COSCO (INDIA) SHIPPING P.LTD, MUMBAI V. ASST CIT 5(1), MUMBAI

ITA 3184/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4249 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 05-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , C, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3184/MUM/2013 ASSESSMENT YEAR: 2009-10 M/S. COSCO (INDIA) SHIPPING P. LTD. WAKEFILED HOUSE, SPROTT RD, BELLARD ESTATE, MUMBAI-400001 / VS. ASST. CIT 5(1) AAYAKAR BHAVAN, M.K. RD. MUMBAI- (ASSESSEE ) (REVENUE ) P.A. NO. AABCC9418Q !' / ASSESSEE BY SHRI B.V. JHAVERI (AR) / REVENUE BY SHRI C.W. ANGOLKAR (DR) # $ % & / DATE OF HEARING : 11/04/2016 % & / DATE OF ORDER: 11/04/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI-9 {(IN SHORT CIT(A)}, DATED 09.01.2013 PASSED AGAIN ST COSCO INDIA SHIPPING PVT. LTD. 2 ASSESSMENT ORDER U/S 143(3) DATED 21.11.2011 FOR TH E ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF BUSINESS PROMOTION OF RS. 1,97,517/- AND ENTERTAINMENT EXPENSES OF RS. 4,22,092/- UPTO 28% IN THE RATIO OF AGENCY COMMISSION OF RS.2,80,38,390/- RECEIVED FROM ITS PRINCIPAL, M/S. CHINA OCEAN SHIPPING (GROUP) COMPANY, TO OTHER BUSINESS INCOME OF RS,6,28,69,798/- RECEIVED FROM OTHER PRINCIPALS. 2. THE CIT (A) SOLELY ON THE PRESUMPTIONS AND SURMISES AND WITHOUT ANY EVIDENCE, ERRED III DISALLOWING BUSINESS PROMOTION AND ENTERTAINMENT EXPENSES UPTO 28% ON THE GROUND THAT THE ASSESSEE MIGHT HAVE INCURRED EXPENDITURE ON BUSINESS PROMOTION AND ENTERTAINMENT EXPENSES IN RESPECT OF ITS PRINCIPAL, NAMELY, M/S. CHINA OCEAN SHIPPING (GROUP) COMPANY. 3. THE CIT (A) FAILED TO APPRECIATE THAT AS PER THE CLAUSE 10.3 OF THE AGENCY AGREEMENT ENTERED BETWEEN THE ASSESSEE AND ITS PRINCIPAL, M/S. CHINA OCEAN SHIPPING (GROUP) COMPANY, THE ASSESSEE HAD RECEIVED REIMBURSEMENT OF OVERHEAD EXPENSES OF RS.80,80,778/- FROM THE SAID PRINCIPAL AND THE BUSINESS PROMOTION EXPENSES OF RS. 1,97,517/- AND THE ENTERTAINMENT EXPENSES OF RS. 4,22,092/- WERE SOLELY INCURRED BY THE ASSESSEE IN RESPECT OF OTHER INDEPENDENT PRINCIPALS FROM WHOM THE ASSESSEE COMPANY EARNED INCOME AGGREGATING TO RS.6,28,69,798/-. 4. THE CIT (A), SOLELY ON THE PRESUMPTIONS AND SURMISES AND WITHOUT ANY EVIDENCE, ERRED IN HOLDING THAT THE FOREIGN TRAVELLING EXPENSES OF RS. 2,43,398/- INCURRED BY THE ASSESSEE ON FOREIGN TRAVEL OF MR. LAI JINGWEN, MANAGING DIRECTOR OF THE ASSESSEE COMPANY, WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE COMPANY. 5. THE CIT (A) FAILED TO APPRECIATE THAT IN ORDER T O PROMOTE BUSINESS AND INCREASE INWARD TRAFFIC, THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY HAD TO COSCO INDIA SHIPPING PVT. LTD. 3 TRAVEL DIFFERENT COUNTRIES LIKE USA, DUBAI AND CHIN A TO MEET VARIOUS PRINCIPALS. 6. THE ORDER OF THE CIT(A) IS BAD IN LAW AND WITHOU T JURISDICTION. 7. YOUR APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND OR DELETE ANY OF THE FOREGOING GROUNDS OF APPEAL. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI B.V. JHAVERI, AUTHORISED REPRESENTATIVE (AR) O N BEHALF OF THE ASSESSEE AND BY SHRI C.W. ANGOLKAR, DEPARTMENTA L REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LINER SHIPPING AGENCY, CONTAINER LOGISTICS, CHARTERING, F REIGHT FORWARDING AND OTHER ALLIED OPERATIONS FOR THE ENTI RE COSCO GROUP OF COMPANIES IN INDIA. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A O MADE AGGREGATE DISALLOWANCE OF RS. 28,54,363/- OUT OF ADVERTISEMENT, BUSINESS PROMOTION & PRESENTATIONS, AND ENTERTAINMENT EXPENSES AND FOREIGN TRAVELLING EXPEN SES. 3.2. BEING AGGRIEVED, THE ASSESSEE HAD FILED APPEAL BEF ORE THE LD. CIT(A), WHEREIN PART RELIEF WAS GIVEN. 3.3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE TRIBUNAL AGAINST THE AMOUNT OF DISALLOWANCE SUSTAIN ED BY LD. CIT(A). IT WAS STATED BY BOTH THE PARTIES DURING TH E COURSE OF COSCO INDIA SHIPPING PVT. LTD. 4 HEARING THAT REVENUE HAS NOT FILED ANY APPEAL AGAIN ST THE AMOUNT OF RELIEF GRANTED BY THE LD. CIT(A). 3.4. DURING THE COURSE OF HEARING IT WAS INTER ALIA STATED BY THE LD. COUNSEL AT THE OUTSET OF THE HEARING THAT ALL T HESE EXPENSES HAVE BEEN COMPLETELY RECOVERED BY THE ASSE SSEE FROM ITS PRINCIPAL AND THE SAME HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT, AND THEREFORE, NOTHING COULD HAVE BEE N DISALLOWED OUT OF THE AFORESAID EXPENSES, AND THERE FORE, LD. CIT(A) OUGHT TO HAVE DELETED THE DISALLOWANCE MADE BY THE AO IN TOTO . ON THE OTHER HAND, LD. DR APPEARING ON BEHALF OF THE REVENUE COULD NOT NEGATE FACTUAL SUBMISSIONS BY THE ASSESSEE. 3.5. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND FIND THAT THIS FACTUAL ASPECT SEEMS TO HAVE BEE N OVERLOOKED BY THE LOWER AUTHORITIES. IN OUR VIEW, I N THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, IF SUBMISSION OF THE ASSESSEE IS FACTUALLY CORRECT I.E. ALL THE EXPENSES OUT OF WHICH DISALLOWANCE HAS MADE BY THE AO, HAVE BEEN RECOVERE D BY THE ASSESSEE AND ACCORDINGLY CREDITED IN THE PROFIT AND LOSS ACCOUNT, THEN, NO DISALLOWANCE SHOULD HAVE BEEN MAD E IN THE PECULIAR FACTS OF THIS CASE. THEREFORE, WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF VERIFICATION OF THIS FACT. THE ASSESSEE SHALL FILE REQUISITE DETAILS AND DOCUMENTARY EVIDENCES TO DEMO NSTRATE THAT THE IMPUGNED EXPENSES HAVE BEEN RECOVERED AND CREDITED IN THE PROFIT AND LOSS ACCOUNT. IF THE CONTENTION O F THE ASSESSEE IS FOUND TO BE FACTUALLY CORRECT, THEN, NO DISALLOW ANCE SHOULD COSCO INDIA SHIPPING PVT. LTD. 5 BE MADE BY THE AO. THE AO SHALL GIVE ADEQUATE OPPOR TUNITY OF HEARING TO THE ASSESSEE. THUS, WITH THESE DIRECTION S ALL THE GROUNDS RAISED BEFORE US ARE SENT BACK TO THE FILE OF THE AO AND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPO SE. 4. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE M AY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARING I.E.11 TH APRIL, 2016. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER # $ MUMBAI; ( DATED 22 /04/2016 CTX? P.S/. . . %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. / BY ORDER, .3* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI