MEGASTOCK INVESTMENT SERVICES PVT LTD vs. ITO CO WARD 6 (3)

i $4s % 2L.O9.20L1 Present: Mr. Anoop Sharma and Mr. Manu K. Giri, Advocates for the appellant. Mr. Kiran Babu, Sr. Standing counsel for the respondent. +ITA No. LLLL/2O1L t< The present appeal filed under Section 2604. of the Income Tax Act, L961 (hereinafter, referred to as 'the Act') is admitted on the following substantial questions of law:- Whether on facts and in law, the Tribunal was justified in confirming the disallowance of Rs.9,99,090/- being a part of commission payable to M/s Jain Ferro Alloys Pvt. Ltd? Whether on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing the deduction of Rs.9,99,090/- representing commission payable to M/s Jain Ferro AJIoys (P) Ltd this year on mercantile basis and offered for taxation in A.Y.201,L-1,2 under Section 1(1)(a) of the Act when the said liability ceased to exist. We have heard learned counsel for the parties as short question of law is involved. The admitted facts of the present appeal are that for the assessment year 2OOL-02 the assessee had filed its return ITA No. 7III/2011 page 1. of 4 t. 2. Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified

t offering its income under section 115JB of the Act. It is providing consultancy services. In the return filed by the assessee, the assessee had claimed deduction of <54,99,090/- as claimed to be payable to M/s Jain Ferro Alloys Pvt. Ltd' (hereinafter, referred, to as Jain Ferro',). According to the assessee, an agreement on its behalf was executed between the appellant and Jain Feffo on B'h October, !997, pursuant to which Jain Ferro had provided services to the assessee. For this, Jain Ferro had also issued debit note in the sum of {54,99,090/-' It is also not in dispute that the assessee is following mercantile system of accounting. It is for this reason .that the assessee claim deduction of the entire amount of {54,99 ,0901-, though the amount paid by the assessee in this year was t45 lakhs. The Assessing officer, after examining the matter, took a view that the actual amount paid by the assessee to M/s Jain Ferro was only t25 lakhs. on this basis Assessing officer granted, deduction to the extent of t25 lakhs and disallowed remaining claim of t29,99,090/-. The assessee preferred an appeal against the aforesaid disallowance by the Assessing Officer. page 2 of4 F\ ITA No. 1L1.L/2011

CIT(A) after examining the facts came to the conclusion that the actual amount paid by the assessee was T45 lakhs and not t25 lakhs. On this view, CIT(A) allowed the deduction of t45 lakhs and still made disallowance of <29,99,0901-. The assessee took the matter further in appeal before the ITAT. Retreating his contention that since it was following mercantile system of accounting, even if an amount of <9,99,090/- was not debited in that order, it should have been allowed deduction thereof under Section 37 of the Act. The assessee treated the same as income and offered deduction thereupon. The ITAT, however, did not accept the contention of the assessee and rejected the appeal. It is in these circumstances that the present appeal is preferred under Section 260A of the Act and raising aforesaid substantial questions of law. It is a matter of record that the authorities below also did not dispute the genuineness of the transaction between the assessee and M/s Jain Ferro. It is for this reason that the amount paid by the assessee to Jain Ferro has been allowed for adjudication. Once the transaction between the assessee and Jain Ferro is treated as genuine and it is also accepted thatJain ITA No. 1111/2011 page 3 of4

t Ferro provid.ed its services to the assessee for which Jain Ferro also issued debit note for {54,99,090/-' It is also not in dispute that the assessee is following mercantile system of accounting' the assessee was entitled to claim deduction of the entire amount even when only t45 lakhs out of the aforesaid amount was paid by the assessee to Jain Ferro in that year' subsequently, mistake committed by the authorities below is to go by cash method ignoring the fact that the assessee was following mercantile system of accounting. Moreover, when the assessee has specifically offered the aforesaid amount of <54,99,090/- and has paid tax thereupon if deduction is not allowed" for the year in question it would amount to double taxation. For this reason, we answer the questions of law in favour of the assessee and the order of the authorities bel0w are set aside holding that the assessee would be entitled to claim deduction for the entire amount of {54,99,090/-' The present appeal stands disposed of terms. No order as to costs. the aforesaid SIKRI, J. 'ft 4 SEPTEMBER 2L,ZOLLIrir" ITA No. 11L1/2011 Ld^-t SIDDHARTH MRIDUL, J. page 4 of4