2014 (5) TMI 394 - AT - Income Tax

Accrual of income Element of income where credit of TDS has been claim on receipt basis - Distribution of incentives on behalf of KBPL Held that - CIT(A) was rightly of the view that the reimbursements made for the quarter ending 30-06-2007, have been reconciled with the bank account of M/s Zebaish and with the bank statement of M/s KBPL - claim of credit for the tax deducted does not make the assessee bound to pay tax on the receipts, unless such receipts constitute income in his hands - the assessee produced books of A/Cs about its retainer ship business; agreement and confirmation from KBPL - Its activity as a retainer-ship which includes distribution of incentives is not denied - The arrangement has not been held to be non-genuine or sham thus, there is no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues Involved:
Revenue's appeal against CIT(A)'s order deleting addition of Rs. 81,39,639 as income for A.Y. 2008-09.

Detailed Analysis:
1. Background: The AO found that an amount of Rs. 81,39,639 was received by the assessee from a company on which TDS was deducted but not offered for taxation. Assessee claimed it was for distribution of incentives and not income.
2. AO's Decision: AO made the addition as actual disbursement of the amount was not verifiable. Confirmation from the company and reimbursement of expenses were not considered sufficient proof.
3. Assessee's Defense: Assessee explained that it was engaged by the company to distribute incentives to wholesalers. The amount received was for onward distribution, supported by an agreement, confirmation, and monthly data statement.
4. CIT(A)'s Decision: CIT(A) referred to the agreement, reconciled reimbursements, and observed no retention of the amount. Deleted the addition stating that if receipts are taxable, corresponding expenditure should be allowed.
5. Appellate Tribunal's Decision: Tribunal upheld CIT(A)'s decision based on the genuine nature of the arrangement, production of relevant documents, and absence of any denial of the retainer-ship activity. No fault was found with the assessee's compliance.

This judgment highlights the importance of substantiating claims with proper documentation and demonstrating the genuine nature of transactions to avoid additions to income. The decision emphasizes the principle of allowing corresponding expenditure if receipts are deemed taxable, ensuring a fair treatment of income and expenses. The Tribunal's ruling underscores the significance of maintaining accurate records and providing verifiable evidence to support the taxpayer's position in such disputes.