DCIT 9(3)(1), MUMBAI V. DEVON OUTSOURCING SERVICES P.LTD, MUMBAI

ITA 3389/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3332 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 13-05-2016
• Court: TRIBUNAL
• Department Lawyers: A RAJHANS
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.3389/MUM/2016 ASSESSMENT YEAR:2012-13 DY. CIT-9(3)(1), 215, AAYAKAR BHAVAN, 2 ND FLOOR, M.K. MARG, MUMBAI-400020 / VS. M/S DEVON OUTSOURCING SERVICES PVT. LTD., 11-A TECHNOPOLIS KONOWLEDGE PARK, MAHAKALI CAVES ROAD, ANDEHRI(E), MUMBAI-400093 / REVENUE / ASSESSEE P.A. NO . AADCD4209N $ % & / REVENUE BY SHRI A. RAJHANS -DR $ % & / ASSESSEE BY NONE / DATE OF HEARING 29/08/2016 & / DATE OF ORDER: 01/09/2016 & / O R D E R THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 24/02/2016 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, ALLOWING EXPENSES TO THE ASSESSEE ALLEGEDLY ITA NO.3389/MUM/2016 M/S DEVON OUTSOURCING SERVICES PVT. LTD. 2 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT STARTED ITS COMMERCIAL ACTIVITIES FOR THE PERIOD UN DER CONSIDERATION. 2. DURING HEARING, THE LD. DR, SHRI A. RAJHAND, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER BY CONTENDING THAT THERE IS VIOLATION OF RULE-46A OF T HE INCOME TAX RULES, 1962 (HEREINAFTER THE RULES) AS T HE LD. ASSESSING OFFICER WAS NOT PROVIDED OPPORTUNITY BY T HE LD. COMMISSIONER OF INCOME TAX (APPEAL), WHILE GRANTING RELIEF TO THE ASSESSEE. 2.1. ON THE OTHER HAND, NONE WAS PRESENT FOR THE ASSESSEE IN SPITE OF ISSUANCE OF REGISTERED AD NOTI CE ISSUED ON 19/07/2016. THE ASSESSEE NEITHER PRESENTE D ITSELF NOR MOVED ADJOURNMENT PETITION. IT SEEMS THA T THE ASSESSEE IS NOT INTERESTED TO PURSUE THE APPEAL FIL ED BY THE REVENUE, THEREFORE, I HAVE NO OPTION BUT TO PROCEED EX- PARTE, QUA THE ASSESSEE, AND TEND TO DISPOSE OF THI S APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 2.2. I HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS IN THE BUSINESS OF PROVIDING IT/ITES SERVICES INCLUDING BUSINESS TECHN OLOGY PROCESS OUTSOURCING, COMPUTER TECHNOLOGY, CALL CENT RE OPERATIONS AND ETC. THE ASSESSEE DECLARED LOSS OF RS.48,81,973/- IN ITS RETURN FILED ON 30/09/2012. THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT NI L, AFTER ITA NO.3389/MUM/2016 M/S DEVON OUTSOURCING SERVICES PVT. LTD. 3 DISALLOWING THE CLAIMED BUSINESS LOSS ON THE GROUND THAT THE ASSESSEE HAD NOT SET UP ITS BUSINESS DURING THE YEAR UNDER CONSIDERATION. THE LD. ASSESSING OFFICER ALSO DISALLOWED CERTAIN BUSINESS EXPENDITURE, INCURRED B Y THE ASSESSEE. 2.3. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE RETURNED LOSS OF RS.48,81, 937/- WAS PARTLY ALLOWED. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.4. BEFORE ADVERTING FURTHER, I AM REPRODUCING HEREUNDER THE DETAILS OF EXPENSES CLAIMED/INCURRED BY THE ASSESSEE:- HEAD AMOUNT (RS.) EMPLOYEE BENEFIT EXPENSES SALARIES AND WAGES 35,04,798 BONUS TO EMPLOYEES 80,724 STAFF WELFARE EXPENSES 26,569 OTHER EXPENSES AUDIT FEES UNDER COMPANY LAW 25,000 OTHER EXPENSES REIMBURSED 1,75,252 RATES & TAXES 12,250 MISCELLANEOUS EXPENSES 12,52,758 TOTAL 50,77,351 WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT, THE LD. ASSESSING OFFICER DISALLOWED BUSINESS EXPENDITU RE OF RS.50,77,351/-, PROFESSION FEES OF RS.8,55,489/-, ITA NO.3389/MUM/2016 M/S DEVON OUTSOURCING SERVICES PVT. LTD. 4 RECRUITMENT EXPENSES OF RS.2,20,573/- AND EXPENSES U/S 40(A)(IA) OF THE ACT. THE ASSESSEE ALSO RELIED UPON FOLLOWING THE DECISION WITH RESPECT TO DATE OF SETTING UP OF BUSINESS. CIT VS E-FUNDS INTERNATIONAL INDIA(2007) 162 TAXMAN 1(DEL.) CIT VS WHIRLPOOL INDIA LTD. (2009) 318 ITR 347(DEL. ) OMNIGLOBE INFORMATION TECH INDIA PVT. LTD. VS CIT ( TS- 526-HC-2014 (DEL.) IT IS NOTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL), WHILE COMING TO A PARTICULAR CONCLUSION H AS ANALYZED THE AFORESAID DECISIONS AND THE DECISION O F OMNIGLOBE INFORMATION TECH INDIA PVT. LTD. (SUPRA) IN DETAIL. IT IS FURTHER NOTED THAT EACH AND EVERY DISALLOWANCE, MADE BY THE ASSESSING OFFICER HAS BEE N EXAMINED BY THE CIT(A). ADMITTEDLY, IN SERVICE INDU STRY, THE KEY PARAMETERS THAT ARE RELEVANT FOR DETERMININ G WHETHER THE ASSESSEE HAS SET UP THE BUSINESS OR NOT OR WHETHER KEY OPERATIONS EMPLOYEES WERE EMPLOYED OR N OT ALONG WITH THE BASIC INFRASTRUCTURE TO COMMENCE BUS INESS OPERATION NEEDS INSPECTION. THE TOTALITY OF FACTS I NDICATES THAT THE EXPENSES, INCURRED BY THE ASSESSEE, ARE WI TH RESPECT TO PAYMENT OF SALARIES, PROFESSIONAL FEES E TC, WHICH WERE REQUIRED FOR RUNNING THE BUSINESS OPERATION AN D ARE EN-EXTRICABLY LINKED TO STARTING UP OF THE BUSINESS OPERATION. IT IS ALSO NOTED THAT WHEREVER, THE EXPE NSES ITA NO.3389/MUM/2016 M/S DEVON OUTSOURCING SERVICES PVT. LTD. 5 WERE FOUND TO BE ALLOWABLE HAD BEEN ALLOWED AND WHE REVER FOUND TO BE NOT ALLOWABLE WERE DISALLOWED BY THE LD .CIT(A). THERE IS UNCONROVERTED FINDING IN PARA 6.3.3 OF THE IMPUGNED ORDER THAT SUBMISSIONS OF THE ASSESSEE WHI CH WERE BASED ON FACTS AND SUPPORTED WITH NECESSARY EVIDENCE WERE EXAMINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THUS, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL). SO FAR AS, THE ARGUMENT OF THE LD. DR THA T THERE IS VIOLATION OF RULE 46A OF THE RULES IS CONCERNED, I FIND THAT NEITHER SUCH GROUND HAS BEEN RAISED BY THE REV ENUE NOR ANY EVIDENCE WAS BROUGHT ON RECORD WITH RESPECT TO SUCH VIOLATION, THEREFORE, I FIND NO MERIT IN THE A RGUMENT OF THE LD. DR WITH RESPECT TO SUCH VIOLATION. THE S TAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS AFFI RMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 29/08/2015. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 01/09/2016 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. ITA NO.3389/MUM/2016 M/S DEVON OUTSOURCING SERVICES PVT. LTD. 6 3. ) ) * / THE CIT, MUMBAI. 4. ) ) * / CIT- , MUMBAI 5. +,- ' , ) '#$ ' / , / DR, ITAT, MUMBAI 6. -0 1$ / GUARD FILE. & / BY ORDER, (+# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI