Singtel Global (India) P.Ltd, New Delhi V. DCIT, Circle-23(2), New Delhi

ITA 5820/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5412 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 07-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 37(1); 250; 37

Judgement Text

1 ITA NO. 5820/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL ME MBER AND SH. PRASHANT MAHARISHI, ACCOUN TANT MEMBER I.T.A. NO. 5820/DEL/20 18 (A.Y 2012-13) (THROUGH VIDEO CON FERENCING) SINGTEL GLOBAL (INDIA) P. LTD. 5 TH FLOOR, BLOCK-A, STATEMAN HOUSE, 148, BARAKHAMBA ROAD, NEW DELHI AALCS7526F (APPELLANT) VS DCIT CIRCLE-23(2) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 28/06/2018 PASSED BY CIT(A)-8, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER: THE APPELLANT RESPECTFULLY SUBMITS THAT: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-8, NEW DELHI [ CIT(A)] HAS ERRED IN PASSING THE ORDER UNDER SECTION UNDER SECTION 250 O F THE INCOME TAX ACT, 1961 (ACT), CONFIRMING THE ADJUSTMENTS MADE BY TH E DEPUTY COMMISSIONER OF APPELLANT BY NONE RESPONDENT BY SH. PRAKASH DUEBY, SR. DR DATE OF HEARING 16.09.2021 DATE OF PRONOUNCEMENT 23.09.2021 2 ITA NO. 5820/DEL/2018 INCOME TAX, CIRCLE 23(2), NEW DELHI (AO) IN THE A SSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. EACH OF THE GROUND IS REFERRED TO SEPARATELY, WHICH MAY KINDLY BE CONSIDERED INDEPENDENT OF EACH OTHER. 1. GROUND NO. 1 - THE ORDER PASSED BY LEARNED CIT(A) I S BAD IN LAW 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE SUBMISSIONS AS WE LL AS THE CASE LAWS RELIED UPON BY THE APPELLANT, WHILE SUMMARILY REJECTING IT BY RELYING ON THE ORDER PASSED BY THE LEARNED AO. 2. GROUND NO. 2 - ADDITION OF REMUNERATION PAID TO DIR ECTOR AMOUNTING TO INR 30,55.082 2.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED A O IN DISALLOWING REMUNERATION PAID TO DIRECTOR, DESPITE OF THE SAME BEING APPROVED BY THE BOARD OF DIRECTORS OF THE ASSESSEE AND THE CENTRAL GOVERNMENT AS WELL. 2.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED A O IN DISALLOWING REMUNERATION PAID TO DIRECTOR AMOUNTING TO INR 30,5 5,082 BY TREATING THE SAME AS A NON-GENUINE BUSINESS EXPENSE UNDER SECTIO N 37 OF THE ACT AS WELL AS CAPITAL EXPENDITURE AND HENCE LIABLE TO BE DISAL LOWED. 2.3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) /A.O HAVE ERRED IN HOLDING THAT THE ASSESSEE SHOULD HAVE EITHER RECOVERED SUCH ADVANCES OR ADJUSTED IT IN THE SUBSEQUENT YEARS SAL ARY OF THE DIRECTOR. 3. GROUND NO. 3-INTEREST U/S 234B OF THE ACT. 3.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A)/AO HAS ERRED IN LEVYING/COMPUTING INTEREST U NDER SECTION 234B OF THE ACT. 4. GROUND NO. 4 - INITIATION OF PENALTY UNDER SECTION 271(L)(C) OF THE ACT. 4.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED HOLDING THAT THE GROUND RAISED BEFORE HIS OFFICE AGAINST INITIATION OF 3 ITA NO. 5820/DEL/2018 PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT IS PREMATURE. ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES FOR LEAVE TO ADD, AMEND, VARY, OMIT OR SUBST ITUTE ANY OF THE AFORESAID GROUNDS AT ANY TIME BEFORE OR AT THE TIME OF HEARIN G OF THE MATTER WITH THE INCOME TAX APPELLATE TRIBUNAL. 3. THE ASSESSEE COMPANY IS ENGAGED IN PROVIDING TEL ECOMMUNICATIONS SERVICES. THE ASSESSEE STARTED ITS COMMERCIAL OPERA TIONS IN AY 2009-10 AND IS CURRENTLY ENGAGED IN PROVIDING NATIONAL LONG DISTAN CE (NLD) AS WELL AS INTERNATIONAL LONG DISTANCE (ILD) TELECOM SERVICE S TO ITS INDIAN AND OVERSEAS CUSTOMERS. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE PRESENT ASSESSMENT YEAR ON 30 TH NOVEMBER 2012 DECLARING A TOTAL INCOME OF RS. 7,68 ,92,720 UNDER NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS 5,10,27,746 UNDER SPECIAL PROVISIONS OF SECTION 115.IB OF THE ACT. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 23 RD MARCH, 2016, WAS PASSED BY THE ASSESSING OFFICER TH EREBY DISALLOWING THE ADVANCE WRITTEN OFF AMOUNTING TO RS 30,55,082/- GIV EN TO THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. ACCORDINGLY, THE ASSESSING OFFICER DETERMINED ASSESSED INCOME OF RS. 7,99,47,803/- UND ER NORMAL PROVISIONS OF THE ACT AND RAISED A TOTAL TAX DEMAND OF RS. 14,59, 820/- INCLUDING INTEREST UNDER SECTION 234B AND 234C OF THE ACT AMOUNTING TO RS. 9,46,168/- AND RS. 5,16,979/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT (A) HAS DISMISSED THE APPEAL O F THE ASSESSEE. 5. AT THE TIME OF HEARING NONE APPEARED FOR THE ASS ESSEE DESPITE GIVING NOTICES. HENCE, WE ARE PROCEEDING ON THE BASIS OF C ONTENTIONS TAKEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND BEFORE TH E CIT(A). 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 4 ITA NO. 5820/DEL/2018 7. WE HAVE HEARD LD. DR AND PERUSED ALL THE MATERIA L AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE REMUNERATION PAID TO THE DIRECTOR WAS APPROVED BY THE BOARD OF DIRECTORS OF THE ASSESSEE AND THE C ENTRAL GOVERNMENT AS WELL. THE RESOLUTION HAS BEEN PASSED BY THE BOARD OF DIRE CTORS FOR WRITING OFF ADVANCE RECOVERABLE AND NECESSARY APPROVALS HAVE BE EN TAKEN FROM THE CENTRAL GOVERNMENT FOR WAIVER OF RECOVERY OF EXCESS REMUNER ATION PAID TO MR. ARUN DAGAR. THESE DOCUMENTS WERE PRODUCED BEFORE THE AS SESSING OFFICER AS WELL AS BEFORE THE CIT(A). THE PROVISIONS OF SECTION 37(1) CLEARLY SET OUT THAT ONCE THE PROPER APPROVAL HAS BEEN TAKEN THE WRITING OFF ADVA NCE RECOVERABLE CANNOT BE DISALLOWED. IT IS A GENUINE BUSINESS EXPENSES, THE ADDITIONS MADE BY THE ASSESSING OFFICER CANNOT BE SAID TO BE IN THE NATUR E OF CAPITAL EXPENDITURE, SINCE NO ENDURING BENEFIT ACCRUES OR ARISES TO THE ASSESSEE FROM ADVANCING LOAN TO THE MD. THUS, THE SAME ACCORDINGLY ACQUIRES CHARACTER OF REVENUE EXPENDITURE. THE SAID EXPENSE ARE BEING INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND HEN CE, IS FULLY DEDUCTABLE U/S 37(1) OF THE ACT. THEREFORE, THE ASSESSING OFFICER AS WELL AS THE CIT(A) WAS NOT RIGHT IN MAKING ADDITION TO THAT EXTENT. HENCE, G ROUND NO. 2, 2.1, 2.2 AND 2.3 ARE ALLOWED. AS REGARDS GROUND NO. 3, 3.1 AND 4, 4 .1 ARE CONSEQUENTIAL, HENCE, NOT ADJUDICATED UPON AT THIS JUNCTURE. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF SEPTEMBER, 2021 SD/- SD/- (PRASHANT MAHARISHI) (SUCH ITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23/09/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 5 ITA NO. 5820/DEL/2018 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI