ACNIELSEN RESEARCH SERVICES P. LTD, MUMBAI V. ADDL CIT RG 5(1), MUMBAI

ITA 2388/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0630 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAI PRATAP SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 2388 /MUM/ 2012 : (A.Y : 2008 - 09 ) ACNIELSEN RESEARCH SERVICES PVT. LTD., 6 TH FLOOR, GODREJ IT PARK, 02 GODRAJ BUSINESS DISTRICT, PHIROJSHANAGAR, LBS MARG, VIKROLI (W), MUMBAI 400 079 PAN : AADCA0218N (APPELLANT) VS. ADDL. CIT, RANGE 5(1), MUMBAI (RESPONDENT) APPELLANT BY : SHRI GIRISH DAVE RESPONDENT BY : SHRI AJAI PRATAP SINGH DATE OF HEARING : 29 / 05 /201 7 DATE OF PRONOUNCEMENT : 29 /0 5 /201 7 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 9 , MUMBAI DATED 6 .1.201 2 , PERTAINING TO THE ASSESSMENT YEAR 200 8 - 0 9 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 28 . 1 2.201 0 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE SOLITARY GRIEVANCE OF THE ASSESSEE IS AGAINST THE ACTION OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.24,84,082/ - ON THE GROUND THAT IT WAS A PRIOR PERIOD EXPENDITURE. 2 ACNIELSON RESEARCH SERVICES PVT. LTD. ITA NO. 2388/MUM/2012 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER - ALIA , ENGAGE D IN THE BUSINESS OF MARKETING RESEARCH, SERVING CLIENTS WITHIN INDIA AS WELL AS OUTSIDE INDIA. THE APPELLANT IS A SUBSIDIARY OF ITS FOREIGN COMPANY BASED IN USA. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE TAX AUDITORS REPORT REVEALED PRIOR PERIOD EXPENSES OF RS.24,84,082/ - WHICH WERE IN THE NATURE OF COMPENSATION, STAFF WELFARE, TRAVEL, CONVEYANCE, ETC. THE ASSESSING OFFICER NOTED THAT SUCH PRIOR PERIOD EXPENSES COULD NOT BE ALLOWED AS A DEDUCTION AGAINST THE CURRENT YEAR RECEIPTS CREDITED TO THE PROFIT & LOSS ACCOUNT SINCE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, THE SAID SUM WAS DISALLOWED AND ADDED BACK TO THE ASSESSEES TOTAL INCOME. THE CIT(A) HAS ALSO AFFIRMED THE STAND OF THE ASSE SSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. EXPLAINING THE BACKGROUND OF THE DISPUTE, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER WHEREIN IN PARA 4.2, THE ASSESSING OFFICER HAS INTER - ALIA, REPRODUCED THE WRITTEN SUBMISSIONS OF THE ASSES SEE. IN TERMS OF THE SAID SUBMISSIONS, IT IS QUITE CLEAR THAT ASSESSEE CANVASSED THAT IN TERMS OF THE CONSISTENT PRACTICE FOLLOWED IN THE PAST, ASSESSEE CLOSED ITS ACCOUNTS EACH YEAR ON 30 TH APRIL ITSELF , I.E. WITHIN ONE MONTH FROM THE END OF THE RELEVANT ACCOUNTING YEAR 31 ST MARCH. ASSESSEE HA S SEVERAL OFFICES IN INDIA FROM WHICH THE STATEMENT OF EXPENSES ARE RECEIVED BY THE HEAD OFFICE AFTER SUCH CUT - OFF DATE OF 30 TH APRIL AND SUCH EXPENSES 3 ACNIELSON RESEARCH SERVICES PVT. LTD. ITA NO. 2388/MUM/2012 ARE BOOKED IN THE SUBSEQUENT ACCOUNTING YEAR. IT WAS EXPLAINED THAT THE CUT - OFF DATE IS TAKEN AS 30 TH APRIL TO BE IN LINE WITH THE FOREIGN HOLDING COMPANY WHICH CLOSES ITS ACCOUNTS ON THE SAID DATE. BECAUSE OF THE SAID REASON, SOME OF THE EXPENSES WHICH PERTAINED TO THE YEAR ENDED 31.3.2007 COULD NOT BE BOOKED AS TH E RELEVANT DETAILS/BILLS, ETC. WERE RECEIVED AFTER 30.4.2007 AND THUS HAS BEEN ACCOUNTED FOR IN THE CURRENT PREVIOUS YEAR ENDING ON 31.3.2008 CORRESPONDING TO THE INSTANT ASSESSMENT YEAR. IT WAS, THEREFORE, EXPLAINED THAT THIS WAS A REGULAR PRACTICE FOLLO WED OVER THE YEARS AND THAT SUCH EXPENDITURE COULD NOT BE DISALLOWED AS PRIOR PERIOD EXPENSES. 5. THE LEARNED REPRESENTATIVE FURTHER EXPLAINED THAT INITIALLY IN ASSESSMENT YEAR 1996 - 97, SUCH A DISPUTE WAS RAISED BY THE ASSESSING OFFICER FOR THE FIRST TIME , WHICH HAD BEEN DECIDED BY THE CIT(A) IN FAVOUR OF THE ASSESSEE AND IN THIS CONTEXT HE HAS FILED THE ORDER OF CIT(A) DATED 23.3.2000. THE LEARNED REPRESENTATIVE POINTED OUT THAT THE SAID DECISION OF THE CIT(A) HAS BECOME FINAL AND THAT UPTO THE INSTANT A SSESSMENT YEAR THERE HAS BEEN NO DISALLOWANCE ON THIS SCORE. THE LEARNED REPRESENTATIVE POINTED OUT THAT ASSESSEE, HOWEVER, WAS NOT IN A POSITION TO SUBSTANTIATE THE AFORESAID BECAUSE COPIES OF THE RELEVANT ASSESSMENT ORDERS STARTING FROM ASSESSMENT YEAR S 1997 - 98 TO 2007 - 08 WERE NOT READILY AVAILABLE ON ACCOUNT OF CHANGE IN MANAGEMENT AND CHANGE IN TAX CONSULTANTS OVER THE YEARS. HOWEVER, THE ASSESSEE HAD MADE EFFORT S TO OBTAIN SUCH MATERIAL BY APPROACHING THE ASSESSING OFFICER ON MORE THAN ONE OCCASION. IN THIS REGARD, HE FILED COPIES OF THE COMMUNICATIONS ADDRESSED TO THE ASSESSING OFFICER DATED 18.12.2015, 25.4.2016, 25.5.2016 AND 4.10.2016. EVEN OTHERWISE, ON 4 ACNIELSON RESEARCH SERVICES PVT. LTD. ITA NO. 2388/MUM/2012 MERITS ALSO, THE LEARNED REPRESENTATIVE POINTED OUT THAT THE DISALLOWANCE WAS IMPERMISSIBLE AND IN THIS CONTEXT, REFERRED TO THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF JAGATJIT INDUSTRIES LTD., 339 ITR 382 (DELHI) . 6. ON THE OTHER HAND, THE LD. DR HAS REITERATED THE REASONING OF THE ASSESSING OFFICER TO THE EFFECT THAT SINCE T HE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE IMPUGNED PRIOR PERIOD EXPENSES COULD NOT BE ALLOWED AS A DEDUCTION IN THE INSTANT YEAR. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. FACTUALLY SPEAKING, THE ASSESSEE HAS BEEN CONSIS TENTLY EXPLAINING BEFORE THE LOWER AUTHORITIES THE REASONS FOR WHICH SUCH EXPENSES HAVE BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. IT HAS BEEN EXPLAINED THAT ITS ACCOUNTS FOR THE YEAR ENDING 31.3.2007 ARE CLOSED ON 30.4.2 007 , TO BE IN LINE WITH THE PRACTICE FOLLOWED BY ITS HOLDING COMPANY IN USA AND, THEREFORE, THE BILLS/DETAILS OF EXPENDITURE OF CERTAIN EXPENSES, WHICH PERTAIN TO 31.3.2007 ENDING, WE RE RECEIVED FROM ITS BRANCHES AFTER 30.4.2007 AND, THUS DEBITED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION, I.E. ENDING ON 31.3.2008 . SUCH EXPENDITURE HAS BEEN TREATED AS A PRIOR PERIOD EXPENDITURE AND DISALLOWED. THE LEARNED REPRESENTATIVE MADE A STATEMENT AT BAR THAT THE AFORES AID METHODOLOGY ADOPTED BY THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWED SINCE MORE THAN 15 YEARS AND THAT AFTER THE INITIAL DISALLOWANCE IN THE ASSESSMENT YEAR 1996 - 97, THERE HAS BEEN NO DISALLOWANCE TILL NOW. BE THAT AS IT MAY, ONE POINT WHICH CLEARLY EME RGES IS THAT THERE IS NO DISPUTE INSOFAR AS THE NATURE OF THE 5 ACNIELSON RESEARCH SERVICES PVT. LTD. ITA NO. 2388/MUM/2012 EXPENDITURE IS CONCERNED , AS BEING RELATABLE TO THE BUSINESS OF THE ASSESSEE. IT IS ALSO CORRECT THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, SO HOWEVER, THE IMPUGNED EXP ENSES MAY RELATE TO AN EARLIER PERIOD, BUT THEY CANNOT BE SAID TO ARISE IN THE PRECEDING YEAR. QUITE CLEARLY, THE EXPENSES HAVE ARISEN AND CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION INASMUCH AS THE REQUISITE BILLS, DETAILS, ETC. HAVE BEEN RECEIVED B Y THE ASSESSEE FOR INCORPORATION IN ACCOUNTS BY ITS HEAD OFFICE DURING THE YEAR UNDER CONSIDERATION AND, THEREFORE, THE SAME HAVE BEEN RIGHTLY ACCOUNTED FOR IN THE INSTANT YEAR. THERE IS NO CONTR O VE RS ION TO THE ASSERTION OF THE LEARNED REPRESENTATIVE THAT SUCH PRACTICE HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND THAT SUCH PRACTICE EVENS OUT ANY DIFFERENCE IN DEDUCTIBILITY OF THE TOTAL EXPENSES OVER A PERIOD OF TIME. CONSIDERING THE AFORESAID, WE FIND NO REASON TO DENY THE CLAIM OF ASSESSEE FOR DEDU CTION OF THE IMPUGNED EXPENDITURE. 8. BEFORE PARTING, WE MAY ALSO REFER TO THE JUDGMENT S OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TAPARIA TOOLS LTD. , 260 ITR 102 (BOM) AND MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. , 225 ITR 802 (BOM) , WHICH HAVE BEEN REFERRED TO BY THE CIT(A). IN OUR CONSIDERED OPINION, THE RATIO OF THE AFORESAID DECISIONS HAVE NO RELEVANCE SO FAR AS THE INSTANT CONTROVERSY IS CONCERNED WHICH IS REQUIRED TO BE ADJUDICATED ON THE PRINCIPLES OF CONSISTENCY AS WELL AS ON THE BASIS OF THE YEAR OF CRYSTALLIZATION OF LIABILITY, WHICH CLEARLY TAKES PLACE IN THE YEAR IN WHICH SUCH EXPENSES ARE BOOKED BY THE ASSESSEE. THUS, WE SET - ASID E THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 24,84,082/ - . 6 ACNIELSON RESEARCH SERVICES PVT. LTD. ITA NO. 2388/MUM/2012 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF HEA RING ON 29 TH MAY, 2017. SD/ - SD/ - ( AMARJIT SINGH ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 2 9 T H MAY , 201 7 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI