Vasantha Corpo Relations Private Limited, Hyderabad, Hyderabad V. Dy. Commissioner of Income Tax, Circle-17(2), Hyderabad, Hyderabad

ITA 1470/Hyd/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8647 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 17-02-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 18-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NOS. 162 & 1470/HYD/2017 ASSESSMENT YEARS: 2012-13 & 2013-14 VASANTHA CORPO RELATIONS PRIVATE LIMITED, HYDERABAD [PAN: AADCV4959M] VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-17(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S.RAMA RAO, AR FOR REVENUE : SHRI ROHIT MUJUMDAR, DR DATE OF HEARING : 17-02-2021 DATE OF PRONOUNCEMENT : 24-03-2021 O R D E R PER S.S.GODARA, J.M. : THESE TWO ASSESSEES APPEALS FOR AYS.2012-13 & 2013 -14 ARISE FROM THE CIT(A)-5, HYDERABADS ORDERS DATED 30- 11-2016 & 20-06-2017 PASSED IN APPEAL NOS.0063/2015-16/CIT( A)-5 & 0126/2016-17/CIT(A)-5; RESPECTIVELY IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH PARTIES. CASE FILES PERUSED. 2. THE ASSESSEES IDENTICAL SOLE SUBSTANTIVE GRIEVANCE RAISED IN BOTH THESE APPEALS CHALLENGES CORRECTNESS OF THE LO WER AUTHORITIES ACTION DISALLOWING STAY INCENTIVES CLAIMS OF RS.1,10,00,000/- AND RS.1,24,76,000/-; RESPECTIVELY IN THE ITA NOS. 162 & 1470/HYD/2017 :- 2 -: COURSE OF ASSESSMENT AND AFFIRMED IN THE CIT(A)S LO WER APPELLATE DISCUSSION AS UNDER: 4.5 AS REGARDS THE ISSUE OF DISALLOWANCE OF STAY I NCENTIVES, THE APPELLANT CONTENDED THAT THE STAY INCENTIVE AMOUNT WAS PAID TO THE GUESTS WITH THE INTENTION OF ENSURING CONTINUED STA Y IN ITS GUEST HOUSE WITHOUT MOVING TO OTHER GUEST HOUSES. THE APP ELLANT CLAIMED THAT IT HAS BEEN CATERING TO THE ACCOMMODATION NEED S OF THE EMPLOYEES OF M/S.TATA CONSULTANCY SERVICES LIMITED (TCS). SIMULTANEOUSLY, THE TCS HAS GRANTED THE LICENSE TO SEVERAL COMPANIES TO PROVIDE ACCOMMODATION TO ITS EMPLOYEES IN THE AREA OF HYDERABAD. IN ORDER TO ATTRACT THE GUESTS, AND ENSU RING THE CONTINUED STAY OF THE GUESTS ALREADY STAYING, THE APPELLANT H AD FORMULATED A SCHEME IN TERMS OF WHICH THE EMPLOYEES ARE PAID AS INCENTIVE FOR NUMBER OF DAYS STAYED. IN SUPPORT OF THE PAYMENT, T HE SIGNATURES OF THE GUESTS ON THE VOUCHERS WERE STATED TO BE OBTAIN ED. THE AMOUNT IS PAID NORMALLY AT THE RATE OF RS.100/- PER DAY PER P ERSON. THE NAMES OF THE PERSONS AND THE AMOUNTS PAID TO THEM WERE ST ATED TO BE FURNISHED TO THE ASSESSING OFFICER DURING THE COURS E OF ASSESSMENT PROCEEDINGS. THE INCENTIVES PAID WERE CLAIMED IN TH E BUSINESS INTERESTS. THIS PAYMENT WAS NOT MADE AS A NECESSARY CONDITION FOR ENTERING INTO THE LICENSE AGREEMENT WITH THE TCS. I T WAS PURELY VOLUNTARY IN NATURE. IT WAS CLAIMED THAT THE EXPEND ITURE INCURRED VOLUNTARILY AND NECESSARILY FOR BUSINESS INTERESTS SHOULD BE ALLOWED AS A DEDUCTION. 4.6 I HAVE CAREFULLY GONE THROUGH THE CONTENTION S OF THE APPELLANT AS WELL AS THE ASSESSING OFFICER. FIRST OF ALL, IT IS PERTINENT TO NOTE THAT SUCH CLAUSE IS NOT INCLUDED IN THE AGREEMENT E NTERED INTO BETWEEN THE ASSESSEE AND TCS. ANY SUCH PAYMENT AS C LAIMED BY THE ASSESSEE IS BEYOND THE AGREEMENT AND AT BEST MAY BE AN INFORMAL ARRANGEMENT. IT WAS CLAIMED THAT EVEN IF SUCH CLAUSE IS NOT THER E, WHEN THE SAME IS MEANT FOR BUSINESS PURPOSE IT SHOULD BE ALL OWED. IT IS PERTINENT TO MENTION HERE THAT SUCH INCENTIVES WERE PAID TO ONLY TCS EMPLOYEES BUT NO OTHER PERSONS WHO STAYED IN THE PR EMISES OF THE ASSESSEE. IF THE COMPANY EVOLVED THIS POLICY OF GIV ING INCENTIVES, IT SHOULD BE COMMON FOR ALL GUESTS AND NOT A SPECIFIED CATEGORY. MOREOVER, THE COMPANY CLAIMED TO HAVE PAID RS.100/- PER DAY AS INCENTIVE AND ON AVERAGE GRANTED RS.3000/- TO AL L THE GUESTS IRRESPECTIVE OF THEIR STAY. THE COMPANY PROVIDED A MASS LEDGER OF STAY INCENTIVES, BUT NOT PRODUCED ANY VOUCHER AS EV IDENCE FOR CASH PAYMENTS. EVEN THE LEDGER CONTAINS ONLY THE NAMES O F PERSONS AND THE NAME OF THE CITY. NOWHERE THE EMPLOYEE CODE OR COMPLETE ADDRESSES ARE REFLECTED IN THE SAID LEDGER. WHEN TH E GUESTS ARE EMPLOYEES OF TCS, SUCH AN AMOUNT SHOULD HAVE BEEN C REDITED TO THEIR ITA NOS. 162 & 1470/HYD/2017 :- 3 -: ACCOUNT, AS ALL THE EMPLOYEES HAVE THEIR ACCOUNTS M AINTAINED WITH TCS. IN VIEW OF THE ABOVE, THE STAY INCENTIVE SCHEM E ADOPTED BY THE ASSESSEE IS APPEAR TO BE AN AFTER-THOUGHT AND THE H UGE EXPENDITURE OF RS.1.10 CR TOWARDS SUCH STAY INCENTIVE IS NOT AN ALLOWABLE EXPENDITURE. MOREOVER THE EXPENDITURE WAS STATED TO BE INCURRED IN CASH AND HENCE THERE IS NO AUDIT TRAIL TO VERIFY TH E GENUINENESS OF THE EXPENDITURE. THEREFORE, I CONFIRM THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE EXPENDITURE OF RS.1.10 CR TOWARDS S TAY INCENTIVES. IN THE RESULT, THE GROUND NO.4 RAISED BY THE APPELLANT IS DISMISSED. 3. MR.RAMA RAO VEHEMENTLY CONTENDED DURING THE COURSE OF HEARING THAT BOTH THE LEARNED LOWER AUTHORITIES HAVE ER RED IN LAW AND ON FACTS IN DISALLOWING THE ASSESSEES CLAIM OF STAY INCENTIVES PAID IN CASH TO TCS EMPLOYEES. HE SOUGHT TO INVITE OUR ATTENTION TO THE ASSESSEES DETAILED PAPER BOOK CON TAINING 303 PAGES INCLUDING LEDGER ACCOUNTS, LEAVE/LICENCE A GREEMENTS WITH TCS EMPLOYEES DETAILS, EVIDENCE(S) FILED BEFORE THE LOWER AUTHORITIES, INCOME TAX RETURNS WITH ACKNOWLEDGMENT, COMPUTATION OF INCOME, AUDIT REPORT, BALANCE SHEET, PROF IT AND LOSS A/C AND SCHEDULES. HIS CASE IS THAT ALL THE SAID DETAILED PARTICULARS IN ASSESSEES BOOKS HAVE NOWHERE BEEN RE JECTED SO AS TO DISALLOW THE IMPUGNED CASH INCENTIVES CLAIM OF RS.1,10,00,000/- AND RS.1,24,76,000/- IN ISSUE. 4. LEARNED DEPARTMENTAL REPRESENTATIVE HAS PLACED STRON G RELIANCE ON THE CIT(A)S ACTION, AFFIRMING THE IMPUG NED DISALLOWANCE. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS. THERE IS NO ISSUE BETWEEN THE PARTIES THA T THE ASSESSEE IS IN FACT HAVING AN AGREEMENT WITH M/S.TCS REGARDING STAY ARRANGEMENT TO BE MADE FOR THE LATTERS EMPLOYEES. ITS SOLE PLEA IS THAT IT HAD PAID CASH INCE NTIVES OF ITA NOS. 162 & 1470/HYD/2017 :- 4 -: RS.100/- EACH TO THE TCS EMPLOYEES WHICH IN TURN HAS BEEN WRONGLY DISALLOWED IN THE LOWER PROCEEDINGS. WE FIND NO REASON TO SUSTAIN EITHER PARTIES SUBMISSIONS IN THE ENTIRTY. THE FACT REMAINS THAT NEITHER THE ASSESSEE HAS PLACED ON RECORD ANY EVIDENCE THAT IT WAS MANDATORY ON ITS PART TO OFFER ANY DISCOUNT OR CASH INCENTIVES TO THE TCS EMPLOYEES NOR TH E ASSESSING OFFICER HAS ISSUED NOTICE TO EVEN A SINGLE SUCH EMPLOYEE ON TEST CHECK BASIS DESPITE THE FACT THAT THE TAXPAYERS PAPER BOOK HAS DULY SUBMITTED LIST OF THE SA ID EMPLOYEES BEFORE US. WE OBSERVE IN THIS FACTUAL BA CKDROP THAT WHETHER OR NOT TO OFFER ANY CASH DISCOUNT DEPENDS ON THE SUBJECTIVE SATISFACTION OF AN ASSESSEE ONLY. FACED WITH THIS SITUATION, WE DEEM IT APPROPRIATE THA T AN ESTIMATED DISALLOWANCE OF 50% OF THE ASSESSEES CLAIM WOULD BE JUST AND PROPER AND THE REMAINING EQUAL SUM OF DISALLOWANCE NEEDS TO BE CONFIRMED. WE ORDER ACCORDI NGLY. IT IS MADE CLEAR THAT OUR INSTANT ESTIMATION SHALL NOT BE TAKEN AS A PRECEDENT IN ANY OTHER CASE; WHATSOEVER THE CASE MAY BE . NECESSARY COMPUTATION SHALL FOLLOW TO BE DONE AS PER LAW IN BOTH ASSESSMENT YEARS. 6. THESE TWO ASSESSEES APPEALS ARE PARTLY ALLOWED I N ABOVE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE R ESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 24-03-2021 TNMM ITA NOS. 162 & 1470/HYD/2017 :- 5 -: COPY TO : 1.VASANTHA CORPO RELATIONS PRIVATE LIMITED, H.NO.1- 96/4, 1 ST FLOOR, ABOVE HYDERABAD HOUSE, SUPREME BUILDING, MADHAPUR MAIN ROAD, HYDERABAD. 2.THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-17(2), HYDERABAD. 3.CIT(APPEALS)-5, HYDERABAD. 4.PR.CIT-5, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.