BATLIBOI INTERNATIONAL LTD,MUMBAI vs. ITO 2(1)(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार/ PER Rajendra A.M.- अनुसार Challenging the orders dated 17/11/2015 of the CIT (A)-4,Mumbai, the assessee has filed the appeals for the above-mentioned two assessment years.Assessee- company is engaged in the business of export trading.The details of filing of returns of income,dates of order u/s. 147 of the Act,assessed incomes in the re-assessment proceedings can be summarised as under: AY. ROI filed on Returned income 143/147 order dt. Income u/s. 143/147 2002-03 21.10.2002 19,97,790/- 24.12.2007 25,34,230/- 2004-05 27.10.2004 46,87,220/- 24.12.2007 60,66,700/- Facts of the Case: 2.The original assessments were completed u/s. 143 (1) of the Act.Subsequently,the assessments were reopened on the basis of the information received from the Central Board of Direct Taxes, dated 18/11/2005 regarding illicit payment made by various supplies to government of Iraq as elaborately reported in Volcker Committee Report (VCR) which gave details of manipulation committed in the oil for food program.On the basis of the report, in the assessment made u/s.143 (3)r.w.s.147,the Assessing Officer(AO)disallowed overseas commission (Rs.5,36,440/-for the AY.2002-03 and Rs.13,79,475/-for the AY.2004-05),paid by the assessee to M/s. Dome International,Abu Dhabi,UAE (DI).

3.Aggrieved by the order of the Assessing Officer the assessee preferred appeals before the First Appellate Authority(FAA),who sustained the additions made by the Assessing

302&303/Mum/16 M/s. Batliboi Intl. Ltd. Officer.While deciding the appeal,filed by the assessee,the Tribunal restored back the matter to the file of the Assessing Officer(ITA/64-65/M/2010,dtd.27.04.2011).The while giving effect to the order of the Tribunal made the same additions and same were again upheld by the FAA.

4.During the course of hearing the Authorised Representative(AR)stated that the Tribunal had asked the AO to verify the amount with regard to after sales service fees (ASSF), that the AO and the FAA treated it as commission payment,that both the authorities had not followed the directions of the Tribunal,that if the payment was more than US $ 14832 same should be disallowed,that the assessee had paid commission to DI.He referred to pages 18,24,28-39 of the Paper book.The Departmental Representative(DR) supported the order of the FAA.

5.We have heard the rival submissions and perused the material before us.We find that while deciding the appeal on earlier occasion the Tribunal had passed the following order: “24.We have gone through the records and perused the relevant materail.Similar issue has been decided by the co-ordinate Bench in M/s. Cipla Ltd. in ITA No.s. 7248 to 7286/M/07.However, it was pointed out that in Table 7 & 8 of the report the amount paid as ASFF is only USD 14823. Even the Volcker Committee Report shows an amount of USD 14823 as ASFF remitted. 25.In these circumstances,we remit the issue to the Assessing Officer to verify the exact amount of ASFF remittance and decide the matter in light of the decision of the co-ordinate Bench in M/s.Cipla Ltd. Vs ACIT in ITA No.s.7248 to 7286/M/07.” From the perusal of the above order it is clear that the Tribunal had asked the AO to ‘verify’ the exact amount of ‘ASSF’ remittance.Besides in the order it was specifically mentioned that in the VCR the amount mentioned was USD 14823.Considering the above we are of the opinion that the AO and the FAA had travelled beyond the directions of the Tribunal.Therefore,reversing the orders of the FAA we direct the AO to restrict the addition to US$ 14823 only.

We further uphold that the FAA was not justified in holding that commission payment to DI had ultimately passed on to Iraq Government and that the expenditure was not allowable u/s. 37(1) of the Act. In short the disallowance should be restricted to USD 14823 as stated earlier.