Since the additions has been deleted the penalty levied by the Assessing Officer has no legs to stand, therefore, the penalty levied under section 271(1)(c) of the Act was also deleted.

7.

Before us, the Ld. DR could not bring any distinguishing decision in favour of revenue.

8.

We have carefully perused the orders of the authorities below. The Coordinate Bench in & 7365/MUM/2017 vide order dated 28.02.2019 had the occasion to consider a similar grievance and held as under: - & 722/MUM/2024 (A.Ys. 2011-12 & 2008-09 Allweiler India Pvt. Ltd. “8. We have noted that in the present case, no commission payment is made to the official of PSU/BHEL, rather the payments were made to the agents, and the agents were working for assessee. Therefore, the ratio of law laid down in M/s Acro Electro Technologies Pvt. Ltd. (supra) is squarely applicable on the facts of present case. The ld. CIT(A) also observed that the similar issue on similar fact was decided by his predecessor for A.Y. 2010-11 and by following the principle of consistency, it was held that the payment made to Denetto International & Bhalla & Associate cannot be disallowed.

9. In view of the above factual and legal discussion, we do not find any infirmity in the order passed by ld. CIT(A), which we affirm.”

9.

Respectfully following the decision of the Coordinate Bench (supra), the additions stands deleted. Since the foundation has been removed the super-structure i.e. the Penalty should fall. Both the appeals by the revenue are accordingly dismissed.

10.

In the result, appeals filed by the revenue are dismissed.

Order pronounced in the open court on 29th May, 2024

More judgments on Section 37

All 4,334 judgments and leading authorities on Section 37 →

Recent GST High Court judgments

Search GST case law →