DCIT CIR 3(3), MUMBAI V. SAHARA ASSET MANAGEMENT COMPANY P.LTD, MUMBAI

ITA 451/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5794 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY MEHTA IZRFKHZ DH LS
• Keywords: Additional evidence
• Section: 143(3); 37(1)

Judgement Text

- 1 - VK;DJ VIHYH; VF/KDJ.K BZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI JH VKJ JH VKJ JH VKJ JH VKJ- -- - LH LHLH LH- -- - 'KEKZ] YS[KK LNL; ,OA MK0 ,L 'KEKZ] YS[KK LNL; ,OA MK0 ,L 'KEKZ] YS[KK LNL; ,OA MK0 ,L 'KEKZ] YS[KK LNL; ,OA MK0 ,L- -- - VH VHVH VH- -- - ,E ,E,E ,E- -- - IOYU] IOYU] IOYU] IOYU] U;KF;D LNL; DS LE{K U;KF;D LNL; DS LE{K U;KF;D LNL; DS LE{K U;KF;D LNL; DS LE{K BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND DR. S.T. M PAVALAN, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO.451/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR 2006-07. ASSISTANT COMMISSIONER OF INCOME TAX, CIR- 3(3), ROOM NO. 609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20 CUKE@ VS. M/S. SAHARA ASSET MANAGEMETN COMPANY PVT. LTD. 9 TH FLOOR, 97-98 ATLANTA,L NARIMAN POINT, MUMBAI 400 021. PAN:- AAACF1696A VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASSESSEE BY SHRI VIJAY MEHTA IZR;FKHZ DH VKSJ LS @ REVENUE BY SHRI R.K. SAHU VKNS'K VKNS'K VKNS'K VKNS'K @ @@ @ ORDER PER R.C. SHARMA, AM. THIS IS AN APPEAL, FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 28.09.2011 FOR A.Y. 2006-07, IN THE MATTER O F ORDER PASSED U/S 143(3) READ WITH SECTION 250 OF THE IT ACT. FOLLOWI NG GROUNDS HAVE BEEN TAKEN BY THE REVENUE:- LQUOKBZ DH RKJH[K @ DATE OF HEARING 16 - 01 - 2014 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 16 - 01 - 2014 - 2 - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS . 20,58,728/- MADE U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE NA TURE OF EXPENSES CLAIMED IS ADVERTISING & PUBLICITY, DISTRIBUTION, MARKETING A ND CONSULTANCY ETC., WHICH IS CLEARLY LIABLE FOR TDS U/S 194 J OF THE IT ACT I N VIEW OF CBDTS CIRCULAR NO. 715 DATED 8 TH AUGUST 1995. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. THE APPELLANT CRAVES LEAD TO AMEND OR ALTER ANY GRO UND OR ADD A NEW GROUND WHICH MAY BE NECESSARY 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF ASSET MANAGEMENT AND INVESTMENT ADVISORY SERVICES. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO NOTICED THAT ASSESSEE HAS NOT DE DUCTED TAX AT SOURCE IN RESPECT OF FOLLOWING EXPENSES:- RS. NANDAN CATERERS FOR SPONSORSHIP 75,000 PRESTIGE ADS 35,460 SECURITY INVESTMENT LIMITED 20,500 V.S. INFRASTRUCTURE CAPITAL 5,90,000 SIFCL 2,41,92 8 INDIA INFOLINE 1,09,350 M/S P.H. FINANCIAL AND INVESTMENT 4,50,000 STRATCAP SECURITIES 1,30,240 CENTRUMDIRECT LIMITED 50,000 INDIA INFOLINE-REPAID 71,250 A.K. CAPITAL 3,30,000 AKASA SECURITIES LTD 30,000 TOTAL 21,33,728 AS PER AO, ASSESSEE WAS REQUIRED TO DEDUCT TAX ON T HESE PAYMENTS. THE ASSESSEE HAS FAILED TO DEDUCT THE TDS. THE ASSESSEE HAS ALSO NOT BEEN - 3 - ABLE TO EXPLAIN AS TO WHY THE TDS WAS NOT DEDUCTED ON THESE PAYMENTS. THEREFORE, KEEPING IN VIEW THE PROVISIONS OF SECTIO N 40(A), THE EXPENDITURE AMOUNTING TO RS. 21,33,728/- WAS DISALL OWED BY AO. 3. BEFORE THE CIT(A), ASSESSEE FILED ADDITIONAL EVI DENCE IN SUPPORT OF HIS CONTENTION THAT ABOVE EXPENDITURE WAS ACTUALLY REIMBURSEMENT OF EXPENSES AND NOT INCURRED BY ASSESSEE ITSELF. CIT(A ) SENT THE ADDITIONAL EVIDENCE TO THE AO FOR HIS COMMENTS. VIDE ORDER DAT ED 25.3.2011, THE AO SENT HIS REMAND REPORT WHEREIN FOLLOWING WAS THE OBSERVATION WITH RESPECT TO THE ADDITIONAL EVIDENCE FILED BEFORE CIT (A):- IN CONNECTION WITH CLAIM OF REIMBURSEMENT EXPENDITU RE, IT IS NOTICED FROM DETAILS THEREOF THAT ASSESSEE HAS NOT FURNISHED COP IES OF BILLS, COPIES OF BANK STATEMENT SHOWING THE PAYMENT BY DIFFERENT PARTIES TO WHOM SUCH AMOUNT IS REIMBURSED. THE DETAILS WHICH WERE FURNISHED BY THE ASSESSEE ARE SELF SERVING DOCUMENTS. IT IS FURTHER NOTICED FROM SELF GENERATED DOCUMENTS THAT NATURE OF SUCH EXPENDITURE ARE OF ADVERTISEMENT AND PUBLICITY, DISTRIBUTION EXPENDITURE, MARKETING EXPENDITURE, CONSULTANCY EXP ENDITURE, PROMOTIONAL ACTIVITIES WHICH ARE ATTRACTING THE DEDUCTION OF TA X AT SOURCES UNDER THE I.T. ACT. IN THESE CIRCUMSTANCES, EXPENDITURE OF RS. 21, 33,728/- ON ACCOUNT OF REIMBURSEMENT EXPENDITURE IS NEITHER ALLOWABLE U/S 37(1) NOR 40(A) OF THE ACT. 4. BY THE IMPUGNED ORDER CIT(A) DELETED THE DISALLOWAN CE, ACCEPT THE DISALLOWANCE OF PAYMENT OF RS. 75,000 MADE TO M/S Y OKOGAWA INDIA LTD, AFTER HAVING FOLLOWING OBSERVATIONS:- I HAVE CONSIDERED THE AOS ORDER AS WELL AS APPEL LANT ARS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT THESE PAYMENTS ARE MADE BY THE APPELLANT COMPANY IN RELATION TO DIFFERENT BILLS RA ISED BY DIFFERENT ENTITIES ON ACCOUNT OF EXPENSES INCURRED ON VARIOUS HEADS SUCH AS MARKETING EXPENSE - 4 - FOR PROMOTION AND MOBILIZATION OF SAHARA MUTUAL FUN D WHICH WAS THE PRIMARY BUSINESS ACTIVITY OF THE APPELLANT COMPANY AND ACCORDINGLY THE SAME WERE REIMBURSED BY THE APPELLANT COMPANY IN TH E COURSE OF BUSINESS ACTIVITIES OF THE APPELLANT COMPANY. I FIND THAT ON E PAYMENT OF RS. 75,000/-, MADE BY THE APPELLANT COMPANY TO YOKOGAWA INDIA LTD . WAS ON ACCOUNT OF SAMMILANA 2006 ORGANIZED BY THAT COMPANY WHICH HA S NOT RENDERED ANY BUSINESS BENEFIT TO THE APPELLANT COMPANY ON ACCOUN T OF SUCH ACTIVITIES AND HENCE IN MY CONSIDERED VIEW THIS PAYMENT OF RS. 75, 000/- IS NOWHERE INCURRED OR REIMBURSED BY THE APPELLANT COMPANY ON ACCOUNT OF BUSINESS EXIGENCY. HENCE THE ADDITION TO THIS EXTENT OF RS. 75,000/- IS CONFIRMED AS THE SAME WAS NOT INCURRED ON ACCOUNT OF BUSINESS PU RPOSES BUT HOWEVER TAKING NOTE OF THE DECISIONS REFERRED BY THE APPELL ANT COMPANY IN ITS SUBMISSION, WHEREIN IT HAS BEEN HELD THAT REIMBURSE MENT OF EXPENSES WILL NOT ATTRACT THE TDS PROVISION. TAKING NOTE OF ALL T HESE FACTS, THE APPELLANT THIS GROUND OF APPEAL IS PARTLY ALLOWED SUBJECT TO AN ADDITION OF RS. 75,000/- WHICH IS CONFIRMED BEING REIMBURSEMENT OF EXPENSES ON ACCOUNT OF PAYMENT TO YOKOGAWA INDIA LTD. THUS APPELLANTS THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND HAVE CA REFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND F ROM RECORD THAT ASSESSEE HAS DEBITED RS. 21,33,728/- IN THE P&L AC COUNT IN RESPECT OF EXPENDITURE ALLEGED TO BE INCURRED ON ADVERTISEMENT , DISTRIBUTOR EXPENSES ETC. AS PER ASSESSEE NO TDS WAS REQUIRED T O BE DEDUCTED ON SUCH PAYMENTS. BEFORE CIT(A) THE MAIN CONTENTION OF THE ASSESSEE WAS THAT IT WAS MERELY A REIMBURSEMENT OF EXPENSES FOR WHICH ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. THESE ADDITIONA L EVIDENCES WERE SENT BY CIT(A) TO THE AO FOR HIS COMMENTS. AFTER EXAMINA TION OF ADDITIONAL - 5 - EVIDENCES, THE AO FOUND THAT THE ASSESSEE HAS NOT F URNISHED COPIES OF BILLS, COPIES OF BANK STATEMENT SHOWING THE PAYMENT BY DIFFERENT PARTIES TO WHOM SUCH AMOUNT WAS REIMBURSED. AS PER AO THE D ETAILS WHICH WERE FURNISHED BY THE ASSESSEE WERE NOTHING BUT SELF SER VING DOCUMENTS. AO FURTHER OBSERVED THAT AS PER SELF GENERATED DOCUMEN TS FILED BY ASSESSEE, THE NATURE OF SUCH EXPENDITURE WAS OF ADVERTISING & PUBLICITY, DISTRIBUTION EXPENDITURE, MARKETING EXPENDITURE, CONSULTANCY EXP ENDITURE, PROMOTIONAL ACTIVITIES WHICH ARE ATTRACTING THE DED UCTION OF TAX AT SOURCE. AS NO TAX WAS DEDUCTED ON SUCH PAYMENTS, THE AO HEL D THAT THESE ARE NOT ALLOWABLE U/S 37(1) NOR 40(A) OF THE IT ACT. HO WEVER, CIT(A) HAS DELETED THE DISALLOWANCE BY OBSERVING THAT ACCEPT P AYMENT OF RS. 75,000/-, THE BALANCE PAYMENT WAS TOWARDS REIMBURS EMENT OF EXPENSES WHICH DOES NOT ATTRACT THE TDS PROVISIONS. IT WAS A RGUED BY LD. DR THAT CIT(A) HAS NOT EXAMINED THE NATURE OF EXPENDITURE W ITH REFERENCE TO DISALLOWANCE MADE ORIGINALLY AS WELL AS REMAND REPO RT SENT BY THE AO WHEREIN THE AO HAS CLEARLY OBSERVED THAT ASSESSEE H AS NOT FURNISHED COPIES OF BILLS, COPIES OF BANK STATEMENT SHOWING T HE PAYMENT BY DIFFERENT PARTIES TO WHOM SUCH AMOUNT IS REIMBURSED . AS PER LD. DR EVEN THE ALLOWABILITY OF EXPENDITURE UNDER THE PROVISION S OF SECTION 37(1) WAS NOT EXAMINED BY CIT(A) BEFORE DELETING THE DISALLOW ANCE. 7. ON THE OTHER HAND LD. AR CONTENDED THAT GROUND T AKEN BY THE REVENUE ITSELF IS NOT SUSTAINABLE IN SO FAR AS THES E EXPENDITURES WERE NOT LIABLE TO TDS U/S 194J. LD. AR ALSO FURNISHED CITAT IONS OF JUDICIAL PRONOUNCEMENTS WITH REGARD TO LIABILITY OF TDS IN C ASE OF REIMBURSEMENT OF EXPENSES. 8. AFTER CONSIDERING ALL THE MATERIAL PLACED ON REC ORD, WE FOUND THAT BEFORE DELETING THE DISALLOWANCE CIT(A) HAS NOT CON SIDERED THE - 6 - OBSERVATIONS IN THE REMAND REPORT OF AO TO THE FAC T THAT ASSESSEE HAS NOT FURNISHED COPIES OF BILLS, COPIES OF BANK STATE MENT SHOWING THE PAYMENT BY DIFFERENT PARTIES TO WHOM SUCH AMOUNT IS REIMBURSED. THERE IS NO DISPUTE TO THE WELL SETTLED PROPOSITION THAT WHILE CLAIMING ANY EXPENDITURE, ONUS IS ON THE ASSESSEE TO PROVE THAT EXPENDITURE WAS INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS A ND FURTHER WHERE SUCH EXPENDITURE/AMOUNT REQUIRES DEDUCTION OF TAX AT SOU RCE, AND IF THE SAME IS NOT DEDUCTED, SUCH EXPENDITURE CANNOT BE ALLOWED . FURTHER NO CLEAR FINDING HAS BEEN RECORDED BY CIT(A) TO THE EFFECT T HAT HE HAS EXAMINED COPIES OF BILLS OF EXPENSES SO INCURRED AND NO EVID ENCE WAS REFERRED BY CIT(A) TO INDICATE THAT THE PAYMENT WAS ACTUALLY TO WARDS REIMBURSEMENT OF EXPENSES INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. WE ARE, THEREFORE, INCLINED TO RESTORE THE MATTER BACK TO T HE FILE OF AO FOR EXAMINING THE MATTER AFRESH, THE NATURE OF EXPENDIT URE VIS--VIS FACT OF REIMBURSEMENT OF EXPENSES BY ASSESSEE TO THE PARTIE S WHO HAVE ACTUALLY INCURRED THE SAME ON BEHALF OF THE ASSESSEE. AO IS TO DECIDE THE MATTER AFRESH. 9. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 16/01/2014 SD/- SD/- (DR. S.T.M. PAVALAN) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 16 /01/2014 SKS SR. P.S - 7 - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI