EYECUBE STUDIOS P. LTD, MUMBAI V. ADDL CIT 8(1), MUMBAI

ITA 5300/MUM/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0363 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUETIN SR
• Assessee Lawyers: SHAILESH PAXMAE
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH E, MUMBAI BEFORE SHRI P. K. BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5300/MUM/2013(A.Y: 2009-10) EYECUBE STUDIOS P. LTD. 201, KAILASH PLAZA, PLOT NO. A-12 OPP LAKSHMI INDL ESTATE LNK ANDHERI WEST MUMBAI. PIN: 400053 PAN : AABCE8913C VS. ADDL CIT 8(1) AAYAKAR BHAVAN, M.K. ROAD. MUMBAI PIN: 400 020 ) APPELLANT) (RESPONDENT) ITA NOS. 4747/MUM/2015 & 4748/MUM/2015, 4749/MUM/20 15 (A.YS: 2010-11, 2011-12 & 2012-13) ADDL CIT 8(1) AAYAKAR BHAVAN, M.K. ROAD. MUMBAI - 400 020 VS. EYECUBE STUDIOS P. LTD. 201, KAILASH PLAZA, PLOT NO. A-12 OPP LAKSHMI INDL ESTATE LNK ANDHERI WEST MUMBAI- 400053 PAN : AABCE8913C )APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SHAILESH PAXMAE DEPARTMENT BY: SHRI V. JUETIN, SR. AR DATE OF HEARING : 03.08.2017 DATE OF PRONOUNCEMENT: 10.08.2017 O R D E R PER PAWAN SINGH JDICIAL MEMBER; 1. THIS SET OF FOUR APPEAL UNDER SECTION 253 OF INCOME TAX ACT (ACT) ARE DIRECTED THE ORDER OF LEARNED CIT(A) 16, MUMBAI DATED 20.0 6.2013 AND 27.05.2005. IN ALL THE APPEALS COMMON GROUNDS OF THE APPEAL ARE RA ISED, FACTS ARE ALSO IDENTICAL, THUS, ALL THE APPEALS WERE HEARD TOGETHER AND ARE D ECIDED BY COMMON ORDER. FOR ITA NO.5300/M/2013 AY 2009-10 ITA NO.4747 TO 4 749/M/2015 AY 2010-11 TO 2012-13 EYECUBE STUDIOS P. LTD. 2 APPRECIATION OF FACTS AND GROUNDS OF APPEAL, FIRST, WE ARE TAKING APPEAL FOR A.Y. 2009-10 IN ITA. NO. 5300/M/2013. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN AP PEAL: - (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPEL LANTS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE D ISALLOWANCE OF A SUM OF RS.1,93,97,555/- ON ACCOUNT OF REIMBURSEME NT OF RENT PAID BY THE HOLDING COMPANY M/S EROS MULTIMEDIA PVT . LTD. BY INVOKING THE PROVISIONS OF SECTION 40(A) (IA) OF TH E INCOME TAX ACT, 1961. (II) IN ANY CASE, LD. CIT(A) FAILED TO APPRECIATE THAT T HE PROVISIONS OF SECTION 40 (A)(IA) OF THE INCOME TAX ACT, 1961 ARE NOT APPLICABLE ON REIMBURSEMENTS OF EXPENSES. (III) THE APPELLANT CRAVE LEAVES TO ADD, AMEND, ALTER, MO DIFY AND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY I S ENGAGED IN THE BUSINESS OF RENDERING STUDIO AND SERVICES, FILED ITS RETURN OF INCOME ON 30.09.2009. THE ASSESSMENT WAS COMPLETED ON 25.03.2013 AND U/S 143( 1) OF THE ACT R.W.S. 92CA (4) OF THE I.T. ACT. THE ASSESSING OFFICER WHILE FR AMING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITION AND DISALLOWANCE, DISAL LOWED A SUM OF RS.1,93,97,555/- U/S 40 (A) (IA) R.W.S. 194 -1 OF T HE I. T. ACT, 1961, HOLDING THAT THE ASSESSEE HAS MADE THE PAYMENT ON ACCOUNT OF REN T WITHOUT DEDUCTING TDS. ON APPEAL BEFORE LD.CIT(A), THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A) THE A SSESSEE HAS FILED PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AND LEARNED DEPARTMENTAL REPRESENTATIVE FOR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE HAS ARGUED THAT THE RENT WAS PAID BY THE HOLDING COMPANY OF THE ASSESSEE V.I.Z. EROS MULTIME DIA P. LTD. AND THE TDS WAS ITA NO.5300/M/2013 AY 2009-10 ITA NO.4747 TO 4 749/M/2015 AY 2010-11 TO 2012-13 EYECUBE STUDIOS P. LTD. 3 DEDUCTED. THE RENTAL EXPENDITURE WHICH WAS INCURRED ON BEHALF OF ASSESSEE COMPANY BY HOLDING COMPANY WAS REIMBURSEMENT BY ASS ESSEE. IT WAS ARGUED THAT BEING IT WAS INITIALLY STAGE OF THE BUSINESS A ND THE ASSESSEE WAS NOT IN A POSITION TO ARRANGE RENT THEREFORE, IT WAS DECIDED TO BE BORNE BY THE HOLDING COMPANY. THE RENT AGREEMENT WAS BETWEEN THE LESSER/ LICENSOR AND THE HOLDING COMPANY. THE LD AR FOR THE ASSESSEE HAS PLACED ON R ECORD THE COPY OF THE LEAVE AND LICENSE AGREEMENTS EXECUTED BETWEEN SH. VISHAL JAIN, SH. VIJAY JAIN AND M/S EROS MULTIMEDIA PRIVATE LIMITED. IT WAS FURTHE R ARGUED THAT FOR THE SUBSEQUENT ASSESSMENT ORDER I.E., IN A.YS. 2010-11, 2011-12 & 2012-13 SIMILAR DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER. H OWEVER, ON APPEAL BEFORE LD. CIT(A) THE ENTIRE DISALLOWANCES WAS DELETED. T HE LD. AR OF THE ASSESSEE INVITED OUR ATTENTION TO THE APPEAL OF REVENUE FOR AYS 2010-11, 2011-12 & 2012-13. THE LD. AR OF THE ASSESSEE HAS ARGUED THA T IN ALL THE APPEALS LD CIT(A) ALLOWED THE SIMILAR DISALLOWANCES IN FAVOUR OF ASSE SSEE. IT WAS ARGUED THAT THE REVENUE MUST FOLLOW THE PRINCIPLES OF CONSISTENCY. ON THE OTHER HAND, THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW. THE LD. DR FOR REVENUE ARGUED THAT THE ASSESSEE HAS NOT SUBSTANTIA TED ITS CONTENTION BEFORE THE LOWER AUTHORITIES THAT THE RENTAL EXPENDITURE WAS B ORNE BY ITS HOLDING COMPANY. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT THE RENT AGREEMENT RENT/LICENSE AGREEMENT PLACE BY ASSESSEE BEFORE THE TRIBUNAL DOE S NOT CONTAINS THE SPECIFIC CLAUSE ABOUT USE OR OCCUPATION OF TENANTED PREMISES BY ANY OTHER PERSON EXCEPT THE TENANT/LICENSEE. IN THE RENT/LICENSE AGREEMENT RATHER THERE IS PROHIBITION CLAUSE THAT THE LICENSOR SHALL NOT ALLOW ANY PERSON TO USE THE PREMISES OR ANY PART THEREOF EITHER ALONG OR JOINTLY. ITA NO.5300/M/2013 AY 2009-10 ITA NO.4747 TO 4 749/M/2015 AY 2010-11 TO 2012-13 EYECUBE STUDIOS P. LTD. 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFF ICER DURING THE ASSESSMENT PROCEEDING NOTICED THAT THE ASSESSEE HAS MADE ENTR IES RELATING TO THE PAYMENT OF LEASE RENTAL OF RS.1,99,99,618/- PAID TO EROS MU LTIMEDIA P. LTD. THE ASSESSING OFFICER AFTER PERUSAL OF THE RENT AGREEMENT NOTICED THAT EROS MULTIMEDIA P. LTD.(HOLDING COMPANY OF THE ASSESSEE) WHICH LICENSO R OF VIJAY JAIN BY VIRTUE OF AGREEMENT DATED 18.07.2007, 03.09.2007& 10.09.2007. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE RENT PAID TO HOLDING CO MPANY SHOULD NOT BE DISALLOWED U/S 40(A)(IA) THE ASSESSEE CONTESTED THE SHOW CAUSE NOTICE AND FILED ITS REPLY DATED 28.01.2014. IN THE REPLY THE ASSESSEE C ONTENDED THAT RENT WAS PAID BY HOLDING COMPANY AND THE TDS, WHEREVER APPLICABLE WA S PAID BY THE HOLDING COMPANY. THE ASSESSEE COMPANY REIMBURSED THE SAID R ENTAL EXPENSES. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER HOLDING THAT THEREIN NO ELEMENT OF PROFIT INVOLVED REIMBURSEMENT OF RENT BY ASSESSEE COMPANY. THE REIMBURSEMENT IS LIABLE TO BE TDS, THE PROVISIONS OF SECTION 194C AS PART THE PROVISION OF SECTION 194-1 OF THE I.T. ACT. THE AO DISALLOWED THE ENTIRE PAYMENT OF SUCH REIMBURSEMENT. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE HOLDING THAT THE ASSESSEE HAS MADE THE PAYMENT ON VERBAL AGREEMENT TO EROS MULTIMEDIA P. LTD.(HOLDING COMPAN Y OF THE ASSESSEE) THUS, THE PAYMENT MADE BY ASSESSEE COMPANY ARE LIABLE TO BE T DS. THE ASSESSEE COMPANY AND HOLDING COMPANY ARE PART OF THE SAME GROUP ARE NOT MATERIAL FOR THE PURPOSE OF TAXATION AS PUT FORTH BY THE ASSESSEE COMPANY. T HE ASSESSEE COMPANY IS HAVING SEPARATELY LEGAL ENTITY. IT WAS FURTHER CONC LUDED THAT THE ASSESSEE FAILED TO PROVE THAT THE PAYMENT IN QUESTION AS REIMBURSEMENT OF EXPENSES. WE HAVE SEEN ITA NO.5300/M/2013 AY 2009-10 ITA NO.4747 TO 4 749/M/2015 AY 2010-11 TO 2012-13 EYECUBE STUDIOS P. LTD. 5 THAT SIMILAR DISALLOWANCE WAS MADE FOR A.YS.2010-11 , 2011-12 & 2012-13 AND ON THE APPEAL ON BEFORE CIT(A), THE DISALLOWANCE WA S DELETED. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT TH E REIMBURSEMENT WAS THAT RENT/LICENSE AGREEMENT WAS IN BETWEEN SHRI VIJAY JA IN, VISHAL JAIN AND EROS MULTIMEDIA P. LTD. FURTHER, IT IS NOT IN DISPUTED A LL THE RENT WAS PAID BY EROS MULTIMEDIA P. LTD. THE ASSESSING OFFICER HAS NOT BR OUGHT ANY MATERIAL ON RECORD THAT THE NO TDS WAS MADE WHILE MAKING THE PAYMENT O F RENT BY EROS MULTIMEDIA P. LTD. TO ITS LESSER/LICENSOR. THE ASSESSING OFFIC ER HAS NOT BROUGHT ON RECORD THAT THE ASSESSEE HAS ANY LIABILITY AND RELEVANT PART OF MAKING OF THE PAYMENT THE LESSER OR TO THE HOLDING COMPANY ON ACCOUNT OF RENT . THE CONTENTION OF ASSESSEE THROUGHOUT THE PROCEEDING IS THAT THE ASSESSEE MADE A REIMBURSEMENT OF RENTAL EXPENSES WHICH WAS BORNE BY HOLDING COMPANY. 6. THE COORDINATED BENCH OF THE TRIBUNAL IN ACIT VS. R ESULT SERVICES P. LTD. [2012] 23 TAXMANN.COM 93(DELHI) HELD THAT THE WHERE HOLDING COMPANY OF ASSESSEE TOOK A PREMISES ON RENT AND ALLOWED ASSESS EE TO USE PART OF IT, AND THERE WAS NO RELATIONSHIP OF LESSOR AND LESSEE BETWEEN TH EM, ASSESSEE HAD NO TDS OBLIGATION UNDER SECTION 194-I, WHILE REIMBURSING T A PART OF RENT OF HOLDING COMPANY. THE ASSESSEE REIMBURSED CERTAIN AMOUNT OF RENT TO HOLDING COMPANY WITHOUT DEDUCTING TDS THE PROVISION OF SECTION 194- 1 WAS NOT APPLICABLE ON THE ASSESSEE. FURTHER, THE RAJKOT BENCH OF THE TRIBUNAL IN NAVUBH A J. CHAWDA VS. ITO IT WAS HELD THAT IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, BENCH FINANCIAL 2012 WITH EFFECT FROM ON 1.07.2013 R.W.S. 201 MADE DISPUTE FAILURE TO DEDUCT TDS THE DISALLOWANCE OF EXPENDITURE SHOULD N OT HAVE BEEN MADE IF, THE ITA NO.5300/M/2013 AY 2009-10 ITA NO.4747 TO 4 749/M/2015 AY 2010-11 TO 2012-13 EYECUBE STUDIOS P. LTD. 6 RECIPIENT HAS TAKEN ACCOUNT INTO ACCOUNT WE AFORESA ID INTEREST WHILE COMPUTING INCOME IN THEIR HAND AND THE PAID THE TAX THEREIN. CONSIDERING THE ABOVE LEGAL AND FACTUAL POSITION NARRATED ABOVE WE FIND THAT TH ERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT OR MAKING TDS WHILE MAKING REIMBURSEMENT OF ITS HOLDING COMPANY. MOREOVER, WE HAVE SEEN THAT THE SI MILAR CONTENTION OF THE ASSESSEE WAS ACCEPTED BY REVENUE IN THE APPEAL BY L D CIT(A) IN THREE SUBSEQUENT ASSESSMENT YEARS. HENCE, THE GROUND OF A PPEAL RAISED BY ASSESSEE IS ALLOWED. 7. ITA. NOS.4747/MUM.2015 & 4748/MUM/2015(A.YS. 2010-1 1 & 2011-12. 8. THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOW ANCE OF LESSEE RENT MADE BY ASSESSEE U/S 40(A)(IA). AS WE HAVE ALREADY ALLOWED THE APPEAL OF THE ASSESSEE ON SIMILAR FACTS FOR A.Y. 2009-10. THUS, CONSIDERING T HE DECISION OF APPEAL FOR A.Y. 2009-10 AND FOLLOWING THE PRINCIPAL OF CONSISTENCY, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. HENCE, ALL THREE APPEALS FILED BY REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 2009 -10 IS ALLOWED AND THE APPEAL OF THE REVENUE FOR A.YS. 2010-11, 2011-12 & 2012-13 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DAY OF AUGUST, 2017 . SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE PRESIDENT JUDICIAL MEMBER / MUMBAI; / DATED 10/08/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. ITA NO.5300/M/2013 AY 2009-10 ITA NO.4747 TO 4 749/M/2015 AY 2010-11 TO 2012-13 EYECUBE STUDIOS P. LTD. 7 / BY ORDER, (ASSTT.REGISTRAR) , / ITAT, MUM 3. ) (/ THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. ! / GUARD FILE.