TMI Blog2016 (6) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... hat payment is against public policy. There is also nothing on record that such payment have routed back to assessee in any manner. Lastly, assessee has paid the amount in question after deducting TDS and recipient has paid taxes on same. Taking all facts and circumstances of the case into consideration, we are of the view that payment in question @5.25% looking to the services rendered by said party is justified and same is allowed. Payment of transport charges made by assessee company - assessee did not discharge the onus to substantiate the claim with supporting evidences - Held that:- Revenue authorities have not disputed the fact that possession of transport vehicles was M/s. Delite International and transportation by assessee. They have not brought anything on record that goods have been transported by other than vehicles of the M/s. Delite International. It is a tax neutrality as held by Hon’ble Bombay High Court in case of CIT vs. Indo Saudi Services (Travel) P. Ltd. [2008 (8) TMI 208 - BOMBAY HIGH COURT] as both the parties are paying tax on highest rate. No colourable device has been suggested by AO with regards to these transports’ payments. similar type payments have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee. - ITA. Nos. 512 & 365/Mum/2016 - - - Dated:- 28-6-2016 - SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. Assessee : Shri Rajiv Khandelwal Shri Neelkanth Khandelwal, A.R. By Revenue : Shri Manjunath Swamy Shri Love Kumar, D.R. ORDER PER SHAILENDRA KUMAR YADAV, J.M: These cross appeals by assessee and Revenue arising out of Commissioner of Income-Tax (Appeals)-18, Mumbai, dated 09.11.2015 for A.Y. 2011-12. 2. In ITA No.512/Mum/2016, assessee has filed the appeal on the following grounds: 1. That the Ld. Commissioner of Income Tax (Appeal) erred in affirming the decision of Ld. AO for disallowing commission payment of ₹ 1,41,21,044/- to M/s Delite International without appreciating the fact that expenditure was incurred wholly and exclusively for the purpose of business. 2. That the Ld. Commissioner of Income Tax (Appeal) erred in affirming the decision of Ld. AO for disallowing transportation charges of ₹ 74,13,811/- in arbitrary manner and without any finding on the reasonableness as required under section 40A(2) (b) of the Income Tax Act, 1961. 3. That the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cles of Plastic. First issue in this appeal is with regards to disallowance of commission payment of ₹ 1,41,21,044/- paid by assessee to M/s Delite International. M/s. Delite International is a proprietary concern of Mr. Ashok Pandey, and he was also a Director in M/s. Shroff Textiles Ltd., assessee company. Thus, Mr. Ashok Pandey, proprietor of M/s. Delite International, is a person specified u/s. 40A(2)(b) of the Act. As far as payment of commission amounting to ₹ 1,41,21,044/- is concerned, Assessing Officer asked the assessee company to explain the basis for making such commission payment, alongwith evidences regarding nature of services rendered, copies of invoices etc. According to Assessing Officer, assessee failed to provide justification/basis for making the impugned payment and supporting evidences during assessment proceedings. So, same was disallowed and added to the total income of assessee. 4.1 Matter was carried before the First Appellate Authority, wherein assessee submitted a copy of Commission Agreement with M/s. Delite International inter alia assessee agreed to pay commission @ 5.25% on net sales turnover to M/s. Delite International on monthly ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthermore, ld. Authorized Representative drew our attention to the return of income as well as to substantiate the payment of the amount in question its accounting for purpose of income tax provision. The stand of assessee has been that the fact is that both assessee and M/s. Delite International are paying tax on higher side rate, so this is a tax neutrality as laid down in the case of CIT vs. Indo Saudi Services (Travel) P.Ltd. (2009) 310 ITR 306 (Bom). In view of above, it was submitted that there is no colourable device in making such payments. According to ld. Authorized Representative, the provisions of Section 40A(2)(b) of the Act has been tried to invoke to disallow the amount in question but no comparable case has been tried to be quoted and ultimately, whole amount is disallowed, which is not in the true spirit of the provisions of Section 40A(2)(b) of the Act. On the other hand, ld. Departmental Representative relied on the order of authorities below and submitted that assessee was not able to substantiate its claim before the authorities below with regard to payment in question. For the same, assessee cannot be allowed such big deduction in absence of substantiating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only services of Commission Agent but composite services to the assessee. Revenue Officers had tried to invoke the provisions of Section 40A(2)(b) of the Act. Comparative cases have to be brought on record to justify the disallowance in question, but in this case, having discussed the provisions of Section 40A(2)(b) of the Act, full amount has been disallowed. Hon ble Bombay High Court in case of CIT vs. Indo Saudi Services (Travel) P. Ltd. (supra) had held that in case of tax neutrality, disallowance in question are not justified because both payee and recipient are paying tax on highest slab. Assessing Officer has not brought on record to establish colourable device in such payment. There is nothing on record that payment is against public policy. There is also nothing on record that such payment have routed back to assessee in any manner. Lastly, assessee has paid the amount in question after deducting TDS and recipient has paid taxes on same. Taking all facts and circumstances of the case into consideration, we are of the view that payment in question @5.25% looking to the services rendered by said party is justified and same is allowed. 5. Next issue is with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 5.3 After going through rival submissions and material on record, we find that similar service has been rendered by M/s. Delite International in earlier years and no adverse view has been taken in this regard. The TDS had been deducted on the amount paid by assessee to the recipient. The payment has been made to M/s. Delite International as per agreement dated 02.02.2009 between assessee and M/s. Delite International. According to said agreement, M/s. Delite International was engaged as transport contractor for a period of 2 years for delivering the products manufactured by assessee from its factory situated at Plot No.J-78, MIDC Industrial Area, Boisar, Disstt. Thane to its vendors/ godowns. Transporter was supposed to supply vehicle to assessee company on regular basis. The transporter was supposed to provide registered commercial vehicles of various sizes ranging small size to big size. In the event of non availability of its own vehicle for any mechanical failure/breakdown of vehicle the transporter was supposed to arrange another alternative vehicle at its own cost and risk. Non compliance may attract penalty of ₹ 1,500/- per instance. According to agreement, trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in India. Further, assessee did not furnish any details regarding the purpose of foreign travel and evidences to prove that expenditure has been incurred for the purpose of business. So, same was disallowed by Assessing Officer and confirmed by CIT(A). 6.1 In this regard, stand of assessee has been that assessee has incurred expenses as mentioned on foreign travel wholly for the business purposes only. The details of the said expenses have been submitted during course of assessment proceedings. Foreign travel carried out with respect to business development along with research gauging the foreign market with respect to newly developed methodology and technical novice for the manufacturing of the products which are produced by assessee. Thus, expenses incurred for foreign travel could not be marked against the sales and purchases as suggested by CIT(A), but foreign travel expenses relate also to the technical study along with market development study for future prospects which would be highlighted subsequently on development and further study on the same. Therefore, assessee requested to allow the same. On the other hand, ld. Departmental Representative supported the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to affidavit deposed by Ashok Pandey, assessee has never authorized any person to not press the legal and factual grounds in question. These are legal claims which can be demonstrated by assessee on merit. Assessee has deposed the fact that assessee has not authorizes one for not pressing these grounds and was never done on behalf of them. Same should be decided on merit. In the interest of justice and in view of deposition by deponent, we restore this issue to Assessing Officer with direction to decide the same as per fact and law after providing due opportunity of hearing to the assessee. As a result, these issues are allowed for statistical purposes. Since we are restoring the issue on preliminary ground, so we are refraining to comment on merit of issue at hand. ITA No.365/Mum/2016 (Revenue s appeal) 8. Assessing Officer has disallowed the interest expenses of ₹ 68,09,927/- (Rs.46,07,791/- paid to M/s. Delite International + ₹ 22,02,136/- paid to Technical Works Industrial Link Ltd.). Assessing Officer stated that there were no loan outstanding in respect of these parties and further that the assessee has not furnished any supporting evidences regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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