KOTAK MAHINDRA INVESTMENTS LTD, MUMBAI V. DCIT RG 3(2), MUMBAI

ITA 6897/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3682 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA KUMARDR
• Assessee Lawyers: CHETAN KAKA
• Keywords: Business expenditure

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./ I.T.A. NO.6897/MUM/2012 / ASSESSMENT YEAR: 2008-09 KOTAK MAHINDRA INVESTMENTS LTD. 36-38A, NARIMAN BHAVAN 227 NARIMAN POINT,MUMBAI-400 021. PAN:AAACH 1075 K VS. DY. CIT RANGE-3(2) AAYAKAR BHAVAN MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJENDRA KUMAR-DR ASSESSEE BY: SHRI CHETAN KAKA / DATE OF HEARING: 03.03.2016 / DATE OF PRONOUNCEMENT: 03.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DTD.31.08.2012 OF THE CIT(A)- 4,MUMBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL RAISING SIX GROUNDS OF APPEAL. 2.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF COMMO DITIES BROKING,FILED ITS RETURN OF FRINGE BENEFIT TAX(FBT) ON 28.09.2008,DISCLOSING THEIR VAL UE OF FB TO THE EXTENT OF RS.1.68 CRORES. LAKHS.THE AO FINALISED THE ASSESSMENT ORDER U/S.115 WE(3) ON 19.05.2011,DETERMINING THE TOTAL VALUE OF FB AT 1.71CRORES.FROM THE TAX AUDIT REPORT,THE AO FOUND THAT THE ASSESSEE HAD COMPUTED FB ON FOLLOWING EXPENSES: SN. NATURE OF EXPENSE EXP. AMOUNT (RS.) % OF EXPENS ES VALUE OF FB(RS.) 1. EMPLOYEE WELFARE 14,14,623/- 20% 2,82,925/- 2. MOTOR CAR EXPENSES 8,30,667/- 20% 1,66,133/- 3. OTHER CLUB EXPENSES 4,814/- 50% 2,407/- 4. ESOP 1,64,14,287/- 100% 1,64,14,287/- AS REGARDS REMAINING VALUE OF FB AMOUNTING TO RS. 2 .37LAKHS IT WAS STATED THAT THE VALUE OF FOLLOWING BENEFITS WAS NOT LIABLE FOR FBT: SN. NATURE OF EXPENSE EXP. AMOUNT (RS.) % OF EXPENSES V ALUE OF FB 1. CONFERENCE & MEETING 18,000/- 20% 3,600/- 2. BUSINESS PROMOTION ETC. 2,11,662/- 20% 4,332/- 3. TRAVEL, HOTEL STAY ETC. 9,17,773/- 20% 1,83,555/- 4. TELEPHONE/MOBILE 38,815/- 20% 7,763/- IT WAS CONTENDED BY THE ASSESSEE THAT THE ABOVE EXP ENDITURE WERE ADMISSIBLE AS DEDUCTIBLE BUSINESS EXPENDITURE,THAT SAME WERE NOT PRIVILEGED/ SERVICE/BENEFIT/AMENITY DIRECTLY OR INDIRECTLY TO ITS EMPLOYEES,THAT SAME WERE NOT LIAB LE FOR FBT. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEE AND HELD THAT FBT WAS PRESUMPTIVE TAX, THAT A PRESUMPTIVE METHOD WAS APPLIED TO CERTAIN HEAD OF EXPENDITURE. FINALLY, HE HELD THAT EXPENSES INCURRED ON TELEPHONE/ MOBILE,CONFERENCE AND MEETINGS AND BUSINESS PROMOTI ON ETC.,AMOUNTING TO RS. 2.37 LAKHS WAS LIABLE TO TAX FOR FB. 6897/12(08-09)KOTAKMIL 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBM ISSION AND OF ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT SIMILAR ISSUE WERE D ECIDED BY THE THEN FAA WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR AY.S.2006-07 AND 2 007-08,THAT ONLY EXPENDITURE ON A FIXED TELEPHONE AND ON TRAVELLING DURING OFFICE HOURS BY EMPLOYEES FOR BUSINESS, INCLUDING CAR HIRE WAS OUTSIDE THE SCOPE OF FBT, THAT FOR OTHER ITEMS OF EXPENDITURE THE DECISION OF THE AO WAS TO RECONFIRMED. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)FAIRLY C ONCEDED THAT THE GROUND NO.1,DEALING WITH THE RE-OPENING OF THE ASSESSMENT,STOOD DECIDED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO.LTD. (373ITR661), THAT OTHER GROUNDS HAVE BEEN RESTORED BACK TO THE FILE OF THE AO BY THE TRIBUNAL WHILE DECIDING THE APPEAL FOR 07-08 (ITA/4 644/MUM/2012-AY 07-08 DT.1.4. 15). DEPARTMENTAL REPRESENTATIVE (DR) STATED THAT MATTER COULD BE DECIDED ON MERITS. 5.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD .WE FIND THAT WHILE DECIDING THE APPEAL FOR THE AY 07-08,(SU PRA), THE TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE AS UNDER AND HAD RESTORED BACK THE MATTER TO THE FILE OF THE AO IN FOLLOWING MANNER. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT SIMILAR ISSUES CAME UP FOR HEARING BEFORE THE TRIBUNAL IN ITA NO.63/MUM/20 10 IN THE CASE OF KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD., FOR A.Y. 2006-07 WHEREI N THE TRIBUNAL WHILE DISCUSSING THE LEVY OF FBT ON DEEMING PROVISION OF SEC. 115WB(2) WHICH PRO VIDES FOR CERTAIN EXPENDITURES INCURRED BY THE EMPLOYER, FRINGE BENEFIT ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEE. THE TRIBUNAL AT PARA-10 HELD AS UNDER: '10. SUB-SECTION (2) OF SECTION 115WB IS A DEEMING PROVISION WHERE CERTAIN EXPENDITURES INCURRED BY THE EMPLOYEE, FRINGE BENEFIT ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEE. IN OUR OPINION, SUB-SECTION (2) OF SE CTION 115WB WHICH DEFINES 'FRINGE BENEFIT' UNDER CHAPTER-XII-H, CONTROL SUB-SECTION (2) AND AN Y EXPENDITURE INCURRED BY AN EMPLOYER IN THE COURSE OF HIS BUSINESS OR PROFESSION, WHICH IS NOT A CONSIDERATION FOR EMPLOYMENT, CANNOT BE CONSIDERED AS 'FRINGE BENEFIT'. THUS, THE DEEMIN G PROVISIONS OF SUB-SECTION 2 OF SECTION 115WB, APPLIES ONLY WHEN THE EXPENDITURE IS IN THE NATURE OF CONSIDERED FOR EMPLOYMENT. THUS, WHILE RESTORING THE ISSUE BACK TO THE FILE OF AO FO R ADJUDICATION AFRESH, WE DIRECT THE AO TO APPLY THE PROPOSITION OF LAW AS INTERPRETED BY US W HILE DETERMINING THE VALUE OF FRINGE BENEFIT. ON THE ISSUE OF EXPENDITURE INCURRED ON CONFERENCE AND MEETINGS, THE AO SHALL CONSIDER BIFURCATION SUBMITTED TO HIM WITH RESPECT TO THE EX PENDITURE INCURRED ON THE AGENTS AND BROKERS AND PASS APPROPRIATE ORDERS. 'FRINGE BENEFIT' CANNO T ARISE WHEN EXPENDITURE IS INCURRED ON PERSONS WHO ARE NOT EMPLOYEES. ON THE ISSUE OF CLUB MEMBERSHIP FEE, THE PAYMENTS MADE TO LIMRA AND ACTUARIAL SOCIETY OF INDIA, ARE TO BE EXC LUDED AS THEY ARE NO PAYMENTS TO CLUBS. WITH THESE OBSERVATIONS, WE RESTORE THE ISSUE BACK TO THE FILE OF AO FOR ADJUDICATION AFRESH.' 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER DREW O UR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ITA NO. 5251/M/2010 AND POINTED OUT THAT THE TRIBUN AL HAS FOLLOWED THE DECISION IN ITA NO. 63/M/10. FACTS AND ISSUES BEING IDENTICAL, THE LD. COUNSEL REQUESTED TO FOLLOW THE DECISION OF THE TRIBUNAL AS CITED HEREINABOVE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONC EDED. 6. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. THEREFORE, RESPECTFU LLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ITA NOS. 63/M/10 AND 5151/M/10 (SUPRA), WE RESTORE THESE ISSUES BACK TO THE FILES OF THE AO FOR ADJUDICATION AFRESH IN THE LIGHT OF THE OBSERVA TIONS MADE BY THE TRIBUNAL IN ITA NO. 63/M/10. 6897/12(08-09)KOTAKMIL 3 CONSIDERING THE ABOVE, WE DECIDE GROUND NO.1 AGAINS T THE ASSESSMENT AND REMIT BACK THE REMAINING GROUNDS OF APPEAL TO THE FILE OF AO FOR D ECIDING THE REMAINING GROUNDS OF APPEAL FOR THE YEAR UNDER CONSIDERATION. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD MARCH ,2016. 3 ! , 2016 SD/- SD/- ( / AMIT SHUKLA) ( '# / RAJENDRA) $% / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.