M/S MASCOT LIFESTYLE PVT LTD., Mumbai V. ITO 10(2)(3), Mumbai

ITA 4456/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4946 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 01-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 4456 / /201 9 ((. . 2015-16. ) ITA NO.4456/MUM/2019 (A.Y.2015-16) M/S. MASCOT LIFESTYLE PVT. LTD., 501, GARDEN VIEW, GULMOHAR ROAD, JUHU, MUMBAI 400 049. PAN: AAGCM 4325D ...... * / APPELLANT ( VS. INCOME TAX OFFICER -10(2)(3), AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ..... +,/ RESPONDENT *-/ APPELLANT BY : SHRI HIMANSHU GANDHI +,-/ RESPONDENT BY : SHRI SANJAY J. SETHI (., / DATE OF HEARING : 04/01/2021 /01 ., / DATE OF PRONOUNCEMENT : 01 /04/2021 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -17, MUMBAI [I N SHORT THE CIT(A)] DATED 20/05/2019 FOR THE ASSESSMENT YEAR 2015-16. 2. SHRI HIMANSHU GANDHI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HEA LTH CLUB AND FITNESS SERVICES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR ON 29/09/2015 DECLARING TOTAL INCOME OF RS.3,56,370/-. IN SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED PAYME NT OF PROFESSIONAL FEES 2 . 4456 / /201 9 ((. .2015-16. ) ITA NO.4456/MUM/2019(A.Y.2015-16 RS.6,35,656/- PAID TO THE DIRECTORS AND DONATIONS O F RS.6,000/- PAID DURING GANESH UTSAV. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE ENTERED INTO A MEMORANDUM OF UNDE RSTANDING WITH KHAR GYMKHANA ON 14/05/2014 FOR PROVIDING PROFESSIONAL P HYSICAL FITNESS PROGRAMME OF CROSSFIT INC., A GLOBAL BRAND FOR FITN ESS SERVICES (PAGE 9 TO 14 OF PAPER BOOK). THE LD.AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE SUBMITTED THAT DHEEPESH BHATT, DIRECTOR OF ASSESSEE COMPANY IS A C ERTIFIED CROSSFIT LEVEL -1 TRAINER (PAGE 17 OF PAPER BOOK) AND MS. PAYAL GOEL IS MBA FROM UNIVERSITY FOR WALES (PAGE 21 OF PAPER BOOK) AND IS MANAGING AFFAI RS OF THE BUSINESS AND GYM. THE ASSESSEE PROVIDED EQUIPMENT AND SPECIALIS ED PROFESSIONAL TRAINING AT KHAR GYMKHANA. THE APPELLANT VIDE BOARD MEETING HELD ON 10/03/2014 RESOLVED TO PAY RS.20,000/- PER MONTH TO EACH OF TH E DIRECTORS W.E.F. 01/05/2014 FOR THE PROFESSIONAL SERVICES. FURTHER, THE ASSESSEE PAID RS.97,828/- TO BOTH THE DIRECTORS TOWARDS PERSONAL TRAINING PROGRAMME. THE ASSESSING OFFICER AND THE CIT(A) HAVE WRONGLY OBSER VED THAT NO DOCUMENTS WERE PLACED ON RECORD TO SUBSTANTIATE THAT THERE WA S AN AGREEMENT BETWEEN THE ASSESSEE AND KHAR GYMKHANA FOR PROVIDING AND MA NAGING GYM AT THE SAID CLUB. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSE SSEE SUBMITTED THAT THE REMUNERATION PAID TO BOTH THE DIRECTORS HAVE BEEN O FFERED TO TAX AND HAS BEEN REFLECTED IN THREE RESPECTIVE RETURN OF INCOME FOR ASSESSMENT YEARS 2015-16. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE R EFERRED TO THE RETURN OF INCOME FILED BY THE DHEEPESH BHATT AT PAGES 18-20 A ND THE RETURN OF INCOME OF PAYAL GOEL AT PAGES 22-23 OF THE PAPER BOOK. THE L D. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ASSERTED THAT THE SA ME INCOME CANNOT BE TAXED TWICE, I.E. ONCE IN THE HANDS OF THE DIRECTORS AND AGAIN IN THE HANDS OF THE 3 . 4456 / /201 9 ((. .2015-16. ) ITA NO.4456/MUM/2019(A.Y.2015-16 ASSESSEE. TO SUPPORT HIS CONTENTIONS THE LD. AR PLA CED RELIANCE ON FOLLOWING DECISIONS: 1. LAXMIPAT SINGHANIA VS. CIT , 71 ITR 291(SC) 2. ITO VS. BACHULAL KAPUR , 60 ITR 74 (SC) 2.1. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESS EE FURTHER SUBMITTED THAT IN THE IMMEDIATE SUCCEEDING ASSESSMENT YEAR I.E. AS SESSMENT YEAR 2016-17, THE PROFESSIONAL FEES PAID TO THE DIRECTORS FOR PRO FESSIONAL SERVICES RENDERED AT KHAR GYMKHANA WAS ALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT PAGE 27 TO 29 OF THE PAPER BOOK. 2.2. IN RESPECT OF DISALLOWANCE OF DONATION RS.6000 /-, THE LD.AR SUBMITTED THAT THE DONATION WAS MADE DURING GANESH UTSAV ON A CCOUNT OF COMMERCIAL EXPEDIENCY. THE NAME OF ASSESSEE WAS DISPLAYED IN THE LIST OF DONORS IN GANESH PANDAL. THE DISPLAY OF ASSSESSEES NAME WAS A SORT OF ADVERTISEMENT. 3. PER CONTRA, SHRI SANJAY J. SETHI REPRESENTING T HE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSI NG THE APPEAL BY ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ACCOUNTS MANAGER OF KHAR GYMKHANA EXPRESSLY STATED THAT SHRI KIRNAY ASHWIN BHATT IS HEAD TRAINER AT KHAR GYMKHAN AND PROFESSIONAL FEES IS PAID TO HIM FOR THE SERVICES OFFERED BY HIM. THE ASSESSEE FAILED TO PRO VIDE ANY DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFICER OR THE CIT(A) REGARDING AGREEMENT WITH KHAR GYMKHANA. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE FAILED TO PROVIDE ANY DOCUMENTARY EVID ENCE WITH RESPECT TO DONATION OF RS.6000/-. IN THE ABSENCE OF ANY DOCUM ENTARY EVIDENCE, THE 4 . 4456 / /201 9 ((. .2015-16. ) ITA NO.4456/MUM/2019(A.Y.2015-16 ASSESSING OFFICER MADE DISALLOWANCE OF PROFESSIONAL FEES PAID TO THE DIRECTORS AND THE DONATION. 4. BOTH SIDES HEARD, ORDERS OF AUTHORITIES BELOW EX AMINED. THE ASSESSEE IN APPEAL HAS RAISED TWO GROUNDS. THE FIRST GROUND IS IN RESPECT OF DISALLOWANCE OF RS.6,35,656/- ALLEGEDLY PAID AS PROFESSIONAL FEES T O THE DIRECTORS OF THE ASSESSEE COMPANY. THE ASSESSEE HAS PAID PROFESSIONA L FEE TO ITS DIRECTORS AS UNDER:- S.NO. NAME OF THE DIRECTOR SHARE OF REVENUE FOR KHAR GYMKHANA REVENUE SHARE WITH THE TRAINERS TOTAL 1. DEEPESH BHATT 2,20,000 97,828 3,17,828 2. PAYAL SHAHIDADPURY (GOEL) 2,20,000 97,828 3,17,828 TOTAL 4,40,000 1,95,656 6,35,656 5. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE P AYMENT OF PROFESSIONAL FEE HAS BEEN DISALLOWED PRIMARILY FOR THE REASON TH AT THE ASSESSEE HAS NOT SUPPORTED HIS CONTENTIONS WITH DOCUMENTARY EVIDENCE . THE ASSESSEE HAS FIELD MEMORANDUM OF UNDERSTANDING (MOU) WITH KHAR GYMKHAN A AT PAGE 9 TO 14 OF THE PAPER BOOK. AN EXAMINATION OF MOU REVEALS TH AT THE ASSESSEE WAS TO EXTEND PROFESSIONAL PHYSICAL FITNESS PROGRAMME OF CROSSFIT INC. FOR THE BENEFIT OF KHAR GYMKHANA MEMBERS. THE ASSESSEE WAS RESPONSI BLE FOR ESTABLISHING AND OPERATING FITNESS PROGRAMME, PROVIDE QUALIFIED EXPERIENCED PROFESSIONALS FOR FITNESS SERVICES, LIABLE FOR PAYMENT OF WAGES A ND COMPENSATION TO STAFF/TRAINERS DEPLOYED AT KHAR GYMKHANA FITNESS CE NTRE, SOURCE NECESSARY MATERIALS, PRODUCTS & EQUIPMENT FOR TRAINING PROGRA MME, ETC. FOR THE SERVICES RENDERED, THE ASSESSEE WAS ENTITLED TO RECEIVE 70% SHARE IN CHARGES (EXCLUDING SERVICE TAX) COLLECTED BY KHAR GYMKHANA FROM ITS ME MBERS AND 80% OF CHARGES 5 . 4456 / /201 9 ((. .2015-16. ) ITA NO.4456/MUM/2019(A.Y.2015-16 COLLECTED FROM NON-MEMBERS. THE SAID MOU CLEARLY IN DICATES THAT THE ASSESSEE WAS TO EXTEND PROFESSIONAL FITNESS SERVICES TO KHAR GYMKHANA. THE ASSESSEE HAS ALSO FURNISHED A COPY OF BOARD RESOLUTION DATED 10/03/2014 (AT PAGE 15 OF THE PAPER BOOK ) ALLOWING PAYMENT OF RS.20,000/- PE R MONTH TO EACH OF THE DIRECTORS OF THE ASSESSEE COMPANY I.E. DHEEPESH ASH VIN BHATT AND PAYAL GAURAV GOEL FOR THE SERVICES RENDERED AT KHAR GYMKH ANA. THE LD. AR OF THE ASSESSEE HAS CERTIFIED THAT THE DOCUMENTS FILED BEF ORE THE TRIBUNAL IN PAPER BOOK WERE AVAILABLE BEFORE THE ASSESSING OFFICER/CI T(A). THE DOCUMENTS ON RECORD CLEARLY INDICATE THAT THE A SSESSEE WAS TO PROVIDE FITNESS SERVICES AT KHAR GYMKHANA, THE PAYM ENTS WERE MADE TO THE DIRECTORS IN ACCORDANCE WITH THE BOARD RESOLUTION F OR PROFESSIONAL SERVICES RENDERED AT KHAR GYMKHANA. THE ASSESSEE HAS FILED S UFFICIENT EVIDENCE IN THE FORM OF EDUCATIONAL/PROFESSIONAL QUALIFICATION CERT IFICATES OF THE DIRECTORS TO SHOW THAT THE DIRECTORS WERE PROFESSIONALLY QUALIFI ED TO PROVIDE THE SERVICES. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE H AS POINTED THAT IN THE SUBSEQUENT ASSESSMENT YEAR THE PROFESSIONAL FEE PAI D TO THE DIRECTORS HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN SCRUTINY A SSESSMENT PROCEEDINGS ON SAME SET OF DOCUMENTS. IT IS NOT THE CASE OF REVENU E THAT THE PROFESSIONAL FEES PAID TO THE DIRECTORS IS IN EXCESS OF THE MARKET RA TE. I FIND MERIT IN THE CONTENTIONS RAISED BY THE ASSESSEE. THE DISALLOWANC E OF PAYMENT OF PROFESSIONAL FEE TO THE DIRECTORS IS UNJUSTIFIED, H ENCE, THE SAME IS DIRECTED TO BE DELETED. IT WOULD BE RELEVANT TO MENTION HERE T HAT BOTH THE DIRECTORS IN THEIR RESPECTIVE RETURN OF INCOME HAS OFFERED PROFE SSIONAL FEE RECEIVED FROM THE ASSESSEE TO TAX. CONSEQUENTLY, GROUND NO.1 OF T HE APPEAL IS ALLOWED. 6 . 4456 / /201 9 ((. .2015-16. ) ITA NO.4456/MUM/2019(A.Y.2015-16 6. IN GROUND NO.2 OF THE APPEAL, THE ASSESSEE HAS A SSAILED DISALLOWANCE OF DONATION RS.6,000/-. THE ASSESSING OFFICER MADE DIS ALLOWANCE AS NO DOCUMENTARY EVIDENCE WAS FILED BY THE ASSESSEE IN T HE FORM OF RECEIPT, ETC. TO SUBSTANTIATE THE DONATION MADE. EVEN BEFORE THE TRI BUNAL NO EVIDENCE IS PRODUCED BY THE ASSESSEE. IN THE ABSENCE OF ANY EV IDENCE GROUND NO.2 OF THE APPEAL IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THURS DAY , THE 01 ST DAY OF APRIL, 2021. SD./- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, 3(/ DATED: 01/04/2021 VM , SR. PS (O/S) 7 . 4456 / /201 9 ((. .2015-16. ) ITA NO.4456/MUM/2019(A.Y.2015-16 COPY OF THE ORDER FORWARDED TO : 1. * / THE APPELLANT , 2. +, / THE RESPONDENT. 3. 4, ( )/ THE CIT(A) 4. 4, CIT 5. 56+,( , . . . , / DR, ITAT, MUMBAI 6. 6789: / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI