Income Tax Appellate Tribunal - Mumbai
Techprocess Solutions Ltd , Mumbai vs Assessee on 31 August, 2012
धकरण, मंुबई यायपीठ 'ई', मंुबई ।
आयकर अपील य अ धकरण,
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E", MUMBAI
सव ी आर.एस. याल, लेखा सद य एवं ी ववेक वमा, या यक सद य, के सम ।
Before Shri R.S.Syal, AM and Shri Vivek Varma, JM
आयकर अपील सं./ITA No.1842, 2660, 2917, 2918 & 3585/Mum/2011
( नधारण वष / Assessment Years : 2003-2004, 2004-2005, 2005-2006,
2006-2007 & 2007-2008)
M/s.Techprocess Solution Limited The Income Tax Officer / DCIT
Building No.2, 1st Floor बनाम/
Ward 10(1)(2) / 10(1)(1) / Cir.10(1)
Mehra Industrial Estate Mumbai.
Next to Jaswant Landmark Vs.
Mumbai - 400 079.
PAN : AABCB5216D
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से /Appellant by : Shri Yogesh Thar
यथ क ओर से /Respondent by : Shri V.Krishnamoorthy
सनवाई
ु क तार ख / घोषणा क तार ख /
Date of Hearing : 28.08.2012 Date of Pronouncement : 31.08.2012
आदे श / O R D E R
Per R.S.Syal, AM :
This batch of five appeals by the assessee involve assessment years 2003-2004 to 2007-2008. Since some of the issues raised in these appeals are common, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience.
Assessment Year 2003-2004
2. The first ground raised in this appeal is against the disallowance of commission paid to M/s.Maxcomm amounting to `2,15,018.
2 ITA Nos.1842/Mum/2011 & Ors.M/s.Techprocess Solution Limited.
Briefly stated the facts of the case are that the assessee was carrying on the business of providing electronic bill presentation and payment services in Mumbai and nine other major cities. Under this facility the customers could view the billing information from different billers like MTNL, BSES, etc. and effect payment of bills online with the help of this facility. In order to find out the customers, the assessee availed the services of various Direct Sales Agents (DSAs). One of the DSAs is M/s.Maxcomm, who was paid commission. The Assessing Officer observed from the letter filed by the assessee dated 11.11.2005 that there was a mention of commission to M/s.Maxcomm at `56,70,814. Another letter of the assessee dated 20.01.2006 mentioned the amount of commission paid to M/s Maxcomm at Rs.54,55,796. The difference of `2,15,018 (56,70,814
- 54,55,796) was disallowed. The assessee argued before the learned CIT(A) that the assessee claimed deduction only for `54.55 lakh and not `56.70 lakh and hence the addition representing the difference in two figures ought not to have been made. The learned CIT(A) upheld the assessment order on this point.
3. After considering the rival submissions and perusing the relevant material on record it is observed that the assessee vide its letter dated 11.11.2005, filed before the A.O., in fact showed commission to M/s.Maxcomm at `56.70 lakh. The copy of the relevant extract of this letter indicating the payment to M/s.Maxcomm at this level is there on at page 41 of the paper book.
3 ITA Nos.1842/Mum/2011 & Ors.M/s.Techprocess Solution Limited.
Page 61 of the paper book is another letter dated 20.01.2006 filed by the assessee indicating the payment to M/s.Maxcomm at `54.55 lakh. The learned AR contended that only the sum of `54.55 lakh was included in the total amount of `1,43,15,833, being the commission paid to DSAs debited to the profit and loss account. If this contention of the assessee is taken as correct, then it would mean that the total debit to the profit and loss account contains the commission paid to M/s.Maxcomm at `54.55 lakh and not `56.70 lakh. In that view of the matter, there can be no question of any disallowance at `2.15 lakh because that amount does not find its way to the Profit and loss account. In our considered opinion, it will be just and fair if the impugned order on this issue is set aside and the matter restored to the file of A.O. for making necessary verification in this regard and thereafter deciding the issue accordingly. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in this regard.
4. Ground nos.2 and 3 of the appeal are against the sustenance of disallowance of some part of commission paid to DSAs and disallowance of entire amount of bonus and incentives paid to DSAs. Briefly stated the facts of these grounds are that the assessee claimed deduction for commission paid at `143.15 lakh to DSAs. On being called upon to give the nature and other relevant consideration of commission, the assessee filed certain details. On verification of these details, it was noticed that the assessee had paid commission to 4 ITA Nos.1842/Mum/2011 & Ors. M/s.Techprocess Solution Limited.
all the DSAs at a higher level than that agreed to between the assessee and such DSAs as per the terms of agreement with each of such DSA. Various instances in which the assessee paid commission to DSAs at a higher level than as agreed to between these DSAs by the assessee, have been set out in para 13 from pages 3 to 6 of the assessment order. In the backdrop of these facts, the Assessing Officer made an ad hoc disallowance of `50 lakh. It was further observed that the assessee had claimed to have made payment of bonus and incentive to DSAs on `21.62 lakh. The A.O. did not find any clause in the agreement permitting the payment of such amounts to the DSAs. He, therefore, made addition for this sum as well. The learned CIT(A) sustained the addition in full towards bonus and incentive to DSAs. As regards the ad hoc disallowance of commission of `50 lakh, the learned CIT(A) restored the matter to the file of A.O. for calculating the exact amount of excess alleged commission paid to such DSAs liable for addition. The assessee is in appeal against this finding of the ld. first appellate authority.
5. We have heard the rival submissions and perused the relevant material on record. It has been argued that the assessee was paying commission to DSAs for fetching customers. The learned AR took us through copy of agreement with M/s.Strategic Marketing Pvt. Ltd., a copy of which is available on pages 169 to 176 of the paper book. It was submitted that similar agreements were entered into with other DSAs with the exception of change in the amount of commission in 5 ITA Nos.1842/Mum/2011 & Ors. M/s.Techprocess Solution Limited.
some cases. On the perusal of the said agreement, it can be seen that the manner of payment of commission to this DSA has been set out on page 176 of the paper book. As per this agreement, M/s.Strategic Marketing Pvt. Ltd. is eligible for commission at `130 per unit in case of "Gold" card up to 100 customers and thereafter `155 per customer between 101 - 350, so on and so forth. There is no dispute on the fact that the actual commission paid to M/s. Strategic Marketing Pvt. Ltd. is more than that agreed to between the assessee and this DSA in terms of the agreement entered into on 15.09.2002. Now the question arises as to whether the assessee is entitled to deduction for a higher sum than that agreed between the assessee and DSAs. There can be no dispute on the fact that if the assessee, in fact, pays a higher sum to the commission agent than that agreed, the disallowance cannot be made for the excess, provided it is amply proved that the excess payment was a consideration for rendering services and as mutually agreed in supersession of the original agreement. On a specific query as to whether any further agreement changing the terms and conditions of commission was entered into between the assessee and such DSAs, the learned AR stated that no new or supplementary agreement was entered into. On a specific query as to whether there was any correspondence between the assessee and DSAs for the claim of higher commission, the learned AR submitted that there was necessary evidence but the same was not required by the A.O. Position has been stated to be similar in respect of agreements with other DSAs. In support of his case, the 6 ITA Nos.1842/Mum/2011 & Ors. M/s.Techprocess Solution Limited.
learned AR referred to confirmation letters from four DSAs, copies of which are available on pages 219 to 222 of the paper book. From the index of the paper book, it can be seen that such confirmation letters were not produced before the Assessing Officer. This leads us to a situation wherein the assessee is claiming to have paid higher amount of commission than that originally agreed but necessary details in this regard were not produced before the A.O. Similarly it is noticed that the assessee did not produce these DSAs before the A.O. to substantiate its claim that higher amount of commission was, in fact, paid to them than that original agreed. On a specific query it was admitted that even the higher payments of commission made to DSAs were not uniform and these varied from person to person and area to area. In such a situation it becomes more relevant for the assessee to conclusively prove with some cogent evidence that it paid higher commission to its DSAs. Mere fact that the payment was made through account payee cheques is not conclusive to the allowability of claim, more so when the actual amount claimed t have been paid to DSAs is higher than that agreed as per the written agreements. Considering the entirety of the facts and circumstances in the instant case, we are of the considered opinion that it will be in the interest of justice if the impugned order on this issue is set aside and the matter is restored to the file of A.O. We order accordingly and direct the A.O. to examine further material / evidence, which the assessee wants to file in support of substantiation of its claim for higher commission to DSAs. It is made clear that the Assessing 7 ITA Nos.1842/Mum/2011 & Ors. M/s.Techprocess Solution Limited.
Officer is also open to examine DSAs in person, if he considers it necessary to do so. The assessee will be obliged to lead the necessary material as required by the A.O. in this regard to satisfy him as to the genuineness of actual making of higher payments to DSAs and that too in the interest of business.
6. Insofar as the amount of bonus and incentive to DSAs is concerned, the same finding as recorded by us qua commission to DSAs would apply. Even though the payment of bonus and incentive to DSAs was not as per the agreement entered into between the assessee and DSAs, still the assessee, in order to claim deduction, is entitled to prove that such sum was genuinely paid by it in furtherance of its business interest. The assessee will lead evidence before the A.O. in fresh proceedings qua the factum of having actually paid this sum and the commercial expediency in making such payment.
7. In the result, the appeal is allowed for statistical purposes.
8. Both the sides are in agreement that the facts and circumstances of the other appeals in the present batch involve the issue of commission to DSAs. In these years the Assessing Officer made disallowance on a proportionate basis in accordance with his action taken for the assessment year 2003-2004 and the learned CIT(A) directed the Assessing Officer to compute the disallowance as per his direction given for assessment year 2003-2004. In view of the 8 ITA Nos.1842/Mum/2011 & Ors. M/s.Techprocess Solution Limited.
foregoing discussion and our decision for assessment year 2003- 2004, we set aside the orders passed by the learned CIT(A) for assessment years 2004-2005, 2005-2006, 2006-2007 and 2007-2008 on the question of allowability or otherwise of commission paid to DSAs and restore the matter to the file of A.O. for taking a decision in accordance with the discussion made by us for assessment year 2003-2004.
9. The last ground for assessment year 2007-2008, being deduction of provision of fringe benefit tax while calculating MAT u/s 115JB, was not pressed by the learned AR. The same is, therefore, dismissed.
10. In the result, the appeals for assessment years 2004-2005 to 2006-2007 are allowed for statistical purposes and appeal for assessment year 2007-2008 is partly allowed for statistical purposes.
Order pronounced on this 31st day of August, 2012.
आदे श क घोषणा दनांकः को क गई ।
Sd/- Sd/-
(Vivek Varma) (R.S.Syal)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मंुबई Mumbai; दनांक Dated : 31st August, 2012.
Devdas*
9 ITA Nos.1842/Mum/2011 & Ors.
M/s.Techprocess Solution Limited.
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-XXI, Mumbai.
4. आयकर आयु / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मंुबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
ु / BY ORDER,
आदे शानसार
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.
उप/ Registrar)
आयकर अपील य अ धकरण,
धकरण, मंुबई / ITAT, Mumbai