BRIDGELINK ADVISORS P. LTD( FORMERLY NOTRE INFOTECH P. LTD), MUMBAI V. ASSTT CIT 10(3), MUMBAI

ITA 1546/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87977 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUDALPH N DSOUZA
• Assessee Lawyers: M D PRAJAPATI
• Keywords: Business expenditure; Corroborative evidences
• Section: 139; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI , ,, , !' !' !' !' ''' ''' ''' '''# ## # $ $ $ $ BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 1546/MUM/2011 (ASSESSMENT YEAR: 2008-09) BRIDGELINK ADVISORS P LTD FORMERLY NONE AS INFOTECH P LTD, FLAT NO. 15, 1 ST FLOOR, COSMOS TOWERS, CASTLE MILLS, THE INDIAN LIBRARY, NEXT TO NAVNEET MOTORS, THANE (WEST), MUMBAI -400 601 .: PAN: AAACN 9954 F VS ASST. COMMISSIONER OF INCOME TAX RANGE -10(3), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M D PRAJAPATI RESPONDENT BY : SHRI RUDALPH N DSOUZA /DATE OF HEARING : 19-11-2014 !'#$ / DATE OF PRONOUNCEMENT : 16-01-2015 ORDER ''' ''' ''' ''' , , , , % %% % PER VIVEK VARMA, JM: INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDE R OF CIT(A) -22, MUMBAI, DATED 14.12.2010, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. THE LEARNED CIT(A) ERRED IN DISALLOWING REGIONAL MA RKETING COST OF RS. 2,80,000/-. 2. THE LEARNED CIT(A) ERRED IN DISALLOWING RENT OF RS. 8,43,873/- U/S 40A(IA). 3. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER, AMEND O R WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL, IF NEC ESSARY. 2. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF IMPARTING COMPUTER TRAINING TO STUDENTS AS BRIDGELINK ADVISORS P LTD FORMERLY NONE AS INFOTECH P LTD ITA 1545/M/2011 2 FRANCHISEE OF APTECH LIMITED. THE RETURN FILED THROUGH E-MOD ULE SCHEME ON 24.09.2008 BY THE ASSESSEE DECLARING LOSS OF R S. 13,66,553/-, WHICH WAS ACCOMPANIED WITH BALANCE SHEET, PROFIT & LOSS A/C. THE RETURN WAS PROCESSED U/S 143(1) OF THE A CT. NOTICES U/SS 143(2) & 142(1) WERE SERVED UPON THE ASSES SEE FROM TIME TO TIME, WHICH WERE DULY COMPLIED WITH BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, TOTAL REVE NUE IS SHOWN AT RS. 52,74,143/- AND NET LOSS HAS BEEN COMPUTED AT RS. 12,81,548/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE DISALLOWING REGIONAL MARKETING COST (RMC), AO STATES: IN THE P&L A/C, REGIONAL MARKETING COST OF RS. 2,8 0,000/- IS DEBITED BY THE ASSESSEE. IN THIS REGARD, THE DETAIL S AND SUPPORTING EVIDENCES WERE CALLED FOR. IN SUPPORT OF ITS CLAIM, THE ASSESSEE HAS SUBMITTED THE COPY OF THE CONTRACT SIG NED WITH M/S APTECH AND ONE STATEMENT OF ACCOUNT SHOWING VAR IOUS PAYMENTS MADE. ON PERUSAL OF THE DETAILS, IT IS OBS ERVED THAT THERE IS NO CLAUSE IN THE CONTRACT IN RESPECT OF TH E PAYMENT OR REGIONAL MARKETING COST OR ITS SHARING. THE PURPOSE OF SUCH PAYMENT AND THE BASIS OF SUCH QUANTIFICATION ARE AL SO NOT EXPLAINED. THE ASSESSEE HAS NOT SUBMITTED ANY DOCUM ENTARY EVIDENCE PROVING THAT THE SAID COST WAS ITS LIABILI TY INCURRED IN CONNECTION WITH THE BUSINESS ACTIVITY. THE PAYMENT IS CLAIMED TO HAVE BEEN MADE TO M/S APTECH BUT IS NOT COVERED BY THE CONTRACT ENTERED INTO FOR THE BUSINESS. HENCE, THE CLAIM IS NOT SUBSTANTIATED. IT IS NOT PROVED THAT THE SUM WAS AC TUALLY INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND PAID FOR THE SAID PURPOSE. HENCE, THE CLAIM IS DISA LLOWED AND THE SUM OF RS. 2,80,000/- IS ADDED TO THE TOTAL INC OME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE APPROACH ED THE WHO, WHILE UPHOLDING THE ORDER PASSED BY THE AO ON THE IMPUGNED ISSUE HELD, I HAVE GONE THROUGH THE ASSESSMENT ORDER, PERUSED THE SUBMISSIONS MADE BY APPELLANT AND ALSO DISCUSSED TH E CASE WITH THE A/R OF THE APPELLANT. THE AO DURING ASSESS MENT PROCEEDINGS NOTED THAT ASSESSEE HAD DEBITED REGIONA L MARKETING COST OF RS. 2,80,000/- TO THE P & L A/C CLAIMING IT TO BE A BUSINESS EXPENDITURE PAYABLE TO APTECH LTD. HOWEVER , THERE WAS NO SUCH CLAUSE IN CONTRACT AGREEMENT IN RESPECT OF THE PAYMENT OF REGIONAL MARKETING COST OR ITS SHARING, AND PURPOSE OF BUSINESS AND BASIS OF THE SAME HAS NOT BEEN EXPL AINED. BEFORE ME IT WAS SUBMITTED THAT THE EXPENDITURE WAS FOR THE BRIDGELINK ADVISORS P LTD FORMERLY NONE AS INFOTECH P LTD ITA 1545/M/2011 3 PURPOSE OF BUSINESS AND IN A MEETING IT WAS DECIDED THAT FRANCHISE WOULD CONTRIBUTE TO REGIONAL MARKETING CO ST. HOWEVER, THE APPELLANT FAILED TO SHOW THE CLAUSE AS PER WHIC H THIS AMOUNT WAS PAYABLE BY THE APPELLANT TO MAKE IT AS EXPENDIT URE MADE OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSIN ESS. THUS, NEITHER BEFORE AO NOR DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE ME THE APPELLANT HAS FURNISHED ANY DOCUMENTA RY EVIDENCE TO PROVE THAT THE EXPENDITURE WAS FOR THE PURPOSE OF BUSINESS. IN VIEW OF THIS THE DISALLOWANCE MADE BY THE AO IS UPHELD. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. THE AR PRAYED FOR VERIFICATION OF GENUINENESS AND NATUR E OF EXPENSES, WHICH WERE DIRECTLY DEDUCTED BY THE FRANCHI SOR, WHICH, IN THE OPINION OF THE ASSESSEE WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINESS, AR FURTHER STATES THAT SUCH NATURE OF BUSINESS REQUIRES HUGE MARKETING EXPENS ES, THE VERY EXPENDITURE OF RMC WAS ONE OF SUCH. 7. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS OF THE PARTIES PERUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE REVENUE A UTHORITIES. AFTER DUE DELIBERATION TO THE ENTIRETY OF FACTS, ARGUMENTS AND SUBMISSIONS, WE ARE OF THE OPINION THAT THE SAID HUGE EXPENDITURE INCURRED BY THE FRANCHISOR, AS PER MEETING CO NVENED WITH FRANCHISEE, IT WAS DECIDED TO SHARE EXPENSES BY ALL T HE FRANCHISES, WHICH WILL BE DISTRIBUTED TO FRANCHISES ONCE THE AMOUNT OF COMMISSION IS ACCUMULATED WITH THE FRANCHISOR. AS WE DO NOT SEE ANY INFIRMITY, IN THE ARGUMENTS MADE BY THE ASSESSEE, ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE COST OF RS. 2,80,000/- INCURRED BY THE ASSESSEE ON RMC. ACCORDINGLY, THE GROUN D IS ALLOWED. BRIDGELINK ADVISORS P LTD FORMERLY NONE AS INFOTECH P LTD ITA 1545/M/2011 4 9. GROUND NO. 2 RELATES TO DISALLOWANCE OF RENT OF RS. 8,43,874/- U/S 40(A)(IA). 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, WHILE DISALLOWING RENT OF RS. 8,43,874/- U/S 40(A)(IA), THE AO OPINED, THE DETAILS OF EXPENSES AND THE TDS THEREON WERE CALLED FOR VIDE NOTICE ISSUED U/S 142(1) OF THE ACT ON 30.06.2 010. THE ASSESSEE SUBMITTED VARIOUS DETAILS INCLUDING THE CO PIES OF THE ACKNOWLEDGEMENT OF TDS RETURN FILED, STATEMENT OF E XPENSES AND THE TDS THEREON AND DETAILS OF EXPENSES. IT IS FOUND FROM THE SAID DETAILS THAT OUT OF RENT PAYMENT OF RS. 15 ,43,679/- DEBITED TO THE P&L A/C, THE ASSESSEE HAS MADE TDS O N RENT OF RS. 6,99,806/- ONLY. NO TDS HAS BEEN MADE ON THE BA LANCE RENT EXPENSES OF RS. 8,43,873/-. IN THIS REGARD, NO EXPL ANATION OR RECONCILIATION IS SUBMITTED BY THE ASSESSEE TILL DA TE INSPITE OF THE OPPORTUNITIES PROVIDED. THE ASSESSEE HAS FAILED TO PROVE THAT IN RESPECT OF THE RENT EXPENDITURE TO THE EXTENT OF RS . 8,43,873/-, IT HAS COMPLIED WITH THE PROVISIONS OF CHAPTER XVII-B OF THE ACT. THEREFORE, THE SAID EXPENDITURE IS DISALLOWED U/S 4 0(A)(IA) OF THE ACT AND THE SUM OF RS. 8,43,873/- IS ADDED TO THE T OTAL INCOME OF THE ASSESSEE. 11. THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A), WHILE UPHOLDING THE DISALLOWANCE MADE BY AO U/S 40(A)(IA) OF RS. 8,43,873/-, IT WAS HELD BY THE CIT(A), I HAVE GONE THROUGH THE ASSESSMENT ORDER, PERUSED THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO DISCUSSE D THE CASE WITH THE AR OF THE APPELLANT. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAD P AID RENT OF RS. 15,43,679/- OUT OF WHICH TDS ON RENT OF RS. 6,99,806/- ONLY WAS MADE AND NO TDS ON BALANCE AMOUNT OF RS. 8,43,873/- HAD BEEN MADE. THE APPELLANT COULD NOT R ECONCILE THE FIGURES BEFORE AO. IT HAS BEEN EXPLAINED BEFORE ME THAT THERE WAS AN AUTHORIZATION TO DEDUCT TDS AT A LOWER RATE AND RECONCILIATION STATEMENT HAS ALSO BEEN SUBMITTED. I T IS NOTED FROM THE CERTIFICATE ISSUED FOR LOWER DEDUCTION THA T THE SAME IS FOR RS. 12 LACS WHILE THE RENT PAID TO MNS PROPERTI ES PVT LTD IS RS. 15,43,679/-. THE FIGURE OF RS. 12 LACS IS WITH REFERENCE TO RENT PAID TO BHARAT JAIN, JITENDRA JAIN AND KIRANBH AI H PUNAMIYA, WHILE THE TDS CERTIFICATE FOR LOWER DEDUC TION IS IN NAME OF MNS PROPERTIES PVT LTD. THE APPELLANT COULD NOT RECONCILE THIS, EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS AND HENCE, I HAVE NO REASON IN INTERFERE IN THE FIN DINGS GIVEN BY THE AO IN ASSESSMENT ORDER. IN VIEW OF THIS, DISALL OWANCE MADE BY THE AO U/S 40(A)(IA) OF RS. 8,43,873/- IS UPHELD . 12. THE AR FOR THE ASSESSEE STATES THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF COMPUTER TRAINING AND HAVING TWO BRIDGELINK ADVISORS P LTD FORMERLY NONE AS INFOTECH P LTD ITA 1545/M/2011 5 TRAINING CENTERS, ONE AT THANE AND ANOTHER AT DADAR. BO TH THESE PREMISES ARE ON RENTAL. AR FURTHER STATES THAT TDS ON R ENT PAYMENT IS REGULARLY DEDUCTED AND ONE OF THE LANDLORD V IZ. MNS PROPERTIES PVT. LTD. WHOSE PREMISE AT THANE (WEST) ARE TA KEN ON RENTAL BASIS HAS OBTAINED LOWER DEDUCTION CERTIFICATE U/S 197(1) OF THE INCOME TAX ACT DATED 09.05.2007. AS PER THE AR, THE CERTIFICATE OF THE DEDUCTEE VIZ. THE ASSESSEE IS AUTHORIZED TO DEDUCT TDS @ 1.25% INSTEAD OF 20% FROM RENT PAYMENT U/ S 194I. THE COPY OF CERTIFICATE U/S 197(1), COPY OF WHICH IS ON RECORD. THE AO, WHILE COMPLETING THE ASSESSMENT HAS ONLY ASKED FOR TDS RETURNS AND TDS CHALLANS. THE STATEMENT OF RECONCILIATION BETWEEN RENT EXPENSES AND TDS DEDUCTION U /S 194I WAS NEVER ASKED, WHICH THE ASSESSEE SUBMITTED AND IN PARTICULAR PAGES 19 & 20 OF THE PAPER BOOK, WHEREBY, IT C AN BE SEEN THAT RENT HAS CONTINUOUSLY BEEN PAID W.E.F. 11.4.2007 TO 31.03.2008. 13. THE DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 14. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES PE RUSED THE RECORDS AND GONE THROUGH THE ORDERS OF THE REVEN UE AUTHORITIES. AFTER DUE DELIBERATION TO THE ENTIRETY OF FACTS , ARGUMENTS AND SUBMISSIONS, WE DEEM IT FIT TO REPRODUCE S ECTION 40(A)(IA): ANY INTEREST, COMMISSION OR BROKERAGE, RENT ROYALT Y, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR C ARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UND ER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 15. AFTER GOING THROUGH THE SUBMISSIONS MADE BY THE AR, A T PAGES 19 & 20 OF THE PAPER BOOK, THE RENT HAS CONTINUO USLY BEEN PAID DURING YEAR UNDER CONSIDERATION. ACCORDINGLY, WE RES TORE BRIDGELINK ADVISORS P LTD FORMERLY NONE AS INFOTECH P LTD ITA 1545/M/2011 6 THE ISSUE OF RENT TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFTER METICULOUSLY GOING THROUGH THE RECORD A ND ANY FURTHER DETAILS REQUIRED, IF ANY, WHICH HE MAY CALL FROM THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE. 16. ACCORDINGLY, GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT, APPEAL AS FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JANUARY, 2015. SD/- SD/- ( ) ( ''' ''' ''' ''' ) ( ( ( ( ) ) ) ) ( ( ( ( (R C SHARMA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 16 TH JANUARY, 2015 */ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A)-22, MUMBAI. 4) THE CIT- 10, MUMBAI. 5) +,- ***. , / *.$ , 0 / THE D.R. G BENCH, MUMBAI. 6) -1 2 COPY TO GUARD FILE. /(3 / BY ORDER / / TRUE COPY / / 4 / 5 / *.$ , 0 DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * *CHAVAN, SR.PS