Deputy Commissioner of Income-tax, V. Coca - Cola India Pvt. Ltd., Pune

ITA 1785/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2524 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MURLIDHARAN

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.1781 TO 1786/PN/2014 #& & / ASSESSMENT YEARS : 1999-2000 TO 2004-05 DCIT, CIRCLE-1(1), PUNE . / APPELLANT V/S COCA COLA INDIA PVT. LTD., PLOT NO.1109-1110, PIRANGUT, TAL : MULSHI, PUNE 411 042 PAN NO. AAACB8573G . / RESPONDENT / ASSESSEE BY : SHRI MURLIDHARAN / REVENUE BY : SHRI AVADHESH KUMAR / ORDER PER R.K. PANDA, AM : THE ABOVE APPEALS FILED BY THE REVENUE ARE DIRECTED AGA INST THE COMMON ORDER DATED 28-02-2014 OF THE CIT(A)-I, PUN E RELATING TO ASSESSMENT YEARS 1999-2000 TO 2004-05 RESPECTIVEL Y. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER. / DATE OF HEARING :10.03.2016 / DATE OF PRONOUNCEMENT: 18.03.2016 2 ITA NO.1781 TO 1786/PN/2014 2. FIRST, WE TAKE UP ITA NO.1781/PN/2014 AS THE LEAD CA SE. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AN D TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A), GROSSLY ERRED IN RESTRICTING THE DISALLOWANCE IN RESPECT OF SERVICE CHARGES TO 30% OF THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER WITHOUT ASSIGNING VALID REASONS AND WITHOUT APP RECIATING THE FACT THAT THE ADDITION WAS MADE ON ACCOUNT OF FAILUR E ON THE PART OF THE ASSESSEE TO PROVE THAT SUCH EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A), GROSSLY ERRED IN ALLOWING THE ASSESSEE, THE EXPENSES BORNE BY THE ASSESSEE RELATING TO OTHER CONCERN, WHICH HAS RESULTED IN EXCESS DEBITING OF EXPENSES THEREBY LEADING TO ARTIFICIALLY LOWERING OF PROFITS, THUS CAUSING HUGE LOSS TO THE REVENUE. 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD.CIT(A) MAY BE VACAT ED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 31-12-1999 DECLARING INCOME OF RS.2,99,20,219/-. THE AO COMPLETED THE ASSESSMENT U/S.143 (3) ON 28-03-2002 COMPUTING THE TOTAL INCOME AT RS.220,65,18, 080/-. IN THE SAID ORDER APART FROM VARIOUS ADDITIONS/DISALLOWANCE S THE AO HAD MADE DISALLOWANCES IN RESPECT OF MARKETING EXPENSE S AND SERVICE CHARGES PAID. 4. IN APPEAL THE LD.CIT(A) DISALLOWED THE WHOLE OF THE MARKETING EXPENSES AS AGAINST 25% DISALLOWED BY THE AO. SIMILARLY OUT OF THE SERVICE CHARGES CIT(A) DISALLOWED AN A MOUNT OF RS.16,22,50,083/- AS AGAINST DISALLOWANCE OF RS.54,22,93,800/ - BY THE AO. THE ASSESSEE AS WELL AS THE REVENUE PREFERR ED APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 31-03 -2010 3 ITA NO.1781 TO 1786/PN/2014 DECIDED THE ISSUE OF MARKETING EXPENSES IN FAVOUR OF THE ASSESSEE. SO FAR AS THE ISSUE REGARDING SERVICE CHARGE IS CONCERNE D THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE AO FOR VERIFIC ATION OF THE EXPENDITURE AS TO WHETHER SUCH EXPENDITURE INCURRE D IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE. THE AO IN THE ORDER PASSED U/S.143(3) R.W.S.254 ORDER DATED 3 0-12- 2011 DISALLOWED THE SERVICE CHARGES AT RS.38,00,43,717/-. 5. IN APPEAL THE LD.CIT(A) RESTRICTED SUCH DISALLOWANCE TO 30% OF THE TOTAL DISALLOWANCE MADE BY THE AO WHICH IS THE SUBJ ECT MATTER OF APPEAL BEFORE THE TRIBUNAL BY THE REVENUE. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUB MITTED THAT THE ASSESSEE HAD FILED A MISCELLANEOUS APPLICATION AGAIN ST THE ORDER OF THE TRIBUNAL DATED 31-03-2010 ON THE ISSUE OF S ERVICE CHARGES. THE TRIBUNAL VIDE ORDER DATED 06-12-2013 DISMIS SED THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE ON THIS ISSUE . THE ASSESSEE FILED A WRIT PETITION BEFORE THE HONBLE BOMBAY HIG H COURT AGAINST THE ORDER OF THE TRIBUNAL IN THE MISCELLANEOU S APPLICATION REJECTING THE ISSUE OF SERVICE CHARGES. HE D REW THE ATTENTION OF THE BENCH TO THE ORDER OF HONBLE BOMBAY HIGH COURT IN WRIT PETITION NO.3650/2014 ORDER DATED 14-08-2014 WHIC H QUASHED THE MISCELLANEOUS APPLICATION DATED 06-12-2013 BY PASSING THE FOLLOWING ORDER : (A) THE ORDER PASSED BY THE TRIBUNAL ON THE MISC. APP LICATION DATED 6 TH DECEMBER, 2013 IS QUASHED AND SET-ASIDE. (B) THE MISC. APPLICATION FILED BY THE PETITIONER SE EKING RECALL OF THE ORIGINAL ORDER TO THE EXTENT OF THE CLAIM OF SER VICE CHARGES INCLUDING TRAVELLING EXPENSES AND RESTORING THAT CLAIM TO THE FILE OF THE TRIBUNAL AND THE APPEAL FILED BY IT, IS, THEREFORE, ALLOWED. 4 ITA NO.1781 TO 1786/PN/2014 (C) THE ORIGINAL ORDER PASSED BY THE TRIBUNAL DATED 31 ST MARCH, 2010 IS RECALLED TO THE EXTENT OF THE CLAIM OF SERVIC E CHARGES INCLUDING TRAVELLING EXPENSES. (D) THE APPEAL FILED BY THE PETITIONER ASSESSEE BEFORE THE TRIBUNAL NAMELY INCOME TAX APPEAL NO.1258/PN/2003 IS RESTORED TO THE FILE OF THE INCOME TAX APPELLATE TRIBUNAL, PUNE BENCH, FOR A DECISION AFRESH ON MERITS AND IN ACCORDANCE WITH LAW ON THE CLAIM OF SERVICE CHARGES INCLUDING TRAVELLING EXPENSES AND WHICH IT SHOULD DECI DE AS EXPEDITIOUSLY AS POSSIBLE. ALL CONTENTIONS OF BOTH SIDES IN RELATION TO THIS CLAIM ARE KEPT OPEN INCLUDING THE CONTENTION OF THE PETITIONER- ASSESSEE THAT THE POSITION, FACTUAL AND LEGAL, REMAINS TH E SAME AND, THEREFORE, THE TRIBUNAL IS BOUND BY THE FINDINGS AND CONCLUSIONS RENDERED BY IT IN RELATION TO THE EARLIER ASSESSMENT YE AR 1997-98 WHICH ALSO STANDS APPROVED IN THE LIGHT OF THE ORDER P ASSED BY THIS COURT. (E) THE TRIBUNAL SHOULD DECIDE THE CLAIM WITHOUT IN ANY MANNER BEING INFLUENCED BY ANY OBSERVATION IN THE ORIGINAL ORDER AS ALSO IN THE ORDER PASSED ON THE RECTIFICATION APPLICATION BOTH OF WHICH DO NOT SURVIVE IN THE LIGHT OF OUR DIRECTION. (F) THE RULE IS MADE ABSOLUTE IN ABOVE TERMS WITH NO ORDERS AS TO COSTS. 7. HE SUBMITTED THAT AN APPEAL WAS FILED BY THE ASSESSE E AGAINST THE ORDER OF THE TRIBUNAL. HE DREW THE ATTENTIO N OF THE BENCH TO THE ORDER OF THE HONBLE HIGH COURT WHEREIN TH E FOLLOWING SUBSTANTIAL QUESTIONS OF LAW WERE FORMULATED : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN RESTORING THE GR OUND RELATING TO THE DISALLOWANCE OF SERVICE CHARGES FOR FRESH ADJUDICAT ION AND IN OMITTING TO DEAL WITH THE GROUND OF APPEAL DESPITE T HE RELEVANT MATERIAL BEING ALREADY ON RECORD AND THE ISSUE BEING COVERED IN FAVOUR OF THE APPELLANT BY THE TRIBUNALS ORDER DATE D 30 TH JUNE, 2008 PASSED FOR THE ASSESSMENT YEAR 1997-98 ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE R ESPONDENT TO EXAMINE THE ENTIRE EXPENDITURE ON ACCOUNT OF SERVICE CHARGES WITHOUT APPRECIATING THAT SUCH DIRECTIONS GO BEYOND THE SUBJEC T MATTER OF THE APPEAL BEFORE US ? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN RESTORING THE GR OUND RELATING TO THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF EMPLOYE ES SPOUSES REIMBURSED BY THE APPELLANT TO CCI INC AS PART OF SERV ICE CHARGES AND IN OMITTING TO DEAL WITH THE GROUND OF APPEAL DESPIT E THE RELEVANT MATERIAL BEING ALREADY ON RECORD AND THE ISSUE BEING COVERED IN 5 ITA NO.1781 TO 1786/PN/2014 FAVOUR OF THE APPELLANT BY THE TRIBUNALS ORDER DATE D 30 TH JUNE, 2008 PASSED FOR THE ASSESSMENT YEAR 1997-98 ? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE EXPENDITURE REIMBURSED BY THE APPELLANT TO CCI INC TOWARDS LOSS OF RS.1,30,00,000/- INCURRED ON WRITE-OFF OF A SECURITY DEPOSIT PLACED TO ACQUIRE PREMISES FOR EMPLOYEES ON LEA SE/LEAVE AND LICENSE IS A CAPITAL LOSS AND NOT AN ALLOWABLE DEDUC TION ? 7.1 HE DREW THE ATTENTION OF THE BENCH TO PARA 10 OF TH E ORDER OF HONBLE HIGH COURT WHICH HAS OBSERVED AS UNDER : 10. WE RESTORE THE QUESTION (I) TO (III) IN THIS APPE AL TO THE FILE OF THE TRIBUNAL FOR IT TO DEAL WITH AND DECIDE THEM AF RESH ALONG WITH THE PROCEEDINGS WHICH ARE THE SUBJECT MATTER OF WRIT PETI TION NO.3650 OF 2014, NAMELY INCOME TAX APPELLATE TRIBUNAL NO.1258/ PN/2003. WE PASS THE SAME ORDER AND WITH THE SAME DIRECTION, AS DEL IVERED IN THE WRIT PETITION. 7.2 HE ACCORDINGLY SUBMITTED THAT SINCE THE AO HAS PASS ED THE ORDER ON THE BASIS OF THE DIRECTION OF THE TRIBUNAL AND SIN CE THE ORDER OF THE TRIBUNAL DOES NOT SURVIVE IN THE LIGHT OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT, THEREFORE, THE SUBSEQUENT PROCEEDINGS BEFORE THE LOWER AUTHORITIES BECOME INFRUCTUOU S. THEREFORE, THE APPEALS FILED BY THE REVENUE ALSO BECOME INFRUCTUOUS. 8. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT IN VIEW OF THE ORDER OF THE HONBLE HIGH COURT SETTING ASIDE THE ISSUE OF SERVICE CHARGES TO THE FILE OF THE TRIBUNAL FOR FRESH ADJUDICATION, THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES HAVE BECOME INFRUCTUOUS. ACCORDINGLY, THE APPEALS FILED BY THE REVENUE HAVE ALSO BECOME INFRUCTUOUS. 9. AFTER HEARING BOTH THE SIDES, WE FIND THE AO HAS PASSE D THE ORDER U/S.143(3) R.W.S. 254 ON THE BASIS OF THE DIRECTION OF THE TRIBUNAL. HOWEVER, THE ORDER OF THE TRIBUNAL HAS BEEN SET ASIDE BY 6 ITA NO.1781 TO 1786/PN/2014 THE HONBLE BOMBAY HIGH COURT AND THE MATTER HAS BEEN RESTORED TO THE FILE OF TRIBUNAL FOR FRESH ADJUDICATION. THEREFORE, THE SUBSEQUENT PROCEEDINGS BEFORE THE AO AND THE CIT(A) HAV E BECOME INFRUCTUOUS. ACCORDINGLY, THE APPEALS FILED BY THE REVENUE HAVE ALSO BECOME INFRUCTUOUS. IN VIEW OF THE ABOVE DISCUSSION , ALL THE APPEALS FILED BY THE REVENUE BEING INFRUCTUOUS ARE DISMISSED. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-03-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 18 TH MARCH, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - I, PUNE 4. 5. 6. THE CIT-I, PUNE $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // // $ ' //TRUE C /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE