INDIA INDEX SERVICES & PRODUCTS LTD, MUMBAI V. ACIT 10(1), MUMBAI

CO 141/MUM/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8030 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Assessee Lawyers: PRODUCTS LTD
• Keywords: Earning of tax free income; Additional evidence
• Section: 14A; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND , SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 1950/MUM/2010 / ASSESSMENT YEAR 2006-07 ADDL. COMMISSIONER OF INCOME TAX, RANGE 10(1), MUMBAI. VS. M/S. INDIA INDEX SERVICES & PRODUCTS LTD., EXCHANGE PLAZA, BANDRA KURLA COMPLEX, MUMBAI-400 051. PAN: AAACI 5633 A . / ITA NO. 1421/MUM/2011 / ASSESSMENT YEAR 2007-08 DY. COMMISSIONER OF INCOME TAX, RANGE 10(1), MUMBAI. VS. M/S. INDIA INDEX SERVICES & PRODUCTS LTD., PLOT NO. C- 1, BLOCK-G, EXCHANGE PLAZA, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051. PAN: AAACI 5633 A . / ITA NO. 6267/MUM/2011 / ASSESSMENT YEAR 2008-09 ACIT - 10(1), 455, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI 400 020. VS. M/S. INDIA INDEX SERVICES & PRODUCTS LTD., PLOT NO. C-1, BLOCK-G, EXCHANGE PLAZA, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051. PAN: AAACI 5633 A C.O. NO. 141/MUM/2012 ASSESSMENT YEAR 2008-09 M/S. INDIA INDEX SERVICES & PRODUCTS LTD., PLOT NO. C- 1, BLOCK-G, EXCHANGE PLAZA, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051. PAN: AAACI 5633 A VS. ACIT - 10(1), 455, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI 400 020. ( ! / APPELLANT ) ( '# ! / RESPONDENT ) REVENUE BY : SHRI AMAR DEEP ASSESSEE BY : SHRI VIJAY MEHTA M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 2 $ %& / DATE OF HEARING : 21-11-2012 '( $ %& / DATE OF PRONOUNCEMENT : 27-11-2012 ) / O R D E R PER RAJENDRA, AM FOLLOWING GROUNDS OF APPEALS/CROSS OBJECTIONS WERE FILED BY THE ASSESSING OFFICER (AO) AND THE ASSESSEE-COMPANY FOR THE ASSES SMENT YEARS (AYS) 2006-07, 2007-08 AND 2008-09 (CROSS-OBJECTION ONLY FOR THE A Y 2008-09) AGAINST THE ORDERS OF THE CIT(A)-21,MUMBAI DT. 18-12-2009, 01-12-2010 & 21-06-2011 RESPECTIVELY. ITA NO.1950/MUM/2010 - AY.2006-07 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.22,08,793/- MADE U/ S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT ASSESSEE HAS FAILED TO SUBSTANTIATE WITH DOCUM ENTARY EVIDENCE THAT THE PAYMENT MADE TO THE HOLDING COMPANIES WAS MERELY REIMBURSEMENT WITH OUT ANY ELEMENT OF PROFIT. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.22,08,793/- MADE U/S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT ASSESSEE HAD FAILED TO DEDUCT TAX AS PER THE PROVISIONS OF SECTION(S) 194C/ 194J ON THE PAYMENTS MADE TO THE HOLDING COMPANY. 3.THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, O MIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. 4.THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.1421/MUM/2011 - AY.2007-08 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.34,63,072/- MADE U/ S.40 (A)(IA) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAS FAILED TO SUBSTA NTIATE WITH DOCUMENTARY EVIDENCE THAT THE PAYMENT MADE TO THE HOLDING COMPANIES WAS MERELY RE IMBURSEMENT OF EXPENSES. 2ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.34,63,072/- MADE U/ S.40(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURC E AS PER THE PROVISIONS OF SECTION(S) 194C/ 194J ON THE PAYMENTS MADE TO THE HOLDING COMPANIES. 3ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULES IN SUPPORT OF THE ASSESSEES CLAIM OF ADVERTISEMENT EXPENDITURE WITHO UT APPRECIATING THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY OF HEARING DURING THE ASSESSMENT PROCEEDINGS TO FILE THE DETAILS OF THE MAJOR EXPENSES DEBITED TO THE PROFIT & LOSS ACC OUNT ALONG WITH DOCUMENTARY EVIDENCE. 4.THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. 5.THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES OF THE CASE. M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 3 ITA NO.6267/MUM/2011 - AY.2008-09 I)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 46,48,659/- MADE B Y THE AO U/ S.40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE FACT THAT UNDER THE ACT THE TAX SH OULD HAVE BEEN DEDUCTED OF THE SUM PAID BY THE ASSESSEE COMPANY TO ITS HOLDING COMPANY TOWARD S THE SERVICES OF DEPUTED PERSONNEL. II)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 1,23,09,627/- MADE BY THE AO U/S.40(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAS FAILED TO SUBSTA NTIATE WITH DOCUMENTARY EVIDENCE THAT THE PAYMENT MADE TO THE HOLDING COMPANIES TOWARDS COMMO N ADVERTISEMENT EXPENSES WAS MERELY REIMBURSEMENT OF EXPENSES. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 18,30,812/- MADE B Y THE AO U/S. 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAS FAILED TO SUBSTA NTIATE WITH DOCUMENTARY EVIDENCE THAT THE PAYMENT MADE TO THE HOLDING COMPANIES TOWARDS REPAI RS AND MAINTENANCE EXPENSES WAS MERELY REIMBURSEMENT OF EXPENSES. (IV)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 1,05,655/ - MADE B Y THE AO U/S.4O(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAS FAILED TO SUBSTA NTIATE WITH DOCUMENTARY EVIDENCE THAT THE PAYMENT MADE TO THE HOLDING COMPANIES TOWARDS CAR H IRE EXPENSES WAS MERELY REIMBURSEMENT OF EXPENSES. V)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 1,07,495/- U/S. 40 A OF THE ACT WHILE COMPUTING THE BOOK PROFIT U/S. 115 JB OF THE ACT. VI)THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. (VII)THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY , OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. CROSS-OBJECTIONS AY. 2008-09( CO NO. 141/M/2012) 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALL OWANCE OF AN AMOUNT OF RS.89,586/- AS PRIOR PERIOD EXPENSES AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT. 1961, AND RULES M ADE THERE UNDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE CONTENT ION OF THE ASSESSEE THAT PROVISIONS OF TAX DEDUCTION AT SOURCE ARE NOT ATTRACTED IN CASE OF PU RE REIMBURSEMENT OF EXPENSES, BEING THE SUM OF RS.18,30,812/- PAID TO HOLDING COMPANY AS RE IMBURSEMENT OF REPAIRS AND MAINTENANCE EXPENSES, WHICH IS WRONG AND CONTRARY TO THE PROVIS IONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THERE UNDER. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AN D/OR MODIFY THE ABOVE GROUNDS OF CROSS OBJECTION ON OR BEFORE THE DATE OF HEARING. ITA NO.1950/MUM/2010 - AY.2006-07 2. ASSESSEE-COMPANY, A JOINT VENTURE BETWEEN NATIONAL STOCK EXCHANGE OF INDIA LTD., (NSEIL) AND CRISIL, ENGAGED IN PROVIDING VARI ETY OF INDICES AND INDEX RELATED M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 4 SERVICES AND PRODUCTS, FILED ITS RETURN OF INCOME O N 17-10-2006 DECLARING TOTAL INCOME OF RS. 2.58 CRORES UNDER THE NORMAL PROVISIONS AND RS. 2.57 CRORES U/S. 115JB OF THE INCOME TAX ACT,1961(ACT).ASSESSMENT WAS FINALISED B Y THE ASSESSING OFFICER (AO) ON 24.11.2008 DETERMINING TOTAL INCOME AT RS. 2.80 CRORES. 2.1. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT UN DER THE HEAD OPERATING ADMINISTRATION AND OTHER EXPENSES, ASSESSEE-COMPAN Y HAD CLAIMED AN EXPENDITURE OF RS. 22.08 LAKHS TOWARDS THE DEPUTED PERSONNEL CO ST. THE SAID PAYMENT WAS CLAIMED TO BE MADE TO NSEIL AND CRISIL WHO ARE THE TWO HOLDING COMPANIES OF THE ASSESSEE-COMPANY. AO ASKED THE ASSESSEE IF ANY TDS WAS DEDUCTED ON THE PAYMENTS MADE. IT WAS ADMITTED BY THE COMPANY THAT ON THE S AID PAYMENTS MADE TO THE HOLDING COMPANY, NO TAX WAS DEDUCTED AT SOURCE. AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD, AO HELD THAT ASSESSEE-COMP ANY WAS PAYING TO HOLDING COMPANIES CERTAIN SUMS WHICH WERE FOR UN-UTILIZATIO N OF FACILITIES BASED ON MUTUAL UNDERSTANDING, THAT ASSESSEE WAS NOT ABLE TO PROVE WITH ANY DOCUMENTARY EVIDENCE THAT PAYMENTS MADE TO THE HOLDING COMPANY WAS ONLY REIMBURSEMENT, THAT IT WAS NOT PROVED THAT PAYMENT WAS ONLY THE COST INCURRED BY T HE HOLDING COMPANIES, THAT IT DID NOT INCLUDE ANY ELEMENT OF PROFIT THAT NO RECORDS W ERE PRODUCED WITH REGARD TO PAYMENT MADE TO THE HOLDING COMPANIES SHOWING SPECI FIC SERVICES PROVIDED BY THE HOLDING COMPANIES. FINALLY, HE HELD THAT IN ABSENC E OF DETAILS, CONTENTION OF THE ASSESSEE THAT PAYMENTS WERE MADE TOWARDS REIMBURSEM ENT OF COST WAS NOT ACCEPTABLE. RELYING UPON THE ORDER OF THE HONBLE SUPREME COURT DELIVERED IN THE CASE OF ASSOCIATED CEMENT COMPANY (201 ITR 435), HE HELD TH AT AS PER THE PROVISIONS OF SECTION 194C/194J OF THE ACT, TAX SHOULD HAVE BEEN DEDUCTED ON THE SUMS PAID BY THE ASSESSEE-COMPANY TO ITS HOLDING COMPANIES TOWARDS T HE SERVICES OF DEPUTED PERSONNEL. INVOKING THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT, EXPENDITURE AMOUNTING TO RS. 22.08 LAKHS WAS DISALLOWED AND ADD ED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOR NOT DEDUCTING TAX AT SOURCE. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE-C OMPANY AND THE ASSESSMENT ORDER, HE HELD THAT PERSONNEL DEPLOYED WITH THE APP ELLANT WERE ON PAYROLLS OF THE PARENT COMPANIES, THAT ASSESSEE HAD PAID SALARY TO THE PERSONS CONCERNED, THAT TDS WAS DULY DEDUCTED BY THE HOLDING COMPANIES, THAT PA YMENT MADE BY THE ASSESSEE- COMPANY WAS REIMBURSEMENT OF EXPENSES, THAT IN CASE OF REIMBURSEMENT OF EXPENDI- TURE PROVISIONS OF TDS WERE NOT APPLICABLE. HE DEL ETED THE ADDITION MADE BY THE AO. 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT ASSESSEE DID NOT PRODUCE DOCUMENTARY EVIDENCE ABOUT PAYMENT MADE TO THE HOLDING COMPANIES, THAT THERE WAS NO PROOF THAT PAYMENT WAS ONLY REIMBURSEM ENT WITHOUT ANY ELEMENT OF PROFIT, THAT ASSESSEE HAD FAILED TO DEDUCT TAX AS P ER THE PROVISIONS OF SECTION 194C/194J OF THE ACT. AUTHORISED REPRESENTATIVE (A R) SUBMITTED THAT ALL THE DETAILS WITH REGARD TO PAYMENT MADE TO THE HOLDING COMPANY WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS, THAT DURING THE AY UNDER CO NSIDERATION, NSEIL AND CRISIL HAD DEPUTED THEIR STAFF TO PERFORM WORK ON INDIA IN DEX SERVICES AND PRODUCTS LTD., THAT BOTH THE PARENT COMPANIES HAD INCURRED EMPLOYM ENT RELATED COSTS WITH RESPECT TO ALL THE EMPLOYEES ON THEIR PAYROLLS INCLUDING THE O NE DEPUTED TO THE ASSESSEE- COMPANY, THAT THE SAID COST HAD BEEN INCURRED UNDER SHARING ARRANGEMENT OF DEPUTATION OF EMPLOYEES, THAT SALARIES PAID BY THE PARENT COMPANIES WERE REIMBURSED BY THE ASSESSEE ON ACTUAL BASIS FOR THE PERIOD OF W ORK IN RESPECT OF THE DEPUTED M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 5 EMPLOYEES, THAT EXPENDITURE WAS DISCLOSED BY THE AS SESSEE IN HIS BOOKS OF ACCOUNTS AS CONSOLIDATED AMOUNT UNDER THE HEAD DEPUTED PERS ONNEL COSTS, THAT REIMBURSEMENT CHARGES WERE PAID IN TERMS OF THE RES OLUTION PASSED IN THE BOARD MEETING (DT. 01-02-2005), THAT IN THAT MEETING IT W AS DECIDED THAT DEPUTATION COST WOULD BE ON THE BASIS OF SHARING ARRANGEMENT, THAT NSEIL AND CRISIL DEDUCTED TAX AT SOURCE U/S. 192 OF THE ACT ON THE SALARY PAYMENT S MADE TO ALL THEIR EMPLOYEES INCLUDING EMPLOYEES ON DEPUTATION WITH THE ASSESSEE , THAT EXPENSES INCURRED ON DEPUTATION OF EMPLOYEES WERE ACTUAL REIMBURSEMENT O F THE COST; THE COMPANY WAS NOT THE EMPLOYER OF THE DEPUTED EMPLOYEES, THAT IT WAS A SHARING ARRANGEMENT WHEREIN THE SALARY COST HAD BEEN SHARED AMONG THE COMPANIES ON THE ACTUAL PERIOD OF WORK, THAT COPIES OF DEBIT NOTES, JOURNAL VOUCHER AND WORKING OF DEPUTED PERSONNEL COST ON THE BASIS OF ACTUAL WORK PERIOD OF SAMPLE BASIS WERE SU BMITTED BEFORE THE AO, THAT PROVISIONS OF SECTION 194J WERE NOT APPLICABLE IN T HE CASE UNDER CONSIDERATION. HE RELIED UPON THE CASES OF SIEMENS AKTIONGESELLSCHAFT (310 ITR 320); INFORMATION ARCHITECTS (322 ITR 1); KARNATAKA URBAN INFRASTRUCT URE DEV. FINANCE CORPORATION (308 ITR 297); MAHINDRA & MAHINDRA LTD., [30 SOT 37 4 (MUM) (SB)]. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. FROM THE PAPER BOOK (PG NOS.19-43) FILED BY TH E ASSESSEE FOR THE AY UNDER CONSIDERATION, IT IS EVIDENT THAT ASSESSEE HAD FURN ISHED SAMPLE COPIES OF DEBIT NOTES EVIDENCING THE REIMBURSEMENTS. SIMILARLY, COPIES O F DEBIT NOTES, JOURNAL VOUCHERS AND WORKING OF DEPUTED PERSONNEL COSTS ON THE BASIS OF ACTUAL PERIOD OF WORK ON SAMPLE BASIS WERE ALSO SUBMITTED DURING THE ASSESSM ENT PROCEEDINGS. THE COPIES OF MINUTES OF THE BOARD MEETING OF THE ASSESSEE-COMPA NY HELD ON 01-02-2005 WERE AVAILABLE WITH THE AO. IN THESE CIRCUMSTANCES, IT CANNOT BE HELD THAT NO DOCUMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE DURING THE AS SESSMENT PROCEEDINGS. 6. AFTER GOING THROUGH THE DOCUMENTS PRODUCED BEFORE T HE AO, WE ARE OF THE OPINION THAT THERE WAS NO FAILURE ON THE PART OF TH E ASSESSEE TO SUPPORT HIS CLAIM WITH REGARD TO EXPENDITURE SHOWN UNDER THE HEAD OPERATI NG ADMINISTRATION AND OTHER EXPENSES. FAA HAS GIVEN A CATEGORICAL FINDING ABO UT PERSONNEL DEPLOYED WITH THE ASSESSEE-COMPANY WERE ON THE PAYROLLS OF THE PARENT COMPANIES WHO HAD PAID SALARIES TO THEM AND TDS WAS DULY DEDUCTED BY THE PARENT COM PANIES. WE FIND THAT AO HAS NOT DISCUSSED THE ABOVE FACT IN HIS ORDER. 7. WE ARE OF THE OPINION THAT TDS PROVISIONS ARE NOT A PPLICABLE TO REIMBURSEMENT OF EXPENDITURE. IN THE MATTER OF IN FORMATION ARCHITECTS (SUPRA) HONBLE JURISDICTIONAL HIGH COURT HAS ALSO HELD THE SAME VIEW. UPHOLDING THE ORDER OF THE FAA WE DECIDE GROUND NOS. 1&2 AGAINST THE AO . APPEAL FILED BY THE REVENUE STANDS DISMISSED. ITA NO.1421/MUM/2011 - AY.2007-08 8. GROUND NOS. 1 & 2 FOR THE AY UNDER CONSIDERATION A RE SAME AS GROUND NOS. 1 & 2 OF THE EARLIER AY. FOLLOWING THE ORDERS OF TH E AY 2006-07 WE CONFIRM THE ORDER OF THE FAA AND DISMISS THE GROUNDS FILED BY T HE AO. 9. GROUND NO.3 OF APPEAL IS ABOUT ADMISSION OF ADDITIO NAL EVIDENCES BY THE FAA WITH REGARD TO ADVERTISEMENT EXPENSES SHARED WITH T HE NSDIL. THE FACTS OF THE CASE M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 6 WERE THAT THE ASSESSEE HAD DEBITED ADVERTISEMENT EX PENSES OF RS. 80 LACES IN P & L ACCOUNT. THE SAID PAYMENT WAS MADE TO HOLDING COMP ANY FOR SHARING THE ADVERTISEMENT EXPENDITURE. AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AO HELD THAT SAID EXPENDITURE WAS NOT ALLOWABLE AS NO EVIDE NCE WAS FURNISHED IN RESPECT OF THE ADVERTISEMENT EXPENDITURE CLAIMED IN THE P & L ACCO UNT. 9.1. DURING THE APPELLATE PROCEEDINGS HE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE ARGUMENTS OF THE AO. BEFORE HIM, THE ASSESSEE FILED DETAILS IN SUPPORT OF ITS CLAIM OF ADVERTISEMENT EXPENSES AND REQUESTED FOR ADMISSION OF SAME AS ADDITIONAL EVIDENCES UNDER RULE 46A OF INCOME-TAX, RULES 1962 (RULES). FAA CALLED FOR A REMAND REPORT FROM THE AO WITH REGARD TO THE EVIDENCES PRODUCED BEFORE HIM. AS PER THE FAA ONE SET OF ASSESSEES WRITTEN SUBMISSIONS AND ADDITIONAL EVIDENCES WERE ALSO FORWARDED TO THE AO FOR COMMENT S ON ADMISSIBILITY OF ADDITIONAL EVIDENCES AND ALSO COMMENTS ON SUCH EVIDENCES. THE AO VIDE REMAND REPORT DATED 22-07-2010 REPORTED THAT DURING ASSESSMENT PROCEEDI NGS THE ASSESSEE WAS ASKED TO FURNISH DETAILS, BUT IT DID NOT FILE ANY EVIDENCE I N THIS REGARD. HE OBJECTED ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 46A OF THE RULES . BUT, HE DID NOT FURNISH ANY COMMENTS ON THE EVIDENCES FILED BY THE ASSESSEE. F AA ADMITTED THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE AS PER THE PROVI SIONS OF RULE 46A OF THE RULES. 9.2. BEFORE US, DR SUBMITTED THAT FAA HAD ADMITTED ADDIT IONAL EVIDENCES IN VIOLATION OF RULE 46 A OF THE RULES.AR SUPPORTED TH E ORDER OF THE AO.AR SUPPORTED THE ORDER OF THE FAA. 9.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE MATERIAL AVAILABLE ON FILE. IN OUR OPINION FAA HAS NOT CONTRAVENED TH E PROVISIONS OF RULE 46 A AS ALLEGED BY THE AO. AS PER THE ESTABLISHED PRINCIPL ES OF LAW FAA IS SUPPOSED TO AFFORD AN OPPORTUNITY OF HEARING TO THE AO, IF HE W ANTS TO ADMIT NEW EVIDENCES. IN THE CASE UNDER CONSIDERATION HE HAD FORWARDED THE COPIE S OF THE EVIDENCES TO THE AO AND HAD DIRECTED HIM TO EXPRESS HIS VIEWS ABOUT THE SAM E.AO CHOSE NOT TO OFFER ANY COMMENTS WITH REGARD TO THE EVIDENCES FORWARDED TO HIM BY THE FAA. AFTER GETTING A CHANCE TO REBUT THE EVIDENCES PRODUCED BEFORE THE F AA, IF AO DECIDES NOT TO SAY ANYTHING ABOUT THEM, THEN IN OUR OPINION HE CANNOT COMPLAIN OF ADMISSION OF ADDITIONAL EVIDENCE BY THE FAA. PRINCIPLES OF NATUR AL JUSTICE WERE ADHERED TO BY THE FAA. HE HAS CO-TERMINUS POWER WITH THE AO, SO, IF WHILE DECIDING AN APPEAL HE IS OF THE OPINION THAT CERTAIN EVIDENCES ARE NECESSARY FO R IMPARTING JUSTICE PROVISIONS OF THE ACT ALLOW HIM TO DO SO. SUB-SECTION 4 OF THE RULE 4 6A OF THE RULES PROVIDES THAT HE CAN ADMIT ADDITIONAL EVIDENCES WITHOUT REFERRING TH EM TO AO IN CERTAIN CIRCUMSTANCES. THUS, THE POWER OF FAA IN ADMITTING NEW EVIDENCES I S VERY WIDE. IT IS HIS DISCRETION TO INVOKE OR NOT TO INVOKE THE PROVISIONS OF SECTIO N 46A,WHENEVER ADDITIONAL EVIDENCES ARE PRODUCED BEFORE HIM. WE FIND THAT IN THE CASE UNDER CONSIDERATION, HE HAS FOLLOWED THE PROVISIONS OF LAW METICULOUSLY. HE RE, WE WOULD LIKE TO REPRODUCE A PORTION OF THE ORDER OF THE FAA THE COPIES OF QUESTIONNAIRE DATED 27.10.2008 AND O RDER/NOTE SHEET WERE CALLED FOR. PERUSAL OF QUESTIONNAIRE DATED 27.10.2008 REVEALED THAT VID E POINT NO. 26 AND 33, DETAILS OF MAJOR EXPENSES DEBITED TO P&L ACCOUNT ALONGWITH DOCUMENTA RY EVIDENCES WERE CALLED FOR. VIDE ORDER SHEET ENTRY DATED 14.12.2009, THE ASSESSEE WA S CALLED FOR TO JUSTIFY THE CLAIM OF SHARING OF ADVERTISING EXPENSES, THE COPY OF ASSESSEES LET TER DATED 22.12.2009 ADDRESSED TO A.O. SHOWS THAT THE ASSESSEE FURNISHED A DETAILED JUSTIF ICATION FOR SHARING OF ADVERTISEMENT EXPENSES WITH NSEIL. THEREFORE, IT WAS EVIDENCE FR OM QUESTIONNAIRE AND ORDER/NOTE SHEET M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 7 ENTRIES THAT THE A.O. DURING ASSESSMENT PROCEEDINGS , NEVER ASKED THE ASSESSEE TO FURNISH THE EVIDENCES OF EXPENSES INCURRED AND PARTIES THROUGH WHOM SUCH EXPENSES WERE INCURRED. THE A.O. ONLY ASKED FOR THE JUSTIFICATION OF SHARING OF EXPENSES WHICH WAS FILED BY ASSESSEE VIDE LETTER DATED 22.12.2009 TO THE A.O. ALONGWITH COPY OF BOARDS RESOLUTION. IN VIEW OF THE FACTS THAT THE A.O. DID NOT ASK FOR EVIDENCES AND OTHER DETAILS DURING ASSESSMENT PROCEEDINGS, THE ADDITIONAL EVIDENCES FILED BY ASSE SSEE WERE ADMITTED UNDER RULE 46A OF I.T. RULES. THE A.O. ALSO DID NOT FURNISH ANY COMMENTS O N SUCH EVIDENCES OF INCURRING OF ADVERTISEMENT EXPENSES. THEREFORE, THE ISSUE HAS BE EN DECIDED ON THE BASIS OF SUCH EVIDENCES. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, WE A RE OF THE OPINION THAT FAA HAS NOT CONTRAVENED THE PROVISIONS OF RULE 46A OF THE R ULES. GROUND NO.3 FILED BY THE AO IS DECIDED AGAINST THE AO. APPEAL FILED BY THE AO FOR THE AY 2007-08 STANDS DI SMISSED. ITA NO.6267/MUM/2011 - AY.2008-09 10. GROUND NO.1 OF THE APPEAL FOR THE AY UNDER CONSIDER ATION IS THE SAME AS THAT OF GROUND OF EARLIER AYS. FOLLOWING THE ORDERS OF T HE AY 2006-07 AND 2007-08, WE DECIDE THE SAID GROUND AGAINST THE AO. 11. GROUND NO.2 IS ABOUT FAILURE OF THE ASSESSEE TO SU BSTANTIATE CLAIM THAT THE PAYMENT OF RS.1,23,09,627/- MADE TO THE HOLDING COM PANIES TOWARDS COMMON ADVERTISEMENT EXPENSES WAS MERELY REIMBURSEMENT OF EXPENSES. WE FIND THAT SIMILAR ADDITION WAS MADE BY THE AO IN THE AY 2007-08 ALSO AND SAME WAS DELETED BY THE AO IN THE APPELLATE PROCEEDINGS. WHILE DECIDING TH E APPEAL FILED BY THE AO FOR THE LAST AY., WE HAVE DISMISSED THE APPEAL FILED BY HIM . FOLLOWING THE ORDER FOR THE AY.2007-08 WE DECIDE THE ISSUE AGAINST THE AO. 12. NEXT GROUND OF APPEAL PERTAINS TO DELETION OF DISAL LOWANCE BY THE FAA; OF RS. 18,30,812/- MADE BY THE AO U/S. 40(A)(IA) OF TH E ACT; IN RESPECT OF THE PAYMENT MADE TO THE HOLDING COMPANIES TOWARDS REPAIRS AND M AINTENANCE EXPENSES. WHILE FRAMING THE ASSESSMENT AO DISALLOWED THE ABOVE EXPE NDITURE BY INVOKING THE PROVISIONS OF SEC.40(A)(IA)OF THE ACT. HE HELD THA T THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE WITH REGARD TO PAYMENTS MADE TO HOLDING C OMPANIES UNDER THE HEAD REPAIRS AND MAINTENANCE. IN THE APPELLATE PROCEEDINGS FAA, AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, HELD THAT THERE WAS NO DISPUTE ABOUT SHARING OF COMMON EXPENSES BY THE ASSESSEE WITH ITS HOLDING COMPANIES, THAT THE HOLDING COMPANY M/S. NESIL WAS INCURRING EXPENDITURE OF COM MON EXPENSES FOR WHICH THE APPELLANT WAS MAKING REIMBURSEMENT TO THE HOLDING C OMPANY, THAT THE TDS PROVISIONS WERE ATTRACTED, THAT THE HOLDING COMPANY HAD ALREADY DEDUCTED TDS ON SUCH EXPENSES, THAT THE DEDUCTION OF TAX BY THE APP ELLANT ON SUCH PAYMENTS WOULD AMOUNT TO DOUBLE TAXATION. CONSIDERING THE FACT THA T THE TAX OF SUCH EXPENSES HAD ALREADY BEEN DEDUCTED BY THE HOLDING COMPANY, HE DE LETED THE DISALLOWANCE MADE BY AO. BEFORE US, DR RELIED UPON THE ORDERS OF THE AO. AR SUBMITTED THAT HOLDING COMPANY HAD DEDUCTED TAX AS PER THE PROVISIONS OF T HE ACT, THAT PAYMENT MADE BY THE ASSESSEE WAS ONLY REIMBURSEMENT. M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 8 12.1. AFTER HEARING THE RIVAL SUBMISSIONS WE ARE OF THE O PINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY INFIRMITY. HE HAS RIG HTLY HELD THAT ONCE TAX WAS DEDUCTED BY THE HOLDING COMPANY, THEN THERE WAS NO JUSTIFICATION FOR AO TO HOLD THAT ASSESSEE SHOULD HAVE ALSO DEDUCTED TAX AT SOURCE FO R THE SAME PAYMENT. AO HAS NOT DOUBTED THAT EXPENDITURE INCURRED BY THE HOLDING CO MPANY WAS NOT A SHARED EXPENDITURE OR THAT HOLDING COMPANY HAD NOT DEDUCTE D TAX ON IT. IN THESE CIRCUMSTANCES, UPHOLDING THE ORDER OF THE FAA, WE D ECIDE THE GROUND NO.3 AGAINST THE AO. 13. NEXT GROUND DEALS WITH DELETION OF DISALLOWANCE OF RS.1,05,655/-, ON ACCOUNT OF CAR HIRE EXPENSES, MADE BY THE AO U/S.40(A)(IA). RELYING ON THE REASONS RECORDED FOR DISALLOWING THE ADVERTISEMENT EXPENSES AO DISAL LOWED THE PAYMENT MADE BY THE ASSESSEE UNDER THE HEAD CAR HIRE CHARGES.FAA WHILE DECIDING THE APPEAL FILED BY THE AO HELD THAT FOLLOWING THE REASONS RECORDED FOR DEL ETION OF ADVERTISEMENT AND REPAIRS AND MAINTENANCE CHARGES ACTION OF THE AO COULD NOT BE SUSTAINED. BEFORE US DR AND THE AR ADVANCED THE SIMILAR ARGUMENT THAT WERE MADE FOR GROUND NOS. 3 AND 4. 13.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE ALREA DY HELD THAT IN CASE OF REIMBURSEMENT OF AN EXPENDITURE, TDS PROVISIONS ARE NOT APPLICABLE. AS THE PAYMENT MADE BY THE ASSESSEE WERE ONLY REIMBURSEMENT, SO TH E ORDER OF THE FAA NEEDS NO INTERFERENCE FROM OUR SIDE. GROUND NO.4 IS DECIDED AGAINST THE AO. 14. LAST EFFECTIVE GROUND IS ABOUT DELETING THE DISALLO WANCE, BY THE FAA, OF RS.1,07, 495/- U/S. 40A OF THE ACT WHILE COMPUTING THE BOOK PROFIT U/S. 115 JB OF THE ACT. WHILE MAKING THE COMPUTATION AS PER THE PROVI SIONS OF SECTION 115 JB AO ADDED RS.1.07 LAKHS TO THE BOOK PROFIT FOR THE DISA LLOWANCE MADE U/S.14A OF THE ACT. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE FACTS OF THE CASE HE HELD THAT WHILE CALCULATING BOOK PROFIT THE APPELLANT HAD TAKEN FIGURE OF NET PROFIT AT RS.6,26 ,63,934/-, THAT IT REDUCED THE DIVIDEND ON NET BASIS AT RS.19.91 LAKHS, THAT THE ASSESSEE, WHILE CALCULATING THE BOOK PROFIT, ITSELF HAD REDUCED THE EXPENDITURE ATTRIBU TABLE TO EXEMPT INCOME, THAT IN THE ASSESSMENT ORDER, AO AGAIN REDUCED THE DISALLOWANCE U/S. 14A, THAT IT AMOUNTED TO DOUBLE DISALLOWANCE. HE FURTHER FOUND THAT THE TAX PAYABLE UNDER THE PROVISIONS OF SEC. 115JB WAS LESS THAN THE TAX PAYABLE UNDER NORM AL PROVISIONS OF THE ACT. HE HELD THAT THE ISSUE OF COMPUTATION OF BOOK PROFIT WAS A CADEMIC IN NATURE. HOWEVER, HE DELETED THE ADDITION MADE BY THE AO. 14.1. BEFORE US, THE DR RELIED UPON THE ORDER OF THE AO A ND THE AR SUPPORTED THE ORDER OF THE FAA. WE FIND THAT THE FAA HAS GIVEN A CATEGORICAL FINDING THAT THE TAX PAYABLE UNDER THE PROVISIONS OF SEC.115JB WAS LESS THAN THE TAX PAYABLE UNDER NORMAL PROVISIONS OF THE ACT. AO HAS NOT CHALLENGED THE F INDING GIVEN BY THE FAA. IN THESE CIRCUMSTANCES WE ARE SURPRISED AS WHY A SECOND APPE AL WAS PREFERRED OR AUTHORISED BY THE REVENUE AUTHORITIES. IN OUR HUMBLE OPINION BEFO RE CHALLENGING THE ORDER OF A SENIOR OFFICER OF THE DEPARTMENT I.E. CIT(A) HIS OR DERS SHOULD BE PERUSED PROPERLY-IT WOULD SAVE VALUABLE TIME OF THE DR AND THE BENCH. WE APPRECIATE THE GESTURE OF THE DR IN BRINGING TO OUR NOTICE THAT DISALLOWANCE MADE/DELETED BY THE AO/FAA DEALT WITH SECTION 14A O F THE ACT, WHEREAS IN APPEAL M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 9 AO HAS, BY MISTAKE, REFERRED TO SECTION 40A. GROUND NO. 5 IS DECIDED AGAINST THE AO. APPEAL FILED BY THE REVENUE FOR THE AY 2008-09 STAN DS DISMISSED. 15. FIRST GROUND OF CROSS OBJECTIONS FILED BY THE ASSES SEE DEALS WITH DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE FAA ON ACCOUNT OF PRIOR PERIOD EXPENSES. DURING THE ASSESSMENT PROCEEDINGS, AO CALLED FOR VA RIOUS BILLS AND HE NOTED THAT THE ASSESSEE WAS CLAIMING A BILL OF RS. 89,586/- IN THE YEAR UNDER CONSIDERATION ON PAYMENT BASIS. IT WAS FOUND THAT BILL WAS FOR THE AMOUNT PAID TO M/S. M/S. REUTERS INDIA PVT. LTD. FOR THE PERIOD 01-07-2006 TO 30-09- 2006. AO HELD THAT ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, SAME WAS DISALLOWABLE AS IT WAS A PRIOR PERIOD EXPENSE. ASSESSEE PREFERRED AN APPEAL BEFOR E THE FAA. AFTER CONSIDERING THE SUBMISSIONS, HE HELD THAT THE BILL WAS DT. 03-07-20 06, THAT THERE WAS NO EVIDENCE ON THE BILL THAT THE BILL WAS SERVED ON THE ASSESSEE O N 24-09-2007 AS CLAIMED BY THE ASSESSEE, THAT THERE WAS NO CONFIRMATION FROM M/S. REUTERS INDIA PVT. LTD., THAT BILL DT. 03-07-2006 WAS SERVED ON THE APPELLANT COMPANY ON 24-09-2007, THAT CLAIM MADE BY THE APPELLANT ABOUT RECEIPT OF THE BILL ON 24-09 -2007 WAS NOT ACCEPTABLE. FINALLY, HE HELD THAT THERE WAS NO FORCE IN ARGUMENT ADVANCE D BY THE APPELLANT THAT THE LIABILITY TO THE EXPENDITURE WAS CRYSTALISED DURING THE YEAR UNDER CONSIDERATION. UPHOLDING THE ORDER OF THE AO, HE DISMISSED THE APPEAL FILED BY T HE ASSESSEE. 15.1. BEFORE US AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT BILL WAS RECEIVED IN THE YEAR UNDER CONSIDERATION AND PAYMENT WAS MADE, THAT AMOUNT IN QUESTION WAS DEDUCTIBLE IN THE YEAR OF PAYMENT. DEPARTMENTAL RE PRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO AND THE FAA. 15.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE US OR THE FAA, ASSESSEE HAS NOT PRO DUCED ANY EVIDENCE REGARDING LATE RECEIPT OF BILL FROM M/S. REUTERS INDIA PVT. LTD. IT WAS ALSO NOT CLAIMED THAT A PROVISION WAS MADE FOR THE SAID EXPENDITURE IN THE PRECEDING ASSESSMENT YEAR. AS THERE IS NO EVIDENCE OF CRYSTALISATION OF THE LIABI LITY FOR THE YEAR UNDER CONSIDERATION, WE ARE OF THE OPINION AND THE ASSESSEE IS NOT ENTIT LED TO CLAIM, EXPENDITURE OF EARLIER PERIOD ESPECIALLY WHEN IT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. UPHOLDING THE ORDER OF THE FAA, GROUND NO.1 OF THE CROSS-OBJE CTION IS DECIDED AGAINST THE ASSESSEE. 16. GROUND NO.2 OF THE CROSS OBJECTION IS ABOUT REJECTI NG THE CONTENTION OF THE ASSESSEE THAT PROVISIONS OF TAX DEDUCTION AT SOURCE ARE NOT ATTRACTED IN CASE OF PURE REIMBURSEMENT OF EXPENSES. WE HAVE DECIDED THE ISS UE OF APPLICABILITY OF PROVISIONS OF TDS WITH REGARD TO REIMBURSEMENT IN FAVOUR OF TH E ASSESSEE WHILE DECIDING THE GROUNDS NO.1 AND 2 OF THE APPEAL FILED BY THE AO FO R THE AY2006-07.WE HAVE ALREADY HELD THAT PROVISIONS OF TDS ARE NOT APPLICA BLE WHEN PAYMENT MADE BY ANY ASSESSEE IS PURE REIMBURSEMENT. WHETHER A PAYMENT IS A PURE REIMBURSEMENT OR NOT IS A QUESTION TO BE DECIDED ON FACTS. IN THE CASE UND ER CONSIDERATION, FAA HAD GIVEN A FACTUAL FINDING THAT PAYMENT AMOUNTING TO RS.18,30, 812/- PAID TO HOLDING COMPANY AS REIMBURSEMENT OF REPAIRS AND MAINTENANCE EXPENSES M ADE ON ACCOUNT WAS REIMBURSEMENT ONLY. WE HAVE UPHOLD THE ORDER OF TH E FAA IN THIS REGARD. M/S. INDIA INDEX SERVICES & PRODUCTS LTD., 10 IN THESE CIRCUMSTANCES, GROUND NO.2 OF THE CRO SS OBJECTION IS DISPOSED-OFF FOR STATISTICAL PURPOSES. CROSS OBJECTION FILED BY THE ASSESSEE IS DECIDED AGAINST HIM. AS A RESULT, APPEALS FILED BY THE AO FOR ALL T HE THREE AYS 2006-07, 2007-08 AND 2008-09 AND THE CROSS OBJECTION(2008-09)FILED BY TH E ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2012. ) $ '( + ,- 27 TH NOVEMBER, 2012 ( $ . / SD/- SD /- ( . . / I.P. BANSAL ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, , DATE: 27 TH NOVEMBER, 2012 TNMM ) ) ) ) $ $$ $ '%0 '%0 '%0 '%0 10% 10% 10% 10% / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR I BENCH, ITAT, MUMBAI 6. GUARD FILE #0% '% //TRUE COPY// ) ) ) ) / BY ORDER, 2 22 2 / 3 3 3 3 DY./ASST. REGISTRAR , / ITAT, MUMBAI