ACIT, New Delhi V. M/s. Escorts Asset Management Pvt. Ltd., New Delhi

ITA 6549/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4986 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BARNWAL
• Assessee Lawyers: R M MEHTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E , NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 6549 /DE L/ 2015 ASSESSMENT YEAR : 2012 - 13 ACIT, CIRCLE - 8(2), C.R. BUILDING, I.P. ESTATE, NEW DELHI VS. M/S. ESCORTS ASSET MANAGEMENT PVT. LTD., 11, SCINDIA HOUSE, CONNAUGHT CIRCUS , NEW DELHI PAN : AAACE2671E (APPELLANT) (RESPONDENT) APPELLANT BY SH. M. BARNWAL, SR.DR RESPONDENT BY SH. R.M. MEHTA, AR DATE OF HEARING 24.08.2017 DATE OF PRONOUNCEMENT 28.08.2017 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST ORDER DATED 14/09/2015 OF THE COMMISSIONER OF INCOME - TAX ( APPEALS) - III, NEW DELHI, FOR ASSESSMENT YEAR 2012 - 13 , RAISING FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.23,73,403/ - MADE BY THE AO ON ACCOUNT OF NON - DEDUCTION OF TDS ON COMMON SHARING EXPENSES. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.46,55,780/ - MADE BY THE AO ON ACCOUNT OF NON - DEDUCTION OF TDS ON ONGOING EXPENSES OF MUTUAL FUND SCHEMES. 2 ITA NO. 6549/DEL/2015 3 . THE APPELLANT CRAVES LEAVE, MODIFY, ADD OR FOREGO ANY GROUND(S ) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 2. A T THE OUTSET, THE LEARNE D COUNSEL OF THE ASSESSEE SUBMITTED THAT BOTH THE GROUNDS OF APPEAL OF THE R EVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE INCOME - TAX APPELLATE TRIBUNAL (IN SHORT THE TRIBUNAL ) IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2010 - 11 AND ACCORDINGLY THE APPEAL OF THE R EVENUE DESERVE TO BE DISMISSED. 3. THE LD. SENIOR DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND REQUESTED THAT THE MATTER MAY BE DECIDED IN ACCORDANCE WITH LAW. 4. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL PARTICULARLY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSM ENT YEAR 2010 - 11 BEARING ITA NO. 1277/DEL/2014. WE FIND THAT IDENTICAL GROUNDS WERE RAISED IN THE PRECEDING YEAR, WHICH HAVE BEEN ADJUDICATED BY THE TRIBUNAL AS UNDER: 2. THE FIRST GROUND OF REVENUE S APPEAL READS AS UNDER: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.34,61,045/ - MADE BY THE AO ON ACCOUNT OF COMMON SERVICES EXPENSES WITHOUT DEDUCTING TDS U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3. WE HAVE HEARD THE SUBMIS SIONS OF BOTH THE SIDES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THIS ISSUE TO BE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF ACIT VS. J.B. BODA & SURVEYORS PVT.LTD. IN ITA NO.4252/MUM/2009 , WHEREIN ITAT HELD AS UNDER: - 'ON PLAIN READING OF ABOVE SECTION, WE FIND THAT ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUBCONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION 3 ITA NO. 6549/DEL/2015 HAS NOT BEEN PAID WITHIN STIPULATED PERIOD, IN THE CASE UNDER CONSIDERATION, THE ASSESSING OFFICER DID NOT SPECIFICALLY POINT OUT AS TO UNDER WHICH CLAUSE OR UNDER WHICH SUB SECTION OF SECTION 40 THE CLAIM OF THE ASSESSEE WAS DISALLOWED. THE CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT MA DE TO PARENT COMPANY, M/S J.B., BODA & CO.PVT.LTD. IS PAYMENT OF REIMBURSEMENT OF EXPENSES AND NOT AGAINST CARRYING OUT ANY CONTRACT WORK AS A CONTRACTOR OR SUB - CONTRACTOR, ON WHICH, TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B OF THE ACT. THE ASSESSEE HAS ESTABLISHED THAT THE PAYMENT TO THEIR PARENT COMPANY M/S J.B. BODA & CO.PVT.LTD. WAS NOT SUBJECT TO TD5 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 C OMPANY, M/S J.B. BODA & CO. PVT. L TD. 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 PAYMENT OF EXPENDITURE IS M ADE BY X PARTY ON BEHALF OF THE Y PARTY AND LATER ON THE SAME IS REIMBURSED TO THE X PARTY, BY Y PARTY, THE EXPENDITURE IS PERTAINING TO Y PARTY AND NOT PERTAINING TO X PARTY. THUS, THE PAYMENT TO M/S J.B. BODA & CO. PVT.LTD. MADE BY THE ASSESSEE IS A SIMP LE REIMBURSEMENT, IN THE CASE UNDER CONSIDERATION, THE PARENT COMPANY M/S J.B. BODA & CO. PVT.LTD. HAS ACTED MERELY THE ROLE OF AGENT FOR MAKING PAYMENT OF EXPENDITURE ON BEHALF OF THE ASSESSEE AND GETTING REIMBURSEMENT. THEREFORE, THE PAYMENT MADE BY M/S J.B. BODA & CO. PVT. LTD. IS NOT ON ACCOUNT OF ANY EXPENDITURE. SECTION 40(A)(IA) APPLICABLE ONLY IN A CASE OF EXPENDITURE. THE SAID SECTION CLEARLY PROVIDES THAT CERTAIN SPECIFIC EXPENDITURE WHICH IS SUBJECT TO TDS IS NOT ALLOWABLE IF THE ASSESSEE FAILED TO MAKE TDS OR AFTER MAKING DEDUCTION OF TDS DOES NOT PAY WITHIN THE STIPULATED PERIOD. AS STATED ABOVE, THE PAYMENT MADE TO M/S J.B. BODA & CO. PVT. LTD. IS ON ACCOUNT OF PERSONAL ACCOUNT IN TERMS OF ACCOUNTING PRINCIPLE PAYING AND THEN RECEIVING AMOUNT WHICH IS NOT AN EXPENDITURE IN THE HANDS OF THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER IS NOT CORRECT 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 XVII - B 4 ITA NO. 6549/DEL/2015 OF THE A CT AGAINST THE ASSESSEE IS ALSO NOT ON RECORD, IN ADDITION TO ABOVE IT HAS ALSO NOTICED THAT THE ASSESSING OFFICER DID NOT DISALLOW SUCH CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR FOR A. Y. 2007 - 08 EVEN AFTER RAISING QUERY IN THIS REGARDS, IN THE LIGHT O F THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE OF RS.29,58,608/ - ON ACCOUNT OF REIMBURSEMENT MADE TO THE PARENT COMPANY M/S J.B. BO DA & CO. PVT. LTD. ' 4. THE RATIO OF THE ABOVE DECISION WOULD BE SQ UARELY APPLICABLE TO THE CASE OF THE ASSESSEE BECAUSE IN THE CASE UNDER APPEAL BEFORE US ALSO, THERE WAS COMMON SHARING OF EXPENSES FOR UPKEEP OF OFFICE BETWEEN THE ASSESSEE COMPANY AND M/S ESCORTS SECURITIES LTD. AND M/S ESCORTS FINANCE & INVESTMENTS LTD. THE EXPENDITURE IS PRIMARILY INCURRED IN THE FIRST INSTANCE BY THESE COMPANIES. THE ASSESSEE ONLY BORNE ITS SHARE OF EXPENSES BY MAKING THE REIMBURSEMENT TO THESE TWO COMPANIES. THE RESPONSIBILITY OF TDS WOULD BE ON THOSE TWO COMPANIES WHEN THEY ACTUALLY INCURRED THE EXPENDITURE. THE ASSESSEE HAS ONLY REIMBURSED THE EXPENDITURE WHICH BELONGED TO THE ASSESSEE SHARE. THEREFORE, ON THESE FACTS, THE DECISION OF ITAT MUMBAI BENCH WOULD BE SQUARELY APPLICABLE WHEREIN THE ITAT HELD THAT ON SUCH REIMBURSEMENT OF E XPENDITURE, THERE IS NO LIABILITY OF TDS. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF ITAT MUMBAI BENCH, UPHOLD THE ORDER OF LEARNED CIT(A) ON THIS POINT AND REJECT GROUND NO. 1 OF THE REVENUE'S APPEAL. 5. GROUND NO. 2 OF THE REVENUE'S APPEAL READS AS UNDER: - 'WHETHER ON FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, LD.CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS.18,90,877/ - MADE BY THE AO ON ACCOUNT OF ONGOING EXPENSES WITHOUT DEDUCTING TDS U/S 40(A)(IA) OF THE INCOME TAX A CT, 1961.' 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES. THIS ISSUE IS ALSO SIMILAR TO THE ISSUE RELATING TO DISALLOWANCE OF COMMON OFFICE EXPENSES. THE FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANAGEMENT OF MUTUAL FU ND SCHEME OF ESCORTS MUTUAL FUND AS PER NORMS PRESCRIBED BY SEBI. THE ASSESSEE EARNS MANAGEMENT FEE WHICH IS BASED ON THE QUANTUM OF ASSET MANAGEMENT. FOR THIS PURPOSE, THE ASSESSEE AGGRESSIVELY SELLS ITS SCHEME TO THE INVESTORS. HOWEVER, THERE IS A LIMIT PRESCRIBED BY SEBI UP TO WHICH THE TOTAL EXPENSES CAN BE CHARGED TO MUTUAL FUND 5 ITA NO. 6549/DEL/2015 SCHEME. ANY EXPENDITURE IN EXCESS OF THE PRESCRIBED LIMIT OF SEBI IS BORNE BY ASSET MANAGEMENT COMPANY. IN THIS CASE ALSO, THE EXPENDITURE IS PRIMARILY INCURRED AND PAID FOR BY THE MUTUAL FUND AND THEREAFTER TO THE EXTENT IT EXCEEDS THE LIMIT PRESCRIBED BY SEBI, IT IS RECOVERED BY MUTUAL FUND FROM THE ASSET MANAGEMENT COMPANY. THUS, THE PRIMARY OBLIGATION TO DEDUCT TDS IS ON THE MUTUAL FUND AT THE TIME OF PAYMENT FOR THE EXPENDI TURE. THE ASSESSEE ONLY REIMBURSED THE EXPENDITURE TO THE MUTUAL FUND WHICH IS IN EXCESS OF THE LIMIT PRESCRIBED BY SEBI. THEREFORE, IN OUR OPINION, THE RATIO LAID DOWN BY THE ITAT IN THE CASE OF M/S J.B. BODA & CO. PVT.LTD. (SUPRA) WOULD BE SQUARELY APPLI CABLE ON THIS GROUND OF APPEAL ALSO. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF ITAT IN THE CASE OF M/S J.B. BODA & CO. PVT.LTD. (SUPRA), UPHOLD THE ORDER OF LEARNED CIT(A) AND REJECT GROUND NO.2 OF THE REVENUE'S APPEAL. 5. S INCE IDENTICAL GROUNDS HAVE BEEN RAISED IN THE YEAR UNDER CONSIDERATION AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE ASSESSMENT YEAR 2010 - 11 AND CURRENT ASSESSMENT YEAR EXCEPT CHANGE OF AMOUNTS, RESPECTFULLY FOLLOWING THE DECISI ON OF THE TRIBUNAL, WE DISMISS BOTH THE GROUNDS OF THE APPEAL. 6. IN THE RESULT, THE APPEAL OF THE R EVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 2 8 T H AUGUST , 201 7 . S D / - S D / - ( BHAVNESH SAINI ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 T H AUGUST , 201 7 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI