Income Tax Appellate Tribunal - Mumbai
Valia Impex P. Ltd, Mumbai vs Department Of Income Tax on 10 September, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
'F' BENCH, MUMBAI.
BEFORE SHRI R.V.EASWAR, SR.VP AND SHRI B.RAMAKOTAIAH, AM
I.T.A. No.1963/Mum/2009
(Assessment Year : 2006-07)
The Deputy Commissioner of Vs. Valia Impex P.Ltd.
Income Tax, Range-8(3), Ground floor, A Wing,
R.No.204, 2nd floor, Kailash Tower, STC Colony,
Aayakar Bhavan, M.K.Road, Western Express Road,
Mumbai-400 020. Andheri(E),
Mumbai-400 069.
PAN:AAACV1301L
(Appellant) (Respondent)
Appellant by : Mr. Virendra Ojha, DR
Respondent by : Mr.Hiro Rai
ORDER
Per R.V.Easwar, Senior Vice President: This appeal by the revenue relates to the assessment year 2006-07 and the only ground taken is that the CIT(A) erred in deleting the disallowance of Rs.8,40,099/- made by the Assessing Officer, being retainership fees which according to the Assessing Officer was not paid for the purpose of the business.
2. The assessee is a private limited company carrying on business as del-credere agent of Reliance Industries Ltd. and Indian Petrochemicals Corporation Ltd. In the return, the assessee claimed deduction of Rs.12,17,899/- as retainership fees which included Rs.8,40,099/- paid to four parties, the names of whom are mentioned in paragraph 3 of the assessment order. The assessee was called upon to justify the claim. The assessee furnished the relevant details as well as the agreements. The Assessing Officer was however not satisfied that the retainership charges were paid for services rendered by the four parties. According to him, they were regular customers of the assessee not entitled to any commission or brokerage on 2 ITA No.1963/Mum/09 the sales. In this view of the matter, he disallowed the amount of Rs.8,40,099/-.
3. On appeal, the CIT(A) following the orders of his predecessor's for the assessment years 2003-04 to 2005-06 deleted the disallowance observing that facts of the case are identical for the year under appeal. It is against the decision of the CIT(A) that the Revenue has preferred the present appeal.
4. At the time of the hearing it was pointed out on behalf of the assessee that the directions issued by the Tribunal in its order dated 10th September, 2009 in ITA Nos.2125, 2294 and 7028/Mum/2007 relating to the assessment years 2003-04 & 2004-05 and as modified by the Tribunal's order dated 8th February, 2010 in M.A.No.770/Mum/2009 should be followed in the present year also. A perusal of the aforesaid orders shows that in the order dated 10th September, 2009, the Tribunal categorized the payment of retainership fees into three categories namely (a) instances where the concession has been offered to the very same person who is the purchaser of goods from RIL - virtually, for the customer this is in the nature of discount which he enjoys against purchase price (described as self) (b) Instances where the benefit was passed on to one of the group concerns of the purchaser group. Often enough, the group concern is the main concern whereas the other concerns are perceived to the satellite units viz the concerns which work for the main concern. Indeed these are the internal details of the purchaser, where have no bearing on the appellant. (described as partly self & partly satellite concerns). (c) Instances where a commission agent would have in the course of his business, assisted the appellant in securing certain orders from the purchasers." (described as third party concern)". After making the above categorisation, the Tribunal came to the conclusion that the matter should be set aside. It thus set aside the assessment and directed the Assessing Officer to examine the 3 ITA No.1963/Mum/09 recipient of the commission and establish the case regarding the genuineness of the transaction, business purpose of the payment and the nature of the services. These directions were given in paragraph 13 of the order. The assessee thereafter filed M.A.No.770/Mum/2009 to point out that in respect of category 'c' above, it is possible to call upon the assessee to establish the services rendered by the person to whom retainership fee has been paid but in respect of the other two categories i.e. (a) &
(b), it was not possible to establish the nature of services rendered because the retainership fee was paid not for services rendered but for retaining loyalty. It was therefore pointed out that the directions given by the Tribunal were not capable of being complied with so far as categories (a) & (b) are concerned and that these directions were given by the Tribunal disregarding the factual basis on which the assessment was made. The assessee accordingly prayed for appropriate modification of the order of the Tribunal.
5. After considering the assessee's prayer in the Miscellaneous Application, the Tribunal passed the following order on 8th February, 2010:-
"7. We have considered the contentions on behalf of the assessee. We are of the view that directions contained in para 13 of the order of the Tribunal in so far as it called upon the Assessing Officer to examine the nature of services rendered with regard to category (a) & (b) of persons to whom retainership fee was paid by the assessee is erroneous. Aforesaid directions will be valid only with regard to payment of retainership fees to third party concerned categorizes in category (c) above. To this extent, directions contained in para 13 of the Tribunal shall be deemed to have been modified. The other directions of the Tribunal will remain the same.
8. In the result, Miscellaneous Application is allowed."4 ITA No.1963/Mum/09
6. After going through the above, we set aside the orders of the departmental authorities on the point of disallowance of retainership fee and restore the matter to the Assessing Officer who shall take a fresh decision regarding the allowability of the retainership fees in the light of the directions of the Tribunal in the orders cited above.
7. The appeal of the Revenue is thus allowed but only for statistical purposes. No Costs.
Order pronounced on this 11th day of March, 2010.
Sd/- Sd/-
(B. RAMAKOTAIAH) ( R.V.EASWAR )
Accountant Member Senior Vice President
Mumbai, Dated 11th March , 2010.
somu
Copy to :
1. The Appellant
2. The Respondent
3. The CIT-8 Mumbai.
4. The CIT(A)-XXIX, Mumbai
5. The DR 'F ' Bench
/True Copy/ By Order
Asstt. Registrar, I.T.A.T, Mumbai