CANARA ROBECO ASSET MANAGEMENT CO.LTD, MUMBAI V. DCIT CIR 2(1), MUMBAI

ITA 5233/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2208 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: JAINJISETH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER / I .T A NO.5233/MUM/2014 ( / ASSESSMENT YEAR : 2008 - 09 A N D / I .T A NO. 5869/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 CANARA ROBECO ASSET MANAGEMENT CO. LTD., CONSTRUCTION HOUSE, 4 TH FLOOR, 5, WALCHAND HIRACHAND MARG, BALLARD ESTATE, MUMBAI - 400 01 / VS. THE ACIT - 2(1), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACC 2031J ( / APPELLANT ) .. ( / RESPONDENT ) / A PPELLANT BY: SHRI GIRISH DAVE & SHRI JAINJISETH / RESPONDENT BY: SHRI K. RAVI KIRAN / DATE OF HEARING : 22 .1 2 . 2015 / DATE OF PRONOUNCEMENT : 22 .1 2 .2015 / O R D E R PER N.K. BILLAIYA, AM: TH ESE TWO APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST T WO SEPARATE ORDER S OF THE LD. CIT(A) - 4 , MUMBAI DATED 26.7.2013 AND ITA. NO S . 5869/M/13 ITA NO. 5233/M/14 2 25.6.2014 PERTAINING TO ASSESSMENT YEAR S 2008 - 09 & 2009 - 10. BOTH THESE APPEALS RELATE TO LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. 2. THE R EPRESENTATIVES OF BOTH SIDES AGREED THAT THE FACTS ON THE BASIS OF WHICH THE PENALTY HAVE BEEN LEVIED ARE COMMON AND THE ISSUES ARE IDENTICAL, THEREFORE, BOTH THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 523 3 /M/2014 A.Y. 2008 - 09 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DURING THE FINANCIAL YEAR 2007 - 08 ONE MR. RAJNISH NARULA WAS APPOINTED AS C E O, TH E DATE OF APPOINTMENT WAS 26.9.2007. BEFORE THE CLOSE OF THE FINANCIAL YEAR I.E. ON 27 TH MARCH, 2008, THE ASSESSEE MADE AN ONLINE APPLICATION TO THE MINISTRY OF CORPORATE AFFAIRS SEEKING APPROVAL OF THE CENTRAL GOVERNMENT TO THE APPOINTMENT AND REMUNERATI ON OF SAID SHRI RAJNISH NARULA. ON 3 RD SEPTEMBER, 2008 A LETTER WAS ISSUED BY THE MINISTRY OF CORPORATE AFFAIRS REQUESTING THE ASESEE TO FURNISH FURTHER DETAILS. REPLY WAS FILED ON 11.9.2008 AND AT THE FAG - END OF THE FINANCIAL YEAR, MINISTRY OF CORPORAT E AFFAIRS APPROVED THE APPOINTMENT ON 21 ST JANUARY, 2009. HOWEVER, THE MINISTRY RESTRICTED THE REMUNERATION AS PER THE FORMULA GIVEN BY IT. ON 16 TH SEPTEMBER, 2009, THE BOARD OF DIRECTORS AGREED THAT THE REMUNERATION SHOULD BE RESTRICTED AS SPECIFIED AS PER THE LETTER FROM MINISTRY OF CORPORATE AFFAIRS AND ON 26 TH SEPTEMBER, 2009 IN THE ANNUAL GENERAL MEETING, IT WAS RESOLVED THAT THE REMUNERATION SHOULD BE AS PER SCHEDULE XIII. ITA. NO S . 5869/M/13 ITA NO. 5233/M/14 3 3.1. THE ABOVE CHRONOLOGICAL SEQUENCE WOULD SHOW THAT TWO FINANCIAL YEARS CROSSED AND IN THESE TWO FINANCIAL YEARS THE ASSESSEE HAD PROVIDED IN ITS BOOKS OF ACCOUNTS REMUNERATION WHICH WAS SUBSEQUENTLY REDUCED BY THE MINIST RY OF CORPORATE AFFAIRS. IN THE FINANCIAL YEAR 2009 - 10 PRECISELY ON 31 ST MARCH, 2010, THE ASSESSEE REVERSED THE EXCESS REMUNERATION PROVIDED IN ITS BOOKS OF ACCOUNTS. 3.2. THE PENALTY HAS BEEN LEVIED ON THE PRETEXT THAT THE ASSESSEE HAS CLAIMED REMUNERATION FAR IN EXCESS OF THE AMOUNT APPROVED BY THE MINISTRY AND SECONDLY THE EXCESS REMUNERATION WAS NEVER REVERSED DURING THE FINANCIAL YEAR ITSELF. 4. AGGRIEVED BY THE LEVY OF PENALTY, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WI THOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT SALARY WAS PAID BY ROBECO GROUP NV AND THE ASSESSEE HAS ONLY RECORDED THE LIABILITY IN ITS BOOKS OF ACCOUNTS THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY PAR TICULARS OF INCOME OR PROVIDED IN ACCURATE PARTICULARS OF INCOME, SINCE THE PROVISION FOR THE LIABILITY UNDERTAKEN BY THE ASSESSEE HAVE BEEN DULY EXPLAINED IN THE AUDIT STATEMENT OF ACCOUNTS BY WAY OF NOTE TO ACCOUNTS. IT IS THE SAY OF THE LD. COUNSEL THAT PENALTY CANNOT BE LEVIED U/S. 271(1)(C) OF THE ACT FOR THE SIMPLE REASON THAT THE APPROVAL OF THE MINISTRY CAME LATER ON WHILE THE ASSESSEE HAD ALREADY PROVIDED FOR THE LIABILITY IN ITS BOOKS OF ACCOUNT. THE LD. COUNSEL DREW OUR ATTENTION TO THE REVERSAL OF EXCESS REMUNERATION IN THE BOOKS OF ACCOUNT AND POINTED OUT THAT THE REVERSALS HAVE BEEN OFFERED TO TAX IN FINANCIAL YEAR 2010 - 11. ITA. NO S . 5869/M/13 ITA NO. 5233/M/14 4 6. PER CONTRA SUPPORTING THE ORDERS OF THE REVENUE AUTHORITIES, THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT I T WAS INCUMBENT UPON THE ASSESSEE TO TAKE PERMISSION FROM THE MINISTRY OF CORPORATE AFFAIRS AT THE TIME OF APPOINTMENT. IT IS THE SAY OF THE LD. DR THAT THE ASSESSEE SHOULD NOT HAVE PROVIDED FOR THE ENTIRE AMOUNT WHEN THE APPOINTMENT WAS ONLY FOR 6 MONTHS . 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE LD. COUNSEL WE HAVE GONE THROUGH THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US. THERE IS NO DISPUTE IN THE CHRONOLOGICAL SEQUENCE OF EVENT MENTIONED ELSEWHERE. A PERUSAL OF THE SAME SHOULD SHOW THAT THE APPROVAL FROM THE MINISTRY OF CORPORATE AFFAIRS WAS RECEIVED WHEN TWO FINANCIAL YEARS HAVE CROSSED AND THE ASSESSEE HAD PROVIDED FOR THE LIABILITY UNDERTAKEN FOR ROBECO GRO UP NV. IT IS ALSO AN UNDISPUTED FACT THAT REVERSAL WAS MADE IN THE BOOKS OF ACCOUNTS IN RESPECT OF EXCESS REMUNERATION. 7.1. IN OUR UNDERSTANDING OF THE AFOREMENTIONED FACTS QUA THE LAW, WE DO NOT FIND THIS TO BE A FIT CASE FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. WE, THEREFORE SET ASIDE THE ORDERS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY SO LEVIED. 8. BEFORE CLOSING, WE FIND THAT THE PENALTY HAS ALSO BEEN LEVIED ON ACCOUNT OF FOREX LOSS WHEN THE PAYMENT WAS MADE TO THE JV PARTNER IN RESPECT OF THE REMUNERATION. WE FIND THAT THIS IS DIRECTLY RELATED TO ITA. NO S . 5869/M/13 ITA NO. 5233/M/14 5 THE REMUNERATION ON WHICH WE HAVE DIRECTED TO DELETE THE LEVY OF PENALTY, THE SAME WOULD HOLD GOOD FOR THIS ALSO. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 22 ND DECEMBER , 2015 . SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 22 ND DECEMBER , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI