Sew Eurpdrive India Pvt.Ltd.,, Baroda v. The Addl.CIT., Circle-4,, Baroda

ITA 1620/AHD/2010 | 2005-2006
Pronouncement Date: 20-08-2010 | Result: Allowed

Appeal Details

RSA Number 162020514 RSA 2010
Assessee PAN AABCS4703Q
Bench Ahmedabad
Appeal Number ITA 1620/AHD/2010
Duration Of Justice 3 month(s) 6 day(s)
Appellant Sew Eurpdrive India Pvt.Ltd.,, Baroda
Respondent The Addl.CIT., Circle-4,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 20-08-2010
Assessment Year 2005-2006
Appeal Filed On 14-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING 3-8-2010: DRAFTED ON: 3-8-2010 ITA NO. 1517 /AHD/ 2010 ASSESSMENT YEAR :2005-06 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4 AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA. VS. M/S. SEW EUROD RIVE INDIA PRIVATE LTD. PLOT NO.4 GIDC POR- RAMANGAMDI BARODA-391243 PAN/GIR NO. : AABCS 4703 Q (A PPELLANT ) .. ( RESPONDENT ) DATE OF HEARING 3-8-2010: DRAFTED ON:3-8-2010 ITA NO. 16 20 /AHD/ 2010 ASSESSMENT YEAR :2005-06 M/S. SEW EURODIRIVE INDIA PRIVATE LTD. PLOT NO.4 GIDC POR- RAMANGAMDI BARODA-391243 VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4 AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA. PAN/GIR NO. : AABCS 4703 Q (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SUDHANSHU S. JHA D.R. RESPONDENT BY: SHRI SANJAY R.SHAH. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE REVENUE A ND ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS)-III BARODA DATED 12-11-2009. 2. THE SOLE GROUND OF APPEAL RAISED BY THE REVENU I N ITS APPEAL READS AS UNDER :- - 2 - THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN DELETING THE ADDITION AMOUNTING TO `.6 00 901/- TO THE VALUE OF CLOSING STOCK BEING THE PROPORTIONA TE AMOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS THOUGH THE ADD ITIONAL OUTGO ON ACCOUNT OF EXCHANGE RATE FLUCTUATION WOULD FALL WITHIN THE SCOPE OF ONE OF THE THREE COMPONENTS OF COST OF INVENTORIES MENTIONED IN THE ACCOUNTING STANDARDS A PPROVED UNDER SECTION 145(2) OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IMPORTED GO ODS/MATERIALS BY WAY OF PURCHASES. THE ASSESSEE RECORDED THE PURC HASE VALUE OF GOODS ON THE BASIS OF EXCHANGE RATE PREVAILING ON T HE DATE OF TRANSACTION. THE ASSESSEE PAID TO THE CREDITORS LAT ER ON AND ON SUCH LATER PAYMENT DUE TO A EXCHANGE FLUCTUATION THE AS SESSEE INCURRED EXCHANGE FLUCTUATION LOSS THE NET AMOUNT OF WHICH P ERTAINING TO CLOSING STOCK WAS `.6 00 901/-. THE ABOVE EXCHANGE FLUCTUATION LOSS WAS NOT INCLUDED IN VALUATION OF CLOSING STOCK BY THE ASSESSEE. 4. ACCORDING TO THE LEARNED ASSESSING OFFICER THIS LOSS SHOULD HAVE BEEN INCLUDED IN VALUE IN CLOSING STOCK AND TH EREFORE ADDED `. 6 00 901/- TO THE INCOME OF THE ASSESSEE. 5. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ABOVE ADDITION BY FOLLOWING T HE CONSOLIDATED ORDER OF THIS TRIBUNAL PASSED IN THE CASE OF THE AS SESSEE IN ITA NO.3961 3962 AND 4181/AHD/2007 DATED 15-9-2008. 6. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICE R. 7. ON THE OTHER HAND THE LEARNED AUTHORISED REPRES ENTATIVE OF THE ASSESSEE RELIED UPON THE ORDER OF THIS TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE AS STATED ABOVE AND SUBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE SAID ORDER IN FAVOUR OF THE ASSESSEE. - 3 - 8. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS AL SO COVERED BY THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF C.I.T. WOODWORD GOVERNOR INDIA PVT. LTD. (2009) 31 2 ITR 254 (SC) WHEREIN AT PARA-19 IT WAS OBSERVED AS UNDER :- A COMPANY IMPORTS RAW MATERIAL WORTH US $ 250000 ON JANUARY 15 2002 WHEN THE EXCHANGE RATE WAS RS. 4 6 PER US $. THE COMPANY RECORDS THE TRANSACTION AT THAT RATE . THE PAYMENT FOR THE IMPORTS IS MADE ON APRIL 15 2002 WHEN THE EXCHANGE RATE IS RS. 49 PER US $. HOWEVER ON THE B ALANCE- SHEET DATE MARCH 31 2002 THE RATE OF EXCHANGE IS RS. 50 PER US $. IN SUCH A CASE IN TERMS OF AS-11 THE EFFEC T OF THE EXCHANGE DIFFERENCE HAS TO BE TAKEN INTO THE PROFIT AND LOSS ACCOUNT. SUNDRY CREDITORS IS A MONETARY ITEM AND H ENCE SUCH ITEM HAS TO BE VALUED AT THE CLOSING RATE I.E. RS . 50 AT MARCH 31 2002 IRRESPECTIVE OF THE PAYMENT FOR THE SALE SUBSEQUENTLY AT A LOWER RATE. THE DIFFERENCE OF RS. 4 (50-46) P ER US $ IS TO BE SHOWN AS AN EXCHANGE LOSS IN THE PROFIT AND LOS S ACCOUNT AND IS NOT TO BE ADJUSTED AGAINST THE COST OF RAW MATERIALS. 9. IN VIEW OF THE ABOVE WE DO NOT FIND ANY ERROR I N THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). I T IS CONFIRMED. THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. IN ASSESSEES APPEAL THE SOLE GROUND OF APPEAL TAKEN IS AS UNDER :- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN SUSTAINING THE DISALLOWANCE IN RESPECT OF THE SALES COMMISSION EXPENSES OF `.5 42 106/-. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE CLAIMED DEDUCTION OF `.5 42 106/- AS COMMISSION PAI D TO M/S. PARAG ENTERPRISE. THE LEARNED ASSESSING OFFICER OB SERVED THAT THE SAID COMMISSION WAS CLAIMED EVEN IN RESPECT OF SALE TO PARTIES TO WHOM THE ASSESSEE ALSO MADE DIRECT SALES. THEREFOR E IN THE OPINION OF THE LEARNED ASSESSING OFFICER PAYMENT OF SUCH - 4 - COMMISSION WAS NOT NECESSARY FOR BUSINESS PURPOSES. HE THEREFORE DISALLOWED THE COMMISSION OF `.5 42 106/ - 12. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND THAT THE SUBMISSION MADE BY THE ASSESSEE BEFORE HIM REQUIRES INVESTIGATION THE ASS ESSEE COULD NOT GIVE REASON AS TO WHY THE ARGUMENT WHICH WERE MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WERE N OT MADE BEFORE THE LEARNED ASSESSING OFFICER AND EVIDENCES WERE NOT FURNISHED BY THE ASSESSEE TO SHOW THAT INITIALLY SA LES TO THE PARTIES WERE THROUGH THE AGENT AND SUBSEQUENTLY DIRECT SALE S WERE ALSO MADE. 13. BEFORE US THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE SUBMITTED THAT THE COMMISSION WAS PAID FOR BUSINESS PURPOSES ONLY. HE CONTENDED THAT BUSINESS NEED IS TO BE APPRECIATED BY THE ASSESSEE AND IT IS THE PREROGATI VE OF THE ASSESSEE TO DECIDE WHICH EXPENDITURE IT SHOULD INCU R AND WHICH IT SHOULD NOT. HE ALSO CONTENDED THAT SUBMISSIONS OR ARGUMENTS WHICH WERE MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WERE ALSO MADE BEFORE THE LEARNED ASSESSI NG OFFICER AND NO NEW EVIDENCE WAS FILED BEFORE THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS). IT WAS HIS CONTENTION THAT I F THE LEARNED ASSESSING OFFICER DOES NOT RECORD THE FULL SUBMISSI ON OF THE ASSESSEE IN THE ORDER OF ASSESSMENT THEN NO FAULT S HOULD BE FOUND WITH THE ACTION OF THE ASSESSEE. WHEN NO NEW EVIDEN CE WAS FILED THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WA S NOT JUSTIFIED IN IGNORING AND REJECTING THE PLEAS OR AR GUMENTS OF THE ASSESSEE ON THE GROUND THAT THE SAME REQUIRES INVES TIGATION. HE ARGUED THAT THE POWER OF LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IS CO-TERMINUS WITH THE POWER OF THE LEAR NED ASSESSING OFFICER AND LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FULL AUTHORITY TO MAKE INVESTIGATION OR TO ASK FOR A REM AND REPORT FROM - 5 - THE LEARNED ASSESSING OFFICER AND ASSESSEE SHOULD N OT BE DENIED JUSTICE BY THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) MERELY ON THE GROUND THAT THE ARGUMENT OF THE ASSES SEE REQUIRE INVESTIGATION. 14. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AU THORITIES. 15. WE FIND THAT IN THE INSTANT CASE THE GENUINENE SS OF PAYMENT OF COMMISSION IS NOT IN DOUBT OR DEBATE. IT IS NOT THE CASE OF THE REVENUE THAT M/S. PARAG ENTERPRISE TO WHOM COMMISSI ON WAS PAID BY THE ASSESSEE WAS A RELATIVE OF THE ASSESSEE OR T HE COMMISSION WAS PAID FOR A CONSIDERATION OTHER THAN THE BUSINES S CONSIDERATION. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER DOUBTED ABOUT THE GENUINENESS OF THE SERVICES RENDERED BY M/S. PA RAG ENTERPRISE ON THE REASON THAT THE COMMISSION WAS PAID IN RESPE CT OF SALE TO THE PARTY WITH WHOM THE ASSESSEE HAD DIRECT DEALING S ALSO. IN OUR CONSIDERED OPINION THE BUSINESS NECESSITY OF AN ENT ERPRISE IS TO BE JUDGED FROM THE POINT OF VIEW OF A BUSINESSMAN AND IT IS THE PREROGATIVE OF THE BUSINESSMAN TO DECIDE WHICH EXPE NDITURE IT SHOULD INCUR AND WHICH EXPENDITURE IT SHOULD NOT IN CUR. THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE IN QUESTION WA S INCURRED FOR GIVING BETTER SERVICES TO THE CUSTOMERS WHO WERE LO CATED IN DIFFERENT GEOGRAPHICAL LOCATION AND TO WHOM RENDERI NG SERVICES FROM BARODA WHERE BUSINESS OF THE ASSESSEE WAS SITU ATED WAS DIFFICULT. WE FIND THAT THE LOWER AUTHORITIES HAVE NOT EXAMINED THE ISSUE AS TO WHETHER THE PAYMENT TO M/.S. PARAG ENTE RPRISE WAS MADE FOR ACTUAL SERVICES RENDERED BY M/S. PARAG ENT ERPRISE IN THE COURSE OF THE ASSESSEES BUSINESS OR NOT. THE ISSUE UNDER CONSIDERATION IS TO BE DECIDED ON THE BASIS OF THE ABOVE PRINCIPLE AND THE REVENUE CANNOT DISALLOW THE GENUINE EXPENSE S ONLY ON THE GROUND THAT IN THEIR OPINION SUCH EXPENDITURE WAS N OT NECESSARY. 16. DURING THE COURSE OF THE HEARING THE LEARNED AU THORISED REPRESENTATIVE OF THE ASSESSEE WAS ASKED BY THE BEN CH THAT SUCH - 6 - COMMISSION TO M/S. PARAG ENTERPRISE WAS PAID IN EAR LIER OR SUBSEQUENT YEARS OR NOT AND WHAT WAS THE POSITION O F ASSESSMENT IN THOSE YEARS TO WHICH THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE EXPRESSED LACK OF KNOWLEDGE. THE LEAR NED AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN REPLY TO THE QUESTION OF THE BENCH HAS ALSO SUBMITTED THAT THERE WAS NO W RITTEN AGREEMENT BETWEEN THE ASSESSEE AND M/S. PARAG ENTER PRISE. NO MATERIAL WAS BROUGHT BEFORE US BY EITHER OF THE PAR TIES TO SHOW THAT SIMILAR PAYMENT OF COMMISSION WAS MADE BY THE ASSESSEE TO OTHER AGENT OR NOT EITHER DURING THE YEAR UNDER CON SIDERATION OR IN ANY OTHER YEAR. IN THE ABOVE CIRCUMSTANCES IN OUR CONSIDERED OPINION IT SHALL BE IN THE INTEREST OF THE JUSTICE TO SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND T O RESTORE THIS ISSUE TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR PROPER VERIFICATION IN LIGHT OF THE DISCUSSION MADE HEREIN ABOVE AND TO RE- ADJUDICATE THE ISSUE AFRESH AS PER LAW BY PASSING A SPEAKING ORDER. WE ORDER ACCORDINGLY AND ALSO DIRECT THE LEARNED AS SESSING OFFICER TO ALLOW A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE AFRESH. THUS THIS GROUND OF APP EAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED AND THAT OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 20 TH AUGUST 2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER AHMEDABAD: ON THIS 20 TH TH DAY OF AUGUST 2010 COMPILED AND COMPARED BY :PATKI - 7 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III BARODA. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 11-8-2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 11-8-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 11-8-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER ----------- ----- ------------------- JM 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------