Shri Narendra D.Modh, Surat v. The ACIT.,Circle-2,, Surat

ITA 706/AHD/2010 | 2006-2007
Pronouncement Date: 22-09-2010 | Result: Allowed

Appeal Details

RSA Number 70620514 RSA 2010
Assessee PAN ABOPM3661J
Bench Ahmedabad
Appeal Number ITA 706/AHD/2010
Duration Of Justice 6 month(s) 18 day(s)
Appellant Shri Narendra D.Modh, Surat
Respondent The ACIT.,Circle-2,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 22-09-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 22-09-2010
Assessment Year 2006-2007
Appeal Filed On 05-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.706/AHD/2010 A. Y: 2006-07 SHRI NARENDRA D. MODH 209 VAKHARIA TEXTILE MARKET RING ROAD SURAT -2. VS THE A. C. I. T. CIRCLE-2 AAYAKAR BHAVAN MAJURA GATE SURAT PA NO. ABOPM 3661 J (APPELLANT) (RESPONDENT) APPELLANT BY NONE(WRITTEN SUBMISSION) RESPONDENT BY SHRI SANDIP GARG AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II SURAT D ATED 23-12-2009 FOR ASSESSMENT YEAR 2006-07 CHALLENGING THE DISALLOWANC E OF RS.6 53 582/- ON ACCOUNT OF DEDUCTION BY THE BUYER FOR HIS AGENT COMMISSION. 2. THE AO ON VERIFICATION OF THE DETAILS NOTED THAT THE ASSESSEE HAS CLAIMED COMMISSION OF RS.6 53 582/- TO FOREIGN BUYE RS COMMISSION AGENTS WHICH HAS BEEN NETTED OFF AGAINST THE AMOUN T OF EXPORT SALES. THE AO NOTED THAT IT IS IMPERATIVE TO NOTE THAT SUC H COMMISSION WAS ALSO CLAIMED IN THE PRECEDING ASSESSMENT YEARS 2004-05 A ND 2005-06 AND THE SAME HAS BEEN DISALLOWED. THE AO FOLLOWING THE FINDINGS FOR THE -- PRECEDING ASSESSMENT YEARS ALSO MADE THE DISALL OWANCE OUT OF COMMISSION AGENCY. THE LEARNED CIT(A) FOLLOW ING HIS APPELLATE ORDER FOR ASSESSMENT YEAR 2005-06 DATED 21-11-2008 DISMISSED THE APPEAL OF THE ASSESSEE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER WRITTEN SUBMISSION IS FILED STATING THEREIN THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT AHMEDABAD D BENCH IN THE CASE ITA NO.706/AHD/2010 SHRI NARENDRA D. MODH VS ACIT CIR-2 SURAT 2 OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 2005-06 IN ITA NO.453/AHD/2009 DATED 11-06-2010 WHEREBY SIMILAR AD DITION HAS BEEN DELETED. COPY OF THE ORDER IS FILED ON RECORD AND S UPPLIED TO THE LEARNED DR. THE LEARNED DR CONCEDED THAT THE ISSUE IS NOW C OVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 11- 06-2010 (SUPRA). 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE ORDER OF THE ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESSEE IN ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 11-06-2010 WHEREBY SIMILAR ADDITION HAS BEEN DELETED. THE FINDINGS OF THE TRIBUNAL IN PARA 6 TO 15 ARE REPRODUCED AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE MAIN PLANK O F THE ARGUMENT ADVANCED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE IS THAT THE COMMISSI ON PAID BY THE ASSESSEE WAS IN THE NATURE OF TRADITION AL DISCOUNT EXTENDED TO FOREIGN BUYERS AND THE ASSESSE E HAD RECEIVED ONLY THE NET PROCEEDS AND THEREFORE TH ERE COULD NOT BE ANY CONCEPT OF INCOME AGAINST THE AMOU NT WHICH WAS NEVER RECEIVED BY THE ASSESSEE OR ACCRUED TO THE ASSESSEE. IN SUPPORT OF HIS CONTENTION HE RELI ED UPON THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CA SE OF DEPUTY COMMISSIONER OF AGRICULTURAL INCOME TAX & SA LES TAX (LAW) VS. TRAVANCORE RAYONS LTD. (1977) 1977 CT R (KER) 264 WHEREIN IT WAS HELD AS UNDER:- THE COMPANY WAS ALLOWING A UNIFORM PERCENTAGE OF DEDUCTION TO THE BUYERS BY WAY OF COMMISSION AND THE INVOICES SHOW THAT AFTER MENTIONED THE GROSS PRICE OF THE GOODS CALCULATED AT THE RATES SPECIFIED THEREIN THE AMOUNT OF COMMISSION IS DEDUCTED AND THE RESULTANT BALANCE IS SHOWN AS THE NOT PRICE ACTUALLY PAYABLE BY THE BUYERS. IN THE CIRCUMSTANCES SUCH A DEDUCTION ALLOWED TO THE BUYERS BY A MANUFACTURER OR A WHOLESALES BY ITA NO.706/AHD/2010 SHRI NARENDRA D. MODH VS ACIT CIR-2 SURAT 3 WHATEVER NAME IT MAY BE DESCRIBED IS CLEARLY IN TH E NATURE OF A TRADE DISCOUNT. WHERE A TRADE DISCOUNT HAS BEEN BONA FIDE GRANTED THE CONSIDERATION FOR THE SALE IS ONLY THE AMOUNT WHICH IS ACTUALLY PAD OR PAYABLE AFTER THE DISCOUNT IS DEDUCTED AND THAT HENCE AMOUNTS ALLOWED BY THE ASSESSEE TO THE BUYERS BY WAY OF TRADE COMMISSION OR DISCOUNT WERE NOT A LIABLE TO BE ADDED TO OR INCLUDED. IN THE TURN-OVER FOR THE PURPOSES OF ASSESSMENT TO CST. ACCORDINGLY IT IS HELD THAT THE TRIBUNAL WAS RIGHT IN DIRECTING THAT THE AMOUNT OF RS. 2 60 327.72 REPRESENTING COMMISSIONS DEDUCTED BY THE ASSESSEE N THE VARIOUS INVOICES OF SALES SHOULD BE EXCLUDED FROM THE TAXABLE TURNOVER OF THE ASSESSEE COMPANY FOR THE YEAR 1961-62. 7. HE ALSO RELIED ON THE DECISION OF COLOUR CHEM L TD. VS. CIT (1997) 225 ITR 164 (BOM) WHEREIN IT WAS HEL D THAT RELATIONSHIP BETWEEN THE ASSESSEE AND THE FORE IGN BUYER WAS CLEARLY THAT OF VENDOR AND BUYER AND THE PAYMENT OF COMMISSION HAD THE EFFECT OF REDUCING TH E SALE PRICE OF GOODS SUPPLIED TO THE BUYER BY THE ASSESSEE . 8. HE FURTHER RELIED ON THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF J.B.BODA & CO. PVT. LT D. VS. CBDT (1997 ) 223 ITR271 (SC) WHEREIN IT WAS HEL D THAT ASSESSEE ACTING AS AGENT OF FOREIGN REINSURER COLLECTING PREMIA FROM THE CEDING INSURANCE COMPANY IN INDIA AND REMITTING THE SAME TO THE FOREIGN INSURER IN FOREIGN EXCHANGE WITH THE PERMISSION OF THE RBI A FTER RETAINING ITS BROKERAGE IN FOREIGN EXCHANGE; THE BR OKERAGE INCOME RETAINED BY ASSESSEE IS RECEIPT OF INCOME IN CONVERTIBLE FOREIGN EXCHANGE QUALIFYING FOR DEDUCTI ON UNDER S. 80-O. ITA NO.706/AHD/2010 SHRI NARENDRA D. MODH VS ACIT CIR-2 SURAT 4 9. ON THE OTHER HAND THE MAIN THRUST MADE BY THE LEARNED COMMISSIONER IS THAT EVEN THOUGH THE ASSESS EE HAS RECORDED THE ONLY NET RECEIPTS AS ITS EXPORT SA LES THE ASSESSEE HAS CLAIMED THE BENEFITS OF IMPORT ENTITLE MENT LIKE DEPB ON THE AMOUNT OF GROSS VALUE OF INVOICE W HICH SHOWS THAT AS FAR AS THE ASSESSEE IS CONCERNED THE EXPORT SALE PROCEEDS IS REPRESENTED BY THE GROSS IN VOICE VALUE AND NOT BY THE NET VALUE AS CLAIMED BY THE ASSESSEE . 10. AT THIS JUNCTURE IT IS NECESSARY FOR US TO ST ATE THAT THE ASSESSEE HAS ACCOUNTED THE EXPORT SALES TURNOVE R AT THE NET FIGURE AND CLAIMED DEPB BENEFITS ON THE GRO SS AMOUNTS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE RBI IN THE LIGHT OF THE EXPORT IMPORT POLICY OF THE GOVERNMENT OF INDIA. THE ASSESSEE HAS GIVEN THE DEDUCTION OF DISCOUNT TO THE FOREIGN BUYER BY WAY O F COMMISSION BEING REDUCED DIRECTLY IN THE SALES INVO ICE IN THE LIGHT OF THE REGULATIONS AND GUIDELINES OF THE RBI. THIS METHOD OF INVOICE AND GIVING DISCOUNT/COMMISSION AN D RECEIVING THE FOREIGN EXCHANGE NET OF INVOICE ARE PERMISSIBLE UNDER THE LAW RELATING TO THE EXPORT AN D FOREIGN EXCHANGE MATTERS. THE EXPORT IMPORT POLICY AND THE RBI REGULATIONS APPROVED THIS METHOD. THE EXPOR T IMPORT POLICY AND THE RBI REGULATIONS FURTHER ALLOW AN ASSESSEE TO CLAIM BENEFITS OF IMPORT ENTITLEMENT LI KE DEPB ON THE GROSS AMOUNT OF INVOICE VALUE INSTEAD O F THE NET AMOUNT OF INVOICE VALUE. THEREFORE THE BENEFIT ACCRUES TO THE ASSESSEE IN RESPECT OF DEPB ON THE DIFFERENTIAL INVOICE AMOUNT WHICH WAS NEVER RECEIVE D BY THE ASSESSEE IN INDIA IN CONVERTIBLE FOREIGN EXCHAN GE AS AN EXPORT PRIVILEGE ENJOYED BY THE ASSESSEE UNDER T HE RELEVANT RULES AND REGULATIONS. THEREFORE THIS DIF FERENCE REFLECTED IN THE NET INVOICE VALUE AND THE GROSS IN VOICE VALUE FOR THE PURPOSE OF ACCOUNTING OF EXPORT SALE TURNOVER AND CLAIMING DEPB BENEFITS CANNOT BE TAKEN AS A GROUND TO REJECT THE CONTENTIONS OF THE ASSESSEE. THEREFORE THE ISSUE HAS TO BE EXAMINED DEVOID OF T HE ABOVE TECHNICALITY POINTED OUT BY THE LEARNED COMMISSIONER OF INCOME-TAX. ITA NO.706/AHD/2010 SHRI NARENDRA D. MODH VS ACIT CIR-2 SURAT 5 11. THERE IS NO DISPUTE REGARDING THE FACT THAT TH E ASSESSEE HAS GIVEN COMMISSION/DISCOUNT IN THE EXPOR T INVOICES ITSELF IN FAVOUR OF THE FOREIGN BUYER. THE FOREIGN BUYER HAS STATED THAT THIS DISCOUNT/COMMISSION WOUL D BE DISTRIBUTED BY HIM TO THE INTENDING AGENTS ABROAD. THEY HAVE STATED THAT THE COMMISSIONS ARE TO BE PAID BY THEM DIRECTLY TO THE AGENTS IN THE COUNTRIES OF IMPORT. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE HAS RECEIVED THE N ET AMOUNT ONLY AS EXPORT PROCEEDS BY WAY OF CONVERTIBL E FOREIGN EXCHANGE. ALL THESE MATTERS HAVE BEEN CERTI FIED BY THE BANKERS OF THE ASSESSEE. ALL THE MATTERS ARE WELL WITHIN THE LAW REGULATED BY THE RBI FOR THE PURPOSE OF EXPORT OF GOODS OUTSIDE INDIA. IN SUCH CIRCUMSTANCE S THE SIMPLE FACT THAT EMERGES OUT OF THE MAZE OF ARGUMEN TS IS THAT AS FAR AS THE ASSESSEE IS CONCERNED HIS EXPOR T SALES TURNOVER IS THE NET AMOUNT OF THE EXPORT INVOICE IS SUED BY HIM. IT IS NOT PROPER TO TREAT THE GROSS INVOICE AM OUNT AS THE EXPORT SALES TURNOVER OF THE ASSESSEE. 12. IN FACT IN THE SITUATION OF THE CASE AS STAT ED IN THE ABOVE PARAGRAPH IT IS TO BE SEEN THAT THE EXPORT S ALE PROCEEDS RECEIVED BY THE ASSESSEE WAS NET AMOUNT ALONE AND NOT THE GROSS AMOUNT. IT IS ALSO TO BE SE EN THAT THE FOREIGN BUYER IS NOT BOUND TO PAY TO THE ASSESS EE THE AMOUNT COVERED BY THE COMMISSION OR DISCOUNT AT ANY FUTURE DATE. THEREFORE THE RIGHT/CLAIM OF THE ASSE SSEE IN RESPECT OF THE EXPORT SALES WAS TO RECEIVE ONLY THE NET INVOICE AMOUNT AND NOTHING MORE. THEREFORE THERE I S NOTHING LEFT OVER BY WAY OF BALANCE TO BE TREATED A S INCOME ACCRUING OR ARISING TO THE ASSESSEE OUTSIDE INDIA BY VIRTUE OF THE IMPUGNED EXPORT SALES. THE ENTIRE INCOME ATTRIBUTABLE TO THE EXPORT SALES WERE ALREADY RECEI VED BY THE ASSESSEE IN INDIA IN THE FORM OF CONVERTIBLE FO REIGN EXCHANGE. THIS POSITION IS PROVED BY THE CERTIFICAT ES ISSUED BY THE BANKERS AS WELL AS LETTERS OF CREDIT OPENED BY THE FOREIGN BUYERS. WHEN THE ASSESSEE HAS RECEIV ED ONLY THE NET PROCEEDS AS PER THE INVOICE THERE IS NOTHING FURTHER LEFT OVER TO BE TREATED AS INCOME RECEIVED OR TO BE RECEIVED OR ACCRUED OR DEEMED TO BE ACCRUED OR ARIS ING IN INDIA OR OUTSIDE INDIA. THEREFORE THE RELIANCE PLA CED BY ITA NO.706/AHD/2010 SHRI NARENDRA D. MODH VS ACIT CIR-2 SURAT 6 THE LOWER AUTHORITIES ON THE SECTION 5 OF THE INCOM E TAX ACT IS RATHER MISLEADING. 13. AS THE ASSESSEE HAS NOT PAID TO THE FOREIGN BU YERS ANY AMOUNT BY WAY OF COMMISSION BUT IT WAS ONLY ADJUSTMENT THROUGH THE EXPORT INVOICES BY WAY OF COMMISSION/DISCOUNT SECTION 94H ALSO HAD NO ROLE T O PLAY. THEREFORE WE FIND THAT ALL THE DISCUSSIONS M ADE BY THE LOWER AUTHORITIES TO MAKE ADDITIONS OF THE COMM ISSION AMOUNT WERE BASED ON HYPOTHESIS AND NOT ON ANY FACT S PROVED. WHEN THE ASSESSEE HAD NO ADDITIONAL AMOUNT TO BE RECEIVED FROM THE FOREIGN BUYERS NO QUESTION OF ADDITIONAL INCOME ARISES. THE INCOME OF THE ASSESSE E IS FULLY EMBEDDED IN THE NET SALE PROCEEDS RECEIVED AN D ACCOUNTED BY HIM. WHEN THE INCOME ITSELF IS NOT GENERATED THERE IS NO QUESTION OF SUCH INCOME BECO MING ACCRUED OR DUE. WHEN THERE IS NOTHING LEFT OVER TO BE FURTHER RECEIVED BY THE ASSESSEE THERE IS NO QUEST ION OF ANY INCOME ARISING IN THE HANDS OF THE ASSESSEE ATTRIBUTABLE TO THE QUANTUM OF COMMISSION RECORDED IN THE INVOICE. THEREFORE WE FIND THAT THE ENTIRE DISCUSS IONS BUT WELL MADE BY THE LOWER AUTHORITIES HAVE BEEN MADE UNFORTUNATELY IN A WRONG DIRECTION. 14. WHEN THE FACTUM OF ACTUAL RECEIPT OF SALE PROC EEDS TO THE EXTENT OF NET INVOICE AMOUNT IS ESTABLISHED BEYOND ANY DOUBT THERE IS NO JUSTIFICATION IN OVERLOOKING UPON THOSE SPEAKING FACTS ON THE TECHNICAL GROUND THAT T HE ASSESSEE HAS CLAIMED THE DEPB BENEFIT ON THE GROSS AMOUNT OF THE INVOICE. THE DEPB CLAIM WAS MADE BY T HE ASSESSEE ON THE BASIS OF PERMISSION GRANTED BY THE RBI AND THAT HAS NOTHING TO DO WITH THE ACTUAL AMOUNT O F EXPORT SALES PROCEEDS RECEIVED BY THE ASSESSEE IN T HE FORM OF CONVERTIBLE FOREIGN EXCHANGE. 15. THEREFORE IT IS QUITE OBVIOUS WITHOUT MUCH DISCUSSION AND DELIBERATION THAT THE REVENUE HAS NO CASE TO HOLD THE ASSESSEE RESPONSIBLE FOR AN ADDITIONAL INCOME OF RS.58 08 755/-. THE SAID ADDITION IS ACCORDINGLY DELETED. OUR ABOVE VIEW ALSO FINDS SUPPORT FROM THE ITA NO.706/AHD/2010 SHRI NARENDRA D. MODH VS ACIT CIR-2 SURAT 7 DECISION OF THIS TRIBUNAL IN THE CASE OF SHRI SANJA Y JAIN VS. CIT IN ITA NO.1533/AHD/2008 FOR ASSESSMENT YEA R 2004-05 ORDER DATED 16.12.2009. 5. CONSIDERING THE ABOVE WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. WE ACCORDINGLY SET ASIDE THE ORDE RS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 22-09-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 22 -09-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD