DCIT RG 8(1), MUMBAI V. ADITYA BIRLA MONEY INSURANCE ADVISORY SERVICES LTD, MUMBAI

ITA 2252/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0912 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: KRUPA R GANDHI
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL ABENCH M UMBAI , , BEFORE S/SHRI JOGINDER SINGH,JUDI CIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A./2252 /MUM/2014 , /ASSESSMENT YEAR: 2009-10 DCIT , RANGE-8(1) ROOM NO.260A, 2ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. ADITYA BIRLA MONEY INSURANCE ADVISORY SERVICES LTD. ONE INDIABULLS CENTRE TOWER 1, 14TH FLOOR, S.B. MARG, ELPHINSTONE ROAD MUMBAI-400 013. PAN:AABCB 6777 H ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: MS. KRUPA R. GANDHI & MS. RITU PUNJABI / DATE OF HEARING: 11.04.2017 / DATE OF PRONOUNCEMENT: 19.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 15/01/2014 OF THE CIT ( A)-14,MUMBAI, THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF DISTRIBUTION OF LIFE INSURANCE PRODUCTS,FILED ITS RETURN OF INCO ME DECLARING LOSS OF RS. 1.75 CRORE. THE AO COMPLETED THE ASSESSMENT U/S.143 (3) OF THE ACT, ON 23/12/2011, DETERMINING ITS INCOME AT RS.(-)57 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE DI SALLOWANCE OF RS. 1.18 CRORE, MADE BY THE AO U/S.40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF REIMBURSEMENT BY THE ASSESSEE TO ITS HOLDING COMPANY.DURING THE ASSESSME NT PROCEEDINGS,THE AO OBSERVED THAT THE IT HAD MADE PAYMENT OF RS.1,18,48,645/- TO ITS HOLD ING COMPANY I.E.BIRLA SUN LIFE DISTRIBUTION COMPANY LTD. HE DIRECTED THE ASSESSEE TO FILE EXPLANATION AS TO WHY PROVISIONS SECTION 40(A)(IA) WERE NOT APPLICABLE. AFTER CONSID ERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT IT HAD ENTERED INTO AN AGREEMENT WITH THE HOLDING COMPANY, THAT FROM THE AGREEMENT IT WAS CLEAR THAT THERE WAS NO BASIS FOR BIFURCATIO NS OF EXPENSES, THAT IT WAS NOT DEDUCTING TAX AT SOURCE FOR THE PAYMENTS MADE TO THE HOLDING COMP ANY,THAT IT HAD RECEIVED MONEY FROM OTHERS WHO HAD DETECTED TAX BEFORE MAKING PAYMENT T O THE ASSESSEE.FINALLY,HE HELD THAT FOR NON-DEDUCTION OF TAX AT SOURCE AMOUNT OF RS. 1.18 C RORE CLAIMED TO HAVE BEEN REIMBURSEMENT HAD TO BE DISALLOWED AS PER THE PROVISIONS SECTION 40(A)(IA) OF THE ACT. 2252/M/14-ADITYA BIRLA 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HER, IT WAS ARGUE D THAT THE ASSESSEE HAD ENTERED INTO AGREEMENT WITH THE HOLDING COMPANY FOR SHARING THE ADMIT STATED AND OTHER EXPENSES, THAT THE HOLDING COMPANY WOULD RAISE 6 MONTHLY DEBIT NOTES O N THE BASIS OF THE MOUS FOR RECOVERY OF THE EXPENSES, THAT THERE WAS NO MARKUP ADDED IN THE DEBIT NOTE RAISED BY THE HOLDING COMPANY TO THE ASSESSEE FOR RECOVERY OF THE EXPENSE S, THAT THERE WAS NO INCOME ELEMENT EMBEDDED IN THE RECOVERY MADE BY THE RULING COMPANY , THAT AS PER THE ACCOUNTING STANDARD 18, THE ASSESSEE HAD DISCLOSED THE SAID TRANSACTION THE NOTES TO ACCOUNTS, THAT IN THE TAX AUDIT REPORT THE AUDITOR HAD NOT QUALIFIED ANY AMOUNT TO BE DISALLOWED U/S.40(A)(IA), THAT IT HAD SUBMITTED THE FULL LIST OF REIMBURSEMENT OF EXPENSE S AND SUPPORTING DOCUMENTS ON SAMPLE BASIS, IT HAD EXPLAINED THE BASIS OF A LOCATION OF THE EXPENSES BETWEEN THE ASSESSEE AND THE HOLDING COMPANY, THAT TAX WAS NOT TO BE DEDUCTED AT SOURCE ON EXPENSES THAT WERE PURELY IN THE NATURE OF REIMBURSEMENTS AND DID NOT HAVE ANY I NCOME ELEMENT EMBEDDED IN THEM, THAT IT WAS DEDUCTING TAX AT SOURCE WHILE MAKING PAYMENT TO THE OTHER PARTIES. IT RELIED UPON CERTAIN CASE LAWS AND FURTHER ARGUED THAT IT WAS ONLY OWNED SUBSIDIARY OF THE HOLDING COMPANY, FOR THE PURPOSE OF REDUCING THE COST OF BOTH THE COMPAN IES THE HOLDING COMPANY INCURRED ALL THE EXPENSES FOR ITS OWN BUSINESS AS WELL AS ON BEHALF OF THE ASSESSEE,THAT THE EXPENSES WERE SHARE BY BOTH THE COMPANIES ON SCIENTIFIC AND RATIO NAL BASIS AND AFTER RECEIVING THE DEBIT NOTES,THAT ALL THE EXPENSES SHARED BY BOTH THE COMP ANIES WERE ON SCIENTIFIC AND RATIONAL BASIS. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT THE ASSESSEE HAD REIMBURSED THE EXPENSES ON ACCOUNT OF SHARING OF COMMON PREMISES, THAT EXPENSES HAD BEEN APPORTION ON WORKSTATION BASIS, T HAT THE CHARGES FOR USES OF FACILITIES HAD BEEN APPORTION ON BASIS OF WORKSTATION ALLOCATED, T HAT THE AO HAD NOT DENIED THESE FACTS, THAT THE PAYMENTS WERE IN THE NATURE OF REIMBURSEMENT, T HAT NO TAX WAS TO BE DEDUCTED AT SOURCE FOR REIMBURSEMENT. SHE REFERRED TO THE CASE OF SIEM ENS (177 TAXMAN 81) DELIVERED BY THE HONBLE BOMBAY HIGH COURT AND HELD THAT THE AO HAD NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT AN INCOME ELEMENT WAS EMBEDDED IN THE PAY MENTS MADE BY THE ASSESSEE, THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES U/ S.40(A)(IA). FINALLY, HE DELETED THE ADDITION OF RS.1.18 CRORE. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND STATED THAT THERE WAS NO BA SIS FOR ALLOCATING THE EXPENSES. THE AUTHORISED REPRESENTATIVE (AR) CONTENDED THAT NO TA X WAS TO BE DEDUCTED AT SOURCE ON EXPENSES THAT WERE PURELY IN THE NATURE OF REIMBURS EMENT AND DID NOT HAVE ANY INCOME 2252/M/14-ADITYA BIRLA 3 ELEMENT EMBEDDED IN THEM, THAT TAX WAS ALSO NOT DED UCTIBLE IF THE PAYMENTS WERE MADE MERELY TOWARDS REIMBURSEMENT OF EXPENSES INCURRED O N BEHALF OF THE ASSESSEE BY ANOTHER ENTITY, THAT THE EXPRESSION ANY WERE USED IN SECTIO N 194C OF THE ACT MEANT LABOUR CONTRACTS AND NOT THE SERVICE CONTRACTS,THAT NO DISALLOW -ANC E COULD BE MADE IF THE RECIPIENT HAD PAID THE TAXES.IT RELIED UPON THE CASE OF SIEMENS (SUPRA ),OCB ENGINEERS(214TAXMAN121)AND SRF FINANCE COMPANY LTD.(211 ITR 861). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD MADE PAYMENTS TO ITS HOLDING COMPANY,T HAT THE AO HELD THAT PROVISIONS OF SECTION 194C WERE APPLICABLE,THAT THE ASSESSEE HAD TO DEDUCT TAX AT SOURCE FOR THE PAYMENTS MADE BY IT TO THE HOLDING COMPANY,THAT HE MADE A DI SALLOWANCE OF RS. 1.18 CRORES INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THA T THE FAA HAD GIVEN THE CATEGORICAL FINDING OF FACT THAT PAYMENTS WERE IN NATURE OF REIMBURSEME NT OF THE EXPENSES.WE FIND THAT ASSESSEE HAD PRODUCED THE DEBIT NOTES ISSUED BY THE HOLDING COMPANY FOR SHARING THE OFFICE PREMISES AND OTHER FACILITIES OF THE HOLDING COMPANY, THAT T HE ALLOCATION WAS THE ON THE BASIS OF WORKSTATION ALLOTTED TO THE ASSESSEE, THAT THE AO H AD NOT ALLEGED THAT THERE WAS ANY MARKUP FOR THE PAYMENTS RECEIVED BY THE HOLDING COMPANY. C LEARLY,THESE PAYMENTS ARE OF THE NATURE OF REIMBURSEMENT AND THE AO HAD NOT BEEN ABLE TO PR OVE THAT INCOME WAS EMBEDDED IN THEM.THEREFORE, IN OUR OPINION, ASSESSEE WAS NOT OB LIGED TO DEDUCT TAX AT SOURCE FOR MAKING THE PAYMENTS TO THE HOLDING COMPANY. HERE WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE JUDGMENT OF THE SIEMENS (SUPRA) AND SAME REA DS AS UNDER: THE SUM CLAIMED TO BE REIMBURSEMENT OF EXPENSES WAS NOT TAXABLE IN INDIA. RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENT, WE ARE O F THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY ,HENCE,CONFIRMING THE SAME, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL,2017. 19 , 2017 SD/- SD/- ( /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 19.04.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 2252/M/14-ADITYA BIRLA 4 5. DR A BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.