2016 (1) TMI 1123 - AT - Income Tax

Disallowance of coordination charges paid - admissibility of additional evidence - Held that - We find that the assessee company was a del credre agent of HPCL for whole of the West Bengal. The assessee paid a sum of ₹ 1.10 cr. to GSSIL as coordination charges for supervising the work of timely lifting of goods and their subsequent delivery to the parties or following up payments thereof. We find from the order of CIT(A) that the assessee has filed written submissions containing the details of agreement with HPCL, bill of GSSIL, quantitative details or correspondence between the assessee and GSSIL and proof regarding deduction of TDS on the above payment and also filing of TDS return by the assessee along with assessment order u/s. 143(3) of the Act for AY 2006-07 and the remand report of the AO on 31.12.2012. We find that the AO has objected to the admission of additional evidences under Rule 46A of the Rules and he mainly relied on the findings given by the AO in his assessment order. We find that the AO has been confronted with all the additional evidence by the CIT(A) in term of Rule 46A of the Rules and he has submitted a remand report. We find that AO in his remand report dated 31.12.2012 has alleged that the disallowance for payment by assessee to GSSIS and debited in the accounts as coordination charges was made by the AO and reasserted the position in the remand report also. We find that the AO in his remand report neither referred to nor dealt with the evidence produced by assessee before CIT(A), which in turn, were referred to him the facts are emerging from the case records. Thus we are of the view that the coordination charges paid by the assessee are clearly allowable as deduction and assessee has rightly claimed the same and CIT(A) has rightly allowed the claim of the assessee - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of disallowance of coordination charges paid to Ganco SS (India) Ltd. based on fresh evidence admitted by CIT(A) in violation of Rule 46A of I. T. Rules, 1962.

Detailed Analysis:

1. Admission of Fresh Evidence:
The primary issue in this appeal was the admission of fresh evidence by the CIT(A) in contravention of Rule 46A of the Income-tax Rules, 1962. The revenue contended that the CIT(A) erred in admitting new evidence overruling the objection of the Assessing Officer. The CIT(A) allowed the additional evidence submitted by the appellant, considering it relevant to the disallowance of coordination charges. The CIT(A) observed that the evidence submitted by the appellant was crucial to the matter under consideration, leading to the deletion of the disallowance.

2. Disallowance of Coordination Charges:
The core dispute revolved around the disallowance of coordination charges amounting to Rs. 1.10 crore paid by the assessee to Ganco SS (India) Pvt. Ltd. The Assessing Officer disallowed this amount due to the absence of a written agreement between the assessee and Ganco SS (India) Pvt. Ltd. The AO argued that the lack of written documentation regarding the supervising and lifting work arrangements led to the disallowance. However, the CIT(A) allowed the claim of the assessee after considering the additional evidence submitted, including details of the agreement with HPCL, bills of Ganco SS, TDS deductions, and assessment orders for previous years.

3. Assessment and Supporting Evidence:
The assessee, a del credre agent of HPCL, paid coordination charges to Ganco SS for supervising the timely lifting and delivery of goods. The CIT(A) reviewed written submissions, agreement details, bills, and TDS-related documents. The AO objected to the admission of additional evidence under Rule 46A but failed to address the evidence provided by the assessee. The CIT(A) found the coordination charges allowable as deduction based on the genuine nature of the transaction, previous assessment orders, and compliance with tax regulations by Ganco SS.

4. Judgment and Conclusion:
After considering the rival submissions and case facts, the ITAT Kolkata upheld the CIT(A)'s decision to allow the coordination charges as a deduction. The ITAT confirmed that the coordination charges were legitimate expenses incurred by the assessee for business purposes, and the CIT(A) rightfully accepted the additional evidence presented. Consequently, the appeal by the revenue was dismissed, affirming the decision in favor of the assessee.

In conclusion, the ITAT Kolkata upheld the CIT(A)'s decision to delete the disallowance of coordination charges, emphasizing the relevance and admissibility of the additional evidence provided by the assessee. The judgment highlighted the importance of substantiating business expenses and complying with tax regulations to support claims for deductions.