ACIT LTU, MUMBAI V. TATA CONSULTANCY SERVICES LTD, MUMBAI

ITA 3457/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8809 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: F B ANDHYARUJINA
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.3457/MUM/2011 ASSESSMENT YEAR-2007-08 THE ACIT, LTU,28 TH FLOOR, CENTRE-1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI-400 005 VS. M/S. TATA CONSULTANCY SERVICES LTD., 9 TH FLOOR, NIRMAL BLDG., NARIMAN POINT, MUMBAI-400 021 PAN-AAACR 4849R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GIRIJA DAYAL RESPONDENT BY: SHRI F.B. ANDHYARUJINA DATE OF HEARING :11.09.2012 DATE OF PRONOUNCEMENT:26.9.2012 O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE REVENUE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF LD. CIT(A)-LTU, MUMBAI DT. 24.2.2011 PERTA INING TO ASSESSMENT YEAR 2007-08. 2. THE SUBSTANTIVE GROUND OF APPEAL OF THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION FROM FRINGE BENEFITS TOWARD S TATA BRAND EQUITY CONTRIBUTION. 3. THE FACTS OF THE CASE ARE THAT FOR THE YEAR UNDE R CONSIDERATION, THE RETURN OF FRINGE BENEFIT WAS FOILED ON 29.10.2007 D ECLARING TOTAL VALUE OF FRINGE BENEFITS AT RS. 50,51,16,878/-. THE CASE WA S SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES WERE ACCORDINGLY I SSUED AND SERVED UPON THE ASSESSEE. ITA NO. 3457/M/2011 2 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURERS OF COMPUTER HARDWARE, SOFTWARE, CONSULTANCY AND I.T. EN ABLED SERVICES. DURING THE COURSE OF FBT PROCEEDINGS, THE ASSESSING OFFICE R OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 27,57,12,999/- BEING PAID TO M/S. TATA SONS TOWARDS TATA BRAND EQUITY CONTRIBUTION WHICH THE ASSESSEE HAS INCLUDED UNDER THE ACCOUNT HEAD SALES PROMOTION. DURING T HE PROCEEDINGS, THE ASSESSEE CLAIMED THAT THESE EXPENSES SO DEBITED TO SALES PROMOTION HEAD ARE NOT LIABLE FOR FBT AND THEREFORE THE SAME MAY BE EX CLUDED FROM FBT. THE CLAIM OF THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE AO WHO RELIED UPON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. 284 ITR 323 HOLDING THAT THE AO HAS NO POWERS TO ALLOW A CLAIM WITHOUT ASSESSEE HAVING FILED A REVISED RETURN. THE AO FUR THER OBSERVED THAT A SIMILAR PLEA WAS TAKEN DURING THE FBT PROCEEDINGS F OR A.Y. 2006-07 WHEREIN ALSO THE ASSESSEE DID NOT GET ANY RELIEF. AS THE A SSESSEE HAS ITSELF INCLUDED THE EXPENSES ON BRAND EQUITY CONTRIBUTION UNDER THE HEAD SALES PROMOTION EXPENSES, THE AO WENT ON TO INCLUDE THE SAID EXPENS ES FOR THE CALCULATION OF THE TOTAL VALUE OF FBT AND ACCORDINGLY COMPLETED TH E FBT ASSESSMENT. 5. THE ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED ITS SUBMISSION THAT THE PAYMENT MADE TO TATA SONS B EING A SUBSCRIPTION TO TATA BRAND EQUITY CONTRIBUTION IS OUTSIDE THE PUR VIEW OF FRINGE BENEFIT TAX. AFTER CONSIDERING THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(A) WAS CONVINCED THAT THE SUBSCRIPTION FEES PAI D TO TATA SONS LTD. CANNOT BE TREATED UNDER THE HEAD SALES PROMOTION INCLUDING PUBLICITY. THE LD. CIT(A) FURTHER OBSERVED THAT SUCH CONTRIBUTION DOES NOT RE SULT INTO ANY PERSONAL BENEFIT FOR THE EMPLOYEES, EITHER PERSONALLY OR COL LECTIVELY SO AS TO ATTRACT THE LEVY OF FBT. THE APPEAL WAS ACCORDINGLY ALLOWED. 6. THE REVENUE IS BEFORE US AGAINST THE FINDINGS OF LD. CIT(A). LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FBT ORDER AND SUBMITTED THAT THE ASSESSEE ITSELF HAS SHOWN THESE EXPENSES UNDER THE HEAD BUSINESS PROMOTION AND PUBLICITY NOT ONLY IN THE ORIGINAL R ETURN BUT ALSO IN THE REVISED ITA NO. 3457/M/2011 3 RETURN FILED ON 10.2.2009, THEREFORE THERE IS NO ER ROR IN THE FINDING OF AO AND PLEADED THAT THE SAME SHOULD BE CONFIRMED. 7. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE PAYMENT MADE TO TATA SONS LTD. IS TOWARDS SUBSCRIPTION FEES NOT COV ERED UNDER SALES PROMOTION AND PUBLICITY. FURTHER THE CONTRIBUTION AS SUBSCRI PTION IS LINKED TO PROFITABILITY. NO SUBSCRIPTION IS PAYABLE IF THE SUBSCRIBERS BUSI NESS BECOMES UNPROFITABLE. THE LD. COUNSEL DREW OUR ATTENTION TO THE FACT THAT M/S. TATA SONS HAS RAISED INVOICE BY CHARGING SERVICE TAX UNDER THE HEAD INTE LLECTUAL PROPERTY SERVICES. RELYING UPON THE DECISION OF THE ITAT BANGALORE IN ITA NO. 1178/BANG/09 IN THE CASE OF DCIT VS M/S. MESCOM, THE LD. COUNSEL SU BMITTED THAT THE SUBSCRIPTION DOES NOT RESULT INTO ANY DIRECT OR IND IRECT BENEFIT TO THE EMPLOYEES. THEREFORE, SUCH CONTRIBUTION IS OUTSIDE THE PURVIEW OF THE PROVISIONS OF FBT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF LOWER AUTHORITIES. IT IS NOT DISPUTED THAT PAYM ENT OF M/S. TATA SONS LTD. BY THE ASSESSEE IS A SUBSCRIPTION AS PER THE AGREEM ENT BETWEEN THE ASSESSEE AND M/S. TATA SONS DT. 19.4.2004. AS PER THE TATA B RAND EQUITY AND BUSINESS PROMOTION AGREEMENT BETWEEN TATA SONS LTD., AND THE ASSESSEE, THE ASSESSEE IS UNDER CONTRACTUAL OBLIGATIONS TO MAKE P AYMENT TOWARDS THE SUBSCRIPTION FEES. IN CONSIDERATION OF THIS SUBSCR IPTION FEES, TATA SONS LTD., IS, INTER ALIA, RESPONSIBLE FOR ORGANIZING CORPORAT E IDENTITY AND BRAND PROMOTIONAL ACTIVITIES AND CAMPAIGNS ENGAGE PROFESS IONAL CONSULTANTS, MAKE AVAILABLE A POOL OF SHARABLE RESOURCES OF THE TATA GROUP TO THE COMPANY AND PROVIDE ASSISTANCE IN ACCESSING THE NETWORK OF DOME STIC AND INTERNATIONAL BUSINESS CONTACTS AND ALSO PERMITTED THE COMPANY TO USE THE BUSINESS NAME. 9. WHILE DECIDING REVENUES APPEAL IN ITA NO. 6747/ M/2011, THIS BENCH HAD THE OCCASION TO CONSIDER THE CIRCULAR ISSUED BY CBDT BEING CIRCULAR NO. 8/2005 DT. 29.8.2005 WHEREIN THIS BENCH HAS HELD TH AT EMPLOYER/EMPLOYEE RELATIONSHIP IS A PRE-REQUISITE FOR THE LEVY OF FBT . RATIONALE FOR INTRODUCTION OF FBT IS THAT IT IS DIFFICULT TO ISOLATE THE PERSON AL ELEMENT IF THE BENEFITS ARE ITA NO. 3457/M/2011 4 COLLECTIVELY ENJOYED BY THE PEOPLE WHICH MEANS THAT THE PROVISIONS OF FBT WILL BE APPLICABLE ONLY IN RESPECT OF THOSE EXPENSES WH ICH CONTAIN OR ATLEAST ARE LIKELY TO CONTAIN AN ELEMENT OF PERSONAL BENEFIT TO EMPLOYEES. WE DO NOT FIND ANY SUCH THING PRESENT ON THE FACTS OF THE PRESENT CASE. THE SUBSCRIPTION AMOUNT HAS BEEN PAID AS PER CONTRACTUAL AGREEMENT B ETWEEN THE ASSESSEE AND M/S. TATA SONS LTD. THE INVOICE RAISED BY M/S. TATA SONS LTD. IS FOR THE SERVICES PROVIDED FOR IT. AS NO EMPLOYER/EMPLOYEE RELATIONSHIP EXISTS BETWEEN THE ASSESSEE AND M/S. TATA SONS LTD., WE AG REE WITH THE FINDINGS OF THE LD. CIT(A) THAT SUBSCRIPTION PAYMENT DESERVES T O BE KEPT OUTSIDE THE PURVIEW OF FBT. ACCORDINGLY ORDER OF THE LD. CIT(A ) IS UPHELD AND THE REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 26 TH DAY OF SEPTEMBER, 2012 SD/- SD/- (D.K. AGARWAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 26 TH SEPTEMBER, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI