M/s.MPG Hotels & Infrstructure P. Ltd, Trivandrum V. The ACIT, Trivandrum

ITA 288/COCH/2015

• Counselvise Citation: 28821914 RSA 2015
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 194C; 263; 63

Judgement Text

ITA NO. 288/COCH/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & GEORGE GEORGE.K , JM ITA NO . 288/COCH/2015 (ASST YEAR 2010 - 11) M/S MPG HOTELS L& INFRASTRUCTURE P LTD PUNN E N ROAD TRIVANDRUM VS THE ASST COMMR OF INCOME TAX CIRCLE 1( 1), TRIVANDRUM ( APP ELLANT ) (RESPONDENT) PAN NO. AACCM1840M ASSESSEE BY SRI R SREENIVASAN REVENUE BY SRI SHANTAM BOSE, CIT - DR DATE OF HEARING 15 TH SEPT 2015 DATE OF PRONOUNCEMENT 16 TH , SEPT 2015 OR D ER PER GEORGE GEORGE.K JM : THIS APP EAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE CITS ORDER DATED 31.3.2015 PASSED U/S 263 OF THE ACT. THE RELEVANT AY IS 2010 - 11. 2 THE GROUNDS RAISED READ AS UNDER: I) THE CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 FOR THE REASON THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. II) THE CIT HAS NOT CONSIDERED OR DISCUSSED THE HIGH COURT ORDER OF THE VERY SAME APPELLANT FOR AN EARLIER YEAR FILED DURING THE COURSE OF THE PRESENT PROCEED INGS AND HAS REFERRED TO SOME OTHER ORDER OF THE JURISDICTIONAL HIGH COURT WHICH HAS NO RELEVANT. ITA NO. 288/COCH/2015 2 III) THE CIT HAS ALSO NOT PROPERLY CONSIDERED THE RATIO AND GUIDELINES OF THE BOARD CIRCULAR CITED IN PARA 6 A PAGE 3 OF THE ORDER U/S 263. IV) THE CIT HAS GROSSLY FAILED T MAKE A DISTINCTION BETWEEN THE PROFESSIONAL CHARGES AND REIMBURSEMENT OF EXPENSES, THE LATTER OF WHICH DO NOT ATTRACT THE PROVISIONS OF TD S VIZ - A - VIZ SECTION 40(A)(IA) V) WHEN SEPARATE BILLS HAVE BEEN ISSUED T WAS ONLY PROPER THAT THE MAT TER SHOULD HAVE BEEN HELD ON MERITS AND WHICH HAS BEEN CONSIDERED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. THE PRESENT STAND TAKEN BY THE CIT TANTAMOUNT TO CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. 3 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A PRIVATE LIMITED COMPANY. FOR THE RELEVANT ASSESSMENT YEAR, THE RETURN OF INCOME WAS FILED ON 14.10.2010 DECLARING A LOSS OF RS. 30,47,680/ - . THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 16.1.2013 DETERMINING THE TOTAL INCOME AT RS . 78,29,360/ - WHICH WAS SET OFF AGAINST THE BROUGHT FORWARD LOSS AND THE TAXABLE INCOME WAS COMPUTED AT NIL. 4 SUBSEQUENTLY, THE CIT ISSUED NOTICED FOR SETTING ASIDE ASSESSMENT BY INVOKING REVISIONARY POWERS U/S 263 OF THE ACT . NOTICE WAS ISSUED FOR THE REASON THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 2,42,80,308/ - DESCRIBED AS REIMBURSEMENT OF ADMINISTRATIVE EXPENSES AND OU T OF THE TOTAL ADMINISTRATIVE EXPENSES OF RS. 2,42,80,380/ - , TDS U/S 194J WAS MADE ONLY ON A SUM OF R S. 3,30,000/ - BEING FEE FOR PROFESSIONAL SERVICES. THE CIT WAS OF THE VIEW THAT THE AO HAS FAILED TO EXAMINE WHETHER TDS IS REQUIRED TO BE MADE ON THE AMOUNT OF RS.2,39,50,308/ - (I.E. RS 2,42,80,308 RS. 3,30,000) . THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF RS. 2.39 CRORES IS NOTHING BUT REIMBURSEMENT OF EXPENSE AND NO T DS IS WARRANTED WAS REJECTED BY THE CIT AND THE CIT DIRECTED ITA NO. 288/COCH/2015 3 THE AO TO EXAMINE THE CASE AFRESH WHETHER OR NOT THE ADMINISTRATIVE EXPENSES OF RS.2,39,50,308/ - ATTRACT DISALLO WANCE U/S 40(A)(IA) OF THE ACT. THE RELEVANT DIRECTIONS OF THE CIT READ AS UNDER: 11. IN THE INSTANT CASE, THE ORDER OF THE AO IS ERRON EOUS AND PREJUDICIAL AS THE AO H AS FAILED TO EXAMINE ISSUE OF DISALLOWING ADMINISTRATIVE EXPENSES. UNDER THE CIRCUMSTAN CES I SET ASIDE THE ORDER TO THE AO TO EXAMINE AFRES H WHETHER OR NOT THE ADMINISTRATIVE EXPENSES OF RS. 2,39,50,308/ - ATTRACT DISALLOWANCE U/S 40(A)(IA), IN THE LIGHT OF THE HONBLE JURISDICTIONAL HIGH COURT ORDER REPORTED IN 222 ITR 354. 5 THE ASSESS EE BEING AGGRIEVED, IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS. 2.39 CRORES IS NOTHING BUT REIMBURSEMENT OF EXPENSES AND THE REIMBURSEMENT PER SE IS NOT LIABLE FOR DEDUCTION EITHER U/S 194J NOR U/S 194C OF THE ACT. FOR THE PROPOSITION THAT THE REIMBURSEMENT OF EXPENSE IS NOT LIABLE FOR TDS, THE ASSESSEE RELIED ON THE JUDGMENTS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS DLF COMMERCIAL PROJECTS IN ITA NO. 627 OF 2012 JUDGMENT DATED 15.7.2013 . THE ASSESS EE ALSO RELIED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S MUTHOOT FINCORP LTD (SISTER CONCERN OF THE ASSESSEE) IN ITA NO.294 OF 2013 (ORDER DATED 27.11.2013). 6. ON THE OTHER HAND, THE LD DR SUBMITTED THAT THE LD AO HAS NOT EXAMIN ED WHETHER THE AMOUNT OF RS. 2.39 CRORES IS A REIMBURSEMENT OF EXPENSES AND NOT INCOME LIABLE FOR TAX IN THE HANDS OF THE RECIPIENT. THEREFORE, IT WAS SUBMITTED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE ITA NO. 288/COCH/2015 4 REVENUE WARRANTI NG INTERFERENCE U/S 263 OF THE ACT. THE LD DR FURTHER POINTED OUT THAT THE DIRECTIONS OF THE CIT IS AN OPEN DIRECTION AN D NO PREJUDICE IS CAUSED TO THE ASSESSEE . 7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. OUT OF THE TOTAL ADM INISTRATIVE EXPENSES OF RS. 2,42,80,308/ - , THE ASSESSEE HAS DEDUCTED TDS U/S 194J ONLY ON AN AMOUNT OF RS. 3.30 LAKS. ADMITTEDLY , ON THE BALANCE AMOUNT OF RS. 2.39 CRORES, NO TAX HAS BEEN DEDUCTED UNDER ANY OF THE PROVISIONS OF CHAPTER XVII - B OF THE ACT. ON PERUSAL OF THE ASSESSMENT ORDER AND ITS RECORDS, IT IS NOT DISCERNIBLE THAT THE AO HA D EXAMINED THE ISSUE WHETHER RS. 2.39 CRORES IS A REIMBURSEMENT OF EXPENSES PER SE AND IS NOT THE INCOME IN THE HANDS OF THE RECIPIENT. IF IT IS REIMBURSEMENT OF EXPE NSES, VARIOUS JUDICIAL PRONOUNCEMENTS HA VE CATEGORICALLY HELD THAT IT IS NOT FORMING PART OF THE INCOME OF THE RECIPIENT AND NO TAX NEED TO BE DEDUCTED AT SOURCE. HOWEVER, THIS BASIC EXAMINATION HAS NOT BEEN DONE BY THE AO IN THE SCRUTINY ASSESSMENT COMPL ETED U/S 143(3) OF THE ACT (ORDER DATED 16.1.2013). SINCE THIS BASI C EXAMINATION HAS NOT BEEN DONE BY THE AO, WE ARE OF THE VIEW THAT THE CIT IS JUSTIFIED IN INVOKING HI S REVISIONARY JURISDICTION U/S 2 63 OF THE ACT. MOREOVER, WE FIND THAT THE DIRECTION O F THE CIT IS AN OPEN DIRECTION AND NO PREJUDICE IS CAUSED TO THE ASSESSEE. THE ASSESSEE, IN THE COURSE OF ASSESSMENT PROCEEDINGS CAN POINT OUT THAT THE ADMINISTRATIVE EXPENSES ARE NOTING BUT REIMBURSEMENT OF EXPENSES AND NO TAX NEED TO BE DEDUCTED ON THE SAME. T HE HONBLE ITA NO. 288/COCH/2015 5 JURISDICTIONAL HIGH COURT IN THE CASE OF M/S MUTHOOT FINCORP LTD., VIDE ORDER DATED 27 TH NOV 2013 IN ITA 294 OF 2013 H AS HELD AS FOLLOWS : 5 THE ENTIRE ISSUE REVOLVES ROUND THE FACT THAT WHETHER THIS AMOUNT OF RS. 8.53 CRORES IS IN RES PECT OF AMOUNTS REIMBURSED TO M/S MPCMS ON CONTRACT AS ALLEGED BY THE ASSESSEE OR OTHERWISE. WHILE CONSIDERING THE MATTER AFRESH BY THE AO, THE EXERCISE HE HAS TO DO IS TO TAKE INTO CONSIDERATION THE PROVISIONS UNDER IT A CT PERTAINING TO THE TAX DEDUCTED A T SOURCE, WHETHER IT IS WITH REFERENCE TO SEC 40(A)(IA) OR OTHER PROVISIONS. THEREFORE, THE EXERCISE TO BE UNDERTAKEN BY THE AO AS INDICATED BY THE TRIBUNAL IS TO BE UNTRAMMELED BY ANY OF THE OPINIONS EXPRESSED BY THE COMMISSIONER WHICH IS CONFIRMED BY THE TRIBUNAL. IN OTHER WORDS, BY APPLICATION OF MIND INDEPENDENTLY TO THE FACTS OF THE CASE WITH REFERENCE TO THE PROVISIONS OF TDS UNDER THE ACT AO HAS TO PROCEED FURTHER. 8 IN VIEW OF THE AFORESAID REASONING AND THE DIRECTIONS OF THE HO NBLE JURISDICTIO NAL HIGH COURT, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT IN INVOKING HIS REVISIONARY JURISDICTION U/S 263 OF THE ACT. IT IS ORDERED ACCORDINGLY. 9 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON THIS 16 TH DAY OF SEPT 2015 . SD/ - SD/ - ( B P JAIN ) (GEORGE GEORGE .K ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 16 TH , SEPT 2015 RAJ* ITA NO. 288/COCH/2015 6 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN