JCIT(OSD), Circle -4, Kolkata, Kolkata V. M/s Gillander Arbuthnot & Co. Ltd., Kolkata

ITA 589/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70502 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2012
• Court: TRIBUNAL
• Department Lawyers: R P NAG SRDR
• Assessee Lawyers: S M SURANA
• Keywords: Business expenditure; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI ABRAHAM.P.GEORGE, ACCOUNTANT MEMBER ITA NO. 589 / KOL / 2012 ASSESSMENT YEAR :2007-08 JCIT (OSD), CIRCLE-4, P-7, CHOWRINGHEE SQURE, 8 TH FLOOR, KOLKATA 700 069 V/S . M/SGILLANDER ARBUTHNOT & CO. LTD. C-4, GILLANDERS HOUSE,KOLKATA- 700 001 [ PAN NO.AAACG 9832F ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI R.P.NAG, SR-DR /BY RESPONDENT SHRI S.M. SURANA, AR /DATE OF HEARING 26-11-2013 /DATE OF PRONOUNCEMENT 19-12-2013 / // / O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE IS AGAINST ORDER OF COMMISS IONER OF INCOME-TAX (APPEALS)-IV, KOLKATA IN APPEAL NO.227CIT(A)-IV/09- 10 DATED 28-12-2011. ASSESSMENT WAS FRAMED BY JCIT, RANGE-4, KOLKATA U/S .143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FO R ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 31-12-2009. 2. FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW PUJA EXPEN SES AND TEMPLE EXPENSES. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1:- ITA NO.589/KOL2012 A.Y.2007-08 JCIT(OSD) CIR-4 KOL V. MS.GILLANDER ARBUTHNOT& CO . LTD. PA GE 2 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO ALLOW PUJA EXPENSE FO R RS.1,36,282/- AND TEMPLE EXPENSE OF RS.1,92,966/- SINCE SUCH EXPENSES ARE NON-BUSINESS EXPENDITURE AND THE ASSESSEE COMPANY COULD NOT ESTA BLISH THE NEXUS BETWEEN THE NECESSITY OF SUCH EXPENDITURE AND THE P URPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE COMPANY. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER TREATED THE PUJA EXPENSE AND TEMPLE EXPENSE OF MICCO DIVISION AND TE XTILE DIVISION OF THE ASSESSEE-COMPANY RESPECTIVELY AS NON BUSINESS EXPEN DITURE AND DISALLOWED THE SAME AT RS.1,36,282/- AND RS.1,92,966/- RESPECTIVEL Y. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO ALSO ALLOWED THE CLAIM OF ASSESSEE BY HOLDING IN PARA-4.1 OF HIS ORDER, WHICH REPRODUCED AS UNDER:- 4.1 THE FACTS NARRATED BY AO AND SUBMISSION OF APP ELLANT IS CONSIDERED. AS PER ASSESSMENT ORDER, PUJA EXPENSE IS NOT A LEGI TIMATE REQUIREMENT OF THE BUSINESS AND THEREFORE, THE EXPENDITURE IS NOT ALLOWED CONSIDERING EXPENDITURE NOT FOR THE PURPOSE OF BUSINESS. APPELL ANT HAS ON THE OTHER HAND SUBMITTED THAT EXPENSES UNDER THIS HEAD WERE I NCURRED FOR CELEBRATION AND INCURRED ON THE OCCASION DIWALI AND MAHURT. AND AS PER THE LETTER OF THE CBDT FILE NO.13A206D-IT(A-II) DATED 3.10.1968 NO MONITORY LIMIT, FOR DISALLOWANCE OF SUCH EXPENSES I S PRESCRIBED. I THINK THERE IS NOTHING UNUSUAL ABOUT SPENDING FOR PUJA BY A COMPANY FOR THE WELFARE AND ENTERTAINMENT OF STAFF AND SENTIMENT AT TACHED WITH SUCH PUJA THAT WOULD FETCH BETTER PROFIT FOR A COMPANY. I THE REFORE, DIRECT THE AO TO ALLOW PUJA EXPENSES AND TEMPLE EXPENSES AS CLAIMED BY THE APPELLANT. AGGRIEVED, NOW REVENUE CAME IN APPEAL BEFORE US. WE FIND THAT THE PUJA EXPENSE INCURRED ON OCCASION OF DIWALI AND MAHURAT ARE CUSTOMARY EXPENSES AND GOING BY THE TURNOVER OF THE ASSESSEE-COMPANY A ND THE NATURE OF THE BUSINESS OF THE ASSESSEE, WE FEEL THAT THESE ARE IN CURRED FOR THE HARMONY OF THE ASSESSEE-COMPANYS EMPLOYEES AND THESE ARE FOR THE PURPOSE OF BUSINESS. SIMILAR ARE THE REASONS FOR INCURRING TEMPLE EXPENS E. HENCE, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. ITA NO.589/KOL2012 A.Y.2007-08 JCIT(OSD) CIR-4 KOL V. MS.GILLANDER ARBUTHNOT& CO . LTD. PA GE 3 4. SECOND ISSUE IN THIS APPEAL OF REVENUE IS AGAINS T THE ORDER OF CIT(A) DELETING THE ADDITION ON ACCOUNT OF CESS ON GREEN L EAF. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.2:- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.59,38,672/- O N ACCOUNT OF CESS ON GREEN LEAF WITHOUT CONSIDERING THE FACT THAT EXPENS ES ON ACCOUNT OF CESS ON GREEN LEAF IS RELATED TO 100% AGRICULTURAL OPERA TION AND SLP IS PENDING BEFORE THE HONBLE SUPREME COURT AGAINST THE DECISI ON OF CALCUTTA HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. VS. CIT ( 270 ITR 167 ) IN THE LIGHT OF WHICH LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. WE FIND THAT THIS ISSUE IS COVERED BY THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AFT INDUSTRIES LTD. V. CIT 270 ITR 167 (CAL), WHEREIN IT HAS BEEN DECIDED BY HONBLE JURISDICTIONAL HIGH COU RT THAT CESS ON GREEN LEAF IS A NORMAL BUSINESS EXPENDITURE AND ONCE THE HONBLE JU RISDICTIONAL HIGH COURT DECIDES THE ISSUE IN FAVOUR OF ASSESSEE, SAME IS CO VERED. HENCE, THE ORDER OF CIT(A) IS CONFIRMED ON THIS ISSUE. THIS ISSUE OF RE VENUES APPEAL IS DISMISSED. 6. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE DISALLOWANCE IN VIEW OF NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.11,35,554/- ON A CCOUNT OF NON DEDUCTION OF TDS U/S.40(A)(IA) IN VIEW OF JUDGMENT GIVEN BY T HE SUPREME COURT IN THE CASE OF MS. TRANSMISSION CORPORATION OF INDIA REPOR TED IN 239 ITR 587 . 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING O FFICER TREATED THE COMMISSION PAID TO FOREIGN AGENT AS NON ALLOWABLE E XPENSES AS ASSESSEE FAILED TO DEDUCT TDS AND HE DISALLOWED THE COMMISSION TO T HE EXTENT OF RS.11,35,554/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING VIDE PARA-7.1 OF HIS ORDER AS UNDER:- 7.1 IT IS SEEN THAT AO MADE THIS DISALLOWANCE ON T HE BASIS OF SUPREME COURT DECISION IN CASE OF M/S. TRANSMISSION CORPORA TION OF INDIA REPORTED ITA NO.589/KOL2012 A.Y.2007-08 JCIT(OSD) CIR-4 KOL V. MS.GILLANDER ARBUTHNOT& CO . LTD. PA GE 4 IN 239 ITR 587 WHEREIN IT WAS HELD THAT ONLY WAY TO ESCAPE LIABILITY IS TO GET NO DEDUCTION CERTIFICATE OR LOWER RATE DEDUCTION CE RTIFICATE FROM AO. APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT THIS ISSUE WAS FURTHER CLARIFIED BY HONBLE SUPREME COURT IN CASE OF GE IN DIA TECHNOLOGY CENTRE P LTD. VS. CIT IN 44 DTR SUPREME COURT 201 ,IN WHICH SUPREME COURT HAS CLARIFIED THAT OBLIGATION TO DEDUCT TAX AT SOURCE A RISES U/S.194 ONLY WHEN THERE IS ANY SUM CHARGEABLE UNDER THE ACT. AND CBDT CIRCULAR HAS ALSO CLARIFIED, THAT TDS PROVISION WILL NOT APPLIED IN C ASE WHERE SUCH INCOME IS NOT TAXABLE IN INDIA. IN THIS CASE, AS THE INCOME D OES NOT ARISE IN INDIA AND THE COMMISSION IS PAID TO THOSE FOREIGN AGENTS, WHO HAVE NO PERMANENT ESTABLISHMENT OR BUSINESS PLACE IN INDIA AND SERVIC ES ARE ALSO RENDERED OUTSIDE INDIA. IT IS VERY CLEAR THAT NO TAX IS DEDU CTIBLE IN CASE WHERE THE NON-RESIDENT AGENTS OPERATE OUTSIDE THE COUNTRY AND NO PART OF HIS INCOME ARISES IN INDIA. IN VIEW OF THE CIRCULAR NO. 23 AND 786 , THE COMPANY WAS UNDER NO OBLIGATION TO DEDUCT TAX AND AS PROVISION U/S. 40(A)(IA) DOES NOT APPLY, THE DISALLOWANCE MADE BY AO IS DIRECTED TO B E DELETED . WE FIND THAT ASSESSEE'S CLAIM WAS THAT THE COMMISSI ON PAID TO FOREIGN AGENTS, WHO ARE NOT HAVING PERMANENT ESTABLISHMENT BUSINESS PLACE IN INDIA AND THEY ARE PROVIDING SERVICES OUTSIDE INDIA AND EVEN THE P AYMENT IS DIRECTLY MADE OUTSIDE INDIA IN FOREIGN EXCHANGE. ACCORDING TO ASS ESSEE, ASSESSEE'S INCOME DOES NOT ACCRUE OR ARISE IN INDIA AND ONCE INCOME D OES NOT ACCRUE OR ARISE IN INDIA, THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON FOREIGN PAYMENTS. ACCORDING TO HIM, THIS ISSUE IS COVERED BY THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P. LTD. V. CIT 44 DTR 201 (SC). AS THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF HONBLE SUPREME COURT, WE HAVE NO REASON TO INTERFERE IN THE ORDER OF CIT( A) AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS ALSO DISMISSED. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 /12/2013 SD/- SD/- (ABRAHAM.P. GEORGE) (MAHAVIR S INGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP !' #- 19/ 1 2 /2013 ) ITA NO.589/KOL2012 A.Y.2007-08 JCIT(OSD) CIR-4 KOL V. MS.GILLANDER ARBUTHNOT& CO . LTD. PA GE 5 **+ **+ **+ **+ ,+ ,+ ,+ ,+ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '.'*/ 0 / CONCERNED CIT 4. 0- / CIT (A) 5. +34 ***/, */ , / DR, ITAT, KOLKATA 6. 478 9: / GUARD FILE. BY ORDER/ , ;/< '= */ , )