The Principal Commissioner Of Income Tax 2 v. M/S. Eta General Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 13.12.2017Coram The Hon'ble Mr.Justice T.S.Sivagnanam &The Hon'ble Mr.Justice K.Ravichandrabaabu The Principal Commissioner of Income Tax 2,No.121, Mahatma Gandhi Road,Chennai - 600 034. ...Appellant Vs. M/s. ETA General Pvt. Ltd.,71, Sterling Road,Chennai - 600 034.PAN : AAA CE 6650 P....Respondent Prayer: Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 against the common order dated 05.10.2016 inI.T.A.No. 473/MDS/2016 on the file of the Income Tax AppellateTribunal, Madras 'A' Bench, for the assessment year 2010-11. Tax Case appeal filed under Section 360 A of the Income TaxAct 1961, against the Common Order dated 05.10.2016 in ITA No469/MDS/2016 and C.O. Nos 58 to 63/MDS/2016 on the file of theIncome Tax Appellate Tribunal, Madras 'A' Bench for theassessment year 2008-2009, 2009-2010,2010-2011,2011-2012 andC.Os. Nos 58,59,60,61,62 and 63/MDS/2016. Against: The order of the Commissioner of Income Tax(Appeals)-6dated 23.12.2015 for the Assessment year 2008-2009, 2009-2010,2010-2011,2011-2012. Against: The Assessment order made u/s 143(3) r.w.s 92 CA(3)dated 26.03.2013, 27.03.2014, 20.03.2015, 23.03.2015 for theAssessment year 2008-2009, 2009-2010, 2010-2011, 2011-2012 madePAN NO: AAACE 6650P. https://hcservices.ecourts.gov.in/hcservices/ (Judgement of the Court was delivered by T.S.Sivagnanam,J.,) Heard Mr. Karthick Ranganathan, the learned SeniorStanding Counsel for the appellant, and Mr. M.P. Senthil Kumar,the learned counsel for the respondent. 2.This Appeal has been filed by the Revenue, raising thefollowing substantial questions of law:- "i)Whether on the facts and in thecircumstances of the case, the ITAT was right inremitting back the issue to the file of theAssessing Officer with a direction to verify thebooks of accounts of assessee whether the servicecommission was debited when the sales made and ifthe assessee charged service commission as soon asthe sales were made, the claim of assessee is to beallowed, as it was related to the sales of airconditioners? ii)Whether on the facts and in thecircumstances of the case, the ITAT was right inremitting back the issue, when as per the assessee'sown version, it would reserve the service commissionafter a lapse of three years and this shows that theprovision created was a contingent liability and notan ascertained one? iii) Whether on the facts and in thecircumstances of the case, the ITAT was right inremitting back the issue of trade discounts with adirection to ascertain whether the trade discountswas given to the sister concern in the sales billsitself or separate credit been given after the saleshad been effected and that, if the separate salesdiscount was given after the sales, then, theprovisions of Section 40 A (2) be applied andiv)Whether on the facts and in thecircumstances of the case, the ITAT failed toappreciate that the disallowance was made as perexplanation to section 37 (1) of the Act forcontravention of the Companies Act and theprovisions of Section 40A(2)/fair price/Arm's lengthprice have no relevance? 3.The learned Senior Standing Counsel for the Revenuefairly submits that the questions of law i) and ii) does notarise for consideration in this Appeal, which pertain to theassessment year 2010-11. Therefore, those two questions standdeleted. Therefore, it has to be seen as to whether the Appealhas to be entertained, and whether the substantial questions oflaw iii) and iv) as framed above, would arise for consideration. andiv)Whether on the facts and in thecircumstances of the case, the ITAT failed toappreciate that the disallowance was made as perexplanation to section 37 (1) of the Act forcontravention of the Companies Act and theprovisions of Section 40A(2)/fair price/Arm's lengthprice have no relevance? 3.The learned Senior Standing Counsel for the Revenuefairly submits that the questions of law i) and ii) does notarise for consideration in this Appeal, which pertain to theassessment year 2010-11. Therefore, those two questions standdeleted. Therefore, it has to be seen as to whether the Appealhas to be entertained, and whether the substantial questions oflaw iii) and iv) as framed above, would arise for consideration. 4.The issue pertains to trade discounts, which, accordingto the Revenue is against the Companies Act, and it is againstthe public policy. The Income Tax Appellate Tribunal, Madras'A' Bench, (for short, Tribunal) took note of its intra Court'sdecision, in the case of Deputy Commissioner of Income Tax Vs.M/s. Power Soaps Pvt Ltd., in I.T.A.No.306/MDS/2015, for theassessment year 2010-11, dated 16.09.2015, which appears to beidentical as that of the petitioner's case, and opined that, ifthe expenditure is debited to the P & L A/c and claim it as anexpenditure in computing the income of assessee, provisions ofSection 40-A (2) of the Act is applicable. The Tribunal furthertook note of the submission made on behalf of the assessee that,it is only the deduction in the sales value made to the sisterconcerns, and it is not claimed as expenditure in the books ofaccount of assessee, and discount was passed by the assesseewhile making the sale itself, and there is no separate discountclaimed by the assessee. This fact was not placed by theassessee either before the Assessing Officer or before theCommissioner of Income Tax (Appeals) and therefore, theTribunal opined that, it is not in a position to appreciate thefindings rendered by the CIT (A) and remanded the matter to theAssessing Officer to ascertain as to whether the trade discountis given to the sister concern in the sales bills, or separatecredit has been given after the sales has been effected.Further, the Tribunal pointed out that, if the sales discount isgiven after the sales, then, the provisions of Section 40-A (2)of the Act should be applied. 5.The Revenue on Appeal before us contended that, thisissue was placed before the Tribunal for the first time, and forsuch reason, the Tribunal ought not to have remitted back thematter. 6.We do not agree with the stand taken by the Revenue,since the Tribunal, being the last forum, which can appreciateor re-appreciate the factual matrix of the case, was fullyjustified in taking note of the submission made on behalf of theassessee and the remanding the matter to the Assessing Officerto ascertain the factual position. 7.Thus, we find that the questions of law iii) and iv) asframed above, does not arise for consideration in this Appeal,at this stage on account of the order of remand, which has beenpassed by the Tribunal to ascertain the correct factualposition. 8.For the above reasons, we are not inclined to entertainthis Appeal. Accordingly, this Tax Case Appeal standsdismissed. Consequently, connected Miscellaneous Petition isclosed. No costs. s/d- Assistant Registrar(CO) True Copy Sub-Assistant RegistrarsdTo1. The Income Tax Appellate Tribunal, Madras 'A' Bench,2. The Commissioner of Income Tax(2)121, Mahatma Gandhi Road Chennai 34.3. The Deputy Commissioner of Income Tax Corporate Circle2, Chennai.4. The Assistant Commissioner of Income Tax Corporate Circle2(1), Chennai.+1 CC to M/s. Karthik Ranganathan, Advocate sr 88833.+1 CC to Mr.G. Baskar, Advocate sr 88915(08/03/2018)T.C.A.No.656 of 2017 PPA(CO)SP(08/02/2018)