Visteon Automotive India Private Limited, Pune V. Deputy Commissioner of Income-tax, Circle - 7, Pune

ITA 2564/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8043 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-11-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 08-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THIS CONSOLIDATED
• Assessee Lawyers: RELATE TO ASSESSMENT YEARS
• Keywords: Non-deduction of tax; Capital expenditure
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / ITA NO.2563 & 2564/PUN/17 / ASSESSMENT YEARS : 2009-10 & 2011-12 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED, OFFICE NO.502, ICC DEVI GAURAV TECH PARK, 5 TH FLOOR, MUMBAI PUNE ROAD, PIMPRI CHINCHWAD, PUNE 411 018 PAN : AACCI3343C VS. DCIT, CIRCLE-7 PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THESE TWO APPEALS BY THE ASSESSEE RELATE TO THE ASSESSMENT YEARS 2009-10 AND 2011-12. FOR THE SAKE OF CONVENIENCE, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER. APPELLANT BY SHRI ABHAY AVCHAT RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 07-01-2019 DATE OF PRONOUNCEMENT 08-01-2019 ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 2 A.Y. 2009-10 : 2. THE FIRST TWO GROUNDS ARE GENERAL IN NATURE, WHICH DO N OT REQUIRE ANY ADJUDICATION. 3. GROUND NOS. 3 TO 5 ARE IN RESPECT OF CONFIRMATION OF DISALLOWANCE OF RS.27,68,317/-. 4. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE CLAI MED TO HAVE PAID A SUM OF RS.27,68,317/- TO ITS HOLDING COMPAN Y TACO, ONE OF THE JOINT VENTURE PARTNERS (50% SHARE) AND SIMILAR AMOUNT OF RS.27,68,317/- WAS ALSO PAID AS ROYALTY TO THE OTHER HOLDING COMPANY, NAMELY, VISTEON INTERNATIONAL HOLDING INC, JOINT VENTURE. THE ASSESSEE CLAIMED THAT SUM OF RS.27.68 LAKHS WAS PAID TO TACO IN VIEW OF THE SERVICES RENDERED BY THEM UNDER THE ADMINISTRATIVE SERVICES AGREEMENT (ASA). THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE NATURE OF SERVICES RECEIVED FROM TACO. IN RESPONS E, THE ASSESSEE STATED THAT ASA CHARGES WERE PAYABLE IN RESPECT OF SERVICES RENDERED BY TACO TOWARDS SUPPORT AND GUIDANCE IN THE OPERATIONAL AREAS OF ; HUMAN RESOURCES; MARKETING A ND SALES; `FINANCE; LEGAL AND TAXATION; AND `IT SUPPORT. T HE AO REQUIRED THE ASSESSEE TO ADDUCE EVIDENCE TO SUBSTANTIAT E ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 3 THE FACTUM OF HAVING RECEIVED THE SERVICES FROM TACO, BUT THE ASSESSEE FAILED TO DO SO. SINCE SUCH PAYMENT WAS MADE TO TACO, A RELATED CONCERN IN TERMS OF SECTION 40A(2)(B), THE AO HELD THAT NO AMOUNT WAS TO BE ALLOWED AS DEDUCTION AS THE ASSESSEE COULD NOT ADDUCE EVIDENCE OF HAVING RECEIVED AN Y SERVICES FROM THE COMPANY. THE LD. CIT(A) DID NOT CHANG E THE POSITION. 5. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT THE ASSESSEE CL AIMED TO HAVE AVAILED SERVICES FROM TACO AND IN LIEU OF THAT PAID ASA CHARGES. THE NATURE OF SERVICES STATED BY THE ASSESS EE BEFORE THE AUTHORITIES BELOW IS HUMAN RESOURCES; MARKETING AND SALES; `FINANCE; LEGAL AND TAXATION; AND IT SUPPORT ETC. IT IS A FUNDAMENTAL RULE THAT A DEDUCTION CAN BE ALLOWED TOWARDS SERVICE FEES IF THE ASSESSEE PROVES THE RE CEIPT OF SERVICES FROM THE SERVICE PROVIDER. IF THERE IS NO EV IDENCE OF SERVICES, THERE CAN BE NO DEDUCTION IN RESPECT OF SUCH PAYMENT. WE HAVE PERUSED THE NATURE OF SERVICES BEING HUMAN RESOURCES- RECRUITMENT, TRAINING, PERFORMANCE EVALUATION, EMPLOYEES BENEFIT AND RELATIONSHIP ADMINISTRATION; `MARKETING AND SALE - CUSTOMER RELATIONSHIP, ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 4 PRICING, STRATEGY OF BUSINESS PLANNING; FINANCE- SUPPORT IN FINANCIAL DECISIONS, CAPITAL EXPENDITURE EVALUATION, INTERNAL AUDIT; `LEGAL AND TAXATION- CONSULTATION; AND `IT SUPPORT- SETTING UP OF IT AND COMMUNICATION. ON GOING THROUGH THE NATURE OF SERVICES, IT BECOMES PATENT THAT THERE HAS TO BE SUBSTANTIAL EVIDENCE IN THE FORM OF E-MAILS AND OTHER DOCUMENTS FOR RENDITION OF SUCH SERVICES. IN THE ABSENCE OF THE ASSESSEE HAVING PRODUCED ANY EVIDENCE TO DEMONSTRATE THAT IT AVAILED THE SERVICES PROVIDED BY TACO, WE CANNOT ACCEPT THE CLAIM OF THE ASSESSEE. 6. THE LD. AR CONTENDED THAT THOUGH THE EVIDENCE WAS NOT AVAILABLE AT THE MATERIAL TIME DURING THE COURSE OF PROCEEDINGS BEFORE THE AUTHORITIES BELOW, SUCH EVIDENCE COULD BE NOW FURNISHED TO THE AO. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS SCORE IS SET-ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO. WE ORDER ACCORDINGLY AND DIRECT THE AO TO EXAMINE THE ASSESSEES CLAIM IN RESPECT OF EVIDENCE OF SERVICES. I N CASE, THE ASSESSEE STILL FAILS TO FURNISH THE EVIDENCE TO THE SATISFACTION ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 5 OF THE AO, THE ASSESSING AUTHORITY WOULD BE FULLY JUSTIFIED IN MAKING ADDITION. 7. BEFORE PARTING WITH THIS MATTER, WE WANT TO CLARIFY THAT IN THE PROCESS OF EVALUATION OF THE EVIDENCE FOR RENDERING O F SERVICES BY TACO, THE AO SHOULD TAKE INTO CONSIDERATION ONLY SUCH EVIDENCE WHICH IS RELEVANT FOR THE INSTANT PAYMENT IN A S MUCH AS THERE IS SOME OTHER PAYMENT TO TACO ALSO, WHICH IS THE SUBJECT MATTER OF THE NEXT GROUND OF APPEAL, VIDE WHICH DISALLOWANCE OF RS.5,19,424/- WAS MADE BY THE AO U/S.40(A)(IA) OF THE ACT. 8. THE NEXT GROUND IS AGAINST THE CONFIRMATION OF ADDITION OF RS.4,14,207/- OUT OF REIMBURSEMENTS TO RELATED PARTIE S U/S. 40(A)(IA) OF THE ACT. 9. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION FOR A SUM OF RS.5,19,424/- UNDER THE HEAD `REIMBURSEMENT OF EXPENSES PAID TO TACO. THESE PAYME NTS WERE OVER AND ABOVE THE ADMINISTRATIVE SERVICE CHARGES PAID TO TACO. THE ASSESSEE WAS CALLED UPON TO EXPLAIN AS TO W HY NO TAX DEDUCTION AT SOURCE WAS MADE. THE ASSESSEE FURN ISHED CERTAIN EXPLANATION JUSTIFYING NON-DEDUCTION OF TAX AT SOURCE ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 6 BY CLAIMING THAT IT WAS A MERE REIMBURSEMENT. NOT CONVINCED , THE AO MADE AN ADDITION OF RS.5,19,424/-. THE LD. CIT(A ) ACCEPTED THE ASSESSEES CONTENTION TO THE EXTENT OF RS.1,05,217/- AND SUSTAINED THE REMAINING ADDITION OF RS.4,14,207/-, AGAINST WHICH THE ASSESSEE HAS APPROACHE D THE TRIBUNAL. 10. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) IS IN RESPECT OF CERTAIN ITEMS MENTIONED ON PAGE 12 OF THE IMPUGNED ORDER WHICH WERE CLAIMED AS REIMBURSEMENT OF JAMSHEDPUR OFFICE EXPENSES INCURRED D URING JUNE TO SEPTEMBER 2008 AND THE CLAIMED REIMBURSEMENT OF EXPENSES OF M/S. SHINOHAR CONSULTANT. THE FIRST SUM OF RS.1,97,406/- IS THE CLAIM BY THE ASSESSEE TO BE REIMBUR SEMENT OF JAMSHEDPUR OFFICE EXPENSES DURING THE MONTHS MENTIONE D ABOVE. EXCEPT FOR INVOICES, THE ASSESSEE HAS PLACED NOT HING ON RECORD TO DEMONSTRATE THAT THESE WERE IN THE NATURE OF REIMBURSEMENT OF EXPENSES NOT HAVING ANY PROFIT ELEMENT THEREIN. SIMILAR IS THE POSITION REGARDING EXPENSES OF SHINOHAR CONSULTANT. THE LD. AR REQUESTED THAT ONE MORE OPPORTUNITY BE GIVEN TO THE ASSESSEE FOR FURNISHING THE ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 7 NECESSARY EVIDENCE TO PROVE THAT THESE WERE MERE REIMBURSEMENT OF EXPENSES AND DID NOT INVOLVE ANY PROFIT ELEMENT. WITHOUT GOING INTO THE MERITS OF THE GROUND, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE IN THE FITNESS OF THINGS IF THE IMPUGNED ORDER ON THIS SCORE IS SET-ASIDE AN D THE MATTER IS RESTORED TO THE FILE OF AO. WE ORDER ACCORDINGLY A ND DIRECT HIM TO DECIDE THE ISSUE AFRESH AS PER LAW AFTER ALLOW ING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. A.Y. 2011-12 : 12. THE ONLY EFFECTIVE ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF EXPENDITURE TOWARDS INTEREST TO BANK AMOUNTING TO RS.25,52,010/- U/S.43B OF THE ACT. 13. THE FACTS CONCERNING THIS ISSUE ARE THAT THE ASSESSEE DEBITED A SUM OF RS.25,52,009/- ON ACCOUNT OF INTEREST PAYMENT TO INDIAN BANK. ON BEING CALLED UPON TO PROVE THAT THE PAYMENT OF SUCH INTEREST WAS MADE, THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE. THIS LED TO THE DISALLOWANCE U/S.43B OF ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 8 THE ACT. THE LD. CIT(A) SUSTAINED THE ADDITION AFTER CONSIDERING THE ASSESSEES ARGUMENT THAT THE AMOUNT OF INTER EST WAS IN FACT PAID BY THE OTHER GROUP CONCERN TO WHOM THE ASSESSEES `LIGHTING UNIT GOT MERGED. THE LD. CIT(A) TO OK THE VIEW THAT THE PAYMENT MUST BE MADE BY THE ASSESSEE SO A S TO CLAIM DEDUCTION. HE THUS SUSTAINED THE DISALLOWANCE. THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATION OF THE ADDITION. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS M ADE A CLAIM OF HAVING PAID INTEREST OF RS.25,52,009/-. IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, SUCH INTEREST WAS SHOWN AS P AYABLE. GOING BY THE MANDATE OF SECTION 43B, SUCH NON-PAYMENT OF INTEREST COULD NOT HAVE ORDINARILY ENTITLED THE ASSESSEE TO CLAIM A DEDUCTION FOR IT. THE LD. AR CLAIMED THAT SUCH INTEREST OF RS.25.52 LAKHS WAS, IN FACT, PAID BY ITS SISTER CONCERN BE FORE THE DUE DATE. HOWEVER, NO EVIDENCE COULD BE FILED TO SHOW THAT FIRSTLY, THE INTEREST OF RS.25.52 LAKHS PERTAINED TO ITS OWN `POWER TRAIN APPLICATION UNIT AND NOT TO THE DEMERGED UNIT OF `LIGHTING SYSTEM UNIT FOR WHICH DEMERGER GOT COMPLETED W.E.F. 01-04-2009 AND SECONDLY, SUCH AMOUNT OF INTEREST WAS ACTUALLY PAID WELL WITHIN THE TIME EVEN BY ITS SISTER CONCERN. ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 9 THE LD. AR SUBMITTED THAT THE ENTIRE DETAILS WERE AVAILABLE WITH THE ASSESSEE BUT WERE NOT HANDY WITH HIM. A REQUEST W AS MADE THAT THE AO BE DIRECTED TO EXAMINE THE ASSESSEES CLAIM ALONG WITH THE EVIDENCE AFRESH. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINIO N THAT IT WOULD BE JUST AND FAIR IF THE IMPUGNED ORDER ON TH IS SCORE IS SET-ASIDE THE MATTER IS RESTORED TO THE FILE OF AO. WE ORDER ACCORDINGLY AND DIRECT HIM TO DECIDE THIS ISSUE AFRESH AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 15. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH JANUARY, 2019. SD/- SD/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESID ENT PUNE; DATED : 08 TH JANUARY, 2019 ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 10 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS),-8, PUNE 4. 5. THE PR. CIT-4, PUNE , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NOS.2563 & 2564/PUN/2017 VISTEON AUTOMOTIVE INDIA PRIVATE LIMITED 11 DATE 1. DRAFT DICTATED ON 07-01-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 07-01-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *