NORTH POINT CENTRE OF LEARNING, MUMBAI V. DCIT 15(1), MUMBAI

ITA 1206/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9193 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH K JOTWANI
• Section: 143(3)

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R. K. GUPTA , JM ITA NO. 1206 / MUM/ 20 1 2 ( ASSESSME NT YEAR : 200 7 - 20 08 ) M/S NORTH POINT CENTRE OF LEARNING, 15 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT, MUMBAI - 400 021. VS. DCIT 15(1), MUMBAI PAN/GIR NO. : A A AJN 0298 D ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. PRAKASH K. JOTWANI /REVENUE BY : MR. MOHIT JAIN DATE OF HEARING : 5 TH DEC . , 2012 DATE OF PRONOUNCEMENT : 7 TH DEC. ,2012 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 8 - 12 - 2009 OF LEANED CIT(A) - 26 , MUMBAI RELA TING TO THE ASSESSMENT YEAR 200 7 - 08 . 2 . THE ASSESSEE IS OBJECTING CONFIRMING THE DISALLOWANCE OF COMMISSION FEES OF RS. 17,05, 716/ - . 3 . DURING TH E ASSESSMENT PROCEEDING, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN PAYMENT OF COMMISSION AT THE ITA NO. 1206 /20 1 2 2 RATE OF RS. 3% OF GROSS RECEIPT TO A RELATED COMPANY NAMELY, M/S NORTH POINT TRAINING & RESEARCH PVT. LTD.. HE OBSERVED THAT NO EVIDENCE OF ANY KIND FOR WORK DONE BY THE RELATED COMPANY HAS BEEN PRODUCED. THE ASSESSING OFFICER ALSO NOTED THAT THE THREE PERSONS, WHO ARE DIRECTORS OF THE SAID COMPANY, ARE ALSO MEMBER OF THE AOP OF THE ASSESSEE COMPANY. ACCORDINGLY, THE ASSESSING OFFICE R OBSERVED THA T WITHOUT RENDERING ANY SERVICES, COMMISSION FEES PAID, WAS NOT JUSTIFIED. ACCORDINGLY, HE DISALLOWED. 4 . IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE AOP CONSISTS OF TWELVE (12) LINTAS EMPLOYEES WELFARE TRUST, WHICH IS RUNNING A TRAINING CENTRE A T KHANDALA. THERE ARE 750 MEMBERS OF THIS TRUST. SINCE THE ASSESSEE AOP WAS UNABLE TO RUN THE INSTITUTION ALONE, THEY HIRED THE ASSISTANCE OF M/S NORTH POINT TRAINING AND RESEARCH PVT. LTD., WHICH WAS INCORPORATED FOR THE PURPOSE OF MANAGEMENT OF THE TRAIN ING AND RESEARCH ACTIVITIES OF THE ASSESSEE AOP. IT WAS FURTHER SUBMITTED THAT THE DIRECTORS OF THE SAID COMPANY ARE PROMINENT MANAGEMENT PERSONNEL HAVING EXPERIENCE IN THE FILED OF FINANCE AND ACCOUNTS AND FOR THEIR ASSISTANCE THE SAID COMMISSION EQUIVAL ENT FEE OF 3% OF THE GROSS TURN OVER WAS PAID. IT WAS ALSO SUBMITTED THAT THE SAID COMPANY HAS OFFERED THE COMMISSION AS INCOME AND IT PAID ON THAT. THEREFORE, THE COMMISSION AMOUNT PAID BY THE ASSESSEE IS ALLOWABLE OTHERWISE IT AMOUNTS TO DOUBLE TAXATION. HOWEVER, THE LEARNED CIT(A) WAS NOT SATISFIED WITH THE CONTENTION OF THE LEARNED AR AS NO EVIDENCE ITA NO. 1206 /20 1 2 3 WAS PRODUCED ON ACCOUNT OF RENDERING OF SERVICES. NOW, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5 . THE CONTENTION RAISED BEFORE THE LOWER AUTHOR ITIES ARE REITERATED HERE BEFORE THE TRIBUNAL. THE ATTENTION OF THE BENCH WAS DRAWN ON THE LIST OF THE BENEFICIARIES OF 12 TRUSTS, WHICH IS 750 NUMBERS, PLACED IN PAPER BOOK AT PAGES 60 TO 63. IT WAS FURTHER EXPLAINED THAT IN FACT THE ASSESSEE HAD ACQUIRED CERTAIN PROPERTIES IN KHANDALA FOR THE COMMON OBJECTIVE OF DEVELOPING AND CONDUCTING A TRAINING AND RESEARCH CENTRE. THE ASSESSEE AOP HAS CONSTRUCTED 12 BUILDINGS FULLY FURNISHED WITH AIR - CONDITIONERS, FURNITURE, FIXTURES, AUDIO - VISUAL, CONFERENCES ROOMS, SPORT FACILITIES, CLUB HOUSE AND OTHER EQUIPMENTS. THE SAID PREMISES WERE CONSTRUCTED FOR THE PURPOSES OF RUNNING A TRAINING AND RESEARCH CENTRE. HOWEVER, AS THE MEMBERS OF THE AOP WERE UNABLE TO OBTAIN THE CLIENTS AND RUN THE ENTIRE INSTITUTION, THEY HIR ED THE SERVICES OF M/S NORTH POINT TRAINING AND RESEARCH PVT. LTD. AS PER TERMS OF THE CONDUCTING AGREEMENT ENTERED BETWEEN THE PARTIES. AN AGREEMENT WAS ENTERED ON 15 - 6 - 2004, COPY OF THE AGREEMENT IS PLACED IN THE PAPER BOOK AT PAGES 49 TO 57. IT WAS ALSO EXPLAINED THAT THE ASSESSEE AOP HAS PAID SIMILAR COMMISSION FOR EARLIER TWO YEARS AND ASSESSMENT HAD BEEN COMPLETED UNDER SECTION 143(3) . NO SUCH DISALLOWANCE WAS MADE FOR THOSE TWO YEARS. ACCORDINGLY, IT WAS SUBMITTED THAT IN VIEW OF THE CONSISTENCY ALSO, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, WHICH IS CONFIRMED BY THE CIT(A), IS NOT JUSTIFIED. ITA NO. 1206 /20 1 2 4 6 . ON THE OTHER HAND, LEARNED DR STRONGLY PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE CIT(A). 7 . AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW, I FOUND THAT THE ASSESSEE DESERVES TO SUCCEED IN ITS APPEAL . I NOTED THAT THE AGREEMENT ENTERED ON 15 - 6 - 2004 PERTAINS TO ASSESSMENT YEAR 2005 - 06 . IN THAT YEAR ALSO THE ASSESSEE PAID A COMMISSION FEE OF RS. 10,39,800/ - . THE CONDUCTOR I.E. M/S NORTH POINT TRAINING AND RESEARCH PVT. LTD. HAS SHOWN ITS RECEIPTS IN ITS PROFIT AND LOSS ACCOUNT . THE FEE HAS BEEN OFFERED FOR TAXATION BY FILING REGULAR RETURN UNDER SECTION 139(1) OF THE ACT. COPY OF THE SAME IS PLACED ON RECORD. ACCORDINGLY, THE COMMISSION FEE WAS PAID FOR SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2006 - 07 AT RS.14,49,940/ - . THE SAME WAS ALSO OFFERED FOR TAXATION. THE RETURN WAS FILED. COPY OF THE SAME IS ALSO PLACED ON RECORD. IT IS FURTHER SEEN THAT THE ASSESSEE AOP FILED ITS RETU RN DECLARING HUGE LOSSES. THE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) . COPIES OF THE SAME ARE PLACED ON RECORD FOR ASSESSMENT YEAR 2005 - 06, THAT DECLARED LOSS OF RS. 2,16,96,919/ - WAS ACCEPTED BY THE AO. SIMILARLY FOR 2006 - 07, DECLARED LOSS OF RS. 1 ,79,54,391/ - WAS ACCEPTED. COPY OF THE ASSESSMENT ORDER IS PLACED ON RECORD. IN SIMILAR MANNER, THE ASSESSEE PAID COMMISSION FEE TO THE CONDUCTOR FOR SAME SERVICES. HOWEVER, IN THIS YEAR, THE AO DISALLOWED ON THE GROUND THAT THE ASSESSEE COULD NOT FILE ANY PROOF OF RENDERING SERVICES AND CIT(A) ALSO CONFIRMED THE ACTION OF THE AO . THE ITA NO. 1206 /20 1 2 5 ASSESSEE HAS EXPLAINED THAT THE SAME SERVICES WERE RENDERED BY THE CONDUCTOR, HOWEVER, THE SAME WAS NOT ACCEPTED. I NOTED THAT A CERTIFICATE FROM THE CONDUCTOR M/S NORTH POINT TRAINING AND RESEARCH PVT. LTD. IS PLACED ON RECORD, BY WHICH IT HAS BEEN STATED THAT THEY HAVE BEEN APPOINTED FOR THE FOLLOWING SERVICES : - 1. TO OBTAIN CLIENTS AND BUSINESS FOR NORTHPOINT CENTRE OF LEARNING WHEN CENTRE IS NOT IN USE BY LINTAS INDIA PRI VATE LIMITED. 2. TO MANAGE THE PROPERTIES AND FACILITIES OF TRAINING AND RESEARCH OF THE CENTRE. 3. TO MANAGE TRAINING AND RESEARCH ACTIVITIES FOR DEVELOPMENT OF KNOWLEDGE AND SKILLS THROUGH TRAINING & RESEARCH. 4. TO OBTAIN LICENSES/PERMISSIONS FOR DAY TO DAY MANAGEMENT OF THE CENTRE AND ITS ACTIVITIES. 5. TO CONDUCT THE ACTIVITIES OF CENTRE AT ITS OPTIMUM UTILITY AND IN A PROFESSIONAL MANNER. THESE SERVICES ARE AS PER AGREEMENT DATED 15 - 6 - 2004 . F OR THE EARLIER TWO YEARS, THE CLAIM OF THE ASSESSEE HA S BEEN ACCEPTED. COPY OF THE RETURN FILED BY THE CONDUCTOR FOR ALL THE YEARS ARE ALSO PLACED ON RECORD AND THEY HAVE OFFERED THE RECEIPTS IN THEIR PROFIT AND LOSS ACCOUNT AND DUE TAX HAS BEEN PAID. THEREFORE, I FEEL THAT DISALLOWANCE MADE BY THE AO, WHICH IS CONFIRMED BY THE C IT (A) , IS NOT JUSTIFIED. THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE FOR IMMEDIATELY TWO YEARS. THE SAME SERVICES ARE RENDERED, THEREFORE, FOR THIS REASON ALSO, DISALLOWANCE IS NOT JUSTIFIED. 8 . IT IS ALSO A MATTER O F FACT THAT THERE IS HUGE LOSS SHOWN BY THE ASSESSEE IN EARLIER TWO YEARS, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT ALSO. IF THOSE LOSSES ARE BROUGHT FORWARD THEN DURING THE ITA NO. 1206 /20 1 2 6 YEAR UNDER CONSIDERATION ALSO, THERE IS A LOSS. IT SHOWS THAT THE ASSESSEE IS NOT SHOWING ANY EXPENSES ON ACCOUNT OF COMMISSION FEE FOR REDUCING THE TAX LIABILITY. 9. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, I DELETE THE DISALLOWANCE. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF DEC . 2012. 2012 SD/ - ( ) ( R.K.GUPTA ) / JUDICIAL MEMBER MUMBAI ; DATED : 07 / 1 2 / 2012 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI