M/S. BHAICHAND AMOLUK CONSULTANCY SERVICES P. LTD, V. THE ACIT CC-46,

ITA 2514/MUM/2005

• Counselvise Citation: 251419914 RSA 2005
• Duration Of Justice: 6 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-06-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 05-04-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI
• Keywords: Business expenditure; Rule of consistency; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 37(1); 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER I T A NO: 2514/MUM/2005 (ASSESSMENT YEAR: 2000-2001) M/S BHAICHAND AMOLUK CONSULTANCY SERVICES APPELLA NT PRIVATE LIMITED, MUMBAI (PAN: AAACB6034A) VS ASSISTANT COMMISSIONER OF INCOME TAX RESPONDENT CENTRAL CIRCLE 46, MUMBAI ASSESSEE BY: MR D V LAKHANI REVENUE BY: MR ABANI KANTA NAYAK DATE OF HEARING: 22 ND JUNE 2011 DATE OF PRONOUNCEMENT: 12 TH AUGUST 2011 O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AND IT PERTAINS TO THE ASSESSMENT YEAR 2000-2001. THE ASSESSEE IS A PRIVA TE LIMITED COMPANY CARRYING ON BUSINESS AS INSURANCE AND REINS URANCE BROKER, CONSULTANCY IN INSURANCE, INVESTMENT AND FI NANCE. THE APPEAL ARISES OUT OF THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961, ON 27 TH FEBRUARY 2004. 2. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS UNDER COVER OF LETTER DATED 28 TH APRIL 2009. THOUGH THERE ARE FOUR ADDITIONAL GROUNDS, ALL OF THEM ARE DIRECTED AGAINST THE VALID ITY OF THE REASSESSMENT MADE UNDER SECTION 147 OF THE ACT. IT IS STATED IN THE ITA NO: 2514/MUM/2005 2 GROUNDS THAT THE BASIC CONDITIONS OF SECTION 147 AR E NOT SATISFIED AND THEREFORE THE NOTICE ISSUED UNDER SECTION 148 I S BAD IN LAW AND FURTHER THAT THE INITIATION OF THE REASSESSMENT PRO CEEDINGS AND THE REASSESSMENT ORDER ARE BAD IN LAW. SINCE THE ADDIT IONAL GROUNDS GO TO THE ROOT OF THE MATTER AND IT DOES NOT REQUIR E ANY ENQUIRY INTO FACTS NOT ALREADY ON RECORD, WE ADMIT THE SAME FOR ADJUDICATION. 3. THE ASSESSEE FILED A RETURN ON 30 TH NOVEMBER 2000 DECLARING TOTAL INCOME OF ` 4,48,08,090/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) ON 13 TH FEBRUARY 2002, ACCEPTING THE INCOME RETURNED. SUBSEQUENTLY THE ASSESSING OF FICER RECORDED REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 AND THESE REASONS WERE RECORDED ON 1 ST MAY 2002 AND THEY ARE AS UNDER: - THE RETURN FOR THE AY 2000-2001 HAS BEEN FILED ON 30.11.2000 SHOWING TOTAL INCOME OF RS.4,48,08,090/-. THE RETURN HAS BEEN DULY PROCESSED UNDER SECTION 143(1) ON 13.02.2002. PERUSAL OF THE AUDITED PROFIT AND LOSS A/C. ATTACHE D WITH THE RETURN SHOWS THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.13,34,981/- ON ACCOUNT OF DIRECTOR S TRAINING AND EDUCATION. IN EARLIER YEARS, AY 1997- 98, AY 1998-99 AND AY 1999-2000 THE EXPENDITURE ON THIS HEAD HAS BEEN DISALLOWED FOR THE REASONS RECORDED IN DETAIL IN THE ASSESSMENT ORDERS. WITHO UT PREJUDICE IT IS WORTHWHILE TO MENTION THAT FOR AY 1997-98 AND 1998-99 THESE DISALLOWANCES HAVE BEEN CONFIRMED AT THE FIRST APPELLATE STAGE. FOR T HE AY 1999-2000 THE APPEAL IS PENDING BEFORE THE CIT(APPEALS). IN VIEW OF THE ABOVE MENTIONED FACTS I HAVE REASON TO BELIEVE THAT THE EXPENDITURE RELATIN G TO THE DIRECTORS TRAINING AND EDUCATION AS MENTIONED ABOVE AS WELL AS THOSE RELATING TO THE FOREIGN TRAVELLING EXPENSES OF THE CONCERNED DIRECTOR IS NO T AN ALLOWABLE DEDUCTION AND HENCE THIS INCOME HAS ESCAPED ASSESSMENT. HENCE, THE ASSESSMENT PROCEEDINGS ARE BEING REOPENED UNDER SECTION 147. ISSUE NOTICE UNDER SECTION 148. ITA NO: 2514/MUM/2005 3 A NOTICE UNDER SECTION 148 WAS ISSUED ON 15 TH FEBRUARY 2002 CALLING UPON THE ASSESSEE TO FILE RETURN OF INCOME, IN RESPONSE TO WHICH THE ASSESSEE STATED THAT THE RETURN EARLIER F ILED ON 30 TH NOVEMBER 2000 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO THE NOTICE OF REASSESSMENT. IN THE COURSE OF THE R EASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED UPON THE A SSESSEE TO JUSTIFY THE CLAIM FOR DEDUCTION OF ` 13,34,981/- MADE ON ACCOUNT OF THE TRAINING AND EDUCATION OF ITS DIRECTOR, MS DEVN A J VORA. IN RESPONSE THERETO THE ASSESSEE FILED DETAILED WRITTE N SUBMISSION ON 25 TH FEBRUARY 2004, WHICH IS REPRODUCED IN THE ASSESSME NT ORDER. IN THIS LETTER IT WAS POINTED OUT HOW THE SERVICES OF THE DIRECTOR WERE NECESSARY FOR THE ASSESSEE COMPANY AND HOW THE STIN T IN LONDON SCHOOL OF ECONOMICS WOULD HELP THE DIRECTOR GET BET TER EDUCATION, KNOWLEDGE AND EXPERIENCE. IN SHORT, THE ASSESSEE J USTIFIED THE INCURRING OF THE EXPENDITURE ON THE EDUCATION AND T RAINING OF THE DIRECTOR. THE ASSESSEE ALSO POINTED OUT THAT WITH EFFECT FROM 1 ST SEPTEMBER 2000, MS DEVNA J VORA HAD JOINED THE COMP ANY AND WAS WORKING AS A DIRECTOR. IT WAS POINTED OUT THAT WITH THE OPENING UP OF THE INSURANCE SECTOR THERE WAS TREMENDOUS OPP ORTUNITY FOR EXPANDING THE BUSINESS OF THE COMPANY AND THE SAID DIRECTOR, ALONG WITH OTHER DIRECTORS, WAS ACTIVELY INVOLVED I N EXPLORING THE OPPORTUNITIES FOR ENTERING INTO JOINT VENTURE BUSIN ESS WITH FOREIGN REINSURANCE BROKER PROVIDING SERVICES AS A THIRD PA RTY ADMINISTRATOR. IT WAS THUS PLEADED THAT THE EXPENDITURE ON THE TRA INING OF MS DEVNA J VORA WAS ALLOWABLE AS BUSINESS EXPENDITURE. ITA NO: 2514/MUM/2005 4 4. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSE ES CLAIM. HE NOTED THAT MS DEVNA J VORA WAS BORN ON 16 TH JANUARY 1978 AND ON HER ATTAINING THE AGE OF 18 SHE WAS INDUCTED INT O THE BOARD OF DIRECTORS ON 25 TH JULY 1996. AT THAT TIME SHE HAD ONLY PASSED HER HSC EXAMINATION. IN OCTOBER 1996 SHE WAS ADMITTED TO THE ALBANY COLLEGE AT LONDON FOR DOING GRADUATION COURSE WITH ECONOMICS AND MATHEMATICS AS MAIN SUBJECTS. LATER SHE WAS SHIFTE D TO THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE FOR DOING B.SC. COURSE IN MANAGEMENT SCIENCE WHICH STARTED ON 1 ST OCTOBER 1997 AND WAS EXPECTED TO BE COMPLETED BY 1 ST JULY 2000. THE ASSESSING OFFICER NOTICED THESE FACTS BUT TOOK THE VIEW THAT THE ASSE SSEES CLAIM THAT THE EXPENDITURE WAS ALLOWABLE AS BUSINESS EXPENDITU RE WAS NOT CREDIBLE. HE NOTED THAT THE COLLEGES IN LONDON WHE RE MS DEVNA J VORA UNDERWENT STUDIES WERE PRESTIGIOUS AND WOULD N OT HAVE LEFT ANY SPARE TIME FOR THE STUDENTS TO ATTEND REGULAR P ART TIME COURSES IN INSURANCE OR REINSURANCE WITH KNOWN AND REPUTED BROKERS AS CLAIMED BY THE ASSESSEE. IT WAS THE VIEW OF THE AS SESSING OFFICER THAT MS DEVNA J VORA COULD NOT HAVE GAINED ANY EXPE RIENCE IN THE LINE IN WHICH THE ASSESSEE COMPANY CARRIED ON BUSIN ESS. HE THEREFORE HELD THAT THERE WAS NO NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE ASSESSEES BUSINESS. APART FROM T HIS THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT IN ANY CA SE IT WAS NOT THE ASSESSEE COMPANYS OBLIGATION TO MEET THE EXPENDITU RE ON THE TRAINING AND EDUCATION OF THE DIRECTOR AS IT WAS NO RMALLY THE PARENTAL OBLIGATION. AS A CONSEQUENCE TO THIS VIEW , HE HELD THAT THE CLAIM WAS NOTHING BUT A DEVISE TO REDUCE THE ASSESS EES INCOME, ITA NO: 2514/MUM/2005 5 ATTRACTING THE RULE IN MCDOWELL & CO. LTD. VS. CTO (1985) 154 ITR 148 (SC). FOR THESE REASONS HE REJECTED THE CLAIM FOR DEDUCTION. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) WAS INFORMED THAT AN AGREEMENT WAS ENTER ED INTO BETWEEN THE COMPANY AND MS DEVNA J VORA, ACCORDING TO WHICH ON COMPLETION OF THE EDUCATION IN LONDON SCHOOL OF ECO NOMICS SHE WOULD RETURN TO INDIA AND CONTINUE IN THE EMPLOYMEN T OF THE COMPANY FOR A PERIOD OF FIVE YEARS FROM THE DATE OF RESUMPTION OF THE EMPLOYMENT. IT WOULD APPEAR TO HAVE BEEN POINT ED OUT TO THE CIT(A) THAT IN ACCORDANCE WITH THIS ARRANGEMENT SHE RETURNED TO INDIA AND WAS EMPLOYED IN THE COMPANY AND HENCE THE EXPENDITURE SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. A COPY OF THE AGREEMENT WOULD ALSO APPEAR TO HAVE BEEN FILED BEFO RE THE CIT(A). THERE IS ALSO REFERENCE IN PARAGRAPH 4.2.2. OF THE ORDER OF THE CIT(A) TO THE BOARDS RESOLUTION DATED 7 TH AUGUST 1996, ACCORDING TO WHICH THE INCURRING OF THE EXPENDITURE WAS APPRO VED. 6. THE CIT(A) TOOK NOTE OF THE FACTS AND THE WRITTE N SUBMISSIONS. ACCORDING TO HIM, ACQUISITION OF EDUC ATIONAL QUALIFICATIONS SO AS TO INCREASE ONES SKILL, INTELL ECTUAL CAPABILITIES AND SPECIALIZED KNOWLEDGE WOULD NORMALLY FALL WITHI N THE PERSONAL DOMAIN OF AN INDIVIDUAL AND THE OBLIGATION TO GET T HE CHILD EDUCATED IS ON THE PARENT. HE REFERRED TO THE PROVISIONS OF THE HINDU ADOPTIONS AND MAINTENANCE ACT, 1956, TO DRIVE HOME THE POINT THAT IT WAS NOT THE OBLIGATION OF THE ASSESSEE COMPANY T O GET MS DEVNA J VORA EDUCATED AT LONDON. HE ALSO NOTED THAT THER E WAS NO POLICY ADOPTED BY THE ASSESSEE COMPANY OF SENDING ANY DIRE CTOR OR ITA NO: 2514/MUM/2005 6 EMPLOYEE TO THE FOREIGN COUNTRY FOR THE PURPOSE OF EDUCATION AND TRAINING. HE CONCLUDED THAT MS DEVNA J VORA WAS SE NT ABROAD FOR EDUCATION AND TRAINING ONLY BECAUSE SHE WAS A RELAT IVE OF THE MANAGING DIRECTOR OF THE COMPANY. THE CIT(A) FURTH ER HELD THAT UNDERGOING EDUCATION IN MANAGEMENT SCIENCES IS NOT A SPECIALIZED TRAINING IN INSURANCE, WHICH WAS RELATED TO THE ASS ESSEES BUSINESS, AND, THEREFORE, IT CANNOT BE SAID THAT SUCH EDUCATI ON AND TRAINING WAS INDISPENSABLE TO THE ASSESSEE COMPANY. IN THIS VIEW OF THE MATTER THE CIT(A) REJECTED THE ASSESSEES CLAIM. H E ALSO DEALT WITH THE VARIOUS AUTHORITIES CITED BEFORE HIM BY THE ASS ESSEE AND HELD THAT THEY WERE CONCERNED WITH DIFFERENT FACTS SITUA TIONS. HE HOWEVER HELD THAT HE WAS FOLLOWING THE JUDGMENT OF THE BOMBAY HIGH COURT IN CIT VS. HINDUSTAN HOSIERY INDUSTRIES (1994) 209 ITR 383 (BOM) AND THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF INTERSIL INDIA LTD. VS. ADDITIONAL CIT, IN ITA NO: 1357/MUM/2001 (ASSESSMENT YEAR 1997-98) DATED 29 TH OCTOBER 2004. THE CIT(A) THUS CONFIRMED THE DISALLOWANCE. 7. BESIDES THE ADDITIONAL GROUNDS RAISED BEFORE US QUESTIONING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT, IN GROUND NO:1 THE ASSESSEE HAS ALSO CHALLENGED THE DECISION OF THE CI T(A) ON MERITS. THE PRINCIPAL CONTENTION OF THE LEARNED REPRESENTAT IVE FOR THE ASSESSEE, BASED ON THE JUDGMENT OF THE SUPREME COUR T IN ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 (SC), IS THAT THE ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND THEREF ORE HE WAS NOT JUSTIFIED IN LAW IN REOPENING THE ASSESSMENT. ON MERITS HE ITA NO: 2514/MUM/2005 7 SUBMITTED THAT THOUGH THE EARLIER ORDERS OF THE TRI BUNAL ON THIS POINT WERE AGAINST THE ASSESSEE, WHICH WERE ALSO ACCEPTED BY THE ASSESSEE, STILL FOR THE YEAR UNDER APPEAL THERE IS A DISTINCTION IN THE SENSE THAT MS DEVNA J VORA JOINED THE ASSESSEE COMP ANY IN SEPTEMBER 1999 AND WAS INSTRUMENTAL IN HELPING THE ASSESSEE FORM A JOINT VENTURE COMPANY AND THUS THERE WERE TA NGIBLE BENEFITS TO THE ASSESSEE COMPANY WHICH PROVIDED THE NECESSAR Y NEXUS BETWEEN THE EXPENDITURE AND THE BUSINESS. HE SUBMI TTED THAT THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT RELIED UP ON BY THE CIT(A) (SUPRA) WAS DISTINGUISHABLE AND WAS ACTUALLY DISTINGUISHED BY THE TRIBUNAL, MUMBAI BENCH, IN THE CASE OF J B A DVANI & CO. LIMITED VS. JCIT, IN ITA NO: 5511/MUM/2000 (DATED 3 0 TH SEPTEMBER 2004). THE LEARNED REPRESENTATIVE FOR THE ASSESSEE ALSO RELIED ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN CIT VS. RAS INFORMATION TECHNOLOGIES (P) LTD. (2011) 50 DTR (KA R) 93, IN WHICH IT WAS HELD THAT MONEY SPENT BY THE ASSESSEE TOWARD S EDUCATIONAL EXPENSES OF A STUDENT IN A DISCIPLINE, IN WHICH THE ASSESSEE WAS CARRYING ON BUSINESS, WAS A PERMISSIBLE EXPENDITURE AND IS ALLOWABLE AS A DEDUCTION UNDER SECTION 37(1), NOTWI THSTANDING THAT THE STUDENT WAS THE SON OF THE MANAGING DIRECTOR OF THE ASSESSEE. SEVERAL OTHER ORDERS / JUDGMENTS WERE FILED BEFORE US IN THE FORM OF A COMPILATION AND IT WAS CONTENDED ON THIS BASIS TH AT THE EXPENDITURE WAS ALLOWABLE AS BUSINESS EXPENDITURE. 8. ON THE OTHER HAND, THE LEARNED SENIOR DR SUBMITT ED THAT SINCE THE RETURN WAS FIRST PROCESSED UNDER SECTION 143(1) AND THERE WAS NO ASSESSMENT OF THE SAME UNDER SECTION 143(3), THERE WAS NO ITA NO: 2514/MUM/2005 8 QUESTION OF ANY OPINION HAVING BEEN FORMED BY THE A SSESSING OFFICER WHICH HE ATTEMPTED TO CHANGE BY REOPENING T HE ASSESSMENT. HE SUBMITTED THAT THE JUDGMENT OF THE SUPREME COURT IN ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. (S UPRA) CITED BY THE ASSESSEE ACTUALLY SUPPORTED THE DEPARTMENTS ST AND THAT THE REASSESSMENT WAS WITHIN THE JURISDICTION OF THE ASS ESSING OFFICER AND VALID. RELYING ON THE REASONS RECORDED ON 1 ST MAY 2002 FOR REOPENING THE ASSESSMENT, HE POINTED OUT THAT THE F ACT THAT SIMILAR EXPENDITURE INCURRED BY THE ASSESSEE IN THE EARLIER YEARS WAS DISALLOWED IN THE ASSESSMENTS OF THOSE YEARS, WHICH DISALLOWANCE WAS ALSO CONFIRMED BY THE CIT(A) IN THE ASSESSMENT YEARS 1997-98 AND 1998-99, CONSTITUTED REASON TO BELIEVE THAT INC OME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HE THEREFORE SUBMIT TED THAT THERE WAS NO FLAW IN THE ISSUE OF NOTICE UNDER SECTION 14 8 OF THE ACT. 9. AS REGARDS MERITS, THE LEARNED SENIOR DR POINTED OUT THAT THERE WAS NO FACTUAL CHANGE FROM THE POSITION WHICH OBTAINED IN THE EARLIER YEARS IN WHICH THE TRIBUNAL HAS CONFIRMED T HE DISALLOWANCE AND THEREFORE THE SAME RESULT SHOULD FOLLOW. HE PO INTED OUT THAT MS DEVNA J VORA WAS ALREADY A DIRECTOR IN THE ASSESSEE COMPANY FROM 25 TH JULY 1996 AND SHE MERELY RESUMED THE DIRECTORSHIP ON HER RETURN FROM LONDON AND REJOINED THE BOARD OF DI RECTORS WITH EFFECT FROM 1 ST SEPTEMBER 2000. HE POINTED OUT THAT THIS DATE FEL L IN THE NEXT ACCOUNTING YEAR AND NOT IN THE ACCOUNTING YEAR ENDED 31 ST MARCH 2000 WHICH IS RELEVANT FOR THE YEAR UNDER APP EAL. HE ALSO CONTENDED THAT THE FACT THAT THE ASSESSEE COMPANY E NTERED INTO A JOINT VENTURE WITH ANOTHER COMPANY AFTER THE RETURN OF MS DEVNA J ITA NO: 2514/MUM/2005 9 VORA DOES NOT IPSO FACTO AND WITHOUT ANY FURTHER EV IDENCE OF HER SERVICES IN CONNECTION WITH THE JOINT VENTURE, FURN ISH ANY NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE JOINT VENT URE. IT WAS POINTED OUT THAT THE JOINT VENTURE CAME INTO EXISTE NCE MUCH LATER THAN THE ACTUAL INCURRING OF THE EXPENDITURE ON THE TRAINING AND EDUCATION OF MS DEVNA J VORA. 10. IN SUPPORT OF THE SUBMISSION THAT THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION OF THE EXPENDITURE, THE L EARNED SENIOR DR RELIED ON THE DECISION OF THE TRIBUNAL IN INTERSIL INDIA LTD. VS. ADDITIONAL CIT (2006) 103 TTJ (MUM) 345 AND THE DEC ISION OF THE KARNATAKA HIGH COURT IN CIT (INTERNATIONAL TAXATION ) VS. MAHESH BHUPATI, 43 DTR (KAR) 159. 11. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. AS REGARDS THE ADDITIONAL GROUNDS CHA LLENGING THE REOPENING OF THE ASSESSMENT, WE ARE OF THE VIEW THA T THERE IS NO MERIT IN THE SAME. THE REASONS RECORDED BY THE ASS ESSING OFFICER FOR REOPENING THE ASSESSMENT SHOW THAT SIMILAR EXPE NDITURE INCURRED BY THE ASSESSEE COMPANY IN THE EARLIER YEA RS, I.E. ASSESSMENT YEARS 1997-98 AND 1998-99 HAD BEEN DISAL LOWED BY THE ASSESSING OFFICER AND THE DISALLOWANCE WAS ALSO CONFIRMED BY THE CIT(A). FOR THE ASSESSMENT YEAR 1999-2000 THE DISALLOWANCE HAD BEEN MADE IN THE ASSESSMENT AND AN APPEAL AGAIN ST THE SAME WAS PENDING WITH THE CIT(A). THESE FACTS, IN OUR O PINION, CONSTITUTE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE RETURN HAD EARLIER BEEN PROCESSED UNDER SECTION 143(1) AND THEREFORE IT CANNOT BE SAID THAT THE ASS ESSING OFFICER ITA NO: 2514/MUM/2005 10 HAD EARLIER FORMED AN OPINION REGARDING THE ALLOWAB ILITY OF THE EXPENDITURE, WHICH WAS CHANGED LATER. IN THE JUDGM ENT OF THE SUPREME COURT CITED SUPRA, IT HAS BEEN HELD THAT WH ERE THE RETURN WAS PROCESSED UNDER SECTION 143(1), THERE WAS NO AS SESSMENT AND THEREFORE THE QUESTION OF CHANGE OF OPINION DOES NO T ARISE. IN THIS VIEW OF THE MATTER WE HOLD THAT THE ASSESSMENT WAS VALIDLY REOPENED. 12. AS REGARDS THE MERITS, WE ARE NOT PERSUADED TO TAKE A DIFFERENT VIEW THAN WHAT WAS TAKEN IN THE ASSESSEE S OWN CASE IN THE EARLIER YEARS. THE FIRST ORDER WAS PASSED BY T HE TRIBUNAL ON 18 TH FEBRUARY 2005 IN ITA NO: 1801/MUM/2001 FOR THE ASSE SSMENT YEAR 1997-98. IN THIS ORDER IT WAS HELD IN PARAGRAPH 10 THAT THOUGH MS DEVNA J VORA WAS A DIRECTOR OF THE ASSESSEE COMPANY , SHE HAD NO QUALIFICATION IN THE FIELD OF BUSINESS CARRIED ON B Y THE ASSESSEE AND THUS THERE WAS NO NEXUS WITH THE ASSESSEES BUSINES S. THE TRIBUNAL HAS ALSO NOTED THAT THE COURSES WHICH SHE STUDIED IN LONDON DID NOT HAVE ANY NEXUS WITH THE ASSESSEES B USINESS. IN RESPECT OF THE ASSESSMENT YEAR 1998-99 THE TRIBUNAL PASSED AN ORDER ON 8 TH MAY 2006 IN ITA NO: 1802/MUM/2001. IN PARAGRAPH 5 OF THIS ORDER IT HAS BEEN NOTED THAT THE ASSESSEE A RGUED THAT THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1997- 98 DID NOT CORRECTLY APPRECIATE THE FACTS AND DID NOT APPLY TH E CORRECT LAW, BUT THE TRIBUNAL REJECTED THE ARGUMENT OF THE ASSESSEE IN PARAGRAPH 7 OF ITS ORDER STATING THAT THE FACTS ARE THE SAME AS IN THE ASSESSMENT YEAR 1997-98. ACCORDINGLY THE DISALLOWANCE OF THE EXPENDITURE WAS CONFIRMED. IN THE YEAR 1999-2000 THE TRIBUNAL PASS ED AN ORDER ON ITA NO: 2514/MUM/2005 11 10 TH AUGUST 2006 IN ITA NO: 3524/MUM/2003. IN THIS ORD ER THE TRIBUNAL NOTED THAT SINCE THE FACTS ARE THE SAME AS IN THE ASSESSMENT YEARS 1997-98 AND 1998-99, JUDICIAL DISC IPLINE AND RULE OF CONSISTENCY REQUIRES THAT THE SAID ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE SHOULD BE FOLLOWED. IN THIS VI EW OF THE MATTER THE TRIBUNAL UPHELD THE DISALLOWANCE IN THIS YEAR A LSO. IN RESPECT OF THE ASSESSMENT YEAR 1997-98 THE ASSESSEE HAD FILED AN APPLICATION UNDER SECTION 254(2) IN MA NO: 438/MUM/2005. IN TH IS MISCELLANEOUS APPLICATION THE ASSESSEE HAD POINTED OUT THAT THERE WERE SEVERAL MISTAKES APPARENT FROM THE RECORD IN I TS ORDER, WHICH SHOULD BE RECTIFIED. THE TRIBUNAL HOWEVER DID NOT FIND ANY MERIT IN THE APPLICATION, WHICH WAS REJECTED BY ORDER DATED 1 ST MARCH 2006. THUS WE FIND THAT THE ISSUE OF ALLOWABILITY OF THE EXPENDITURE HAS BEEN EXAMINED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THREE DIFFERENT ASSESSMENT YEARS. THE TRIBUNAL DID NOT F IND ANY MERIT IN THE ASSESSEES CLAIM. FOR THE YEAR NOW UNDER APPEA L, THE LEARNED REPRESENTATIVE HAS POINTED OUT TWO DIFFERENCES IN T HE FACTUAL POSITION. THE FIRST IS THAT FOR THE YEAR UNDER CON SIDERATION A BOND HAD BEEN EXECUTED BY MS DEVNA J VORA TO REJOIN THE COMPANY AND AS A MATTER OF FACT ON HER RETURN SHE JOINED THE CO MPANY AND WAS WORKING ON A SALARY OF ` 10,000/- PER MONTH. THE OTHER DIFFERENCE POINTED OUT IS THAT MS DEVNA J VORA WAS INSTRUMENTA L IN THE ASSESSEE FORMING A JOINT VENTURE COMPANY AND IN THI S CONNECTION OUR ATTENTION WAS INVITED TO PAGE 3 OF PAPER BOOK N O:2, WHICH IS A SCHEDULE TO THE BALANCE SHEET SHOWING INVESTMENTS I N SUBSIDIARY COMPANIES. THIS SCHEDULE SHOWS THAT THE ASSESSEE H ELD 2,20,000 ITA NO: 2514/MUM/2005 12 EQUITY SHARES OF WILLIS BA INDIA PRIVATE LIMITED AC QUIRED AT A COST OF ` 2.22 CRORES. IN THIS PAPER BOOK THE ASSESSEE HAS A LSO FILED COPIES OF THE LICENCE OBTAINED BY THE JOINT VENTURE COMPAN Y FROM THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY, THE JOINT VENTURE AGREEMENTS ENTERED INTO IN 2003 AND 2005, AND THE B OARD RESOLUTION FOR THE PROPOSAL TO SUPPORT THE JOINT VE NTURE. AT PAGE 42 OF THIS PAPER BOOK IS THE CERTIFIED COPY OF THE RES OLUTION PASSED ON 12 TH JANUARY 2001. IT SHOWS THAT THE PROPOSAL FOR THE JOINT VENTURE COMPANY WAS MADE BY MS DEVNA J VORA AND THAT SHE HA D ALSO MADE A PRESENTATION TO THE BOARD AS TO WHAT ARE THE ADVANTAGES THE COMPANY WILL HAVE BECAUSE OF THE JOINT VENTURE. THE RESOLUTION APPROVED THE PROPOSAL AND AUTHORIZED HER TO FURTHER NEGOTIATE THE TERMS AND CONDITIONS OF THE JOINT VENTURE ARRANGEME NT. BUT ALL THIS HAPPENED SUBSEQUENT TO THE YEAR UNDER CONSIDERATION , FOR WHICH THE ACCOUNTING YEAR ENDED ON 31 ST MARCH 2000. SO THEY CANNOT BE CONSIDERED AS DISTINGUISHING FEATURES FOR THE YEAR UNDER APPEAL. 13. THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL I N THE CASE OF J B ADVANI & CO. LIMITED (ITA NO: 5511/MUM/2000 DAT ED 30 TH SEPTEMBER 2004) WAS ALSO CITED BY THE LEARNED REPRE SENTATIVE FOR THE ASSESSEE AND IT WAS SUBMITTED THAT IN THIS ORDE R THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN HOSI ERY INDUSTRIES (SUPRA) HAS BEEN DISTINGUISHED. EACH CASE HAS ITS OWN FACTS AND JUST BECAUSE IN SOME ORDER OF THE TRIBUNAL A SIMILA R CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY DISTINGUISHING A JUDGM ENT OF THE JURISDICTIONAL HIGH COURT, IS NO GROUND TO TAKE A D IFFERENT VIEW IN THE CASE OF AN ASSESSEE, IN WHOSE CASE THE CONSISTENT V IEW TAKEN BY ITA NO: 2514/MUM/2005 13 THE TRIBUNAL IN THREE EARLIER YEARS IS THAT THE EXP ENDITURE IS NOT ALLOWABLE. IN THE COMPILATION FILED BY THE ASSESSE E SEVERAL ORDERS / JUDGMENTS HAVE BEEN COMPILED AND OUR ATTENTION HAS BEEN DRAWN TO THEM IN SUPPORT OF THE CLAIM THAT THE EXPENDITUR E IS ALLOWABLE AS A DEDUCTION. HOWEVER, SINCE THE TRIBUNAL HAS CONSI STENTLY TAKEN A VIEW IN THE ASSESSEES OWN CASE, WE ARE NOT, WITH R ESPECT, INCLINED TO TAKE A DIFFERENT VIEW OF THE MATTER. 14. FOR THE AFORESAID REASONS WE UPHOLD THE DISALLO WANCE OF ` 13,34,981/- AND DISMISS THE FIRST GROUND. 15. THE SECOND GROUND IS THAT THE CIT(A) ERRED IN D ISALLOWING A SUM OF ` 2,00,000/- BEING PAYMENT MADE TO THE INSURANCE INST ITUTE OF INDIA FOR AWARDING PRIZES TO THE CANDIDATES STAN DING FIRST IN THE EXAMINATION CONDUCTED BY THE INSTITUTE. THE BRIEF FACTS ARE THAT THE ASSESSEE DEBITED THE AFORESAID EXPENDITURE UNDER TH E HEAD MISCELLANEOUS EXPENSES. IT WAS EXPLAINED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THAT THE AMOUNT WAS PAID FOR AWARDING PRIZES TO THE CANDIDATES STANDING FIRST IN THE EXAM INATION CONDUCTED BY THE INSTITUTE IN INDIVIDUAL SUBJECTS. IT WAS FURTHER POINTED OUT THAT THE INSTITUTE WAS THE ONLY BODY RE COGNIZED FOR HOLDING PROFESSIONAL EXAMINATIONS AND GRANTING DIPL OMAS IN INSURANCE. THE ASSESSEE ALSO FILED A COPY OF THE R ELEVANT PAGE OF THE HAND BOOK PUBLISHED BY THE INSTITUTE GIVING INF ORMATION ON THE MODALITIES OF THE PRIZES TO BE AWARDED. THE ASSESS ING OFFICER HOWEVER TOOK THE VIEW THAT THE PAYMENT WAS MADE ONL Y FOR ENCOURAGING TALENTED STUDENTS IN THE FIELD OF INSUR ANCE AND DID NOT ITA NO: 2514/MUM/2005 14 FALL WITHIN THE AMBIT OF SECTION 37(1) OF THE ACT. HE ACCORDINGLY DISALLOWED AND ADDED BACK THE SAME. 16. ON APPEAL, THE CIT(A) NOTED FROM THE CORRESPOND ENCE THAT IT WAS A VOLUNTARY PAYMENT MADE BY THE ASSESSEE TO THE INSTITUTE AND THAT THE INSTITUTE HAD NOT ASKED THE ASSESSEE TO SP ONSOR THE PRIZE. HE FURTHER NOTED THAT THE INSTITUTE DID NOT ACCEPT THE PAYMENT READILY, BUT STATED THAT THEY HAVE TO PLACE THE PRO POSAL BEFORE THE COMMITTEE. HE THUS HELD THAT THE PAYMENT WAS VOLUN TARY AND WAS NOT NECESSITATED BY ANY COMMERCIAL CONSIDERATION NO R WAS IT PAID FOR ANY SERVICE RENDERED BY THE INSTITUTE. THE INS TITUTE HAD ALSO CHRISTENED THE PAYMENT AS DONATION. IN THIS VIEW OF THE MATTER THE CIT(A) UPHELD THE DISALLOWANCE. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND THE FACTS. AT PAGE 26 OF THE PAPER BOOK NO:1, THE ASSE SSEE HAS PLACED A COPY OF ITS LETTER DATED 5 TH JANUARY 2000 SENT TO THE SECRETARY GENERAL OF THE INSURANCE INSTITUTE OF INDIA. THE L ETTER REFERS TO THE EAGERNESS OF THE ASSESSEE TO CONTRIBUTE TO THE CAUS E OF GENERAL INSURANCE EDUCATION THROUGH THE INSTITUTE AND THAT THE AMOUNT OF ` 2,00,000/- PAID BY CHEQUE WAS A ONE-TIME DONATION M ADE FOR INSTITUTING AN AWARD, AS WAS TO BE FINALLY DESIGNED BY THE INSTITUTE, TO MOTIVATE THE EXAMINEES RESULTING IN ENRICHMENT O F SERVICES TO THE DISCERNING AND DEMANDING CUSTOMERS IN THE FIELD OF GENERAL INSURANCE. AT PAGE 29 IS A COPY OF THE DETAILS OF THE PRIZES TO BE AWARDED UNDER THE SCHEME DESIGNED BY THE INSTITUTE. THE PRIZES WERE TO BE AWARDED TO THE CANDIDATES STANDING FIRST IN THE EXAMINATION AND IN INDIVIDUAL SUBJECTS. THE ASSESS EE COMPANY HAS ITA NO: 2514/MUM/2005 15 BEEN SHOWN AS AN ASSOCIATE DONOR IN RESPECT OF NON- LIFE (GENERAL) INSURANCE SUBJECTS. ON A CAREFUL CONSIDERATION OF THE CORRESPONDENCE AND THE DETAILS OF THE PAYMENT, WE A RE OF THE VIEW THAT THOUGH IT HAS BEEN MADE VOLUNTARILY, THE PAYME NT IS ALLOWABLE AS A DEDUCTION SINCE IT WAS MADE TO THE ONLY INSTIT UTE WHICH IS AUTHORIZED TO CONDUCT EXAMINATIONS ON INSURANCE SUB JECTS, A FIELD IN WHICH THE ASSESSEE WAS CARRYING ON BUSINESS. IT CA NNOT BE DENIED THAT GIVING INCENTIVES TO MERITORIOUS STUDENTS WHO EXCEL IN THE EXAMINATION CONDUCTED ON INSURANCE SUBJECTS WOULD U LTIMATELY BE IN THE INTEREST OF THE INSURANCE BUSINESS IN GENERAL A ND THE ASSESSEE HAVING BEEN ENGAGED IN SUCH BUSINESS WOULD ALSO BE BENEFITTED BY SUCH EXCELLENCE. IN OUR VIEW THE INCOME TAX AUTHOR ITIES, WITH RESPECT, APPEAR TO HAVE TAKEN A HYPER TECHNICAL VIE W OF THE MATTER. THERE IS A NEXUS BETWEEN THE PAYMENT AND THE BUSINE SS OF THE ASSESSEE JUSTIFYING THE ALLOWANCE OF THE SAME UNDER SECTION 37(1) OF THE ACT. WE THEREFORE DIRECT THE ASSESSING OFFI CER TO ALLOW THE PAYMENT OF ` 2,00,000/- AS A DEDUCTION. THE GROUND IS ALLOWED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST 2011. SD/- SD/- (B RAMAKOTAIAH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 12 TH AUGUST 2011 SALDANHA ITA NO: 2514/MUM/2005 16 COPY TO: 1. M/S BHAICHAND AMOLUK CONSULTANCY SERVICES PVT. L TD. COMMERCIAL UNION HOUSE, 9, WALLACE STREET FORT, MUMBAI 400 001 2. ACIT, CENTRAL CIRCLE 46, MUMBAI 3. CIT-CENTRAL IV, MUMBAI 4. CIT(A)-CENTRAL II, MUMBAI 5. DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI