DCIT, New Delhi V. M/s. I.P. Supoort Services India (P) Ltd., New Delhi

ITA 524/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69181 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K UPADHYAY
• Keywords: Business income; Depreciation
• Section: 14A

Judgement Text

ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 524/DEL/2013 ASSESSMENT Y EAR: 2009-10 DY.COMMISSIONER OF INCOME TAX, VS M/S IP SUPPORT SE RVICES INDIA (P) LTD. CIRCLE-11(1), 202, KIRTIDEEP BUILDING, NEW DELHI. 2, NANGAL RAYA BUSINESS CENTRE, NEW DELHI-110046 (PAN: AAAC13062R) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.K. UPADHYAY, SR.DR RESPONDENT BY: SHRI K.V.S.R. KRISHNA O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XV, NEW DELHI DATED 2 9.11.20912 IN APPEAL NO. 258/11-12/C.I.T.(A)-XV FOR AY 2009-10. 2. THE MAIN GROUNDS RAISED BY THE REVENUE IN THIS A PPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.46,63,676/- MADE ON ACCOUNT OF DISALLOWANCE OF REPAIR AND MAINTENANCE EXPENSES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 2 RS.50,17,397/- MADE ON ACCOUNT OF EXCESS DEPRECIATI ON ON FURNITURE AND FIXTURE AND PLANT & MACHINERY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.33,35,986/- MADE ON ACCOUNT OF DISALLOWANCE BY INVOKING RULE 8D READ WITH SECTION 14A OF INCOME TA X ACT, 1961. GROUND NO.1 & 2 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) WAS SERVED ON THE ASSESSEE. DURING T HE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SUPPORT SERVICES RELATED TO INTELLECTUAL PROPERTY (IP) AND RENTING OF COMMERCIAL PROPERTY. THE ASSES SING OFFICER MADE DISALLOWANCES ON ACCOUNT OF REPAIR AND MAINTENANCE OF LET OUT BUILDING, EXCESS DEPRECIATION CLAIMED AND DISALLOWANCE U/S 14 A R/W RULE 8D OF THE INCOME TAX RULES, 1962. THE AGGRIEVED ASSESSEE PRE FERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A) WHICH WAS PARTLY ALLOWED BY PASSING THE IMPUGNED ORDER. NOW, THE REVENUE IS BEFORE US IN THIS SECOND APPEAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. 4. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD. DURING THE ARGUMENTS, THE ASSE SSEES REPRESENTATIVE ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 3 SUBMITTED COPIES OF ITAT C BENCH DELHI IN ASSESSE ES OWN CASES I.E. ITA NO. 1173/DEL/2011 FOR AY 2006-07 DATED 31.01.2012, ITA NO.3915/DEL/2011 FOR AY 2007-08 DATED 30.03.2012 AN D ITA NO. 2644/DEL/2012 FOR AY 2008-09 DATED 26.10.2012. THE AR SUBMITTED THAT GROUNDS NO. 1 AND 2 ARE COVERED BY THE ABOVE ORDERS OF ITAT DELHI C BENCH AND SHOULD BE DECIDED IN FAVOUR OF THE ASSESS EE. THE DR ACCEPTED THAT THE APPEALS OF THE REVENUE IN ALL THREE PRECED ING YEARS HAVE BEEN DISMISSED BY ITAT DELHI C BENCH PERTAINING TO GRO UNDS NO. 1 AND 2 AND THE ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSES SEE. BUT THE DR ALSO CONTENDED THAT THERE MAY BE APPEAL TO HONBLE HIGH COURT BY THE DEPARTMENT AGAINST THESE ORDERS. ON SPECIFIC QUERY FROM THE BENCH, THE DR FAIRLY ACCEPTED THAT TO THE BEST OF HIS KNOWLEDGE, THERE IS NO ORDER OF HONBLE HIGH COURT MODIFYING OR SETTING ASIDE ABOVE ORDERS OF ITAT DELHI C BENCH (SUPRA) IN ASSESSEES OWN APPEALS FOR THE IMM EDIATELY PRECEDING THREE YEARS. 5. ON CAREFUL READING OF ABOVE ORDERS OF ITAT, WE O BSERVE THAT IN ASSESSEES OWN APPEAL FOR AY 2006-07, THE DEPARTMEN T RAISED GROUNDS PERTAINING TO DISALLOWANCE OF REPAIR AND MAINTENANC E EXPENSES AND DISALLOWANCE ON ACCOUNT OF EXCESS DEPRECIATION ON F URNITURE, FIXTURES AND PLANTS AND MACHINERY. THE TRIBUNAL HAS DECIDED BOT H THE ISSUES IN FAVOUR OF ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 4 THE ASSESSEE AND AGAINST THE REVENUE BY DISMISSING THE APPEAL OF THE DEPARTMENT WITH FOLLOWING OBSERVATIONS:- 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE H AD ENTERED INTO A LICENCE AGREEMENT WITH REMFRY & SAGA R, FOR USE OF OFFICE SPACE BY THEM, AT THE 6 TH TO 9 TH FLOORS IN MILLENNIUM PLAZA, GURGAON BELONGING TO THE ASSESSEE . ON THIS LET OUT, THE ASSESSEE HAD RECEIVED RS.2,39,49,416/- AS RENT (CALLED LICENCE FEE BY T HE ASSESSEE). THE QUESTION IS AS TO WHETHER THE SAID INCOME IS INCOME FROM HOUSE PROPERTY AS CLAIMED BY THE ASS ESSEE OR BUSINESS INCOME, AS TAKEN BY THE ASSESSING OFFIC ER. THE ASSESSEE HAD ALSO RECEIVED CONSULTANCY FEE OF RS.1,53,91,486/- FROM REMFRY & SAGAR. THIS WAS UND ER A SEPARATE AGREEMENT, WHICH PROVIDED FOR RECEIPT OF CONSULTANCY FEE BY THE ASSESSEE FROM REMFRY & SAGAR FOR THE LEGAL AND SECRETARIAL SERVICES PROVIDED BY THE ASESSEE. REMFY & SAGAR HAD ALSO ISSUED A CONFIRMAT ORY LETTER DATED 24.8.06 IN THIS REGARD, STATING THT TH E ASSESSEE HAD BEEN COMPENSATED FOR THE SERVICES PROVIDED. THEREIN, IT WAS CONFIRMED THAT A SERVICE FEE REPRESENTING 25% MARK UP OVER CERTAIN EXPENSES AGRE ED UPON BETWEEN THE PARTIES/PARTNERS WAS TO BE PAID BY REMFRY & SAGAR TO THE ASSESSEE. THE ASSESSEE GAVE DETAILS OF THE TOTAL EXPENSES OF RS.1,22,41,728/- W HICH AMOUNT HAD BEEN DEBITED IN THE PROFIT AND LOSS ACCO UNT. THE ASSESSEES EXPENSES WERE OF RS.25,61,586/- AND THOSE CONCERNING CONSULTANCY FEE WERE OF RS.96,80142/-, INCLUDING LEGAL AND PROFESSIONAL AND CONSULTANCY CHARGES, REMUNERATION AND BENEFITS, TRAVELING (FORE IGN AS WELL AS DOMESTIC TRAVEL), COMMUNICATION, ELECTRICIT Y CHARGES, VEHICLE EXPENSES AND REPAIRS AND MAINTENAN CE OF BUILDING LET OUT AND EXPENSES ON FURNITURE AND F IXTURES, REPAIR ON COMPUTERS, ELECTRIC ITEMS, ETC., ALL THE SAID ITEMS HAVING BEEN PROVIDED TO REMFRY & SAGAR BY THE ASSESSEE FOR US IN THE RENTED PREMISES. DETAILS OF DEPRECIATION CALCULATED AS PER THE INCOME TAX ACT O N ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 5 FURNITURE AND FIXTURES, VEHICLES AND OFFICE EQUIPME NT AMOUNTING TO RS.26,33,046/- WERE ALSO PROVIDED. TAK ING NOTICE OF THESE FACTS, THE LD. CIT (A) OBSERVED THA T THE EXPENSES CONSIDERED FOR CALCULATING THE CONSULTANCY FEE, ACCOMMODATED TO REMFRY & SAGAR, ALONG WITH DEPRECIATION, CAME TO RS.1,23,13,188/-. THE REIMBURSEMENT OF EXPENSES MADE TO THE ASSESSEE WAS ON THIS AMOUNT, AFTER ADDING A MARK UP OF 25% AMOUNTIN G TO RS.30,78,298/-. THE TOTAL CONSULTANCY FEE AFTER MAR K UP WAS THUS FOUND TO BE RS.1,53,91,486/-. UNDISPUTEDLY , IT IS THIS AMOUNT WHICH WAS OFFERED FOR TAXATION AS CONSULTANCY FEE IN THE PROFIT AND LOSS ACCOUNT BY T HE ASSESSEE. THE DETAILS OF REPAIR AND MAINTENANCE OF BUILDING INCLUDED MONTHLY MAINTENANCE CHARGE OF RS.48,77,596/- PAID TO MILLENNIUM PLAZA, BESIDES EXPENSES OF RS.6,748/- ON SANITATION/ PLUMBING REPA IR. IT WAS IN TERMS OF THE AGREEMENT THAT THE REIMBURSEMEN T OF ALL EXPENSES HAVE BEEN MADE TO THE ASSESSEE AND THE ASSESSEE HAS SHOWN IT AS INCOME. 9. IN THESE FACTS, THE LD. CIT (A) RIGHTLY OBSERVED THAT THE REIMBURSEMENT AND 25% MARK UP WERE DIFFERENT FR OM THE RENTAL INCOME, SEPARATELY SHOWN BY THE ASSESSSE E AT RS.2,39,49,416/-, ON WHICH, STATUTORY DEDUCTION OF 30% HAD BEEN CLAIMED U/S 24(A) OF THE ACT. 10. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO ERROR WHATSOEVER IN THE ORDER OF THE LD. CIT (A). IT HAS RIGHTLY BEEN OBSERVED THAT THERE WAS NO SEPARATE CLAIM OF R EPAIR AND MAINTENANCE AND DEPRECIATION BY THE ASSESSEE. T HE REIMBURSEMENT AND 25% MARK UP HAD ALREADY BEEN OFFERED BY THE ASSESSEE TO TAX. THE REIMBURSEMENTS HAVE BEEN FOUND ON DEDUCTIONS CLAIMED IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF REPAIR AND MAINTENANCE OF BUILDING, FURNITURE AND DEPRECIATION CLAIMED ON COMPUTERS, FURNITURE AND FIXTURES, VEHICLES AND OFF ICE EQUIPMENT PROVIDED TO REMFRY & SAGAR FOR USE. THE ASSESSING OFFICER WAS, AS SUCH, IN ERROR TO HOLD TH AT IT WAS A CASE OF DOUBLE DEDUCTION. THE LD. CIT (A) ALS O TOOK SPECIFIC NOTE OF THE FACT THAT AS PER CLAUSE ( 6) (B) OF ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 6 THE RENT AGREEMENT, THE REIMBURSEMENT FOR REPAIR AN D MAINTENANCE AS WELL AS ELECTRICITY, POWER EXPENSES, ETC. HAD TO BE MADE TO THE ASSESSEE COMPANY. 11. IN VIEW OF THE ABOVE DISCUSSION, WE CONCUR WIT H THE FINDING OF FACT RECORDED BY THE LD. CIT (A). TH E ORDER UNDER APPEAL IS, ACCORDINGLY, UPHELD, REJECTING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 6. THE SAME ISSUES WERE RAISED BY THE DEPARTMENT I N ITA NO. 3915/DEL/2011 FOR AY 2007-08 WHICH WERE ALSO DECIDE D AGAINST THE REVENUE AND IN FAVOUR OF THE REVENUE FOLLOWING THE JUDGMENT OF COORDINATE BENCH OF TRIBUNAL IN ITA NO.1173/DEL/2011 DATED 31.1.2012 (S UPRA) AND DEPARTMENTAL APPEAL HAS BEEN DISMISSED CONFIRMING T HE FINDINGS OF THE COMMISSIONER OF INCOME TAX(A). IN THE SAME FASHION , DEPARTMENTAL APPEAL IN ITA NO. 2644/DEL/2012 FOR AY 2008-09 HAS BEEN DI SMISSED VIDE THIS ORDER DATED 26.10.2012 FOLLOWING THE JUDGMENT OF IT AT IN ITA NO. 1173/DEL/2011 DATED 31.1.2012 (SUPRA) IN FAVOUR OF THE ASSESSEE. 7. IN VIEW OF ABOVE, WE ARE UNABLE TO SEE ANY AMBIG UITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGN ED ORDER PERTAINING TO THE DELETION OF DISALLOWANCES ON ACCOUNT OF REPAIR AND MAINTENANCE ON LET OUT BUILDINGS AND DISALLOWANCE ON ACCOUNT OF DEPRECIATI ON CLAIMED ON FURNITURE, FIXTURES AND PLANT AND MACHINERY. FROM A BARE READ ING OF THE IMPUGNED ORDER, WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX(A) HAS FOLLOWED THE JUDGMENT OF ITAT FOR AY 2006-07 (SUPRA) AND 2007-08 (SUPRA) AND WE HAVE NO REASON TO ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 7 INTERFERE WITH THE SAME. ACCORDINGLY GROUND NO. 1 AND 2 OF THE REVENUE BEING DEVOID OF MERITS ARE DISMISSED. GROUND NO.3 8. APROPOS GROUND NO.3, LD. DR SUBMITTED THAT THE C OMMISSIONER OF INCOME TAX(A) HAS ERRED IN DELETING ADDITION OF RS. 33,35,986 MADE ON ACCOUNT OF DISALLOWANCE BY INVOKING RULE 8D OF THE INCOME TAX RULES R/W SECTION 14A OF THE ACT. THE DR FURTHER SUBMITTED T HAT THE COMMISSIONER OF INCOME TAX(A) WAS NOT JUSTIFIED IN ACCEPTING THE SU O MOTO ESTIMATE AMOUNT OF RS.4,33,914 VOLUNTARILY OFFERED BY THE ASSESSEE FOR TAXATION BECAUSE THE ASSESSING OFFICER RIGHTLY ESTIMATED THE AMOUNT OF D ISALLOWANCE ON THE BASIS OF MATERIAL PLACED BEFORE HIM. 9. REPLYING TO THE ABOVE, THE AR SUBMITTED THAT THE ITAT DELHI IN ASSESSEES OWN CASE FOR AY 2007-08 ON APPRECIATION OF IDENTICAL FACTS HAS HELD THAT THE DECISION OF ASSESSING OFFICER TO INVO KE SECTION 14A OF THE ACT R/W RULE 8D OF INCOME TAX RULES WAS UNREASONABLE AN D ORDER OF COMMISSIONER OF INCOME TAX(A) DELETING THE ADDITION HAD BEEN UPHELD. THE AR FURTHER SUBMITTED THAT UNTIL AND UNLESS THE ORDER OF ITAT IS MODIFIED OR SET ASIDE BY THE HIGHER FORUM, THE SAME IS BINDI NG IN THE SUBSEQUENT PROCEEDINGS OF THE TRIBUNAL AS A JUDGMENT OF COORDI NATE BENCH. ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 8 10. FROM A GLANCE AT THE ORDER OF ITAT IN ASSESSEE S OWN CASE FOR AY 2007-08 IN ITA NO.3915/DEL/2011 DATED 30.3.2012, WE OBSERVE THAT GROUND NO. 4 OF THE DEPARTMENTAL APPEAL HAD BEEN REJECTED BY ITAT DELHI C BENCH WITH FOLLOWING OBSERVATIONS:- 5. SO FAR AS REGARDS GROUND NO. 4, THE DEPARTMENT SUBMITS THAT THE LD. CIT(A) HAS ERRED IN DELETING T HE ADDITION OF RS. 23,14,444/- MADE ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE I.T. ACT READ WITH RULE 8D OF THE I.T. RULES. 6. HERE, AGAIN, WE DO NOT FIND ANY FAULT WITH THE F INDINGS RECORDED BY THE CIT(A) WHILE DELETING THE ADDITION MADE. UNDISPUTEDLY, AS PER THE PROFIT AND LOSS ACCOUNT AN D BALANCE SHEET OF THE ASSESSEE, THERE WERE RESOURCES AND SURPLUS OF RS. 47.52 CRORES. THERE WERE SHARE CAPIT AL OF RS.12.56 CRORES. THE INVESTMENT OF RS.50.96 CRORES , THEREFORE, STOOD FULLY COVERED. NO INTEREST COSTS H AVE BEEN INCURRED BY THE ASSESSEE ON ANY BORROWINGS FOR THE PURPOSE OF INVESTMENT. BESIDES, THERE WAS NO OTHER EXPENDITURE INCURRED TO EARN THE INCOME. NO INTERES T EXPENDITURE STOOD DEBITED IN THE PROFIT AND LOSS AC COUNT. ON THE OTHER HAND, THE ASSESSEE HAD ITSELF ADDED PO RT- FOLIO MANAGER EXPENDITURE OF RS.29,66,938/- INCURR ED FOR MONITORING THE PORT-FOLIO OF THE ASSESSEE. IT H AS BEEN STATED ON BEHALF OF THE ASSESSEE THAT ALL THE SHARE S OF THE ASSESSEE ARE THROUGH THIS PORT-FOLIO AND THERE IS N O DIRECT DEALING. IN THE STATEMENT OF ASSESSABLE INCOME, A C OPY WHEREOF HAS BEEN FILED BEFORE US, THE ASSESSEE HAS ADDED EXPENDITURE ON PMS CONSIDERED SEPARATELY 29,66,938. IT HAS ALSO BEEN STATED THAT NO SEPARAT E CLAIM IN THIS REGARD HAS BEEN MADE. 7. THE LD. DR HAS CONTENDED THAT THE MATTER BE REMI TTED TO THE FILE OF THE AO FOR ASCERTAINING THE EXPENDIT URE. HOWEVER, IN VIEW OF THE FACTS DISCUSSED IN THE PREC EDING PARAGRAPHS, WE DO NOT FIND ANY NECESSITY OF SENDING BACK ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 9 THE MATTER TO THE AO, THE ASSESSEE HAVING ITSELF MA DE THE DISALLOWANCE IN THE COMPUTATION OF INCOME, AS ABOVE , AND THE FINDINGS OF THE LD. CIT(A), AS DISCUSSED RE MAINING UNCHALLENGED. 11. IN VIEW OF ABOVE, WE OBSERVE THAT THIS TRIBUNAL HAS UPHELD THE FINDINGS OF THE COMMISSIONER OF INCOME TAX(A) WHICH DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING RULE 8D O F THE INCOME TAX RULES R/W SECTION 14A OF THE ACT. IN THIS JUDGMENT , IT HAS BEEN HELD THAT THE ASSESSEE HAD ITSELF ADDED PORTFOLIO MANAGEMENT EXPE NDITURE INCURRED FOR MAINTAINING PORTFOLIO OF THE ASSESSEE AND THE ASSES SEE HAS ADDED EXPENDITURE OF PORTFOLIO MANAGEMENT SERVICES VOLUNTARILY, THEN IF IT IS FOUND THAT NO INTEREST EXPENDITURE STOOD DEBITED IN THE P&L ACCOU NT, RULE 8D R/W SECTION 14A OF THE ACT CANNOT BE INVOKED. ACCORDINGLY, WE HOLD THAT THE COMMISSIONER OF INCOME TAX(A) RIGHTLY UPHELD PART A DDITION IN THIS REGARD AND ANOTHER PART OF THE ADDITION HAS BEEN DELETED O N JUSTIFIED GROUNDS. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WIT H THE FINDINGS OF THE COMMISSIONER OF INCOME TAX(A) IN THIS REGARD. THE COMMISSIONER OF INCOME TAX(A) HAS FOLLOWED THE ORDER OF THE TRIBUNA L FOR AY 2007-08 (SUPRA) AND HAS ACCEPTED SUO MOTO ESTIMATED AMOUNT OFFERED BY THE ASSESSEE FOR TAXATION, HENCE WE UPHOLD THE OBSERVATIONS AND FINDINGS OF THE ITA NO. 524/DEL/2013 ASSTT.YEAR: 2009-10 10 COMMISSIONER OF INCOME TAX(A) IN THIS REGARD. ACCO RDINGLY, GROUND NO. 3 OF THE REVENUE IS ALSO DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AS STATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 08.08.13. SD/- SD/- ( J.S. REDDY ) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 8 TH AUGUST, 2013 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR TRUE CO PY BY ORDER ASSTT. REGISTRAR