OM INTERCONTINENTAL, MUMBAI V. JCIT CIR 18(2), MUMBAI

ITA 3693/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84330 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 3693/MUM/2013 ASSESSMENT YEAR: 2008-09 M/S. OM INTERCONTINENTAL, C/O, SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265, PRINCESS STREET MUMBAI- 400 002 PAN:AAEFA 4801 B VS. JCIT CIR - 18(2) PIRAMAL CHAMBERS, MUMBAI (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI S.L. JAIN REVENUE BY : SHRI SACHCH IDANAND DUBEY DATE OF HEARING : 20.11.2014 DATE OF ORDER : 26 . 1 1 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AG AINST ORDER DATED 06.12.2013, PASSED BY THE LD.CIT(A) -16 , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y . 2008-09. THE ASSESSEE IS MAINLY AGGRIEVED BY DISALLOWANCE OF VAR IOUS EXPENSES, WHICH HAS BEEN CHALLENGED IN THE GROUNDS OF APPEAL IN THE FOLLOWING MANNER. ITA NO. 3693/MUM/2013 M/S. OM INTERCONTINENTAL, ASSESSMENT YEAR: 2008-09 2 1. HON. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.3,87,145/- AU OF FOREIGN TRAVELLING EXPENSES INCURRED IN FOREI GN EXCHANGE WITHOUT APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. THE HON. CIT(A), ERRED IN DIRECTING DISALLOWANCE OUT OF TELEPHONE EXPENSES BEING 90% EXPENSES INCURRED ON T ELEPHONES INSTALLED AT RESIDENCE OF PARTNERS, 50% OF EXPENSES INCURRED ON MOBILE PHONES OF PARTNERS, AS WELL AS 10% OF EXPENS ES INCURRED ON LAND LINE PHONES USED BY PARTNERS IN OFFICE AND THEREBY CONFIRMING THE DISALLOWANCE HIGHER THAN MADE BY LD. ASSESSING OFFICER IN THE ASSESSMENT ORDER OF RS.72,800/- WITH OUT APPRECIATING THE FACTS OF THE CASE AND LAW APPLICAB LE THERETO. 3. THE HON. CIT(A) SHOULD HAVE APPRECIATED THAT APP ELLANT IS IN THE BUSINESS OF EXPORT AND TELEPHONES INSTALLED AT RESIDENCE OF PARTNERS AND PERSONAL MOBILE PHONES ARE ESSENTIAL F OR CARRYING BUSINESS. DISALLOWANCE CONFIRMED BY HON. CIT(A) IS ABNORMALLY ON HIGHER SIDE AND REQUIRES PROPER REDUCTION. THERE WAS NO JUSTIFICATION IN CONFIRMING ANY DISALLOWANCE OUT OF EXPENSES INCURRED ON LAND LINE PHONES INSTALLED AT OFFICE PR EMISES. 4. THE HON CIT(A), ERRED IN NOT CONSIDERING DISALLO WANCE OF RS.85,935/- AS MADE BY LD. ASSESSING OFFICER OUT OF TELEPHONE EXPENSES INCURRED BEING MISCELLANEOUS TELEPHONE EXP ENSES INCURRED BY STAFF DURING THE COURSE OF TRAVELLING A ND OUT OF OFFICE IN LACK OF DETAILS WHICH WERE FILED BEFORE HON.CIT(A). 5. THE HON. CLT(A) ERRED IN CONFIRMING PART OF THE DISALLOWANCE OF RS.3,15,332/- BEING 20% OF EXPENSES INCURRED ON MOT OR CARS ALLOTTED TO PARTNERS WITHOUT PROPERLY APPRECIATING THE FACTS THAT SUCH DISALLOWANCE MADE BY LD. ASSESSING OFFICER WAS AT 10%. 6. THE HON CIT(A), ERRED IN CONFIRMING DISALLOWANCE OUT OF EXPENSES ON FOREIGN TRAVELING, CARS AND TELEPHONE W HICH EXPENSES HAS BEEN SUBJECT TO MATTER OF F.B.T AND HE NCE NO DISALLOWANCE ON ACCOUNT OF PERSONAL USER IS CALLED FOR. 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE A.YS. 2006-07 AND 2007-08, WHEREIN THESE ISSUES HAV E BEEN SET ASIDE TO ITA NO. 3693/MUM/2013 M/S. OM INTERCONTINENTAL, ASSESSMENT YEAR: 2008-09 3 THE FILE OF THE AO, WITH THE DIRECTION TO VERIFY, W HETHER OR NOT THE EXPENDITURES WERE SUBJECTED TO THE FRINGE BENEFIT T AX (FBT). LD. DR ALSO ADMITTED THAT THE ISSUES INVOLVED ARE COVERED BY THE DECISION OF THE TRIBUNAL AND THEREFORE, THE MATTER SHOULD BE RESTOR ED BACK TO THE FILE OF THE AO. 3. AFTER CONSIDERING THE RELEVANT FINDINGS GIVEN I N THE IMPUGNED ORDER AND ALSO THE EARLIER YEAR ORDER OF THE TRIBUN AL, WE FIND THAT THE ISSUE OF DISALLOWANCES OF EXPENSES HAVE BEEN SENT B ACK TO THE FILE OF THE AO TO VERIFY, WHETHER THE FBT HAS BEEN PAID ON THES E EXPENSES AND IN CASE FBT HAS BEEN PAID, THEN, NO DISALLOWANCE IS CA LLED FOR. BRIEF FACTS ARE THAT, THE ASSESSEE IS ENGAGED IN THE BUSINESS O F EXPORT AND IMPORT OF DYES AND CHEMICALS AND WIND POWER GENERATION. DU RING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER N OTED THAT THE ASSESSEE HAS DEBITED EXPENSES ON ACCOUNT OF FOREIGN TRAVEL, TELEPHONE EXPENSES AND MOTOR CAR EXPENSES WHICH ARE NOT FULLY VERIFIABLE AND PERSONAL ELEMENT CANNOT BE RULED OUT. ACCORDINGLY H E MADE THE DISALLOWANCES IN THE FOLLOWING MANNER:- (I) UNDER THE HEAD FOREIGN TRAVELLING EXPENSES, T HE ASSESSEE HAD DEBITED EXPENSES OF RS.85,72,936/- UNDER THE HEAD TRAVELLING AND CONVEYANCE EXPENSES. IN ORDER TO COVER SOME POSSIBL E LEAKAGES HE HAD MADE AD HOC DISALLOWANCE, @ 10%, ON ACCOUNT OF PURC HASE OF FOREIGN CURRENCIES OF RS.38,71,448/- AND DISALLOWANCE OF RS .1,44,384/- ON ACCOUNT OF OTHER EXPENSES FOR WHICH NO DETAILS WERE SUBMITTED. THUS THE AGGREGATE DISALLOWANCE OF RS.5,31,529/- WAS MADE. (II) UNDER THE HEAD, TELEPHONE EXPENSES THE ASSES SEE HAS DEBITED RS.8,13,935/- ON ACCOUNT OF TELEPHONE CHARGES. TO C OVER UP THE POSSIBLE ITA NO. 3693/MUM/2013 M/S. OM INTERCONTINENTAL, ASSESSMENT YEAR: 2008-09 4 LEAKAGES, THE ASSESSING OFFICER HAS DISALLOWED RS.1 ,58,735/- ON ACCOUNT TELEPHONE EXPENSES AND OTHER EXPENSES. (III) UNDER THE HEAD, MOTOR CAR EXPENSES, THE ASS ESSEE HAS DEBITED RS.31,53,323/-. THE ASSESSING OFFICER DISALLOWED @ 10% OF SAID EXPENSES ON ACCOUNT OF PERSONAL USER AND ACCORDINGL Y, HE DISALLOWED RS.3,15,332/- 4. THESE EXPENDITURE HAS BEEN PARTLY CONFIRMED BY T HE LD.CIT(A). 5. NOW THE ISSUE BEFORE US IS WHETHER FBT HAS BEEN PAID ON SUCH EXPENSES OR NOT THE QUANTUM OF DISALLOWANCE IS NOT AN ISSUE. WE FIND THAT THE TRIBUNAL HAS DECIDED THE ISSUE AFTER OBSER VING AND HOLDING AS UNDER: WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIO NS HAVE CAREFULLY BEEN CONSIDERED. IN THE AFOREMENTIONED DE CISION IN THE CASE OF HANSRAJ MATHURADAS (SUPRA), RELYING UPON CB DT CIRCULAR NO.8/2005 DATED 29/8/2005 IT WAS HELD THAT ONCE FBT IS LEVIED ON EXPENSES INCURRED, IT FOLLOWS THAT THE SAME ARE TRE ATED AS FRINGE BENEFIT PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLOYEES AND THE SAME HAVE TO BE APPROPRIATELY ALLOWED AS EX PENDITURE INCURRED WHOLLY AND EXCLUSIVELY BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. NO CONTRARY DECISION HAS BEEN BROU GHT TO OUR NOTICE IN THIS REGARD. THEREFORE, RESPECTFULLY FOLL OWING THE AFOREMENTIONED DECISION WE HOLD THAT IF THE AFOREME NTIONED EXPENDITURE WERE SUBJECTED TO FBT, THEN DISALLOWANC E CANNOT BE MADE. HOWEVER, TO VERIFY THAT WHETHER OR NOT THESE EXPENDITURE WERE SUBJECTED TO FBT, WE RESTORE THE ISSUES RAISED IN THESE APPEALS TO THE FILE OF AO WITH A DIRECTION TO VERIF Y THE CONTENTION OF THE ASSESSEE THAT WHETHER OR NOT IMPUGNED EXPEND ITURE WERE SUBJECTED TO FBT. IF THOSE EXPENDITURE WERE SUBJECT ED TO FBT THEN NO DISALLOWANCE CAN BE MADE AND THE CLAIM OF T HE ASSESSEE SHOULD BE ACCEPTED IN ITS ENTIRETY. WE DIRECT ACCOR DINGLY. SINCE SIMILAR PLEA HAS BEEN RAISED BEFORE US IN THI S YEAR ALSO, THEREFORE, CONSISTENT WITH THE VIEW TAKEN IN THE EARLIER YEAR, WE ALSO ORDER ACCORDINGLY AND DIRECT THE AO TO VERIFY, WHETHER ON THESE EXPENDITURES ITA NO. 3693/MUM/2013 M/S. OM INTERCONTINENTAL, ASSESSMENT YEAR: 2008-09 5 FBT HAS BEEN PAID. IF THESE EXPENSES ARE SUBJECTED TO FBT, THEN NEEDLESS TO SAY NO DISALLOWANCE SHOULD BE MADE. ACC ORDINGLY GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED FOR ST ATISTICAL PURPOSE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2014. SD/- SD/- (SANJAY ARORA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 26.11.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.