DCIT-12(2)(2), MUMBAI V. M/S.MERITUS ANALYTICS INDIA PVT.LTD.(NOW KNOWN AS GAIN THEORY CONSULTANTS PRIVATE LIMITED), MUMBAI

ITA 4203/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9086 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 15-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.4203/M/2018 ASSESSMENT YEAR: 2012-13 DY. COMMISSIONER OF INCOME TAX 12(2)(2), ROOM NO.145, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. MERITUS ANALYTICS INDIA PVT. LTD. (NOW KNOWN AS GAIN THEORY CONSULTANTS PVT. LTD.), GAIN THEORY CONSULTANTS PVT. LTD. 8 TH FLOOR, COMMERZ INTL BUS PARK, OBEROI GARDEN CITY, GOREGAON (E), MUMBAI 400 063 PAN: AADCM8047R (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI JOTHI LAKSHMI NAYAK, A.R. REVENUE BY : SHRI ARIJIT CHAKRAVARTY, D.R. DATE OF HEARING : 05.11.2019 DATE OF PRONOUNCEMENT : 19.12.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 27.04.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A) GIVING RELIEF TO THE ASSESSEE MERELY ON THE BASIS THAT ASSESSEE HAS MADE PAYMENT WHEREAS AS A MATTER OF FA CT THE LIABILITY HAS BEEN SQUARED UP IN 2017 AND THE ASSES SMENT WAS COMPLETED ON 25.03.2015. ITA NO.4203/M/2018 M/S. MERITUS ANALYTICS INDIA PVT. LTD. (NOW KNOWN AS GAIN THEORY CONSULTANTS PVT. LTD.) 2 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED FROM THE PERUSAL OF BALAN CE SHEET THAT ASSESSEE HAS SHOWN RS.1,88,54,479/- UNDER THE HEAD CURRENT LIABILITIES AS OUTSTANDING TO GROUP M. SIN GAPORE. ACCORDINGLY, THE ASSESSEE WAS ISSUED A SHOW CAUSE VIDE LETTER DATED 04.03.2015 AS TO WHY THE SAME SHOULD NOT BE T REATED AS CESSATION OF LIABILITY AND SHOULD NOT BE ADDED TO T HE INCOME OF THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE BY S UBMITTING THAT THE SAID AMOUNT WAS IN FACT REIMBURSEMENT OF E XPENSES PAYABLE TO GROUP M. SINGAPORE WITHOUT ANY PROFIT ELEMENT EMBEDDED THEREIN. THE ASSESSEE SUBMITTED THAT ASSE SSEE WAS A NEW COMPANY FORMED IN 2002 AND ASSESSEE EXECUTIVE M R. M.J. VENKETESH WAS WORKING AT SINGAPORE. THE ASSESSEE SUBMITTED THAT FOR THE SAKE OF CONVENIENCE, PAYMENT OF SALARY , WORK STATION, COST OF TRAVEL AND OTHER INCIDENTAL EXPEND ITURE WERE INCURRED BY GROUP M. SINGAPORE OVER A PERIOD OF 2 TO 3 YEARS ON BEHALF OF THE ASSESSEE AND HENCE THE AMOUNT PAYABLE TO GROUP M. SINGAPORE WAS SHOWN AS THE OUTSTANDING LIABILIT Y. IT WAS ALSO SUBMITTED THAT RS.1,88,54,479/- CAN NOT BE ADD ED UNDER SECTION 41 OF THE ACT ON THE GROUND THAT THIS IS NO T A TRADING LIABILITY AND THEREFORE SECTION 41 OF THE ACT CAN N OT BE INVOKED. IT WAS ALSO SUBMITTED THAT THE PROVISIONS OF LIMITA TION ALSO DO NOT APPLY AS THE DEBT WAS RECOGNIZED BY BOTH THE C OMPANIES AS PAYABLE AND RECEIVABLE IN THEIR BOOKS OF THE ACCOUN TS. THE ASSESSEES CONTENTIONS DID NOT FIND FAVOUR WITH THE AO AND HE ULTIMATELY ADDED THE SAID AMOUNT AS VALUE OF BENEFI T ARISING OUT OF BUSINESS UNDER SECTION 28(4) OF THE ACT TO THE I NCOME OF THE ITA NO.4203/M/2018 M/S. MERITUS ANALYTICS INDIA PVT. LTD. (NOW KNOWN AS GAIN THEORY CONSULTANTS PVT. LTD.) 3 ASSESSEE BY FRAMING ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 25.03.2015. 3. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER TAKING INTO ACCOUNT TH E SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AND AFTER CALLING FOR THE REPORT FROM THE AO ON THE ADDITIONAL EVIDENCES ADMITTED DU RING THE PROCEEDINGS BY OBSERVING AND HOLDING AS UNDER: 4.4 DECISION ON GROUND NO. 1 4.4.1 I HAVE CONSIDERED THE CONTENTION OF THE AO IN THE ASSESSMENT ORDER AND IN THE REMAND REPORT DATED 12.02.2018. I HAVE ALSO CONSIDE RED THE SUBMISSIONS OF THE APPELLANT MADE IN THE COURSE OF THE APPELLATE PROCE EDINGS. 4.4.2 IN THE COURSE OF THE APPELLATE PROCEEDINGS TH E APPELLANT PRODUCE SOME ADDITIONAL EVIDENCE AS MENTIONED ABOVE. CONSIDERING THE FACT THAT THE PAYMENT WAS MADE AFTER THE ASSESSMENT ORDER WAS PASSED, THE APPELLANT HAD NO OPPORTUNITY TO PRODUCE THE EVIDENCE OF PAYMENT BEFO RE THE AO. THEREFORE, I ADMIT THE ADDITIONAL EVIDENCE FILED BY THE APPELLANT IN T HE COURSE OF THE APPELLATE PROCEEDINGS. 4.4.3 IN MY VIEW THE AO HELD THAT THE LIABILITY SHO WN IN ACCOUNT OF M ASIA PACIFIC HOLDINGS PTE LTD ('GROUP M SINGAPORE') HAD CEASED T O EXIST ONLY ON THE GROUND THAT THERE WAS UNUSUAL DELAY. THE AO DID NOT BRING ANY O THER MATERIAL ON RECORD. IN HIS REMAND REPORT THE AO HAS NOT DISPUTED THE FACT THAT THE PAYMENT WAS SUBSEQUENTLY MADE. CONSIDERING THE FACT THAT THE LI ABILITY WAS DISCHARGED SUBSEQUENTLY, I HOLD THAT THE APPELLANT DID NOT DER IVE ANY BENEFIT MENTIONED IN SECTION 28(IV) OF THE ACT. THEREFORE, I HOLD THAT T HE ADDITION MADE UNDER SECTION 28(IV) IS NOT SUSTAINABLE. ACCORDINGLY GROUND NO. 1 OF THE APPELLANT IS ALLOWED. 4. THE LD. D.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT THE ORDER PASSED BY THE LD. CIT(A) IS WRONG AND AGA INST THE FACTS OF THE PRESENT CASE. THE LD. DR , WHILE BRINGING T O THE NOTICE OF THE BENCH, SUBMITTED THAT THE SAID OUTSTANDING AMO UNT OF RS.1,88,54,479/- WAS SHOWN AS PAYABLE TO GROUP M. SINGAPORE FOR VARIOUS EXPENSES INCURRED BY THE SAID GROUP ON BEHALF OF THE ASSESSEE OVER A PERIOD OF 2 TO 3 YEARS. THE LD. D. R. SUBMITTED THAT THE ASSESSEE EVEN DID NOT BOTHER TO SEEK THE R BI PERMISSION ITA NO.4203/M/2018 M/S. MERITUS ANALYTICS INDIA PVT. LTD. (NOW KNOWN AS GAIN THEORY CONSULTANTS PVT. LTD.) 4 TO REMIT THE OUTSTANDING PAYMENTS TO THE FOREIGN EN TITY NEITHER DURING THE COURSE OF FINANCIAL YEAR NOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. LD. D.R. SUBMITTED THAT THE ASSESSEE APPLIED TO RBI FOR PERMISSION TO REMIT THE PAYMENT ON 01.05.2017 APPROXIMATELY 2 YEARS AFTER THE DATE OF ASSESSMENT ORDER. THE LD. D.R., THEREFORE, ARGUED THAT THE A O HAS RIGHTLY MADE THE ADDITION UNDER SECTION 28(IV) OF THE ACT. THE SAID AMOUNT REPRESENTED THE BENEFIT ACCRUING TO THE ASSE SSEE UNDER SECTION 28(IV) OF THE ACT WAS RIGHTLY ADDED TO THE INCOME OF THE ASSESSEE. THE LD. D.R. SUBMITTED THAT HAD IT BEEN A GENUINE PAYMENT, THE ASSESSEE WOULD HAVE OBTAINED THE PERMI SSION WELL IN TIME AND WOULD HAVE REMITTED THE PAYMENT BUT TH IS WAS ONLY DONE WHEN THE MATTER WAS PENDING BEFORE LD. CIT(A) AND THE EVIDENCES OF REMISSION OF PAYMENT AFTER OBTAINING P ERMISSION FROM RBI WAS FILED BEFORE LD. CIT(A). THOUGH THE L D. CIT(A) HAS CALLED FOR A REPORT FROM AO ON THESE EVIDENCES BUT THE AO CLEARLY DOUBTED THE GENUINENESS OF THE LIABILITY BY SUBMITT ING THAT THERE WAS A HUGE TIME LAG BETWEEN THE PROVIDING OF LIABIL ITY AND ACTUAL PAYMENT OF LIABILITY. UNDER THESE CIRCUMSTANCES TH E ORDER OF LD. CIT(A) MAY KINDLY BE REVERSED AND THAT OF THE AO MA Y BE RESTORED. 5. THE LD. A.R., ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE DID NOT APPLY TO THE RBI FOR OBTAINING PER MISSION TO MAKE PAYMENT AS THERE WAS A LIQUIDITY CRUNCH IN TH E ASSESSEE ASSESSEE COMPANY AND ACCORDINGLY THE PERMISSION WAS APPLIED TO RBI WHEN THE ASSESSEE WAS HAVING FUNDS FOR MAKIN G THE PAYMENT. THE ASSESSEE ALSO FILED DETAILS OF YEARWI SE OUTSTANDING PAYABLE TO OVERSEAS ENTITIES AND SUBMITTED THAT THI S WAS A ITA NO.4203/M/2018 M/S. MERITUS ANALYTICS INDIA PVT. LTD. (NOW KNOWN AS GAIN THEORY CONSULTANTS PVT. LTD.) 5 ROUTINE PHENOMENON IN THE BUSINESS OF THE ASSESSEE. THE LD. A.R. ALSO TOOK US THROUGH THE PROVISIONS OF SECTION 28(IV) OF THE ACT THAT THE SAID SUB SECTION PROVIDES FOR CHARGING TO INCOME TAX THE INCOME IN THE NATURE OF VALUE OF ANY BENEFIT OR PERQUISITE WHETHER BEYOND CONVERTIBLE INTO MONEY OR NOT WHICH AROSE FROM THE BUSINESS OF THE ASSESSEE BUT IN THE PRESENT CAS E THE LD. A.R. SUBMITTED THAT NO SUCH BENEFIT ACCRUED IN FAVOUR OF THE ASSESSEE AS THE ASSESSEE MADE THE PAYMENT IN 2017 AFTER OBTA INING PERMISSION FROM RBI. THE LD. A.R. SUBMITTED THAT A SSESSEE AS WELL AS THE FOREIGN ENTITY RECOGNIZED THE SAID AMOU NT AS PAYABLE AND RECEIVABLE RESPECTIVELY IN THEIR RESPECTIVE ACC OUNTS AND THEREFORE THE ORDER OF LD. CIT(A) IS VERY REASONED AND CORRECT WHICH HAS RECOGNIZED THE FACT THAT THE SAID AMOUNT COULD NOT BE TREATED AS BENEFIT ACCRUING TO THE ASSESSEE IN VIEW OF THE FACT THAT PAYMENT WAS MADE IN THE SUBSEQUENT YEARS. THE LD. A.R., THEREFORE, PRAYED THAT THE ORDER OF LD. CIT(A) MAY KINDLY BE AFFIRMED. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE PAYMENT OUTSTANDING IN THE BOOKS OF ACCOUNTS WAS DUE TO GROUP M. SINGAPORE ON ACCOUNT OF VARIOUS EXPENSES INCURRED BY THE SAID ENTITY ON BEHALF OF THE ASSESSEE AND THE SAID PAYMENT WAS COMING OVER FROM A.Y. 2011 -12 AS IS APPARENT FROM THE DETAILS FILED BY THE ASSESSEE DUR ING THE COURSE OF HEARING. WE OBSERVE FROM THE SAID DETAILS THAT IT IS A REGULAR PHENOMENON IN THE BUSINESS OF THE ASSESSEE THAT SUC H TYPE OF PAYMENTS ARE OUTSTANDING RIGHT FROM A.Y. 2007-08 TO A.Y. 2016- 17. THIS IS UNDISPUTABLE THAT THE PERMISSION WAS A PPLIED ON 01.05.2017 AND THE PAYMENT WAS MADE TO THE FOREIGN ENTITY ITA NO.4203/M/2018 M/S. MERITUS ANALYTICS INDIA PVT. LTD. (NOW KNOWN AS GAIN THEORY CONSULTANTS PVT. LTD.) 6 AFTER THE PERMISSION IS GRANTED BY THE RBI. UNDER THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CI T(A) AND ARE INCLINED TO DISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.2019. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19.12.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.