DCIT 1(2), MUMBAI V. GOLDMAN SACHS (INDIA) FINANCE P. LTD, MUMBAI

ITA 2518/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100919 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 18-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D NAIK
• Assessee Lawyers: J D MISTRY
• Keywords: Depreciation
• Section: 143(3); 194C

Judgement Text

GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED ITA NO. 2518 /MUM/201 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. : 2518 /MUM/20 1 3 ( ASSESSMENT YEAR: 200 9 - 1 0 ) DY COMMISSION ER OF INCOME TAX 1 ( 2 ) , ROOM NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED , 951 - A, RATIONAL HOUSE, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI - 400 025 .: PAN: AAAC P 2448 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B D NAIK RESPONDENT BY : SHRI J D MISTRY /DATE OF HEARING : 3 1 - 08 - 201 5 / DATE OF PRONOUNCEMENT : 04 - 0 9 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL HA S BEEN FILED BY THE REVENUE AG AINST IMPUGNED ORDER DATED 1 6 .0 1 .2013 , PASSED BY CIT(A) - 2, MUMBAI FOR QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 200 9 - 1 0 ON THE SOLE GROUND , WHICH READS AS UNDER : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF DEDUCTION FOR REIMBURSEMENT OF EXPENSES OF RS. 1,73,0 7,000/ - TO FELLOW SUBSIDIARY U/S 40(A)(IA) OF THE I.T. ACT ON THE BASIS THAT NO TAX HAS BEEN DEDUCTED AT SOURCE U/S 194C. 2. THE BRIEF FACTS QUA THE AFORESAID ISSUE ARE THAT , THE ASSESSING OFFICER NOTED THAT GOLDMAN S ACHS (INDIA) SECURITIES FINANCE PVT LI MITED ( GSIPL ) HAD RECHARGED AN AMOUNT OF RS. 1,73,07,000/ - TO THE ASSESSEE. IN RESPONSE TO THE SHOW CAUSE GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED ITA NO. 2518 /MUM/201 3 2 NOTICE, THE ASSESSEE SUBMITTED THAT SUCH RECHARGE OF COSTS PERTAINS TO ADMINISTRATIVE COST S LIKE EMPLOYEE COST , RENT, FINANCE, LEGAL, CORPORATE RECHA RGE ETC. WHICH WERE RECHARGED ON THE BASIS OF TIMES SPENT BY THE EMPLOYEES OF GSIPL FOR SUPPORTING ASSESSEE. NO TAXES HAVE BEEN WITH HELD ON THE GROUND THAT THESE ARE PURELY COST RECHARGES AND NOT TOWAR D S CARRYING OUT A N Y WORK OR RENDERING OF ANY SERVICES. H OWEVER, THE ASSESSING OFFICER HELD THAT SUCH A PAYMENT EVEN IF IT INCLUDES REIMBURSEMENT OF EXPENSES SHOULD HAVE BEEN MADE AFTER WITHHOLDING THE TAX U/S 194C AND ACCORDINGLY MADE THE DISALLOWANCE U/S 40(A)(IA) OF RS. 1,73,70,000/ - . 3. BEFORE THE CIT(A), THE ASSES S EE GAVE FOLLOWING SUBMISSION IN RESPECT OF THE NATURE OF EXPENDITURE FOR WHICH THE ASSESSEE HAS MADE REIMBURSEMENT TO ITS GROUP COMPANY. DURING AY 2009 - 10, THE APPELLANT REIMBURSED EXPENDITURE AMOUNTING TO RS 17,307,000 TO ITS GROUP COMPANY. THE APPELLANT WAS EARLIER CALLED PRATHAM INVESTMENTS TRADING PRIVATE LIMITED (PITPL). THE GOLDMAN SACHS GROUP ACQUIRED 100% STAKE IN PITPL, PURSUANT TO OBTAINING REGULATORY APPROVALS, IN MAY 2008. PURSUANT TO COMPLETING THE ACQUISITION, GSIFPL LEVERAGED ON TH E EMPLOYEES AND OTHER INFRASTRUCTURE OF ITS GROUP COMPANY IN INDIA, GSISPL. ACCORDINGLY, GSIFPL REIMBURSED THE FOLLOWING EXPENDITURE INCURRED BY GSISPL AND ALLOCATED TO GSIFPL, AGGREGATING TO RS 17,307,000 WHICH ARE AS FOLLOWS: PARTICULARS AMOUNT(RS) EMPL OYEE RELATED COST 11,238,600 RENT 456,719 CORPORATE RECHARGES 577,634 DEPRECIATION 34,385 COST OF SUPPORT FUNCTIONS SUCH AS HUMAN RESOURCE, FINANCE, LEGAL ETC. 5,000,000 TOTAL 17,307,000 CORP ORATE RECHARGES INCLUDE EXPENDITURE IN THE NATURE OF ENTERTAINMENT EXPENSES, PRINTING, GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED ITA NO. 2518 /MUM/201 3 3 COURIER CHARGES, TELECOMMUNICATION EXPENSES ETC. 54. THE APPELLANT AND GSISPL HAD ENTERED INTO A COST ALLOCATION & RECHARGE AGREEMENT FOR THIS PURPOSE. A COPY OF THE AG REEMENT WAS ENCLOSED AS ANNEXURE 55. THE APPELLANT MADE THE PAYMENTS TO GSISPL WITHOUT DEDUCTION OF TAX AT SOURCE, SINCE, THE PAYMENTS WERE IN THE NATURE OF REIMBURSEMENTS COSTS INCURRED BY GSISPL AND THERE WAS NO INCOME ELEMENT FOR GSISPL. HOWEVER, THE LE ARNED AO DISALLOWED THE DEDUCTION FOR THE SAID EXPENSES TO THE APPELLANT UNDER SECTION 40(A)(IA) OF THE ACT, ON THE BASIS THAT THE APPELLANT OUGHT TO HAVE WITHHELD TAX UNDER SECTION 194C OF THE ACT. 56. IN THIS REGARD, WE HAVE IN THE FOLLOWING PARAGRAPHS O UR SUBMISSIONS AS TO WHY NO TAXES ARE REQUIRED TO BE DEDUCTED ON REIMBURSEMENTS MADE TO GSISPL. 57. AS PER THE AGREEMENT, GSISPL SHALL RECHARGE ALL DIRECT COSTS INCURRED ON BEHALF OF THE GROUP COMPANIES AND OTHER ALLOCATED COMMON COSTS INCURRED ON BEHALF OF VARIOUS GROUP COMPANIES. 58. GIVEN THE ABOVE, AS THE AFORESAID COSTS ARE IN THE NATURE OF REIMBURSEMENTS, THERE WAS NO LIABILITY ON THE APPELLANT TO DEDUCT TDS ON RE - IMBURSEMENTS. 59. IN RELATION TO ABOVE, WE WISH TO SUBMIT THAT THE TERM 'REIMBURSEMEN T' HAS NOT BEEN DEFINED IN THE ACT. ACCORDINGLY, IT SHOULD PARTAKE THE MEANING ASSIGNED TO IT IN COMMON PARLANCE. THE GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED ITA NO. 2518 /MUM/201 3 4 MEANING OF THE TERM 'REIMBURSEMENT' IN LAW LEXICON IS 'TO PAY BACK, TO MAKE RESTORATION, TO REPAY THAT EXPENDED, TO INDEMNIFY OR MAKE WHOL E. 60. ACCORDINGLY, PAYMENTS MADE TOWARDS MEETING ACTUAL EXPENSES INCURRED SHOULD QUALIFY AS REIMBURSEMENTS. AS A PURE REIMBURSEMENT OF EXPENSE WOULD NOT INCLUDE ANY PROFIT, SUCH PAYMENT SHOULD NEVER CONSTITUTE INCOME OF THE RECIPIENT. WH ERE EXPENSES HAVE BEEN INCURRED BY THE RECIPIENT AT THE BEHEST OF N BEHALF OF OR FOR THE BENEFIT OF ANOTHER PERSON, AND THE SAME 'E RIGHTLY REIMBURSED TO THE RECIPIENT, (IN WHICH CASE, BY EFFECTING REIMBURSEMENT, THE EXPENSES WERE CORRECTLY BORNE BY THE OTHER SON), SUC H REIMBURSEMENT ARE MERE RECOUPMENT OF EXPENSES AND WO ULD NOT CONSTITUTE INCOME OF THE RECIPIENT. BESIDES THIS, RELIANCE WAS ALSO PLACED ON VARIOUS DECISIONS, WHICH HAS BEEN DISCUSSED BY THE CIT(A) IN DETAIL. IT WAS FURTHER SUBMITTED THAT GSIPL HAD ALREADY DEDUCTED TAX - AT - SOURCE IN ACCORDANCE WITH THE CHAPTER - XVII WHILE MAKING THE PAYMENT TO THE THIRD PARTIES/EMPLOYEES, WHEREVER APPLICABLE , HENCE ORIGINAL PAYMENT HAS ALREADY SUFFERED TAX. LD. CIT(A), RELYING UPON VARIOUS DECISIONS OF THE TRIBUNAL UPHELD THE CONTENTION OF THE ASSES S EE AND HELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) AS THE ASSESSEE WAS NOT LIABLE TO DEDUCT ANY TDS ON REIMBURSEMENT OF ANY EXPENSES. 4. BEFORE US, LD. DR STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER, WHEREAS T HE LD. SENIOR COUNSEL, SHRI J D MISTRY APART FROM REFERRING THE FOLLOWING DECISIONS WHICH HAVE BEEN REFERRED AND RELIED UPON BY THE CIT(A) : GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED ITA NO. 2518 /MUM/201 3 5 I) ACIT V J B BODA SURVEYORS PVT LTD (ITA 4252/M/2009) II) MAHYCO MONSANTO BIOTECH (INDIA) LTD VS ACIT (ITA NO. 58 42/MUM/2012) , S TRONGLY RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SIEMENS (ATKONGE SELLS) SHAFT , REPORTED IN [2009] 310 ITR 320 WHEREIN, IT HAS BEEN UPHELD THAT NO TDS IS REQUIRED TO BE DEDUCTED ON REIMBURSEMENT OF COST . T HAT APART , HE MADE FURTHER SUBMISSIONS AS TO WHY NO TDS WAS REQUIRED TO BE DEDUCTED ON SUCH REIMBURSEMENT OF EXPENSES AND ALSO POINTED OUT THAT THE TAX HAS ALREADY BEEN DEDUCTED BY THE OTHER COMPANY WHILE MAKING PAYMENT TO THIRD PARTIES AS NOTED BY THE CIT(A) IN PARA 3.8 OF THE APPELLATE ORDER. 5. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AND ALSO THE SUBMISSIONS MADE BY THE PARTIES, WE FIND THAT ASSESSEE HAS REIMBURSED EXPENDITURE AMOUNTING TO RS. 1,73,07,000/ - TO GSI PL WHICH WERE INCURRED BY IT ON THE FOLLOWING HEADS : - PARTICULARS AMOUNT(RS) EMPLOYEE RELATED COST 11,238,600 RENT 456,719 CORPORATE RECHARGES 577,634 DEPRECIATION 34,385 COST OF SUPPORT FUNCTIONS SUCH AS HUMAN RESOU RCE, FINANCE, LEGAL ETC. 5,000,000 TOTAL 17,307,000 IN PURSUANCE OF C OST A LLOCATION & R ECHARGED A GREEMENT BETWEEN THE ASSESSEE AND THE SAID COMPANY, WHEREBY GSIPL WAS REQUIRED TO INCUR COST AND MAKE PAYMENTS AFTER DEDUCTING THE TDS . SUCH COST WAS THEN RECHARGED TO THE ASSESSEE. SUCH RECHARGED OF COST WAS PURELY ON ACCOUNT OF REIMBURSEMENT OF EXPENSES WHICH WERE INCURRED BY GSIPL AND HENCE THERE IS NO INCOME ELEMENT ON SUCH A PAYMENT. ONCE THAT IS SO, THEN THERE IS NO REQUIREMENT TO DEDUCT TDS , I N VIEW OF THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT VS. SIEMENS ( SUPRA ). THUS , THE FINDING OF THE CIT(A) THAT THERE WAS NO REQUIREMENT TO DEDUCT TDS GOLDMAN S ACHS ( INDIA ) FINANCE PVT LIMITED ITA NO. 2518 /MUM/201 3 6 ON SUCH REIMBURSEMENT OF COST IS FACTUALLY AND LEGALLY CORRECT AND IS THEREFORE , UPHELD. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS TREATED AS DIS MISSED. 6 . IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER , 2015. SD/ - SD/ - ( RAJESH KUMAR ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 4 TH SEPTEMBER , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 2 , MUMBAI. 4) THE CIT CONCERNED ______ , MUMBAI. 5) , , / THE D.R. G BENCH, MUMBAI. 6) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS