E-Infochips Limited, Ahmedabad V. The Dy.CIT.,Circle-4, Ahmedabad

ITA 1174/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6913 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA.NO.1174/AHD/2011 (ASSESSMENT YEAR:2007-08) M/S. E-INFOCHIPS LTD. 11-A/B, CANDRA COLONY, OFF C.G.ROAD, ELLISBRIDGE, AHMEDABAD. APPELLANT VS. DCIT, CIRCLE 4, AHMEDABAD. RESPONDENT PAN: AACCS1310E /BY APPELLANT :URVASHI SHODHAN, A.R. /BY RESPONDENT : SHRI B. L. YADAV, SR.D.R. !'# /DATE OF HEARING : 16.10.2014 $%& !'# /DATE OF PRONOUNCEMENT :29.10.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VIII, I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 2 AHMEDABAD, DATED 17.01.2011 FOR A.Y. 2007-08 ON THE FOLLOWING GROUNDS. (1) THE LEARNED ASSESSING OFFICER AND HON. CIT(APPEALS) HAVE ERRED IN PASSING THE ORDER AND THEREBY MAKING ADDITIONS TO THE VALUE OF FBT AND PARTICULARLY RETAINING THE ADDITIONS (BY CIT-A) RESPECTIVELY FOR THE YEAR I.T.A.Y. 2007-08 AS PER ORDERS, NOT APPRECIATING THE PROVISIONS OF THE ACT AND INSTRUCTIONS OF CBDT ON THE VARIOUS ISSUES IN RESPECT OF THE VALUES OF FBT AND INTEREST CHARGED AS UNDER:- RS. (A) SALES PROMOTION RS. 4,18,356/- (B) TRAVELLING EXPENSES RS. 6,73,166/- [PARTLY ALLOWED BY CIT(A)] (C) CONFERENCE EXPENSES RS. 2,36,633/- (D) INTEREST RS. 1,81,089/- (2) THE LEARNED CIT (APPEALS) HAS ERRED IN FOLLOWIN G THE DECISION OF HIS PREDECESSOR AND NOT ARRIVING AT HIS OWN CONCLUSIONS. (3) THE ASSESSING OFFICER AND HON. CIT(APPEALS) HAV E ERRED IN NOT CONSIDERING THE SUBMISSIONS MADE FROM TIME TO TIME AND HAVE ERRED IN NOT FOLLOWING THE CBDT INSTRUCTIONS CORRECTLY ON THE SUBJECT. 2. ASSESSING OFFICER DURING THE COURSE OF ASSESSMEN T PROCEEDING OBSERVED THAT ASSESSEE HAD NOT WORKED OU T CORRECTLY THE LIABILITY FOR FBT ON PAYMENTS MADE BY IT UNDER FOLLOWING HEADS: I) SALES PROMOTION RS. 4,18,356/- II) TRAVELLING EXPENSES RS. 6,73,166/- III) CONFERENCE EXPENSES RS. 2,36,633/- I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 3 TOTAL RS. 13,27,855/- ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E MAINLY FOR THE REASONS THAT ISSUE INVOLVED ARE SIMILAR TO THE PRECEDING YEAR AND SO FOLLOWING THE DECISION OF EAR LIER YEAR, ASSESSING OFFICER DISALLOWED 5% OF DIFFERENCE IN TR AVELLING AND 20% OF DIFFERENCE IN CONFERENCE AND SALES PROMO TION EXPENSES. 3. IN APPEAL CIT(A) FOLLOWING ITS PREDECESSORS ORD ER FOR A.Y. 06-07 CONFIRMED THE ADDITION TO TAXABLE VALUE OF FB T ON ACCOUNT OF SALE PROMOTION OF RS.4,18,356/- REGARDIN G TRAVELLING EXPENSES AND CONFERENCE EXPENSES, CIT(A) GRANTED PARTIAL RELIEF. 4. AT THE OUTSET, LD. A.R. POINTED OUT THAT THIS IS SUE IS COVERED BY ORDER OF ITAT IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 623/AHD/2010, WHEREIN TRIBUNAL H AS RESTORED THE ISSUE TO A.O. BY OBSERVING AS UNDER: 8. FOR EXAMINING THESE ISSUES IT IS NECESSARY TO L OOK INTO THE RELEVANT PORTION OF THE ACT AND THE QUESTI ONS ANSWERED BY THE BOARD WHICH ARE REPRODUCED HEREIN BELOW FOR REFERENCE:- SEC.115WB (2): THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHETHER OR NOT S UCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) INCURRED ANY EXPENSE ON, OR MADE NY PAYMENT FOR, THE FOLLOWING PURPOSES, NAMELY:- I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 4 (A) -- (B) ---- (C) CONFERENCE (OTHER THAN FEE FOR PARTICIPATION BY THE EMPLOYEES IN ANY CONFERENCE). EXPLANATION.- FOR THE PURPOSES OF THIS CLAUSE, ANY EXPENDITURE ON CONVEYANCE, TOUR AND TRAVEL (INCLUDI NG FOREIGN TRAVEL), HOTEL, OR BOARDING AND LODGING I N CONNECTION WITH ANY CONFERENCE SHALL BE DEEMED TO B E EXPENDITURE INCURRED FOR THE PURPOSES OF CONFERENCE ; (D) SALES PROMOTION INCLUDING PUBLICITY: (I) PROVIDED THAT ANY EXPENDITURE ON ADVERTISEMENT, - (I) BEING THE EXPENDITURE (INCLUDING RENTAL) ON ADVERTISEMENT OF ANY FORM IN ANY PRINT (INCLUDING JOURNALS, CATALOGUES OR PRICE LISTS) OR ELECTRONIC MEDIA OR TRANSPORT SYSTEM; (II) BEING THE EXPENDITURE ON THE HOLDING OF, OR TH E PARTICIPATION IN, ANY PRESS CONFERENCE OR BUSINESS CONVENTION, FAIR OR EXHIBITION' (III) BEING THE EXPENDITURE ON SPONSORSHIP OF ANY S PORTS EVENT OR ANY OTHER EVENT ORGANIZED BY ANY GOVERNMEN T AGENCY OR TRADE ASSOCIATION OR BODY; (IV) BEING THE EXPENDITURE ON THE PUBLICATION IN AN Y PRINT OR ELECTRONIC MEDIA OF ANY NOTICE REQUIRED TO BE PUBLISHED BY OR UNDER ANY LAW OR BY AN ORDER OF A C OURT OR TRIBUNAL; (V) BEING THE EXPENDITURE ON ADVERTISEMENT BY WAY OF SIGNS, ART WORK, PAINTING, BANNERS, AWNINGS, DIRECT MAIL, ELECTRIC SPECTACULARS, KIOSKS, HOARDINGS, BILL BOAR DS [ DISPLAY OF PRODUCTS] OR BY WAY OF SUCH OTHER MEDIUM OF ADVERTISEMENT, (VI) BEING THE EXPENDITURE BY WAY OF PAYMENT TO ANY ADVERTISING AGENCY FOR THE PURPOSES OF CLAUSES (I) TO (V) ABOVE. I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 5 (VII) BEING THE EXPENDITURE ON DISTRIBUTION OF SAMP LES EITHER FREE OF COST OR AT CONCESSIONAL RATE AND ] (VIII) BEING THE EXPENDITURE BY WAY OF PAYMENT TO A NY PERSON OF REPUTE FOR PROMOTING THE SALE OF GOODS OR SERVICES OF THE BUSINESS OF THE EMPLOYER,] (E) ----- ---------------------------------- ---------------------------------- ---------------------------------- QUESTION & ANSWER NO.58 OF BOARD CIRCULAR NO.8/2005 BEING RELEVANT IS ALSO REPRODUCED HEREIN BELOW FOR REFERENCE:- 'WHETHER 'SALES PROMOTION EXPENSES' INCLUDES BROKERAGE AND SELLING COMMISSION IN RELATION TO SALES PAID TO DIRECT SELLING AGENTS/DIRECT MARKETIN G AGENTS AND, IF SO, WHETHER FBT IS PAYABLE THEREON? 58. BROKERAGE AND SELLING COMMISSION PAID FOR SELLING GOODS HAVE BEEN HELD BY COURTS TO BE IN THE NATURE OF ORDINARY SELLING EXPENSES. THEREFORE, THE EXPENDITURE ON BROKERAGE AND SELLING COMMISSION IS NOT EXPENDITURE FOR THE PURPOSES OF 'SALES PROMOTION INCLUDING PUBLICITY' WITHIN THE MEANING OF CLAUSE (D) OF SUB-SECTION(2) OF SEC.115WB ACCORDINGLY, FBT IS NOT PAYABLE ON BROKERAGE AND SELLING COMMISSION PAID FOR SELLING GOODS.' 9. NOW LET US ANALYZE THE EXPENSES INCURRED BY THE ASSESSEE. SL. NO. HEAD OF EXPENSES DETAILS OF EXPENDITURE FBT NOT LIABLE ACCORDING TO ASSESSEE WHICH IS NOT EXPLANATION OFFERED BY THE ASSESSEE I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 6 ACCEPTED BY A.O 1. SALES PROMOTION SALES CONFERENCE 93060 FEES FOR EXHIBITION IN JAPAN NOT LIABLE TO FBT 2. CONFERENCE CONFERENCE EXP. 0 115WB2(C) 3. FOREIGN MARKETING MARKETING EXPENSES IN US 238601 NOT LIABLE TO FBT 4. MARKETING MARKETING EXP. 11786184 NOT LIABLE TO FBT 5. FOREIGN MAINTENAN CH SALES ONSITE EXP. 89725 NOT LIABLE TO FBT 6. EXHIBITION PAID TO VLSI TRUST 59500 NOT LIABLE TO FBT 7 TRADE MARK REGISTRATION FEES 500 NOT LIABLE TO FBT 8. FOREIGN MAINTENAN CH SALES ONSITE EXP. 81598 NOT LIABLE TO FBT 9. SALES PROMOTION MARKETING EXP. 4285985 NOT LIABLE TO FBT TOTAL 1,66,35,153 1) FEES PAID FOR CONFERENCE RS. 93060/- :- THE ASSESSEE HAD CLAIMED THAT THIS EXPENSES WAS RELATED TO FEES PAID FOR THE EMPLOYEES TO PARTICIPATE IN THE EXHIBITION HELD AT JAPAN. THEREFORE, THIS EXPENDITURE IS EXEMPT FROM F BT BY VIRTUE OF SEC,115WB(2)(C) BECAUSE THE PROVISIONS OF I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 7 THE ACT PROVIDES THAT FEES FOR PARTICIPATION BY THE EMPLOYEES IN ANY CONFERENCE IS EXEMPT. IT IS PERCEP TIBLE FROM THE PROVISIONS OF THE ACT THAT IF THE NATURE O F EXPENDITURE IS OF THE NATURE AS EXPLAINED BY LD.A.R THEN BY VIRTUE OF SEC.115WB(2)(C) SUCH EXPENDITURE DOES NOT COME UNDER THE AMBIT OF THE PROVISIONS OF FBT. HOWEVER, APPARENTLY THE FACTS WITH RESPECT TO THE N ATURE OF EXPENDITURE INCURRED BY THE ASSESSEE DO NOT CLEA RLY EMERGE FROM THE ORDER OF THE ID. A.O. THEREFORE, WE REMIT BACK THIS ISSUE TO THE FILE OF LD.A.O FOR VER IFICATION AND PASS APPROPRIATE ORDER AS PER LAW. 2) WITH RESPECT TO ITEM NOS.2 TO 9 EXCLUDING ITEM N O.7 BEING TRADE MARK FEE OF RS. 500/- WHICH FALLS OUTSI DE THE PURVIEW OF FBT, THE NATURE OF EXPENDITURE INCUR RED BY THE ASSESSEE IS ALSO NOT CLEARLY BROUGHT OUT IN THE ORDER OF ID.AO IN ORDER TO DETERMINE THE RELEVANT PROVISIONS OF THE ACT WHICH COULD BE INVOKED TO BRI NG THE EXPENSES UNDER THE NET OF FBT. THEREFORE, IN TH E INTEREST OF JUSTICE THIS ISSUE IS ALSO REMITTED BAC K TO THE FILE OF AO. 10. THUS THE FIRST GROUND VIZ. 'LD. ADDL.CIT HAS ERRED IN MAKING THE ADDITION AND HON.CIT(A) HAVE ERRED IN SUSTAINING THE ADDITION OF RS.33,27,031/- BEING SAL ES PROMOTION EXPENSES TO THE TAXABLE FBT VALUE' IS HEREBY REMIT BACK TO THE FILE OF ID.AO FOR FRESH CONSIDERA TION. IT IS ORDERED ACCORDINGLY. 11. WITH RESPECT TO FOREIGN MAINTENANCE ALLOWANCE AND STAFF TRAINING EXPENSES AMOUNTING TO RS. 1,73,39,3637- ( 1,61,66,331 + 11,75,532), ID. CIT(A ) OBSERVED IN PARA 5.11 OF HIS ORDER THAT THESE EXPENDITURES DO NOT FALL WITHIN THE SCOPE OF SECTIO N 10(14)(II) OF THE ACT AND THEREFORE, PROVISIONS OF FBT WILL BE APPLICABLE AND THE CIRCULAR NO.8/2005 ISSUED BY CBDT WILL ALSO NOT COME TO THE ASSESSEE'S RESCUE. HOWEVER, ID. CIT(A) HAS CATEGORICALLY MADE A FINDIN G THAT THESE EXPENDITURES ALSO INCLUDES BOARDING AND LODGING. THUS FROM THE ORDER OF THE REVENUE, THE CO RRECT I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 8 AND FULL CLASSIFICATION OF EXPENDITURE IS NOT SPLIT AND MADE CLEAR, AND THUS THE RELEVANT PROVISIONS OF THE ACT THAT SHOULD BE INVOKED TO THE RELEVANT EXPENDITURE IS ALSO NOT STATED IN THE ORDER. THEREFORE, IN THE INT EREST OF JUSTICE, THIS GROUND RAISED BY THE ASSESSEE IS ALSO REMITTED BACK TO THE FILE OF THE LD. AO FOR A CLEAR CUT FINDING AND FRESH CONSIDERATION. NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOLL OWING THE SAME REASONING WE RESTORE THE ISSUE IN RESPECT OF V ALUES OF FBT ON ACCOUNT OF SALE PROMOTION, TRAVEL EXPENSES, CONFERENCE EXPENSES TO ASSESSING OFFICER WITH DIREC TION TO DECIDE THE SAME AS PER FACTS AND LAW AFTER PROVIDIN G DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. ISSUE OF I NTEREST IS CONSEQUENTIAL. ASSESSING OFFICER IS DIRECTED ACCOR DINGLY. 5. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF OCTOBER, 2014. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YA DAV) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA ' ' ' ' !( !( !( !( )(&! )(&! )(&! )(&! / COPY OF ORDER FORWARDED TO:- 1. ,- / REVENUE 2. / ASSESSEE I.T.A. NO. 1174/AHD/2011 A.Y. 07-08 (M/S. E-INFOCHIPS LTD. VS. DCIT) PAGE 9 3. 00! 1 / CONCERNED CIT 4. 1- / CIT (A) 5. (56 !, , / DR, ITAT, AHMEDABAD 6. 69: ;< / GUARD FILE . BY ORDER / ' , =/ 0, , ?