FORBES CONCEPTS HOSPITALITY SERVICES P.LTD, MUMBAI V. DCIT CIR 6(2), MUMBAI

ITA 340/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1532 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC,M UMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.340/MUM/2015 FOR (ASSESSMENT YEAR : 2010-11) FORBES CONCEPT HOSPITALITY SERVICES PRIVATE LIMITED, 81/83, SHALINI PALACE, 2 ND FLOOR, BHAVANI SHANKAR ROAD, DADAR(WEST), MUMBAI-400028 PAN: AAACF9944R VS. DCIT CIRCLE-6(2), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. JISHAAN JAIN ( AR ) REVENUE BY : MR. SAURABH KUMAR R AI (DR) DATE OF HEARING : 07.12.2016 DATE OF PRONOUNCEMENT : 07.12.2016 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JM: 1. THIS APPEAL BY ASSESSEE FILED U/S 253 OF THE INCOME -TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEAL S) [FOR SHORT THE CIT(A)] 12, MUMBAI DATED 13.10.2014 FOR ASSESSMENT YEAR (AY) 20 10-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: GROUND I: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE COMMISSIONER OF INCOME- TAX (APPEALS) - 12, MUMBAI ('THE CIT(A)') E RRED IN CONFIRMING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME-TAX - 6(2), MUMBA I ('THE A.O.) IN MAKING DISALLOWANCE OF RS. 58,92,067/- U/S. 40(A)(IA) OF T HE INCOME-TAX ACT, 1961 ('THE ACT') ON THE ALLEGED GROUND THAT TAX WAS NOT DEDUCTED AT SOURCE. 2. THE CIT(A) ALSO ERRED IN OBSERVING THAT AMOUNT P AID IS FOR: A. UTILISATION OF THE PREMISES OF ROOTS CORPORATION LIMITED; B. OPERATION OF THE RESTAURANT; C. UTILISATION OF EQUIPMENT / PLANT & MACHINERY/ F URNITURE & FIXTURE. 3. THE CIT(A) ALSO ERRED IN STATING THAT IF THE PAY MENT DOES NOT FALL IN CATEGORIES STIPULATED IN TDS PROVISIONS U/S. 40(A)(IA) OF THE ACT, THEN SUCH PAYMENT IS NOT A REVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF BUS INESS. 4. THE APPELLANT PRAYS THAT PAYMENT OF RS. 58,92,06 7/- BE HELD AS A PAYMENT OUTSIDE THE PURVIEW OF TAX DEDUCTION PROVISIONS AND ALLOWED AS REVENUE EXPENDITURE. WITHOUT PREJUDICE TO ABOVE: 2 ITA NO. 340 /M/2015 FORBES CONCE PT HOSPITALITY SERVICES PRIVATE LIMITED GROUND II: 1. THE APPELLANT PRAYS THAT THE PAYMENT TO ROOTS CO RPORATION LIMITED FOR 'FOOD & BEVERAGE MANAGEMENT SERVICES' BE HELD AS 'REVENUE S HARING'. 2. THE ASSESSEE FURTHER VIDE APPLICATION DATED 02.08.2 016 RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 1.1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL)-12, ('CIT(A)') ERRED IN HOLDING THAT TAX OUGHT TO HAVE BEEN DEDUCTED EITHER UNDER SECTION 19 4C, 194H OR 194J (IN ADDITION TO SECTION 1941 AS CONTENDED BY THE AO) OF THE INCOME TAX ACT, 1961 ('THE ACT'). 1.2. THE CIT(A) ERRED IN ENHANCING THE SCOPE OF DISALLOW ANCE AND CONSEQUENTLY THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WITHOUT FOLLOWING THE PROVISIONS OF SECTION 251 (2) OF THE ACT. 1.3. 1.3 THE CIT(A) OUGHT TO HAVE ISSUED SHOW CAUSE NOTI CE TO THE APPELLANT AND PROVIDED REASONABLE OPPORTUNITY TO THE APPELLANT AG AINST THE ENHANCEMENT. THUS, THE CIT(A)'S ACTION WAS NOT IN ACCORDANCE WITH PROV ISIONS OF SECTION 251(2). 1.4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE HELD AS BAD IN LAW TO THE EXTENT OF INVOCATION OF PROVISIONS OF SECTION 194C, SECTION 194H AND SECTION 194J OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF PROVIDING CATERING FACILITIES( SERVICES) TO VARIOUS COMPANIES, FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 01.10.2010 DECLARING TOTAL INCOM E AT NIL. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 25.03.2013. IN T HE ASSESSMENT, THE ASSESSING OFFICER (AO) MADE THE DISALLOWANCE OF RS. 58,92,067 /- U/S 40(A)(IA) HOLDING THAT ASSESSEE HAS PAID THIS AMOUNT TOWARDS F & B OUTLET FEE AND HAS NOT DEDUCTED TDS ON THE AMOUNT WHICH IS IN THE NATURE OF PAYMENT OF RE NT AS DEFINED IN SECTION 194 I OF THE ACT. ON APPEAL, THE DISALLOWANCE WAS SUSTAINED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT (A), THE ASSESSEE HAS FILED THE PR ESENT APPEAL BEFORE US RAISING THE VARIOUS GROUNDS OF APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE. T HE LD. AR OF THE ASSESSEE ARGUED THAT SIMILAR DISALLOWANCE WAS MADE IN AYS 20 07-08 AND 2008-09 AND THE ASSESSEE FILED APPEAL TO THE TRIBUNAL, WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL RESTORED THE SIMILAR ISSUE TO THE FILE OF CIT(A). THE LD DR FOR THE REVENUE HAS NOT DISPUTED THE CONTENTION URGED BY LD. AR. WE HAVE CO NSIDERED THE CONTENTION OF THE PARTIES AND SEEN THE ORDER OF CO-ORDINATE BENCH IN ITA NO. 6984 & 6985/MUM/2014 FOR AYS 2007-08 AND 2008-09 WHEREIN THE IDENTICAL G ROUNDS OF APPEAL WAS CONSIDERED BY THE CO-ORDINATE BENCH AND PASS THE FOLLOWING ORD ER: 3 ITA NO. 340 /M/2015 FORBES CONCE PT HOSPITALITY SERVICES PRIVATE LIMITED 12. THEREFORE CONSIDERING THE AFORE MENTIONED FACT UAL AS WELL AS LEGAL POSITION WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT C ASE, THE CIT(A) HAS DEALT WITH THIS ISSUE AND MODIFIED THE ASSESSMENT BY DEALING W ITH SECTION 194C AND 194J OF THE ACT FOR WHICH SPECIFIC SHOW CAUSE NOTICE OR OPP ORTUNITY HAS NOT BEEN GIVEN TO THE ASSESSEE. 13. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER S PASSED BY REVENUE AUTHORITIES AND EVEN ON MERITS ID. DR SUBMITTED THA T THE JUDGMENT RENDERED BY HONBLE ITAT MUMBAI BENCH IN THE CASE OF' KAMAT ILO TELS (I) LTD. VS. ITO' 78 ITD 241 IS NOT APPLICABLE UNDER THE FACTS AND CIRCUMSTA NCES ?F THE PRESENT CASE AS IN THE AFORE MENTIONED CASE THE PAYMENT WAS NOT AT FIX ED PRICE BUT RATHER THE PAYMENT WAS FLUCTUATING IN NATURE. AND EVEN IN PARA NO. 34 OF THE SAID JUDGMENT THE FOLLOWING OBSERVATION HAS BEEN MADE: 'IN THE VIEW WE HAVE TAKEN AS ABOVE, IT IS NOT NECE SSARY FOR US TO EXAMINE THE TWO SUBSIDIARY CONTENTIONS RAISED BY MR. PARDIWALLA VIZ ., THAT THERE WAS NO ACTUAL PAYMENT BY THE ASSESSEE UNDER THE AGREEMENTS AND TH EREFORE, THERE IS NO LIABILITY TO DEDUCT TAX AND THAT WHEN THE PAYEE HAS PAID THE TAX ON THE ROYALLY/COMMISSION ON THE FOOTING THAT THEY WERE INCOME FROM BUSINESS, TH E ASSESSING OFFICER HAD NO JURISDICTION TO DEMAND THE LAX FROM THE ASSESSEE.' 14. FROM THE ABOVE FINDINGS, IT IS CLEAR THAT HON' BLE .HIGH COURT HAS NOT EXAMINED THE TWO SUBSIDIARY CONTENTIONS WITH REGARD TO MAKING OF ACTUAL PAYMENT BY THE ASSESSEE AND LIABILITY TO DEDUCT THE TAX AND MOREOVER.IAS PER THE FACTS OF THE PRESENT CASE, THE LD. DR ALSO SUBMITTED THAT IN THE PRESENT' CASE THE PREMISES IN WHICH THE BUSINESS OF THE ASSESSEE IS BEING CARRIED OUT/IS OWNED BY RCL AND THE ASSESSEE HAD OPERATED ITS BUSINESS AS THAT OF RUNNI NG A FOOD AND BEVERAGES OUTLET/RESTAURANT.' AS AND BY WAY OF CONSIDERATION FOR THE USE OF SAID PREMISES AS WELL AS FOR OPERATION OF RESTAURANT ACTIVITIES AT ' THE SAID PREMISES. THE ASSESSEE IS PAYING CERTAIN PERCENTAGE OF REVENUE GENERATED FROM THE SAID BUSINESS CARRIED OUT AT THE SAID PREMISES. IN ADDITION THE ASSESSEE IS ALSO MAKING PAYMENT OF FIXED AMOUNT OF RS.60,000/- PER MONTH UPTO THE MINIMUM RE VENUE OF RS.4,00,000/- PER MONTH AND THEREAFTER 17% PER MONTH ON THE INCREMENT AL .ABOVE RS.4 LAKH PER MONTH. BE THAT AS IT MAY AT THIS STAGE WE ARE NOT GOING INTO THE MERITS OF THE CASE REGARDING THE DEDUCTIONS MADE BY AO OR CIT(A) SINCE THERE, IS LEGAL LACUNA IN THE PRESENT CASE AS THE CIT(A) HAS NOT COMPLIED WITH TH E MANDATORY PROVISION OF SECTION 251 (2) OF THE ACT, BEFORE MODIFYING /ENHAN CING ASSESSMENT U/S 194J AND 194C OF THE ACT. THEREFORE CONSIDERING FACTUAL AS W ELL AS LEGAL POSITION WE REMIT THE CASE BACK TO THE FILE OF CIT(A) FOR FRESH DECIS ION ON AFORESAID POINTS. 15. KEEPING IN VIEW THE INTEREST OF JUSTICE, WE REM IT THE MATTER BACK TO THE FILE OF CIT(A) WITH A DIRECTION TO PROVIDE A REASONABLE OPP ORTUNITY TO THE ASSESSEE, REGARDING APPLICABILITY OF SECTION OF 1941 AND 194C OF THE ACT AND THEREAFTER TO PASS AFRESH ORDER AFTER PROVIDING A OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO. 6985/MUM/2014 (A.Y. 2008-09) 16. AFTER ANALYZING THE ABOVE ORDERS WE FIND THAT I DENTICAL QUESTION INVOLVED IN THE PRESENT CASE HAS ALREADY BEEN DECIDED IN THE AB OVE ITA NO.6984/MUM/2014. THEREFORE KEEPING IN VIEW OUR OWN DECISION AND IN O RDER TO MAINTAIN JUDICIAL CONSISTENCY WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE CASE OF THE ASSESSEE. WE PASS SAME ORDERS IN THIS APPEAL ALSO. 5. IN VIEW OF THE ABOVE REFERRED DECISION OF THE CO-OR DINATE BENCH, THE GROUNDS OF APPEAL RAISED IN THE PRESENT APPEAL ARE ALSO RESTOR ED TO THE FILE OF LD. CIT(A) TO DECIDE 4 ITA NO. 340 /M/2015 FORBES CONCE PT HOSPITALITY SERVICES PRIVATE LIMITED THE ISSUE AFRESH IN ACCORDANCE WITH THE DIRECTION C ONTAINED IN ITA NO. 6984 & 6985/MUM/2014 DATED 26.10.2016. NEEDLESS TO ORDER THAT THE LD CIT (A) SHALL PROVIDE ADEQUATE OPPORTUNITY WHILE DECIDING THE CAS E. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER, 2016. SD/- SD/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 07/12/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/