KOTAK MAHINDRA INVESTMENT LTD, MUMBAI V. DCIT RG 3(2), MUMBAI

ITA 4644/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92232 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: F V IRANI
• Keywords: Business expenditure

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.4644/MUM/2012, ! ! ! ! / ASSESSMENT YEAR-2007-08 M/S KOTAK MAHINDRA INVESTMENT S LTD. 36-38A NARIMAN BHAVAN, 227, NARIMAN POINT, MUMBAI-400021 PAN:AAACH1075K VS DCIT RANGE 3(2), AAYKAR BHAVAN,M K ROAD, MUMBAI-20 ( '# / ASSESSEE) ( $%'# / RESPONDENT) &' &' &' &' ( ( ( ( /ASSESSEE BY :SHRI F.V.IRANI ) ( / REVENUE BY :SHRI NEIL PHILIP ) )) ) '* '* '* '* / DATE OF HEARING : 01 - 04 -2015 +,! ) '* / DATE OF PRONOUNCEMENT : 01 -04-2015 , 1961 ) )) ) 254(1) '-' '-' '-' '-' . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. : CHALLENGING THE ORDER DT.25.04.2012 OF THE CIT(A)-4 ,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUND NO. I - FBT IS NOT CHARGEABLE WHEN THERE IS NO FRINGE BENEFIT PROVIDED TO THE EMPLOYEES 1. THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 ('H EREINAFTER REFERRED AS TO THE CIT(A)'') ERRED IN HOLDING THAT EXPENDITURE OF RS.90,83,635 INCURRED B Y THE APPELLANT ON TRAVEL, HOTEL STAY, CONFERENCE EXPENSES, WAS LIABLE TO LEVY OF FRINGE B ENEFIT TAX (FBT). 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMO UNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO. II -TRAVEL EXPENSES (DOMESTIC & FOREIGN) 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS.65,35,809 INCURRED BY THE APPELLANT ON FOREIGN TRAVEL WAS LIABLE TO THE LEVY OF FRINGE BEN EFIT TAX AS THIS EXPENSES DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE THE BENEFIT, IF ANY, WAS NOT COLLECTIVE IN NATURE AND THEREFORE DID NOT FALL WITHIN THE SCOPE OF FBT. 3. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMO UNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO.III - TOURS & TRAVEL (HOTEL STAY) 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS.9,92,610 INCURRED BY THE APPELLANT ON BOARDING AND LODGING WAS LIABLE TO THE LEVY OF FBT AS THIS EXPENSE DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE THE BENEFIT, IF ANY, WAS NOT COLLECTIVE IN NATURE AND THEREFORE DID NOT FALL WITHIN THE SCOPE OF FBT. 3. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMO UNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO.IV - CONFERENCE & MEETING 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS.15,55,216 INCURRED BY THE APPELLANT ON CONFERENCE AND MEETING WAS LIABLE TO THE LEVY OF FB T AS THIS EXPENSE DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMO UNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AS MAY BE ADVISED IN DUE COURSE. 2 ITA NO.4644/M/12 M/S KOTAK MAHINDRA INVESTMENTS LTD . 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF COMMODI TIES BROKING,FILED ITS RETURN OF FRINGE BENEFIT TAX (FBT) ON 30.10.2007 DISCLOSING T HEIR VALUE OF FB TO THE EXTENT OF RS.3.54 LAKHS.ASSESSING OFFICER(AO)FINALISED THE ASSESSMENT ORDER U/S.115WE(3) ON 17.12.2009 DETERMINING THE TOTAL VALUE OF FB AT 13.23 LAKHS. F ROM THE TAX AUDIT REPORT THE AO FOUND THAT THE ASSESSEE HAD COMPUTED FB ON FOLLOWING EXPE NSES. S.NO. NATURE EXPENSES EXP AMOUNT RS. % OF EXPENSES VALUE OF FRINGE BENEFIT 1 ENTERTAINMENT 145,378 20% 29,076 2 EMPLOYEE WELFARE 825,406 20% 165,081 3 MOTOR CAR EXPENSES 803,197 20% 160,639 1,773,981 354,796 AS REGARDS REMAINING VALUE OF FB AMOUNTING TO RS. 9 7.44 LAKHS IT WAS STATED THAT THE VALUE OF FOLLOWING BENEFITS WAS NOT LIABLE FOR FBT. S.NO. NATURE EXPENSES EXP AMOUNT RS. % OF EXPENSES VALUE OF FRINGE BENEFIT 1 TELEPHONE / FAX 75,523 20% 15,105 2 TRAVEL EXPENSES DOMESTIC & FOREIGN 6,535,809 5% 326,790 3 CONVEYANCE EXPENSES 585,007 20% 117,001 4 CONFERENCE & MEETING 1,555,216 20% 311,043 5 HOTEL STAY 992,610 20% 198,522 TOTAL 9,744,165 968,462 IT WAS CONTENDED BY THE ASSESSEE THAT THE ABOVE EXP ENDITURE WERE ADMISSIBLE AS DEDUCTIBLE BUSINESS EXPENDITURE, THAT SAME WERE NOT PRIVILEGED /SERVICE/BENEFIT/AMENITY DIRECTLY OR INDIRECTLY TO ITS EMPLOYEES, THAT SAME WERE NOT LIA BLE FOR FBT. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEE AND HELD THAT FBT WAS PRESU MPTIVE TAX, THAT A PRESUMPTIVE METHOD WAS APPLIED TO CERTAIN HEAD OF EXPENDITURE. FINALLY , HE HELD THAT EXPENSES INCURRED ON TELEPHONE, TRAVEL, CONVEYANCE AND CONFERENCE AND ME ETINGS AMOUNTING TO RS. 9.68 LAKHS WAS LIABLE TO TAX FOR FB. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). AFTER CONSIDERING THE SUB MISSION AND OF ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT SIMILAR ISSUE WERE D ECIDED BY THE THEN FAA WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR AY 2006-07, THAT S IMILAR ISSUES AND FACTS WERE INVOLVED IN A GROUP CASE NAMELY M/S KOTAK MAHINDRA CAPITAL CO. LT D. FOR AY.S. 2006-07 AND 2007-08, THAT ONLY EXPENDITURE ON A FIXED TELEPHONE AND ON T RAVELLING DURING OFFICE HOURS BY EMPLOYEES FOR BUSINESS, INCLUDING CAR HIRE WAS OUTS IDE THE SCOPE OF FBT, THAT FOR OTHER ITEMS OF EXPENDITURE THE DECISION OF THE AO WAS TO RECONF IRMED. 3 ITA NO.4644/M/12 M/S KOTAK MAHINDRA INVESTMENTS LTD . BEFORE US, THE AR CONTENDED THAT IN THE CASE OF THE ASSESSEE AS WELL AS OTHER GROUP CONCERNS THE TRIBUNAL HAD PASSED ORDERS AND HAD RESTORED THE MATTER TO THE FILE OF THE AO, HE REFERRED TO THE ORDER DATED 16.01.2013 IN THE CASE OF KOTAK COMMODITY SERVICES (ITA/7271/ MUM/ 2010-AY- 2006-07), M/S KOTAK MAHINDRA ASSET MANAGEM ENT CO. LTD. (ITA/7272/ MUM/ 2010-AY-2006-07), KOTAK MAHINDRA INVESTMENT LTD. (I TA/7273/MUM/2010-AY-2006-07), KOTAK MAHINDRA CAPITAL CO. LTD. (ITA/7334/MUM/2010- AY-2006-06) & ORS. HE FURTHER STATED THAT IN ALL THE ABOVE MENTIONED CASES THE MA TTER OF KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE(ITA/63/MUM/2010-AY-2006-07) HAD BEEN FOLL OWED. THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETIO N OF THE BENCH. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE ABOVE REFERRED APPEALS THE TRIBUNAL HAD HELD AS UND ER: 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT SIMILAR ISSUES CAME UP FOR HEARING BEFORE THE TRIBUNAL IN ITA NO.63/MUM/2010 I N THE CASE OF KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD., FOR A.Y. 2006-07 WHEREIN THE TRIBUNAL WHILE D ISCUSSING THE LEVY OF FBT ON DEEMING PROVISION OF SEC. 115WB(2) WHICH PROVIDES FOR CERTAIN EXPENDI TURES INCURRED BY THE EMPLOYER, FRINGE BENEFIT ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEE. THE TRIBUNAL AT PARA-10 HELD AS UNDER: '10. SUB-SECTION (2) OF SECTION 115WB IS A DEEMING PROVISION WHERE CERTAIN EXPENDITURES INCURRED BY THE EMPLOYEE, FRINGE BENEFIT ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEE. IN OUR OPINION, SUB-SECTION (2) OF SECTIO N 115WB WHICH DEFINES 'FRINGE BENEFIT' UNDER CHAPTER-XII-H, CONTROL SUB-SECTION (2) AND ANY EXPE NDITURE INCURRED BY AN EMPLOYER IN THE COURSE OF HIS BUSINESS OR PROFESSION, WHICH IS NOT A CONSI DERATION FOR EMPLOYMENT, CANNOT BE CONSIDERED AS 'FRINGE BENEFIT'. THUS, THE DEEMING PROVISIONS O F SUB-SECTION 2 OF SECTION 115WB, APPLIES ONLY WHEN THE EXPENDITURE IS IN THE NATURE OF CONSIDERED FOR EMPLOYMENT. THUS, WHILE RESTORING THE ISSUE BACK TO THE FILE OF AO FOR ADJUDICATION AFRES H, WE DIRECT THE AO TO APPLY THE PROPOSITION OF LAW AS INTERPRETED BY US WHILE DETERMINING THE VALU E OF FRINGE BENEFIT. ON THE ISSUE OF EXPENDITURE INCURRED ON CONFERENCE AND MEETINGS, THE AO SHALL C ONSIDER BIFURCATION SUBMITTED TO HIM WITH RESPECT TO THE EXPENDITURE INCURRED ON THE AGENTS A ND BROKERS AND PASS APPROPRIATE ORDERS. 'FRINGE BENEFIT' CANNOT ARISE WHEN EXPENDITURE IS I NCURRED ON PERSONS WHO ARE NOT EMPLOYEES. ON THE ISSUE OF CLUB MEMBERSHIP FEE, THE PAYMENTS MADE TO LIMRA AND ACTUARIAL SOCIETY OF INDIA, ARE TO BE EXCLUDED AS THEY ARE NO PAYMENTS TO CLUBS. WI TH THESE OBSERVATIONS, WE RESTORE THE ISSUE BACK TO THE FILE OF AO FOR ADJUDICATION AFRESH.' 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER DRE W OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ITA NO. 5251/M/2010 AND POINTED OUT THAT THE TRIBUN AL HAS FOLLOWED THE DECISION IN ITA NO. 63/M/10. FACTS AND ISSUES BEING IDENTICAL, THE LD. COUNSEL REQUESTED TO FOLLOW THE DECISION OF THE TRIBUNAL AS CITED HEREINABOVE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCE DED. 6. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ITA NOS. 63/M/10 AND 5151/M/10 (SUPRA), WE RESTORE THESE ISS UES BACK TO THE FILES OF THE AO FOR ADJUDICATION AFRESH IN THE LIGHT OF THE OBSERVATION S MADE BY THE TRIBUNAL IN ITA NO. 63/M/10. RESPECTFULLY,FOLLOWING THE ABOVE, APPEAL FILED BY T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 0'1 &' 2 3 ) - 4) 567 8 ) ' 9: . ORDER PRONOUNCED IN THE OPEN COURT ON 1ST MARCH,201 5. 4 ITA NO.4644/M/12 M/S KOTAK MAHINDRA INVESTMENTS LTD . . ) +,! ; < 01.04. 2015 , ) - = SD/- SD/- ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, < /DATE: 01.04.2015 SK . . . . ) )) ) $'> $'> $'> $'> ?>!' ?>!' ?>!' ?>!' / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / '# 2. RESPONDENT / $%'# 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR A BENCH, ITAT, MUMBAI / >B- $' , , . . . 6. GUARD FILE/ - 0 %>' $' //TRUE COPY// . / BY ORDER, 5 / 9 DY./ASST. REGISTRAR , /ITAT, MUMBAI.