DIRECTI INTERNET SOLUTIONS P.LTD, MUMBAI V. DCIT 5(1)(2), MUMBAI

ITA 5447/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4275 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 24-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: PHIROZE ANDHYARJUNA LD
• Keywords: Business expenditure
• Section: 143(3); 115JB; 37

Judgement Text

ITA NO.5447/MUM/2017 DIRECTI INTERNET SOLUTIONS P.LTD. ASSESSMENT YEAR :2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5447/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) DIRECTI INTERNET SOLUTIONS P.LTD. PLOT NO.1, ROW HOUSE NO.7 JANKI KUTIR CHS LTD. JUHU CHURCH (JANKI KUTIR) ROAD OPP. ST. JOSEPH HIGH SCHOOL VILE PARLE WEST, MUMBAI-49. / VS. DY. COMMISSIONER OF INCOME TAX -5(1)(2) ROOM NO.21, B-WING MITTAL COURT, NARIMAN POINT MUMBAI-400 021. ./ ./PAN/GIR NO. AACCG-4058-M ( ! /APPELLANT ) : ( ' #! / RESPONDENT ) ASSESSEE BY : PHIROZE ANDHYARJUNA- LD. AR REVENUE BY : D.G. PANSARI-LD.DR / DATE OF HEARING : 11/03/2019 / DATE OF PRONOUNCEMENT : 13/03/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-10, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-10/DCIT-5(1)(2)/171/2015-16 DATED 28/06/2017 QUA ITA NO.5447/MUM/2017 DIRECTI INTERNET SOLUTIONS P.LTD. ASSESSMENT YEAR :2012-13 2 CONFIRMATION OF ADHOC DISALLOWANCE OF RS.2 LACS AND CONFIRMATION OF ANOTHER DISALLOWANCE OF RS.0.52 LACS AS INTEREST PAID ON INCOME TAX. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DE PUTY COMMISSIONER OF INCOME TAX-5(1)(2) U/S 143(3) ON 26 /03/2015 WHEREIN THE LOSS UNDER NORMAL PROVISIONS WAS DETERMINED AT RS.66.86 LACS AFTER CERTAIN DISALLOWANCES AS AGAINST RETURNED LOSS OF R S.69.38 LACS E-FILED BY THE ASSESSEE ON 27/09/2011. THE BOOK PROFITS U/S 115JB WERE DETERMINED AT RS.129.48 LACS. THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS STATED TO BE ENGAGED IN IT ENABLED & BPO SERVICES. 2.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE CLAIMED BUSINESS PROMOTION AND MARKETING EXPENSES FOR RS.76.13 LACS. VARIOUS DISCREPANCIES WERE FOUND IN THE EXPENSE VOU CHERS SUBMITTED BY THE ASSESSEE AND LD. AO OPINED THAT THE ASSESSEE CO ULD NOT PROVE THAT THE EXPENDITURE HAS BEEN WHOLLY AND EXCLUSIVELY INC URRED FOR THE PURPOSE OF BUSINESS. RESULTANTLY, AN ADHOC DISALLOWANCE OF RS.2 LACS WAS MADE AGAINST THE SAME. 2.2 THE SECOND DISALLOWANCE OF RS.0.52 LACS REPRESE NT INTEREST ON INCOME TAX , WHICH IN THE OPINION OF LD. AO, WAS NOT ALLOWABLE AS DEDUCTION. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITHOU T ANY SUCCESS BEFORE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDE R DATED 28/06/2017 WHEREIN THE STAND OF LD. AO GOT CONFIRMED, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. SR. COUNSEL APPEARING FOR ASSESSEE [AR], SUBMITTED THAT ADHOC DISALLOWANCE MADE BY LD. AO WORKS OUT TO 2.6% OF C ONCERNED EXPENDITURE WHICH WAS ON THE HIGHER SIDE. THE DEDUC TION OF INTEREST OF ITA NO.5447/MUM/2017 DIRECTI INTERNET SOLUTIONS P.LTD. ASSESSMENT YEAR :2012-13 3 INCOME TAX HAS BEEN JUSTIFIED BY SUBMITTING THAT TH E SAME WAS COMPENSATORY IN NATURE. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE STAND OF LOWER AUTHORITIES. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. THE UNDISPUTED POSITIO N THAT EMERGES IS THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE BUSINESS PROMOTION AND MARKETING EXPENSES CONCLUSIVELY SINCE VARIOUS DISCREPANCIES WERE NOTED IN THE EXPENSE VOUCHERS SUBMITTED BY THE ASSE SSEE. THE LD. AO ALSO POINTED THAT THE ASSESSEE FAILED TO DEMONSTRAT E THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THEREFORE, KEEPING IN VIEW THE FACTUAL MA TRIX AND WITH A VIEW TO END LITIGATION, AS PLEADED BY LD.AR, WE RESTRICT THE IMPUGNED ADDITION TO RS.0.50 LACS AND DELETE THE BALANCE DISALLOWANCE OF RS.1.50 LACS. THIS GROUND STANDS PARTLY ALLOWED. 6. SO FAR AS THE DEDUCTION OF INTEREST ON INCOME TAX IS CONCERNED, LD. AR HAS DRAWN OUR ATTENTION TO CERTAIN JUDICIAL ANNO UNCEMENTS TO SUBMIT THAT THE SAME WAS COMPENSATORY IN NATURE AND HENCE ALLOWABLE TO THE ASSESSEE. HOWEVER, WE FIND THAT THE STATED ISSUE ST OOD SQUARELY AGAINST THE ASSESSEE BY THE JUDGEMENT OF OUR JURISDICTIONAL HONBLE BOMBAY HIGH COURT RENDERED IN FERRO ALLOYS CORPN. LTD.VS. CIT [196 ITR 406] WHEREIN THE MATTER HAS BEEN CONCLUDED IN FAVOR OF R EVENUE BY OBSERVING AS UNDER: - V.A. MOHTA, J. AT THE INSTANCE OF THE ASSESSEE, THE FOLLOWING QUE STION OF LAW IS REFERRED FOR THE OPINION OF THIS COURT UNDER SECTIO N 256(1) OF THE INCOME-TAX ACT, 1961: 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CLAIM FOR DEDUCTION OF INTEREST LEVIED UNDER SECTION 220(2) OF RS. 6,03 ,168, INTEREST LEVIED UNDER SECTION 215 OF RS. 1,38,506 AND INTEREST LEVIED UNDER SECTI ON 201(1A) OF RS. 66,590 WAS ITA NO.5447/MUM/2017 DIRECTI INTERNET SOLUTIONS P.LTD. ASSESSMENT YEAR :2012-13 4 RIGHTLY REJECTED AS NOT ALLOWABLE UNDER SECTION 37 OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 1976-77?' THE ASSESSEE WAS REQUIRED TO PAY THE FOLLOWING AMOU NTS AS INTEREST. RS. 6,03,168 UNDER SECTION 220(2), RS. 1,38,506 UNDER SECTION 215, AND RS. 66,590 UNDER SECTION 201(1A) OF THE INCOME-TAX ACT. THESE AMOUNTS WERE CLAIMED AS BUSINESS EXPENDITURE UNDER SECTION 37 OF THE INC OME-TAX ACT. THE INCOME-TAX OFFICER, THE COMMISSIONER IN FIRST APPEAL AND THE T RIBUNAL IN SECOND APPEAL, REJECTED THE SAID CLAIM AS NOT ALLOWABLE UNDER SECTION 37 AND IT IS AGAINST THE ABOVE BASIC UNDISPUTED BACKGROUND THAT THE QUESTION HAS BEEN RE FERRED. THE POINT STANDS CONCLUDED AGAINST THE ASSESSEE BY THE CONSISTENT VIEW OF THIS COURT RIGHT FROM ARUNA MILLS LTD. V. CIT [1957] 31 ITR 15 3 TO CIT V. GHATKOPAR ESTATE AND FINANCE CORPORATION ( P) LTD. [1989] 177 ITR 222 (B OM). THE DELHI HIGH COURT IN THE CASE OF BHARAT COMMERCE INDUSTRIES LTD. V. CIT [198 5] 153 ITR 275 AND THE KERALA HIGH COURT IN THE CASE OF FEDERAL BANK LTD. V. CIT [1989] 180 ITR 37 , HAVE ALSO TAKEN THE SAME VIEW. VERY FAIRLY, SHRI BHIDE, LEARNED COU NSEL FOR THE ASSESSEE, INFORMS US THAT THERE IS NO DECISION WHICH HAS TAKEN A CONTRARY VIE W. THE REFERENCE HAS BEEN MADE ONLY BECAUSE THE SPECIA L LEAVE PETITION AGAINST THE DELHI HIGH COURT DECISION IN BHARAT COMMERCE INDUSTRIES L TD.'S CASE [1985] 153 ITR 275 IS PENDING BEFORE THE SUPREME COURT. WE SEE NO REASON FOR KEEPING THIS REFERENCE PENDING INDEFINITELY FOR THAT REASON. UNDER THE CIRCUMSTANCES, WE RECORD THE ANSWER IN TH E AFFIRMATIVE. NO ORDER AS TO COSTS. IT IS NOTED THAT SPECIAL LEAVE PETITION [SLP] FILED BY THE ASSESSEE AGAINST THE DECISION OF HONBLE DELHI HIGH COURT AS REFERRE D TO ABOVE HAS ALREADY BEEN DISMISSED BY HONBLE APEX COURT IN [19 98] 98 TAXMAN 151 AND THE SAME HAS ALREADY ATTAINED FINALITY. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF APP EAL STANDS DISMISSED. 7. IN NUTSHELL, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2019. SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13/03/2019 SR.PS, JAISY VARGHESE ITA NO.5447/MUM/2017 DIRECTI INTERNET SOLUTIONS P.LTD. ASSESSMENT YEAR :2012-13 5 !'! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. +, '%- , - , / DR, ITAT, MUMBAI 6. ,./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.