Montane Shippng Private Ltd., CHENNAI V. DCIT (OSD), CHENNAI

ITA 3327/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4123 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-05-2017
• Assessment Year: misc
• Appeal Filed On: 08-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MURUGABOOPATHY JCIT
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Opportunity of being heard; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 3327/MDS/2016 / ASSESSMENT YEAR : 2012-13 MONTANE SHIPPING (P) LTD., 108/64, II FLOOR, CATHOLIC CENTRE, ARMENIAN STREET, CHENNAI 600 001. [PAN: AAECM 0886H] VS. DEPUTY COMMISSIONER OF INCOME TAX (OSD), CORPORATE CIRCLE -4(1), CHENNAI. ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI V.S. JAYAKUMAR, ADVOCATE )*% & / RESPONDENT BY : SHRI MURUGABOOPATHY, JCIT & /DATE OF HEARING : 15.05.2017 & /DATE OF PRONOUNCEMENT : 11.07.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI IN ITA NO. 154/2015-16 DATED 30.09.2016. :-2-: I.T.A. N0. 3327/MDS/2016 2. M/S. MONTANE SHIPPING (P) LTD., THE ASSESSEE, IS IN THE BUSINESS OF STEAMER LINER AGENT. WHILE COMPLETING THE ASSESSME NT FOR ASSESSMENT YEAR 2011-12, THE ASSESSING OFFICER FOUND THAT THE ASSES SEE HAS CLAIMED RS. 40 LAKHS IN P&L ACCOUNT AS EXPENSES AND CLAIMED THAT T HESE PAYMENTS WERE MADE TO CERTAIN PERSONS TOWARDS NON-COMPETE FEE. T HE ASSESSING OFFICER FOUND, INTER ALIA, THAT ON RECORD, THE ASSESSEE CRE ATED PUCCA EVIDENCE BY FOLLOWING PROCEDURES OF BANK TRANSACTIONS, MOU, FIL ING RETURN OF INCOME ETC, AS A COLOURABLE DEVICE TO REDUCE THE PROFIT ETC. T HE AO, PRIMARILY DISALLOWED THE ASSESSEES CLAIM FOR THE FOLLOWING REASONS: I. NON PRODUCTION OF COPIES OF RETURN OF INCOME OF OTHER PERCIPIENTS WITH ASSESSMENT DETAILS, WHERE ABORTS. II. PRODUCTION OF THOSE PERSONS, FINANCIALS OF FIR MS, UNAUTHENTICATED COPIES OF MOU ONE HEARING AND COPIES MOU WITH SIGNA TURES ON OTHER DATE OF HEARING. III. CONFIRMATION OF EMPLOYMENT OF MR. TIWARI AND MRS. JISA IN THE ASSESSEE COMPANY DURING PERIOD FROM 01.04.2011 TO 3 1.03.2012 BUT CLAIMED AS PARTNERS OF APCL SUBSEQUENTLY BY DRAFT MOU AND C LAIMING PAYMENT OF NON COMPETE FEE AND NON PRODUCTION OF OTHER 3 PERSONS W HO ARE RECIPIENT OF SO CALLED NON-COMPETE FEE ETC. CONFIRMS THAT THERE WA S A MALAFIDE INTENTION TO DO SUCH ACT SO AS TO SIPHON OFF THE PROFIT OF THE A SSESSEE. IV. THE CLAIM IN NON-COMPETE COMPENSATION IN RETUR N AND NOT FEE AS SUBMITTED. :-3-: I.T.A. N0. 3327/MDS/2016 3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE CIT(A). THE CIT(A) CONFIRMED SUCH DISALLOWANCE, INTER ALIA, FOR THE FO LLOWING REASONS: A. IT IS SEEN THAT THE COMPENSATION WAS TO BE PAID TO THE APCL/PARTNERS FOR OFFERING THEIR SERVICES TO THE AP PELLANT AND FOR RELINQUISHING THEIR RIGHTS OVER THE BUSINESS THEY W ERE CARRYING ON. THEREFORE, IT CANNOT BE CONCLUDED THAT THE AMOUNT O F RS. 40,00,000/- WAS PAID TOWARDS NON-COMPETE FEE IF AT ALL. BOTH, MR. SRIPRAKASH TIWARI AND MS. JISA KOLAPRAN TOOK EMPLOYMENT WITH THE APPE LLANT AND CONTINUED TO RENDER SERVICES. B. THE FURNISHING OF A COPY OF MOU SIGNED ONLY BY S HRI PRAKASH TIWARI, TO THE EXCLUSION OF OTHER PARTNERS OF THE APCL, ITSELF LAYS THAT FOUNDATION FOR QUESTIONING THE GENUINENESS OF THE ENTIRE TRANSACTION AND THE PRODUCTION OF A COPY OF THE MOU SIGNED BY A LL THE PARTNERS MORE THAN A WEEK LATER DOES NOT REMEDY THE SITUATION C. APART FROM THE AMOUNT OF RS. 40,00,000/- PAID TO THE PARTNERS, THE MOU ALSO STATES AT PARA 2.2 AS FOLLOW S: IN ADDITION, MR. RAJAN NAIR, THE HUSBAND OF THE 1 ST OF THE PARTIES OF THE SECOND PART AND MEDIATOR HER EIN WHO IS IN DEFACTO MANAGEMENT OF THE PARTNERSHIP FIRM OF ATLANTIC AND PACIFIC CONTAINER LINE WILL BE GIVEN A LUMP SUM PAYMENT OF RS. 500,000/- (RUPEES FIVE LAKHS ONLY) IN RECOGN ITION OF HIS EXTENSIVE CONTRIBUTION TO THE GROWTH OF THE FIR M AND THE GOODWILL HE HAS GENERATED FOR THE BUSINESS OF THE F IRM THERE IS NO REASON WHY THE APPELLANT SHOULD PAY ANY PARTY UNRELATED TO THE TRANSACTION BETWEEN THE APPELLANT COMPANY AND T HE PARTNERSHIP FIRM. :-4-: I.T.A. N0. 3327/MDS/2016 D. ON VERIFICATION OF THE RETURNS OF INCOME OF MR. SRIPRAKASH TIWARI AND MS. JISA KOLAPRAN FURNISHED BY THE APP ELLANT THE AMOUNTS OF RS. 10,00,000/- ARE SHOWN TO BE COMMISSION RECEIVED BY THEM IN THEIR RETURNS OF INCOME FOR THE ASSESSMENT YEAR 2012-13. THIS ONLY GOES ON TO PROVE THAT THE AMOUNTS THE PARTNERS OF APCL, REC EIVED HAD NOTHING TO DO WITH ANY NON-COMPETE FEE AS CLAIMED BY THE APPEL LANT. E. LAST BUT NOT LEAST, THE APPELLANTS INABILITY TO PRODUCE EITHER MR. TIWARI AND MR. NAIR TO BE EXAMINED BY THE ASSES SING OFFICER OR THE FINANCIAL AND OTHER DETAILS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS RIGHTLY LEAD THE ASSESSING OFFICER TO CONCLUDE THAT THE TRANSACTION WAS ONLY INTENDED TO SIPHON OFF THE FUNDS OF THE AP PELLANT. 4. AGGRIEVED AGAINST THE CIT(A) ORDER, THE ASSESSEE FILED THIS APPEAL. BEFORE US, IT SUBMITTED, INTER ALIA, AS UNDER: 2. I HAVE FILED A PAPER BOOK BEFORE THIS HON'BLE T RIBUNAL CONSISTING OF VARIOUS DOCUMENTS TO SUPPORT THE CLAI M OF PAYMENTS TO FEW PERSONS BELONGING TO THE FIRM M/S. ATLANTIC AND PAC IFIC CONTAINER LINE IN MUMBAI AMOUNTING TO RS. 40,00,000/- TOWARDS NON-COM PETE FEES. 3. I COULD PRODUCE ONLY FEW DOCUMENTS BEFORE THE AS SESSING OFFICER AT THE TIME OF ASSESSMENT AS SOME OF THOSE PERSONS OF THE MUMBAI FIRM WERE ON TRAVEL AND THE NO PERSON TO FUR NISH US THE DETAILS CALLED FOR BY US. SUBSEQUENT TO THE PASSING OF THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A), ON ADVICE FROM OUR PROFESS IONAL ADVISORS, WE APPROACHED THE MUMBAI PARTY AND WE COULD GATHER SOM E MORE RELEVANT PAPERS FROM THE SAID MUMBAI FIRM IN SUPPORT OF OUR CLAIM TO PROVE THAT THE EXPENDITURE WAS GENUINE. :-5-: I.T.A. N0. 3327/MDS/2016 4. THE DELAY IN PRODUCING THESE EVIDENCES /PAPERS A RE NOT WANTON OR DELIBERATE BUT DUE TO THE CIRCUMSTANCES BEYOND T HE CONTROL OF THE APPELLANT THE SAME COULD NOT BE GATHERED AT THE ASS ESSMENT STAGE. 5. I ALSO SUBMIT THAT WE COULD NOT PRODUCE THE PART IES CONCERNED WHO ARE PARTNERS OF THE MUMBAI FIRM AS ALSO THE MED IATOR TO APPEAR BEFORE THE ASSESSING OFFICER TO SUBSTANTIATE THE FA CTS RELATING TO THE PAYMENT MADE TO THE PERSONS, NAMELY, A. MRS. DAISY RAJAN NAIR RS.20 LAKHS; B. MR.NITIN RS.10 LAKHS; C. MRS. JISA RS. 10 LAKHS; D. MR.SRIPRAKASH RS.10 LAKHS. 6. I AM WILLING TO CO-OPERATE BY PRODUCING THOSE PE RSONS BEFORE THE ASSESSING OFFICER AND PROVE THAT THE EXPENDITUR E HAS BEEN GENUINELY INCURRED BY THE COMPANY. THE RESPECTIVE NAMES AND A DDRESSES ARE ENCLOSED ALONG WITH THIS AFFIDAVIT. 7. I THEREFORE, REQUEST THIS HON'BLE TRIBUNAL TO TA KE THIS AFFIDAVIT ON RECORD AND GIVE THE APPELLANT AN OPPORTUNITY OF BEING HEARD AND DECIDE THE MATTER ACCORDANCE WITH LAW AND RENDER JU STICE. THE DR SUPPORTED THE ORDERS OF THE ASSESSING OFFICE R & THE CIT(A) AND ARGUED THAT AS PER THE RATIO LAID BY THE SUPREME CO URT IN XXVII ITR 34 IN THE CASE OF ASSAM BENGAL CEMENT CO. VS CIT, WEST BENGAL , THE IMPUGNED EXPENDITURE IS NOTHING BUT A CAPITAL EXPENDITURE AN D HENCE THE DISALLOWANCE MADE IS SUSTAINABLE ON THE ADMITTED FACTS. 5. WE HEARD THE RIVAL SUBMISSIONS. SINCE, THE ASSES SEE IS WILLING TO COOPERATE BY PRODUCING THOSE PERSONS BEF ORE THE AO AND PROVE THAT :-6-: I.T.A. N0. 3327/MDS/2016 THE EXPENDITURE HAS BEEN GENUINELY INCURRED BY THE COMPANY ETC., WE ARE OF THE VIEW THAT, IN THE INTEREST OF JUSTICE, THIS ISS UE SHOULD BE REMITTED BACK TO THE AO FOR DUE EXAMINATION AND VERIFICATION, AFRESH , AND FOR PASSING AN APPROPRIATE ORDER IN ACCORDANCE WITH LAW, AFTER AFF ORDING DUE OPPORTUNITY TO THE ASSESSEE AND ACCORDINGLY DO SO. 6. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 11 TH DAY OF JULY, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 11 TH JULY, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF