TMI Blog2019 (4) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... affirmed by the Tribunal, it is clear that question (a) raised by the revenue is a pure question of fact and in the absence of any perversity being pointed out in the concurrent findings of fact recorded by the Tribunal, does not give rise to any question of law. Loss on allotment of fertilizer bonds and addition on account of loss on actual sale of fertilizer bonds - capital or business loss - HELD THAT:- Tribunal, on appreciation of facts and considering the history of allotment of bonds by the Government of India in lieu of subsidy amount, held that the finding of the Assessing Officer that from the date of allotment when the market value of the bond is less then it is the notional loss, is not correct. It was also found that as a matter of fact that in assessment year 2008-09, the Assessing Officer has already allowed such loss as revenue loss. It emerges from records that on the date of allotment the bonds were received in lieu of subsidy which was the additional sale price receivable from GOI. The assessee had offered to tax the subsidy receivable as part of sale price. The realization of additional sales price by way of subsidy in the form of fertilizer bond does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal to principal basis and, therefore, the payment made by the dealer is not liable for any deduction of tax by the assessee company. Therefore, in the facts of the case, the provisions of section 40(a)(ia) cannot be applied as the dealer cannot be said to be a commission agent of the assessee company. It is not possible to state that the Tribunal has committed any legal error so as to warrant interference - R/TAX APPEAL NO. 1360 of 2018 - - - Dated:- 29-4-2019 - MS HARSHA DEVANI AND MR BHARGAV D. KARIA, JJ. For The Appellant (s) : MR.VARUN K.PATEL (3802) For The Opponent (s) : MR JP SHAH, SENIOR ADVOCATE with MR MANISH J SHAH ORAL ORDER ( PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. The Revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred as the Act ) challenging the order dated 17.5.2018 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat (hereinafter referred as the Tribunal ) in ITA No.1363/Ahd/2013/SRT for assessment year 2009-10 raising the following questions of law, stated to be substantial q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers of ₹ 2,95,05,335/-? 2. With regard to question (a), brief facts are as under:- 2.1 The respondent assessee filed its e-return of income for assessment year 2009-10 declaring total income of ₹ 289,02,59,060/-. The Assessing Officer framed the assessment order under section 143(3) of the Act on 30.12.2011. While passing the assessment order, the Assessing Officer disallowed an amount of ₹ 255,82,153/- of expenses on consumption and replacement of stores and spares and treated the same as capital expenditure. 2.2 The assessee being aggrieved by the said disallowance preferred an appeal before the CIT (Appeals) who by order dated 27.2.2013 allowed the appeal of the assessee on this count. 2.3 The revenue being aggrieved by the aforesaid findings of fact given by the CIT (Appeals) preferred Appeal No. 1363 of 2013 before the Tribunal. The Tribunal after considering the facts and findings given by the CIT (Appeals) as well as the assessment order passed for the year 1999-2000 dismissed the appeal filed by the revenue on this ground. 3. Learned advocate Mr. Varun K Patel for the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e machines and within the machine there are components requiring replacement due to wear and tear, that was different plants within the fertilizers and chemical plant. Reference was also made to past history of disallowance wherein the Tribunal had set aside the issue to the Assessing Officer for the assessment years 1998-99 to 2002-03, who in turn accepted the explanation furnished by the appellant in de novo assessment proceedings and no additions were made. On perusal of the facts noted by the CIT (Appeals) as well as affirmed by the Tribunal, it is clear that question (a) raised by the revenue is a pure question of fact and in the absence of any perversity being pointed out in the concurrent findings of fact recorded by the Tribunal, does not give rise to any question of law. 5. With regard to questions (b) to (d) which are relatable to deleting addition on account of loss on allotment of fertilizer bonds at ₹ 18,62,04,574/- and addition on account of loss on actual sale of fertilizer bonds of ₹ 3,77,73,348/-, the Assessing Officer has found as under:- 5.1 The assessee company is engaged in the manufacturing of fertilizers. The Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 37 of the Act. 7. The Tribunal, on appreciation of facts and considering the history of allotment of bonds by the Government of India in lieu of subsidy amount, held that the finding of the Assessing Officer that from the date of allotment when the market value of the bond is less then it is the notional loss, is not correct. It was also found that as a matter of fact that in assessment year 2008-09, the Assessing Officer has already allowed such loss of ₹ 7,71,16,280/- as revenue loss. 8. It emerges from records that on the date of allotment the bonds were received in lieu of subsidy which was the additional sale price receivable from GOI. The assessee had offered to tax the subsidy receivable as part of sale price. The realization of additional sales price by way of subsidy in the form of fertilizer bond does not make bonds an investment because the bonds were never acquired by the assessee as investment or capital but as debt and also shown as current assets. Therefore, the loss suffered on allotment of bonds and actual sale of the bonds cannot be considered as capital loss but has to be allowed as business loss under section 28 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n payment to dealers of ₹ 2,95,05,335/- . 11.1 The Assessing Officer disallowed of sales made to dealers on the ground of treating the same as discount by way of commission which ought to have been subjected to Tax Deducted at Source under section 194H of the Act. 11.2 The assessee, therefore, being aggrieved by the said disallowance preferred an appeal before the CIT(A) who allowed the appeal of the assessee. 11.3 The revenue, therefore, preferred an appeal before the Tribunal. The Tribunal affirming findings of the CIT (Appeals) dismissed the appeal of the revenue. 11.4 The Assessing Officer while considering the tripartite agreement between the respondent assessee and the dealer who is the second purchaser found that in sale made by the assessee company, the consumers and dealers are informed of the terms of conditions of sales, discounts etc. and the material is directly transferred to the consumer. The dealer does not have any control over the price at which the product would be sold to consumer and, therefore, it is acting like a commission agent. The Assessing Officer after distinguishing between the deale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore the assessee company is liable to deduct tax under section 194H of the Act and as the assessee company did not deduct such tax, the Assessing Officer was justified in disallowing the amount on the ground of such commission under section 40(a) (ia) of the Act. 13. On a perusal of the findings given by both the CIT (Appeals) as well as the Tribunal, it is not in dispute that the transaction of sale between the assessee company and the dealer is on principal to principal basis. Such supplies are made in the accounts of the dealers only. All accounts are maintained in favour of the dealer. The dealer makes the payment to the assessee for such supplies. All credit notes, debit notes, if any, for the agreed terms are issued by the assessee in favour of the dealers only and for all practical purposes, dealer is debtor of the company. On the facts of the case, when the assessee sells goods to its dealers, it is the dealer who makes the payment to the assessee and there is no payment made by the assessee to the dealer and, therefore, the question of deducting any tax under section 194H of the Act does not arise. The relevant extract of section 194H reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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