TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 61
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....wever, as the case was already centralised by the Notification No. 3 of 2014-15 dated April 3, 2014, (copy enclosed) the Deputy Commissioner of Income-tax, Company Circle-V(2) has forwarded this order to Deputy Commissioner of Income-tax, Central Circle-IV(2), Chennai on October 7, 2014, who submitted the scrutiny report through the Joint Commissioner of Income-tax on October 31, 2014. On receipt of the scrutiny report, the Office of Commissioner of Income-tax, Central-1 requisitioned and obtained the order of the Commissioner of Income-tax (Appeals) on November 3, 2014 (copy enclosed). Since the Commissioner of Income-tax, Central-1 who was having jurisdiction over the case, received the appellate order on November 3, 2014, the same date was mentioned in the certificate under rule 15. However, inasmuch as the Commissioner of Income- tax, Puducherry, has received the appellate order on July 26, 2014, and since the limitation for filing a tax case appeal is 60 days, the appeal ought to have been filed on or before September 24, 2014. Since the appeal was actually filed on February 4, 2015 only, there is a delay of 133 days. Inadvertently, by oversight, this was wrongly mentioned as ....
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.... 18,23,79,520 which was revised on January 13, 2011 admitting income of Rs. 12,87,49,070 after claiming deduction under section 80-IA of the Act. Assessment was completed under section 143(3) of the Act on March 25, 2013 determining the income of the assessee at Rs. 18,11,97,350. While completing the assessment the Assessing Officer disallowed Rs. 5,04,03,180 under section 40A(2)(a) of the Act being trade discount holding that the assessee allowed excess trade discount to sister concerns at around 7.29 per cent. The Assessing Officer was of the opinion that sister concerns are enjoying deduction under section 80-IB of the Act therefore, there is transfer of profit to sister concerns where trade discount allowed is equal to the net profit percentage of the assessee. Therefore there is a violation under section 40A(2) of the Act. On appeal, the Commissioner of Income-tax (Appeals) following various decisions of the High Court including the jurisdictional High Court in the case of CIT v. A. K. Subbaraya Chetty and Sons [1980] 123 ITR 592 (Mad) held that the Assessing Officer was clearly in error in disallowing trade discount under section 40A(2)(a) of the Act since trade discount allo....
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....n admitted fact that the trade discount allowed to the sister business concerns of the appellant was by way of book adjustment and that the appellant has realised the sale amount net of trade discount. Therefore, the appellant cannot be stated to have incurred any expenditure for which payment was made, so as to attract the provisions of section 40A(2)(a). The decision of the Madras High Court relied on by the learned authorised representative, namely, CIT v. A. K. Subbaraya Chetty and Sons [1980] 123 ITR 592 (Mad) clearly support the case of the appellant. Since the operative portion of this decision has already been reproduced in the earlier paragraph, the same is not repeated here. Very same issue came up recently before the Delhi High Court in United Exports v. CIT [2011] 330 ITR 549 (Delhi) (I. T. A. No. 356 of 2009). In this case the question before the honourable Delhi High Court was (page 555) "Whether in the facts and circumstances of the case, the Tribunal erred in law in interpreting section 40A(2) and holding it applicable to the appellant, when trade discount is not, expenditure paid and in any case, when it was lesser sales realization". The above question was answere....
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....s entitled to receive a commission of 10 per cent. on the sales. The Assessing Officer noticed that this firm could be considered as a person 'within the purview of clause (b) of sub-section (2) of section 40A and that, since the assessee had sold goods to this firm at a rate lower than the market rate, the profit of Rs. 6,81,987 earned by the firm would amount to payment of additional commission. In view of this matter, the Assessing Officer made a disallowance of Rs. 6,81,987 under section 40A(2)(a). It was held by the court that the expenditure incurred by the assessee was the commission. Even if the assessee sold bidis to the sole selling agents at a price less than the market rate, the difference between the market rate and the price at which the bidis were sold cannot, in our opinion, be termed as expenditure incurred by the assessee. On the finding reached by the Tribunal, it has to be held that the Income-tax Officer was not right, in adding Rs. 6,81,987 under section 40A(2).' Yet another case where the decision was on similar lines came before the Punjab and Haryana High Court recently in CIT v. Rajnish Ahuja [2013] 85 CCH 4 (P&H) ; [2013] 219 Taxman 85 (P&H) (Ma....
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....n after allowing discount, the rate at which the goods were sold to sister concerns was more than the rate at which the sale was effected to others. Only in the case of M/s. Ultramarine and Pigments Ltd. the rate was slightly more. It is seen that, the purchaser was relatively new to the appellant and longer credit was allowed. It needs hardly any emphasis that bulk purchasers enjoy better bargaining power and therefore are able to get lower rate and discount. It is seen that the rate at which the goods were sold to sister concerns were not a ridiculously low rate, but, were at reasonable rates compared to the sale to others. Therefore it cannot be considered that the discount allowed to sister concerns was unreasonable and was excessive having regard to the market rate. Hence, the grounds of appeal filed by the appellant on this issue are allowed and treated as disposed of accordingly." 9. On going through the order of the Commissioner of Income-tax (Appeals), we do not find any valid reason to interfere with his findings. The Revenue has not filed any evidence to rebut the findings of the Commissioner of Income-tax (Appeals), therefore we sustain the order of the Commissioner of....