HILTON FORGE Vs. JOINT COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
JOINT COMMISSIONER OF INCOME TAX
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Vijay Pal Rao, Member (J) -
(1.) THIS appeal by the Assessee is directed against the order dated 22/12/2008 of CIT(A) for the assessment year 2005 -06. The Assessee has raised the following grounds along with Form -36.
"1. On the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 8,32,544/ - being discount (Bonus) paid to Damstahl GMBH Germany u/s. 40(a)(ia) of the Income tax Act in spite of the fact that the same is not applicable in this case.
(2.) THE ld. CIT(A) has further erred in not agreeing with the remand report filed by Assessing Officer wherein he himself has confirmed that the provision of section 195 are not applicable in the present case and as such there will be no addition of Rs. 8,32,544/ - u/s. 40(a)(ia) of the Income tax Act."
1.1 The Assessee has also filed additional grounds along with the application for admitting the additional ground. The additional grounds read as under: - -
"1. The ld. CIT(A) erred in holding that Bonus of Rs. 8,32,544/ - paid by the appellant to Damstahl a/s was prior period expenses without affording reasonable opportunity to the Assessee to explain that the Bonus payment was rightly claimed as deduction in assessment year 2005 -06 and hence the order of CIT(A) may be quashed.
1.1 Without prejudice to above, the ld. CIT(A) erred in holding that Bonus of Rs. 8,32,544/ - paid by the Appellant to Damstahl a/s was prior period expenses without appreciating that as the export realization of exports relating to March, 2003 to Feb. 2004 was completed in assessment year 2005 -06. Bonus payment accrued in assessment year 2005 -06 and hence order of CIT(A) disallowing the said payment is bad in law.
2. The ld. CIT(A) erred in holding that Appellant failed to prove the services rendered by Damstahl a/s was of sale of goods on principal to principal basis and hence, order of CIT(A) disallowing Bonus payment may be set aside."
1.2 Though the original grounds as well as additional grounds are in respect of disallowance of Rs. 8,82,544/ - paid by the Assessee to M/s. Damstahl GMBH, Germany, however the additional ground is only for taking a plea which was not raised in the original grounds.
We have heard the ld. Authorized Representative and the ld. DR on the issue of admission of additional ground. We note that the additional ground raised by the Assessee do not pertain to raising a new issue, but it is only a plea raised in respect of the same issue raised in the original ground. Therefore, in the facts and circumstances of the case and in the interest of justice we admit the additional grounds raised by assessee.
2. The brief facts giving rise to the solitary issue raised by the Assessee in this appeal are that the Assessee is a firm engaged in the business of Steel Forgings. During the year the Assessee has shown turnover of Rs. 32.17 crores inclusive of other income. The Assessee has debited a sum of Rs. 8,32,544/ - as discount/bonus on export paid to M/s. Damstahl GMBH, Germany. The AO asked the Assessee to furnish the detail on this transaction and as to why the tax at source has not been deducted on this payment. The Assessee submitted that the payment was made as per the agreement with the said party and on the export made by the assessee to the said party, therefore, this was not subjected to TDS under the provisions of section 195. AO did not accept the explanation and contention of the Assessee and disallowed the said amount of Rs. 8,32,544/ - u/s. 40(a)(ia) of the I.T. Act for non -deduction of TDS.
In the first appeal CIT(A) issued a remand order and after receiving the remand report confirmed the disallowance in question, however, on different reasoning. The CIT(A) has held that the alleged payment pertains to assessment year 2004 -05 and not for the assessment year under consideration. Therefore, this is not allowable for the year under consideration being prior period expenses.
(3.) BEFORE us the ld. Authorized Representative of the Assessee has submitted that this payment was made to M/s. Damstahl GMBH, Germany, against the order for export placed by the said party and on realization of export sales, therefore, the said amount is not a commission or bonus, it is in the nature of a discount which was paid by the Assessee on realization of export sale from the same party. He has referred to the remand report and submitted that AO has mentioned in the remand report that as per CBDT Circular No. dated 07/02/2000 the payment remitted directly abroad to a non -resident operating outside the country, no part of his income arising in India, therefore, no tax is deductible u/s. 195.;
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