BHUPINDER INVESTMENT P. LTD, MUMBAI V. DCIT CIR 10(2), MUMBAI

ITA 2290/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8371 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 08-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAV
• Assessee Lawyers: KETAN PANCHMIA
• Keywords: Right to appeal
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO. 2290/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. BHUPINDER INVESTMENT PRIVATE VS. DCIT, CIRCLE 10(2) LTD., 27, KIROL, VIDYAVIHAR AAYAKAR BHAVAN, M.K. RO AD MUMBAI 400086 MUMBAI 400020 PAN - AAACB 9117 G APPELLANT RESPONDENT APPELLANT BY: SHRI KETAN PANCHMIA RESPONDENT BY: SHRI R.S. SRIVASTAV O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 04.01.2010 PASSED BY THE LEARNED CIT(A) FOR A .Y. 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS DERIVING INCOME FROM INVESTMENT, DIVIDEND AND INTER EST. IT FILED RETURN DECLARING VALUE OF FRINGE BENEFITS AT ` 5,38,364/-. THE A.O., AFTER EXAMINING THE DETAILS/DOCUMENTS FURNISHED BY THE ASSESSEE ACC EPTED THE RETURN FILED BY THE ASSESSEE ASSESSING THE VALUE OF FRINGE BENEF ITS AT THE SAME AMOUNT AS DISCLOSED, I.E., ` 5,38,364/- VIDE ORDER DATED 12.12.2008 PASSED UNDER SECTION 115WE(3) OF THE INCOME TAX ACT, 1961 (THE A CT). ON APPEAL IT WAS CONTENDED BY THE ASSESSEE THAT SINCE THE ADDITION O F ` 20,25,822/- WAS MADE BY THE A.O. IN THE ASSESSMENT ORDER PASSED UNDER SE CTION 143(3) IN THE CASE OF THE ASSESSEE COMPANY, THEREFORE, 20% OF THE SAME , I.E. ` 4,05,164/- SHOULD BE REDUCED FROM THE TOTAL VALUE OF FRINGE BE NEFIT ASSESSED. ASSESSEE HAS ALSO FILED COPY OF CBDT CIRCULAR NO. 8/2005 WHE REIN IT WAS EXPLAINED THAT ANY ADDITION/DISALLOWANCE IN THE ASSESSMENT OR DER WILL NOT BE CONSIDERED AS VALUE ASSESSABLE UNDER FBT. IT WAS, T HEREFORE, CLAIMED THAT THE VALUE OF ` 4,05,164/- SHOULD BE REDUCED FROM THE FBT. HOWEVER, THE LEARNED CIT(A), WHILE AGREEING IN PRINCIPLE, HELD T HAT SINCE THE ASSESSEES ITA NO. 2290/MUM/2010 M/S. BHUPINDER INVESTMENT P. LTD. 2 RETURN OF FBT WAS ACCEPTED BY THE A.O., THEREFORE, NO CAUSE OF ACTION AROSE AGAINST THE ORDER OF THE A.O. FOR FILING APPEAL AGA INST THE ORDER AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE DID NO T EMANATE FROM THE ORDER APPEALED AGAINST AND HENCE HE DISMISSED THE A PPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) 21, MUMBAI ERRED IN CONFIRMING THE ACTION OF THE DY COMMISSION ER INCOME TAX CIRCLE 10(2) (HEREINAFTER REFERRED AS AO), MUMB AI AND NOT ACCEPTING ASSESSEES CLAIM IN REDUCING THE FBT VALU E BY RS.405,164. 2. THE LEARNED AO HAS ERRED IN NOT REDUCING THE FRI NGE BENEFIT VALUE OF RS.405,164 IN RESPECT OF ENTERTAINMENT AND TRAVEL EXPENSES DISALLOWED TO THE EXTENT OF RS.2,025,822 A S PER ORDER U/S 143(3). AO BE DIRECTED TO REDUCE THE FRINGE BEN EFIT VALUE BY RS.405,164 IN RESPECT OF DISALLOWED EXPENSES. 4. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LEARNED CIT(A) FURTHER SUBMITS THAT SINCE IN THE CASE OF THE COMPA NY THE A.O. HAS MADE DISALLOWANCE OF ` 20,25,822/- OUT OF TRAVELLING AND ENTERTAINMENT EXPENDITURE, THEREFORE THE A.O. AND LEARNED CIT(A) HAVE ERRED IN NOT REDUCING THE FRINGE BENEFIT VALUE OF ` 4,05,164/- BEING 20% OF ` 20,25,822/- OUT OF THE TOTAL VALUE OF FRINGE BENEFIT ASSESSED A T ` 5,38,364/-. RELIANCE WAS ALSO PLACED ON THE CBDT CIRCULAR NO. 8/2005. 5. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTS THE OR DERS OF THE A.O. AND THE LEARNED CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THERE IS NO DISPUTE THAT THE A.O., WHILE MAKING THE ASSESSMENT OF THE A SSESSEE COMPANY UNDER THE INCOME TAX ACT, HAS MADE DISALLOWANCE OF TRAVEL AND ENTERTAINMENT EXPENDITURE AT ` 20,25,822/-, VIDE ORDER DATED 12.12.2008 PASSED UND ER SECTION 143(3)OF THE ACT. WE FURTHER FIND THAT IT I S ALSO NOT IN DISPUTE THAT THE ASSESSEE WHILE FILING THE RETURN DECLARING THE VALUE OF FRINGE BENEFIT OF ` 5,38,364/-, ALSO INCLUDED THE VALUE OF FRINGE BENEF IT IN RESPECT OF ITA NO. 2290/MUM/2010 M/S. BHUPINDER INVESTMENT P. LTD. 3 ENTERTAINMENT EXPENSES OF ` 14,18,083/- AND CONVEYANCE, TOUR AND TRAVEL EXPENSES OF ` 6,07,739/-, AGGREGATING TO ` 20,25,822/- AND THE A.O. ACCEPTED THE RETURN FILED BY THE ASSESSEE AS SUCH. 7. IN THE CBDT CIRCULAR NO. 8/2005 DATED 29.08.2005 RE PORTED (2005) 277 ITR 20 (ST.) IN ANSWER TO QUESTION NO. 35 IT HA S BEEN STATED AS UNDER: - 35. WHETHER EXPENSES DISALLOWED UNDER SECTION 37 O F THE INCOME- TAX ACT ON THE PLEA THAT THE EXPENSES ARE PERSONAL IN NATURE, WOULD ALSO BE LIABLE TO FBT. ANS. SECTION 37 OF THE INCOME-TAX ACT PROVIDES THA T ANY EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. ACCORDINGLY, ANY EXPENDITU RE THAT IS INCURRED FOR PERSONAL PURPOSES IS NOT ALLOWABLE AS DEDUCTION. SUB-SECTION (2), OF SECTION 115WB PROVIDES FOR A LE VY ON FRINGE BENEFITS ESTIMATED ON A PRESUMPTIVE BASIS USING CER TAIN EXPENSES AS A MEASURE. TO THE EXTENT THE EXPENSES I NCURRED BY THE EMPLOYER ARE PERSONAL IN NATURE AND HAVE, THERE FORE, BEEN DISALLOWED UNDER SECTION 37 OF THE INCOME-TAX ACT, SUCH DISALLOWANCE WOULD NOT BE LIABLE TO FBT. FOR EXAMPL E, LET US ASSUME A FIRM, BEING AN EMPLOYER, HAS INCURRED AN EXPENDITURE OF ` 100/- TOWARDS TOUR AND TRAVEL, OF WHICH RS.40/-, IS PERSONAL IN NATURE. THEREFORE, THE AMOU NT OF RS.40, BEING PERSONAL IN NATURE, WILL BE DISALLOWANCE UNDE R SECTION 37 OF THE INCOME-TAX ACT, AND FBT WILL BE LEVIED ON 20 PER CENT OF THE AMOUNT OF RS.60/- (RS.100 - RS.40/-) 8. FROM THE ABOVE IT IS CLEAR THAT SINCE THE EXPENDITU RE OF ` 20,25,822/- HAS BEEN DISALLOWED BY THE A.O. UNDER SECTION 37 OF THE ACT, THEREFORE, ON THE SAID DISALLOWANCE FBT WILL NOT BE LEVIED. SINCE THE SAID DISALLOWANCE WAS MADE BY THE A.O. WHILE COMPLETING THE ASSESSMENT OF THE ASSESSEE COMPANY UNDER SECTION 143(3) OF THE ACT AND THE RETURN OF F BT WAS FILED BY THE ASSESSEE PRIOR TO SUCH DISALLOWANCE, THEREFORE, THE ASSESSEE OFFERED THE SAID AMOUNT AS VALUE OF FBT AND IN THE ABSENCE OF ANY SU CH DISALLOWANCE UNDER INCOME TAX ACT, DID NOT EXCLUDE THE SAME FOR THE PU RPOSE OF FBT. 9. IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (1998) 229 ITR 383 (SC) IT HAS BEEN OBSERVED AS UNDER (PAGE 386): - UNDER SECTION 254 OF THE INCOME-TAX ACT, THE APPEL LATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPO RTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. T HE POWER OF THE ITA NO. 2290/MUM/2010 M/S. BHUPINDER INVESTMENT P. LTD. 4 TRIBUNAL IN DEALING WITH APPEALS IN THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCE EDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX L IABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESUL T OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE T HE TRIBUNAL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISS IBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE S HOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRI BUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD I N RESPECT OF THAT ITEM. WE DO NOT SEE ANY REASON TO RESTRICT THE POWER OF T HE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CR OSS OBJECTIONS BEFORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNA L SHOULD BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. IT HAS BEEN HELD (PAGE 387): - .. THE TRIBUNAL HAS JURISDICTION TO EXAMINE A QU ESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUND BY THE AUTHORITIES B ELOW AND HAVING A BEARING ON THE TAX LIABILITY OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE DECI SION AND KEEPING IN MIND THE BOARD CIRCULAR (SUPRA) WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE FRINGE BENEFIT VALUE OF ` 405,164/- FROM THE TOTAL FRINGE BENEFITS OF ` 5,38,364/- ASSESSED BY THE A.O. THE A.O. IS DIRECTE D TO ALLOW THE SAME AFTER VERIFICATION OF THE AMOUNT OF DISALLOWAN CE OF TRAVEL & ENTERTAINMENT EXPENSES MADE IN THE INCOME-TAX ASSES SMENT. SUBJECT TO THE VERIFICATION THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 10. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY 2011. SD/- SD/- (RAJENDRA SINGH) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18 TH FEBRUARY 2011 ITA NO. 2290/MUM/2010 M/S. BHUPINDER INVESTMENT P. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXI, MUMBAI 4. THE CIT X, MUMBAI CITY 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P. ITA NO. 2290/MUM/2010 M/S. BHUPINDER INVESTMENT P. LTD. 6 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 08.02.11 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 09.02.11 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER