M/s.Grand Motors Sales corporation, Trivandrum v. ACIT, Trivandrum

ITA 76/COCH/2013 | 2008-2009
Pronouncement Date: 31-07-2013 | Result: Allowed

Appeal Details

RSA Number 7621914 RSA 2013
Assessee PAN AACFG3656L
Bench Cochin
Appeal Number ITA 76/COCH/2013
Duration Of Justice 5 month(s) 18 day(s)
Appellant M/s.Grand Motors Sales corporation, Trivandrum
Respondent ACIT, Trivandrum
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 31-07-2013
Date Of Final Hearing 28-05-2013
Next Hearing Date 28-05-2013
Assessment Year 2008-2009
Appeal Filed On 11-02-2013
Judgment Text
1 ITA NO.76 & 77/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 76/COCH/2013 - A.Y. 2008-09 I.T.A NO. 77/COCH/2013 - A.Y. 2008-09 M/S GRAND MOTORS SALES CORPORATION VS THE A.C.I.T. CIR.1(2) TC-31/1398-2 BYEPASS ROAD THIRUVANTHANPURAM CHACKA THIRUVANANTHAPURAM PAN : AACFG3656L (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI T.M. SREEDHARAN SR.COUNSEL RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 28-05-2013 DATE OF PRONOUNCEMENT : 31-07-2013 O R D E R PER N.R.S. GANESAN (JM) THE ASSESSEE FILED THE APPEALS AGAINST THE ORDER O F CIT(A) TRIVANDRUM DATED 21-01-2013 AGAINST THE ASSESSMENT FOR ASSESSMENT YEAR 2008-09 AND PENALTY LEVIED U/S 271(1)(C) OF TH E ACT. 2. LET US FIRST TAKE ITA NO.76/COCH/2013. SHRI T.M . SREEDHARAN THE LD.SENIOR COUNSEL SUBMITTED THAT THE FIRST ISSUE AR ISES FOR CONSIDERATION IS DISALLOWANCE OF RS.11 00 240 WITH REGARD TO PAYMENT OF COMMISSION / BROKERAGE. THE LD.SENIOR COUNSEL SUBMITTED THAT DU RING THE COURSE OF ITS 2 ITA NO.76 & 77/COCH/2013 BUSINESS THE ASSESSEE PAID BROKERAGE TO THOSE PEOP LE WHO BROUGHT CUSTOMERS. ACCORDING TO THE LD.SENIOR COUNSEL THI S PAYMENT IS IN THE NATURE OF SALES PROMOTION EXPENDITURE. ACCORDING T O THE LD.SENIOR COUNSEL THE PAYMENT MADE BY THE ASSESSEE HAS A NEXUS WITH T HE SALE OF VEHICLE AND IT IS FOR CANVASSING THE CUSTOMERS TO GO TO THE ASSESSEE FOR PURCHASING VEHICLE. THEREFORE ACCORDING TO THE LD.SENIOR COU NSEL THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 3. ON THE CONTRARY SMT. S VIJAYAPRABHA THE LD.DR SUBMITTED THAT THE ASSESSEE SPECIFICALLY CLAIMS THAT IT PAID COMMISSIO N / BROKERAGE TO THE MIDDLEMEN. WHEN THE COMMISSION / BROKERAGE WAS PAI D THE ASSESSEE IS BOUND TO DEDUCT TAX. SINCE THE TAX WAS NOT DEDUCTE D ACCORDING TO THE LD.DR THE SAME WAS RIGHTLY DISALLOWED U/S 40(A)(IA ). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH T HE ASSESSEE CLAIMS THAT THE PAYMENT HAS DIRECT NEXUS WITH THE SALE OF VEHICLES AND IT IS IN THE NATURE OF SALES PROMOTION EXPENDITURE IN THE GROUN DS OF APPEAL THE ASSESSEE CLAIMS THAT IT IS WITH REGARD TO BROKERAGE AND COMMISSION. THE ASSESSEE ALSO CLAIMED BEFORE THE LOWER AUTHORITIES THAT THE BROKERAGE / COMMISSION WAS PAID TO THE MIDDLEMEN FOR BRINGING T HE CUSTOMERS FOR PURCHASE OF VEHICLE FROM THE ASSESSEE. THEREFORE THE PAYMENT MADE BY 3 ITA NO.76 & 77/COCH/2013 THE ASSESSEE IS IN THE NATURE OF COMMISSION / BROKE RAGE TO THE MIDDLEMEN; HENCE TAX HAS TO BE DEDUCTED. ADMITTEDLY TAX WAS NOT DEDUCTED THEREFORE THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES. ACCORDINGLY THE ADDITION OF RS.11 00 240 IS CONFIRMED. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS.9 51 163. SHRI T.M. SREEDHARAN THE LD.SENIOR COUNSEL SUBMITT ED THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS. 9 51 163 TOWARDS ADVERTI SEMENT CONSULTANCY AND AUDIT FEES. ACCORDING TO THE LD.SENIOR COUNSEL THE ASSESSEE IS NOT SUPPOSED TO DEDUCT TAX IN RESPECT OF THESE PAYMENTS . WE HEARD SMT. S VIJAYAPRABHA THE LD./DR ALSO. 6. IT IS NOT IN DISPUTE THAT THE PAYMENTS WERE MADE TOWARDS ADVERTISEMENT CONSULTANCY AND AUDIT FEES. WHEN TH E PAYMENTS WERE MADE FOR ADVERTISEMENT CONSULTANCY AND AUDIT FEES THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT TAX HAS TO BE DEDUCTED. TH EREFORE WE HOLD THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE U /S 40(A)(IA) MADE BY THE ASSESSING OFFICER. HENCE WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS. 7 48 350. THE LD.SENIOR COUNSEL SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF 4 ITA NO.76 & 77/COCH/2013 RS. 9 51 163 UNDER THE HEAD CAPITAL GAIN. IN FAC T NO TRANSFER OF PROPERTY TOOK PLACE. ACCORDING TO THE LD.SENIOR COUNSEL ON REVALUATION OF THE ASSETS THE VALUE OF BLOCK OF ASSET WAS SHOWN IN TH E ACCOUNTS. 8. ON THE CONTRARY SMT. S VIJAYAPRABHA THE LD.DR SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY PARTICULARS BEFORE T HE ASSESSING OFFICER. HOWEVER THE ASSESSING OFFICER FOUND THAT THERE IS A DELETION OF THE CAPITAL ASSET TO THE EXTENT OF RS. 9 51 163. IN THE ABSENC E OF ANY FURTHER MATERIAL THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSES SING OFFICER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE PURPOSE OF ASSESSING CAPITAL GAINS THERE SHOULD BE A TRANSFER OF ASSET. TRANSFER IS DEFINED IN SECTION 2 (47) OF THE INCOME-TAX. THIS IS AN INCLU SIVE DEFINITION. THEREFORE FOR THE PURPOSE OF LEVY OF CAPITAL GAIN TAX THERE S HALL BE A TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(47) OF THE AC T. THE ASSESSING OFFICER FOUND THAT THERE WAS A DELETION OF CAPITAL ASSET TO THE EXTENT OF RS. 9 51 163. HOWEVER THE ASSESSEE CLAIMS THAT THIS D ELETION WAS DUE TO REVALUATION OF THE CAPITAL ASSET AND NOT BECAUSE OF ANY TRANSFER. THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE IN TH E LIGHT OF DEFINITION GIVEN IN SECTION 2(47) OF THE ACT. THEREFORE THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF 5 ITA NO.76 & 77/COCH/2013 DEFINITION GIVEN IN SECTION 2(47) OF THE INCOME-TAX ACT. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSIN G OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 2(4 7) AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVIN G OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF INTEREST. ACCORDING TO THE LD.SENIOR COUNSEL IN THE AUDIT RE PORT FILED U/S 44AB OF THE ACT IN FORM 3CB THE CHARTERED ACCOUNTANT CERTIFIED THAT THE ASSESSEE HAS PAID INTEREST OF RS.1 55 77 138. THE ASSESSING OFF ICER FOUND THAT ONLY PAYMENT OF RS.1 18 41 287 WAS BACKED BY DOCUMENTARY PROOF. IN RESPECT OF RS. 37 35 512 THE PAYMENTS WERE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. ACCORDING TO THE LD.SENIOR COUNSEL THIS RS.37 35 512 INCLUDES PENAL INTEREST PAID TO THE EXTENT OF RS. 2 33 306. ACCORDING TO THE LD.SENIOR COUNSEL THE PENAL INTEREST PAID BY THE ASSESSEE WA S ALSO DISALLOWED ON THE GROUND THAT IT IS A PENALTY. ACCORDING TO THE LD.SENIOR COUNSEL IT IS NOT A PENALTY BUT IS ONLY A COMPENSATION FOR USING THE MONEY BELONGING TO THE BANK. FURTHER SINCE THE INTEREST WAS PAID TO THE BANK THERE IS NO QUESTION OF ANY DISALLOWANCE. 6 ITA NO.76 & 77/COCH/2013 11. ON THE CONTRARY SMT. S VIJAYAPRABHA THE LD.DR SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE FOR PAYMENT OF INTEREST TO THE EXTENT OF RS.37 35 512. THIS AMOUNT OF RS.37 35 51 2 INCLUDES PENAL INTEREST OF RS. 2 33 306. IN THE ABSENCE OF ANY DO CUMENTARY EVIDENCE TO SUPPORT THE CLAIM OF PAYMENT ACCORDING TO THE LD.D R THE CLAIM MADE BY THE ASSESSEE CANNOT BE ALLOWED ONLY ON THE BASIS OF THE AUDIT REPORT. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT ONLY ON THE BASIS OF THE AUDIT REPORT THE CLAIM OF THE ASSESSEE TOWARDS PAYMENT CANNOT BE ALLOWED. APART FROM THAT IF THE ASSESSEE CLAIMS TH AT THE PAYMENT WAS MADE TO THE RESPECTIVE BANKS ON THE FUNDS BORROWED FROM THEM IT IS NOT DIFFICULT FOR THE ASSESSING OFFICER TO VERIFY THE P AYMENT FROM THE RESPECTIVE BANKS. THE ASSESSING OFFICER BEING A QUASI JUDICIA L AUTHORITY IS EXPECTED TO CALL FOR RESPECTIVE DETAILS AND THE PAYMENT FROM TH E RESPECTIVE BANKERS AND THEREAFTER DECIDE THE MATTER. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PENAL INTEREST PAID FOR THE DELAYE D PAYMENT IS COMPENSATORY IN NATURE FOR USE AND ENJOYMENT OF THE MONEY BELONGING TO THE BANK THEREFORE IT IS NOT FOR INFRACTION OF LA W. AT THE BEST WE MAY SAY THAT THIS PAYMENT OF INTEREST IS FOR BREACH OF CONT RACTUAL AGREEMENT WITH REGARD TO THE TIME SCHEDULE FOR REPAYMENT OF THE LO AN. THEREFORE WHEN THE ASSESSEE CLAIMS THAT THE MONEY WAS PAID TO THE BANK THERE IS NO 7 ITA NO.76 & 77/COCH/2013 QUESTION OF ANY DISALLOWANCE AS IF IT IS A PENALTY. THERE IS NO PENALTY FOR PAYMENT OF PENAL INTEREST ON THE DELAYED REPAYMENT OF THE BORROWED FUNDS. THEREFORE THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE GENUINENESS OF THE PAYMENT HAS TO BE EXAMINED BY TH E ASSESSING OFFICER. ACCORDINGLY THE ORDERS OF LOWER AUTHORITIES ARE SE T AIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFTER CALLING FOR NECESS ARY DETAILS FROM THE BANKERS AND THEREAFTER DECIDE THE ISSUE AFRESH IN A CCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE. 13. NOW COMING TO THE PENALTY APPEAL IN ITA NO.77/C OCH/2013 THE PENALTY WAS LEVIED AGAINST THE DISALLOWANCE OF THE CLAIM OF THE ASSESSEE WITH REGARD TO THE PAYMENT OF INTEREST TO THE EXTEN T OF RS. 37 35 512. WE HEARD THE LD.SENIOR COUNSEL AND THE LD.DR. WHEN TH E QUANTUM APPEAL WAS CONSIDERED IN THE EARLIER PART OF THIS ORDER THE I SSUE OF DISALLOWANCE OF INTEREST WAS REMITTED BACK TO THE FILE OF THE ASSES SING OFFICER FOR RECONSIDERATION AFTER CALLING FOR NECESSARY DETAILS FROM THE BANKERS AND TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. TH EREFORE THE PENALTY IF ANY SHALL BE LEVIED ONLY AFTER CONSIDERING THE QUA NTUM ADDITION IN THE ASSESSMENT PROCEEDINGS. ACCORDINGLY THE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE OF LEVY OF PENALTY AFTER 8 ITA NO.76 & 77/COCH/2013 DECIDING THE QUANTUM ADDITION IN THE ASSESSMENT AFT ER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. 14. IN THE RESULT APPEAL IN ITA NO.76/COCH/2013 IS PARTLY ALLOWED AND THE APPEAL IN ITA NO.77/COCH/2013 IS ALLOWED FOR ST ATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST JULY 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN DT : 31 ST JULY 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL COCHIN BENCH