DCIT CC 4(1) CEN RG 4, MUMBAI V. BIJESH THAKKAR, MUMBAI

ITA 6645/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5385 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: PRAKESH JHUNJHUNWALA
• Keywords: Double taxation relief; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' B ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 6645 /MUM/ 2016 (ASSESSMENT YEAR: 2012 - 13 ) DCIT, CENTRAL CIRCLE - 23 ROOM NO. 1916, 19TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400021 VS. SHRI BIJESH THAKKAR PROP. THAKKAR & THAKKAR 601, EMBASSY CENTRE NARIMAN POINT MUMBAI 400021 PAN AAAPT7758G APPELLANT RESPONDENT APPELLANT BY: SHRI SUMAN KUMAR RESPONDENT BY: SHRI PRAKESH JHUNJHUNWALA & SHRI ABHISHEK JHUNJHUNWALA DATE OF HEARING: 09 .07.2018 DATE OF PRONOUNCEMENT: 30 . 07.2018 O R D E R PER R.C. SHARMA, AM THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF THE CIT(A) - 5 , MUMBAI DATED 15 . 07 .201 6 FOR A.Y. 20 12 - 13 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. IN THIS APPEAL REVENUE IS AGGRIEVED FOR DELETING THE ADDITION OF ` 31,81,507/ - MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I.T. RULES, 1962 AND ALSO FOR DELETING THE DISALLOWANCE OF ` 10,26,936/ - MADE ON ACCOUNT OF ASSOCIATE FEES PAID TO SHRI C.Z. SHAH BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 3. AT THE OUTSET THE LEARNED A.R. PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2009 - 10 , 20 10 - 1 1, 2011 - 12 AND ITA NO. 6645 /MUM/ 2016 SHRI BIJESH THAKKAR 2 2008 - 09 WHEREIN EXACTLY SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE ORDER OF TRIBUNAL DATED 27.04.2018 FOR ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 WHEREIN THE ADDITION MADE UNDER SECTION 14A OF THE ACT WAS DELETED BY THE TRIBUNAL AFTER HAVING THE FOLLOWING OBSERVATION: - 7 WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE IN ITS ORDER CONTAINED IN PARA NO. 1.1 TO 1.3 AND REACHED TO THE CONCLUSION T HAT ASSESSEE H AS NOT MADE ANY CLAIM OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME, THEREFORE, THE PROVISIONS OF SECTION 14A R.W.S. 14A(2) OF THE ACT ARE NOT ATTRACTED AND HENCE THE DISALLOWANCE BY INVOKING RULE 8D IS NOT CALLED FOR. W E FURTHER NOTICE THAT THE IDENTICAL GROUNDS RAISED IN THE PRESENT APPEAL H AVE ALREADY BEEN DECIDED BY HON BLE ITAT IN IT A NO. 4694/MUM/12 FOR AY 2008 - 09 IN ASSESSEE'S OWN CASE ON MERITS AND THIS FACTS IS ALSO CONTAINED IN THE ORDERS PASSED BY LD. CIT(A).THE OPERATIVE PORTION OF THE ORDER OF HON'BLE ITAT IS CONTAINED IN PARA NO. 5 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT NEITHER THE AO NOR CIT(A) HAS RECORDED ANY SATISF ACTION IN APPLYING RULE 8D (2) (II I) DESPITE THE FACT THAT THE ASSESSEE HIMSELF OFFERED A SUM OF RS. 1 LAC TOWARDS DISALLOWANCE UNDER SECTION 14A OF THE ACT. THERE IS NO BASIS GIVEN BY AO WHILE MAKING THIS DISALLOWANCE OR HOW HE IS NOT SATISFIED WITH THE C ORRECTNESS OF THE ACCOUNT OF THE ASSESSEE. WE FIND THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) HAS EMPHASIZED ON SATISFACTION AS UNDER: - WHAT MERITS EMPHASIS IS THAT THE JURISDICTION OF THE ASSESSING OFFICER TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, IN ACCORDANCE WITH THE PRESCRIBED METHOD, ARISES IF THE ASSESSING OFFICER IS NOT SA TISFIED WITH THE CORRECTNESS OF THE CLAIM O F THE ASSESSEE IN RESPECT OF THE EXPENDITURE WHICH THE ASSESSEE CLAIMS TO HAVE INCURRED IN RELATION TO INCOME WHICH DOES NOT PART OF THE TOTAL INCOME. MOREOVER THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARRIVED AT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. HENCE, SUB - SECTION (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICER TO APPLY THE METHOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOE S NOT FORM PART OF THE TOTAL INCOME IS ITA NO. 6645 /MUM/ 2016 SHRI BIJESH THAKKAR 3 CORRECT. THE ASSESSING OFFICER MUST, IN THE FIRST INSTANCE, DETERMINE WHETHER THE CLAIM OF THE ASSESSEE IN THAT REGARD IS CORRECT AND THE DETERMINATION MUST BE MADE HAVING REGA RD TO THE ACCOUNTS OF THE ASSESSEE. THE SATISFACTION OF THE ASSESSING OFFICER MUST BE ARRIVED AT ON AN OBJECTIVE BASIS. IT IS ONLY WHEN THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THAT THE LEGISLATURE DIRECTS HIM TO FOLLOW THE ME THOD THAT MAY BE PRESCRIBED. IN A SITUATION WHERE THE ACCOUNTS OF THE ASSESSEE FURNISH AN OBJECTIVE BASIS FOR THE ASSESSING OFFICER TO ARRIVE AT A SATISF ACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM O F THE ASSESSEE OF THE EXPENDITURE WHICH HAS BE 'EN INC URRED IN RE LATION TO INCOME - WHICH DOES NOT FORM PART OF THE T OTAL INCOME, THERE WOULD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBED BY THE RULES. FOR, IT IS ONLY IN THE EVENT OF THE ASSESSING OFFICER NOT BEING SO SATISFIED THAT RECOURSE TO TH E PRESCRIBED METHOD IS MANDATED BY LAW. SUB - SECTION (3) OF SECTION 14A PROVIDES FOR THE APPLICATION OF SUB - SECTION (2) ALSO TO A SITUATION WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT . 6. FROM THE ABOVE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT AND THE FACTS OF THE CASE THAT THE AO HAS NOT RECORDED SATISFACTION QUA THE INCORRECTNESS OF THE ACCOUNTS OF THE ASSESSEE, WE DELETE THE DISA LLOWANCE AND ALL OW THE APPEAL OF THE ASSESSEE. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND T HE ORDER OF HON'BLE ITAT AND SUBMISSIONS MADE BY BOTH THE PARTIES WE FIND THAT THE SIMILAR ISSUES ARE COVERED BY THE ORDER OF HON'BLE ITAT IN ASSESSEE 'S OWN CASE IN ITA NO. 4694/MUN/ 2012 FOR AY 2008 - 09. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF HON'BLE ITAT IN ITA NO. 4694/MUM/2012 FOR AY 2008 - 09 IN ASSESSEE'S OWN CASE A ND THE SAME FACTS ALSO CONTAINED IN THE ORDERS PASSED BY LD. CIT(A), WE HAVE NO REASONS TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT(A) AS THE SAME ARE BASED ON THE ORDERS PASSED BY THE HONBLE ITAT. HENCE, WE ARE OF THE CONSIDERE D VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT(A) ARE JUDICIOUS AND ARE WELL REASONED. RESULTANTLY, THESE GROUNDS RAISED BY THE REVENUE STANDS DISMISSED. 5. DISALLOWANCE MADE UNDER SECTION 40(A)(IA) WAS ALSO DELETED BY THE TRIBUNAL AFTER HAVING THE FOLL OWING OBSERVATION: - 9. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE IN PARA NO. 2(2.1 TO 2 .3) OF ITS ORDER AND DELETED THE ADDITION MADE U/S 40(A)(IA) OF THE I.T. ACT. ON TWO COUNTS. THE LD. CIT(A) HAD CATEGORICALLY HELD THAT THE SERVICES RENDERED BY SHRI C. Z. SHAH WAS IN THE NATURE OF 'MANAGERIAL SERVICES AS DEFINED UNDER EXPLANATION - 2 ITA NO. 6645 /MUM/ 2016 SHRI BIJESH THAKKAR 4 TO SE CTION 9(1 )(7) OF THE I.T. ACT. THEREFORE, SHRI C. Z. SHAH HAS NOT PROVIDING ANY 'PROFESSIONAL SERVICES AND NOT PERFORMING INDEPENDENT ACTIVITY - SIMILAR TO 'PROFESSIONAL SERVICES WITHIN THE MEANING OF ARTICLE - 1 5 OF INDIA - UK, DTAA. THEREFORE, FEE PAID TO SHRI C. Z. SHAH BY THE ASSESSEE FALLS U/S 9(L)(VII)(B) AND THEREBY SUCH INCOME IN THE HANDS OF SHRI C. Z. SHAH IS DEEMED TO ARISE IN INDIA U/S 9 OF THE ACT. IT WAS FURTHER HELD THAT ALTHOUGH, SUCH SERVICES ARE ALSO COVERED BY PROVISIONS OF ARTICLE 13 OF I NDIA - UK, DTAA, BUT SHRI C.Z. SHAH HAVE RENDERED SUCH SERVICES WHICH DOES NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE TO THE APPELLANT. THEREFORE, SUCH SERVICES RENDERED BY SHRI C.Z. SHAH WAS HELD TO BE OUTSIDE THE PUR VIEW OF ARTICLE 13 OF INDIA - UK, DTAA, WHICH HAVE O VERRIDING EFFECT OVER THE I.T. ACT, THUS THE AMOUNT WAS NOT PAYABLE IN INDIA, AND NO TAX WAS REQUIRED TO BE DEDUCTED. 6. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2018 . SD/ - SD/ - ( AMARJIT SINGH ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JULY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 5 , MUMBAI 4. THE PR. CIT - 16 , MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.