Income Tax Appellate Tribunal - Mumbai
Dcit 10(3), Mumbai vs Taj Agro Commodities P.Ltd, Navi Mumbai on 21 June, 2017
ITA. NO. 7079/Mum/2013 Taj Agro Commodities Private Limited Assessment Year 2010-11 आयकर अपीलीय अिधकरण "ई"
ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"E" BENCH, MUMBAI
ी सी. नाग साद, ाियक सद एवं
ी मनोज कुमार अ वाल, ले खा सद के सम ।
BEFORE SHRI C.N. PRASAD, JM AND
SHRI MANOJ KUMAR AGGARWAL, AM
आयकर अपील सं./I.T.A. No.7079/Mum/2013
(िनधा रण वष / Assessment Year: 2010-11)
Deputy Commissioner of Taj Agro Commodities
Income Tax Circle 10(3) Private Limited
Room No. 451,4th Floor Plot No. 88
बनाम/
Aaykar Bhavan, M.K.Road Trimurti Granduer
Mumbai 400 020 Vs. Sector-19C,
APMC Market II
Navi Mumbai - 400 703
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AACCT-0880-A (अ पीलाथ# /Appellant) : ( $थ# / Respondent) अ पीलाथ# की ओर से / Appellant by : Dr. A.K.Nayak, Ld. DR $थ# की ओर से/Respondent by : Jitendra Singh, Ld. AR सुनवाई की तारीख / : 05/06/2017 Date of Hearing घोषणा की तारीख / : 21/06/2017 Date of Pronouncement 2 ITA. NO. 7079/Mum/2013 Taj Agro Commodities Private Limited Assessment Year 2010-11 आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. The Captioned appeal by revenue for Assessment Year [AY] 2010-11 assails the order of Ld. Commissioner of Income Tax (Appeals)-22 [CIT(A)], Mumbai dated 03/09/2013 qua deletion of certain addition with respect to commission u/s 36(1)(ii).
2. Facts leading to the dispute are that the assessee, being resident corporate assessee engaged as trader / broker of agricultural produce, was assessed for impugned AY u/s 143(3) on 09/02/2013 at Rs.2,75,58,940/- after disallowance of Rs.85,35,976/- u/s 36(1)(ii) as against returned income of Rs.1,90,22,968/- e-filed by assessee on 28/09/2010. The assessee reflected turnover of Rs.109.41 crores and other income of Rs.38.64 Lacs.
3. Upon perusal of Tax Audit Report, it was noted that an amount of Rs.85,35,976/- was paid as commission to a concern namely 'Trimurti Enterprises', being an entity covered u/s 40A)(2)(b). The said concern was proprietorship concern of 'Himatlal J.Chandra', a director of the company holding 50% shareholding in the assessee company. The assessee justified the same on the ground that the commission was paid to achieve higher sales and drew attention to the fact that turnover in the impugned AY improved substantially from Rs.33.03 crores in immediately AY to 3 ITA. NO. 7079/Mum/2013 Taj Agro Commodities Private Limited Assessment Year 2010-11 Rs.109.41 crores. Further, the assessee contended that the provisions of Section 36(1)(ii) were not applicable since no correspondence payment was made to the other director of the company who was also holding 50% share in the company. However, not convinced, Ld. AO disallowed the same on the premises that the same was paid in lieu of dividend and by making the payment in this manner, the assessee avoided payment of Dividend Distribution Tax u/s 115O.
4. Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 03/09/2013 and explained that the said payment was made against services rendered by the said proprietorship concern of the director and due TDS was deducted u/s 194H. The said concern assisted in sale / purchases activities of the assessee to the tune of Rs.83.38 crores and was paid commission @1%. The said concern had vast expertise and knowledge and good reputation in the field of pulses and grain markets which could be gauged from the fact that there was marked improvement in the financials of the company by availing these services. Further, the rendering of services was an admitted fact by Ld. AO. The case law rendered by Tribunal in Dalal & Brocha Stock Broking Pvt. Ltd. Vs. ACIT [ITA No. 5792/Mum/2009] and relied upon by Ld. AO was also distinguished on the facts. The attention was further drawn to the fact that the proprietor of the said concern paid tax at maximum marginal rate of tax and even from that angle there was no loss to the exchequer.
4ITA. NO. 7079/Mum/2013 Taj Agro Commodities Private Limited Assessment Year 2010-11
5. The Ld. CIT(A) was convinced with various contentions / submissions of the assessee and noted that the services were actually rendered, sales/profit showed marked improvement, the quantum of commission was not hit by Sec. 40A(2)(b) and no such payment was made to the other director who was having similar shareholding and therefore, the impugned payments could not be disallowed u/s 36(1)(ii) or 40A(2)(b) rather the same were an eligible expenditure u/s 37(1). Accordingly, the Ld. CIT(A) deleted the impugned addition against which the revenue is in appeal before us.
6. The Ld. Departmental Representative placed reliance on the conclusion reached at by Ld. AO and contended that the impugned payment was hit by the provisions of Section 36(1)(ii) as the assessee earned huge profits and distributed the same in the guise of the commission.
7. Per contra, Ld. AR placed reliance on the elaborate discussion made by Ld. CIT(A) and drew our attention to the fact that the said director paid tax at maximum marginal rate of tax and due TDS u/s 194H was deducted by the assessee. The said concern had vast expertise and knowledge in the business line of the assessee and was working for several other entities and earned handsome commission. The attention was also drawn to the fact the factum of rendering of services was nowhere disputed by the Ld. AO and addition has been made merely on the basis of suspicion which was not justified.
5ITA. NO. 7079/Mum/2013 Taj Agro Commodities Private Limited Assessment Year 2010-11
8. After appreciating the rival contentions and perusal of relevant material on record, we find strength in the various arguments of Ld. AR. The rendering of services was nowhere in dispute and no such payment was made to other director having similar shareholding and therefore, the impugned payment were not at all disallowable under Section 36(1)(ii). Due TDS on the impugned payments u/s 194H has been deducted as noted by Ld. CIT(A) and complete details of sale/purchase on which commission has been paid has been placed in the paper book which is not controverted by the revenue. The concern namely 'Trimurti Enterprises' has earned commission of Rs.1.88 Crores and reflected Net Profit of Rs.1.45 Crores as per the audited financial statements placed before us which shows that the said concern worked for many other entities on commission basis. The director has reflected Total Income of Rs.1.52 crores in his return of income and paid Taxes of Rs.47.51 Lacs. Therefore, we find that Ld. CIT(A) after elaborate discussion and due application of mind clinched the issue in the right perspective that the impugned payment were not hit by Section 36(1)(ii). The revenue has nowhere disputed the quantum / rate of payment having regard to market rates of such services as per the provisions of Section 40A(2)(b) and therefore, the impugned payments are squarely covered u/s 37(1) and also allowable u/s 36(1)(ii). This being the case, finding no substance in revenue's appeal, we dismiss the same.
6ITA. NO. 7079/Mum/2013 Taj Agro Commodities Private Limited Assessment Year 2010-11
9. In nutshell, the revenue's appeal stands dismissed.
Order pronounced in the open court on 21st June, 2017.
Sd/- Sd/-
(C. N. Prasad) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनांक Dated :21.06.2017
Sr.PS:- Thirumalesh
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ# / The Appellant
2. $थ# / The Respondent
3. आयकर आयु,(अपील) / The CIT(A)
4. आयकर आयु, / CIT - concerned
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड0 फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai