DCIT, CHENNAI V. Spencer and Company Ltd., CHENNAI

ITA 2610/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86260 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH JCIT IRS
• Assessee Lawyers: R SIVARAMAN
• Keywords: Question of law
• Section: 260A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI .. , , BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ I.T.A. NO.2610/MDS/2014 ( ! / ASSESSMENT YEAR : 2010-2011) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4) CHENNAI 600 034. ( /APPELLANT) VS. M/S. SPENCER AND COMPANY LTD, FLAT NO.2D, 2 ND FLOOR, QUEENS COURT, 98-145, MONTIETH ROAD, EGMORE, CHENNAI 600 008. [PAN :AAACS5058F] ( /RESPONDENT) ' # $ / APPELLANT BY : SHRI. A.V. SREEKANTH, JCIT, IRS. %&' # $ / RESPONDENT BY : SHRI. R. SIVARAMAN, ADVOCATE ' ( # )* /DATE OF HEARING : 22.01.2015. +,! # )* /DATE OF PRONOUNCEMENT : 27.01.2015. / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, CH ENNAI DATED 28.07.2014 FOR THE ASSESSMENT YEAR 2010-2011. I.T.A.NO.2610/MDS/2014 . :- 2 -: 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F BREAD FRANCHISE OPERATION AND PROPERTY RENTALS. THE ASSESSEE FILED ITS RETURN FOR T HE ASSESSMENT YEAR 2010-2011 ON 23.09.2010 ADMITTING INCOME OF `71,72,070/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 143 (2) WAS ISSUED ON 29.08.2011. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE ASSESSING OFFICER INTER-ALIA HELD TH AT THE LICENCEE FEES OF `25,00,000/- PAID BY THE ASSESSEE T O RPG ENTERPRISES LTD IS NOT AN ALLOWABLE BUSINESS EXPEND ITURE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 19.03.2013, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TA X (APPEALS) FOLLOWING THE DECISION OF JURISDICTIONAL HI GH COURT IN ASSESSEES OWN CASE ACCEPTED THIS GROUND OF APPEAL OF THE ASSESSEE. AGAINST THE FINDINGS OF COMMISSIONER OF I NCOME TAX (APPEALS) ON THIS ISSUE THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI. A.V. SREEKANTH REPRESENTING THE DEPARTM ENT REITERATED THE GROUNDS RAISED IN THE APPEAL AND VEH EMENTLY DEFENDED THE ASSESSMENT ORDER. THE LEARNED DEPARTME NTAL I.T.A.NO.2610/MDS/2014 . :- 3 -: REPRESENTATIVE PRAYED FOR REVERSING THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. 4. SHRI. R. SIVARAMAN APPEARING ON BEHAL F OF THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAD COME UP IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2001-02. TH E MATTER TRAVELLED UPTO THE HONBLE HIGH COURT. THE HONBL E JURISDICTIONAL HIGH COURT UPHELD THE FINDINGS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE LEARNED COUNSEL PLACED ON RECORD A COPY OF THE JUDGMENT OF HONBLE MADRAS HIGH COURT I N THE CASE TITLED CIT VS. SPENCERS & CO. LTD (NO.2) REPOR TED AS 359 ITR 630 (MAD). 5. BOTH SIDES HEARD. THE ORDERS OF THE AUTHORITIE S BELOW PERUSED. WE FIND THAT THE ISSUE IN APPEAL IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2001-2002. ONE OF THE QUESTION WHICH WAS BEFORE THE HONBLE HIGH COURT IN THE AFORESAID APPEAL WAS : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE LICENCE FEE PAID TO I.T.A.NO.2610/MDS/2014 . :- 4 -: M/S. RPG ENTERPRISES LTD. CAN BE DEDUCTED AS A BUSIN ESS EXPENDITURE? THE HONBLE HIGH COURT AFTER CONSIDERING THE SUBMISS IONS OF BOTH SIDES HELD AS UNDER:- 13. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE TR IBUNAL, WHICH I IMPUGNED BEFORE US IN THIS APPEAL. WE FIND THAT WHI LE CONCURRING WITH THE COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISS UE OF LICENCE FEE PAID, THE TRIBUNAL HAD SET ASIDE THIS FINDINGS OF THE ASSESSING AUTHORITY. THE ESSENTIAL FACT WHICH EMERGED FROM TH E MATERIAL ON RECORD WAS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PAYMENT OF LICENCE FEE TO M/S. RPG ENTERPRI SES LTD, WAS JUSTIFIABLE ON THE FACTS FOR ALLOWANCE. WE NOTE FR OM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE ORDER OF THE TRIBUNAL THAT THE RESPONDENT-ASSESSEE BY AVAILING O F SERVICE BENEFITS FORM THE GROUP RESOURCE COMPANY, VIZ., M/S.RPG ENTE RPRISES LTD AVAILED OF VALUABLE BENEFIT, FOR THEIR BUSINESS OPE RATIONS AND THAT THE PAYMENT OF LICENCE FEE TO M/S. RPG ENTERPRISES LTD, BY THE RESPONDENT-ASSESSEE WAS TOWARDS THEIR SHARE OF ACTU AL EXPENSES INCURRED BY M/S. RPG ENTERPRISES LTD. THE COMMISSI ONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL IN THEIR ORDERS CLEA RLY POINTED OUT THAT THE EXPENDITURE INCURRED BY THE RESPONDENT-ASSESSEE TOWARDS THE LICENCE FEE PAYMENT TO M/S. RPG ENTERPRISES LTD, WE RE RELATABLE TO THE BUSINESS EXPEDIENCY AND PROFITS OF THE RESPONDE NT-ASSESSEE AND THAT THE BENEFITS AVAILED OF BY THE RESPONDENT-ASSE SSEE FROM THE SERVICE OF THE GROUP RESOURCE COMPANY WAS TANGIBLE AND JUSTIFIED. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE CONC URRENT FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX (AP PEALS) AND THE TRIBUNAL. THE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND TRIBUNAL CONTAINED COGENT REASONS FOR ARRIVING AT SUCH FINDINGS. 14. THE ISSUE REGARDING LICENCE FEE PAID IS SQUAREL Y COVERED BY TWO DECISIONS OF THE HIGH COURTS OF BOMBAY AND CALC UTTA (REFERRED TO ABOVE) IN WHICH THE QUESTION OF LAW RAISED BY THE R EVENUE WAS REJECTED IN THE ASSESSEES GROUP COMPANY CASE. IT IS SETTLED LAW IN SO FAR AS THE SCOPE, POWER AND AMBIT OF THE HIGH CO URT IN EXERCISE OF JURISDICTION UNDER SECTION 260A OF THE INCOME-TAX A CT AND THE SUM AND SUBSTANCE OF THE DECISIONS RELIED UPON BY THE L EARNED COUNSEL ON EITHER SIDE IS THAT ONCE THE TRIBUNAL AND THE APPEL LATE AUTHORITY HAS DECIDED THE CASE WITH REFERENCE TO THE EXPLANATION OFFERED BY THE ASSESSEE IN DETAIL THEN THE COURT CANNOT INTERFERE ON THE CASE. FURTHER, IF THE FINDINGS OF FACT ARRIVED AT BY THE AUTHORITIES BELOW ARE BASED ON PROPER APPRECIATION OF THE FACTS AND THE M ATERIAL AVAILABLE ON RECORD AND SURROUNDING CIRCUMSTANCES THEN THAT W ILL NOT INVOLVE ANY SUBSTANSTIVE QUESTION OF LAW. IN OUR JUDGEMENT IN THE TAX APPEALS IN T.C. (A) NOS. 310 TO 312 OF 2007 AND T.C (A) NOS.1388 TO I.T.A.NO.2610/MDS/2014 . :- 5 -: 1390 OF 2007 (CIT V. RPG TRANMISSIONS LTD [2013] 35 9 ITR 673 (MAD) (INFRA), WHICH WAS HERD ALONG WITH THIS APPEA L AND DISPOSED OF TODAY, WE HAVE HELD THAT A TRANSACTION OR AN ARRANG EMENT WHICH IS PERFECTLY PERMISSIBLE AND WHICH MAY HAVE THE EFFECT OF REDUCTION OF TAX BURDEN NEED NOT BE SEEN WITH TAINTED DISFAVOUR. IN THIS APPEAL ALSO WE DO NOT FIND ANY REASON ON THE FACTS AND CIR CUMSTANCES OF THE MATTER TO TAKE A DIFFERENT VIEW. 15. FOLLOWING THE SAID DECISIONS, WE ANSWER THE SUB STANTIAL QUESTION OF LAW NO.1 RAISED IN THIS APPEAL IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. SINCE, THE ISSUE IN PRESENT APPEAL HAS ALREADY BEE N DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE, WE FIND NO MERITS IN THE APPEAL OF THE RE VENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED BEING DEVOID OF MERITS. ORDER PRONOUNCED ON TUESDAY, THE 27TH OF JANUARY, 2015, AT CHENNAI. SD/- SD/- . . ) (B.R. BASKARAN) / ACCOUNTANT MEMBER ( ) (VIKAS AWASTHY) ! /JUDICIAL MEMBER - /DATED:27.01.2015. K.V . # %)/ 0!) /COPY TO: 1. '/ APPELLANT 2. %&' / RESPONDENT 3. ' 2) ( )/CIT(A) 4. ' 2) /CIT 5. 34 %) 5 /DR 6. 46 7( /GF. I.T.A.NO.2610/MDS/2014 . :- 6 -: