ACIT, New Delhi v. M/s Creative Travel Pvt. Ltd.,, New Delhi

ITA 3670/DEL/2011 | 2008-2009
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 367020114 RSA 2011
Assessee PAN AAACC0874D
Bench Delhi
Appeal Number ITA 3670/DEL/2011
Duration Of Justice 2 month(s) 1 day(s)
Appellant ACIT, New Delhi
Respondent M/s Creative Travel Pvt. Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-09-2011
Assessment Year 2008-2009
Appeal Filed On 29-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 3670/DEL/2011 ASSESSMENT YEAR: 2008-09 ASSISTANT COMMISSIONER OF IT VS. CREATIVE TRAVEL PVT. LTD. CIRCLE 3(1) 27-30 CREATIVE PLAZA NEW DELHI. NANAKPURA MOTI BAGH NEW DELHI. (PAN: AAACC0874D) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ROHIT GARG SR.DR RESPONDENT BY: SHRI CS AGGARWAL ADV. ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 31.05.2011 PASSED FOR ASSESSMENT YEAR 2008-09. THE GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEAL S) HAS ERRED IN DELETING THE ADDITION OF RS.76 75 179 WHICH WAS ADDED BY THE ASSESSING OFFICER BY MAKING A DISALLOWANCE UNDER SEC. 36(1)(II) OUT OF C OMMISSION AND BONUS PAID TO THE DIRECTORS. 2. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HON'BLE HIGH COURT PASSED IN ASSESSMENT YEAR 2005-06 WHEREIN HON'BLE HIGH COURT HAS UPHELD THE ORDER OF THE ITAT DELETING A SIMILAR 2 DISALLOWANCE IN ITA NO.394/DEL/09. HE FURTHER POINT ED OUT THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS FOLLOWED THE ORDER OF THE ITAT AS WELL AS OF THE HON'BLE HIGH COURT IN EARLIER YEARS. ASSESSING OFFICER HAS DISALLOWED THE PAYMENT OF COMMISSION WITHOUT TAKING COGNIZANCE OF THE ITATS ORDER IN ASSESSMENT YEAR 2005-06 BROUGHT TO HIS NOTICE. HE F URTHER POINTED OUT THAT NOT ONLY IN ASSESSMENT YEAR 2005-06 BUT SIMILAR DIS ALLOWANCE HAS BEEN DELETED BY THE ITAT IN ASSESSMENT YEARS 2006-07 20 07-08 AND 2002-03. HE PLACED ON RECORD COPIES OF ALL THESE ORDERS. LEARNE D DR WAS UNABLE TO CONTROVERT THE CONTENTION OF THE LEARNED COUNSEL FO R THE ASSESSEE. 3. WE FIND THAT IN ASSESSMENT YEAR 2006-07 THE ITA T WHILE DELETING A SIMILAR DISALLOWANCE IN ITA NO. 190/DEL/2010 HAS MA DE A REFERENCE TO THE ORDER OF THE ITAT PASSED IN ASSESSMENT YEAR 2005-06 AS WELL AS THE ORDER OF THE HON'BLE DELHI HIGH COURT PASSED IN ITA NO.1672 OF 2010 WHEREBY HON'BLE HIGH COURT HAS REJECTED THE APPEAL OF THE R EVENUE AND UPHELD THE ORDER. THE OBSERVATIONS RECORDED BY THE ITAT IN ASS ESSMENT YEAR 2006-07 IN PARAGRAPHS 10 ONWARDS READ AS UNDER: 10. IN THIS CASE THE LEARNED CIT(A) HAS UPHELD TH E ORDER OF THE AO BY RELYING UPON HIS OWN DECISION PASSED IN ASSESSME NT YEAR 2005-06. WE FIND THAT THE CIT(A)S ORDER DATED 4.12.2008 PAS SED IN ASSESSMENT YEAR 2005-06 WAS APPEALED AGAINST BY THE ASSESSEE 3 BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DA TED 11.12.2009 IN ITA NO.394/DEL/2009 REVERSED THE CIT(A)S ORDER AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AND HO LDING AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. SEC.36(1)(II) OF THE ACT HAS A DIRECT BEARING ON THE CONTROVERSY. THEREFORE IT IS SALUTARY UPON US TO TAKE NOTE OF THIS CLAUSE. IT READS AS UNDER: THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTER DEALT WITH THEREIN IN COMPUTING THE INCOME REFERRED TO IN SEC. 28 OF THE ACT. SECTION 36(1) (I) X X X X X (IA) X X X X X (IB)X X X X X ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMISSION FOR SERVICES RENDERED WHERE SUCH SUM WOULD NOT HAVE BEEN PAYABLE TO HIM AS PROFITS OR DIVIDEND IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION. 7. THE PLAIN READING OF SEC. 36(1)(II) CONTEMPLATES TWO SITUATIONS. ACCORDING TO THE FIRST SITUATION ANY S UM PAID TO AN EMPLOYEE AS A BONUS OR COMMISSION FOR SERVICES REND ERED WOULD BE ALLOWED TO THE ASSESSEE. THE SECOND PART E XHIBITING THE OTHER CONDITION THAT THE DEDUCTION MENTIONED IN THE FIRST SITUATION COULD BE ALLOWED IF SUCH SUM WOULD HAVE NOT BEEN PAYABLE TO AN EMPLOYEE AS A PROFIT OR DIVIDEND MEAN ING THEREBY 4 IF THE AMOUNT OF COMMISSION OR BONUS IS RECEIVABLE BY AN EMPLOYEE IN THE SHAPE OF PROFIT/DIVIDEND THEN SUCH COMMISSION PAID TO SUCH EMPLOYEE WOULD NOT BE ALLOWED AS A DED UCTION. WE HAVE ALREADY NOTICED THE SHAREHOLDING PATTERN OF TH E ASSESSEE IN PARAGRAPH 4 OF THIS ORDER. NO DOUBT IT INDICATES T HAT MOST OF THE SHARES ARE HELD BY THE FAMILY MEMBERS I.E. MR. RAM KOHLI HIS WIFE AND TWO SONS. BEING A PRIVATE LIMITED COMP ANY CONTROLLED BY THE FAMILY MEMBERS A RESOLUTION APPR OVING THE PAYMENT OF COMMISSION TO THE WORKING DIRECTORS MAY NOT BE A VERY DIFFICULT TASK BUT WHETHER THIS ARRANGEMENT IN DICATES THAT IF THIS COMMISSION WAS NOT PAID TO THE WORKING DIRECTO RS THEN IT WOULD BE RECEIVED IN THE SHAPE OF PROFIT/DIVIDEND. IN OUR OPINION THE REPLY WOULD BE SIMPLY NO BECAUSE NO COMMISSION WAS PAID TO MRS. KOHLI. IF THIS AMOUNT O F RS.59 LACS WAS DISTRIBUTED ON ACCOUNT OF SHAREHOLDING PATTERN THEN SHE WOULD GET A SUBSTANTIAL SHARE WHEREAS SHE WAS NOT P LAYING ANY ACTIVE ROLE IN THE DAY TO DAY BUSINESS OF THE ASSES SEE COMPANY. THE TWO OTHER DIRECTORS WHO HAD RECEIVED THE COMMIS SION HAD A VERY SMALL SHAREHOLDING PATTERN WOULD NOT BE ABLE T O GET THE AMOUNT EQUIVALENT TO THE COMMISSION IN THE SHAPE OF DIVIDEND. THUS EXACTLY THE COMMISSION AMOUNT WOULD NOT BE RE CEIVABLE BY THE DIRECTORS IN THE SHAPE OF DIVIDEND. THE DIRE CTORS TO WHOM COMMISSION WAS PAID IS NOT WITH RESPECT TO THEIR SH AREHOLDING PATTERN RATHER IT IS LINKED WITH THE SALES TURNOVER OF THE ASSESSEE AND TO THE PERFORMANCE OF THE DIRECTORS. IT HAS NOT HING TO DO WITH THE SHAREHOLDING PATTERN. THE NEXT REASON WEIG HED IN OUR MIND IS THAT IN THE PAST SIMILAR COMMISSION WAS PAI D TO THE 5 WORKING DIRECTORS AS INFORMED BY THE LEARNED COUNSE L BUT IT WAS NEVER DISALLOWED. THEREFORE IN OUR OPINION AS SESSING OFFICER HAS FAILED TO CONSTRUE THE FACTS AND CIRCUM STANCES AND FAILED TO INTERPRET THE LAW IN RIGHT PERSPECTIVE. W E ALLOW THIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE. 11. WE FURTHER OBSERVE THAT THE ORDER OF THE TRIBUN AL DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HAS BEEN UPHELD BY THE HONBLE HIGH COURT OF DELHI IN ITA NO.1672/2010 BY REJECTING THE APPEAL FILED BY THE REVENUE. THE HONBLE HIGH COURT IN THAT APPEAL HAS OBSERVED AS UNDER:- ON THE FACTS OF THIS CASE THE INCOME TAX APPELLAT E TRIBUNAL AHS ALLOWED THE PAYMENT OF BONUS AND COMMISSION TO THE EMPLOYEE-DIRECTORS OF THE ASSESSE E COMPANY UNDER SECTION 36(1)(II) OF THE INCOME TAX A CT AND ONE OF THE REASONS GIVEN BY THE TRIBUNAL WHICH HAS SPECIFICALLY WEIGHED WITH IT IS THAT IN THE PAST S IMILAR COMMISSION WAS PAID TO THE WORKING DIRECTORS AND IT WAS NEVER DISALLOWED. MR. AGGARWAL LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SUCH A DEDUCTION IS ALLOWED UNDER SE CTION 36(1)(II) OF THE ACT FOR THE PAST 30 YEARS. IN VIE W OF THIS WE ARE OF THE OPINION THAT NO QUESTION OF LAW ARISE S. THE APPEAL IS DISMISSED. 12. IT IS ALSO SEEN THAT THE TRIBUNALS ORDER PASSE D IN ASSESSMENT YEAR 2005-06 HAS BEEN FOLLOWED BY THE TRIBUNAL IN A SSESSMENT YEARS 2002-03 AND 2007-08 VIDE ORDER DATED 15.09.2010 IN ITA NOS. 3238 & 3239/DEL./2010 BY CONCLUDING AS UNDER:- 7. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECI SION OF I.T.A.T IN ASSESSEES OWN CASE AND REVENUE HAS N OT BROUGHT ON RECORD ANY MATERIAL TO DISTINGUISH THE F ACTS OF 6 THE CASE IN THE YEAR UNDER CONSIDERATION WITH REFER ENCE TO ASSESSMENT YEAR 2005-06 WE DO NOT FIND ANY REASON TO DIFFER WITH THE ORDER PASSED BY I.T.A.T. DELHI BENC H `B FOR ASSESSMENT YEAR 2005-06. ACCORDINGLY WE DO NO T FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. C IT(A) DELETING THE ADDITION. 13. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE IT IS THUS CLEAR THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF TR IBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2005-06 WHICH HAS BEEN FOLLOWED IN ASSESSMENT YEARS 2002-03 AND 2007-08. IT IS ALSO S EEN THAT THE TRIBUNALS ORDER PASSED IN ASSESSMENT YEAR 2005-06 HAS BEEN UPHELD BY THE HONBLE HIGH COURT. WE THEREFORE ALLOW TH IS ISSUE IN FAVOUR OF THE ASSESSEE AND DELETE THE DISALLOWANCE. THUS THE ISSUE INVOLVED IN GROUND NOS. 1 TO 4 IS DECIDED IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE. 4. RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDIN ATE BENCH AS WELL AS OF HON'BLE HIGH COURT WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30.09.201 1 SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 30/09/2011 MOHAN LAL 7 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR