GRAMEEN CAPITAL INDIA LTD., MUMBAI V. ACIT 12(2)(2), MUMBAI

ITA 5231/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9693 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 19-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5231/M/2016 ASSESSMENT YEAR: 2012-13 M/S. GRAMEEN CAPITAL INDIA LTD., 402, 5 TH FLOOR, 36 TURNER ROAD, OPP. TAWA HOTEL, BANDRA (W), MUMBAI 400 051 PAN: AACCG9490K VS. ASST. COMMISSIONER OF INCOME TAX 12(2)(2), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SASHANK DUNDU, A.R. REVENUE BY : SHRI POOJA SWAROOP, D.R. DATE OF HEARING : 22.02.2018 DATE OF PRONOUNCEMENT : 28.03.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 17.03.2015 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED IN BOTH THE GROUNDS OF APP EAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF SALARY TO EMPLOYEES COST TO THE EXTENT OF RS.62,88,551/- BY LD . CIT(A) AS MADE BY THE AO BY RESTRICTING THE EMPLOYEES COST TO 91% ITA NO.5231/M/2016 M/S. GRAMEEN CAPITAL INDIA LTD. 2 OF THE RECEIPTS WHICH RESULTED INTO DISALLOWANCE OF RS.62,88,551/-. 3. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SU BMITTED BEFORE THE BENCH THAT THE CASE OF THE ASSESSEE IS C OVERED IN ITS FAVOUR BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITS OWN CASE IN ITA NO.783/M/2016 FOR A .Y. 2011- 12 VIDE ORDER DATED 13.12.17 WHEREIN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. A.R. PRAY ED THAT SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE THE SAME RATIO SHOULD BE FOLLOWED IN THE C URRENT YEAR AND THE APPEAL OF THE ASSESSEE MAY BE ALLOWED. 4. THE LD. D.R. FAIRLY AGREED TO THE CONTENTION OF THE LD. A.R. THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSES SEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RELEVANT MATERIAL PLACED BEFORE US. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO -ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.783/M/2016 FOR A.Y. 2011-12 VIDE ORDER DATED 13.12.17 IN ASSESSEES OWN CASE. T HE RELEVANT PARA IS REPRODUCED AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AFTER GOING THROUGH THE CASE RECORDS AND ARGUMENTS OF BOTH THE SIDES, WE FIND THAT THE AO HAS SIMPLY HELD THE EMPLOYEES COST UNREASONABLY WITHOUT POINTING OUT ANY DEFECT. THE A SSESSEE PRODUCED COMPLETE BILLS AND VOUCHERS AND GENUINENESS OF PAYMENT OF EM PLOYEE COST IS NOT DOUBTED BY THE ASSESSING OFFICER. BY APPLYING THE FORMULA OF R ECEIPT/ EXPENSES RATIO OF AY 2010-11 I.E. AT 91% OF THE RECEIPTS AND APPLYING TH E SAME, HE DISALLOWED THE EMPLOYEE COST AT 41,84,901/-. NO DOUBT THE ASSESS EE IS INCURRING LOSSES YEAR AFTER YEAR, BUT THAT IT DOES NOT MEAN THE SALARY CANNOT B E ALLOWED TO THE ASSESSEE. WE FIND THAT THIS COMPANY WAS INCORPORATED IN THE YEAR 2007 AS PART OF GLOBAL GRAMEEN FAMILY; IT INVOLVES THE BUSINESS OF PROMOTING MICRO FINANCE IN INDIA AND ENABLING ACCESS TO CAPITAL FOR MICRO FINANCE INSTITUTIONS. T HIS WAY, THIS COMPANY EARNS ITA NO.5231/M/2016 M/S. GRAMEEN CAPITAL INDIA LTD. 3 ADVISORY FEES FROM ADVISER MICRO FINANCE INSTITUTIO NS. IN EARLIER YEAR, THE SAME SALARY WAS ALLOWED WHILE FRAMING ASSESSMENT UNDER SECTION 143(3) AND NO SUCH DISALLOWANCE WAS MADE. IT WAS THE CONTENTION OF THE LEARNED COUNSEL BEFORE US, THAT THE SALARY PAID WAS IN ORDER TO CONTRACT AND R ETAIN TALENTED EMPLOYEES AND IT WAS COMMENSURATE WITH THE DUTIES AND PROFILE OF EMP LOYEES. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF JK WOOLLEN MANUFACTURERS VS. CIT (1972) 72 ITR 612 (SC), WHEREIN IT IS HELD AS UNDER: - 'COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN E XPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF THE BUSINES S, REASONABLENESS OF THE EXPENDITURE HAS TO BE ADJUDGED FROM THE POINT OF VI EW OF THE BUSINESSMAN AND NOT OF THE INCOME-TAX DEPARTMENT. AN EMPLOYER IN FIXING THE REMUNERATION OF HIS EMPLOYEES IS ENTITLED TO CONSIDER THE EXTENT OF HIS BUSINESS, THE NATURE OF THE DUTIES TO BE PERFORMED AND THE SPECIAL APTITUDE OF THE EMPLOYEE, FUTURE PROSPECTS OF EXTENSION BY THE BUSINESS AND A HOST OF OTHER RE LATED CIRCUMSTANCES. IT IS NOT THE FUNCTION OF THE TRIBUNAL TO DETERMINE THE REMUNERAT ION WHICH IN THEIR VIEW SHOULD BE PAID TO AN EMPLOYEE OF THE ASSESSEE.' 6. IT IS CLEAR FROM THE ABOVE THAT THE CO-ORDINATE B ENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE AO CANNOT STEP INTO THE SHOES OF B USINESSMAN FOR DECIDING THE REASONABLENESS AND THUS ALLOWED TH E APPEAL OF THE ASSESSEE. MAINTAINING THE CONSISTENCY WITH THE E ARLIER YEAR DECISION , WE ALLOW THE APPEAL OF THE ASSESSEE BY S ETTING ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO ACCORDINGLY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.03.2018. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.03.2018. * KISHORE, SR. P.S. ITA NO.5231/M/2016 M/S. GRAMEEN CAPITAL INDIA LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.