ASST CIT 14(1)(2), MUMBAI V. DHL EXPRESS (INDIA) P. LTD, MUMBAI

ITA 165/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1853 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.165/MUM/2015 (ASSESSMENT YEAR 2009-10) THE ASST. COMMISSIONER OF INCOME TAX -14(1)92), ROOM NO.460, 4 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S. DHL EXPRESS (INDIA) PVT.LTD. 8 TH FLOOR, DHEERAJ ARMA, A.K.MARG, BANDRA(E),MUMBAI 400038 PAN: AABCD 3611Q ...... RESPOND ENT APPELLANT BY : SHRI VAIBHAV JAIN RESPONDENT BY : SHRI NIRAJ SHETH DATE OF HEARING : 18/11/2016 DATE OF PRONOUNCEMENT : 18 /11/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAIN ING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-21, MUMBAI DATED 20/10/2014, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28/03/2013. 2 ITA NO.165/MUM/2015 (ASSESSMENT YEAR 2009-10) 2. IN THIS APPEAL, THE SOLITARY GROUND RAISED BY TH E ASSESSEE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF CLUB EXPENSES AMOUNTING TO RS.72,90,873/- WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE FAILED TO PROVE THE COMMERCIAL EXPEDIENCY OF SUCH EXPENDITURE AND FURTHER FAILED TO PROVE THAT SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE RES PONDENT ASSESSEE IS ENGAGED IN THE BUSINESS OF INTERNATIONAL COURIER SE RVICES AND OPERATION OF PICK-UP AND DELIVERY OF EXPRESS COURIER SHIPMENT S. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD DEBITED A SUM OF RS.72,90,873/- ON ACCOUNT OF EXPEN DITURE INCURRED ON PAYMENTS TO CLUBS. ON BEING SHOW CAUSED, ASSESSEE S UBMITTED THAT SAID EXPENSES WERE INCURRED FOR PROMOTION OF BUSINESS AN D HENCE WERE ALLOWABLE. THE ASSESSING OFFICER DISAGREED WITH THE ASSESSEE AND ACCORDING TO HIM THERE WAS NO MATERIAL TO SUGGEST T HAT SUCH EXPENDITURE HAD RESULTED IN PROMOTION OF BUSINE SS. ACCORDINGLY, HE DISALLOWED A SUM OF RS.72,90,873/- IN RESPECT OF CL UB PAYMENTS. 4. BEFORE CIT(A), ASSESSEE REITERATED ITS STAND THAT SUCH EXPENDITURE HAVE BEEN INCURRED PURELY ON ACCOUNT OF BUSINESS E XIGENCY AND IS A GENUINE EXPENDITURE INCURRED BY THE ASSESSEE. THE CIT(A) NOTED THAT SIMILAR DISALLOWANCE HAD COME UP IN ASSESSMENT YEAR 2005-06 ALSO AND THE ACTION OF THE ASSESSING OFFICER WAS SET-ASIDE. IN PARA 3.2 OF HIS ORDER, THE CIT(A) HAS REPRODUCED THE DISCUSSION IN THE ORDER OF THE CIT(A) FOR THE EARLIER ASSESSMENT YEAR 2005-06. FO LLOWING THE PRECEDENT, AS ALSO THE JUDGMENT OF THE HONBLE SUPR EME COURT IN THE 3 ITA NO.165/MUM/2015 (ASSESSMENT YEAR 2009-10) CASE OF CIT V. UNITED GLASS MGF CO. LTD., CIVIL APP EAL NO.6447 OF 2012 DATED 12 TH SEPTEMBER, 2012, THE CIT(A) HAS DELETED THE ADDITI ON. 5. BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE HAS M ERELY REITERATED THE DISCUSSION IN THE ASSESSMENT ORDER TO POINT OUT THAT EXPENSES ON ACCOUNT OF CLUB PAYMENTS DO NOT PROVE T HAT IT WAS INCURRED FOR THE PURPOSES OF BUSINESS. 6. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR TH E ASSESSEE POINTED OUT THAT THE CIT(A) HAS MADE NO MISTAKE IN DELETING THE ADDITION BY FOLLOWING THE JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF UNITED GLASS MGF CO.LTD.(SUPRA). IT HAS AL SO BEEN POINTED OUT THAT THERE IS NO DISPUTE TO THE FACT-SITUATION THAT THE IMPUGNED CLUB EXPENDITURE HAS BEEN INCURRED ON THE EMPLOYEES/OFFI CERS OF THE ASSESSEE COMPANY. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. QUITE CLEARLY, THE CIT(A) HAS DELETED THE DISALLOWANCE PR IMARILY FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2005-06. THOUGH AT THE T IME OF HEARING, NONE OF THE PARTIES COULD CLEARLY POINT OUT THE FAT E OF THE DECISION OF THE CIT(A) FOR ASSESSMENT YEAR 2005-06, BUT EVEN OTHERW ISE ALSO THE APPEAL IS LIABLE TO BE DISPOSED OF IN THE LIGHT OF THE JUD GMENT OF THE HONBLE SUPREME COURT IN THE CASE UNITED GLASS MGF CO. LTD. (SUPRA). THE CIT(A) TOOK NOTE OF THE FACT-SITUATION IN THE INSTANT CASE FOR ASSESSMENT YEAR 2005-06, WHEREIN IT HAS BEEN NOTED THAT THE MEMBER SHIP OF THE CLUB WAS TAKEN IN THE NAME OF THE ASSESSEE COMPANY AND N OT IN THE NAME OF THE EMPLOYEES, THE EXPENSES WERE FOR USE OF CLUB FA CILITIES BY THE 4 ITA NO.165/MUM/2015 (ASSESSMENT YEAR 2009-10) EMPLOYEES. ON THIS BASIS, CIT(A) PROCEEDED TO HOLD THAT, AS IN THE PAST YEAR, THE IMPUGNED EXPENDITURE WAS OF THE ASSESSE E COMPANY, THOUGH FOR THE PURPOSE OF ALLOWING CERTAIN BENEFITS TO ITS EMPLOYEES. BEFORE US, THERE IS NO CHALLENGE TO THE FACT-SITUATION AND UND ER THESE CIRCUMSTANCES IT HAS TO BE HELD THAT EXPENDITURE IN CURRED FOR THE PURPOSES OF WELFARE OF THE EMPLOYEES IS AN ALLOWABL E EXPENDITURE, BEING PAYMENTS MADE TO CLUBS, FOLLOWING THE JUDG MENT OF THE HONBLE SUPREME COURT IN THE CASE OF UNITED GLASS MGF CO. L TD.(SUPRA). IN THIS VIEW OF THE MATTER, WE HEREBY AFFIRM THE DECISION O F THE CIT(A) AND REVENUE FAILS IN ITS APPEAL. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/2016 SD/- SD/- ( RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 18/11/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI