AMAR TEA P. LTD, MUMBAI V. DCIT CIR 6(1), MUMBAI

CO 193/MUM/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2386 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2015
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Assessee Lawyers: RISHABH S HAH
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI AMIT SHUKLA (JM) I.T.A. NO. 4475 /MUM/ 20 1 4 (ASSESSMENT YEAR 20 1 0 - 11 ) I.T.A. NO. 4476/MUM/2014 (ASSESSMENT YEAR 2011 - 12) I.T.A. NO. 2379/MUM/2013 (ASSESSMENT YEA R 2009 - 10) DCIT, CIRCLE 6(1) ROOM NO. 506 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. AMAR TEA PVT. LTD. 61, DR.SS. RAO ROAD NEAR M.G. HOSPITAL LALBAUG MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 683/MUM/2013 (ASSESSMENT YEA R 2009 - 10) C . O. NO. 193/MUM/2015 (ASSESSMENT YEAR 2010 - 11) M/S. AMAR TEA PVT. LTD. 61, DR.SS. RAO ROAD NEAR M.G. HOSPITAL LALBAUG MUMBAI - 400 012. VS. ACIT, CIRCLE 6(1) ROOM NO. 506 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESP ONDENT ) PAN NO . AAACA3927D ASSESSEE BY SHRI RISHABH SHAH DEPARTMENT BY SHRI A. RAMACHANDRAN DATE OF HEARING 2 . 8 . 201 6 DATE OF PRONOUNCEMENT 2.9 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - M/S. AMAR TEA PVT. LTD. 2 ALL THESE APPEALS ARE DIRECTED AGAINST THE ORDER S PASSED BY LEARNED CIT(A) - 14, MUMBAI AND THEY RELATE TO A.YS. 2009 - 10 TO 2011 - 12. 2. THE REVENUE S APPEAL RELATE TO THE RELIEF GRANTED BY LEARNED CIT(A) IN RESPECT OF THE ADVERTISEMENT EXPENSES INCURRED BY THE ASSESSEE. 3. THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF BLENDING, PACKING AND SELLING TEA UNDER THE BRAND NAME SOCIETY TEA. ANOTHER CONCERN NAMED M/S. HASMUKHRAI & CO., WHO WAS THE OWNER OF THE TEA BRAND SOCIETY TEA. THE ENTERED INTO AN AGREEMENT TITLED AS DEVELOPMENT AND FRANCHISEE AGREEM ENT WITH M/S HASMUKHRAI & CO., AND AS PER THE SAID AGREEMENT, THERE ASSESSEE HEREIN WAS REQUIRED TO BEAR THE ADVERTISEMENT EXPENSE. ACCORDINGLY IT INCURRED EXPENDITURE TOWARDS ADVERTISEMENT OF THE ABOVE SAID BRAND AND CLAIMED THE SAME AS DEDUCTION. T HE ASSESSING OFFICER DISALLOWED THE SAME IN ALL THE THREE YEARS UNDER CONSIDERATION ON THE REASONING THAT IT WAS NOT EXPENDED FOR THE PURPOSE OF BUSINESS. LEARNED CIT(A), HOWEVER , ALLOWED THE CLAIM BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN ASSESSE ES OWN CASE IN THE EARLIER YEARS , WHICH HAS SINCE BEEN UPHELD BY HON'BLE BOMBAY HIGH COURT. AGGRIEVED BY THE ORDER S PASSED BY LEARNED CIT(A) ON THIS ISSUE IN ALL THE THREE YEARS UNDER CONSIDERATION, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICED THAT THE IDENTICAL ISSUE CAME TO THE CONSIDERATION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO A.Y. 2008 - 09 IN ITA NO. 8563/MUM/2011 AND THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING DECISION RENDERED IN ASSESSEES OWN CASE IN EARLIER YEARS. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OBSERVATIONS MADE BY THE TRIBUNAL IN THE ABOVE SAID CASE : - 2. AT THE TIME OF HEARING, ID. DR RELIE D ON THE ORDER OF AO AND WHEREAS ID. AR SUBMITTED THAT SAME VERY ISSUE ON IDENTICAL FACTS HAVE BEEN CONSIDERED BY TRIBUNAL IN ASSESSEE'S OWN CASE IN EARLIER M/S. AMAR TEA PVT. LTD. 3 ASSESSMENT YEARS AND BOTH THE ISSUES HAVE BEEN DECIDED IN FAVOUR OF ASSESSEE. LD. AR REFERRED PAGES 1 T 12 OF THE PAPER BOOK WHICH IS A COPY OF ITAT ORDER DATED 27.2.2004 IN ITA NO.3084/MUM/1999 FOR ASSESSMENT YEAR 1996 - 97, PAGES 13 TO 18 OF PAPER BOOK OF THE ORDER OF ITAT DATED 18.5.2004 IN IT A NO.2169/MUM/2001 RELATING TO ASSESSMENT YEAR 1997 - 98, PAGE S 19 TO 21 OF THE PAPER BOOK WHICH IS A COPY OF ITAT ORDER DATED 28.11.2007 IN ITA NO.2682/MURN/2005 FOR ASSESSMENT YEAR 2002 - 03, PAGES 22 & 23 OF PAPER BOOK WHICH IS A COPY OF ITAT ORDER DATED 28.3.2008 IN 1TA NO.4637/MUM/2005 FOR ASSESSMENT YEAR 2003 - 04, PAGES 24 & 25 OF THE PAPER BOOK WHICH IS A ORDER OF ITAT DATED 30.9.2008 IN ITA NO.4962/MUM/2006 FOR ASSESSMENT YEAR 2004 - 05, PAGES 26 TO 30 OF PAPER BOOK WHICH IS A COPY OF ITAT ORDER DATED 7.8.2009 IN ITA NO.5345/MUM/2008 FOR ASSESSMENT YEAR 2005 - 06 AND SUBMITTED THAT SIMILAR DISALLOWANCES MADE BY THE AD WERE DELETED BY TRIBUNAL BY UPHOLDING THE ORDER(S) OF ID. CIT(A). HE FURTHER SUBMITTED THAT DEPARTMENT ALSO FILED APPEAL BEFORE THE HON'BLE BOMBAY HIGH COURT IN RESPECT OF ASSESSMENT YEAR 2006 - 07 BEING I NCOME TAX APPEAL NO.2094 OF 2011 AGAINST THE ORDER OF TRIBUNAL DISPUTING THE DELETION OF SIMILAR DISALLOWANCES MADE BY AO AND THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DATED 15.2.2013 DISMISSED THE APPEAL OF THE DEPARTMENT BY CONFIRMING THE ORDE R OF TRIBUNAL. HE SUBMITTED THAT IN RESPECT OF ASSESSMENT YEARS 1996 - 97 AND 2001 - 02, THE DEPARTMENT ALSO FILED APPEALS BEFORE THE HON'BLE BOMBAY HIGH COURT AND THE HON'BLE HIGH COURT VIDE ITS ORDER DATED 20.2.2008 CONFIRMED THE ORDER(S) OF TRIBUNAL AND REF ERRED PAGES 31 & 32 OF THE PAPER BOOK. HE FURTHER REFERRED PAGES 33 & 34 OF THE PAPER BOOK AND SUBMITTED THAT SPECIAL LEAVE APPEAL FI L ED BY THE DEPARTMENT WAS ALSO DISMISSED BY THE HON'BLE APEX COURT VIDE ORDER DATED 30.9.2011. HE SUBMITTED THAT IN VIEW OF ABOVE, ORDER OF ID. CIT(A) MAY KINDLY BE CONFIRMED. 3. WE HAVE CONSIDERED THE ABOVE SUBMISSIONS OF ID. REPRESENTATIVES OF PARTIES AND THE ORDERS OF AUTHORITIES BELOW AS ALSO THE EA RLIER ORDERS OF TRIBUNAL, THE H ON'BLE HIGH COURT AS WELL AS HON'BLE APEX CO URT (SUPRA). SINCE THE ISSUE IN RESPECT OF DISALLOWANCES MADE BY AO ARE IDENTICAL AND THE ID. CIT(A) HAS ALSO DELETED THE DISALLOWANCES MADE BY AO BY FOLLOWING EARLIER ORDERS OF TRIBUNAL IN ASSESSEE'S OWN CASE, WE IN THE ABSENCE OF ANY OTHER MATERIAL ON R E CORD UPHOLD THE ORDER OF ID. CI T(A) BY REJECTING THE GROUNDS OF APPEAL TAKEN BY DEPARTMENT. HENCE, BOTH THE GROUNDS TAKEN BY DEPARTMENT ARE REJECTED AT THE TIME OF HEARING LEARNED AR SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO A NEW DEVELOPMENT AND FRANC HISES AGREEMENT WITH HASKUKHRAI & CO. O N 1 ST APRIL 1999 AND AS PER THAT AGREEMENT ALSO, THE ASSESSEE HAS UNDERTAKEN TO BEAR COST OF ADVERTISEMENT OF THE BRAND SOCIETY TEA/T - TOWN. ACCORDINGLY, M/S. AMAR TEA PVT. LTD. 4 LEARNED AR SUBMITTED THAT THE DECISION TAKEN BY THE TRIBUNAL A S WELL AS BOMBAY HIGH COURT IN THE EARLIER YEARS SHALL CONTINUE TO PREVAIL DURING THIS YEAR ALSO. 5. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. WE NOTICED FROM THE AGREEMENT DATED 1.4.1999 THAT THE ASSESSEE HAS UNDERTAKE N TO BEAR COST OF ADVERTISING OF THE PRODUCT SOCIETY TEA/T - TOWN. HON'BLE BOMBAY HIGH COURT AS WELL AS THE TRIBUNAL HAS GIVEN DUE COGNIZANCE TO THE ABOVE SAID FACT UNDER THE OLD AGREEMENT AND ACCORDINGLY THE CLAIM OF THE ASSESSEE WAS A LLOWED IN THE EARLI ER YEARS . FOR THE SAKE OF CONVENIEN CE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER DATED 20.2.2008 PASSED BY HON'BLE BOMBAY HIGH COURT IN ITA NO. 1084/2004 AND OTHERS IN ASSESSEES OWN CASE : 4. THE ISSUE PERTAINS TO FOR EXPENSES TOWARDS ADVERTIS EMENT INCURRED BY THE ASSESSEE IN ADVERTISING THE BRAND NAME IN TERMS OF THE AGREEMENT WHICH THEY HAD WITH THE HOLDER OF THE BRAND. BOTH COMMISSIONER (APPEALS) AND ITAT HAVE RECORDED FINDINGS OF FACT THAT THESE EXPENSES WERE ALLOWABLE. CONSIDERING THE FACT THAT REVENUE HAS RIOT PREFERRED APPEAL FOR 2 YEARS, THE FACT THAT ANOTHER YEAR APPEAL HAS BEEN DISMISSED AND THERE ARE CONCURRENT FINDINGS OF FACT, WE DO NOT FIND THE QUESTION AS FRAMED WOULD ARISE AND CONSEQUENTLY, APPEAL STANDS DISMISSED. SINCE THE FA CTS PREVAILING IN THE YEARS UNDER CONSIDERATION ARE IDENTICAL IN NATURE, CONSISTENT WITH THE WITH TAKEN IN EARLIER YEARS, WE CONFIRM THE ORDER PASSED BY LEARNED CIT(A) ON THIS ISSUE. 6. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR AY 2009 - 10, WHEREIN THE ASSESSEE IS CONTESTING THE ADDITION MADE BY THE AO U/S 14A OF THE ACT, WHICH HAS SINCE BEEN CONFIRMED BY LD CIT(A). BEFORE US THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CHEMVEST LIMITED ( ITA 749/2014 DATED 20 - 09 - 2015), WHEREIN IT WAS HELD THAT THE DISALLOWANCE U/S 14A IS NOT CALLED FOR WHEN NO DIVIDEND IS RECEIVED. THE LD A.R, ACCORDINGLY, CONTENDED THAT THE DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE DIVIDEND INCOME. M/S. AMAR TEA PVT. LTD. 5 7. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. DURING THE YEAR RELEVANT TO AY 2009 - 10, THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.97,885/ - AND THE AO HAS DISALLOWED A SUM OF RS.6,59,583/ - BY APPLYING THE PROVISIONS OF RULE 8D. FROM THE BALANCE SHEET FURNISHED BY THE ASSESSEE, WE NOTICE THAT THE ASSESSEE HAS HELD AN INVESTMENT OF RS.25.11 CRORES IN MUTUAL FUND UNITS AS AT 31.3.2009. THE SHARE HOLDERS FUND STAND AT RS.19.32 CRORES. BESIDES THE ABOVE, THE ASSESSEE HAS RECEIVED UNSECURED LOANS FROM DIRE CTORS AND SHARE HOLDERS. IT IS NOT CLEAR AS TO WHETHER THESE UNSECURED LOANS ARE INTEREST BEARING OR INTEREST FREE. IF THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IS IN EXCESS OF THE INVESTMENTS, THEN THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWA NCE OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) OF THE I.T RULES AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF HDFC BANK LTD (366 ITR 505) . SINCE THE DETAILS OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE NOT FULLY BROU GHT ON RECORD, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES EXAMINATION AT THE END OF THE AO. BESIDES THE ABOVE, THE ASSESSEE HAS PLACED RELIANCE ON CERTAIN OTHER CASE LAWS ALSO. HENCE WE PREFER TO SET ASIDE THE ISSUE RELATING TO THE DISALLOWANCE MADE UNDE R RULE 8D(2)(III) ALSO TO THE FILE OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO FOR FRESH EXAMINATION AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE . 8. WE SHALL NOW T AKE UP THE C.O FILED BY THE ASSESSEE FOR AY 2010 - 11. FOLLOWING TWO ISSUES ARE CONTESTED BY THE ASSESSEE: - (A) DISALLOWANCE MADE U/S 14A OF THE ACT. (B) DISALLOWANCE OF PURCHASES. 9. THE FIRST ISSUE RELATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. AN IDENTICAL ISSUE WAS RESTORED TO THE FILE OF THE AO BY US IN AY 2009 - 10 . CONSISTENT WITH THE VIEW TAKEN THEREIN, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR FRESH EXAMINATION OF THE ISSUE. M/S. AMAR TEA PVT. LTD. 6 10. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF PURCHASES. THE AO AS WELL AS LD CIT(A) DISALLOWED A SUM OF RS.47,558/ - OUT OF PURCHASES ACCOUNT, SINCE THE ASSESSEE FAILED TO FURNISH THE DETAILS RELATING TO THE ABOVE SAID CLAIM. BEFORE US ALSO, THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO SUPPORT THE C LAIM OF PURCHASES. UNDER THESE SET OF FACTS, WE HAVE NO OTHER OPTION BUT TO CONFIRM THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 11. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE APPEAL OF THE ASSESSEE FILED FOR AY 2009 - 10 IS TREATED AS ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE FOR AY 2010 - 11 IS TREATED AS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2.9 .2016 SD/ - SD/ - (AMIT SHUKLA ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 / 9 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TR UE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS