CONVERGYS INFOWAVZ P.LTD, MUMBAI V. ITO 10(1)(2), MUMBAI

ITA 2316/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5471 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 16-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2316/MUM/2015 ASSESSMENT YEAR: 2010 - 11 CONVERGYS INDIA SERVICES P. LTD. 7 TH , 11 TH , 14 TH & 15 TH FLOOR, G CORP TECH PARK, KASARVADAVALI, GHODBUNDAR ROAD, THANE (W) - 400601 VS. INCOME TAX OFFICER - 10(1)(2), MUMBAI (ERSTWHILE INCOME TAX OFFICER 8(2)(1), MUMBAI) PAN NO. AAACI6687A APPELLANT RESPONDENT ASSESSEE BY : MS. CHANDNI SHAH, AR REVENUE BY : MR. RAM TIWARI, DR DATE OF HEARING : 0 9 /07/2018 DATE OF PRONOUNCEMENT : 18/07/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 17 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE WOULD NOT LIKE TO PRESS THE 2 ND GROUND OF APPEAL. ACCORDINGLY, THE 2 ND GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. THE 1 ST GROUND OF APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF PART OF EXPENDITURE CONVERGYS INDIA SERVICES ITA NO. 2316/MUM/2015 2 INCURRED TOWARDS RENT AMOUNTING TO RS.1,78,48,050/ - OUT OF THE TOTAL RENT INCURRED BY THE APPELLANT. THE APPELLANT PRAYS THAT THE RENT PAID BY THE APPELLANT BE HELD TO BE BUSINESS EXPENDITURE AND ACCORDINGLY BE ALLOWED AS DEDUCTION. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE HAD CLAIMED PAYMENT OF RENT OF RS.3,76,38,051/ - IN THE P&L ACCOUNT. THE ASSESS EE HAD MADE RENT PAYMENT TO M/S PANKAJ SHAWLS P. LTD. ALSO THE ASSESSEE HAD SHARED THE PREMISES WITH M/S STREAM INTERNATIONAL SERVICES P. LTD. IN THE AY 2009 - 10 AND THE PROPORTIONATE RENT @ 50% WAS DISALLOWED. IN RESPONSE TO A QUERY RAISED BY THE AO TO EXP LAIN WHY SIMILAR DISALLOWANCE SHOULD NOT BE MADE FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED A REPLY WHICH HAS BEEN EXTRACTED BY THE AO AT PARA 6.2 (PAGE 4 - 5) OF THE ASSESSMENT ORDER DATED 26.03.2013. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAI D REPLY AND OBSERVED THAT (I) THE ASSESSEE HAD SHARED THE PREMISES WITH ITS PARENT COMPANY M/S STREAM INTERNATIONAL SERVICES P. LTD., (II) THE LEAVE AND LICENSE AGREEMENT IS ALSO IN THE NAME OF M/S STREAM INTERNATIONAL SERVICES P. LTD., (III) THE RESOLUTIO N DATED 28.06.2008 PASSED BY M/S STREAM INTERNATIONAL SERVICES P. LTD. PROVES THAT THE SAID PREMISES WAS TO BE USED BY M/S STREAM INTERNATIONAL SERVICES P. LTD. OR ITS SUBSIDIARY M/S INFO WAVZ INTERNATIONAL P. LTD., (IV) IT IS ALSO SUBSTANTIATED BY THE ASSE SSEE THAT THE PREMISES WERE EXCLUSIVELY USED BY IT, (V) NONE OF THE DOCUMENTS SHOW THAT M/S STREAM INTERNATIONAL SERVICES P. LTD. WOULD NOT BE USING THE SAID PREMISES, (VI) ALL THE DOCUMENTS SHOW THAT THE ASSESSEE WILL USE THE PREMISES WITH M/S STREAM INTE RNATIONAL SERVICES P. LTD. CONVERGYS INDIA SERVICES ITA NO. 2316/MUM/2015 3 AFTER OBSERVING THAT SIMILAR DISALLOWANCE MADE IN THE AY 2009 - 10 HAS BEEN CONFIRMED BY THE LD. CIT(A), THE AO MADE A DISALLOWANCE OF RS.1,78,48,050/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR THE AY 2011 - 12 AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER OF THE TRIBUNAL FOR THE AY 2009 - 10 IN ITA NO. 6896/MUM/20 12 AND ITA NO. 2799/MUM/2017. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE SAME ISSUE AROSE BEFORE THE TRIBUNAL IN AY 2009 - 10. IN THE 1 ST ROU ND (ITA NO. 6896/MUM/2012), THE ITAT I BENCH REMITTED BACK THE ISSUE TO THE FILE OF THE AO TO FIND OUT AS TO WHETHER THE PARENT COMPANY WAS WORKING FROM OTHER PREMISES DURING THE YEAR UNDER CONSIDERATION. IN THE 2 ND ROUND (ITA NO. 2799/MUM/2017), THE TRI BUNAL VIDE ORDER DATED 07.03.2018 HELD AS UNDER: 8. IT IS ALSO NOTED THAT THE MATTER IN THE FIRST ROUND WAS REMITTED BACK BY THE COORDINATE BENCH TO VERIFY TWO THINGS VIZ. WHETHER THE PARENT COMPANY I.E. SISPL WAS OPERATING FROM ANY OTHER PREMISES AND SECONDLY, WHETHER THE PARENT COMPANY HAD CLAIMED ANY PART OF STATED EXPENDITURE IN HIS BOOKS OF ACCOUNTS. ON THE BASIS OF ABOVE FACTS AS ENUMERATED BY US IN PARA - 6 ABOVE, WE FIND THAT BOTH THE REQUIREMENTS HAVE SUCCESSFULLY BEEN DEMONSTRATED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND THERE CONVERGYS INDIA SERVICES ITA NO. 2316/MUM/2015 4 IS NOTHING CONTRARY ON RECORD AGAINST THE ASSESSEE. THEREFORE, IN PRINCIPL E , WHILE AGREEING WITH THE CLAIM OF THE ASSESSEE, WE FIND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE REQUIRE RECONCILIATION AND EXPLANATION AS PER OBSERVATION IN PARA - 7. IT IS ALSO OBSERVED T HAT THE ASSESSEE WAS IN POSSESSION OF 25008 SQUARE FEET OF SPACE DURING FIRST THREE MONTH OF THE IMPUGNED AY WHEREAS IT WAS OCCUPYING 17448 SQUARE FEET DURING THE BALANCE PERIOD, AGAINST WHICH NO PLAUSIBLE EXPLANATION IS AVAILABLE ON RECORD. IT IS NOTED TH AT THE ASSESSEE WAS A CORPORATE ENTITY REGISTERED WITH SERVICE TAX AUTHORITIES / STPI AUTHORITY / OTHER STATUTORY BODIES AND WAS REQUIRED TO GET APPROPRIATE ENDORSEMENT AS TO CHANGE IN PREMISES / ADDRESSES UNDER THOSE LAWS. 9. THEREFORE, ON FACTS AND CIRCUMSTANCES OF THE CASE WHILE PRIMARILY CONCURRING WITH THE STAND OF LD. AR, THE MATTER STANDS REMITTED BACK TO LD. AO WITH A DIRECTION TO THE ASSESSEE TO RECONCILE THE FIGURES AS WELL FURNISH A PLAUSIBLE EXPLANATION AS TO THE SPACE OCCUPIED BY IT DURING THE IMPUGNED AY AND SUBMIT ADEQUATE DOCUMENTARY EVIDENCES IN SUPPORT OF THE SAME. AFTER CONSIDERING THE SAME, THE LD. AO IS DIRECTED TO RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE AS PER LAW. 6.1 FACTS BEING IDENTICAL, WE SET AS IDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO FOLLOW THE ORDER OF THE TRIBUNAL FOR THE AY 2009 - 10 DELINEATED AT PARA 6 HEREINBEFORE. 7. IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18/07/2018. SD/ - SD/ - ( JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 18/07/2018 RAHUL SHARMA, SR. P.S. CONVERGYS INDIA SERVICES ITA NO. 2316/MUM/2015 5 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