The Principal Commissioner Of Income Tax, Panaji.… v. M/S. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd.…

1 IN THE HIGH COURT OF BOMBAY AT GOATAX APPEAL NO.4 OF 2019 The Principal Commissioner of Income Tax, Panaji.…. Appellant V/s M/s. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd.…. Respondent Ms. Amira Razaq, Standing Counsel for the Appellant. Mr. A.F. Diniz, Advocate for the Respondent. Coram :- S. C. GUPTE & NUTAN D. SARDESSAI, JJ. Date:- 25[th] June, 2019 ORAL ORDER : (Per S.C. Gupte, J.) This Tax Appeal challenges an order passed by theIncome Tax Appellate Tribunal, Panaji bench, Panaji, in an appealfiled by the Revenue. 2.The controversy concerns the income tax returns filedby the Assessee for Assessment Year 2012-13. In a DRI inquiry inthe matter of exports effected by the Assessee, the DRI had foundthat the Assessee was evading export customs duty byundervaluing iron ore shipments exported to various overseasbuyers. The DRI found that for facilitating its exports and recoveryof sales proceeds, the Assessee had appointed non-resident foreignagents, agreeing for direct payment to such agents by the foreign 2 importers by deducting such amount from the export salesconsideration payable to the exporter. The DRI found that customsduty was paid on such net amount remitted to the Assessee; theFOB value disclosed, on which customs duty was paid, did notinclude the commission paid to the foreign agents. The DRI foundthis to be an evasion of customs duty. Based on the DRI report,which was sent by it to the ITO, the Department issued a noticeunder Section 143(2) and 142(1) of the Income Tax Act. TheAssessing Officer, amongst other things, disallowed the amount of₹5,46,31,543/- (Rupees five crores forty six lakhs thirty onethousand five hindered and forty three only) paid by way ofcommission to the foreign agents on account of under invoicing inview of the DRI report. The income of the Assessee was assessedafter adding this amount to it. 3.When the matter was carried in appeal by the Assesseebefore CIT (Appeals), the latter held that the appellant Assesseewas engaged in the business of export of ore and had made exportsales to foreign buyers during the year under consideration. It hadengaged non-resident foreign agents for facilitating its exports,agreeing for direct payment to such agents by the foreignimporters on its behalf for the services rendered to it and remissionof net export sales consideration to it as FOB price payable by theimporters. The CIT (Appeals) held that the non-resident foreign 3 commission agents, M/s. Good Bloom Asia Pacific Limited, HongKong and M/s. NRB Group INC, USA, had provided services to theAssessee outside India and no part of their income was assessablein India as the agents had no operations in India and therefore, theprovisions of Section 9(1)(i) could not be invoked. The CIT(Appeals), accordingly, deleted the addition of income of₹5,46,31,543/- (Rupees five crores forty six lakhs thirty onethousand five hindered and forty three only) made on account ofdis-allowance of the commission paid to non-resident foreignagents. 4.In the Department's appeal before ITAT, the Tribunalobserved that the Assessee had disclosed FOB as actual receipt,which did not include the commission paid by the foreign buyers tothe non-residents. The Tribunal held that the addition of income onaccount of such commission was rightly deleted by the CIT(Appeals) on the ground that the appellant did not claim anyexpenses against the commission paid; the payment of commissionhad a combined effect of liability as nil in the income of theAssessee; the transaction was between foreign agents and theexporters, which was not liable to be assessed in India. TheTribunal was accordingly of the view that the CIT (Appeals) hadrightly allowed the claim of the Assessee and no interference waswarranted in the appeal before the Tribunal. 4 4 5.The Department's case in the present appeal is that anydeduction/expenditure, which is not claimed in the return ofincome, cannot be claimed before the Assessing Officer withoutfiling any revised return. The Revenue relies on the case ofGoetze (India) Ltd. V/s. Commissioner of Income Tax[1] in thisbehalf. In Goetze (India) Ltd., the deduction claimed by theAssessee was disallowed by the Assessing Officer on the groundthat there was no provision under the Income Tax Act to makeamendment in the return of income by modifying an application atthe assessment stage without revising the return. The Assessee'sappeal before the Commissioner of Income Tax (Appeals) wasallowed. The ITAT, however, reversed that order. The Assesseethereupon approached the Supreme Court submitting that theTribunal was wrong in upholding the assessment order. Relying onthe decision of the Supreme Court in National Thermal PowerCo. Ltd. V/s. Commissioner of Income Tax[2], it was contendedthat it was open to the Assessee to raise points of law even beforethe Appellate Tribunal. The Supreme Court held that the decisionin National Thermal Power Co. Ltd. dealt with the power of theTribunal under Section 254 of the Income Tax Act, 1961 toentertain for the first time a point of law provided the fact on thebasis of which such issue of law was raised was available on record 1284 ITR 323 (SC)2(1998) 229 ITR 3832(1998) 229 ITR 383 5 before the Tribunal. The Supreme Court held that the decision didnot in any way relate to the power of the Assessing Officer toentertain a claim for deduction otherwise than upon filing of arevised return. 6.In the present case, there is no question of theAssessee claiming any deduction by filing of a revised return. It isthe case of the Revenue that the Assessee had not disclosed theexpenditure incurred by a foreign agent on its behalf. What theAssessee received from its foreign buyers was the net FOB value;the Assessee was not claiming any expenditure on account ofcommission paid. There is, thus, no question of any revised return.There is no tax effect whatsoever by reason of the expendituremade by foreign buyers by way of commission paid outside India. 7.In the premises, there is no substantial question of lawarising for consideration of this Court in the present appeal. Theappeal is, accordingly, dismissed. 8. It is not in dispute that the other two questions of law raised by the Department in the present case do not survive, if theDepartment's case on the first issue is not accepted by the Court,since the tax effect in respect of those two questions is below₹50,00,000/- (Rupees fifty lakhs only). These questions are 6 accordingly not considered in the appeal. NUTAN D. SARDESSAI, J. S. C. GUPTE, J. NH