Mundra Port & Special Economic Zone Ltd., Ahmedabad V. The Addl.CIT.,Range-4, Ahmedabad

ITA 3234/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76691 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Gift; Recovery proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 3234 /AHD/2010 (ASSESSMENT YE AR: 2007-08) MUNDRA PORT AND SPECIAL ECONOMIC LTD. 1 ST FLOOR, ADANI HOUSE, SHRIMALI SOCIETY, MITHAKHALI CIRCLE, NAVRANGPURA, AHMEDABAD V/S ADDI CIT RANGE-4, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACG7917K APPELLANT BY : SHRI VARTIK CHOKSI RESPONDENT BY : SHRI O.P. MEENA, SR., D.R. ( )/ ORDER DATE OF HEARING : 21-04-2014 DATE OF PRONOUNCEMENT : 09 -05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-VIII, AHMEDABAD DATED 22.10.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF DEVELOPMENT AND OPERATION OF PORT AND SEZ. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 29.12.2007 DECLARING TOTAL NIL INCOME AFTER SETTING OFF OF CARRY FORWARD LOSSES AND DEPRECIATIO N. THE CASE WAS ITA NO 3234 /AHD/2010 . A.Y. 2007- 08 2 SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT OF FRINGE BENEFIT WAS FRAMED UNDER SECTION 115 WE(3) OF THE ACT VIDE ORDE R 30.12.2009 AND THE TOTAL FRINGE BENEFIT WAS COMPUTED AT RS. 2,54,9 1,650/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BE FORE CIT(A). CIT(A) VIDE ORDER DATED 22.10.2010 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN PROCEEDING ON THE ASSUMPTION (MADE VIDE PARA 2 OF THE APPELLATE ORDER) THAT EVEN AS THE APPELLANT HAD TAKEN SIX GROUNDS CONCERNING THE LEVY OF FRINGE BENEFIT TAX IN RESPECT OF SALES PROMOTION EXPENDITURE, THE COMMON ARGUMENT IN ALL T HOSE GROUNDS WAS ONLY IN RESPECT OF LEVY OF FRINGE BENEFIT TAX IN RESPECT OF BUSINESS EXPENDITU RE WHICH DID NOT AT ALL RESULT INTO ANY BENEFIT TO THE APPELLANT'S EMPLOYEES. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT EVEN IF THE GROUNDS TAKEN BY THE APPELLANT IN ITS APPEAL BEFORE HIM WERE TO BE R EDUCED TO 'EFFECTIVE' GROUNDS, IT WAS INCUMBENT UPO N HIM TO RENDER HIS APPELLATE DECISION AT LEAST ON TH E FOLLOWING ISSUES: A) ON THE APPELLANT'S CHALLENGE TO THE VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM, INTER ALIA, ON THE GROUND THAT THE RELEVANT PROVISIONS IN RESPE CT OF THE FRINGE BENEFIT TAX WERE UNCONSTITUTIONAL (VIDE GROUNDS NO. 1 AND 2 OF ITS APPEAL BEFORE HIM) ; B) ON THE APPELLANT'S CHALLENGE TO THE LEVY OF FRIN GE BENEFIT TAX OF RS. 15,23,231 ON THE VALUE OF FRI NGE BENEFITS OF RS.45,25,345 (CORRESPONDING TO EXPENDIT URE OF RS.90,50,068 WHICH, IN THE CONTENTION OF THE APPELLANT, WAS NOT LIABLE TO FRINGE BENEFIT TAX ) VIDE THE ASSESSMENT ORDER IMPUGNED BEFORE HIM; C) ON THE APPELLANT'S CHALLENGE TO THE LEVY OF INTE REST PRESUMABLY AMOUNTING TO RS. 3,11,693 UNDER SECTION 115WJ AND/OR SECTION 115WK OF THE INCOME-TA X ACT, 1961 (DETAILS THEREOF NOT HAVING BEEN PROVIDED EITHER IN THE ASSESSMENT ORDER OR IN THE N OTICE OF DEMAND) (VIDE GROUND NO. 7 OF ITS APPEAL BEFORE HIM); D) ON THE APPELLANT'S PLEA, MADE VIDE GROUND NO. 6 OF ITS APPEAL BEFORE HIM, WITHOUT PREJUDICE TO THE FOREGOING ISSUES, TO DIRECT THE LEARNED ASSESSING OFFICER NOT TO INIT IATE ANY RECOVERY PROCEEDINGS FOR THE FRINGE BENEFIT TAX OF RS. 15,23,231 WHICH THE A PPELLANT HAD DEPOSITED IN A SEPARATE BANK ACCOUNT IN CONFORMITY WITH THE DECISION OF THE GUJARAT HIGH COURT IN THE WRIT PETITION FILED BY THE GUJARAT CHAMBER OF COMMERCE AND INDUSTRIES AND OTHERS; THE LEARNED CIT(A) HAS GROSSLY ERRED IN NOT RENDERI NG HIS DECISION ON THE ISSUES AT ITEMS (A), (C) AND (D) ABOVE. 2. THE APPELLANT PRAYS THAT UNLESS THIS HON'BLE TRI BUNAL MAY DEEM IT APPROPRIATE TO KEEP THE APPELLANT'S PRESENT APPEAL BEFORE IT PENDING, TILL THE HON'BLE GUJARAT HIGH COURT HAD RENDERED ITS FINAL DECISION IN THE WRIT PETITION, FOR BEING DISPOSED O F IN ACCORDANCE WITH SUCH FINAL DECISION OF THE ITA NO 3234 /AHD/2010 . A.Y. 2007- 08 3 HON'BLE GUJARAT HIGH COURT, IT MAY BE PLEASED TO CO NSIDER AND RENDER ITS DECISION ON THE ISSUES AT ITEMS (A), (C) AND (D) REFERRED TO IN THE PRECEDING GROUND ON WHICH THE LEARNED CIT(A) HAS NOT RENDERED HIS APPELLATE DECISION AND ON THE ISSUE AT ITEM (B) WHICH THE LEARNED CIT(A) HAS DECIDED AGAINST THE APPELLANT. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND/OR ALTER THE GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS, THE ONLY EFFECTIVE GROUND IS WITH RESPECT TO LEVY OF FRINGE BENEFIT TA X IN RESPECT OF SALES PROMOTION EXPENDITURE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD INCURRED SALES PROMOTION EXPENDITURE. HE ALSO N OTICED THAT OF THE TOTAL FRINGE BENEFIT TAX (FBT) OF RS. 90,50,688/- O N THE SALES PROMOTION EXPENSES, ASSESSEE HAD PAID TAX OF RS. 76,37,779/- ON BENEFITS WHICH WERE RELATED TO THE EMPLOYEES AND TAXES OF RS. 15,2 3,231/- ON NON- EMPLOYEE RELATED BENEFITS WERE PARKED IN THE FORM O F FIXED DEPOSIT WITH THE STATE BANK OF SAURASHTRA. ASSESSEE HAD CLAIMED THAT THE EXPENSES MADE UNDER THE HEAD GIFTS WERE ACTUALLY IN THE NA TURE OF SALES PROMOTION AND DID NOT FELL WITHIN THE AMBIT OF FBT AND FELL WITHIN THE AMBIT OF THE WRIT PETITION FILED BY CHAMBER AND COM MERCE INDUSTRIES WHEREIN IT WAS AGITATED THAT THE PAYMENTS RELATED T O SALES PROMOTION DOES NOT FALL WITHIN THE AMBIT OF FBT. THE A.O DID NOT A CCEPT THE CONTENTIONS OF THE ASSESSEE. HE WAS OF THE VIEW THAT THE NATURE OF GIFTS ARE SUCH THAT IT IS NOT POSSIBLE TO CATEGORIZE THEN COMPLETE LY WITH SALES PROMOTION. HE ACCORDINGLY DIRECTED THE ASSESSEE TO PAY THE ENT IRE AMOUNT OF RS. 15,23,231/- ALONG WITH INTEREST AS PER THE COMPUTAT ION OF FRINGE BENEFIT ITA NO 3234 /AHD/2010 . A.Y. 2007- 08 4 TAX. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRI ED THE MATTER BEFORE CIT(A). CIT(A) CONFIRMED THE ORDER OF A.O BY HOLDIN G AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT. THE PROVISION OF SECTION 115WB(2) IS EXPLICITLY CLE AR THAT IF ASSESSEE HAS MADE ANY PAYMENT TOWARDS EXPENDITURE MENTIONED IN CLAUSE - A TO CLAU SE - Q, ASSESSEE IS LIABLE TO MAKE PAYMENT OF FBT. THE VALUE OF FRINGE BENEFIT IS TO BE WORKED OU T BY APPLYING A PERCENTAGE GIVEN IN SECTION 115WC. BOTH THE SECTIONS DO NOT GIVE ANY DISCRETION THAT FBT IS REQUIRED TO BE COMPUTED ONLY ON THOSE EXPENDITURE WHICH ARE DIRECTLY RELATED TO OR WHICH ARE FOR THE BENEFIT OF EMPLOYEES. AS PROVISIONS OF FRINGE BENEFIT TAXES ARE VERY CLEAR, THE SUBMISSION MADE BY APPELLANT FOR NON-LEVY OF FBT ON SALES PROMOTION EXPENDITURE CANNOT BE ACC EPTED, AS THERE IS NO SCOPE OF ADJUSTMENT IN SECTION AND ALL THE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT AND COVERED BY THOSE PROVISIONS ARE SUBJECT TO FBT AND ASSESSING OFFICER HAS RIGHTL Y CONSIDERED SALES PROMOTION EXPENDITURE WHILE DETERMINING FBT IN CASE OF APPELLANT. THE DEC ISION OF HON'BLE GUJARAT HIGH COURT DOES NOT PUT ANY STAY ON ASSESSMENT OR APPELLATE PROCEED INGS AND IN SUCH ORDER IT IS ONLY STATED THAT TILL THE DISPOSAL OF THE FINAL APPEAL BY THE HIGH C OURT, ASSESSEE CAN DEPOSIT FBT TO SEPARATE BANK ACCOUNT FOR EXPENDITURE WHICH ARE NOT FOR THE BENEF IT OF EMPLOYEES. HENCE, DECISION RELIED UPON BY APPELLANT IN PRESENT CASE IS NOT APPLICABLE. CON SIDERING THIS, ADDITION TO THE VALUE OF FRINGE BENEFITS MADE BY ASSESSING OFFICER IS CONFIRMED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 6. BEFORE US, AT THE OUTSET THE LD. A.R. SUBMITTED THA T THE LEVY OF FBT CANNOT BE INVOKED ON EXPENSES WHICH ARE NOT INCURRED ON TH E EMPLOYEES OR THEIR FAMILY MEMBERS. HE FURTHER SUBMITTED THAT ON IDENTI CAL FACTS IN THE CASE OF INTAS PHARMACEUTICALS LTD. ITA NO. 3086, 3087 AN D 3088/AHD/2010 ORDER DATED 03.03.2014, THE HONBLE TRIBUNAL HAS RE MITTED THE MATTER BACK TO THE A.O. TO GIVE A CLEAR FINDING AS TO WHET HER THE EXPENSES WERE INCURRED IN RELATION TO NON-EMPLOYEE FOR BUSINESS P URPOSES. HE THEREFORE SUBMITTED THAT FOLLOWING THE AFORESAID DECISION OF THE HONBLE TRIBUNAL, IN THE PRESENT CASE THE MATTER MAY ALSO BE REMANDED WITH SIMILAR ITA NO 3234 /AHD/2010 . A.Y. 2007- 08 5 DIRECTIONS TO A.O. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS WITH RESPECT TO CHARGING OF FBT ON SALES PROMOTION EXPENSES WHICH THE ASSESSEE CLAIMS TO HAVE NOT BEEN INCURRED FOR THE EMPLOYEES OF THE ASSESSEE AND WERE IN RELATION TO NON- EMPLOYEE AND WERE PURELY FOR THE PURPOSE OF BUSINES S. WE FURTHER FIND THAT IN THE CASE OF INTAS PHARMACEUTICALS LTD. (SUP RA) ON SIMILAR FACTS, THE CO-ORDINATE BENCH OF TRIBUNAL, RELYING ON THE DECIS ION IN THE CASE OF ARVIND FASHIONS LTD. VS. DCIT REMITTED THE MATTER TO THE FILE OF A.O BY HOLDING AS UNDER:- 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE ORDER OF THE TRIBUNAL IN ARVIND FASHIONS LTD. VS. D CIT (SUPRA). WE FIND THAT THE DECISION OF THE ITAT, AHMEDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (S UPRA) HAS HELD THAT THE PROVISION OF 'FBT' COULD NOT BE INVOKED IN RESPECT OF THE EXPENSES WHI CH WERE NOT INCURRED ON EMPLOYEES OR THEIR FAMILY MEMBERS. THE TRIBUNAL IN THIS CASE HAS REFERRED TO THE DECISIONS OF THE CO-ORDINATE BENCH OF THE ITAT, AHMEDABAD, PUNE AND BANGALORE, WHICH HAVE SIMILARLY HELD THAT THE 'FBT' COULD NOT BE INVOKED ON EXPENSES WHICH WERE NOT INCURRED ON THE EMPLOYEES O R THEIR FAMILY MEMBERS. HOWEVER, WE FIND THAT THERE IS NO CLEAR CUT FINDING RECORDED BY THE AO OR THE CIT(A) IN THEIR ORDER THAT WHETHER THE ADDITIO N MADE WERE RELATING TO THE EXPENDITURE IN RELATION T O NON-EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE CLAIM OF THE .ASSESSEE WAS THAT THE E XPENSES WERE NOT RELATED TO ITS EMPLOYEES AND WERE INCURRED ONLY IN RELATION TO NON-EMPLOYEES AND FOR BUSINESS PURPOSE OF THE ASSESSEE COMPANY. IN THESE FACTS, WE ARE OF THE VIEW THAT IT SHALL BE IN THE I NTEREST OF JUSTICE TO RESTORE THE ISSUE IN THE GROU NDS OF THE APPEAL OF THE ASSESSEE FOR ALL THREE YEARS TO T HE FILE OF THE AO WITH DIRECTION TO DECIDE THE SAME DE NOVO IN ACCORDANCE WITH LAW AFTER PROVIDING REASONA BLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN THE LIGHT OF DECISIONS OF THE ITAT, AHMEDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA). THE AO IS FURTHER DIRECTED TO RECORD A CLEAR FINDING THAT WHE THER THE EXPENSES IN QUESTION WERE INCURRED WITH RELATION TO NON-EMPLOYEES FOR THE BUSINESS PURPOSE OF THE ASSESSEE AS CLAIMED BY THE ASSESSEE- COMPANY. IN CASE THE EXPENSES ARE FOUND TO HAVE BEE N INCURRED BY THE ASSESSEE WITH RELATION TO NON- EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSES SEE, THE DECISION IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA) SHALL APPLY TO THE CASE OF THE ASSESSEE. NE EDLESS TO SAY THAT ANY DECISION OF THE HON'BLE GUJA RAT ITA NO 3234 /AHD/2010 . A.Y. 2007- 08 6 HIGH COURT IN THE WRIT PETITION PENDING BEFORE THE HON'BLE HIGH COURT, AS MENTIONED BY THE CIT(A) IN ITS APPELLATE ORDER, SHALL BE BINDING ON THE AUTHOR ITIES. WE DIRECT ACCORDINGLY. 8. IN THE PRESENT CASE IT IS SEEN THAT THE ISSUE IN DI SPUTE IS SIMILAR TO THAT IN THE CASE OF INTAS PHARMACEUTICALS (SUPRA). WE THERE FORE FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF INTAS PHARMA (SUPRA) AND FOR THE SIMILAR REASONS GIVEN TH EREIN AND WITH SIMILAR DIRECTIONS REMIT THE ISSUE TO THE FILE OF A.O TO DE CIDE THE ISSUE AFRESH. WE THUS DIRECT ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 09 - 05 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD