DCIT, Gurgaon V. M/s. Strategic Decisions Management Consulktants P.Ltd., Gurgaon

ITA 2367/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5792 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR MAHAR
• Assessee Lawyers: KIMMI DAWAR
• Keywords: Rule of consistency; Additional evidence; TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A , NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO . 2367 /DEL/ 2016 ASSESSMENT YEAR: 2011 - 12 DCIT, CIRCLE - 2, GURGAON VS. M/S. STRATEGIC DECISIONS MANAGEMENT CONSULTANTS P. LTD., SUITE - 13, THE MASTERPIECE, SECTOR - 54, GOLF COURSE EXTENSION ROAD, GURGAON PAN : AAKCS9216K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MANOJ KUMAR MAHAR, SR.DR RESPONDENT BY SHRI KIMMI DAWAR, CA ORDER PER O.P. KANT, A.M.: THIS APPEAL BY THE R EVENUE HAS BEEN PREFERRED AGAINST THE ORDER DATED 16/02/2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) - 2, GURGAON [IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR 2011 - 12 , RAISING FOLLOWING GROUNDS: 1.1 LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN GRANTING RELIEF TO THE EXTENT OF RS.64,87,544/ - (RS.67,95,481 RS.3,07,937) IN SPITE OF THE FACT T HAT THESE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. DATE OF HEARING 06.08.2019 DATE OF PRONOUNCEMENT 09.08.2019 2 ITA NO . 2367/DEL/2016 1.2 LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN GRANTING RELIEF TO THE EXTENT OF RS.61,54,972/ - WHEREAS EXPENDITURE WAS NOT ALLOWABLE U/S 40(A)(I) OF THE ACT. 3. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. B RIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN PROVIDING CONSULTING SERVICES INCLUDING CORPO RATE PORTFOLIO STRATEGY, BUSINESS UNIT STRATEGY, RESOURCE ALLOCATION, E NTERPRISE R ISK M ANAGEMENT ETC. FOR THE YEAR UNDER CONSIDERATION , THE ASSESSEE FILED RETURN OF INCOME ON 30/11/201 1 DECLARING TOTAL INCOME OF RS. 2,58,63,690/ - . THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSME NT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 (IN SHORT THE A CT ) WAS COMPLETED ON 30/01/2014 AFTER MAKING CERTAIN ADD ITIONS/DISALLOWANCES. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) , WHO PARTLY ALLOWED THE APPEAL OF ASSESSEE. AGGRIEVED WITH THE RELIE F ALLOWED TO THE ASSESSEE, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS A S REPRODUCED ABOVE. 3. IN GROUND NO. 1 AND 2 OF THE APPEAL, THE R EVENUE HAS C HALLENGED RELIEF A LLOWED OF RS. 64,87,544/ - OUT OF THE ADDITION OF RS.67,95,481/ - MADE BY THE ASSESSING OFFICER , IN RESPECT OF THE SALARY EXPENSES CLAIMED BY THE ASSESSEE. 3.1 THE ASSESSING OFFICER OBSERVED THAT UNDER THAT SALARY EXPENSES, THE ASSESSEE CLAIMED REIMBURSEMENT OF AMOUNT ON ACCOUNT OF DRIVER SALARY, UNIFORM EXPENSES, CONVEYANCE AND BOOKS A ND PERIODICALS AMOUNTING TO RS.1, 00,42,938/ - . ACCORDING TO THE ASSESSING OFFICER , THERE WAS NO JUSTIFICATION FOR ALLOWING 3 ITA NO . 2367/DEL/2016 DRIVER SALARY AND CONVEYANCE EXPENSES AT THE SAME TIME . REGARDING THE CLAIM OF REIMBURSEMENT OF BOOKS AND PERIODICALS, THE ASSESSING OFFICER NOTICED THAT ALL THE BILLS AND VOUCHERS IN RESPECT OF THE CLAIMS WERE NOT PRODUCED BY THE ASSESSEE AND THE EXPENSES WERE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BU SINESS BUT ON ACCOUNT OF PERSONAL CONSIDERATION AND AS SUCH WAS NOT ALLOWABLE. THE ASSESSING OFFICER ALSO NOTICED THAT LAST YEAR ON 14/12/2012, A SURVEY/VERIFICATION REGARDING CORRECTNESS OF THE TAX DEDUCTED AT SOURCE (TDS) WAS CARRIED OUT BY THE I NCOME T A X DEPARTMENT AND WHEREIN THE ASSESSEE COULD NOT FURNISH THE EVIDENCE/BASIS OF MAKING REIMBURSEMENT OF EXPENSES OR TO SHOW THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ACC ORDING TO THE ASSESSING OFFICER , IN RESPECT OF CLAIM OF REIMBURSEMENT OF DRIVER SALARY, ALSO DOCUMENTS CONTAINING NAME AND ADDRESS OF THE DRIVERS, THEIR MONTHLY SALARY, BASIS OF REIMBURSEMENT OF CLAIMS MADE BY EMPLOYEES, PROOF REGARDING OWNERSHIP OF THE VEHICLES, LOGBOOK OF VEHICLES ETC DETAILS WERE NOT PRODUCED. THUS , ACCORDING TO HIM THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. SIMILAR OBSERVATIONS WERE MADE IN RESPECT OF UNIFORM AND CONVEYANCE EXPENSES, HOWEVER HE OBSERVED THAT IT WAS COMMON PRACTICE OF THE COMPANIES TO PROVIDE UNIFORM AND CONVEYANCE TO ITS EMPLOYEES FOR THE PURPOSE OF THE BUSINESS, HE RESTRICTED THE DISALLOWANC E TO 50% OF THE REIMBURSEMENT OF CONVEYANCE AND UNIFORM EXPENSES . THE DETAIL OF DISALLOWANCE MADE AGAINST VARIOUS REIMBURSEMENTS IS REPRODUCED AS UNDER: 4 ITA NO . 2367/DEL/2016 SL. NO. NATURE OF REIMBURSEMENTS CLAIMED AMOUNT DISALLOWED 1. DRIVER SALARY 19,89,034/ - 19,89,034/ - 2. UNIFORM EXPENSES 20,63,700/ - 10,31,850/ - 3. CONVEYANCE 44,31,214/ - 22,15,607/ - 4. BOOKS & PERIODICALS 15,58,990/ - 15,58,990/ - TOTAL 1,00,42,938/ - 67,95,480/ - 3.2 THE LD. CIT ( A), HOWEVER , SUSTAINED THE ADDITION OF RS. 3, 07,937 / - AND DELETED THE BALANCE AMOUNT OF ADDITION OF RS. 64,87,544/ - . THE LD. CIT(A) HAS RELIED MAINLY ON THE ORDER OF THE FIST APPELLATE AUTHORITY AGAINST THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 201(1)/201(1A) OF THE A CT I.E. FOR DEFAULT IN DEDUCTING TDS, DURING WHICH THE ASSESSEE FILE D ADDITIONAL EVIDENCE AND MATTER WAS REMANDED TO THE ASSESSING OFFICER. DURING THE REMAND PROCEEDING, THE ASSESSING OFFICER VERIFIED ORIGINAL BILLS AND VOUCHERS ETC. AND LD. CIT(A) RESTRICTED THE PENALTY U/S 20 1(1) & 201(1A) OF THE ACT TO RS.3,07,937/ - . 3.3 BEFORE US, THE LEARN ED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT LD. CIT(A) HAD DELETED THE ADDITION , THOUGH THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND IN SPITE OF THE FACT THAT EXPENSES WERE NOT GENUINE. 3.4 ON THE CONTRARY, THE LEARNE D COUNSEL OF THE ASSESSEE, RELIED ON THE ORDER OF THE LD. CIT(A). 3.5 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THOUG H, IN THE ASSESSMENT PROCEEDING , THE ASSESSEE FAILED TO PRODUCE BILLS AND VOUCHERS IN RESPECT OF THE REIMBURSEMENT OF THE EXPENSES , HOWEVER , DURING REMAND PROCEEDINGS IN RELATION TO ORDER UNDER SECTION 201(1)/201(1A) OF THE ACT, THE ASSESSEE PRODUCED ALL THE BILLS AND 5 ITA NO . 2367/DEL/2016 VOUCHERS AND ON THE BASIS OF THE REMAND REPORT OF THE ASSESSING OFFICER, THE LD. FIRST APPELLATE A UTHORITY , RESTRICTED THE DEFAULT UNDER SECTION 201( 1)/201(1A) TO THE EXTENT OF RS.3,07, 937/ - . A COPY OF THE SAID REMAND REPORT AND FINDING OF TH E LD. FIRST A PPELLATE A UTHORITY HAVE BEEN REPRODUCED BY THE LD. CIT(A) AT PARA 5.3 AND 5.4 OF THE IMPUGNED ORDER. RELYING ON THE SAME, THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UNDER: 5.5. I HAVE CAREFULLY CONSIDERED THE APPELLANT S SUBMISSIONS. THE AO HAS DISALLOWED THE EXPENSES ON THE GROUND THAT THE SAME WERE NOT WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES BUT ON ACCOUNT OF PERSONAL CONSIDERATION. THE GENUINENESS OF THE EXPENSES IN CURRED IS NOT IN DOUBT IN THIS CASE. IT IS EVIDENT FROM THE FACTS RECORDED BY THE AO IN THE REMAND REPORT REFERRED TO ABOVE, THE FACTS RECORDED BY THE CIT(A) IN HIS ORDER REPRODUCED ABOVE AS ALSO THE APPELLANT S CONTENTION THAT THE EXPENDITURE CLAIMED BY T HE APPELLANT WAS WITH REGARD TO REIMBURSEMENT OF VARIOUS EXPENSES INCURRED BY THE EMPLOYEES. THE CIT(A) HAS CATEGORICALLY RECORDED THAT THE APPELLANT GAVE SUFFICIENT DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE FACT THAT IT HAD REIMBURSED VARIOUS EXPENSES INCU RRED BY THE EMPLOYEES, ATTER FOLLOWING THE DUE PROCEDURE LAID DOWN IN THE COMPANY FOR REIMBURSEMENT OF EXPENSES3THE CIT(A) FURTHER RECORDED THAT THE FACT OF INCURRING THE EXPENSES BY EMPLOYEES AND THEIR SUBSEQUENT REIMBURSEMENT BY THE APPELLANT HAVE BEEN E STABLISHED DURING THE REMAND PROCEEDINGS BY PRODUCING ORIGINAL BILLS/VOUCHERS/OTHER. 3.6 WE FIND THAT LD. CIT(A) HAS DELETED THE ADDITION ON THE BASIS OF THE VERIFICATION OF THE ORIGINAL BILLS AND VOUCHERS IN RESPECT OF THE REIMBURSEMENT EXPENSES IN DI SPUTE , WHICH THE ASSESSING OFFICER HIMSELF VERIFIED , EXCEPT THE AMOUNT OF RS.3,07, 937/ - . IN OUR OPINION, THE REVENUE IS NOT JUSTIFIED IN PREFE RRING THE APPEAL BEFORE THE T RIBUNAL ON THIS ISSUE ON THE GROUND THAT SAME HAS NOT BEEN INCURRED FOR THE PURPOSE O F THE BUSINESS, WITHOUT BRINGING A N Y T H I N G CONTRARY ON THE RECORD OR ANY MALAFIDE ACTION ON THE PART OF THE ASSESSING OFFICER. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY , WE 6 ITA NO . 2367/DEL/2016 UPHOLD THE SAME. THE GROUND NO. 1 AND 2 OF THE APPEAL ARE DISMISSED. 4. IN GROUND NO. 3 , THE R EVENUE HAS CHALLE NGED THE RELIEF GRANTED OF AMOUNT OF RS.61,54, 972/ - , WHICH WAS HELD BY THE ASSESSING OFFICER IS NOT ALLOWABLE UNDER SECTION 40(A)(I) OF THE A CT. THE AMOUNT OF RS. 61,54,972/ - WAS CLAIMED BY THE ASSESSEE AS REIMBURSEMENT OF THE EXPENSES INCURRED ON BEHALF OF THE ASSESSEE. THE DETAIL S OF SAID EXPENSES ARE REPRODUCED AS UNDER: S. NO. EXPENSE HEAD AMOUNT (RS.) 1. TRAVEL 9,80,365/ - 2. INSURANCE 20,44,044/ - 3. COMMUNICATION 6,86,283/ - 4. COMPUTER CONSUMABLES 24,21,861/ - 5. LEGAL & PROFESSIONAL 22,419 TOTAL 61,54,972/ - 5. A CCORDING TO ASSESSING OFFICER, TAX WAS TO BE DEDUCTED AT SOURCE ON REIMBURSEMENT OF THE ABOVE EXPENSES AND DUE TO FAILURE ON THE PART OF THE ASSESSEE , SAID EXPENDITURE WAS LIABLE FOR DISALLOWANCE UNDER SECTION 40(A)(I) OF THE A CT. THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UNDER: 4.9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS./HAVE ALSO PERUSED THE COST APPORTIONMENT AGREEMENT FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. THIS COST APPORTIONMENT AGREEMENT IS EFFECTIVE W.E.F. 01.04.2008 AND WAS VALID FOR SUBSEQUENT 60 MONTHS. IT WAS THEREFORE APPLICABLE TO THE YEAR UNDER CONSIDERATION. THE AO HAS MADE A DISALLOWAN CE OF RS. 1,17,04,972/ - U/S 40(A)(IA) FOR NON DEDUCTION OF TDS. AS SEEN FROM THE FACTS DISCUSSED ABOVE, THE APPELLANT HAD CLAIMED EXPENDITURE OF RS. 61,54,972/ - ONLY. THE AMOUNT OF RS. 55,50,000/ - REVERSED BY THE APPELLANT IN THE ACCOUNTS AND NOT CLAIMED I N P&L ACCOUNT WAS THEREFORE EVIDENTLY WRONGLY DISALLOWED BY THE AO. 7 ITA NO . 2367/DEL/2016 4.10. AS REGARDS THE REMAINING AMOUNT OF RS. 61,54,972/ - , IT IS EVIDENT FROM THE FACTS RECORDED IN THE ASSESSMENT ORDER AS ALSO THE SUBMISSIONS OF THE APPELLANT AND THE TERMS COST APPORTI ONMENT AGREEMENT THAT THESE EXPENSES PERTAINED TO REIMBURSEMENT OF EXPENSES BY THE APPELLANT INCURRED BY THE US ENTERPRISE ON BEHALF OF THE APPELLANT. THE APPELLANT HAD FURNISHED THE BILLS AND VOUCHERS WITH RESPECT TO THESE 5 HEADS OF EXPENSES. THIS FACT H AS BEEN CLEARLY RECORDED BY THE AO IN THE ASSESSMENT ORDER AS UNDER: - THE ASSES SEE HAS FURNISHED SOME BILLS AND VOUCHERS BUT THEY ARE ONLY IN RESPECT OF 5 HEADS OF EXPENSES MENTIONED ABOVE 4.11. IN ANY CASE IT IS NOT EVEN THE AO S CONTENTION THAT THE EXPENSES CLAIMED WERE BOGUS OR NOT GENUINE. THE ONLY ISSUE IS WITH REGARD TO THE FACT WHETHER TDS WAS DEDUCTABLE ON THESE EXPENSES. KEEPING IN VIEW THE FACTS OF THE CASE, THE NATURE OF EXPENSES AND THE TERMS OF COST APPORTIONMENT AGREEMENT AS ALSO THE FAC T THAT SIMILAR CLAIM OF EXPENSES ON ACCOUNT OF REIMBURSEMENT WITHOUT DEDUCTING TDS WAS ALLOWED IN THE IMMEDIATELY PRECEDING & SUCCEEDING YEARS, IT IS HELD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TDS ON THE REIMBURSEMENT OF EXPENSES INCURRED BY THE US E NTERPRISES ON BEHALF OF THE APPELLANT. DISALLOWANCE MADE BY TH E AO ON THIS ACCOUNT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD , INCLUDING THE IMPUGNED ORDER OF THE LOWER AUTHORITIES. WE FIND THAT WHETHER THE AMOUNT IN QUESTION IS REIMBURSEMENT OF THE EXPENS ES IS NOT IN DISPUTE. THE LD. CIT(A) HAS NOTED THAT SIMILAR REIMBURSEMENT OF EXPENSES HAVE BEEN ALLOWED BY THE ASSESSING OFFICER WITHOUT DEDUCTING OF TDS IN THE PRECEDING AND SUCCEEDING YEAR ALSO. ACCORDING LY, THE LD. CIT(A) DELETED THE DISALLOWANCE IN THE YEAR UNDER CONSIDERATION. WE DO NOT FIND ANY ERROR IN THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IN VIEW O F THE RULE OF CONSISTENCY 8 ITA NO . 2367/DEL/2016 ALSO. ACCORDINGL Y, THE GROUND OF APPEAL OF THE R EVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE R EVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 9 T H AUGUST , 2019. S D / - S D / - [ AMIT SHUKLA ] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 9 T H AUGUST , 2019. RK/ - [D.T.D.S] COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI