ACIT, New Delhi V. M/s Botil Oil Tools India Pvt. Ltd., New Delhi

ITA 6452/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4728 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 04-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR YADAV SENIOR
• Keywords: Business expenditure; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6453/DEL./2015 (ASSESSMENT YEAR : 2011-12) ITA NO.6452/DEL./2015 (ASSESSMENT YEAR : 2012-13) ACIT, CIRCLE 5 (1), VS. M/S. BOTIL OIL TOOLS INDIA PVT. LTD., NEW DELHI. 4 TH FLOOR, MOHTA BUILDING, 4, BHIKAJI CAMA PLACE, NEW DELHI 110 066. (PAN : AAACB0222G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, CA REVENUE BY : SHRI ARUN KUMAR YADAV, SENIOR DR DATE OF HEARING : 29.08.2017 DATE OF ORDER : 31.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS, THE SAME ARE BEING D ISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. 2. APPELLANT, ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 5 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REV ENUE), BY FILING THE PRESENT APPEALS SOUGHT TO SET ASIDE THE IMPUGNE D ORDER DATED ITA NO.6452 & 6453/DEL./2015 2 31.08.2015 PASSED BY THE COMMISSIONER OF INCOME-TA X (APPEALS)- 2, NEW DELHI, FOR THE ASSESSMENT YEARS 2011-12 & 20 12-13 ON THE GROUNDS INTER ALIA THAT :- ASSESSMENT YEAR 2011-12 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE A DDITION OF RS.1,08,82,886/- U/S 36(1)(II) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT (A) IS NOT JUSTIFIED IN DELETIN G THE ADDITION U/S 36(1)(II) OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE PAYMENT HAS BEEN MAD E TO DIRECTORS AS COMMISSION AND EX GRATIA WITHOUT DEEMI NG THE SAME AS DIVIDEND OR PROFIT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE A DDITION OF RS.1,08,933/- MADE ON ACCOUNT OF CLUB EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT (A) IS NOT JUSTIFIED IN DELETIN G THE DISALLOWANCES MADE ON ACCOUNT OF CLUB EXPENSES WITH OUT APPRECIATING THE FACT THAT THE CLUB EXPENSES ARE NO T RELATED TO THE BUSINESS OF THE ASSESSEE. ASSESSMENT YEAR 2012-13 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE A DDITION OF RS.1,71,57,311/- U/S 36(1)(II) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT (A) IS NOT JUSTIFIED IN DELETIN G THE ADDITION U/S 36(1)(II) OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE PAYMENT HAS BEEN MAD E TO DIRECTORS AS COMMISSION AND EX GRATIA WITHOUT DEEMI NG THE SAME AS DIVIDEND OR PROFIT. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : DURING SCRUTINY PROCEEDIN GS, ASSESSING ITA NO.6452 & 6453/DEL./2015 3 OFFICER NOTICED THAT THE ASSESSEE HAS PAID COMMISS ION AND EX- GRATIA ALLOWANCES TO ITS DIRECTORS, NAMELY, SHRI H .L. KHUSHALANI, SHRI VIVEK KHUSHALANI, MRS. RAKSHA WALIA AND MR. K. N. SHARMA TO THE TUNE OF RS.1,41,65,711/0 & RS.29,91,600/- FO R AY 2011-12 AND RS.1,41,65,711/0 & RS.29,91,600/- FOR AY 2012-1 3 RESPECTIVELY. BEING DIS-SATISFIED WITH THE EXPLANA TION FURNISHED BY THE ASSESSEE, AO INVOKED THE PROVISIONS CONTAINED U /S 36(1)(II) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) AND PROCEEDED TO CONCLUDE THAT THE BONUS/COMMISSION PAID TO AN EMPLO YEES IS NOT ALLOWABLE DEDUCTION, RATHER IT COULD HAVE BEEN PAI D AS PROFIT OR DIVIDEND AND THEREBY MADE AN ADDITION OF RS.1,08,82 ,886/- & RS.1,71,57,311/- FOR AYS 2011-12 & 2012-13 RESPECTI VELY. 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EALS BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION OF RS. 1,08,82,886/- & RS.1,71,57,311/- FOR AYS 2011-12 & 2012-13 RESPECTI VELY MADE BY THE AO BY ACCEPTING THE APPEALS FILED BY THE ASS ESSEE. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.6452 & 6453/DEL./2015 4 GROUNDS NO.1 & 2 IN AYS 2011-12 & 2012-13 5. LD. DR FOR THE REVENUE CONTENDED THAT THE LD. CI T (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,08,82,886/- & RS.1,71,57,311/- FOR AYS 2011-12 & 2012-13 RESPECTI VELY AND RELIED UPON THE ORDER PASSED BY THE AO. 6. HOWEVER, TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. DR, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE ISSU E IN CONTROVERSY HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN AY 2008-09 BY THE HONBLE DELHI HIGH COURT. 7. UNDISPUTEDLY, THE ASSESSEE COMPANY HAS PAID COMM ISSION AND EX-GRATIA TO ITS DIRECTORS TO THE TUNE OF RS.1, 71,57,311/- IN AY 2012-013 RESPECTIVELY, DETAILS OF WHICH ARE AS UNDE R :- COMMISSION (RS.) EX-GRATIA TOTAL MR. H.L. KHUSHALANI 88,53,569 13,50,000 102,03,569 MR. VIVEK KHUSHALANI 35,41,428 8,10,000 43,51,428 MS. RAKSHA KHUSHALANI 17,70,714 5,67,000 23,37,714 MR. K.N. SHARMA NIL 2,64,600 2,64,600 TOTAL 1,41,65,711 29,91,600 171,57,311 8. UNDISPUTEDLY, THE ISSUE IN CONTROVERSY HAS ALREA DY BEEN DECIDED BY THE REVENUE IN FAVOUR OF ASSESSEE IN AYS 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09 AND ALL THE S AID ORDERS HAVE BEEN AFFIRMED BY THE COORDINATE BENCH OF THE T RIBUNAL. 9. IN AY 2008-09, THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.2922/DEL/2013 ORDER DATED 23.09.2015 IN ASSE SSEES OWN ITA NO.6452 & 6453/DEL./2015 5 CASE WHILE DECIDING THE IDENTICAL ISSUE RETURNED CATEGOR ICAL FINDINGS BY RELYING UPON THE CASE OF HONBLE HIGH COURTS IN METPLAST PVT. LTD. VS. DCIT (2012) 341 ITR 563 (D EL.) AND LOYAL MOTORS SERVICES COMPANY LTD. VS. CIT (1946) 14 ITR 647 (MUMBAI) HELD THAT, COMMISSION PAID FOR SERVICES RENDERED BY THE DIRECTOR AS PER THE TERMS OF THE APPOINTMENT CO ULD NOT BE SAID TO BE DISTRIBUTION OF DIVIDEND OR PROFITS IN THE GU ISE OF COMMISSION AND THE PROVISIONS OF SECTION 36(1)(II) WOULD NOT A PPLY. 10. MOREOVER, WHEN UNDISPUTEDLY PAYMENT MADE TO THE DIRECTORS ON ACCOUNT OF COMMISSION AND EX-GRATIA ARE IN THE N ATURE OF REMUNERATION THE SAME CANNOT BE SAID TO BE DISTRIBU TION OF DIVIDENDS OR PROFITS UNDER THE GARB OF COMMISSION A ND AS SUCH, PROVISIONS CONTAINED U/S 36(1)(III) ARE NOT ATTRAC TED. 11. SO, IN VIEW OF THE DECISIONS RENDERED BY HONBL E JURISDICTIONAL HIGH COURT IN CASE OF METPLAST PVT. LTD. (SUPRA) AND IN VIEW OF THE RULE OF CONSISTENCY BEING APPLIED BY THE REVENUE IN ASSESSEES OWN CASES, WE FIND NO ILLEGALITY OR PERV ERSITY IN THE FINDINGS RETURNED BY LD. CIT (A) IN DELETING THE AD DITION OF RS.1,08,82,886/- & RS.1,71,57,311/- FOR AYS 2011-12 & 2012-13 RESPECTIVELY ON ACCOUNT OF PAYMENT MADE TO THE DIRE CTORS AS COMMISSION AND EX-GRATIA. SO, GROUNDS NO.1 & 2 IN BOTH THE APPEALS ARE DETERMINED AGAINST THE REVENUE. ITA NO.6452 & 6453/DEL./2015 6 GROUND NO.3 & 4 IN AY 2011-12 12. AO DISALLOWED AN AMOUNT OF RS.1,08,933/- CLAIME D AS CLUB EXPENDITURE BY THE ASSESSEE ON THE GROUND THAT THE SAME ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS E. HOWEVER, LD. CIT (A) DELETED THE ADDITION ON THE GROUND THAT SIMILAR ADDITION HAS BEEN DELETED IN ASSESSEES OWN CASE IN AY 2010- 11. MOREOVER, WHEN THE ASSESSEE HAS COME UP WITH SPECIF IC PLEA THAT EXPENSES WHICH ARE IN THE NATURE OF SUBSCRIPTION FE E AND COST OF SERVICES PAID TO VARIOUS CLUBS AS INCURRED BY THE A SSESSEE COMPANY FOR ENTERTAINING THE CUSTOMERS AT VARIOUS MEETINGS IN THE COURSE OF ITS BUSINESS BY THE DIRECTORS, DISALLOWANCE OF THE SAME BY THE AO WITHOUT RECORDING ANY REASON AS TO HOW THE SAME IS NOT BUSINESS EXPENSES, IS NOT SUSTAINABLE. SO, AGAIN, WE FIND N O ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED BY THE LD. CIT (A) ON THIS ISSUE. HENCE, GROUNDS NO.3 & 4 IN AY 2011-12 IS DETERMINED IN AGAINST THE REVENUE. 13. RESULTANTLY, BOTH THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF AUGUST, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST DAY OF AUGUST, 2017 TS ITA NO.6452 & 6453/DEL./2015 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-2, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.