VIJAY ASSOCIATES WADHWA CONSTRUCTION P.LTD, MUMBAI V. DCIT 13(3)(2), MUMBAI

ITA 1125/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1693 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV K GABGROTRA LD DR
• Assessee Lawyers: JITENDRA JAIN LD
• Keywords: Opportunity of being heard; Scheme of amalgamation
• Section: 143(3)

Judgement Text

ITA.NO.1125/MUM/2016 VIJAY ASSOCIATES WADHWA CONSTRUCTION PVT.LTD. ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.1125/MUM/2016 ( ASSESSMENT YEAR: 2012-13) VIJAY ASSOCIATES WADHWA CONSTRUCTION PRIVATE LIMITED (MERGED WITH WADHWA GROUP HOLDINGS PVT.LTD) 301, 3 RD FLOOR, PLATINA PLOT C-59, G BLOCK BANDRA KURLA COMPLEX BANDRA (E), MUMBAI-400 051 VS. DEPUTY COMMISSIONER OF INCOME TAX-13(3)(2) MUMBAI ! ' PAN/GIR NO. AACCV-3657-P ( !# APPELLANT ) : ( $%!# RESPONDENT ) ASSESSEE BY : JITENDRA JAIN, LD. AR REVENUE BY : RAJEEV K. GABGROTRA, LD.DR & DATE OF HEARING : 30/07/2018 '() / DATE OF PRONOUNCEMENT : 05/09/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-21 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-21/DCIT-13(3)(2)/I.T-543/2014-15 DATED 18/12/2015 BY RAISING THE FOLLOWING GROUNDS O F APPEAL:- ITA.NO.1125/MUM/2016 VIJAY ASSOCIATES WADHWA CONSTRUCTION PVT.LTD. ASSESSMENT YEAR-2012-13 2 1. (A) THE COMMISSIONER OF INCOME TAX (APPEALS)-21 ERRED IN CONFIRMING THE DISALLOWANCE OF RECRUITMENT FEES OF RS.36,99,587/- PAID TO ICON SOLUTIONS FZE BY HOLDING THAT THE SAME WERE NOT ALLOWABLE. THE APPELLANT SUBMITS THAT RECRUITMENT FEES OF RS.3 6,99,587/- PAID TO ICON SOLUTIONS FZE ARE INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF THE BUSINESS AND THE SAME SHALL BE ALLOWED AS DEDUCTIBL E REVENUE EXPENSE. (B) THE CIT(A) ERRED IN NOT ACCEPTING THE APPELLANT S CONTENTION THAT NO TDS WAS DEDUCTIBLE ON PAYMENT OF RS.36,99,587/- MADE TO M/S ICON SOLUTION FZE AND HENCE NO DISALLOWANCE IS ATTRACTED U/S 40(A)(IA ) OF THE I.T. ACT R.W.S. 195 AND SECTION 9 OF THE I.T.ACT. THE APPELLANT SUBMITS THAT UNDER THE FACTS AND CIRC UMSTANCES OF THE CASE OF THE APPELLANT, PAYMENTS TO ICON SOLUTIONS FZE DOES NOT ATTRACT TDS UNDER THE PROVISIONS OF THE I.T. ACT AND HENCE NO DISALLO WANCE IS ATTRACTED U/S 40(A)(IA) OF THE ACT. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-13(3)(2) U/S 143(3) ON 25/02/2015 WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT RS. 53.97 CRORES AFTER CERTAIN DISALLOWANCE AS AGAINST RS.53.49 CRORES E-FILED BY THE ASSESSEE ON 27/09/2012. THE ADDITION OF RS.36.99 LACS AS MAD E BY LD. AO U/S 40(A)(I) IS THE SOLE SUBJECT MATTER OF THIS APPEAL. 2. THE DOCUMENTS ON RECORD REVEAL THAT THE ASSESSEE HAS SINCE BEEN AMALGAMATED WITH WADHWAGROUP HOLDINGS PVT. LTD UNDER A SCHEME OF AMALGAMATION U/S. 391 TO 394 OF THE COMPANIES ACT,1 956 AS PER ORDER DATED 24/08/2012 PASSED BY HONBLE BOMBAY HIGH COUR T. THE SAME IS NOTED AND TAKEN ON RECORD. 3. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS.36.99 LACS ON ACCOUNT OF LEGAL & PROFESSIONAL FEES STATED TO BE PAID TO AN ENTITY NAMELY M/S ICON SOLUTIONS FZE, SHARJAH AS RECRUITMENT FEES. NO TAX AT SOURCE WAS DEDUCTED AGAINST THE SAME WHICH, IN THE OPINION OF LD. AO, CALLED FOR DI SALLOWANCE U/S 40(A)(I). THE ASSESSEE DEFENDED THE SAME BY SUBMITTING THAT T HE AFORESAID ITA.NO.1125/MUM/2016 VIJAY ASSOCIATES WADHWA CONSTRUCTION PVT.LTD. ASSESSMENT YEAR-2012-13 3 PAYMENT WAS TAXABLE IN UAE AS PER DOUBLE TAXATION AVOIDANCE TREATY [DTAA] AND THEREFORE, NO TDS WAS REQUIRED AGAINST THE SAME IN TERMS OF THE TREATY. HOWEVER, NOT CONVINCED, LD. AO ADDED TH E SAME TO THE INCOME OF THE ASSESSEE BY WAY OF DISALLOWANCE U/S 4 0(A)(I). THE SAME UPON CONFIRMATION BY LD. CIT(A),VIDE IMPUGNED ORDER DATED 18/12/2015, IS BEING AGITATED BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI. JITENDRA JAIN, AT THE OUTSET, DREW OUR ATTENTION TO THE FACT THAT SIMILAR ISSUE AROSE IN THE CASE OF ASSESSEES SISTER CONCER N BEFORE THIS TRIBUNAL VIDE ITA NO.5202/MUM/2015 & 32/MUM/2016 DATED 13/06 /2018 WHEREIN THE MATTER HAS BEEN REMITTED BACK TO THE FILE OF LD . AO WITH CERTAIN DIRECTIONS. A COPY OF THE ORDER HAS BEEN PLACED ON RECORD. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], RAJEEV K. GABGROTRA, SUBMITTED THAT THE COMPLETE ONUS TO SUBSTANTIATE THE RECEIPT OF SERVICES AS WELL AS COMPLIANCE OF TDS PROVISIONS LIE ON THE ASSESSEE. 5. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE MA TTER. UPON PERUSAL OF CITED ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEES ASSOCIATED CONCERN NAMELY RAGHULEELA LEASING & REAL ESTATE PRIVATE LIMITED , WE FIND THAT SIMILAR ISSUE HAS ALREADY BEEN DEALT WITH BY CO- ORDINATE BENCH OF THIS TRIBUNAL AND THE MATTER HAS BEEN SET ASIDE TO LOWER AUTHORITIES BY OBSERVING AS UNDER:- 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, THE ASSESSI NG OFFICER HAS DISALLOWED THE PAYMENT OF RECRUITMENT FEES AMOUNTING TO RS.31,16,6 44/- PAID TO ICON SOLUTIONS FZE ON TWO GROUNDS. FIRSTLY, BECAUSE THE ASSESSEE FAILE D TO ESTABLISH THAT SUCH EXPENDITURE WAS FOR THE PURPOSE OF ASSESSEES BUSIN ESS AND THE ASSESSEE, IN FACT, HAS RECEIVED SERVICES FROM ICON SOLUTIONS FZE NECES SITATING SUCH PAYMENT. SECONDLY, SINCE, THE ASSESSEE HAS NOT DEDUCTED TAX UNDER SECTION 195 OF THE ACT WHILE MAKING SUCH PAYMENT, IT HAS TO BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT. ITA.NO.1125/MUM/2016 VIJAY ASSOCIATES WADHWA CONSTRUCTION PVT.LTD. ASSESSMENT YEAR-2012-13 4 THE LEARNED COMMISSIONER (APPEALS) HAS UPHELD THE A DDITIONS BY ACCEPTING THE REASONING OF THE ASSESSING OFFICER THAT THE ASSESSE E HAS FAILED TO PROVE THAT THE PAYMENT MADE WAS FOR THE PURPOSE OF ASSESSEES BUSI NESS. IT IS EVIDENT, THE PRIMARY AND FUNDAMENTAL REASONING ON WHICH THE DEPA RTMENTAL AUTHORITIES DISALLOWED THE PAYMENT IS, THE ASSESSEE FAILED TO P ROVE THROUGH PROPER DOCUMENTARY EVIDENCE THE FACT THAT IT HAS RECEIVED ANY SERVICES FROM ICON SOLUTIONS FZE AND SUCH PAYMENT IS FOR THE PURPOSES OF ASSESSEES BUSI NESS. THUS, THE DISALLOWANCE MADE WAS DUE TO LACK OF ADEQUATE DOCUMENTARY EVIDEN CES FURNISHED BY THE ASSESSEE TO PROVE THE BUSINESS EXPEDIENCY OF THE EX PENDITURE. IT HAS BEEN SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT, GIVEN AN OPPORTUNITY, THE ASSESSEE CAN PROVE THE BUSINESS EXPEDIENCY OF THE E XPENDITURE BY FURNISHING PROPER DOCUMENTARY EVIDENCES. CONSIDERING THE AFORE SAID SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE WE ARE INCLINED T O REMIT THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER CO NSIDERING THE EVIDENCES SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFICER MU ST ALLOW PROPER AND REASONABLE OPPORTUNITY TO THE ASSESSEE TO SUPPORT I TS CLAIM BY FURNISHING PROPER DOCUMENTARY EVIDENCES AND SHALL DECIDE THE ISSUE ON LY AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS ALSO MADE CLEAR, SINCE, LEARNED COMMISSIONER (APPEALS) HAS NOT DECIDED THE ISSUE RELATING TO APP LICABILITY OF SECTION 40(A)(I) OF THE ACT TO THE DISPUTED PAYMENT, THE SAID ISSUE ALSO RE STORED BACK TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. GROUNDS RAISED ARE ALLOWED FOR STATISTICA L PURPOSES. SINCE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING T HE SAME, THE MATTER STAND REMITTED BACK TO THE FILE OF LD. AO ON SIMILA R LINES AND WITH SIMILAR DIRECTIONS. 6. RESULTANTLY, THE APPEAL STAND ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH SEPTEMBER, 2018 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED :05.09.2018 SR.PS:- THIRUMALESH ITA.NO.1125/MUM/2016 VIJAY ASSOCIATES WADHWA CONSTRUCTION PVT.LTD. ASSESSMENT YEAR-2012-13 5 COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ! / BY ORDER, ' !# $ (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI