DCIT 14(2)(1), Mumbai V. M/S MAHANAGAR GAS LTD., Mumbai

ITA 4715/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3670 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P JAYARAMAN
• Assessee Lawyers: BHARAT ANGHLE
• Keywords: Business expenditure; Reason to believe; TDS
• Section: 143(3); 115JB; 40(a)(ia); 194J; 2

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH MUMB AI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ITA NO.4715/MUM/2019 (ASSESSMENT YEAR 2012-13) DCIT- 14(2)(1), ROOM NO.432, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S MAHANAGAR GAS LTD. BLOCK G-33, MGL HOUSE, BKC, BANDRA (E), MUMBAI-40005 1. P AN: AABCM4640G APPELLANT RESPONDENT APPELLANT BY : SHRI BHARAT ANGHLE ( CIT-DR) REVENUE BY : SHRI P.P. JAYARAMAN (AR) DATE OF HEARING : 08.03.2021 DATE OF PRONOUNCEMEN T : 31.05.2021 ORDER PER RAM LAL NEGI, JM; THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-22, MUMBAI [FOR SHORT THE LD. CIT (A)] PERTAINING TO THE ASSESSME NT YEAR (AY) 2012-13, WHEREBY THE CIT(A) HAS PARTLY ALLOWED THE APPEAL FI LED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 1 43(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME FOR THE AY UNDER CONSIDERATION DECLARING TOTAL INCO ME OF RS. 421,94,16,450/-. THE ASSESSING OFFICER (AO) COMPLET ED THE ASSESSMENT ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 2 UNDER SECTION 143(3) OF THE ACT AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 425,26,99,804/- UNDER THE NORMAL PR OVISIONS OF LAW AFTER INTER ALIA MAKING ADDITION OF RS. 270.81 LAKHS UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWING SECONDMENT CHARGES, ADDITION OF RS. 30,00,000/- ON ACCOUNT OF COMPENSATION RECEIVABLE FROM CUSTOMERS ON ACCRUA L BASIS AND RS. 34,53,96,83,301/- AS PER SECTION 115JB OF THE ACT. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE DELETED BOTH THE ADDITIONS BY FOLLOWING TH E DECISION OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS. 3. AGGRIEVED BY THE ORDER PASSED BY LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. THE REVENUE HAS CHALLENGED TH E IMPUGNED ORDER BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE SECONDMENT EXP ENSES ON WHICH TAX WAS NOT DEDUCTED AT SOURCE AND DELETING T HE ADDITION MADE ON THIS ACCOUNT BY THE AO U/S.40(A)(IA) TO THE TUNE OF RS. 2,70,81,000/AND IN NOT APPRECIATING THE FACT THAT C ERTIFICATE FOR NON-DEDUCTION OF TDS WAS NOT OBTAINED BY THE ASSESS EE COMPANY FROM THE APPROPRIATE TDS AUTHORITY FOR THE YEAR UND ER CONSIDERATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .30 LACS MADE BY AO ON ESTIMATED BASIS ON ACCOUNT OF COMPENSATION RE CEIVE FROM CUSTOMERS WITHOUT APPRECIATING THE FACTS THAT THE A SSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, AND HENC E, THE COMPENSATION RECEIVABLE FROM THE CUSTOMERS IS REQUI RED TO BE ACCOUNTED ON ACCRUAL BASIS. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 3 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH THE GROUNDS OF APPEAL ARE COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE ITA NO. 3461/MUM/20 16 FOR THE ASSESSMENT YEAR 2011-12. THE LD. COUNSEL FURTHER SU BMITTED THAT SINCE ITAT HAS DECIDED THE IDENTICAL ISSUES IN FAVOUR OF THE A SSESSEE, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. 5. THE DEPARTMENTAL REPRESENTATIVE (DR) FAIRLY ADMI TTED THAT BOTH THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2011-12, HOWEVER, SUPPORTED THE ORDER PASSED BY THE AO. 6. WE HAVE PERUSED THE MATERIAL ON RECORD INCLUDING THE DECISION OF D BENCH OF THE TRIBUNAL RENDERED IN THE ASSESSEES OW N CASE FOR THE AY 2011- 12. WE NOTICE THAT THE D BENCH OF THE TRIBUNAL HA S DISMISSED THE IDENTICAL ISSUE RAISED BY THE REVENUE WITH REGARD TO THE ADDI TION MADE UNDER SECTION 40(A)(IA) OF THE ACT BY FOLLOWING THE DECISION OF T HE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 658/MUM/2015 FOR THE AY 2010-11. THE RELEVANT PORTION OF THE ORDER PASSED BY THE D BEN CH OF THE MUMBAI TRIBUNAL READ AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE DOCUMENTS ON RECORD IN THE LIGHT OF THE RIVAL CONTENTIONS. WE FI ND THAT GROUND NO 1 OF THE ASSESSEES APPEAL IS COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE ITA NO.658 /MUM/2015FOR THE ASSESSMENT YEAR 2010-11, THE REVENANT PORTION OF TH E ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL READ AS UNDER:- ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 4 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF T HE AUTHORITIES BELOW AND THE CASE LAW RELIED UPON BY THE ASSESSEE. WE FI ND FROM THE MATERIAL PLACED BEFORE US AND THE DECISION OF TRIBUNAL RELIE D UPON BY THE AR THAT THE ISSUE RAISED BY THE REVENUE COVERED IS IN FAVOU R OF THE ASSESSEE IN ASSESSEE'S OWN CASE IN ITA NO. 1945/ MU M/ 2013 (SU PRA). THE OPERATIVE PART IS AS UNDER:- 6 NOW WE GO THROUGH THE CASE LAW CITED BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2012) 340 ITR 333 (BOM), WHEREIN IT HAS BEEN HELD AS UNDER: 31. THE OBJECT OF INTRODUCING SECTION 40(A)(IA), A S EXPLAINED IN THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO. 5, DATED JULY 15 , 2005 SEE [2005J 276 ITR (ST.) 151), IS TO AUGMENT AND CURB BOGUS PA YMENTS. MOREOVER, THOUGH SECTION 194J WAS INSERTED WITH EFFECT FROM J ULY 1, 1995, TILL THE ASSESSMENT YEAR IN QUESTION THAT IS THE ASSESSMENT YEAR 2005-06 BOTH THE REVENUE AND THE ASSESSEE PROCEEDED ON THE FOOTI NG THAT SECTION 194J WAS NOT APPLICABLE TO THE PAYMENT OF TRANSACTION CH ARGES AND ACCORDINGLY DURING THE PERIOD FROM 1995 TO 2005 NEI THER THE ASSESSEE HAS DEDUCTED TAX AT SOURCE WHILE CREDITING THE TRAN SACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE NOR THE REVENUE H AS RAISED ANY OBJECTION OR INITIATED ANY PROCEEDINGS FOR NOT DEDU CTING THE TAX AT SOURCE. IN THESE CIRCUMSTANCES, IF BOTH THE PARTIES FOR NEARLY A DECADE PROCEEDED ON THE FOOTING THAT SECTION 194J IS NOT A TTRACTED, THEN IN THE ASSESSMENT YEAR IN QUESTION, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE UNDER SECTION 194J OF THE ACT AND CONSEQUENTLY, NO ACTION COULD BE TAKEN UNDER SECTIO N 40(A)(IA) OF THE ACT. IT IS RELEVANT TO NOTE THAT FROM THE ASSESSMEN T YEAR 2006-07 THE ASSESSEE HAS BEEN DEDUCTING TAX AT SOURCE WHILE CRE DITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXC HANGE THOUGH NOT AS FEES FOR TECHNICAL SERVICES BUT AS ROYALTY. IT IS F URTHER RELEVANT TO NOTE THAT IT IS NOT THE CASE OF THE REVENUE THAT ON ACCO UNT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE, THE R EVENUE HAS SUFFERED PRESUMABLY BECAUSE, THE STOCK EXCHANGE HAS DISCHARG ED ITS TAX LIABILITY FOR THE ASSESSMENT YEAR IN QUESTION. IN ANY EVENT, IN THE FACTS OF THE PRESENT CASE, IN VIEW OF THE UNDISPUTED DECADE OLD PRACTICE, THE ASSESSEE HAD BONA FIDE REASON TO BELIEVE THAT THE TAX WAS NO T DEDUCTIBLE AT SOURCE UNDER SECTION 194J OF THE ACT AND, THEREFORE, THE A SSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING SECTION 40(A)(IA) OF THE ACT AND DISALLOWING THE BUSINESS EXPENDITURE BY WAY OF TRANSACTION CHARGES INCURRED BY THE ASSESSEE. 32. ACCORDINGLY, WE HOLD THAT THE TRANSACTION CHARG ES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE FEES FOR TECHNICA L SERVICES COVERED UNDER SECTION 194J OF THE ACT AND, THEREFORE, THE A SSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE CREDITING THE TRANSACTIO N CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. HOWEVER, SINCE BOTH THE REVENUE AND THE ASSESSEE WERE UNDER THE BONA FIDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE WE AT SOURCE ON PAYMENT OF TRANS ACTION CHARGES, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTI NG THE TAX AT SOURCE IN ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 5 THE ASSESSMENT YEAR IN QUESTION AND CONSEQUENTLY DI SALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF TH E ACT IN RESPECT OF THE TRANSACTION CHARGES CANNOT BE SUSTAINED. WE MAKE IT CLEAR THAT WE HAVE ARRIVED AT THE ABOVE CONCLUSION IN THE PECULIAR FAC TS OF THE PRESENT CASE, WHERE BOTH THE REVENUE AND THE ASSESSEE RIGHT FROM THE INSERTION OF SECTION 194J IN THE YEAR 1995 TILL 2005 PROCEEDED O N THE FOOTING THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE AND IN FACT IMMEDIATELY AFTER THE ASSESSMENT YEAR IN QUESTION, I.E. FROM TH E ASSESSMENT YEAR 2006-07 THE ASSESSEE HAS BEEN DEDUCTING TAX AT SOUR CE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. 7. WE ALSO FIND THAT THE ISSUE IS COVERED BY THE DE CISION OF ITAT, BANGALORE BENCH IN THE CASE OF IDS SOFTWARE SOLUTIONS (INDIA) (P) LTD. VS. ITO (INTERNATIONAL TAXATION) (2009) 122 TTJ 410 (BANG), WHEREIN THE FACTS DISCUSSED AS REGARDS TO WHERE THE ASSESSEE ENTERED INTO ASECONDMENT AGREEMENT WITH US COMPANY AND OBTAINED THE SERVICES OF AN EMPLOYEE AND THE QUESTION AROSE WHETHER THE REIMBURSEMENT BY S THE ASSESSEE TO THE US COMPANY OF THE SALARY PAID BY THE US COMPANY WAS CHARGEABLE TO TAX AS FESS FOR TECHNICAL SERVICES. IT WAS HEL D THAT THOUGH THE US CO WAS THE EMPLOYER IN A LEGAL SENSE BUT SINCE THE SER VICES OF THE EMPLOYEE HAD BEEN SECONDED TO THE ASSESSEE AND SINCE THE ASS ESSEE WAS TO REIMBURSE THE EMOLUMENTS AND IT CONTROLLED THE SERV ICES OF THE EMPLOYEE, IT WAS THE ASSESSEE WHICH FOR ALL PRACTIC AL PURPOSES WAS NOT CHARGEABLE TO TAX. THOUGH THE PERSON DEPUTED BY THE US CO WAS A TECHNICAL PERSON, THE CONSIDERATION PAID UNDER THE SECONDMENT AGREEMENT WAS NOT FEES FOR TECHNICAL SERVICES BEC AUSE THE FACT THAT THE SECONDED EMPLOYEE WAS RESPONSIBLE AND SUBSERVIE NT TO THE PAYER (ASSESSEE) AND WAS REQUIRED TO BE ALSO ACT AS OFFIC ER OR AUTHORIZED SIGNATORY OR NOMINEE OF THE ASSESSEE MADE IT CONSIS TENT WITH AN AGREEMENT FOR PROVIDING TECHNICAL SERVICES. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DI SMISS THIS ISSUE OF REVENUES APPEAL. RESPECTFULLY FOLLOWING THE ORDER OF COORDINATE BENCH, WE DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE. 8. WE FURTHER NOTICE THAT THE COORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF TH E COORDINATE BENCH PASSED IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009-10. SI NCE, THE COORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE AS SESSEE IN ASSESSEES OWN CASE REFERRED ABOVE, WE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 6 BENCH DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE A ND DISMISS GROUND NO. 1 OF THE REVENUES APPEAL. 7. SINCE THIS BENCH HAS ALREADY DECIDED THE IDENTIC AL ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISIONS OF THE COOR DINATE BENCH IN ASSESSEES APPEAL FOR THE EARLIER ASSESSMENT YEARS AND THERE IS NO MATERIAL CHANGE IN THE PRESENT CASE, WE DO NOT FIND ANY REAS ON TO TAKE A DIFFERENT VIEW IN THIS CASE. THE FINDINGS OF THE LD. CIT(A) A RE IN CONSONANCE WITH THE FINDINGS OF THE TRIBUNAL. HENCE, WE DO NOT FIND MERIT IN THIS GROUND OF THE APPEAL. WE THEREFORE, DISMISS THIS GROUND OF AP PEAL OF THE REVENUE. 8. WE FURTHER NOTICED THAT THE ISSUE REGARDING ADDI TION OF RS. 30,00,000/- MADE BY THE AO ON ESTIMATION BASIS ON A CCOUNT OF COMPENSATION FROM CUSTOMERS, THIS BENCH HAS DELETED THE IDENTICAL ADDITION IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2011-12 DISCUSSED ABOVE BY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH IN ASS ESSEES OWN CASE FOR THE AY 2009-10. THE OPERATIVE PART OF THE SAID ORDER RE ADS ARE AS UNDER: 10. WE FIND THAT THE IDENTICAL ISSUE HAD COME UP B EFORE THE TRIBUNAL AND THE TRIBUNAL HAS SENT BACK THE ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION IN TERM OF THE PRINCIPLES LAID DOWN IN THE ORDER PA SSED IN ITA NO. 6832/MUM/2011 FOR ASST. YEAR 2008-09 VIDE ORDER DAT ED 27.02.2013. THE RELEVANT OPERATIVE PARA OF THE SAID ORDER IS REPROD UCED BELOW: 9. AT THE OUTSET, ID. COUNSEL FOR THE ASSESSEE STA TED THAT THIS ISSUE HAS ALREADY BEEN REMITTED BACK TO THE FILE OF AO IN THE IMMEDIATE PRECEDING YEAR EXACTLY ON IDENTICAL FACTS BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 6832/MUM/2011 FOR ASST. YEAR 2008-09 VIDE ORDER DATED 27.02.2013 AND ON SIMILAR LINE IF THE ISSUE IS REMITTED BACK T O THE FILE OF THE AO THAT WILL SUFFICE THE MATTER. ON QUERY FROM THE BENCH, ID. SR . DR HAS NOT OBJECTED TO THE STAND OF THE ASSESSEE. HENCE, WE DIRECT THE AO TO DECIDE THE ISSUE IN ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 7 TERMS OF THE PRINCIPLES LAID DOWN IN THE ORDER PASS ED IN ITA NO. 6832/MUM/2011 FOR ASST. YEAR 2008-09 VIDE ORDER DAT ED 27.02.2013. THIS ISSUE OF REVENUES APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. 11. IN VIEW OF THE ABOVE, WE ARE INCLINED TO SEND T HE ISSUE BACK TO THE FILE OF THE AO TO DECIDE THE MATTER AFRESH IN TERMS OF RATI O LAID DOWN IN ITA NO. 6832/MUM/2011 (SUPRA). ACCORDINGLY, THE GROUND IS A LLOWED FOR STATISTICAL PURPOSES. 10. IN VIEW OF THE FACT THAT THE COORDINATE BENCH H AS SEND THE IDENTICAL ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN AC CORDANCE WITH THE PRINCIPLES OF LAW LAID DOWN IN THE ORDER PASSED IN ITA NO 6832/MUM/2011 FOR THE ASSESSMENT YEAR 2008-09, WE RESPECTFULLY FO LLOWING THE DECISION OF THE COORDINATE BENCH RENDERED IN THE ASSESSEES CAS E FOR THE ASSESSMENT YEAR 2010-11, SEND THE ISSUE BACK TO THE AO TO DECI DE THE ISSUE AFRESH IN ACCORDANCE WITH THE RATIO LAID DOWN IN ITA NO. 6832 /MUM/2011 REFERRED ABOVE. HENCE, THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 9. SINCE THIS ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2009-10 & 2011-12 AND SINCE THE FINDINGS OF THE LD. CIT(A) ARE IN ACCORDA NCE WITH THE DECISION OF THE TRIBUNAL, WE DO NOT FIND ANY REASON TO INTERFER E WITH THE FINDINGS OF THE LD. CIT(A). WE ACCORDINGLY UPHOLD THE DECISION OF T HE LD. CIT(A) AND DISMISSED THIS GROUND OF APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED ON 31.05.2021 UNDER RULE 34 O F THE ITAT RULES. SD/- SD/- SHAMIM YAHYA RAMLAL NEGI ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 31.05.2021 SK ITA NO. 4715/MUM/2019-M/S MAHANAGAR GAS LTD. 8 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR D BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT , MUMBAI