ACIT 2(3), MUMBAI V. STOCK TRADERS P.LTD, MUMBAI

ITA 5362/MUM/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6065 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 27-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SENTHIL KUMARAN LD
• Assessee Lawyers: NITESH JOSHI LD
• Keywords: Transfer pricing; Earning of tax free income; Tax effect
• Section: 143(3); 14A

Judgement Text

M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , ! , # BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5507/MUM/2012 ( $ $ $ $ %$ %$ %$ %$ / ASSESSMENT YEAR: 2008-09) M/S STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FORT, MUMBAI-400 001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX- 2(3) ROOM NO.552, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. & ./ ./PAN/GIR NO. AAACS-7235-A ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) & ./ I.T.A. NO.5362/MUM/2012 ( $ $ $ $ %$ %$ %$ %$ / ASSESSMENT YEAR: 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX- 2(3) ROOM NO.552, 5 TH FLOOR AAYKAR BHAVAN,M.K. ROAD MUMBAI-400 020 / VS. M/S STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FORT, MUMBAI-400 001 & ./ ./PAN/GIR NO. AAACS-7235-A ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) & ./ I.T.A. NO.2799/MUM/2013 ( $ $ $ $ %$ %$ %$ %$ / ASSESSMENT YEAR: 2009-10) M/S STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FORT, MUMBAI-400 001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX- 2(3) ROOM NO.552, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. & ./ ./PAN/GIR NO. AAACS-7235-A ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) & M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 2 ./ I.T.A. NO.3502/MUM/2013 ( $ $ $ $ %$ %$ %$ %$ / ASSESSMENT YEAR: 2009-10) ASSISTANT COMMISS IONER OF INCOME TAX- 2(3) ROOM NO.552, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. / VS. M/S STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FORT, MUMBAI-400 001 & ./ ./PAN/GIR NO. AAACS-7235-A ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : NITESH JOSHI- LD. AR REVENUE BY : S. SENTHIL KUMARAN - LD.DR + ,- / DATE OF HEARING : 09/01/2019 % + ,- / DATE OF PRONOUNCEMENT : 23/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS APPEALS FOR ASSESSMENT YEARS [AY ] 2008-09 AND 2009-10 WHICH AGITATE SEPARATE ORDERS OF FIRST APPE LLATE AUTHORITY. SINCE COMMON ISSUES ARE INVOLVED, WE PROCEED TO DISPOSE-O FF THE SAME BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E AND BREVITY. CROSS APPEALS FOR 2008-09 2.1 THE ASSESSEE IS AGGRIEVED BY FOLLOWING ADJUSTME NTS AS CONFIRMED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-15, MUM BAI [CIT(A)], APPEAL NO. CIT(A)-15/CURR 2/12-13 ORDER DATED 15/06 /2012 : - NO. ADDITIONS/ADJUSTMENTS AMOUNT (RS.) 1. TP ADJUSTMENT AGAINST PROFESSIONAL FEE 4,31,60,6 45/- 2. DISALLOWANCE OF FOREIGN TRAVEL EXPENSES 15,44,21 5/- 3. DISALLOWANCE U/S 14A 7,14,320/- M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 3 THE ASSESSEE BEING RESIDENT CORPORATE ENTITY STATED TO BE ENGAGED IN BUSINESS OF FINANCING & LETTING OUT OF PROPERTIES WAS ASSESSED FOR IMPUGNED AY U/S 143(3) READ WITH SECTION 144C ON 13/12/2011 BY LD. ASSISTANT COMMISSIONER OF INCOME TAX-2(3), MUMBAI [ AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.41.34 L ACS AFTER CERTAIN ADDITIONS / ADJUSTMENTS AS AGAINST RETURNED LOSS OF RS.462.43 LACS FILED BY THE ASSESSEE ON 30/09/2008. 2.2 DURING THE ASSESSMENT PROCEEDINGS, IT TRANSPIRE D THAT ASSESSEE PAID A SUM OF RS.431.60 LACS TO ONE OF ITS ASSOCIATED ENTERPRISES [AE], NAMELY PRS SERVICES AG [FORMERLY KNOWN AS PREROY AG], ZURI CH, SWITZERLAND STATED TO BE TOWARDS RENDERING OF CERTAIN CONSULTAN CY SERVICES. HOWEVER, THE LD. TRANSFER PRICING OFFICER [TPO], VIDE ORDER U/S 92CA(3) DATED 14/10/2011, DETERMINED ARMS LENGTH PRICE [ALP] OF THE SAME AS NIL SINCE THE ASSESSEE FAILED TO PROVE THE FACTUM OF RE NDERING OF ACTUAL SERVICES BY THE AFORESAID ENTITY. SUBSEQU ENTLY, THE ASSESSEE FAILED TO PROVE THE SAID FACT EVEN BEFORE LD. AO AL SO. THEREFORE, RELYING UPON THE STAND OF EARLIER YEARS, THE SAID EXPENDITU RE WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 2.3 BOTH REPRESENTATIVES CONVERGE ON THE POINT THAT THE ISSUE WAS RECURRING IN NATURE AND STOOD AGAINST THE ASSESSEE BY VARIOUS ORDERS OF TRIBUNAL FOR EARLIER YEARS, THE COPIES OF WHICH HAV E BEEN PLACED ON RECORD. UPON PERUSAL OF LATEST ORDER OF THE TRIBUNA L ITA NO. 2108/MUM/2006 DATED 19/11/2018 FOR AYS 2002-03, 2005-06 & 2006-07 , WE FIND THAT THE SIMILAR EXPENDITURE INCURRED BY TH E ASSESSEE IN EARLIER YEARS, HAS CONSISTENTLY BEEN DISALLOWED IN VIEW OF THE FACT THAT SERVICES WERE ACTUALLY RENDERED BY SH. SUSHIL PREMCHAND IN THE CAPACITY OF A M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 4 DIRECTOR AND NOT BY THE STATED ENTITY. THEREFORE, F OLLOWING THE CONSISTENT STAND OF TRIBUNAL, THE GROUNDS RAISED BY THE ASSESS EE, ON THIS ACCOUNT, STANDS DISMISSED. RESULTANTLY, DELVING INTO THE ISS UE OF DETERMINATION OF ALP OF THE SAME BECOME MERELY ACADEMIC IN NATURE AND TH EREFORE, NOT DEALT WITH BY US. 3.1 THE SECOND ADDITION IS ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES OF RS.49.02 LACS STATED TO BE INCURRED FOR TRAVELLING OF A DIRECTOR AND HIS SPOUSE FOR WANT OF EVIDENCE THAT THE SAME WERE INCU RRED FOR THE PURPOSE OF ASSESSEES BUSINESS. ON SIMILAR LOGIC, THE EXPEN SES INCURRED TOWARDS FOREIGN CURRENCY AMOUNTING TO RS.6.94 LACS AND PAYM ENT MADE THROUGH FOREIGN CREDIT CARD AMOUNTING TO RS.9.05 LACS WAS D ISALLOWED. THE AGGREGATE OF ALL THE THREE ADDITIONS CAME TO RS.65. 02 LACS. 3.2 THE FIRST APPELLATE AUTHORITY, FOLLOWING EARLIE R YEARS, HELD THAT EXPENDITURE INCURRED TOWARDS DIRECTORS TRAVELLING WAS AN ALLOWABLE EXPENDITURE WHEREAS EXPENDITURE ON ACCOUNT OF SPOUS E OF THE DIRECTOR WAS NOT ALLOWABLE. AGGRIEVED, THE ASSESSEE AS WELL AS REVENUE IS UNDER APPEAL BEFORE US. OUR ATTENTION HAS BEEN DRAWN TO T HE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 1995-96 TO 1999-2000 TO SUBMIT THAT THE ISSUE STOOD PARTLY COVERED AGAINST THE ASSESSEE. 3.3 UPON DUE CONSIDERATION, WE FIND THAT SO FAR AS THE ISSUE OF ALLOWABILITY OF EXPENDITURE ON ACCOUNT OF SPOUSES TRAVELLING IS CONCERNED, THE SAME STOOD AGAINST THE ASSESSEE BY T HE CITED ORDERS OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE SAME, WE C ONFIRM THE STAND OF LD. CIT TO THAT EXTENT. THE GROUND RAISED IN ASSESS EES APPEAL STANDS DISMISSED. M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 5 3.4 SO FAR AS THE REVENUES APPEAL IS CONCERNED, WE FIND THAT THE TAX EFFECT OF QUANTUM ADDITION BEING CONTESTED BY THE R EVENUE IS LESS THAN THE PRESCRIBED LIMIT OF RS.20 LACS AND THEREFORE TH E APPEAL IS NOT MAINTAINABLE IN VIEW OF THE RECENTLY ISSUED LOW TAX EFFECT CIRCULAR NO.03/2018 DATED 11/07/2018 ISSUED BY CENTRAL BOARD OF DIRECT TAXES [CBDT]. THE AFORESAID LIMITS, AS PER PARA 13 OF THE CIRCULAR APPLIES TO PENDING APPEALS ALSO. IN VIEW OF THE ADMITTED POSIT ION, WE DISMISS THE REVENUES APPEAL. 4. THE THIRD DISALLOWANCE U/S. 14A STEM FROM THE FA CT THAT THE ASSESSEE EARNED EXEMPT INCOME OF RS.3.58 LACS DURIN G IMPUGNED AY BUT OFFERED NO DISALLOWANCE AGAINST THE SAME. THE L D. AO ESTIMATED THE SAME @0.5% OF AVERAGE INVESTMENTS WHICH CAME TO RS. 7.14 LACS. THE SAME, UPON CONFIRMATION BY FIRST APPELLATE AUTHORIT Y, IS UNDER APPEAL BEFORE US. THE ONLY PLEA RAISED BY LD. AR IS THAT F OR THE PURPOSE OF COMPUTATION OF DISALLOWANCE, ONLY EXEMPT INCOME YIE LDING INVESTMENT SHOULD BE CONSIDERED AS HELD BY THE TRIBUNAL IN ITS LATEST ORDER DATED 19/11/2018 IN ASSESSEES OWN CASE. UPON PERUSAL OF THE CITED ORDER, WE CONCUR WITH THE SUBMISSIONS OF LD. AR AND ACCORDING LY DIRECT THE LD. AO TO COMPUTE THE DISALLOWANCE AFTER CONSIDERING ONLY THOSE INVESTMENTS WHICH HAS YIELDED ANY EXEMPT INCOME DURING IMPUGNED AY. THIS GROUND STANDS PARTLY ALLOWED. 5. RESULTANTLY, THE ASSESSEES APPEAL STAND PARTLY ALLOWED WHEREAS THE REVENUES APPEAL STANDS DISMISSED. CROSS APPEALS FOR 2009-10 6.1 THE FIRST ISSUE OF ASSESSEES APPEAL IS DISALLO WANCE OF FOREIGN TRAVELLING EXPENSES OF WIFE OF THE DIRECTOR FOR RS. 1,34,751/-. THE SAME M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 6 STOOD AGAINST THE ASSESSEE AS NOTED BY US WHILE ADJ UDICATING SIMILAR ISSUE FOR AY 2008-09 AND ACCORDINGLY STANDS DISMISS ED. 6.2 THE SECOND ISSUE IS RELATED WITH FOREIGN TRAVEL LING EXPENSES DISALLOWANCE OF RS.1,29,189/- INCURRED BY THE ASSES SEE FOR AN EXTERNAL CONSULTANT FOR PROVIDING SEMINAR AT OVERSEAS LOCATI ON. THE LD. AR HAS SUBMITTED THAT THE SAID EXPENDITURE HAS BEEN INCURR ED FOR ASSESSEES BUSINESS AND THEREFORE, THE SAME ARE ALLOWABLE TO T HE ASSESSEE U/S 37(1). KEEPING IN VIEW THE SAME, THE MATTER STANDS REMITTED BACK TO THE FILE OF LD. AO TO APPRECIATE THE FACTUAL MATRIX WIT H A DIRECTION TO THE ASSESSEE TO DEMONSTRATE FULFILLMENT OF CONDITIONS A S ENVISAGED BY SECTION 37. THIS GROUND STANDS ALLOWED FOR STATISTI CAL PURPOSES. 6.3 SO FAR AS THE REVENUES APPEAL IS CONCERNED, WE FIND THAT THE TAX EFFECT OF QUANTUM ADDITION BEING CONTESTED BY THE R EVENUE IS LESS THAN THE PRESCRIBED LIMIT OF RS.20 LACS AND THEREFORE TH E APPEAL IS NOT MAINTAINABLE IN VIEW OF THE RECENTLY ISSUED LOW TAX EFFECT CIRCULAR NO.03/2018 DATED 11/07/2018 ISSUED BY CENTRAL BOARD OF DIRECT TAXES [CBDT]. THE AFORESAID LIMITS, AS PER PARA 13 OF THE CIRCULAR APPLIES TO PENDING APPEALS ALSO. IN VIEW OF THE ADMITTED POSIT ION, WE DISMISS THE REVENUES APPEAL. CONCLUSION 7. BOTH THE APPEALS OF THE REVENUE STANDS DISMISSED WHEREAS BOTH THE APPEALS FILED BY THE ASSESSEE STANDS PARTLY ALL OWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JANUARY, 2019. SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M/S. STOCK TRADERS PVT.LTD. ASSESSMENT YEARS :2008-09 & 2009-10 7 MUMBAI; DATED : 23 RD JANUARY, 2019. SR.PS, JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ! , ! , / DR, ITAT, MUMBAI 6. #$% / GUARD FILE / BY ORDER, / / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.