Siemens Limited Vs DCIT (ITAT Mumbai)
The appeals before the ITAT Mumbai arose from cross appeals filed by Siemens Limited and the Revenue. The Tribunal adjudicated three principal issues: (i) allowability of a payment of ₹18.50 lakh wrongly classified as commission, (ii) allowability of provision for long-service anniversary awards, and (iii) allowability of provision for post-retirement medical benefits.
1. Genuine Business Expense Remains Deductible Despite Wrong Accounting Head
The Assessing Officer disallowed ₹18.50 lakh paid to M/s Apex Medi Equip on the ground that the assessee had booked the payment as “commission”, whereas the recipient confirmed that it had never acted as a commission agent and that the payment represented consideration for supplying bought-out items and local accessories.
The Tribunal observed that income-tax liability depends upon the real nature of a transaction rather than its accounting nomenclature. A wrong accounting head cannot convert an otherwise genuine business expenditure into a non-deductible expense.
The Tribunal found substantial documentary evidence supporting the assessee’s claim:
- Purchase order specifically required supply of local bought-out items and accessories.
- Payment exactly matched the purchase order value.
- Payment was made through banking channels.
- Payment advice referred to the relevant invoices.
- Vendor confirmed receipt of the amount towards supply of accessories.
- Revenue did not dispute the identity of the recipient, genuineness of payment or banking trail.
- No evidence suggested the transaction was sham or that money had returned to the assessee.
Although the vendor’s invoice was not produced, the Tribunal held that the purchase order, payment documents and vendor confirmation collectively established the genuineness of the business purchase.
Accordingly, the Tribunal held that the expenditure remained allowable even though it had been mistakenly booked as commission and directed deletion of the disallowance of ₹18.50 lakh.
The Tribunal also held that the challenge to initiation of penalty proceedings under section 271(1)(c) was premature since no separate penalty order had been passed.
2. Actuarially Valued Long-Service Award Provision Is Tax Deductible
The Revenue challenged deletion of disallowance of ₹2.1458 crore representing provision for anniversary awards payable to employees completing 25 years of service.
The Tribunal noted that:
