AMBIENCE BUSINESS SERVICES P.LTD, MUMBAI V. ASST CIT CIR 6(1), MUMBAI

ITA 6503/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2569 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Assessee Lawyers: RAJA B SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 6503/MUM/2013 (ASSESSMENT YEAR : 2009-10) M/S. AMBIENCE BUSINESS SERVICES PVT. LTD., (FORMERLY KNOWN AS AMBIENCE ADVERTISING PVT. LTD.), 401-E, NEELAM CENTRE, SK MARG, WORLI, MUMBAI 400 030 PAN:AAACA 9528L ... APPELL ANT VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 6(1), AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI RAJA B. SINGH RESPONDENT BY : SHRI A.K.KARDAM DATE OF HEARING : 30/09/2015 DATE OF PRONOUNCEMENT : 13/07/2016 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN OR DER PASSED BY CIT(A)-14, MUMBAI DATED 27/09/2013, WHICH IN TURN A RISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30 /12/2011. 2 ITA NO. 6503/MUM/2014 (ASSESSMENT YEAR : 2009-10) 2. IN THIS APPEAL, ASSESSEE HAS RAISED MULTIPLE GRO UNDS OF APPEAL, WHICH WE SHALL TAKE-UP IN SERIATIM. THE FIRST ISSU E RELATES TO A DISALLOWANCE OF RS.14,26,650/- MADE BY THE ASSESSI NG OFFICER OUT OF TRAVELLING EXPENSES. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT THE APPELLANT IS A COMPANY, WHICH IS INTER-ALIA, ENGAGE D IN THE BUSINESS OF HIRE OF BUSINESS ASSETS, RESEARCH AND CONSULTANCY S ERVICES, ETC. DURING THE YEAR UNDER CONSIDERATION, THE INCOME EARNED BY THE ASSESSEE CONSISTED OF MANAGEMENT CONSULTANCY FEE RECEIVED FR OM PUBLICIS GROUPE HOLDINGS BV, NETHERLANDS. THE ASSESSING OFF ICER NOTED THAT ASSESSEE HAD DEBITED TOTAL TRAVEL EXPENSES OF RS.1 4,20,650/-, WHICH INCLUDED RS.3,73,324/- TOWARDS DOMESTIC TRAVEL AND THE BALANCE OF RS.10,47,326/- TOWARDS FOREIGN TRAVEL. THE ASSESSI NG OFFICER DISALLOWED THE ENTIRE EXPENDITURE ON THE GROUND THAT THE ASSES SEE COULD NEITHER PROVE THE INCURRENCE OF THE EXPENDITURE AND NOR THE REASONS FOR INCURRING SUCH EXPENDITURE IN RELATION TO THE EARNI NG OF INCOME FROM PUBLICIS GROUPE HOLDINGS BV, NETHERLANDS. WE FIND T HAT THE CIT(A) HAS ALSO AFFIRMED THE ADDITION. 3. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE V EHEMENTLY SUBMITTED THAT THE FACTUAL ASPECTS OF THE EXPENDIT URE WAS FULLY EXPLAINED BEFORE THE ASSESSING OFFICER AND ALSO BEF ORE THE CIT(A) . FOR THAT PURPOSE OUR ATTENTION HAS BEEN DRAWN TO PARA-3 TO 3.6 OF THE STATEMENT OF FACTS ANNEXED BEFORE THE CIT(A) TO JUS TIFY THAT ADEQUATE EXPLANATION WAS FURNISHED FOR THE IMPUGNED EXPENDIT URE. LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT TH E CIT(A) HAS WITHOUT ANY JUSTIFICATION DISMISSED THE PLEA OF THE ASSESSE E BY REFERRING TO THE 3 ITA NO. 6503/MUM/2014 (ASSESSMENT YEAR : 2009-10) ORDER OF HIS PREDECESSOR FOR EARLIER YEAR WHEN THE FACTUAL POSITION IN THE INSTANT YEAR WAS QUITE DIFFERENT. 4. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE HAS DEFENDED THE DISALLOWANCE SUSTAINED BY THE CIT(A) B Y POINTING OUT THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND TO BE NOT SATISFACTORY. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW R EVEAL THAT THE DISALLOWANCE HAS BEEN MADE IN RATHER CASUAL MANNER WITHOUT PINPOINTING ANY PARTICULAR INFIRMITY. IN FACT, THE DETAILS OF EXPENDITURE WHICH HAVE BEEN PLACED AT PAGE 42 OF THE COMPILATIO N LIST OUT THE DATE OF TRAVEL, PLACES TRAVELLED, BREAK-UP OF EXPENSES N AMELY, AIR FARES, HOTEL EXPENSES, OTHER EXPENSES, ETC. THE ASSESSEE HAS AL SO EXPLAINED BEFORE THE LOWER AUTHORITIES THAT IT WAS REQUIRED TO INCUR OF TRAVELLING EXPENSES ON ITS EXECUTIVES AND DIRECTORS TO TRAVEL TO VARIOUS PLACES TO MEET CLIENTS AS WELL AS POTENTIAL CLIENTS ON VARIOU S BUSINESS MATTERS, ETC. IT WAS ALSO EXPLAINED THAT SINCE ASSESSEE COM PANY REPRESENTED PUBLICIS GROUPE HOLDINGS BV,NETHERLANDS IN INDIA, F OR WHICH IT IS EARNING MANAGEMENT CONSULTANCY FEE, THERE WERE SEVERAL OCCA SIONS WHEN DIRECTORS OF THE ASSESSEE COMPANY WERE REQUIRED TO TRAVEL AND MEET THE OFFICIALS OF PUBLICIS GROUPE HOLDINGS BV,NETHERLA NDS. IT WAS, THEREFORE, CONTENDED THAT THE TRAVEL EXPENSES ARE INDEED RELATABLE TO THE ACTIVITY OF MANAGEMENT CONSULTANCY SERVICES. A T THE TIME OF HEARING, OUR ATTENTION WAS ALSO INVITED TO THE FACT THAT IN CASE OF DOMESTIC TRAVEL EXPENSES, ASSESSEE HAS RECOVERED A SUM OF 4 ITA NO. 6503/MUM/2014 (ASSESSMENT YEAR : 2009-10) RS.7,45,643/- FROM THE CLIENTS AND ONLY THE BALANCE OF RS.3,70,324/- HAS BEEN CHARGED TO THE P&L ACCOUNT. BE THAT AS IT MAY , WE ARE ONLY TRYING TO BRING OUT THAT VARIED AND DETAILED SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND THE SAME HAVE BEEN UNJUSTLY REJECTED WITHOUT POINTING OUT ANY SPECIFIC INFIRMIT Y. THEREFORE, IN OUR VIEW, THE DISALLOWANCE WAS REQUIRED TO BE WORKED OU T, IF ANY, HAVING REGARD TO THE FACT-SITUATION IN THE PRESENT YEAR AN D NOT FOR ANY IRRELEVANT REASONS. WE, THEREFORE, SET ASIDE THE O RDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 14,20,650/-. 6. THE NEXT ISSUE RELATES TO DISALLOWANCE OF RS.3,7 0,043/- OUT OF ENTERTAINMENT EXPENDITURE. THE ASSESSING OFFICER N OTICED THAT ASSESSEE HAD INCURRED ENTERTAINMENT EXPENDITURE OF RS.6,16,7 38/- AND ON BEING ASKED TO EXPLAIN, THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND TO BE SATISFACTORY. ACCORDINGLY, 60% OF SUCH EXPENSES AMOUNTING TO RS.3,70,043/- WAS DISALLOWED BY THE ASSESSING OF FICER ON ADHOC BASIS. THE CIT(A) ALSO RETAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 7. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE P OINTED OUT THAT IN THE ASSESSMENT YEAR 2008-09 THE TRIBUNAL VIDE ITS ORDER IN ITA NO.5509/MUM/ 2012 DATED 30/4/2014 DELETED THE DIS ALLOWANCE OUT OF ENTERTAINMENT EXPENDITURE. 8. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5 ITA NO. 6503/MUM/2014 (ASSESSMENT YEAR : 2009-10) 9. HAVING PERUSED THE ORDERS OF THE AUTHORITIES BE LOW, IT IS EVIDENT THAT THE ENTIRE DISALLOWANCE IS BASED ON MERE SURM ISES AND CONJECTURES WITHOUT ANY SPECIFIC INFIRMITY WITH REGARD TO THE NON-BUSINESS NATURE OF THE EXPENDITURE. THE DISALLOWANCE, IN OUR VIEW, IS NOT MERITED AND THE SAME IS DIRECTED TO BE DELETED. 10. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH R EGARD TO A DISALLOWANCE OF RS.65,699/- MADE BY THE LOWER AUTHO RITIES BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. NOTABLY, ASSESSEE COMPANY HAD EARNED EXEMPT INCOME BY WAY OF DIVIDEND INCOME AND, THEREFORE, ASSESSING OFFICER COMPUTED THE DISALLOWANCE AT RS. 65,699/- UNDER SECTION 14A OF THE ACT BY APPLYING THE PROVISIONS O F RULE 8D OF THE INCOME TAX RULES, 1962. THE ADDITION HAS SINCE BE EN AFFIRMED BY THE CIT(APPEALS). 11. BEFORE US, THE PLEA OF THE ASSESSEE IS THAT THE DISALLOWANCE HAS BEEN WORKED OUT BY THE ASSESSING OFFICER IN A MECHA NICAL MANNER WITHOUT RECORDING A SATISFACTION AS TO WHY THE DISA LLOWANCE OF RS.3,473/- SUGGESTED BY THE ASSESSEE WAS UNJUST O R UNREASONABLE. 12. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS PRIMARILY DEFENDED THE DISALLOWANCE BY POINTING OUT THAT THE SAME IS IN ACCORDANCE WITH THE FORMULA CONTAINED IN RUL E 8D OF THE RULES. 13. HAVING CONSIDERED THE RIVAL STAND, IT IS QUITE OBVIOUS THAT IN THE PRESENT CASE, THE ASSESSING OFFICER HAS PROCEEDED T O MAKE THE DISALLOWANCE BY INVOKING RULE 8D OF THE RULES WITHO UT RECORDING A SATISFACTION AS TO WHY THE DISALLOWANCE OF RS.3,473 /- CANVASSED BY THE ASSESSEE WAS UNREASONABLE HAVING REGARD TO THE FAC TS AND 6 ITA NO. 6503/MUM/2014 (ASSESSMENT YEAR : 2009-10) CIRCUMSTANCES OF THE CASE. OSTENSIBLY, THE ACTION OF THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH THE EXPLICIT REQ UIREMENT OF RECORDING A PROPER SATISFACTION CONTAINED IN SUB-SECTION (2) O F SECTION 14A OF THE ACT. AS A CONSEQUENCE, WE DEEM IT FIT AND PROPER T O SET ASIDE THE ORDER OF CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO RETAIN A DISALLOWANCE OF RS.3,473/-ONLY UNDER SECTION 14A AND DELETE THE BALANCE. THUS, ON THIS ASPECT ASSESSEE PARTLY SUCCEEDS. 14. THE LAST ISSUE RAISED BY THE ASSESSEE IS THAT T HE FOLLOWING ADDITIONAL GROUND OF APPEAL, WHICH WAS RAISED BEFOR E CIT(APPEALS) HAS NOT BEEN CONSIDERED:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN FAILING TO CONSIDER THE ADDITIONAL GROUND OF APPEAL RAISED BEF ORE HER DURING THE HEARING OF THE APPEAL ON 12 TH AUGUST 2013:- THE LEARNED ASSESSING OFFICER ERRED IN FAILING TO CONSIDER RS.6,89,059/- BEING SHORT TERM CAPITAL LOSS FOR TH E PREVIOUS YEAR ( TO BE CARRIED FORWARD TO FUTURE YEARS), IN THE COMPUTA TION OF THE INCOME FOR THE PREVIOUS YEAR. 14.1 IN THIS CONTEXT, THE ONLY PLEA OF THE ASESSEE IS THAT THE MATTER BE SENT BACK TO THE FILE OF THE CIT(APPEALS) TO CONSID ER THE AFORESAID ADDITIONAL GROUND OF APPEAL, WHICH INADVERTENTLY HAS REMAINED TO BE CONSIDERED BY THE CIT(APPEALS). 14.2 LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENU E HAS NOT OPPOSED THE PLEA OF THE ASSESSEE FOR REMANDING OF THE MATTER BACK TO THE FILE OF CIT(APPEALS). 14.3 AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO A COMMUNICATION DATED 12/08/2013 ADDRES SED TO THE CIT(APPEALS), COPY OF WHICH HAS BEEN PLACED ON RECO RD, WHEREBY THE 7 ITA NO. 6503/MUM/2014 (ASSESSMENT YEAR : 2009-10) AFORESAID ISSUE WAS RAISED BY WAY OF AN ADDITIONAL GROUND OF APPEAL. IT APPEARS FROM THE PERUSAL OF THE ORDER OF THE CIT(AP PEALS) THAT INADVERTENTLY THE SAME HAS BEEN OVERLOOKED AND, THE REFORE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE FOR THE MATTER TO BE REMANDED BACK TO THE FILE OF CIT(A) FOR CONSIDERING IT AFRESH IN AC CORDANCE WITH LAW. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS FOR STATISTICAL PU RPOSES. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13/07/201 6 SD/- SD/- (RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED 13/07/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI