Indisol Marketing Pvt. Ltd. Vs DCIT (ITAT Mumbai)
The Mumbai ITAT deleted a disallowance of ₹6.75 crore paid as professional fees for facilitating import remittances relating to Iranian-origin goods affected by OFAC sanctions. The assessee, engaged in pharmaceutical imports, had appointed a consultancy firm to assist in expediting complex banking clearances and overseas remittances which were otherwise facing extraordinary delays due to sanctions scrutiny.
The Tribunal noted that the payments were made through banking channels after deduction of TDS, the recipient had responded to notice u/s 133(6), confirmed the transactions, filed returns, disclosed the income and paid taxes thereon. The ITAT held that identity of the payee, genuineness of payments and movement of funds stood fully established.
Importantly, the assessee demonstrated that after availing the consultancy services, the average payment cycle to foreign creditors reduced from 167 days to 103 days, turnover increased from ₹1507 crore to ₹2620 crore, and profits rose substantially. The Tribunal accepted that the issue was not routine import-export compliance but involved highly sensitive OFAC-sanction banking difficulties requiring specialised liaison and banking relationships.
Rejecting the Revenue’s objections regarding the consultant’s small infrastructure, chawl/residential address and lack of multiple clients, the ITAT observed that “suspicion, however strong, cannot take the place of evidence.” It reiterated that commercial expediency must be judged from the businessman’s perspective and not from the Revenue’s armchair. Relying on Supreme Court and Bombay High Court rulings, the Tribunal held that when the recipient has offered the income to tax and no evidence of bogusness or money circulation is shown, disallowance u/s 37(1) cannot survive.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
