ACIT 2(3)(1), MUMBAI V. TATA SONS LTD, MUMBAI

ITA 6239/MUM/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3816 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Rule of consistency; Wholly owned subsidiary
• Section: 13

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI S . RIFAUR RAHMAN, AM & SHRI RAM LAL NEGI, JM ./ I.T.A. NO . 6239 & 6240 /MUM/2016 ( / ASSESSMENT YEAR: 2008 - 09 & 2007 - 08 ) ACIT 2(3)(1), ROOM NO. 552, 5 TH FLOOR, AA YAKAR BHAVAN, M. K. ROAD, MUMBAI 400 020 / VS. M/S TATA SONS LTD. 24, BOMBAY HOUSE, HOMI MODY STREET, FORT, MUMBAI - 400 001 ./ ./ PAN NO. A A A CT4060A ( / APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NO . 61 61 & 6162/MUM/2016 ( / ASSESSMENT YEAR: 2008 - 09 & 2007 - 08 ) M/S TATA SONS LTD. 24, BOMBAY HOUSE, HOMI MODY STREET, FORT, MUMBAI - 400 001 / VS. ACIT 2(3)(1), ROOM NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 020 ./ ./ PAN NO. AAACT4060A ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MANJUNATHA SWAMY, DR / RESPONDENTBY : MS. AARTI VISSANJI, AR / DATE OF HEARING : 02.09 .2020 / DATE OF PRONOUNCEMENT : 19.10.2020 2 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT FOUR ( 4 ) CROSS A PPEAL S HAVE BEEN FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 6 , MUMBAI, I N S HO RT LD. CIT(A) DATED 28.07. 2016 FOR AY 2007 - 08 & 2008 - 09 RESPECTIVE LY. 2. SINC E THE ISSUE RAISED IN ALL THE APPEALS ARE IDENTICAL, THEREFORE, FOR TH E SAKE OF CONVENIENCE, THESE APPEALS ARE CLUBBED, HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDE R. WE AR E TAKING THE ASSESSMENT YEAR 2007 - 08 AS LEAD CASE TO ADJUDICATE 3 . THE BRIEF FACTS OF THE CASE ARE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENT HOLDI NGS AND CONSULTANCY SERVICES. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y.2007 - 08 ON 31.10.2007 D ECLARI NG TOTAL INCOME OF RS.55,20,600/ - UNDER NORMAL PROVISIONS OF THE ACT AND RS.22,68,62,20,848/ - U/S. 115 JB OF THE ACT. THE AO COMPLETED THE ASSESSMENT ULS.143(3) OF THE ACT ON 29.12.2009 DETERMINING TOTAL INCOME AT RS.26,40,32,12,860/ - UNDER NORMAL PRO VISIONS OF THE ACT AND RS.26158,28,74,409/ - U/S. 11 5JB OF THE ACT. 3 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. 4. SUBSEQUENTLY, THE ASSESSMENT WAS RECTIFIED VIDE ORDER DATED 26.03.2010 DETERMINING TOTAL INCOME AT RS.26,40,17,49,020/ - . CONSEQUENT TO ORDER GIVING EFFECT TO CIT(A)'S ORDER DATED 16.02. 2012, THE TOTAL INCOME W AS REVISED TO RS.3,27,59,48,430/ - UNDER NORMAL PROVISIONS AND RS.25,81,57,00,552/ - U/S. 11 5JB OF THE ACT. 5. THEREAFTER, THE CASE WAS RE - OPENED AND ORDER U/S.143(3) R.W.S.147 WAS PASSED ON 29.11.2012 DETERMINING TO TAL INCOME AT RS. 3,27,59,48,430/ - UNDER NORMAL PROVISIONS AND RS.26,38,77,00,552/ - U/S.11 5JB OF THE ACT. CONSEQUENT TO THE ORDER GIVING EFFECT TO CIT(A)'S ORDER DATED 11.03.2014, THE TOTAL INCOME W AS REVISED TO RS.3,27,59,48,430/ - UNDER NORMAL PROVISIONS AND RS.26,38,77,00 ,552/ - U/S.11 5JB OF THE ACT. 6. THE CASE WAS AGAIN RE - OPENED BY ISSUING NOTICE U/S .148 ON 18.03.2014. THE AO COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT AFTER DISALLOWING RS.12,50,00,000/ - IN RESPECT OF EST ABLISHMENT AND OTHER EXPENSES U/ S.37 OF THE ACT. THIS IS RELATING TO PAYMENT OF RS.12,50,00,000/ - TO M/S. VAISHNAVI CORPORATE COMMU NICATIONS PVT. LTD. (VCCPL) AND 4 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. OMITTED TO GRANT CREDIT FOR DIT RELIEF AMOUNTING TO RS. 1,11,15,750/ - AS DIRECTED BY CIT(A) VIDE ORDER DATED 31.01.2012. 7 . A GGR IEVED WITH THE ABOVE ORDER , ASSESSEE PREFERRED AN APPEAL BEFORE LD CIT(A) AND SUBMITTED BEFORE HIM A DETAILED SUBMISSION. LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, PARTLY ALLOWED THE APPEAL OF ASSESSEE BY ALLOWING 50% OF PAYMENTS MADE TO M/S . VAISHNAVI CORPORATE COMMUNICATIONS PVT. LTD. ON AD HOC BASIS. 8. AGGRIEVED WITH THE ABOVE ORDER, REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US ON THE SOLITARY GROUND THAT LD. CIT(A) ERRED IN ALLOWING 50% OF PAYMENTS MADE TO M/S VAISHNAVI CORPORATE COMMUN ICATIONS PVT. LTD. (VCCPL) AS CONSULTANCY FEES. 9. AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THIS GROUND IS SQUARELY COVERED BY THE ORDER OF COORDINATE BENCH OF HON'BLE ITAT IN ITA 4630 & 4637/MUM/2016 FOR AY 2009 - 10 IN ASSE SSEE'S OWN CASE, WHEREIN THE ENTIRE PAYMENT TO VCCPL HAS BEEN ALLOWED AS A 5 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. DEDUCTION TO THE ASSESSEE. SHE FURTHER SUBMITTED THAT ASSESSEE IS PRESSING GROUND NO. 6 SINCE THE HON'BLE IT AT HAS GIVEN RELIEF TO ASSESSEE ON MERITS. SHE WANTED TO KEEP GROUND NOS . 1 TO 5, WHICH IS RAISED ON JURISDICTIONAL ISSUES AS OPEN. FURTHER, SHE ALSO SUBMITTED THAT ASSESSEE COMPANY IS WHOLLY OWNED SUBSIDIARY OF TATA GROUP OF COMPANIES AND ITS DATE OF INCORPORATION IS 02.03.2007. THE GROUP COMPANIES HAVE INFUSED THE WHOLE CAPI TAL. THE AGREEMENT ENTERED BY THE GROUP COMPANIES IS EQUALLY APPLICABLE TO ALL THE GROUP COMPANIES. 10. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER PASSED BY AO AND SUBMITTED THAT VCCPL HAS NOT DONE ANY CONSULTANCY SERVICES. THE SERVICE AGREEMENT DOES NO T CONTAIN THE NAME OF THE ASSESSEE. HE VEHEMENTLY ARGUED THAT LD. CI T(A) HAS GIVEN RELIEF TO THE ASSESSEE WITHOUT BASIS. HE RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASAOMI SATSANG, 193 ITR 321 (SC). 11 . CONSIDERED THE RIVAL SU BMISSIONS AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORD THAT THE IDENTICAL GROUND RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE COORDINATE 6 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. BENCH OF ITAT IN ITA 4630 & 4637/MUM/2016 FOR AY 2009 - 10 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, IT IS REPRODUCED BELOW: - 7.5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE FOLLOWING DOCUMENTS WERE DULY PLACED ON RECORD BEFORE THE LOWER AUTHORITIES: - (A) COPY OF MEDIA RELATIO NS, STRATEGIC PLANNING AND PUBLIC AFFAIRS SERVICES AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND VCCPL DATED 21/11/2006 TOGETHER WITH ANNEXURE - A CONTAINING LIST OF TATA COMPANIES THAT ARE PART OF THIS AGREEMENT; (B) ANNEXURE - B DEFINING VARIOUS SERVICES TO BE RENDERED BY THE PARTIES CONCERNED; (C) ANNEXURE - C DEFINING THE DATA CODE OF CONDUCT; (D) ANNEXURE - D DEFINING THE DATA CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING AND CODE OF CORPORATE DISCLOSURE PRACTICES (ENCLOSED IN PAGES 20 - 63 OF THE PAPER BOOK). 7.6. WE HAVE ALREADY GONE THROUGH THE AGREEMENT ENTERED BY THE ASSESSEE COMPANY WITH VCCPL DATED 21/11/2006 REFERRED TO SUPRA WHEREIN IN ANNEXURE - A, THE FOLLOWING ARE THE LIST OF COMPANIES THAT ARE LISTED OUT AS BELONGING TO TATA GROUP OF 7 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. COMPANIES WHICH ARE COVERED WITHIN THE AMBIT OF THIS AGREEMENT: - TATA COMPANIES THE TATA COMPANIES ARE SUBSTANTIVELY THOSE THAT HAVE SIGNED THE TATA BRAND EQUITY AND BUSINESS PROMOTION AGREEMENT WITH TSL. KEY COMPANIES {INCLUDING THEIR OPERATING DIVISION S AND SUBSIDIARIES) ARE: TATA SONS LIMITED AND THE TATA TRUSTS TATA INDUSTRIES LIMITED THE TATA IRON AND STEEL CO. LTD. TATA MOTORS LTD. THE TATA POWER CO. LTD. TATA CHEMICALS LTD. THE INDIAN HOTELS CO. LTD. TATA TEA LIMITED TATA CONSULTANCY SERVICES LTD. TATA TELESERVICES LIMITED INCLUDING TATA TELESERVICES (MAHARASHTRA) LTD., VIDESH SANCHAR NIGAM LIMITED RALLIS INDIA LIMITED TATA ELXSI LIMITED . VOLTAS LTD. . TATA COFFEE LTD. TRENT LTD. TITAN INDUSTRIES LTD. 8 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. CMC LIMITED TATA INTERNATIONAL LIMITED TATA AUTOCOMP SYSTEMS LTD. 7.7. FROM THE AFORESAID LIST, ADMITTEDLY, IT COULD BE SEEN THAT TATA REALTY INVESTMENT AND INFRASTRUCTURE LTD., DO ES NOT FIGURE IN THE SAID LIST. FROM THE AFORESAID AGREEMENT DATED 21/11/2006, IT COULD ALSO BE SEEN THAT MS. NIRA RADIA IS A MEDIA RELATIONS PROFESSIONAL AND VCCPL WAS A COMPANY PROMOTED BY HER AS A PRIVATE LIMITED COMPANY ON 01/11/2001 AND THE SAID COMPA NY HAS BEEN IN THE BUSINESS OF PUBLIC RELATION MANAGEMENT AND COMMUNICATION STRATEGIES AND HAS RENDERED SERVICES IN THOSE AREAS TO THE ASSESSEE COMPANY AND OTHER TATA COMPANIES SINCE 01/11/2001. THESE FACTS ARE NOT DISPUTED BY THE REVENUE BEFORE US. WE FIN D THAT PRIMARILY THE ASSESSEE HEREIN HAS MADE INVESTMENTS OF RS.1700/ - CRORES IN ITS SUBSIDIARY COMPANY TATA REALTY INVESTMENT AND INFRASTRUCTURE LTD. THE SAID SUBSIDIARY COMPANY HAD UTILISED THE SAID FUNDS TO BUY LANDS FROM UNITECH GROUP AND IT WAS UNITE CH GROUP WHICH HAD ULTIMATELY ACQUIRED 2G TELEPHONE SPECTRUM LICENSES FROM DEPARTMENT OF TELECOMMUNICATIONS, GOVERNMENT OF INDIA WHICH ARE GOVERNED BY TELECOM REGULATORY AUTHORITY OF INDIA (TRAI) REGULATIONS. HENCE, THE PRIMARY TRANSACTIONS OF AMOUNTS INVE STED BY THE ASSESSEE IN TATA REALTY INVESTMENT AND INFRASTRUCTURE LTD., AND ITS CONSEQUENTIAL FUNDING TO UNITECH GROUP AND UNITECH GROUPS CONSEQUENTIAL UTILISATION FOR ACQUIRING 2G LICENSES CANNOT BE LINKED WITH PAYMENTS MADE BY THE ASSESSEE TO VCCPL. WHA T IS TO BE SEEN HERE IS THE PURPOSE OF PAYMENTS BY THE ASSESSEE COMPANY 9 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. TO VCCPL. FOR THIS PURPOSE WHAT IS RELEVANT IS THE COPY OF MEDIA RELATIONS, STRATEGIC PLANNING AND PUBLIC AFFAIRS SERVICES AGREEMENT ENTERED BETWEEN ASSESSEE COMPANY AND VCCPL DATED 21 /11/2006 WHICH ARE PART OF THE RECORDS BEFORE THE LOWER AUTHORITIES AS STATED SUPRA. WE FIND THAT THIS AGREEMENT CLEARLY DEFINES THE SCOPE OF SERVICES TO BE RENDERED BY VCCPL TO THE ASSESSEE WHICH HAS GOT ABSOLUTELY NOTHING TO DO WITH TATA REALTY INVESTMEN T AND INFRASTRUCTURE LTD., OR UNITECH GROUP. THAT IS WHY, RIGHTLY THE NAME OF TATA REALTY INVESTMENT AND INFRASTRUCTURE LTD., HAD NOT FIGURED IN THE LIST OF COMPANIES ENCLOSED IN ANNEXURE - A OF THE AFORESAID AGREEMENT DATED 21/11/2006. THE VARIOUS SERVICES TO BE RENDERED BY VCCPL HAVE ALREADY BEEN LISTED ABOVE. WE FIND THAT THE LD. CIT(A) HAD ALSO PARTIALLY AGREED THAT SERVICES WERE INDEED RENDERED BY VCCPL TO THE ASSESSEE COMPANY. SINCE, THE ASSESSEE HAVING MADE INVESTMENTS IN VARIOUS GROUP COMPANIES WOULD CERTAINLY LIKE TO HAVE A UNIFIED MEDIA FOCUS FOR THE ENTIRE TATA GROUP AND SINCE VCCPL IS A COMPANY WHICH HAS GOT THE NECESSARY EXPERTISE OF PROVIDING SUCH SERVICES, THE ASSESSEE HAD ENTERED INTO THE AGREEMENT DATED 21/11/2006 WITH THEM AND HAS MADE PAYMEN TS OF RS.12.66 CORES TOWARDS MEDIA RELATION AGENCY FEES. WE ALSO FIND THAT SIMILAR SERVICES WERE RENDERED BY VCCPL TO THE ASSESSEE IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS WHICH WERE DULY ALLOWED AS DEDUCTION BY THE REVENUE AS UNDER: - FEES PAID (EXC LUDING SERVICE TAX) YEAR AMOUNT (RS.) AY 2004 - 05 8.07 10 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. AY 2005 - 06 9.12 AY 2006 - 07 9.12 AY 2007 - 08 10.45 AY 2008 - 09 12.31 AY 2009 - 10 12.31 AY 2010 - 11 12.31 AY 2011 - 12 12.31 AY 2012 - 13 (UPTO 31ST OCT. 2011) 7.18 7.8. HENCE, IN VIEW OF THE AFORESAID OBSERVATIONS AND APPLYING THE PRINCIPLE OF CONSISTENCY AS HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASAOMI SATSANG REPORTED IN 193 ITR 321 (SC), IN ALLOWING SUCH CLAIM TO THE ASSESSEE IN EARLIER AS W ELL AS IN SUBSEQUENT YEARS, WE HOLD THAT THERE IS ABSOLUTELY NO CASE MADE OUT BY THE REVENUE FOR DISALLOWING THIS SUM OF RS.12.66 CRORES DURING THE YEAR UNDER APPEAL. HENCE, THE GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED AND GROUND NO.3 RAISED BY THE RE VENUE IS DISMISSED. 12. T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THE G ROUND RAISED BY THE REVENUE STANDS DISMISSED . WITH REGARD TO GROUND NO. 6 RAISED BY ASSESSEE, IT IS ALLOWED AND OTHER GROUNDS ON JURISDICTIONS ARE DISMISSED AS NOT PRESSED. 11 I.T.A. NO. 6161 & 6162 /MUM/2016 & ITA NO. 6239 & 6240 /MUM/2017 M/S TATA SONS LTD. 13. IN THE NET RESULT, ALL THE APPEALS FILED BY THE REVENUE IS DISMISSED AND APPEAL FILED BY ASSESSEE ARE PARTLY ALLOWED . 14. ORDER PRONOUNCED IN THE OPEN COURT ON 19.10. 2020. SD/ - SD/ - (R. L. NEGI ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 19.10 .2020 SR.PS. DHANANJAY / 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, MUM BAI