BOB FINANCIAL SOLUTION LTD., MUMBAI V. DCIT ,CIRCLE 2 (1)(1), MUMBAI

ITA 1207/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0411 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 05-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL RAMANLD
• Assessee Lawyers: KISHOR C DALALLD
• Keywords: Retrospective amendment; Bad and doubtful debts; Revised return; TDS; Set aside
• Section: 143(3); 115JB; 139(5); 195A

Judgement Text

ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1207/MUM/2019 ( / ASSESSMENT YEAR : 2014-15 ) B OB FINANCIAL SOLUTION S LTD. 2 ND FLOOR, BARODA HOUSE S.V. ROAD, JOGESHWARI (W) MUMBAI-400 062 / VS. D CIT CIRCLE - 2(1)(1) 561, 5 TH FLOOR AAYKAR BHAVAN, MK MARG MUMBAI-400 020 +, ./ ./PAN/GIR NO. AAACB-1989-L ( ,. /APPELLANT ) : ( /0,. / RESPONDENT ) ASSESSEE BY : SHRI KISHOR C. DALAL-LD.AR REVENUE BY : SHRI RAHUL RAMAN LD. CIT-DR / DATE OF HEARING : 24/02/2021 / DATE OF PRONOUNCEMENT : 15/03/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-4, MUMBAI [CIT(A)], APPEAL NO.CIT(A)-4/IT-236/ACIT-2(1 )(1)/2016-17 DATED 06/12/2018 ON FOLLOWING GROUNDS OF APPEAL : - 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED ASSESSING OFFICER ERRED IN DISALLOWING TDS PAID ON LICENSE FEES ON VI SA CARDS AS PER AGREEMENT WITH VISA CARD OF RS.49,36,262/- AND COMMISSIONER O F INCOME TAX (APPEALS)-4, MUMBAI ERRED IN CONFIRMING THE SAME. ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 2 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LA W THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION OF RS.19,30,95,394/- BEING PROVISION FOR CARD RECEIVABLE WRITTEN BACK WHILE COMPUTING BOOK PROFIT UNDER SECT ION 115JB AND COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI ERRED IN CONFIRMING THE SAME. 2. THE LEARNED COUNSEL FOR ASSESSEE, AT THE OUTSET , SUBMITTED THAT BOTH THE ISSUES ARE COVERED IN ASSESSEES FAVOR BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE. THE COPIES OF THE ORDERS HAVE BEEN PLACED ON RECORD. THE LD. CIT-DR, HOWEVER, DEFENDED THE POSITION TAKEN BY LD. AO. 3. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE ORDER OF LOWER AUTHORITIES AND ALSO THE EARLIER DEC ISIONS OF TRIBUNAL IN ASSESSEES OWN CASE. OUR ADJUDICATION TO THE SUBJEC T MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 4. THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE I S STATED TO BE ENGAGED IN THE BUSINESS OF CREDIT CARDS. AN ASSESSM ENT WAS FRAMED FOR THE YEAR UNDER CONSIDERATION U/S 143(3) ON 30/12/20 16 WHEREIN TWO ISSUES HAVE CROPPED UP WHICH ARE THE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. 5. TDS ON PAYMENTS TO VISA/MASTER CARD : 5.1 THE ASSESSEE PAID TDS ON BEHALF OF MASTER CARD & VISA CARD FOR RS.26.39 LACS & RS.49.36 LACS RESPECTIVELY AND CLAI MED THE SAME AS EXPENDITURE IN VIEW OF THE FACT THAT TDS WAS NON-RE IMBURSABLE IN NATURE. THE ASSESSEE SUBMITTED THAT AS PER THE TERMS OF RES PECTIVE AGREEMENT, THE ASSESSEE HAD TO BEAR ALL TAX LIABILITY ON PAYME NT MADE TO VISA / MASTER CARD AND THEREFORE, THE EXPENDITURE WAS BUSI NESS EXPENDITURE ALLOWABLE U/S 37(1). THE ASSESSEE HAD DEPOSITED TAX IN TERMS OF SEC.195 ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 3 R.W.S. 195A SINCE THE PAYMENT WAS OVER AND ABOVE SE RVICE CHARGES PAYABLE TO TWO NON-RESIDENT ENTITIES. THE ATTENTION WAS DRAWN TO FAVORABLE ORDERS OF TRIBUNAL FOR AYS 2003-04 TO 200 5-06, 2007-08 TO 2008-09, 2010-11 AND 2011-12. HOWEVER, LD. AO OPINE D THAT THE PAYMENT WAS NOT THE LIABILITY OF THE ASSESSEE AND S ECONDLY, THE COPIES OF RESPECTIVE AGREEMENTS WERE NOT FURNISHED BY THE ASS ESSEE. FURTHER, TDS BEING PART OF ADVANCE INCOME TAX WOULD NOT BE A N ALLOWABLE DEDUCTION TO THE ASSESSEE SINCE THE EXPENDITURE COU LD NOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSIN ESS PURPOSES. IN THE AFORESAID BACKGROUND, THE DEDUCTION SO CLAIMED WAS DENIED TO THE ASSESSEE. 5.2 UPON FURTHER APPEAL, LD. CIT(A), RELYING UPON A PPELLATE ORDER FOR 2015-16 DENIED DEDUCTION OF TDS PAID FOR VISA CARD PAYMENTS BUT ALLOWED DEDUCTION OF TDS PAID FOR MASTER CARD PAYME NTS. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5.3 WE FIND THAT ASSESSEE ASSAILED THE APPELLATE OR DER FOR AY 2015-16 BEFORE THIS TRIBUNAL VIDE ITA NO.6724/MUM/2018 ORDE R DATED 05/02/2020 WHEREIN THE MATTER WAS ADJUDICATED AS UNDER:- 5. AFTER CAREFUL CONSIDERATION OF FACTUAL MATRIX AS ENUMERATED HEREINABOVE, WE FIND THE DISPUTE TO BE IN NARROW COMPASS. WE FIND THAT P RIMARY REASON TO CONFIRM THE DISALLOWANCE ON VISA CARD IS THE FACT THAT THE TERM S OF MASTER CARD AND VISA CARDS HAVE BEEN FOUND TO BE AT VARIANCE. AS NOTED BY LD, CIT(A), ARTICLE-11 OF AGREEMENT WITH VISA CARDS MANDATED ASSESSEE TO PROVIDE PROOF OF PAYMENT OF TAXES AND NOTHING MORE AND THERE WERE NO SPECIFIC STIPULATION S THAT THE PAYMENT OF THE SAME WOULD CONSTITUTE ASSESSEE'S LIABILITY. HOWEVER, THE FACT THAT WHETHER THE SAID EXPENDITURE WAS REIMBURSABLE BY VISA OR NOT, WAS NO T BROUGHT ON RECORD. THE ANSWER TO THE SAME WOULD BE VITAL TO CLINCH THE ISS UE IN PROPER PERSPECTIVE. OBVIOUSLY, IF THE EXPENDITURE WAS NON REIMBURSABLE IN NATURE AND IT WAS BORNE BY THE ASSESSEE HIMSELF, THE SAME WOULD CERTAINLY BECO ME ASSESSEE S LIABILITY AND HENCE AN ALLOWABLE EXPENDITURE AS HELD IN EARLIER Y EARS. ON THE CONTRARY, IF THE EXPENDITURE WAS REIMBURSABLE IN NATURE, IT WOULD MA TERIALLY ALTER THE ASSESSEE'S CLAIM OF DEDUCTION. THE SUBMISSIONS MADE BY LD. AR ALSO DO NOT THROW MUCH LIGHT ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 4 ON THIS FACT AND THE OBSERVATION MADE BY LD. CIT(A) HAS REMAINED UNADDRESSED. THEREFORE, WITH A VIEW TO BRING ON RECORD CLEAR FAC TS AND TO DISPEL THE CONCERNS RAISED BY LD. DR, WE RESTORE THE MATTER BACK TO THE FILE OF LD. CIT(A) WITH A DIRECTION TO ASCERTAIN THE CORRECT FACTS. THE ASSESSEE IS DIR ECTED TO PROVIDE THE REQUISITE DETAILS / INFORMATION. NEEDLESS TO ADD THAT, IF THE EXPENDITURE WAS NON- REIMBURSABLE IN NATURE, THE SAME WOULD BE AN ALLOWA BLE DEDUCTION OTHERWISE NOT. FACTS AS WELL AS THE ISSUE BEING IDENTICAL, THIS IS SUE STAND RESTORED BACK TO THE FILE OF LD. CIT(A) WITH SIMILAR DIRECTIONS. THE GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 6. WRITE-BACK OF PROVISION FOR CARD NPA 6.1 WHILE COMPUTING BOOK PROFITS U/S. 115JB, THE AS SESSEE REDUCED PROVISION OF CARD RECEIVABLES WRITTEN-BACK AMOUNT ING TO RS.19.30 CRORES. HOWEVER, THE PROVISION FOR CARD RECEIVABLE, IN EARLIER YEARS, WAS NOT ADDED BACK TO COMPUTE BOOK PROFITS FOR AYS 2007 -08 TO 2010-11. THEREFORE, LD.AO OPINED THAT REDUCTION IN BOOK PROF ITS WOULD NOT BE AVAILABLE TO THE ASSESSEE IN THIS YEAR. 6.2 THE ASSESSEE SUBMITTED THAT WRITE-BACK REPRESEN TS PROVISIONS OF NPA MADE IN EARLIER YEARS FOLLOWING RBI GUIDELINES. THE COMPANY MADE PROVISION FOR NPA DURING FINANCIAL YEARS 2006-07 TO 2009-10. THE SAME WAS VOLUNTARILY DISALLOWED AGAINST THE NET PROFIT U NDER NORMAL TAX PROVISIONS IN EARLIER ASSESSMENT YEARS AND THEREFOR E, THE SAME HAS BEEN REDUCED WHILE COMPUTING INCOME UNDER NORMAL PROVISI ONS AS WELL AS WHILE COMPUTING BOOK PROFITS U/S 115JB. THE ASSESSE E ALSO SUBMITTED THAT DURING AYS 2007-08 TO 2010-11, THE ASSESSEE WA S INCURRING BUSINESS LOSSES AND THEREFORE, AS PER ADVICE OF TAX AUDITOR, THE BOOK PROFITS IN RETURN OF INCOME WERE SHOWN AS NIL WIT HOUT MAKING ANY ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 5 ADJUSTMENT AS PROVIDED IN SEC. 115JB AS IT HAD NO I MPACT ON ASSESSEES TAX LIABILITY. 6.3 HOWEVER, LD. AO REJECTED THE PLEA ON THE GROUND THAT ASSESSEES BOOK PROFIT WERE NOT INCREASED FOR AY 2010-11, AND THEREFORE, PROVISIONS WRITTEN-BACK AS REDUCED BY THE ASSESSEE, WAS ADDED BACK TO THE BOOK PROFITS U/S 115JB. UPON FURTHER APPEAL, LD. CIT(A) CHOSE TO CONFIRM THE STAND OF LD. AO BY RELYING UPON APPELLATE ORDER FOR AY 2012-13. 6.4 WE FIND THAT THE ASSESSEE ASSAILED THIS ISSUE F OR AY 2012-13 BEFORE THIS TRIBUNAL IN CROSS-APPEALS ITA NO.4485 & 4297/MUM/2017 ORDER DARED 07/05/2019 WHEREIN THE MATTER WAS ADJUD ICATED AS UNDER: - 5.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. THE BASIC FACTS ARE NOT UNDER DISPUTE. SO FAR AS THE NATURE OF PROVISIONS OF CARD RECEIVAB LES IS CONCERNED, WE FIND THAT HONBLE APEX COURT HAS SUCCINCTLY CARVED OUT THE FINE DISTINCTION BETW EEN DEBTS PAYABLE BY THE ASSESSEE VIS--VIS DEBTS RECEIVABLE BY THE ASSESSEE IN THE CITED CASE OF CIT VS. HCL COMMET SYSTEMS & SERVICES LTD. [305 ITR 409] IN THE FOLLOWING MANNER: - AS STATED ABOVE, THE SAID EXPLANATION HAS PROVIDED SIX ITEMS, I.E., ITEM NOS.(A) TO (F) WHICH IF DEBITED TO THE PROFIT AND LOSS ACCOUNT CAN BE ADDED BACK TO THE NET PROFIT FOR COMPUTING THE BOOK PROFIT. IN THIS CASE, WE ARE CONCERNED WITH IT EM NO. (C) WHICH REFERS TO THE PROVISION FOR BAD AND DOUBTFUL DEBT. THE PROVISION FOR BAD AND DO UBTFUL DEBT CAN BE ADDED BACK TO THE NET PROFIT ONLY IF ITEM (C) STANDS ATTRACTED. ITEM (C) DEALS WITH AMOUNT(S) SET ASIDE AS PROVISION MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINE D LIABILITIES. THE ASSESSEE'S CASE WOULD, THEREFORE, FALL WITHIN THE AMBIT OF ITEM (C) ONLY I F THE AMOUNT IS SET ASIDE AS PROVISION; THE PROVISION IS MADE FOR MEETING A LIABILITY; AND THE PROVISION SHOULD BE FOR OTHER THAN ASCERTAINED LIABILITY, I.E., IT SHOULD BE FOR AN UN ASCERTAINED LIABILITY. IN OTHER WORDS, ALL THE INGREDIENTS SHOULD BE SATISFIED TO ATTRACT ITEM (C) OF THE EXPLANATION TO SECTION 115JA . IN OUR VIEW, ITEM (C) IS NOT ATTRACTED. THERE ARE TWO TYPE S OF 'DEBT'. A DEBT PAYABLE BY THE ASSESSEE IS DIFFERENT FROM A DEBT RECEIVABLE BY THE ASSESSEE . A DEBT IS PAYABLE BY THE ASSESSEE WHERE THE ASSESSEE HAS TO PAY THE AMOUNT TO OTHERS WHEREA S THE DEBT RECEIVABLE BY THE ASSESSEE IS AN AMOUNT WHICH THE ASSESSEE HAS TO RECEIVE FROM OTHERS. IN THE PRESENT CASE 'DEBT' UNDER CONSIDERATION IS 'DEBT RECEIVABLE' BY THE ASS ESSEE. THE PROVISION FOR BAD AND DOUBTFUL DEBT, THEREFORE, IS MADE TO COVER UP THE PROBABLE D IMINUTION IN THE VALUE OF ASSET, I.E., DEBT WHICH IS AN AMOUNT RECEIVABLE BY THE ASSESSEE. THER EFORE, SUCH A PROVISION CANNOT BE SAID TO BE A PROVISION FOR LIABILITY, BECAUSE EVEN IF A DEBT IS NOT RECOVERABLE NO LIABILITY COULD BE FASTENED UPON THE ASSESSEE. IN THE PRESENT CASE, TH E DEBT IS THE AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PAYABLE BY THE ASSES SEE AND, THEREFORE, ANY PROVISION MADE TOWARDS IRRECOVERABILITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE, IN OUR VIEW ITEM (C) OF THE EXPLANATION IS NOT ATTRACT ED TO THE FACTS OF THE PRESENT CASE. IN THE CIRCUMSTANCES, THE AO WAS NOT JUSTIFIED IN ADDING B ACK THE PROVISION FOR DOUBTFUL DEBTS OF RS.92,15,187/- UNDER CLAUSE (C) OF THE EXPLANATION TO SECTION 115JA OF THE 1961 ACT. WITH A VIEW TO OVERCOME THE SAME, CLAUSE (I) WAS AD DED TO EXPLANATION-1 TO SECTION 115JB WITH RETROSPECTIVE EFFECT FROM AY 2001-02 VIDE FINANCE ( NO.2) ACT, 2009 WHICH PROVIDED THAT THE BOOK PROFITS SHOULD BE INCREASE BY THE AMOUNT SET ASIDE AS PROVI SION FOR DIMINUTION IN THE VALUE OF ANY ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 6 ASSET. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD FILED RETURN OF INCOME FOR AY 2007-08 MUCH BEFORE THE DATE OF THE SAID AMENDMENT AND THEREFORE, THE S AID AMENDMENT COULD NOT BE GIVEN EFFECT TO BY FILING REVISED RETURN OF INCOME U/S 139(5) WHICH AL READY EXPIRED ON 31/03/2009. 5.2 PROCEEDINGS FURTHER, IT IS ALSO AN UNDISPUTED F ACT THAT THE WRITE-BACK OF RS.363.37 LACS HAS BEEN MADE OUT OF PROVISIONS OF RS.3449.82 LACS MADE IN AY 2007-08. NOTHING ON RECORD CONTROVERT THE AFORESAID FACT. WE FIND THAT IN AY 2007-08, THE ASSESSEE HAD BOOK LOSSES OF RS.4601.10 LACS AND EVEN AFTER ADDING BACK THE SAID PROVISIONS AS E NVISAGED BY THE AMENDMENT, THE RESULTANT FIGURE WOULD HAVE STILL BEEN A NEGATIVE FIGURE AND THE ASS ESSEE WOULD NOT HAVE ANY LIABILITY TO PAY TAX U/S 115JB. THEREFORE, WE FIND SUBSTANTIAL FORCE IN THES E ARGUMENTS RAISED BY LD. AR BEFORE US. 5.3 LASTLY, IT IS ALSO EVIDENT FROM ASSESSMENT ORDE R DATED 27/01/2014 OF IMMEDIATELY PRECEDING AY 2011-12 THAT SIMILAR TREATMENT GIVEN BY THE ASSE SSEE TO WRITE-BACK OF RS.1899.12 LACS IN THAT YEAR HAS BEEN ACCEPTED BY THE REVENUE SINCE NO COMP UTATION OF BOOK PROFIT HAS BEEN MADE IN THE ASSESSMENT ORDER. THEREFORE, FOLLOWING THE PRINCIPL E OF CONSISTENCY, THE ASSESSEES CLAIM WAS TO BE ACCEPTED, THERE BEING NO CHANGE IN FACTUAL MATRIX. 5.4 BEARING IN MIND THE AFORESAID FACTUAL MATRIX, W E ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF WRITE-BACK W HILE COMPUTING BOOK PROFITS U/S 115JB FOR THE IMPUGNED AY. WE ORDER SO. GROUND NO. 1 STAND ALLOWE D. WE FIND THE FACTUAL MATRIX TO BE SIMILAR IN THIS YE AR. THE LEARNED CIT(A) HAS CONFIRMED THE ORDER OF LD. AO BY FOLLOWING APPE LLATE ORDER FOR AY 2012-13 WHICH STOOD REVERSED BY THIS TRIBUNAL. THER EFORE, RESPECTFULLY FOLLOWING EARLIER VIEW OF THE TRIBUNAL IN AY 2012-1 3, WE HOLD THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF WRITE-BACK W HILE COMPUTING BOOK PROFITS U/S 115JB. THE LD. AO IS DIRECTED TO RE-COM PUTE BOOK PROFITS U/S 115JB. THE GROUND THUS RAISED STAND ALLOWED. 7. THE APPEAL STAND PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 15 TH MARCH, 2021. SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 15/03/2021 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. ,. / THE APPELLANT 2. /0,. / THE RESPONDENT 3. 7 ( ) / THE CIT(A) 4. 7 / CIT CONCERNED 5. 89/2: , : , / DR, ITAT, MUMBAI 6. 9;<= / GUARD FILE ITA NO.1207/MUM/2019 BOB FINANCIAL SOLUTIONS LIMITED ASSESSMENT YEAR: 2014-15 7 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.