TMI Blog2012 (12) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... with that of the scheme framed by the Government of Maharashtra in 1979, considered in the case of DCIT Versus Reliance Industries Limited [ 2003 (10) TMI 255 - ITAT BOMBAY-J] and if so teat it as a capital receipt. Disallowance of discount given to stockists – Held that:- What is offered by the assessee to the stockists are nothing but discount because the assessee sells the goods to the stockists, who is turn sells the goods to the consumer. In the sale transaction between the assessee and the stockists there cannot be payment of commission to the purchaser himself. Here stockists themselves are buying goods and it cannot be said that they are rendering any service in the course of such buying of goods which will render any payment to them as commission. Thus confirming findings of the CIT(A) that what was offered to the stockists is nothing but discount under provisions to sec.194H will not apply – in favour of assessee. Computation of capital gains arising from transfer of undertaking – Held that:- Merely because the land was not conveyed by means of a registered conveyance deed, it cannot be said that the transferee who was permitted to enjoy complete domain over the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The CIT(A) forwarded the said evidences to the AO for necessary verification. After considering the submissions of the assessee and the remand report submitted by the AO, the CIT(A) allowed the appeal of the assessee observing as under:- 2.3 I have duly considered the submissions of the appellant and the material available on record. The additional evidences f iled by the appellant clearly show that the debts in question are in the nature of short recovery/non-recovery of the sale proceeds of the sales made in the earl ier years. The said sale proceeds were offered to tax in the respective years and the debts were written off in the books in the current year. The relevant sales and the debtors shown in the balance sheet have been accepted in the earlier years. Hence the existence of the debts has been established by the appellant. The appellant has written off the bad debts in the account books and it is not incumbent on him to prove that all necessary measures have been taken for the recovery of debts or the debts written off have indeed become bad in this year. Decisions in the case of Morgan Securities and Credits Pvt. Ltd. (292 ITR 339 Delhi), Autometers Limited (292 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of ITAT, Mumbai in the case of Reliance Industries Ltd. (88 ITD 273)(SB). The AO disallowed the claim of the assessee for the reasons that sales tax collected is a trading receipt as held in the cases of Chowringhee Sales Bureau Pvt. Ltd. (87 ITR 542)(SC), Sinclaire Murray Co. Pvt. Ltd. (97 ITR 615) Jonnala Narasimha Rao Co. (200 ITR 558). It was observed that exemption of payment of sales tax after collection does not alter the nature of receipt. In all the earlier years similar receipts were offered for tax by the assessee itself. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 8. In the written submissions filed during the appeal proceedings stated that the sales tax incentive was given to the appellant company to eat off the locational disadvantage of setting up the unit in the backward district. The assessee was entitled to the sales tax subsidy equivalent to 130% of the capital invested in the new project. The method of release of this subsidy by the Government in the form of exemption from levy of sales tax is irrelevant as subsidy was given to set up an industry in the backward area and not to assist unit to merely improve the bottom lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Tribunal held that for determining the nature of subsidy, the object with which the subsidy was given, was decisive and it took primacy over the fact that it was given af ter commencement of production or conditional upon it. The Tribunal considered and distinguished the decisions of Hon ble Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd., Sinclaire Murray Co. Pvt. Ltd Jonnala Narasimha Rao Co., relied upon by the AO. The subsequent decision of the Mumbai Tribunal in the case of Oceanic Farms Exports Pvt. Ltd. (supra) also supports the case of the appellant. In this case, the Tribunal considered the 1998 scheme of Maharashtra Government for dispersal of industries which was similar to the scheme under which the appellant got the subsidy. It was held that the subsidy received in the form of exemption from payment of sales tax, was in the nature of capital subsidy. Similar view was also taken by the Hon ble Allahabad High Court in the case of Kalpana Palace (275 ITR 365). It was held by the Court that grant-in-aid given in order to promote construction of cinema buildings in the small towns was capital receipt, even though given after the business had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to the files of the AO to determine whether the scheme was identical with that considered by the special bench and if so treat the subsidy as a capital receipt. In the circumstances, we set aside the issue to the files of the AO to consider whether the present subsidy scheme enjoyed by the Assessee is identical with that of the scheme framed by the Government of Maharashtra in 1979, considered by the Special bench and the Bombay High Court in the case of reliance Industries supra and if so teat it as a capital receipt. In the result the appeal of the Revenue on this issue is treated as allowed for statistical purposes. 10. In the result, the appeal of the revenue in ITA No 917/H/11 for AY 2004-05 is partly allowed for statistical purposes. ITA No 918/H/09 AY : 2005-06 11. The first issue is regarding allowance of bad debts under Section 36(1)(vii). Similar issue has been decided by us in ITA No 917/H/09 for the assessment year 2004-05(supra). Respectfully following the conclusions drawn in AY 2004-05 and the decision of the Apex Court in the case of TRF Ltd Vs CIT reported in 323 ITR 397(SC), we confirm the order of the CIT(A) in allowing bad debt written off in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders which were directly executed by the assessee company for which commission was paid to the stockist af ter making TDS. The discounts allowed to the stockists on direct sales made to them cannot be treated as commission. As a matter of fact, discount is not paid to the stockists. Discount is an abatement in the sale price. Legal distinction between discount and commission was explained by the Hon ble Courts in the case of Ahmedabad Stamp Vendors Association and Kerala Stamp Vendors Association (supra) relied upon by the appellant. The issue was dealt in depth by the Hon ble ITAT, Delhi in the case of Idea Cellular Ltd. in its order dated 28/03/2008, copy of which was furnished by the ld. AR. The observation of the Hon ble Bench, in paras 13 and 14 of its order was reproduced hereunder 13. From above decision it is clear that discount allowed on transactions resulting in outright purchases cannot be treated as brokerages or commission. There should be in existence the relationship of principal and agent in order to bring the discount in the ambit of commission or brokerage. Section 182 of the Indian Contract Act, 1872 def ines the term agent and principal. An agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be payment of commission to the purchaser himself. Brokerage or commission envisaged under section 194H is for the payment received by the person action on behalf of another for services rendered in the course of buying and selling of goods. Here stockists themselves are buying goods and it cannot be said that they are rendering any service in the course of such buying of goods which will render any payment to them as commission. In the circumstances, we concur with the conclusion and findings of the CIT(A) that what was offered to the stockists is nothing but discount under provisions to sec.194H will not apply. In the circumstances, the CIT(A) has rightly deleted the disallowance of discount paid by the assessee to the stockists to the extent of Rs.113068338/-. We dismiss the departmental appeal on this issue. 16. In the result, the appeal of the revenue in ITA No 918/H/11 for AY 2005-06 is partly allowed for statistical purposes. ITA No 919/H/2009 AY : 2006-07 17. Ground No. 1 is regarding treatment of sales-tax collection should have bee held to be capital receipt on account of subsidy granted by the Government for setting up of industries. Similar issue was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not registered. On this fact alone, I agree with the contention of the ld. AR that the provisions of section 50C do not apply in the instant case. These provisions apply only where a document is registered and it was found by AO that the consideration received or accrued was less than the value adopted or assessed by the registration authority. Sub-section(2) of Sect. 50C further provides that the value so adopted or assessed by the stamp valuation authority, if questioned, in an appeal or revision or reference before any other authority or Court, then reference has to be made to the Valuation officer. This is a valuable right for a tax payer whereby the arbitrary determination of the value by the stamp valuation authority can be challenged before the AO. In such an event, section 50C will operate with the modif ication as contained in sub section (2) thereof . The remedy by way of an appeal, revision or reference can be availed only if there is an assessment for stamp duty. This sub section also brings out the fact that unless there is such an assessment, AO cannot apply section 50C of the Act. I am supported in my views by the decision of the ITAT, Jodhpur in the case of Navnee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 2(42C) clarif ies that the determination of value of an asset for payment of stamp duty, registration fees or other similar taxes or fees, shall not be regarded as assignment of values to individual assets or liabilities. Considering the def inition of slump sale occurring in Section 2(42C) read with Explanation 2, it is evident that the transfer of HED to TWL by Business Transfer Agreement dated 04/04/2005 was a slump sale. In fact, the AO was also initially of the same view and therefore, he issued a show cause notice to the appellant seeking their objection that why the said transfer should not be treated as a slump sale? The appellant erroneously objected to the said show cause relying on the decision of Hon ble Supreme Court in the case of Artex Manufacturing Company (227 ITR 260). It is evident from the allocation of net sale consideration of HED made by the appellant that no actual valuation of assets was made by the appellant. The sale value consideration was allocated in the ratio of net book value of the asset to the net book value of the total assets . Hence, the aforesaid decision of the Hon ble Supreme Court decision does not apply to the instant case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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