EAL CONSULTING INDIA P. LTD, MUMBAI V. ITO WD 11(1), MUMBAI

ITA 2359/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3763 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV JAINDR
• Assessee Lawyers: KADAMBARI DAVE
• Keywords: Depreciation; Principle of natural justice; Wholly owned subsidiary; Revised return
• Section: 37(1); 32

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.2359/DEL/2012 ASSESSMENT YEAR:2008-09 EAL CONSULTING INDIA PVT. LTD. B-501, SAHAYOG BUILDING, S.V. ROAD, KANDIVALI (WEST) MUMBAI-400067 VS ITO, WARD-11(1), NEW DELHI ( ! ' /ASSESSEE) ( # / REVENUE) PA N. NO. AABCE7843B % #& ' ' ( / DATE OF HEARING : 01/03/2016 ' ' ( / DATE OF ORDER: 01/03/2016 ! ' / ASSESSEE BY SHRI GIRISH DAVE & MS. KADAMBARI DAVE # / REVENUE BY SHRI SANJEEV JAIN-DR ITA NO.2359/DEL/2012 EAL CONSULTING INDIA PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 29/02/2012, OF THE LD. FIRST APPELLATE AUTHORITY, M UMBAI. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. EXPENDITURE ON TRADEMARK AND PROFESSIONAL FEES A. THE LEARNED CIT(A) ERRED IN NOT ALLOWING DEPRECI ATION ON EXPENDITURE INCURRED ON TRADEMARK REGISTRATION AMOU NTING TO RS.2,70,390 UNDER SECTION 32 OF THE INCOME-TAX ACT, 1961. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN NOT ALLOWING DEDUCTION FOR SUCH EXPENSES UNDER SECTION 37(1). B. THE LEARNED CIT(A) ERRED IN NOT ALLOWING DEDUCTI ON FOR EXPENDITURE ON PROFESSIONAL FEES AMOUNTING TO RS. 1 ,55,000 UNDER SECTION 37(1). C. THE LEARNED CIT(A) ERRED IN REJECTING THE ABOVE CLAIMS OF THE APPELLANT ON THE BASIS THAT THE SAME WERE MADE FOR THE FIRST TIME BEFORE HIM AND NOT TAKEN BEFORE THE ASSESSING OFFIC ER AND' THAT THE APPELLANT HAD NOT FILED A REVISED RETURN IN THIS RE GARD . 2. GENERAL AND ADMINISTRATIVE EXPENSES AND PERSONNE L EXPENSES A. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER OF DISALLOWING AN AMOUNT OF RS. 1,12,13,534 , BEING 50% OF THE GENERAL AND ADMINISTRATIVE EXPENSES AND PERSONA L EXPENSES. B. THE LEARNED CIT(A) ERRED IN OBSERVING THAT THE E XPENSES WERE NOT SUPPORTED BY PROPER BILLS AND VOUCHERS AND SAME WER E NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. C. THE LEARNED CIT(A) ERRED IN OBSERVING THAT THE A PPELLANT HAS CLAIMED EXPENSES OF RS. 7,22,226 TWICE IN THE BOOKS OF ACCOUNTS UNDER THE HEAD 'GENERAL AND ADMINISTRATIVE EXPENSES ' AND 'INCORPORATION EXPENSES' . ITA NO.2359/DEL/2012 EAL CONSULTING INDIA PVT. LTD. 3 D. THE LEARNED CIT(A) ERRED IN STATING THAT THE PRO VISION FOR BONUS OF RS. 11,17,500 WAS MADE WITHOUT ANY BASIS AND NO DET AILS OF THE PROVISION WERE SUBMITTED. E. THE LEARNED CIT(A) ERRED IN OBSERVING THAT TRAVE LLING EXPENSES ARE INCURRED IN THE NAME OF EXECUTIVE ACCESS LIMITED FO R TRAVELLING OF RAKESH SAPRU, WHO IS NOT AN EMPLOYEE OF THE APPELLA NT COMPANY. 2. SO FAR AS, GROUND WITH RESPECT TO EXPENDITURE ON TRADEMARK ON PROFESSIONAL FEE IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE, SHRI GIRISH DAVE ALONGWITH MS. KADAMB ARI DAVE, ADVANCED ARGUMENTS, WHICH ARE IDENTICAL TO TH E GROUND RAISED BY CONTENDING THAT, IF THE RELIEF U/S 32 IS NOT GRANTED THEN ALTERNATIVELY, IT IS TO BE ALLOWED U/S 37(1) O F THE ACT AS THE ASSESSEE HAS ALREADY MADE A CLAIM BY FURTHER SU BMITTING THAT THE ASSESSEE COMPANY WAS INCORPORATED IN MAY 2 007 AND IT IS THE FIRST YEAR OF INCORPORATION/BUSINESS. ON THE OTHER HAND, THE LD. DR, SHRI SANJEEV JAIN, CONTENDED THAT THE CLAIM WAS MADE FOR THE FIRST TIME BEFORE THE LD. COMMISSI ONER OF INCOME TAX (APPEALS), THEREFORE, THE LD. ASSESSING OFFICER COULD NOT GET THE OPPORTUNITY TO EXAMINE THE FACTS AND TH E GENUINENESS OF CLAIM. THE LD. COUNSEL FOR THE ASSES SEE FAIRLY AGREED THAT THE CLAIM WAS MADE BEFORE THE LD. FIRST APPELLATE AUTHORITY. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE COMPANY, AS PER THE ASSESSEE, WAS INCORPORATED IN MAY 2007, UNDER THE COMPANIES ACT 1 956. THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF EAL IN DIA HOLDINGS LTD., HONGKONG. AS PER THE CLAIM OF THE AS SESSEE, THE ITA NO.2359/DEL/2012 EAL CONSULTING INDIA PVT. LTD. 4 INCORPORATION AS WELL AS OPERATION OF THE ASSESSEE COMPANY IS FOR THE ACCOUNTING PERIOD STARTED FROM 4 TH MAY 2007. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RENDERING HR SERVICES INCLUDING MANPOWER (SKILLED AND MANAGERIAL) ON CONT RACTUAL BASIS, EXECUTIVE SEARCH, RECRUITMENT, PLACEMENT, MA NPOWER RESOURCES AND MANAGEMENT CONSULTANCY, ETC. THE GRUD GE OF THE ASSESSEE IS THAT DEPRECIATION ON EXPENDITURE OF RS.2,70,390/-, INCURRED ON TRADEMARK REGISTRATION, WAS NOT ALLOWED U/S 32 AND WITHOUT PREJUDICE IT HAS TO BE A LLOWED AS A DEDUCTION U/S 37(1) OF THE ACT INCLUDING PROFESSION AL FEE AMOUNTING TO RS.1,55,000/-. IT IS NOTED THAT THE L D. COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THIS GROUND ON THE PLEA THAT IT WAS RAISED, FOR THE FIRST TIME, BEFORE HIM AND WAS NOT TAKEN BEFORE THE LD. ASSESSING OFFICER AND FURTHER THE ASSESSEE HAD NOT FILED A REVISED RETURN. CONSID ERING THE TOTALITY OF FACTS, AND SPECIFICALLY, THE ISSUE WAS NOT RAISED BEFORE THE LD. ASSESSING OFFICER, THEREFORE, CONSID ERING THE TOTALITY OF FACTS, PRINCIPLE OF NATURAL JUSTICE AND THE MANDATE OF THE CONSTITUTION AS DUE TAXES HAS TO BE LEVIED/COLL ECTED, WE REMAND THIS ISSUE, AS AGREED BY BOTH SIDES, TO THE FILE OF THE LD. ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE AFRESH AND AFTER PROVIDING DUE OPPORTUNITY, DECIDE IN ACCO RDANCE WITH LAW, THIS GROUND IS, CONSEQUENTLY, ALLOWED FOR STATISTICAL PURPOSES. 3. THE NEXT GROUND RAISED BY THE ASSESSEE PERTAINS TO ADMINISTRATIVE EXPENSES/PERSONAL EXPENSES. THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE LD. FIRST ITA NO.2359/DEL/2012 EAL CONSULTING INDIA PVT. LTD. 5 APPELLATE AUTHORITY WRONGLY AFFIRMED THE ACTION OF THE ASSESSING OFFICER DISALLOWING THE AMOUNT OF RS.1,12 ,13,534/-, BEING 50% OF GENERAL ADMINISTRATIVE EXPENSES/PERSON AL EXPENSES. IT WAS ALSO CONTENDED THAT THE OBSERVATIO N OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE CLAIM WAS NOT SUPPORTED BY PROPER BILLS AND VOUCHERS AND FURTHER THAT THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FO R BUSINESS PURPOSES IS ALSO CONTRARY TO FACTS. IT WAS ALSO EXPLAINED THAT M/S EXECUTIVE ACCESS IS A HONGKONG B ASED COMPANY AND IS HAVING NO BRANCH/OFFICE IN INDIA. T HE OBSERVATION MADE AT PAGE-5 OF THE ASSESSMENT ORDER WITH RESPECT TO INCORPORATION WAS CLAIMED TO BE WRONG. OUR ATTENTION WAS INVITED TO PAGE 468 OF THE PAPER BOOK ALONG WITH PAGES 249 TO 278 AND MORE SPECIFICALLY PAGE 250 BY ASSERTING THAT FACTUALLY NO ENQUIRY WAS MADE BY THE ASSESSING OFFICER. HOWEVER, THE LD. DR, DEFENDED THE CONCLUSION ARRIVE D AT IN THE IMPUGNED ORDER BY DEFENDING THAT FINDING RECORDED I N THE ASSESSMENT ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERI NG THE TOTALITY OF FACTS AND THE MATERIAL AVAILABLE ON REC ORD, INCLUDING THE ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, WE ARE IN AGREEMENT WITH THE ARGUMENTS AT LEAST TO THE EXTENT THAT NEITHER THE FACTS WERE PROPERLY EXPLAINED BY THE AS SESSEE BEFORE THE LOWER AUTHORITIES NOR PROPER ENQUIRY WAS MADE BY THE LD. ASSESSING OFFICER. THE LD. ASSESSING OFFIC ER WAS HANDICAPED IN THE ABSENCE OF PROPER FACTS TO BE EXP LAINED BY ITA NO.2359/DEL/2012 EAL CONSULTING INDIA PVT. LTD. 6 THE ASSESSEE. THEREFORE, CONSIDERING THE TOTALITY O F FACTS, WE DIRECT THE ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE , FOR ITS CLAIM, BEFORE THE LD. ASSESSING OFFICER, WHO WILL E XAMINE THE FACTS/CLAIM AFRESH AND AFTER PROVIDING DUE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE SHALL DECIDE IN ACCORDA NCE WITH LAW. THE ASSESSEE IS AT LIBERTY TO FURNISH EVIDENCE , IF ANY, IN SUPPORT OF ITS CLAIM, CONSEQUENTLY, THIS GROUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 01/03/2016. SD/- SD/- ( SANJAY ARORA ) (JOGINDER SINGH) ! ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER % & MUMBAI; ) DATED : 01/03/2016 F{X~{T? P.S/. . . $#%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 % 1' ( + ) / THE CIT, MUMBAI. 4. 0 0 % 1' / CIT(A)- , MUMBAI 5. 3#4 .' , 0 +( 5 , % & / DR, ITAT, MUMBAI 6. 7& / GUARD FILE. / BY ORDER, /3+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI