DCIT, CIR-5(1), KOLKATA, Kolkata V. M/s Spencer's Retail Ltd., Kolkata

ITA 1939/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5894 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: D S DAMLE
• Keywords: Business expenditure; Earning of tax free income; Revenue expenditure
• Section: 143(3); 14A

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1939 / KOL / 20 16 ASSESSMENT YEAR :2009-10 DCIT, CIRCLE-5(1) P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069 V/S . M/S SPENCERS RETAIL LTD., 31, NETAJI SUBHAS ROAD, DUNCAN HOUSE, 1 ST FLOOR, KOLKAKTA-700001 [ PAN NO.AABCG 3443 R ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SAURABH KUMAR, ADDL. CIT-DR /BY RESPONDENT SHRI D.S. DAMLE, AR /DATE OF HEARING 10-07-2018 /DATE OF PRONOUNCEMENT 25-07-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2009-10 A RISES AGAINST COMMISSIONER OF INCOME TAX(APPEALS)-2, KOLKATAS OR DER DATED 25.07.2016, PASSED IN CASE NO.981/CIT(A)-2/14-15, REVERSING THE ASSESSING OFFICERS ACTION INTER ALIA DISALLOWING / ADDING ASSESSEES C LUB EXPENDITURE CLAIM, ESOP, SECTION 36(1)(VA) DISALLOWANCE ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO ESI/PF AND SECTION 14A R .W. RULE 8D DISALLOWANCE OF 20,32,700/-; RESPECTIVELY INVOLVING PROCEEDINGS U/S . 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THIS ASSESSEE IS A COMPANY ENGAGED IN RETAIL TRA DING OF FOOD ITEMS, NON-FOOD ITEMS, MUSIC, BOOKS ETC. IT CLAIMED ITS CL UB EXPENDITURE OF 17,39,624/- IN ITS BOOKS OF ACCOUNT. ITS CASE THERE IN WAS TO HAVE INCURRED THE ITA NO.1939/KOL/2016 A.Y. 2009- 10 DCIT, CIR-5(1), KOL. VS. M/S SPENCER S RETAIL LTD. PAGE 2 ABOVE EXPENSES PRIMARILY FOR ORGANIZING SEMINARS AN D TRAINING WORKSHOPS FOR ITS EMPLOYEES THROUGHOUT THE COUNTRY. AN AMOUNT OF 13,76,485/- REPRESENTS ITS SUBSCRIPTION AS AGAINST THE COST OF USING CLUB FACILITIES OF 3,63,139/-. THE ASSESSING OFFICER DECLINED ASSESSEES CLAIM BY TREA TING THE ABOVE CLUB SERVICES TO BE IN THE NATURE OF ITS DIRECTORS PERS ONAL EXPENSES INSTEAD OF BUSINESS EXPENDITURE. ALL THIS RESULTED IN THE IMPU GNED DISALLOWANCE. THE CIT(A) ACCEPTS ASSESSEES CHALLENGE TO THE IMPUGNED DISALLOWANCE BY CONCLUDING THAT THE ASSESSEE HAD DULY PROVED THE IM PUGNED EXPENDITURE AS INCURRED FOR ENTRANCE FEE, SUBSCRIPTION AS WELL AS HOLDING SEMINARS AND TRAINING PROGRAMMES ETC., EXCLUSIVELY FOR BUSINESS PURPOSES. THERE IS A CATEGORY FINDING OF FACT THAT ASSESSEES DIRECTORS HAD NEVER ATTENDED OR USED THE ABOVE CLUB. THE SAME HAS GONE UNREBUTTED AT THE REVENUES BEHEST. WE FIND THAT VARIOUS HON'BLE COURTS IN CIT VS. SUNDARAM INDUSTRIES LTD. 240 ITR 335, OTIS ELEVATDOR CO. (INDIA) LTD. 195 ITR 682, CIT VS. GROZ BECKERT ASIA LTD 31 TAXMANN.COM 115 HOLD THAT CLUB EXPENSES INCURRE D TO FACILITATE SMOOTH RUNNING AS ALLOWABLE BUSINESS EXPENDITURE. WE THUS AFFIRM CIT(A)S FINDING UNDER CHALLENGE. 3. THE REVENUES NEXT SUBSTANTIVE GROUND CHALLENGES THE CIT(A)S ORDER HOLDING ASSESSEES EMPLOYEES STOCK OPTION ESOP E XPENDITURE DISALLOWANCE OF 17,70,000/- AS REVENUE EXPENDITURE. WE NOTICE HEREI N AS WELL THAT ASSESSING OFFICER NOWHERE DOUBTED ALL OTHER ASPECTS OF ASSESSEES ESOP SCHEME. HE DECLINED THE CORRESPONDING EXPENDITURE C LAIMED ONLY ON THE GROUND THAT IT WAS NOT REVENUE EXPENDITURE. THE CIT (A) FOLLOWS THIS TRIBUNALS SPECIAL BENCH DECISION IN BIOCON LTD. VS. ACIT 35 TAXMANN.COM 335 ADJUDICATING THE VERY ISSUE IN ASSESSEES FAVOUR. L EARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT THE VERY LEGAL POSITION CONTINUES TILL DATE. WE THEREFORE REJECT REVENUES INSTANT SECOND SUBSTA NTIVE GROUND AS WELL. 4. THE REVENUES THIRD SUBSTANTIVE GROUND PLEADS TH AT CIT(A) ERRED IN GRANTING RELIEF OF 48,96,848/- TO THE ASSESSEE THEREBY DELETING THE U/ S 36(1)(VA) DISALLOWING OF EMPLOYEES ESI/PF ON ACCOU NT OF LATE PAYMENT. SUFFICE TO SAY, WE FIND THAT ASSESSEE HAD DEPOSITED THE SAID EMPLOYEES ITA NO.1939/KOL/2016 A.Y. 2009- 10 DCIT, CIR-5(1), KOL. VS. M/S SPENCER S RETAIL LTD. PAGE 3 CONTRIBUTION BEFORE THE DATE OF FILING RETURN U/S. 139(1) OF THE ACT. HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. COAL INDIA LTD. ITA NO. 12 OF 2015 DATED 12.08.2015 UPHOLDS THIS TRIBUNALS IDENT ICAL FINDINGS DELETING THE IMPUGNED DISALLOWANCE ON ACCOUNT OF THE CONCERNED A SSESSEE HAVING DEPOSITED EMPLOYEES CONTRIBUTION BEFORE THE DUE DA TE OF FILING REGULAR RETURN. WE THEREFORE AFFIRM THE CIT(A)S FINDINGS QUA THIS THIRD GROUND. 5. THIS LEAVES US THE REVENUES LAST SUBSTANTIVE GR OUND WHILST SEEKING TO REVIVING SECTION 14A R.W.S 8D RULE OF 20,32,700/-. WE FIND THAT THE ASSESSEE HAS NOT DERIVED ANY EXEMPT INCOME. HON'BLE JURISDIC TIONAL HIGH COURTS DECISION IN CIT VS. M/S ASHIKA GLOBAL SECURITIES LTD. ITAT 100 OF 2014 GA NO.2122 OF 2014 DECIDED ON 11.06.2018 HOLDS THAT SECTION 14A R.WS. 8D RULE DISALLOWANCE PROVISION DOES NOT APPLY IN ABSENCE OF ANY EXEMPT INCOME DERIVED IN THE RELEVANT PREVIOUS YEAR. THE CIT(A) H AS FOLLOWED THE VERY LEGAL POSITION WHILE ACCEPTING ASSESSEES ARGUMENTS. THE REVENUES INSTANT LAST SUBSTANTIVE GROUND ALSO FAILS ACCORDINGLY. 6. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 25/07/2018 SD/- SD/- ( %) (' %) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 25 / 07 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-5(1), P-7 CHOWRINGHEE SQUARE, KOL KATA-69 2. /RESPONDENT-M/S SPENCERS RETAIL LTD., 31,NETAJI SUB HAS ROAD,DUCAN HOUSE, 1 ST FLOOR, KOLKATA-700001 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,