ACIT 2(3), MUMBAI V. TATA MOTORS LTD, MUMBAI

ITA 3001/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1376 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 1985-1986
• Appeal Filed On: 08-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: DINESH VYAS
• Keywords: Revenue expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E : MUMBAI BEFORE SHRI D. MANMOHAN, HONBLE VICE PRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA. NO. 3001/MUM/2009 ASSESSMENT YEAR 1985-1986 ITA. NO. 3002/MUM/2009 ASSESSMENT YEAR 1986-1987 ITA. NO. 3003/MUM/2009 ASSESSMENT YEAR 1987-1988 ITA. NO. 3034/MUM/2009 ASSESSMENT YEAR 1989-1990 ACIT 2 (3) MUMBAI. VS. M/S. TATA MOTORS LTD. (FORMERLY KNOWN AS TELCO LTD.) BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-001 PAN AAACT-2727-Q (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI NAVEEN GUPTA FOR ASSESSEE : SHRI DINESH VYAS ORDER PER D. MANMOHAN, V.P. 1. THESE APPEALS, FILED AT THE INSTANCE OF THE REV ENUE, INVOLVE ONE COMMON ISSUE AND HENCE WE PROCEED TO DISPOSE OF THESE APPEALS BY A COMBINED ORDER, FOR THE SAKE OF CONVENIENCE. 2. IN RESPECT OF THE ASSESSMENT YEARS 1985-86, 198 7-88 AND 1989-90 THE ONLY GROUND URGED IN THE APPEALS FILED BY THE REVENUE IS WITH REGARD TO ACTION OF THE LEARNED CIT(A) IN ALLO WING EXPENDITURE INCURRED ON FOOD AND BEVERAGES AT THE GUEST HOUSES MAINTAINED BY THE ASSESSEE; THE CASE OF THE REVENUE IS THAT THERE IS NO EVIDENCE TO SHOW THAT THE IMPUGNED EXPENDITURE WAS INCURRED ON THE E MPLOYEES IN CONNECTION WITH THEIR STAY DURING OFFICIAL VISITS W HEREAS ASSESSEE- COMPANY SUBMITS THAT THE IMPUGNED EXPENDITURE WAS I NCURRED FOR THE PURPOSE OF BUSINESS, SINCE COMPANYS EMPLOYEES STAY ED IN THE INSPECTION/GUEST HOUSE NEAR FACTORIES WHILE CARRYIN G OUT THEIR OFFICIAL 2 DUTIES AND DURING SUCH PERIOD FOOD AND BEVERAGES WE RE PROVIDED TO THEM AND SUCH EXPENDITURE IS ALLOWABLE AS DEDUCTION UNDE R EXPLANATION 2 TO SECTION 37 (2) OF THE ACT, AT IT STOOD AT THE RELEV ANT POINT OF TIME. 3. HOWEVER, IN RESPECT OF THE ASSESSMENT YEAR 1986 -87 ORDER OF THE LEARNED CIT(A) WAS CHALLENGED BY THE REVENUE VI S--VIS ALLOWABILITY OF EXPENDITURE INCURRED ON FOOD AND BEVERAGES AT THE G UEST HOUSE AS WELL AS EXPENDITURE INCURRED ON BEAUTIFICATION OF HORNIMAN CIRCLE. LEARNED SENIOR COUNSEL RELIED UPON THE DECISION OF ITAT, A BENCH, MUMBAI (ITA. NO. 3222/B/92 DATED 25-1-2002) AND CONTENDED THAT C ONTRIBUTION OF ASSESSEE TOWARDS BEAUTIFICATION OF HORNIMAN CIRCLE IS A REVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. A S REGARDS EXPENDITURE FOR FOOD AND BEVERAGES, IT WAS CONTENDED THAT JUDIC IAL NOTICE HAS TO BE TAKEN WITH REGARD TO UTILISATION OF GUEST/INSPECTIO N HOUSES BY EMPLOYEES IN THE COURSE OF THEIR EMPLOYMENT. 4. WE SHALL FIST DEAL WITH THE ISSUE OF CLAIM OF D EDUCTION REFERABLE TO EXPENDITURE INCURRED ON FOOD AND BEVER AGES WHICH IS COMMON IN ALL THESE YEARS. IN RESPECT OF THE ASSESS MENT YEAR 1985-86 ORIGINALLY ASSESSEE APPEARS TO HAVE CLAIMED DEDUCTI ON UNDER SECTION 37 OF THE ACT WHICH WAS DISALLOWED BY THE ASSESSING OF FICER BY INVOKING THE PROVISIONS OF SECTION 37 (4) OF THE ACT WHICH WAS C ONFIRMED BY THE LEARNED CIT(A) AND ON AN APPEAL FILED BY THE ASSESS EE, THE ITAT C BENCH, MUMBAI (ITA. NO. 1668/BOM/92 DATED 26 TH JUNE, 2006) OBSERVED THAT EXPENDITURE RELATING TO MAINTENANCE OF GUEST H OUSE IS HIT BY THE PROVISIONS OF SECTION 37(4) AND (5) OF THE ACT. AT THIS JUNCTURE, ASSESSEE APPEARS TO HAVE RAISED AN ALTERNATIVE PLEA THAT CER TAIN EXPENDITURE WAS INCURRED ON SUPPLY OF FOOD AND BEVERAGES TO THE STA FF MEMBERS WHO STAYED AT THE GUEST HOUSE AND THUS IT WAS AN EXPEND ITURE INCURRED FOR BUSINESS PURPOSE. THE TRIBUNAL OBSERVED THAT SO LON G AS AN EXPENDITURE IS PROVED TO HAVE INCURRED ON FOOD AND BEVERAGES AN D EMPLOYEES ARE 3 SHOWN TO HAVE STAYED IN THE GUEST HOUSE TO CARRY ON THEIR DUTIES, THE SAME WOULD FALL WITHIN THE EXCEPTION PROVIDED UNDER SECTION 37 (2) OF THE ACT. HAVING REGARD TO THE PLEA OF THE ASSESSEE THE TRIBUNAL RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A S PECIFIC DIRECTION WHICH READS AS UNDER: WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO BE EXAMINE IN THE LIGHT OF PROVISIONS OF SECTION 37 (2 ) OF THE I.T. ACT AND IF THE ASSESSEE SUCCEEDS IN PROVING THAT THESE EXPENSES ON FOOD AND BEVERAGES ON ITS EMPLOYEES WER E INCURRED AT THE WORK PLACE, IT MAY BE ALLOWED AS PE R EXPLANATION 2 TO SECTION 37 (2) OF THE ACT. 5. SIMILARLY, FOR THE ASSESSMENT YEARS 1986-87 AND 1987-88, VIDE ORDER DATED 24-7-2006 ITAT F BENCH, MUMBAI ( ITA. NO. 1669 & 1670/BOM./92) SET ASIDE THE ISSUE TO THE FILE OF TH E ASSESSING OFFICER WITH AN IDENTICAL DIRECTION. EVEN FOR THE ASSESSMEN T YEAR 1989-90, THE ISSUE WITH REGARD TO ALLOWABILITY OF EXPENDITURE ON FOOD AND BEVERAGES WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER BY THE ITAT, C BENCH, MUMBAI (ITA. NO. 1787/BOM./95) DATED 26-6-2006). 6. SINCE THERE WAS A SPECIFIC DIRECTION BY THE APP ELLATE TRIBUNAL, THE ASSESSING OFFICER, IN ORDER TO GIVE E FFECT TO THE ITATS DIRECTION, CALLED UPON THE ASSESSEE TO FURNISH EVID ENCE TO PROVE THAT THE EXPENDITURE WAS INCURRED ON FOOD AND BEVERAGES ON T HE EMPLOYEES WHO STAYED IN THE INSPECTION/GUEST HOUSE FOR BUSINESS P URPOSE. 7. EXCEPT REITERATING ITS CONTENTION THAT EMPLOYEE S STAYED AT THE GUEST HOUSE/INSPECTION HOUSE DURING THEIR OFFIC IAL VISITS, NO EVIDENCE WHATSOEVER WAS FURNISHED TO PROVE THAT EMPLOYEES HA D IN FACT STAYED IN THE GUEST HOUSE AND IMPUGNED EXPENDITURE WAS NOT IN CURRED ON 4 OUTSIDERS. IN THE ABSENCE OF ANY EVIDENCE, ASSESSIN G OFFICER DISALLOWED THE CLAIM OF DEDUCTION. 8. AGGRIEVED, ASSESSEE PREFERRED APPEALS BEFORE TH E FIRST APPELLATE AUTHORITY. LEARNED CIT(A) CHOSE TO ACCEPT THE CLAIM OF THE ASSESSEE-COMPANY WITH REGARD TO DEDUCTION OF EXPEND ITURE AND IN THIS REGARD OBSERVED, IN ITS ORDER FOR ASSESSMENT YEAR 1985-86, AS UNDER (DISALLOWANCE WAS SET ASIDE FOR THE OTHER YEARS ALS O ON THE STRENGTH OF IDENTICAL OBSERVATIONS) : 5.5. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS REITERATED THE SAME FACTS THAT THE COMPANY HAS STAF F INSPECTION HOUSES NEAR FACTORIES WHERE EMPLOYEES ST AY DURING THEIR OFFICIAL VISITS FOR THE PURPOSE OF BUS INESS. THE FOOD AND BEVERAGES HAVE BEEN PROVIDED TO THE EMPLOYEES WHO STAYED IN THE STAFF INSPECTION HOUSES DURING THEIR OFFICIAL VISITS. THE A.O. HAS NOT APPR ECIATED THE FACTS. THE A.O. HAS ALSO TAKEN INTO ACCOUNT THE DIRECTION OF THE HONBLE ITAT WHILE DECIDING THE IS SUE. HE SIMPLY DISALLOWED THE CLAIM FOR WANT OF SUPPORTI NG EVIDENCE. 5.6. I HAVE GONE THROUGH THE ABOVE SUBMISSIONS CAREFULLY AND REASONING GIVEN BY THE ASSESSING OFFICER. I FIN D THAT THE HONBLE ITAT HAS GIVEN SPECIFIC DIRECTION ON TH IS ISSUE AND IN MY OPINION THE APPELLANT COMPANY FULFI LLS THE REQUIREMENT FOR ALLOWING ITS CLAIM IN VIEW OF T HAT DIRECTIONS. THEREFORE, FOLLOWING THE DIRECTIONS OF THE HONBLE ITAT AND KEEPING IN VIEW THE PROVISIONS OF LAW AS WELL AS THE FACTS RELATED TO THE ISSUE, I HOLD T HAT THE CLAIM OF THE APPELLANT IS ALLOWABLE. HENCE, THE SAM E IS 5 ALLOWED. THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT. 9. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. LEAR NED DR SUBMITTED THAT THE ASSESSING OFFICER, WHILE GIVING EFFECT TO THE ORDER OF THE APPELLATE TRIBUNAL, IS BOUND BY THE SPECIFIC DI RECTIONS OF THE SUPERIOR FORUM AND SUCH DIRECTIONS CANNOT BE DILUTED/DISOBEY ED. 10. IN THE INSTANT CASE, THE BENCH SPECIFICALLY DI RECTED THE ASSESSING OFFICER TO EXAMINE THE ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 37 (2) AND FURTHER CLARIFIED THAT THE IMPUGNED EXPE NDITURE IS ALLOWABLE ONLY UPON THE CONDITION THAT THE ASSESSEE HAS TO PR OVE THAT THE EXPENDITURE WAS INCURRED ON FOOD AND BEVERAGES ON I TS EMPLOYEES AT THE WORK PLACE. IN OTHER WORDS, THE PRELIMINARY BURDEN IS PLACED UPON THE ASSESSEE TO PROVE THAT THE EMPLOYEES HAD VISITED TH E GUEST HOUSE/INSPECTION BUNGALOWS TO CARRY ON THEIR WORK A ND WHILE UTILISING IT AS WORK PLACE, FOOD AND BEVERAGES WERE SUPPLIED TO THEM. ASSESSEE- COMPANY DID NOT CHOOSE TO PREFER APPEALS AGAINST TH E ORDERS PASSED BY THE APPELLATE TRIBUNAL. SUCH BEING THE CASE IT OUGH T TO HAVE FOLLOWED THE MANDATE OF FURNISHING THE EVIDENCE, EITHER IN THE F ORM OF SHOWING FROM THE INSPECTION BUNGALOW RECORDS OR OTHERWISE, THAT SPECIFIED NUMBER OF WORKERS WERE ASSIGNED DUTY AT THE RELEVANT PLACE AN D IN DISCHARGE OF THEIR DUTIES THEY HAVE UTILISED THE GUEST HOUSE/INS PECTION BUNGALOW AS THEIR WORK PLACE AND FOOD AND BEVERAGES WERE SUPPLI ED TO THEM. ADMITTEDLY, NO SUCH EVIDENCE WAS FURNISHED BEFORE T HE ASSESSING OFFICER AS WELL AS THE CIT(A). THE PLEA OF THE LEARNED COUN SEL, APPEARING ON BEHALF OF THE ASSESSEE BEFORE US, IS THAT IT HAS TO BE NORMALLY ASSUMED THAT GUEST HOUSE/INSPECTION BUNGALOWS ARE AT A STON ES THROW DISTANCE FROM THE WORK PLACE (WITHIN THE FACTORY PREMISES OR ADJACENT TO FACTORY PREMISES) AND THUS IT CAN BE CONSIDERED AS AN EXTEN DED WORK PLACE OF THE EMPLOYEES. WE MAY OBSERVE HERE THAT EVERY COMPANY W OULD MAINTAIN 6 CERTAIN RECORDS AT THE GUEST HOUSES WITH REGARD TO NUMBER OF GUESTS OR STAFF WHO HAVE UTILIZED THE GUEST HOUSE FACILITIES, AS OTHERWISE IT MAY LEAD TO WRONG USE OF A GUEST HOUSE; SUCH RECORDS OUGHT T O HAVE BEEN PRODUCED BEFORE THE ASSESSING OFFICER OR SOME OTHER INFERENTIAL MATERIAL COULD HAVE BEEN FURNISHED TO PROVE THAT EMPLOYEES H AVE TREATED GUEST HOUSES AS WORK PLACE AND FOOD AND BEVERAGES WERE SUPPLIED TO THEM IN THE GUEST HOUSE WHILE THEY WERE CARRYING-OUT THEIR DUTIES IN SUCH WORK PLACE. STRANGELY, DESPITE LACK OF EVIDENCE, LEARNED CIT(A) ASSUMED THAT THE TRIBUNAL DID NOT DIRECT THE ASSESSING OFFICER T O FURNISH EVIDENCE AND BASED UPON A BALD PLEA OF THE ASSESSEE THAT IT HAD INCURRED EXPENDITURE ON FOOD AND BEVERAGES PROVIDED TO THE EMPLOYEES AT THE GUEST HOUSE, ASSESSING OFFICER WAS DIRECTED TO ALLOW THE CLAIM O F DEDUCTION. 11. HAVING HEARD THE RIVAL SUBMISSIONS ON THIS ISS UE, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE PLEA OF THE ASSESSEE, WITHOUT ANY EVIDENCE ON RECORD TO PRO VE THAT THE EMPLOYEES HAD IN FACT UTILISED THE GUEST HOUSE/INSPECTION HOU SE AS THEIR WORK PLACE. WE THEREFORE, SET ASIDE THE ORDER OF THE LEA RNED CIT(A) ON THIS ISSUE. IN THE RESULT, THE ONLY GROUND URGED IN ITS APPEALS FOR THE ASSESSMENT YEARS 1985-86, 1987-1988 AND 1989-1990 I S DECIDED IN FAVOUR OF THE REVENUE. THIS ALSO DISPOSE OF GROUND NO.1 IN THE APPEAL FILED FOR THE ASSESSMENT YEAR 1986-1987 (IN FAVOUR OF REVENUE). 12. GROUND NO.2 FOR THE ASSESSMENT YEAR 1986-87 RE ADS AS UNDER : THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE EXPEN SES OF RS.10,00,000/- DISALLOWED BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES ON BEAUTIFICATION OF HORNIMAN CIRCLE, WITH OUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO S UBMIT ANY DETAILS IN THIS REGARD AT ANY TIME I.E. EITHER AT T HE TIME OF ORIGINAL ASSESSMENT OR EVEN AFTER THE ASSESSMENT WAS MADE WI TH THE DIRECTION OF THE HONBLE ITATS ORDER. 7 13. AS COULD BE NOTICED FROM THE ORDER OF THE ITAT , F BENCH, MUMBAI (SUPRA), THE CLAIM WAS DISALLOWED ON THE GRO UND THAT ASSESSEE FAILED TO PROVE THAT THE EXPENDITURE INCURRED IS IN CONNECTION WITH THE ASSESSEES BUSINESS AND NO DETAILS REGARDING THE EX PENDITURE WERE FILED. THE APPELLATE TRIBUNAL RESTORED THE ISSUE TO THE FI LE OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : UNDOUBTEDLY, IT IS FOR THE ASSESSEE TO PROVE THAT THE SAID EXPENDITURE IS IN THE NATURE OF ADVERTISING AND NOT FOR THE PURPOSE OF SOCIAL WELFARE. THE MERE FACT THAT THE A SSESSEE HAS GIVEN ITS SHARE OF CONTRIBUTION ALONG WITH OTHE R GROUP COMPANIES DOES NOT BY ITSELF MAKE THE EXPENDITURE A S ALLOWABLE. THE ASSESSING OFFICER SHALL GIVE OPPORTU NITY TO THE ASSESSEE WHICH IS REQUIRED TO FILE THE NECESSARY DE TAILS IN ORDER TO SUBSTANTIATE THE SAID CLAIM. 14. DESPITE AN OPPORTUNITY GIVEN BY THE ASSESSING OFFICER, WHILE GIVING EFFECT TO THE ORDER OF THE ITAT, THE ASSESSE E HAS NOT PRODUCED ANY EVIDENCE/EXPLANATION IN RESPECT OF BEAUTIFICATION E XPENSES OF HORNIMAN CIRCLE AND THUS THE CLAIM OF DEDUCTION WAS REJECTED BY THE ASSESSING OFFICER. HOWEVER, ON AN APPEAL FILED BY THE ASSESSE E, THE LEARNED CIT(A) RELIED UPON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF TATA IRON & STEEL CO. ITA. NO. 3222/BOM./92 TO HOLD THAT CONTRIBUTION MADE TO TATA SERVICES LTD. AS SHARE OF EXPENSES FOR MAIN TENANCE OF HORNIMAN CIRCLE GARDEN WAS WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS. 15. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. LEA RNED DR SUBMITTED THAT MERELY BECAUSE THE ASSESSEE IS SHARI NG THE EXPENDITURE WITH THE OTHER GROUP COMPANIES, IT CAN NOT CONSTITU TE SUFFICIENT EVIDENCE TO PROVE THAT THE EXPENDITURE WAS INCURRED ON ADVER TISEMENT. DESPITE A SPECIFIC DIRECTION BY THE BENCH THAT NECESSARY DETA ILS HAVE TO BE FURNISHED BY THE ASSESSEE, THE LEARNED CIT(A) ERRED IN ACCEPTING THE PLEA 8 OF THE ASSESSEE, WITHOUT ANY EVIDENCE ON RECORD TO PROVE THAT MAINTENANCE OF HORNIMAN CIRCLE GARDEN HELP THE ADVE RTISEMENT CAMPAIGN OF THE ASSESSEE COMPANY. 16. ON THE OTHER HAND, LEARNED COUNSEL STRONGLY RE LIED UPON THE ORDER OF THE ITAT REFERRED TO BY THE LEARNED CIT(A) . 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. IN THE LIGHT OF SPECIFIC DIRECT IONS OF THE BENCH, WHILE GIVING EFFECT TO THE ORDER OF THE ITAT THE ASSESSIN G OFFICER IN OUR OPINION, WAS JUSTIFIED IN CALLING UPON THE ASSESSEE TO FURNI SH EVIDENCE. EVEN AT THAT STAGE THE ASSESSEE MERELY REITERATED ITS CONTE NTION THAT IT WAS CONTRIBUTING ITS SHARE. IN THE ABSENCE OF ANY SPECI FIC AND DIRECT EVIDENCE, TO SHOW THAT CONTRIBUTING ITS SHARE WOULD HELP THE ASSESSEES COMPANYS ADVERTISEMENT CAMPAIGN, LEARNED CIT(A) WAS NOT JUST IFIED IN ACCEPTING THE CLAIM OF DEDUCTION. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND UPHOLD THE PLEA OF THE REVENUE. 18. IN THE RESULT, APPEALS FILED BY THE REVENUE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 3 0 TH DAY OF JUNE, 2010. SD/- SD/- (PRAMOD KUMAR) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 30 TH JUNE, 2010. VBP/- 9 COPY TO 1. ACIT 2 (3), MUMBAI. 2. M/S. TATA MOTORS LTD. (FORMERLY KNOWN AS TELCO L TD.) BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUM BAI-001 PAN AAACT-2727-Q 3. CIT (A)-XXX, MUMBAI. 4. CIT-2, MUMBAI. 5. D.R. E BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.