ADDL CIT RG 1(2), MUMBAI V. J B BODA REINSURANCE BROKERS P.LTD, MUMBAI

ITA 5911/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62692 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 24-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS INDRA G ANAND
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI G E VEERABHADRAPPA, PRESIDENT & SHRI VIJAY PAL RAO, JM ITA NO. 5911/MUM/2011 (ASST YEAR 2008-09 ) THE ADDL COMMR OF INCOME TAX RANGE 1(2), MUMBAI VS J B BODA REINSURANCE BROKERS PVT LTD MAKER BHAVAN NO.1 NEW MARINE LINES MUMBAI 20 (APPELLANT) (RESPONDENT) PAN NO. AABCJ2372E ASSESSEE BY MRS INDRA G ANAND REVENUE BY SH A K NAYAK DT.OF HEARING 17 TH JULY 2012 DT OF PRONOUNCEMENT 25 TH ,JULY 2012 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23/06/2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2008 09. 2 THE SOLITARY GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DELET ING THE DISALLOWANCE MADE U/S 40(A)(IA) BY THE ASSESSING OFFICER APPLYIN G THE RATIO OF HONBLE ITAT S DECISION IN THE CASE OF M/S CROWE BODA & CO PVT LTD VS ACIT IN ITA NO.4251 FOR AY 2006-07 WHICH IS NOT SQUARELY APPLICABLE TO T HE FACTS OF THE CASE. 2.1 THE ASSESSEE COMPANY IS A RE-INSURANCE BROKER. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAD MADE AN ADDIT ION OF RS. 75,04,158/-UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT ON THE GROU ND THAT THE PROVISIONS OF SECTION 194C WERE NOT COMPLIED WITH BY THE ASSESSEE COMPANY WHILE MAKING THE PAYMENT TO THE PARENT COMPANY M/S J B BODA & CO PVT LTD. ITA NO.5911/M/2011 J B BODA REINSURANCE BROKERS PVT LTD 2 2.2 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPE ALS) DELETED THE ADDITION BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE C ASE OF M/S CROWE BODA AND CO PVT LTD., THE SISTER CONCERN OF THE ASSESSEE IN ITA NO . 4251/M/2009. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT NO TDS IS REQUIR ED TO BE DEDUCTED ON THE REIMBURSEMENT OF EXPENSES MADE BY THE ASSESSEE TO I TS PARENT COMPANY M/S JB BODA & COMPANY LIMITED AND DIRECTED THE ASSESSING O FFICER TO INTIMATE THE ASSESSING OFFICER OF M/S J B BODA & CO P LTD., TO CHECK WHETHER TDS WAS DEDUCTED ON THE PAYMENT MADE BY THE PARENT COMPANY TO 3RD PA RTIES IN ACCORDANCE WITH LAW OR NOT. 3 BEFORE US, THE LD DR HAS SUBMITTED THAT EACH GROU P COMPANY OF THE ASSESSEE IS INDEPENDENT COMPANY AND THEREFORE, THE ISSUE HAS TO BE DECIDED INDEPENDENTLY AS PER THE FACTS AND CIRCUMSTANCES OF EACH CASE. HE HAS FURTHER SUBMITTED THAT IT IS NOT CLEAR WHETHER THE PARENT COMPANY HAS DEDUCTED T HE TAX BEFORE MAKING THE PAYMENT OF EXPENDITURE WHICH WAS CLAIMED TO HAVE BE EN REIMBURSED BY THE ASSESSEE COMPANY. THE LD DR HAS FURTHER SUBMITTED THAT IT IS ALSO NOT CLEAR IN WHOSE NAME THE BILLS OF THE EXPENDITURE WERE RAISED AND I F THE BILLS WERE RAISED THE NAME OF THE ASSESSEE, THEN THE ASSESSEE WAS LIABLE TO DEDUC T THE TAX. HE HAS RELIED UPON THE ORDER OF ASSESSING OFFICER. 3.1 ON THE OTHER HAND, THE LEARNED AR OF THE ASSESS EE HAS SUBMITTED THAT THE BILLS WERE RAISED IN THE NAME OF PARENT COMPANY AND EXPEN DITURE IS SHARED BY ALL THE GROUP COMPANIES. HE HAS FURTHER SUBMITTED THAT THE PAYMENT WAS MADE BY THE PARENT COMPANY AFTER TDS WAS DEDUCTED. HE HAS RELIE D UPON THE DECISION OF THIS TRIBUNAL IN CASE OF ACIT VS CROWE BODA AND CO PVT L TD., WHICH IS BEING FOLLOWED BY THIS TRIBUNAL IN THE CASE OF ANOTHER GROUP COMPANY M/S J D BODA SURVEYORS P LTD AS WELL AS M/S JB BODA & BROTHERS PVT LTD. THE LEARNE D AR OF THE ASSESSEE HAS FURTHER ITA NO.5911/M/2011 J B BODA REINSURANCE BROKERS PVT LTD 3 SUBMITTED THAT IN THE CASE OF ANOTHER SISTER CONCER N M/S DHIRAJ OFFSHORE SURVEYORS & ADJUSTORS P LTD., THE TRIBUNAL HAS DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION IN CASE OF M/S CROWN BODA & COMPANY PVT LTD. 4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ISSUE WAS FIRST CONSIDERED AND DECIDED BY THIS TRIBUNAL IN CASE OF ACIT VS M/S CROWE BODA AND CO PVT LTD ., A GROUP COMPANY OF THE ASSESSEE, WHO HAVE SHARED THE EXPENDITURE IN QUESTION. THIS TRIBUNAL I N ITA NO. 4251/M/2009 VIDE ORDER DATED 30 TH MARCH 2010 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SUBSEQUENTLY, IN CASE OF ACIT VS M/S JB BODA SURVE YORS PVT LTD AND ANOTHER IN ITA NO 4252/M/2009 AND 4253/M/2009 VIDE ORDER DATED 21 ST MAY 2010 HAS CONSIDERED AND DECIDED THE ISSUE IN PARA 6 AS UNDER: 6 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THA T THE FACTS NOT IN DISPUTE INASMUCH AS THE PAYMENT WAS MADE TO PARENT C OMPANY M/S. J.B. BODA & CO. PVT. LTD. AS PAYMENT OF REIMBURSEMENT EX PENSES ON THE BASIS OF COST SHARING ARRANGEMENT. THIS ARRANGEMENT WAS ENTERED INTO FOR MORE EFFECTIVE COST MANAGEMENT. THE COMMON EXPENSES ARE INCURRED FOR AND ON BEHALF OF EVERYONE IN THE GROUP. ALL THE GROUP COMPAN IES REIMBURSED THE EXPENSES TO M/S. J.B. BODA & CO. PVT. LTD. ON AN EQ UITABLE BASIS DETERMINED IN EARLIER YEARS BY THE MANAGEMENT CONSULTANT. THER E IS NO MATERIAL N RECORD TO SHOW THAT THE ASSESSEE HAS MADE PAYMENTS TO THE CONTRACTOR OR SUB- CONTRACTOR OR ACTUAL SERVICE PROVIDER. THEREFORE, THE PA YMENTS MADE TO M/S. J.B. BODA & CO. PVT. LTD. DO NOT FALL WITHIN THE PU RVIEW OF SECTION 40(A)(IA) OF THE ACT..IN M/S. CROWE BODA & COMPANY (SUPRA), IT HA S BEEN HELD BY THE TRIBUNAL VIDE PARA-6 OF ITS ORDER DATED 30.3.2010 AS U NDER :- 6. ON PLAIN READING OF ABOVE SECTION, WE FIND THAT ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY FEES FOR PROFESS IONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB CONTRACTOR BEING RESIDENT FOR CAR RYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY W ORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND, SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID WITHIN STIPULATED PERIOD. IN THE CASE UNDER CONSIDERATION, THE ASSESS ING OFFICER DID NOT SPECIFICALLY POINT OUT AS TO UNDER WHICH CLAUSE OR U NDER WHICH SUB- SECTION OF SECTION 40 THE CLAIM OF THE ASSESSEE WAS DISALLOWED. THE CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT MADE TO PARENT, COMPANY, M/S. BODA & CO. PVT. LTD. IS PAYMENT OF RE IMBURSEMENT OF EXPENSES AND NOT, AGAINST CARRYING OUT ANY CONTRACT WORK AS A ITA NO.5911/M/2011 J B BODA REINSURANCE BROKERS PVT LTD 4 CONTRACTOR OR SUB-CONTRACTOR, ON WHICH, TAX IS DEDUCT IBLE AT SOURCE UNDER CHAPTER XVII-B OF THE ACT. THE ASSESSEE HAS ES TABLISHED THAT THE PAYMENT TO THEIR PARENT COMPANY M/S. J.B. BODA & CO. PVT. LTD. WAS NOT SUBJECT TO TDS AS PAYMENTS WERE NOT MADE AGAINST ANY CONTRACT, WORK CARRIED OUT. IT IS AN ADMITTED FACT IN THE CASE CONSIDERATION THAT THE PAYMENT MADE TO PARENT COMPANY, M/S. J.B. BODA & CO. PVT. LTD. IS A PAYMENT OF REIMBURSEMENT OF EXPENSES. IN CASE OF REIMBURSEMENT OF EXPENSES, THE EXPENDITURE INCURRED IS RELATED TO THE PERSON WHO WAS NOT MADE THE ORIGINAL PAYMENT. IN OTHER WORDS, THE PA YMENT OF EXPENDITURE IS MADE BY X-PARTY ON BEHALF OF THE Y-PA RTY AND LATER ON THE SAME IS. REIMBURSED TO THE X-PARTY, BY Y-PARTY, T HE EXPENDITURE IS PERTAINING TO Y-PARTY AND NOT PERTAINING TO X-PARTY . THUS, THE PAYMENT TO M/S. J.B BODA & CO. MADE BY THE ASSESSEE IS A SI MPLE REIMBURSEMENT. IN THE CASE UNDER CONSIDERATION, THE P ARENT COMPANY M/SJ.B. BODA & CO. PVT. LTD. HAS ACTED MERELY THE R OLE OF AGENT FOR MAKING PAYMENT OF EXPENDITURE ON BEHALF OF THE ASSE SSEE AND GETTING REIMBURSEMENT. THEREFORE,THE PAYMENT MADE TO M/S. J.B . BODA & CO. PVT. LTD. IS NOT ON ACCOUNT OF ANY EXPENDITURE. SECT ION 40(A)(IA) APPLICABLE ONLY IN A CASE OF EXPENDITURE. THE SAID S ECTION CLEARLY PROVIDES THAT CERTAIN SPECIFIC EXPENDITURE WHICH IS SUBJECT TO TDS IS NOT ALLOWABLE IF THE ASSESSEE FAILED TO MAKE TDS OR AFT ER MAKING DEDUCTION OF TDS DOES NOT PAY WITHIN THE STIPULATED PERIOD. A S STATED ABOVE, THE PAYMENT MADE TO M/S. J.B. BODA & CO. PVT. LTD. IS O N ACCOUNT OF PERSONAL ACCOUNT IN THE TERMS OF ACCOUNTING PRINCIPLE PAYING AND THEN RECEIVING AMOUNT WHICH IS NOT AN EXPENDITURE I N THE HANDS OF THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER IS NOT COR RECT IN INVOKING SECTION 40(A)(IA) OR OTHER PROVISION OF SECTION 40 OF THE ACT. IT IS ALSO TO BE NOTED HERE THAT THERE IS NO EVIDENCE OR MATERIAL ON RECORD BASED ON WHICH IT CAN BE SAID THAT PAYMENT MADE TO M/S. J .B. BODA & CO. PVT. LTD. IS SUBJECT TO TAX DEDUCTED AT SOURCE UNDER CHAPTER XVII-B OF THE ACT. WHETHER THE REVENUE HAS TAKEN ANY PROCEEDINGS FOR DEFAULT OF NOT MAKING TDS UNDER CHAPTER XVIIB OF THE ACT AGAI NST THE ASSESSEE IS ALSO NOT ON RECORD. IN ADDITION TO ABOVE IT HAS AL SO NOTICED THAT THE ASSESSING OFFICER DID NOT DISALLOW SUCH CLAIM OF TH E ASSESSEE IN THE SUBSEQUENT YEAR FOR ASSESSMENT YEAR 2007-08 EVEN AFTER RAISING QUERY IN THIS REGARDS. IN THE LIGHT OF THE ABOVE DISCUSSION , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE DIS ALLOWANCE OF RS.29,58,608/- ON ACCOUNT OF REIMBURSEMENT MADE TO P ARENT COMPANY M/S. J.B. BODA & CO. PVT. LTD. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE, WE FOR THE REASONS AS DISCUSSED ABOVE AND R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL HOLD THAT THE ASSESSEE IS N OT LIABLE TO DEDUCT TDS ON THE REIMBURSEMENT OF EXPENSES AND ACCORDINGLY WE ARE I NCLINED TO UPHOLD ,THE FINDING OF THE ID. CIT(A) IN DELETING THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE, REJECTED ITA NO.5911/M/2011 J B BODA REINSURANCE BROKERS PVT LTD 5 5 SIMILARLY IN THE CASE OF M/S DHIRAJ OFFSHORE SURV EYORS & ADJUSTORS P LTD., IN ITA NO. 4254/M/2009, THIS TRIBUNAL VIDE ITS ORDER DATED 7 TH MAY 2010 HAS ALSO CONSIDERED AND DECIDED THIS ISSUE IN PARAS NUMBER 3 AND 4 AS U NDER: 3 AT THE VERY OUTSET THE LEARNED COUNSEL FOR THE AS SESSEE CONTENDED THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE C ASE OF ANOTHER SISTER WAS DELETED BY THE LEARNED CIT(A). WHEN THE MATTER CAME U P BEFORE THE TRIBUNAL IN ITA NO.4251/MUM/2009 IN ACIT VS. M/S CROWE BODA & CO. PVT. LTD., THE TRIBUNAL WAS PLEASED TO UPHOLD THE CIT(A)S VIEW VID E ITS ORDER DATED 30.3.2010. A COPY O THE SAID ORDER WAS PLACED ON RE CORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE, AFTER GOING THROUGH THE SAID ORDER, FAIRLY CONCEDED THAT THE FACTS ARID CIRCUMSTANCES OF THE PRE SENT APPEAL WERE SIMILAR TO THOSE ALREADY CONSIDERED AND DECIDED BY T HE TRIBUNAL. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS BUT COMMON SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE FACTS OF DELETION OF INSTANT ADDITION AMOUNTING TO RS.10.67 LAKHS IN THI S CASE IS SIMILAR TO THE DELETION OF DISALLOWANCE OF RS.29.58 LAKHS IN THE C ASE OF ASSESSEES SISTER CONCERN M/S. CROWE BOTH & CO. PVT. LTD. IN VIEW OF THE DECISION GIVEN BY THE TRIBUNAL IN THE CASE OF SISTER CONCERN AND RESPECTFULLY FOLLOWING THE PRECEDENT WE UPHOLD THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE. 6 THUS, IT IS CLEAR THAT THE EXPENDITURE WAS SHARED BY THE ALL THE GROUP COMPANIES; BUT THE PAYMENT WAS MADE BY THE PARENT C OMPANY. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE AS WELL AS THE OTHER G ROUP COMPANIES TO THE PARENT COMPANY IS NOTHING BUT REIMBURSEMENT OF THE EXPENDI TURE TO THE EXTENT OF THE SHARE. WHEN THE ASSESSEE HAS CATEGORICALLY STATED THAT THE PARENT COMPANY MADE THE PAYMENT AFTER DEDUCTING THE TDS, THEN NO FURTHE R TDS IS REQUIRED TO BE DEDUCTED AT THE TIME OF REIMBURSEMENT OF THE SAME B Y THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARENT COMPANY HAS REC OVERED MORE THAN WHAT WAS PAID AND THERE WAS ANY MARK-UP OR MARGIN INVOLVED I N THE SAID REIMBURSEMENT OF PAYMENT. 7 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND DECISION OF THIS TRIBUNAL IN THE CASE OF SISTER CONCERN OF THE ASSESSEE, WE DO N OT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS) IN DEL ETING THE ADDITION. ITA NO.5911/M/2011 J B BODA REINSURANCE BROKERS PVT LTD 6 7.1 AS FAR AS THE GRIEVANCE OF THE REVENUE THAT IT IS NOT CLEAR WHETHER THE PARENT COMPANY HAS DEDUCTED THE TAX BEFORE MAKING THE PAYM ENT TO 3RD PARTIES, THE COMMISSIONER OF INCOME TAX(APPEALS) HAS ALREADY ISS UED A DIRECTION IN THIS RESPECT. THEREFORE, WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE CONTENTION OF THE LD DR ON THIS POINT. 8 IN THE RESULT APPEAL FILED BY THE REVENUE IS DISM ISSED ORDER PRONOUNCED IN THE OPEN COURT ON THE 25 TH ,DAY OF JULY 2012. SD/- SD/- ( G E VEERABHADRAPPA ) PRESIDENT ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 25 TH , JULY 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI