JCIT (OSD), Circle - 22, Kolkata, Kolkata V. M/s. Deloitte Haskins & Sells, Kolkata

ITA 1216/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0803 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 01-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Corroborative evidences; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1216/KOL/2018 (ASSESSMENT YEAR-2014-15) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 23.03.2018 PASSED BY CIT(A)-6, KOLKATA FOR AY 2014-15 U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). 2. GROUND NO. 1 IS RELATING TO ADDITION MADE ON ACCOUNT OF VIOLATION OF PROVISION OF SECTION 194J OF THE ACT. 3. THE LD. AR PLACED ON RECORD THE ORDER DATED 11.07.2018 IN ITA NO.587 & 588/KOL/2016 FOR AY 2010-11 AND 2011-12 IN ASSESSEES OWN CASE AND SUBMITTED THAT THE ISSUE ON HAND IS COVERED BY THE ORDER OF THIS TRIBUNAL AND REFERRED TO PARA 10 OF THE SAID ORDER. WE FIND THE ISSUE IS COVERED BY THE ASSESSEES OWN CASE IN PARA 10 WHICH IS REPRODUCED HEREIN UNDER FOR READY-REFERENCE:- 10. WE HAVE HEARD LEARNED ARGUMENTS ON BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT, SO FAR AS THE CASE BEFORE US IS CONCERNED, THE ASSESSEE PAID AN AMOUNT OF RS. 48,95,212/- TO DHS, JCIT (OSD), CIRCLE-22, KOLKATA. VS M/S. DELOITTE HASKINS & SELLS , BENGAL INTELLIGENT PARK, BUILDING ALPHA, 1 ST FLOOR, BLOCK-EP & GP, SECTOR-V, SALT LAKE ELECTRONIC COMPLEX, KOLKATA-700091. PAN-AADFD5357J (APPELLANT) (RESPONDENT) APPELLANT BY SH.SHANKAR HALDER, SR.DR JCIT RESPONDENT BY SH.RAJESH SHARMA, C.A. DATE OF HEARING 31.01.2019 DATE OF PRONOUNCEMENT 27 .0 3 .2019 ITA NO.1216/KOL/2018 (ASSESSMENT YEAR-2014-15) PAGE | 2 MUMBAI. IT IS THE CLAIM OF THE ASSESSEE THAT PAYMENT WAS ITS SHARE OF SUBSCRIPTION ALLOCATED TO VARIOUS INDIAN ENTITIES OF A COMMON GLOBAL NETWORK ON THE BASIS OF THE REVENUE BY DHS, MUMBAI, OF WHICH THE ASSESSEE IS A MEMBER. THE TOTAL SUBSCRIPTION IS PAID BY DHS, MUMBAI AFTER DEDUCTION OF TAX AT SOURCE (TDS) TO DTT TOWARDS UTILIZATION OF COMMON KNOWLEDGE SYSTEMS, COMMON INFORMATION TECHNOLOGY SYSTEMS AND BETTER ACCESS FOR CLIENTS OF UNIFORM AND HIGH QUALITY SERVICES BY THE INDIAN MEMBERS OF THE NETWORK. THE ASSESSEES CONTRIBUTION/SHARE OF RS.48,95,212/- COMPRISED IT SHARE OF RS.31,86,534/- FOR THE RELEVANT PREVIOUS YEAR AND DIFFERENTIAL SHARE OF RS.17,08,679/- PAID FOR THE EARLIER YEARS BEING THE DIFFERENCE BETWEEN THE CONTRIBUTION PAYABLE ON THE BASIS OF THE REVENUE AND CONTRIBUTION ALREADY PAID EARLIER FOR THOSE YEARS AND WAS CLAIMED IN LINE WITH THE CASH SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE ASSESSEE PRODUCED DEBIT NOTES ISSUED BY DHS, MUMBAI AS SUPPORTING EVIDENCE. THE ASSESSEE HAS TO PAY SUBSCRIPTION FEES THROUGH DELLOITE, HASKINS AND SELLS, MUMBAI (DHS, MUMBAI) FOR THIS PURPOSE TO DTT. HOWEVER, AS DHS, MUMBAI MAKES THE PAYMENT AFTER DEDUCTING TDS AND THE ASSESSEE ONLY REIMBURSES ITS SHARE OF EXPENSES, TAX WAS NOT REQUIRED TO BE DEDUCTED AGAIN IN RESPECT OF ITS REIMBURSEMENT OF SHARE OF EXPENSES OF RS.48,95,212/- TO DHS, MUMBAI. WE NOTE THAT IT IS NOT THE CASE OF THE AO THAT THE EXPENSES WERE NOT GENUINE. IT IS ALSO NOT THE CASE OF THE AO THAT THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PROFESSION. THE ASSESSEE HAS CLAIMED THE EXPENSES IN ACCORDANCE WITH ITS CASH SYSTEM OF ACCOUNTING AND THE AO HAS NOT DISPUTED THE SYSTEM OF ACCOUNTING. THE AO HAS CONCLUDED THAT THE ASSESSEE HAD PAID FOR THE PROFESSIONAL SERVICES RENDERED BY DHS, MUMBAI WITHOUT SPECIFYING THE NATURE AND DETAILS OF SERVICES RENDERED BY DHS, MUMBAI. THE ASSESSEE HAS FURNISHED COPIES OF DEBIT NOTES ISSUED BY DHS, MUMBAI MENTIONING THE AMOUNT DEBITED AS BEING YOUR SHARE OF DTT OPERATIONAL BUDGET (SUBSCRIPTION FEE) & TECH, SUBSCRIPTION FEES PAID TO DELOITTE TOUCH TOHMATSU, NEW YORK WHICH HAVE NOT BEEN QUESTIONED BY THE AO. THE ASSESSEE HAS ALSO FURNISHED EVIDENCE TO PROVE THAT THE ASSESSEE IS A MEMBER OF THE GLOBAL NETWORK OF DTT, ENJOYS CERTAIN ADVANTAGES AS A RESULT OF THE MEMBERSHIP AND HAS PAID ITS CONTRIBUTION OF THE SUBSCRIPTION TO THE MEMBERSHIP OF THE GLOBAL NETWORK. 4. AS RIGHTLY POINTED OUT BY THE LD.AR THAT THE ISSUE ON HAND IS COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE WHEREIN THE TRIBUNAL HELD THAT THE ALLEGED PAYMENT MADE IS ONLY ON REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF THE ASSESSEE AND THERE WAS NO PROFIT ELEMENT. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THUS, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 5. GROUND NO. 2 IS RELATING TO ACTION OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF INDEMNITY INSURANCE EXPENSES. ITA NO.1216/KOL/2018 (ASSESSMENT YEAR-2014-15) PAGE | 3 6. WE FIND THE ISSUE ON HAND IS ALSO COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE AND REFERRED TO PARA 20 OF THE SAID ORDER. THE RELEVANT PORTION IS REPRODUCED HEREIN BELOW:- 20. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT LIKE ANY OTHER INSURANCE PREMIUM, THE ASSESSEE HAS PAID IT TO COVER ITSELF AGAINST LOSS ARISING OUT OF DAMAGES ETC. CLAIMED FROM IT IN CONSEQUENCE OF WRONGFUL ACT IN CONNECTION WITH PROFESSIONAL BUSINESS. THEREFORE, THE ASSESSEE IS NOT INSURED FOR UNLAWFUL ACTS OR ACTS OPPOSED TO PUBLIC POLICY OR LAW. THE FACT THAT THE POLICY HAS TO BE RENEWED EVERY YEAR BY PAYING RENEWAL PREMIUM PRECLUDES ANY ENDURING BENEFITS RESULTING FROM THE POLICY AND THE PAYMENT OF THE PREMIUM IS CLEARLY TO COVER LOSSES TO THE BUSINESS. THUS, THE EXPENDITURE ON PROFESSIONAL INDEMNITY INSURANCE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IS AN ADMISSIBLE DEDUCTION. FOR THAT WE ALSO RELY ON THE JUDGMENT OF THE COORDINATE BENCH OF MUMBAI TRIBUNAL, IN THE CASE OF M/S. A.F. FERGUSON ASSOCIATES VS. ACIT IN ITA NO.6962/M/2012, WHEREIN IT WAS HELD AS FOLLOWS: 5. GROUND NO.2 RELATES TO THE DISALLOWANCE ON ACCOUNT OF PREMIUM PAID FOR PROFESSIONAL INDEMNITY INSURANCE. THE AO DISALLOWED THE INSURANCE PREMIUM EXPENDITURE OF RS.2,10,000/- OBSERVING THAT THE SAID EXPENDITURE WAS MADE ON THE LIFE INSURANCE OF THE PARTNERS OF THE FIRM. SINCE THE ABOVE PAYMENTS WERE MADE ON THE PERSONAL INSURANCE OF THE PARTNERS AND THE EXPENSES WERE NOT RELATED TO THE PROFESSIONAL ACTIVITY OF THE ASSESSEE FIRM HE THEREFORE DISALLOWED THE SAID EXPENDITURE. 6. THE LD. CIT(A) MAKING THE SAME OBSERVATIONS CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO. 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND ALSO HAVE GONE THROUGH THE RECORDS. THE LD. REPRESENTATIVE OF THE ASSESSEE SUBMITTED BEFORE US THAT THE SAID EXPENDITURE WAS NOT INCURRED ON THE LIFE INSURANCE OF THE PARTNERS RATHER THE SAME WAS IN RELATION TO PROFESSIONAL INDEMNITY INSURANCE OF THE PARTNERS OF THE FIRM. 8. SINCE THE FIRM IS PROVIDING PROFESSIONAL SERVICES AND AS SUCH THE PROFESSIONAL INDEMNITY INSURANCE PREMIUM THUS WAS RELATED TO THE PROFESSIONAL ACTIVITY OF THE PARTNERS OF THE FIRM AND WAS FOR INDEMNIFICATION OF ANY LOSS ARISING OUT OF ANY CLAIM OF DAMAGES OR COMPENSATION PAYABLE BY THE ASSESSEE FIRM OR ITS PARTNERS IN RELATION TO THE PROFESSIONAL SERVICES PROVIDED BY THEM TO THEIR CLIENTS. UNDER SUCH CIRCUMSTANCES THE OBSERVATION OF THE LOWER AUTHORITIES THAT THE SAID EXPENDITURE WAS IN RELATION TO PERSONAL EXPENDITURE IS WRONG AND ACCORDINGLY THE ADDITION MADE UNDER THIS HEAD IS HEREBY SET ASIDE. THIS GROUND OF APPEAL IS ALSO ALLOWED IN FAVOUR OF THE ASSESSEE. WE NOTE THAT THE FACTS NARRATED IN THE CASE OF M/S. A.F. FERGUSON ASSOCIATES (SUPRA) ARE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE UNDER CONSIDERATION. HENCE, THE EXPENDITURE ON PROFESSIONAL INDEMNITY INSURANCE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IS AN ADMISSIBLE DEDUCTION. THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A) DELETING THE AFORESAID ADDITION. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND THE GROUND ITA NO.1216/KOL/2018 (ASSESSMENT YEAR-2014-15) PAGE | 4 NO.3 RAISED BY THE REVENUE IN ITA NO.587/KOL/2016 AND GROUND NO.3 RAISED BY REVENUE IN ITA NO.588/KOL/2016, ARE DISMISSED. 7. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ISSUE IS BASED ON IDENTICAL AND SIMILAR FACTS RAISED IN THE AY 2010- 11 AND 2011-12 WHEREIN WHILE DELETING THE ISSUE ON HAND, THE TRIBUNAL HELD EXPENDITURE ON PROVISIONAL INDEMNITY INSURANCE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IT IS AN ADMISSIBLE DEDUCTION. IN VIEW OF THE SAME, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). THUS, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.03.2019. SD/- SD/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER DATE:- 27.03.2019 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- JCIT (ODS), CIRCLE-22, KOLKATA. 2. RESPONDENT- M/S. DELOITTE HASKINS & SELLS , BENGAL INTELLIGENT PARK, BUILDING ALPHA, 1 ST FLOOR, BLOCK-EP & GP, SECTOR-V, SALT LAKE ELECTRONIC COMPLEX, KOLKATA-700091. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA