DEPUTY COMMISSIONER OF INCOME-TAX vs. ATLAS COPCO (INDIA) LTD.,

आदेश / ORDER

PER VIKAS AWASTHY, JM

This appeal by the Department is directed against the order of Commissioner of Income Tax (Appeals)-I, Nashik dated 03.03.2014 for the assessment year 2000-01.

2 ITA No.1044/PUN/2014 A.Y.2000-01

company is engaged in manufacturing of pneumatic compressors, spare parts

etc. The assessee filed its return of income for the assessment year under

appeal on 30.11.2000 declaring total income of Rs.14,27,83,790/-. During the

course of scrutiny assessment proceedings, the Assessing Officer observed that

assessee has paid commission to the tune of Rs.2,28,81,674/. The assessee was

asked to submit the details of parties to whom commissions were paid. The

assessee vide communication dated 12.12.2002 submitted the names and

addresses of the parties to whom commission amounting to Rs.1,82,13,603/-

was paid during relevant period. However, no details of the parties for the

remaining commission amounting to Rs.46,68,071/- was furnished by the

assessee during assessment proceedings. The Assessing Officer disallowed

entire payment of commission i.e. Rs.2,28,81,674/- on the ground that the

assessee has failed to produce actual services rendered by commission agent.

Apart from above, the Assessing Officer disallowed deduction of

Rs.38,13,642/- claimed u/s.80HHC of the Income Tax Act, 1961 (hereinafter

referred to as ‘the Act’). The assessee had claimed deduction of Rs.92,68,728/-

u/s. 80HHC of the Act. In the revised returns, the assessee reduced claim to

Rs.89,29,348/-. The Assessing Officer restricted the assessee’s claim of

deduction u/s. 80HHC to Rs.51,15,706/- after excluding sale of scrap, risk

insurance recovery and sundry neutral revenue etc from total turnover while

calculating deduction u/s. 80HHC of the Act.

appeal before the Commissioner of Income Tax (Appeals). The Commissioner of

Income Tax (Appeals) after placing reliance on the decision of the Tribunal in

assessee’s own case in ITA No. 448/PN/2010 for assessment year 2001-02

dated 30.01.2012 which has been subsequently upheld by the Hon'ble Bombay

3 ITA No.1044/PUN/2014 A.Y.2000-01

High Court in Income Tax Appeal (LOD) No. 1107 of 2012 decided on 1st

February, 2013 allowed entire claim of assessee qua the payment of

commission. The Commissioner of Income Tax (Appeals) further accepted

assessee’s claim of deduction u/s. 80HHC on exclusion of sale of scrap, risk

insurance recovery, sundry neutral revenue as business profits by following the

order of Tribunal in assessee’s own case in assessment year 2001-02( supra.).

Now, the Department is in appeal before the Tribunal assailing findings of

Commissioner of Income Tax (Appeals) in allowing assessee’s claim of payment

of commission as well as excluding income from sale of scrap, risk insurance

recovery and sundry neutral revenue etc for computing deduction u/s. 80HHC

of the Act.

the course of assessment proceedings, the Assessing Officer asked to submit

names and addresses of the parties to whom commission was paid. The

assessee could furnish details of parties to whom commission to the tune of

Rs.1,82,13,603/- was paid. No details whatsoever in respect of payment of

commission amounting to Rs.46,68,071/- was furnished by the assessee. The

assessee expressed its inability to produce any correspondence regarding

commission agents specifying details of services rendered by them or any

correspondence regarding credit notes by assessee specifying services rendered

in respect of payment Rs. 46,68,071/-. The assessee could not furnish complete

details of names and address of the parties. The ld. DR fairly admitted that for

assessment year 2001-02, the Hon'ble Bombay High Court has upheld the

decision of Tribunal in allowing assessee’s claim of deduction on payment of

commission. The ld. DR submitted that in so far as payment of commission to

Rs.46,68,071/- is concerned, the assessee has even failed to give names and

address of the parties to whom commission has been paid. At least to the extent

of Rs.46,68,071/-, payment of commission should be disallowed.

4 ITA No.1044/PUN/2014 A.Y.2000-01

4.1 In respect of ground No. 3 and 4 relating to inclusion of income from

scrap sales, risk insurance recovery, sundry neural revenue etc, the ld. DR

submitted that Commissioner of Income Tax (Appeals) has erred in allowing

inclusion of all the aforesaid items in total turnover while computing deduction

u/s. 80HHC of the Act. The ld. DR submitted that the Hon'ble Supreme Court of

India in recent decision rendered in the case of CIT Vs. Punjab Stainless Steel

Industries has held that ‘turn over’ in section 80HHC does not includes sale

proceeds of scrap. The word ‘turnover’ means solely the amount of sale proceeds

received in respect of goods in which assessee is dealing. Thus, in view of recent

decision, income of assessee from sale of scrap has to be excluded while

computing total turnover for determining deduction u/s. 80HHC of the Act.

submitted that issue raised by the Department in ground No. 1 and 2 relating to

payment of commission is squarely covered by the decision of Tribunal in

assessee own case in ITA No.448/PN/2010 for assessment year 2001-02

(supra.) and the decision of Tribunal in ITA No. 2285/PN/2014 for assessment

year 1996-97 decided on 06.12.2016. The Hon'ble Bombay High Court in

Income Tax Appeal (LOD) No. 1107 of 2012 (supra.) has upheld the findings of

Tribunal on payment of commission. The ld. AR submitted that the assessee

had given approximately 80% of the data in respect of commission paid. The

Assessing Officer did not test check to verify the payment of commission and

therefore, no disallowance in respect of Rs.46,68,071/- i.e. remaining 20% of

data which was not supplied to the Assessing Officer should be made.

5.1 In respect of ground No. 3 and 4 raised in appeal qua inclusion of income

from sale of scrap, risk insurance recovery and sundry neutral revenue etc from

business profits for the purpose of computing deduction u/s. 80HHC of the Act,

5 ITA No.1044/PUN/2014 A.Y.2000-01

the ld. AR placed reliance on the decision of Tribunal for the assessment year

2001-02 (supra.). The ld. AR submitted that the Tribunal has remitted the issue

back to the file of Commissioner of Income Tax (Appeals) to adjudicate the

matter in line with the judgment of Hon'ble Bombay High Court in the case of

CIT v. Pfizer Ltd. reported as 42 DTR 32 (Bom.) and Dresser Rand India Pvt.

Ltd. ITA 2186 of 2009 decided on 08.04.2010.

and have perused the orders of Authorities below. The Department in appeal

has raised two issues. The ground No. 1 and 2 raised in appeal is with respect

to payment of commission to third parties by assessee amounting to

Rs.2,28,81,674/-. The Assessing Officer has disallowed payment of entire

commission on the ground that the assessee has failed to give details of services

rendered. A perusal of assessment order shows that out of total commission

paid Rs. 2,28,81,674/-, the assesses has furnished details of commission paid

Rs.1,82,13,603/-. No details have been furnished by assessee with regard to Rs.

46,68,071/-.

We find that in the past i.e. assessment years 1985-86, 1986-87, 1988-

89, 1991-92, 1993-94,1995-96 and 1996-97, the Tribunal has allowed payment

of commission. The Department has never challenged the order of the Tribunal

on this issue before the Hon'ble High Court. The Co-ordinate Bench of Tribunal

in assessment year 2001-02 in ITA No. 448/PN/2010 (supra) again allowed the

claim of assessee with regard to payment of commission. The Department

carried the matter in appeal before the Hon'ble Bombay High Court in Income

Tax Appeal (LOD) No. 1107 of 2012 (supra). The Hon'ble High Court dismissed

the ground raised by the Revenue.

6 ITA No.1044/PUN/2014 A.Y.2000-01

Thus, following the decision of co-ordinate Bench which has been upheld

by the Hon'ble Bombay High Court, the payment of commission to the extent of

Rs.1,82,13,603/- is allowed.

In so far as payment of commission of Rs.46,68,071/- is concerned, we

find that the Assessing Officer has categorically observed that the assessee has

not even furnished the complete names and addresses of the parties. The ld. AR

has not rebutted these findings of Assessing Officer. The Commissioner of

Income Tax (Appeals) is also silent on the observations of Assessing Officer qua

commission payment of Rs.46,68,071/-. No doubt, the payment of commission

has been allowed by the Tribunal in past which has now been upheld by the

Hon'ble High Court in the case of assessee for assessment year 2001-02, but

the fact of actual payment of commission has to be verified. The duty is cast

upon the assessee to furnish basic details viz. names, addresses etc. of the

recipients of commission.

Thus, we are of considered view that the issue relating to payment of

commission to the extent of Rs.46,68,071/- needs revisit to the file of Assessing

Officer for verification and genuineness of parties to whom commission has

been paid. In the result, ground No. 1 and 2 raised by the Department are

partly allowed for statistical purposes.

exclusion of income from sale of scrap, risk insurance recovery and sundry

neutral revenue etc, from the business profits for the purpose of computing

deduction u/s. 80HHC. We observe that identical issue was raised before the

Tribunal in assessee’s own case in assessment year 2001-02 (supra). The

Tribunal restored the issue back to Assessing Officer. The relevant extract of the

order reads as under:

7 ITA No.1044/PUN/2014 A.Y.2000-01

“46. In Ground No.9, the Revenue has urged that on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in not excluding foreign exchange gain, miscellaneous receipts (sale of scrap, risk insurance recovery, sundry neutral revenue, recovery of doubtful accounts, refund from customs, income due to order cancellation & others) from eligible business profits for the purpose of calculating deduction under section 80HHC as per Explanation (baa) to sec.80HHC of the Act. 47. We have carefully considered the rival submissions. In the assessee's appeal, vide ITA No.448/PN/2010, similar issue relating to assessee's claim under section 80HHC of the Act in respect of certain other items of income, has been considered by us vide para 16 above, wherein we have extracted the findings of our co-ordinate Bench in its order dated 30.11.2010 (supra) regarding exclusion of service charges from the profits of business as per Explanation (baa) to section 80HHC of the Act. Following the said precedent as the circumstances are identical in this year, we set aside the order of the Commissioner of Income-tax (Appeals) and remit the matter back to his file to be adjudicated afresh in line with the judgment of the Hon'ble Bombay High Court in the case of Pfizer Ltd. (supra) and Dresser Rand India P Ltd. ITA No 2186 of 2009 (HC) We hold so. As a result, Ground NO.9 of appeal of the Revenue is partly allowed.”

Since the issue involved in the present appeal is identical, we deem

it appropriate to remit the ground No. 3 and 4 raised in appeal back to

the file of the Assessing Officer to follow the direction of Tribunal in

assessee’s own case for assessment year 2001-02. Accordingly, ground

No. 3 and 4 raised in appeal by the Department are allowed for

statistical purposes.

requires no adjudication.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 07th March, 2018. SB

8 ITA No.1044/PUN/2014 A.Y.2000-01

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-1, Nashik. 4. The CIT-V, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// स�या�पत ��त // True Copy //

आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.