Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 5966 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-06-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2015-2016
Appeal Filed On
10-05-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE S HRI RAJESH KUMAR (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 3121 /MUM/20 1 9 ASSESSMENT YEAR: 2015 - 16 COLE PARMER INDIA PRIVATE LIMITED, 403, A WING , DELPHI, HIRANANDANI BUSINESS PARK, P OWAI, MUMBAI - 400076 PAN: AAJCS7671K VS. THE ASSISTANT COMMISSIONER OF INCOME TAX 15(1)(2), ROOM NO. 483A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MADHUR AGRAWAL (AR) REVENUE BY : SHRI V. VINOD K UMAR (D R) DATE OF HEARING: 16/06/2020 DATE OF PRONOUNCEMENT: 23 / 06/2020 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 01.02.20 19 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APP E ALS) (FOR SHORT THE. CIT (A) 24 , MUMBAI , FOR THE A S S ESSMENT YEAR 2015 - 16 , WHEREBY THE LD. CIT(A) HAS DISMISSED THE APPEAL PREFERRED BY THE ASSESSEE AGAINST T HE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX AC T, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING IN LABORATORY EQUIPMENTS , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 6,24,79,670/ - .THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, DETERMINING THE TOTAL INCOME AT RS. 7,48,59,310/ - AFTER MAKING ADDITION OF RS. 1,23,79,645/ - ON ACCOUNT OF DISALLOWANCE OF SHARES SERVICES EXPENSES U/ S 2 ITA NO. 3121 / MUM/2019 ASSESSMENT YEAR: 2015 - 1 6 40(A)(IA) OF THE ACT , CLAIMED BY THE ASSESSEE BY DEBIT ING THE SAID AMOUNT UNDER THE HEAD SHARED SERVICE EXPENSES . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A) INTER ALIA ON THE GROUND THAT THE AO HAS WRONGLY DISALLOWED THE CLAIM . TH E LD. CIT(A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL AND CONFIRMED THE FINDINGS OF THE AO HOLDING THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE EXPENSES. THE ASSESSEE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT(A). 3 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING GROUND S OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) 24 [CIT (A)] HAS ERRED IN CONFIRMING THE DISALLOWANCE OF THE SHARED SERVICE EXPENSES AMOUNTING TO RS. 1,23,79,645/ - . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED AO OF LEVYING INTEREST AMOUNTING TO RS. 13,98,697/ - UNDER SECTION 234B OF THE I T ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN DISMISSING THE GROUND OF APPEAL CHALLENGING THE ACTION OF THE LEARNED AO TO INITIATE THE PENALTY PROCEEDING UNDER SECTION 271 (1) (C) OF THE ACT. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014 - 15. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE FINDINGS OF T HE AUTHORITIES BELOW ARE CONTRARY TO THE DECISION OF THE TRIBUNAL, THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND, THE LD. D.R. FAIRLY ADMITTED THAT THE TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES CA SE FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR, HOWEVER, SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6 . WE HAVE PERUSED THE RELEVANT MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL CONTENTIONS OF THE PARTIES. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSE SSEE 3 ITA NO. 3121 / MUM/2019 ASSESSMENT YEAR: 2015 - 1 6 THE C BENCH OF THE MUMBAI TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES APPEAL ITA NO.957/MUM/2018 FOR THE ASSESSMENT YEAR 2014 - 15 VIDE ORDER DATED 27.09.2019. DURING THE SAID ASSESSMENT YEAR, THE ASSESSEE HAD PAID RS. 2,91,88,975/ - TO ITS GROUP COMPANY M/S THERMO FISHER SCIENTIFIC INDIA PVT. LTD. THE ASSESSEE CONTENDED THAT SINCE THE SHARED SERVICE EXPENSES ARE NOTHING BUT REIMBURSEMENT OF EXPENSES BY THE ASSESSEE, THE PROVISIONS OF TDS DO NOT APPLY, THEREFORE, DIS ALLOWANCE U/S 40(A)(IA) IS NOT WARRANTED . THE AO REJECTING THE CONTENTION OF THE ASSESSEE MADE ADDITION OF THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. IN THE FIRST APPEAL , THE LD. CIT(A) CONFIRMED THE ADDITION. HOWEVER, IN FURTHER APPEAL, THE TRIBUNAL R EVERSED THE FINDINGS OF THE LD. CIT(A) HOLDING AS UNDER: - 15. CONSIDERING THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD, WE NOTICE FROM THE RECORDS SUBMITTED BEFORE US THAT DURING THIS ASSESSMENT YEAR, ASSESSEE HAD UTILIZED COMMON FACILITIES AND ADM INISTRATIVE SERVICES FROM THERMO FISHER SCIENTIFIC INDIA PVT. LTD. (TFS INDIA), WHICH IS GROUP COMPANY. THE DETAILS OF SUCH SHARED SERVICES ARE SALARY AND WAGES OF RS. 95,74,485/ - , DEPRECIATION ON EQUIPMENT OF RS. 13,78,331/ - , RENT OF RS. 84,24,167/ - AND O THER EXPENSES OF RS. 66,11,456/ - , IN TOTAL RS. 259,88,439/ - . IT IS 2% ON THE REVENUE FROM OPERATION FOR THE ASSESSMENT YEAR. THESE EXPENSES WERE ALLOCATED BY TFS INDIA BASED ON THE AGREED SHARING RATIO AND THIS IS AS PER ORAL AGREEMENT. 16. WHEN THE AO ASK ED THE ASSESSEE TO SUBSTANTIATE THE SAME, THE ASSESSEE SUBMITTED THAT THE COST WERE ALLOCATED BASED ON USAGE OF THE FACILITY AND THE GROUP COMPANY TFS INDIA HAS ALREADY COMPLIED WITH THE PROVISIONS AS PER I.T. ACT, 1961. BEFORE LD. CIT (A), ASSESSEE HAD MA DE DETAILED SUBMISSION INCLUDING THE CONFIRMATION FROM TFS INDIA, WHICH WAS NOT SUBMITTED BEFORE AO. ALL THESE INFORMATION WERE VERIFIED BY AO IN REMAND PROCEEDINGS AND AO HAD MADE FOLLOWING ADVERSE COMMENTS THAT A) TFS INDIA HAS NOT FILED CONFIRMATION U/S 133(6), ASSESSEE WAS GIVEN SEVERAL OPPORTUNITIES TO SUBMIT THE SUPPORTING DOCUMENTS FOR EXPENSES, NOT FILED THE BASIS OF ALLOCATION, HUGE DIFFERENCE IN ALLOCATION OF PERCENTAGE OF TOTAL SHARED SERVICE EXPENSES, SERVICE TAX APPLICABLE AND NO DETAILS ON CLA IM OF MODVAT CLAIM SUBMITTED AND THE CLAIM OF EXPENSES ARE CLEAR DUE TO NON - EXISTENCE OF AGREEMENT BETWEEN THE ASSESSEE AND TFS INDIA. LD. CIT (A) ALSO CONFIRMED THE ADDITION MERELY RELYING ON THE FINDINGS OF AO INSTEAD OF 4 ITA NO. 3121 / MUM/2019 ASSESSMENT YEAR: 2015 - 1 6 ADDRESSING THE ISSUES RAISED BY A SSESSEE IN THE LEGAL CONTEXT, WHICH IS GIVEN BELOW: - A) ASSESSEE HAS SHARED THE REVENUE EXPENSES WITH THE GROUP COMPANY I.E. TFS INDIA, WHICH IS 2% OF THE REVENUE FROM OPERATION AND ASSESSEE HAS FILED THE DETAILS OF COST OF WORK FORCE EMPLOYED BY ASSESSEE, WHICH ARE BASICALLY COMPRISED OF MARKETING STAFFS. FOR THE OTHER ADMINISTRATIVE , SPACE UTILIZATION AND OTHER COMMON EQUIPMENTS WERE SHARED WITH THE GROUP CONCERN. ASSESSEE HAS NOT CHARGED ANYTHING FOR THE ADMINISTRATIVE EXPENSES TO THE P & L ACCOUNT. IN OUR VIEW, EVERY BUSINESS NEEDS ADMINISTRATION AND IF THE ASSESSEE DECIDED TO AVAIL COMMON FACILITIES, WHICH IS LEGALLY PERMISSIBLE. SINCE BOTH THE SISTER CONCERN AND HAVING SIMILAR TAX RATES, THERE WILL NOT BE ANY TAX LEAKAGE. FURTHER THE ALLOCATION IS BAS ED ON AGREED FORMULA. AS LONG AS IT IS WITHIN PERMISSIBLE LIMIT, IT SHOULD BE CONSIDERED. IN THIS CASE, IT IS ONLY 2% OF THE REVENUE FROM OPERATION. B) AO CANNOT INVOKE SECTION 40(A) (IA) WITHOUT FINDING THE ASSESSEE AS AN ASSESSEE IN DEFAULT, LD. CIT (A) SHOULD HAVE CONSIDERED THE SECOND PROVISO TO SECTION 40(A)(IA) BEFORE DISMISSING THE PLEA OF THE ASSESSEE. C) NEXT ISSUE IS, THE GROUP COMPANY TFS INDIA, DOES NOT HAVE TAXABLE INCOME, THE COURT IN THE CASE OF IDFC INVESTMENT ADVISORS LTD. (SUPRA), NO TDS IS REQUIRED TO BE DEDUCTED ON SHARED SERVICE EXPENSES. LD. CIT (A) SHOULD HAVE VERIFIED THIS ASPECT BEFORE DISMISSING THE GROUND. 17. CONSIDERING THE ABOVE FACTS AND DISCUSSION, THE ASSESSEE HAS SHARED THE REVENUE EXPENSES WITH THE GROUP COMPANY AND THE CL AIM IS WITHIN THE NORMAL LIMITS I.E. 2%. THE ASSESSEE HAS SUBMITTED AND ALSO CONFIRMED BY TFS INDIA THAT THEY HAVE NOT CHARGED ANY PROFIT ON THE SHARED SERVICE EXPENSES I.E. COST TO COST BASIS. FURTHER, TFS INDIA HAS ALREADY CONFIRMED THAT THEY HAVE COMPLI ED WITH THE TDS PROVISIONS AS PER LAW ON THE EXPENSES SHARED BY THEM WITH THE ASSESSEE. THERE IS ABSOLUTELY NO LOSS TO THE REVENUE. FURTHER, IT IS NOTICED THAT ASSESSEE HAS DISCONTINUED THIS PRACTICE FROM AY 2016 - 17. THEREFORE, WE ARE INCLINED TO ACCEPT TH E GROUNDS RAISED BY THE ASSESSEE AND ACCORDINGLY GROUNDS ARE ALLOWED. 6. WE NOTICE THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE PERTAINING TO THE ASSESSMENT YEAR 2014 - 15 DISCUSSED ABOVE AND THE ISSUES I NVOLVED IN BOTH THE CASES ARE IDENTICAL. SINCE THE 5 ITA NO. 3121 / MUM/2019 ASSESSMENT YEAR: 2015 - 1 6 TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE IMME DIATE PREVIOUS ASSESSMENT YEAR AND SINCE THERE IS NO MATERIAL CHANGE IN THE FACTS OF THE PRESENT CASE, WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW. HENCE, FOLLOWING THE DECISION OF THIS TRIBUNAL, WE ALLOW GROUND NO.1 OF THE APPEAL AND SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). SINCE, WE HAVE DECIDED THE MAIN ISSUE IN FAVOUR OF THE ASSESSE E, WE DO NOT FIND IT NECESSARY TO ADJUDICATE THE OTHER GROUNDS OF APPEAL WHICH ARE OF CONSEQUENTIAL NATURE. IN THE RESULT, WE ALLOW THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2015 - 16. ORDER PRON OUNCED UNDER RULE 34 (4) OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. SD/ - SD/ - ( RAJES H KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 23 / 06/202 0 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
