P & O NEDLLOYD LOGISTICS INDIA P.LTD ( NOW MERGED WITH APM TERMINALS INDIA P.LTD), MUMBAI V. DCIT 4(3), MUMBAI

ITA 3621/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3309 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.3621/M/12 ( / ASSESSMENT YEAR: 2006-07) P&O NEDLLOYD LOGISTICS INDIA PRIVATE LIMITED (NOW MERGED WITH APM TERMINALS INDIA PRIVATE LIMITED) 11 TH FLOOR, TOWER A, URMI ESTATE, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI - 400013 / VS. DEPUTY COMMISSIONER OF INCOME TAX RANGE 4(3) AAYAKAR BHAVAN, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACM8741P ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 15.12.2015 /DATE OF PRONOUNCEMENT: 16.03.2016 !' / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL AGAINST THE ORDER DATED 18.12.20 134 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) - 8, MUMBAI [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)], MUMBAI FOR THE ASSESSEE BY: SHRI NIRAJ SHETH DEPARTMENT BY: SHRI AKHILENDRA P. YADAV ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 2 ASSESSMENT YEAR 2006-07 WHEREIN THE PENALTY TO THE TUNE OF RS.25,20,760/- LEVIED BY THE ASSESSING OFFICER WAS UPHELD. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME FOR THE A.Y.2006-07 ON 30.11.2006 DECLARING TOTAL INCOME TO THE TUNE OF RS.1,76,21,459/-. THE ASSESS MENT WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) ON 24.12.2008, DETERMINING TOTAL ASSESSED INC OME AT RS.4,45,82,160/-. DURING THE ASSESSMENT PROCEEDING S, FOLLOWING ADDITIONS WERE MADE:- 1. EXPENSES CLAIMED U/S.40A(2)(B) RS.62,84,995/- 2. UNEXPLAINED EXPENDITURE U/S.69C RS.39,91,952/- 3. DOUBLE CLAIM EXPENSES RS.11,61,113/- 4. EXPENDITURE IN FOREIGN CURRENCY RS.1,18,09 ,285/- 5. LEGAL & PROFESSIONAL FEES U/S.40(A)(IA) RS.1,38,914 /- 6. CUSTOM CLEARANCE LOSS RS.20,22,638/- 7. BAD DEBT RS.7,50,807/- HOWEVER, THE PENALTY WERE INITIATED ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED U/S.40A(2)(B) OF THE ACT AND DOUBL E CLAIM EXPENSES AND DISALLOWANCE OF LEGAL AND PROFESSIONAL FEES U/S. 40(A)(IA) OF THE ACT. ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 3 1. EXPENSES CLAIMED U/S. 40A(2)(B):- FINDING OF THE ASSESSING OFFICER IS HEREBY REPRODUC ED AS UNDER:- 1. PONIPL IS OUR PARENT COMPANY AND IS THE AGENT FOR PONL LTD. UK. THEY HAVE CREATED APPROPRIATE INFRASTRUCTURE FACILITIES IN ORDER TO PERFORMANCE T HEIR ACTIVITIES. WE, AS THE LOGISTICS SERVICE PROVIDER REPRESENT PONL LTD., UK IN INDIA. 2. IN ORDER TO PROVIDE CUSTOMER SERVICE UNDER A COMMON ROOF, WE AS LOGISTICS COMPANY, OPERATE FROM THE PREMISES THAT OF PONIPL ACROSS INDIA. PONIPL IS TH E LESSEE OF THE PREMISES AND MOST OF THE INFRASTRUCTU RE IS REGISTERED IN THEIR NAME. ALSO, FOR COMMON FACILIT IES THE VENDOR CONTRACTS ARE REGISTERED IN THEIR NAMES SO A S TO AVAIL ECONOMICS OF SCALE, WE BOTH SHARE THE SAME COMMON RESOURCES FOR WHICH PONIPL INCURS THE INITIA L COST. 3. BASED ON EITHER THE OFFICE SPACE AND/OR NUMBER OF EMPLOYEES, SUCH COSTS ARE THEN ALLOCATED BY PONIPL TO US. THIS IS DONE FOR ADMINISTRATIVE EASE, OR ELSE WE WOULD HAVE HAD TO REGISTER SEPARATELY FOR SUCH SERVICES W HICH WOULD HAVE BEEN AT A HIGHER COST CONSIDERING THE SI ZE OUR OPERATIONS. ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 4 BY GOING THROUGH ABOVE MENTIONED FINDING RECORDED B Y THE ASSESSING OFFICER IT IS APPARENT ON RECORD THAT THE ASSESSEE HAS TO PAY SERVICE CHARGES OF RS.2,21,54,570/- TO PONIPL ( HOLDING COMPANY. THE COMPANY HAS ALSO DEBITED SEPARATELY R ENT RS.16,53,170/-, TELEPHONE RS.6,97,000/-, COURIER & POSTAGE RS.2,93,990/-, PRINTING & STATIONERY RS.63,067/- AN D GENERAL EXPENSES OF RS,2,78,184/-. ALL THESE CHARGES WERE PAID BASED ON A DEBIT NOTE RECEIVED FROM HOLDING COMPANY PONIPL. T HE ASSESSEE COMPANY WAS SUBMITTED EVIDENCE IN SUPPORT OF HIS CL AIM IN EXCESS OF EXPENSES. THE ASSESSING OFFICER DISALLOWED THE 25% OF THE CLAIM TO THE TUNE OF RS.62,84,995/-. THE LEARNED C IT(A) HAS ALSO CONFIRMED THE DISALLOWANCE & 25% OF SERVICE CHARGES . THE EXPLANATION OF THE ASSESSEE IS THAT THE ASSESSEE HA S DISCLOSED THE SERVICE CHARGES PAID TO ITS PARENT COMPANY IN ITS P ROFIT AND LOSS ACCOUNT AND ALSO SUBMITTED THE DETAILS IN THE ASSES SMENT PROCEEDINGS. THEREFORE, IN THE SAID CIRCUMSTANCES THERE IS NO CONCEALMENT OF INCOME IN THIS CASE IS FURNISHING IN ACCURATE PARTICULARS TO EVADE THE TAX AND ALSO PLACE RELIANC E UPON THE LAW SETTLED IN COMMISSIONER OF INCOME TAX VS. INDO SAUD I SERVICES (TRAVEL) (PVT.)LTD. BY HIGH COURT OF BOMBAY. IT IS SPECIFICALLY HELD THAT: WE HAVE HEARD THE LEARNED ADVOCATES APPEARING FOR BOTH SIDES. WE HAVE ALSO PERUSED THE ORDER PASSED BY THE TRIBUNAL DATED 21 ST OCTOBER 1999 WHICH IS IMPUGNED BY THE REVENUE IN THE PRESENT APPEALS. WE FIND THAT THE F OLLOWING ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 5 FACTS WERE ESTABLISHED BEFORE THE TRIBUNAL AND THE SAME HAVE BEEN ACCEPTED BY THE REVENUE EVEN BEFORE US. (I) TH AT THE ASSESSEE APART FROM PAYING HANDLING CHARGES @ 9 P ER CENT TO ITS SISTER CONCERN, HAVE PAID HANDLING CHARGES A T THE SAME RATE TO OTHER AGENTS VIZ., M/S. A.K.TRAVELS, M/S. O M TRAVELS AND M/S. JET AGE TRAVELS. (II) FOR ASST. YRS 1986-8 7 AND 1987-88 THE ASSESSEE HAD PAID THE HANDLING CHARGES @ 10 PERCENT TO THE SISTER CONCERN OF THE ASSESSEE AND S UCH CHARGES PAID WERE CONSIDERED TO BE REASONABLE BY THE APPELL ANT. (III) FOR ASST. YRS. 1989-90 AND 1990-91 THE ASSESSEE HAD REDUCED THE PAYMENT OF HANDLING CHARGES TO 9 PER CENT TO ITS SISTER CONCERN. THE AO HAS CONSIDERED THE PAYMENT OF COMMISSION TO THE SISTER CONCERN IN THE ASST. YR. 1 989-90 AND ALLOWED THE CLAIM AFTER DUE SCRUTINY. FOR ASST. YR . 1990-91 ALSO THE CLAIM OF THE ASSESSEE @ 9 PER CENT HAS B EEN ALLOWED THOUGHT THE SAME HAS NOT BEEN DEALT WITH BY THE AP SPECIFICALLY IN THE ORDER. (IV) FOR ASST. YRS. 199 36-94 AND 1994-95 THE ASSESSMENT HAS BEEN MADE BY THE AO UNDE R S. 143(3) AND HANDLING CHARGES PAID TO THE SISTER CONC ERN @ 9.5% PER CENT HAVE BEEN CONSIDERED TO BE REASONABLE AND ALLOWED. (IV) THE SISTER CONCERN OF THE ASSESSEE M/S. MIDDLE EAST INTERNATIONAL IS ALSO ASSESSED TO TAX AND INCO ME ASSESSED FOR THE ASST. YR 1991-92 IS RS.9,38,510/- AND FOR ASST. YR. 1992-93 IS RS.14,65,880 AND THE SAID ASSE SSMENT ORDER HAVE BEEN PLACED ON RECORD. (V) UNDER THE CBD T CIRCULAR NO. 6-P, DT. 6 TH JULY, 1968 IT IS STATED THAT NO ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 6 DISALLOWANCE IS TO BE MADE UNDER S. 40A(2) IN RESPE CT OF THE PAYMENTS MADE TO THE RELATIVES AND SISTER CONCERNS WHERE THERE IS NO ATTEMPT TO EVADE THE TAX. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE QUITE SIMILAR. IN THE INSTANT CASE THE EXPENSES HAVE BEEN DISALLOW ED WHICH HAS BEEN CLAIMED U/S. 40A(2)(B) THEREFORE IN VIEW OF T HE FINDING OF THE ABOVE MENTIONED CASE WE ARE OF THE VIEW THAT THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 40A(2)(B) WILL N OT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF HIS INCOME. T HESE LEVY OF PENALTY BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT WAS NOT JUSTIFIED. THEREFORE, WE ARE OF THE VIEW THAT THI S GROUND IS NOT PROPER TO LEVY THE PENALTY HENCE WE DELETE THE PENA LTY ON THIS GROUND. 2. DOUBLE CLAIM EXPENSES:- SO FAR AS THE GROUND NO. 2 IS CONCERNED, THE SAME IS IN CONNECTION WITH THE DOUBLE CLAIM EXPENSES. THE ASSESSEE IN HI S PROFIT AND LOSS ACCOUNT DEBITED UNDER ADMINISTRATIVE EXPENSES, TELEPHONE EXPENSES OF RS.6,97,000/-, PRINTING & STATIONERY OF RS.63,067/-, RENT RS.36,48,011/- AND UNDER THE HEAD OF POSTAGE A ND COURIER RS.2,93,990/-. THESE EXPENSES HAVE ALREADY BEEN I NCLUDED IN THE SERVICE CHARGES AND AGAIN DEBITED UNDER SEPARATE HE AD. OBSERVING DOUBLE CLAIM THE DISALLOWANCE IS RESTRICTED TO THE EXTENT 75%, AS 25% HAS ALREADY BEEN CONSIDERED UNDER THE COMMON EX PENSES. NO DOUBT LEARNED CIT(A) CONFIRMED THE SAID ORDER BUT I T IS REQUIRED TO BE SEEN WHETHER DISALLOWANCE MADE BY THE ASSESSING OFFICER FALLS ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 7 WITHIN THE PURVIEW OF 271(1)(C) OF THE ACT. BY GOI NG THROUGH THE ORDER IN QUESTION NOTHING NEW MATERIAL CAME ON RECO RD, HOWEVER ON SEEING THE RECORD THE CLAIM OF ASSESSEE WAS DISA LLOWED AND DISALLOWANCE OF CLAIM IS NOT REQUIRED TO BE CONSIDE RED AS THE CASE OF THE CONCEALMENT OF INCOME OR FURNISHING INACCURA TE PARTICULARS TO EVADE THE TAX. THIS GROUND IS NOT JUSTIFIABLE T O LEVY THE PENALTY U/S. 271(1)(C) OF ACT. 3. LEGAL AND PROFESSIONAL FEES U/S. 40(A)(IA):- NOW COMING TO THE THIRD GROUND WHICH THE ASSESSING OFFICER LEVIED THE PENALTY. THE ASSESSEE PAID THE LEGAL AN D PROFESSIONAL FEES TO THE TUNE OF RS.1,45,536/-. NO TDS WAS DEDU CTED THEREFORE THE SAID CLAIM WAS REJECTED AND THE SAID AMOUNT OF RS.1,45,536/- WAS ADDED TO THE INCOME OF ASSESSEE U/S. 40A(IA) OF THE ACT. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES THE CASE OF THE ASSESSEE HAS FULLY COVERED BY THE ORDER OF THE INCO ME TAX APPELLATE TRIBUNAL MUMBAI BENCH IN CASE RAMKRISHNA SHETTY VS. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA NO.7142 /M/2011 & 4735/M/2013. ACCORDINGLY, IT IS NOT A GROUND TO LEVY THE PENALTY. IN VIEW OF THE ABOVE SAID FACTS AND CIRCU MSTANCES WE ARE OF THE VIEW THAT THE ORDER OF LEARNED CIT(A) IS WRO NG AGAINST LAW AND FACT AND IS HEREBY ORDERED TO BE SET ASIDE AND WE DELETE THE PENALTY. ITA NO.3621/MUM/2014 ASSESSMENT YEAR: 2006-07 8 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) ! / ACCOUNTANT MEMBER $% ! /JUDICIAL MEMBER & ' MUMBAI; (! DATED : 16 TH MARCH, 2016 MP MP MP MP !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+, %%-. , -. , & ' / DR, ITAT, MUMBAI 6. ,/0 1 / GUARD FILE. / BY ORDER, * % //TRUE COPY// % / & ' (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI