ASK PROPERTY INVESTMENT ADVISORS PVT. LTD., MUMBAI V. DCIT , CIRCLE 2(1)(1), MUMBAI

ITA 6683/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5301 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 25-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR LD
• Assessee Lawyers: J D MISTRI LD SR
• Keywords: Business income; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.6683/MUM/2019 ( / ASSESSMENT YEAR: 2014-15) ASK PROPERTY INVESTMENT ADVISORS P. LTD. BIRLA AURORA, 16 LEVEL OFFICE 9 TH FLOOR, DR. ANNIE BESANT ROAD WORLI, MUMBAI 400 030 / VS. DCIT - 2(1)(1) 561, 5 TH FLOOR AAYKAR BHAWA, M.K.ROAD MUMBAI 400 020 PAN NO. : AA HCA - 5652 - N ( /APPELLANT ) : ( ! / RESPONDENT ) ASSESSEE BY : SHRI J.D.MISTRI- LD. SR. COUNSEL REVENUE BY : SHRI BRAJENDRA KUMAR LD. SR. DR / DATE OF HEARING : 04/05/2021 / DATE OF PRONOUNCEMENT : 04/05/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-4, MUMBAI [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO.CIT(A)-4/E-FILE- 176/DCIT 2(1)(1)/2016-17 DATED 29/08/2019 ON FOLLOWING GROUNDS OF APPEAL: - 2 DISALLOWANCE OF CLIENT REFERRAL FEES OF RS.3,45,61, 071/- (PARA 7.2 OF THE ORDER) (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS)-4 ERRED IN CONFIRMING THE D ISALLOWANCE OF CLIENT REFERRAL FEES OF RS.3,45,61,071/- MADE BY THE ASSESSING OFFICER I N THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 IGNORING THE SUBMISSIONS OF TH E APPELLANT. (B) IN VIEW OF THE ABOVE, THE CIT(A) BE DIRECTED TO DELETE THE DISALLOWANCE OF CLIENT REFERRAL FEES OF RS.3,45,61,071/-. AS EVIDENT, THE SOLE ISSUE UNDER THE APPEAL IS DISA LLOWANCE OF CLIENT REFERRAL FEES OF RS.345.61 LACS. 2. THE LD. SR. COUNSEL, AT THE OUTSET, SUBMITTED TH AT IDENTICAL ISSUE AROSE IN AYS 2010-11 & 2012-13 WHICH HAS BEEN ADJUD ICATED BY THE TRIBUNAL VIDE ITA NOS.1810/MUM/2017 & 1635/MUM/2016 COMMON ORDER DATED 04/10/2019. THE COPY OF THE ORDER HAS BEEN PL ACED ON RECORD. THE LD. DR COULD NOT CONTROVERT THE SAID POSITION. NO C HANGE IN FACTUAL MATRIX COULD BE BROUGHT OUT BEFORE THE BENCH. IN FA CT THE IMPUGNED ORDER RELIES UPON FIRST APPELLATE ORDERS FOR AYS 2010-11 & 2012-13. IN THE ABOVE BACKGROUND, OUR ADJUDICATION TO THE SUBJECT M ATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THA T THE ASSESSEE PAID CLIENT REFERRAL FEES (CRF) OF RS.403.21 LACS. IN AY 2010-11, SIMILAR EXPENDITURE AS CLAIMED BY THE ASSESSEE WAS ALLOWED TO BE AMORTIZED FOR 7 YEARS. IN AY 2013-14, THE SAID EXPE NDITURE WAS TREATED AS CAPITAL EXPENDITURE. THOUGH THE ASSESSEE DEFENDE D ITS STAND OF CLAIMING FULL EXPENDITURE DURING THE YEAR, HOWEVER, FOLLOWING ASSESSMENT ORDER FOR AY 2010-11, LD. AO ALLOWED 1/7 TH OF THE EXPENDITURE AND DISALLOWED THE BALANCE AMOUNT OF RS.345.61 LACS. 3 4. THE LD. CIT(A), FOLLOWING FIRST APPELLATE ORDERS FOR AYS 2010-11 & 2012-13, DISMISSED THE GROUNDS URGED BY THE ASSESSE E. AGGRIEVED THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. AS RIGHTLY POINTED OUT BY LD. SR. COUNSEL, THIS ISSUE STOOD SQUARELY IN ASSESSEES FAVOR BY THE CITED DECISION OF THE TR IBUNAL WHEREIN IT HAS BEEN HELD AS UNDER: - 6.2. FROM THE AFORESAID JUDGMENT, WHAT WE ARE ABLE TO DECIPHER IS THE ASSESSEE IS GIVEN A CHOICE TO CLAIM THE EXPENDITURE AS REVENUE IN NATURE IN ONE GO I.E IN THE YEAR OF INCURRENCE OR ALTERNATIVELY, CLAIM THE SAME AS A MORTIZATION DULY GIVING CREDENCE TO THE MATCHING PRINCIPLE. BOTH THE CHOICES HAVE BE EN PERMITTED BY THE HON BLE APEX COURT IN THE AFORESAID JUDGMENT. THE ASSESSEE IN THE INSTANT CASE HAD CHOSEN TO CLAIM THE ENTIRE REVENUE EXPENDITURE IN ONE GO I N THE YEAR OF INCURRENCE. WE ALSO FIND THAT THE HONBLE SUPREME COURT IN ITS FINDINGS THAT THE AMORTIZATION METHOD CANNOT BE FORCED ON THE ASSESSEE UNLESS OTHERWISE S PECIFICALLY PROVIDED SUCH AS SECTION 35D, ETC. AND IT IS ONLY PERMITTED IF THE ASSESSEE CHOOSES TO DO SO IN THE RETURN. WE FIND THAT THE RATIO LAID DOWN IN THE AFO RESAID JUDGMENT SQUARELY COVERS THE CASE OF THE INSTANT ASSESSEE IN ITS FAVOUR. 6.3. IN A NUTSHELL, WE HOLD THAT THE ACCRUAL OF CLI ENT REFERRAL FEE CANNOT BE DISPUTED AS BOTH THE LD AO AND LD CIT(A) HAD ALLOWED PART (I .E 1/7TH ) OF THE EXPENDITURE AS DEDUCTION. WE FIND THAT THE ASSESSEE HAD OFFERED A SUM OF RS 4.42 CRORES AS FEES DURING THE YEAR AS BUSINESS INCOME WHICH HAD ADMITT EDLY BEEN EARNED PURSUANT TO INCURRENCE OF THE AFORESAID CLIENT REFERRAL FEE EXP ENDITURE. HENCE THE BUSINESS NEXUS OF INCURRENCE OF THE EXPENDITURE VIS A VIS TH E FEES RECEIVED BY THE ASSESSEE IS ALSO ESTABLISHED BEYOND DOUBT. MOREOVER, WE FIND TH AT THOUGH THE ASSESSEE HAD INCURRED LOSS DURING THE YEAR UNDER CONSIDERATION, ADMITTEDLY DUE TO CLAIMING THE ENTIRE CLIENT REFERRAL FEE OF RS 10.11 CRORES AS DE DUCTION, IT HAD EARNED MORE PROFITS IN THE SUBSEQUENT YEARS AS ADMITTEDLY THE B ENEFIT OF INCURRENCE OF EXPENDITURE HAD ACCRUED TO THE ASSESSEE IN SUBSEQUE NT 6 YEARS ALSO. THE FOLLOWING CHART WOULD PROVE THE BONAFIDE OF THE ASSESSEE BEYO ND DOUBT WHICH IS ENCLOSED IN PAGE 108 OF THE PAPER BOOK :- .. 6.4 THE LD DR RELIED ON THE DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF FIDELITY BUSINESS SERVICES INDIA PVT LTD VS ACIT IN ITA NO. 512/2017 DATED 23.7.2018 TO SUPPORT HIS ARGUMENTS THAT THIS TRIBUN AL SHOULD SET RIGHT THE ERROR COMMITTED BY THE LD CIT(A) IN THE FACTS OF THE INST ANT CASE IN AS MUCH AS, THE LD CIT(A) ON ONE HAND HAD DISPUTED THE INCURRENCE OF E XPENDITURE FOR THE PURPOSE OF ASSESSEES BUSINESS DURING THE YEAR UNDER CONSIDERA TION , BUT ON THE OTHER HAND HAD ALLOWED THE SAID EXPENDITURE AT 1/7TH AS WAS DO NE BY THE LD AO. THIS GOES TO PROVE THAT THE LD CIT(A) HAD PARTIALLY ACCEPTED THE SAID EXPENDITURE ( I.E 1/7TH PORTION) TO HAVE INCURRED FOR BUSINESS PURPOSES. AC CORDING TO LD DR, THIS CONTRARY FINDING GIVEN BY THE LD CIT(A) SHOULD BE RECTIFIED BY THIS TRIBUNAL BY REMANDING THE ENTIRE ISSUE TO THE FILE OF LD CIT(A) IN THE LIGHT OF DECISION OF HONBLE KARNATAKA HIGH COURT RELIED UPON SUPRA. IN THIS REGARD, WE FIND TH AT THE ALLOWABILITY OF 1/7TH AS A BUSINESS EXPENDITURE WAS NOT IN DISPUTE BEFORE US I N THE APPEAL OF THE ASSESSEE, AS THE SAID DEDUCTION HAS BEEN GRANTED BY BOTH THE LD AO AS WELL AS THE LD CIT(A). THE 4 ASSESSEE IS IN APPEAL BEFORE US ONLY FOR THE ALLOWA BILITY OF REMAINING 6/7TH OF THE EXPENDITURE PORTION. MOREOVER, THE ISSUE IN DISPUTE BEFORE US SQUARELY STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS REFERRED TO SUPRA. HENCE THER E IS NO NEED TO PLACE RELIANCE ON VARIOUS JUDGMENTS THAT WERE RELIED UPON BY THE LD D R IN HIS LEGAL PAPER BOOK AND ALSO THE DECISION OF HONBLE KARNATAKA HIGH COURT R EFERRED TO SUPRA. 6.5. IN VIEW OF OUR AFORESAID FINDINGS AND RESPECTF ULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS SUPRA, WE HOLD THAT THE REMAINING 6/7TH PORTION OF CLIENT REFERRAL FEE IN T HE SUM OF RS 8,67,18,139/- IS TO BE ALLOWED AS DEDUCTION IN THE ASST YEAR 2010-11 AND W E DIRECT THE LD AO ACCORDINGLY. HENCE THE GROUNDS RAISED BY THE ASSESSEE FOR THE AS ST YEAR 2010-11 ARE ALLOWED. FACTS BEING IDENTICAL, WE DIRECT LD.AO TO ALLOW FUL L DEDUCTION OF EXPENDITURE AS CLAIMED BY THE ASSESSEE. 6. THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED ON 04 TH MAY, 2021. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04/05/2021 SR.PS, JAISY VARGHESE !'#' / 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, MUMBAI.