The Director Of Income Tax It v. M/S. Staubli A.g.india Branch Office

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.896 OF 2011 The Director of Income Tax IT. V. M/s. Staubli A.G.India Branch office. ..Appellant. ..Respondent. Mr. Suresh Kumar for the Appellant. Mr. K.Gopal along with Mr. Jitendra Singh for the Respondent. CORAM : S.J.VAZIFDAR & M.S. SANKLECHA, JJ. DATE : -1[st] August, 2012 PC: In this appeal under Section 260A of the Income Tax Act (“the Act”) the revenue has challenged an order dated 5/4/2010 of the Income Tax Appellate Tribunal (“ITAT”) relating to the assessment year 2001-02 by formulating the following questions of law for consideration of this court. a)Whether on the facts and circumstances of the case and in law the ITAT in law in confirming the order of CIT(A) directing the AO to delete the addition of Rs.25,08,701/- made by estimating the commission income @ 10%? 2)The respondent is a India Branch office of M/s. Staubli A.G. engaged in selling the textile machines manufactured by Staubli Group entities on commission basis to its customers in India. In the course of its business, the respondent sells textile machinery of various types and receives commission at rates varying from 4% to 10% depending upon the type of machinery sold. The Assessing officer accepted the books of account maintained by the respondent. However, he concluded that the varying commission shown does not reflect the income earned by the respondent-assessee and therefore, applied a flat rate of 10% as commission. This resulted in the income being enhanced by Rs.25.08 lacs. 3)In appeal, the Commissioner of Income Tax(Appeals) by an order dated 31/1/2005 held that the respondent's accounts are maintained on mercantile basis and audited under the Companies Act, 1956. Consequently, there was no occasion to increase the commission earned to 10% on ad-hoc basis. Consequently, by an order dated 31/1/2005 the addition of Rs.25.08 lacs was deleted. 4)In appeal, the Tribunal by its order dated 5/4/2010 upheld the order of the Commissioner of Income Tax (Appeals). The Tribunal held that the account books maintained by the respondent as well as the audited financial statements have not been challenged by the revenue and/or rejected under Section 145 of the Income Tax Act. In view of the above, it is not open to the revenue to make an ad-hoc addition by levying an ad-hoc commission at the rate of 10% in respect of sales of all types of machineries when in fact the commission received varied from 4% to 10% depending upon the type of textile machinery sold. In the circumstances, the Tribunal also upheld the deletion of Rs.25.08 lacs done by the Commissioner of Income Tax( Appeals). 5)As the books of account of the respondent has been accepted by the revenue, there is no basis for the appellant-revenue to disregard the varying commission shown by the respondent as having been earned from the sales of different types of textile machinery. There are concurrent findings of fact by the Commissioner of Income Tax (Appeals) and the Tribunal to that effect that the commission received on the sale of textile machinery varies from 4% to 10% and the application of 10% as commission on sale of all types of textile machinery is arbitrary. The aforesaid finding being a finding of fact, no question of law arises for the consideration of this court particularly in the absence of any allegations that the finding of fact is arbitrary or perverse. . 6)The appeal is dismissed. No order as to costs. ( M.S. SANKLECHA, J. ) ( S. J. VAZIFDAR, J.)