DCIT 3(2), MUMBAI V. INTERNATIONAL GEMOLOGICAL INSTITUTE (I) P.LTD, MUMBAI

ITA 6992/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100998 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 10-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3); 37(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6992/MUM/2013 ASSESSMENT YEAR: 2010-11 DCIT-3(2), R. NO.674, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD MUMBAI-400020 / VS. M/S INTERNATIONAL GEMOLOGICAL INSTITUTE (INDIA) PVT. LTD. 402/404, MANI MAHAL, 11/21, MATHEW ROAD, OPERA HOUSE, MUMBAI-400004 ( / REVENUE) ( !'#$ % /ASSESSEE) P.A. NO. AEKPA7894L / REVENUE BY SHRI M.M.CHATE-DR !'#$ % / ASSESSEE BY SHRI RYAN SALDANHA ! & % ' / DATE OF HEARING : 10/09/2015 & % ' / DATE OF ORDER: 29/09/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 20/09/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO D ELETING THE ADDITION OF RS.95,42,036/- ON ACCOUNT OF PAYMENT OF SERVICE TAX AND INTEREST THEREON FROM 2004-05 TO 2008-09 HO LDING INTERNATIONAL GEMOLOGICAL INSTITUTE (INDIA) PVT. LT D. ITA NO.6992/MUM/2013 2 THAT SUCH EXPENSES WERE INCIDENTAL AND ARISING OUT OF BUSINESS OF THE ASSESSEE WITHOUT APPRECIATING THE F ACT THAT THE ALLOWANCE OF EXPENDITURE U/S 37(1) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER THE ACT) IS RESTRICTED TO THE YEA R IN WHICH IT IS INCURRED. 2. THE LD. DR, SHRI M.M. CHATE, ADVANCED HIS ARGUMENTS, WHICH IS IDENTICAL TO THE GROUND RAISED BY SUBMITTING THAT WHILE GRANTING RELIEF TO THE ASSESS EE, THE LD. FIRST APPELLATE AUTHORITY DID NOT APPRECIATE THAT T HE SAID EXPENSES WERE NOT DEBITED TO THE PROFIT & LOSS ACCO UNT OF THE CONCERNED ASSESSMENT YEAR AND ADDED BACK IN COMPUTA TION OF INCOME, SO AS TO CLAIM THE SAME U/S 43B, IN THE YEAR OF PAYMENT. IT WAS ALSO PLEADED THAT THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) DID NOT APPRECIATE THAT THE AS SESSEE FAILED TO COLLECT SERVICE TAX FROM THE STUDENTS, WH ICH CANNOT BE A REASON FOR ALLOWING AS A DEDUCTION. 2.1. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE, SHRI RYAN SALDHANA, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY PLACING RELIANCE UPON THE DEC ISION FROM HONBLE GUJARAT HIGH COURT IN CIT VS KAYPEE MECHANICAL INDIA PVT. LTD. (2014) 45 TAXMAN.COM 363 (GUJ.). 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IDENTIFICATION, GRADING AND CERTIFICATION OF DIAMON DS, JEWELLERY, PRECIOUS STONES AND ALSO CONDUCTING SHOR T TERM INTERNATIONAL GEMOLOGICAL INSTITUTE (INDIA) PVT. LT D. ITA NO.6992/MUM/2013 3 VOCATIONAL COURSES ON GEMOLOGY, DECLARED INCOME OF RS.26,51,84,580/- WHICH WAS COMPLETED U/S 143(3) DETERMINING TOTAL INCOME AT RS.27,47,26,620/- ON 07/01/2013. THE LD. ASSESSING OFFICER MADE DISALLO WANCE OF RS.95,42,036/-, BEING SERVICE TAX ALONG WITH COMPEN SATORY INTEREST PAID BY THE ASSESSEE IN FINANCIAL YEAR 200 9-10 ON THE BASIS OF DEMAND SO RAISED. IT IS NOTED THAT SERVICE TAX AUTHORITY CONDUCTED AUDIT OF THE BUSINESS OF THE AS SESSEE BY OBSERVING THAT THE ASSESSEE HAS NOT RAISED/RECOVERE D SERVICE TAX ON CERTAIN SERVICES PROVIDED BY THE ASSESSEE DU RING FINANCIAL YEARS 2004-05, 2005-06 AND 2006-07. THE A SSESSEE WAS DIRECTED TO DEPOSIT SERVICE TAX ALONG WITH COMP ENSATORY INTEREST AGGREGATING RS.95,42,036/- TO THE SERVICE TAX DEPARTMENT. THE ASSESSEE DEPOSITED THE IMPUGNED AMO UNT, RAISED BY THE LD. COMMISSIONER (SERVICE TAX), AS PE R THE PROVISIONS OF CHAPTER V OF FINANCE ACT, 1994 (32) O F THE 1994 AND SERVICE TAX RULES 1994. THE IMPUGNED AMOUNT WAS DISALLOWED BY THE ASSESSING OFFICER ON THE REASONIN G MENTIONED IN PARA 3.3 (PAGES 3 & 4) OF THE IMPUGNED ORDER. 2.3. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEALS), THE IMPUGNED AMOUNT WAS ALLOWED AGAI NST WHICH THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEF ORE THIS TRIBUNAL. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN INTERNATIONAL GEMOLOGICAL INSTITUTE (INDIA) PVT. LT D. ITA NO.6992/MUM/2013 4 JUXTAPOSITION AND ANALYZED, THERE IS NO DISPUTE TO THE FACT THAT THE IMPUGNED AMOUNT WAS DEPOSITED BY THE ASSES SEE PURSUANT TO THE DIRECTION MADE BY THE SERVICE TAX DEPARTMENT AS PER THE PROVISIONS OF SECTION 65 OF C HAPTER V AND SERVICE TAX RULES 1994. TOTALITY OF FACTS, CLEA RLY INDICATES THAT THE IMPUGNED DEMAND AROSE PURSUANT T O SHOW CAUSE-CUM-DEMAND NOTICE ISSUED IN FINANCIAL YEAR 20 09-10, DIRECTING THE ASSESSEE, TO DEPOSIT SERVICE TAX ALON G WITH COMPENSATORY INTEREST AGGREGATING TO RS.95,42,036/- TO THE SERVICE TAX DEPARTMENT, THEREFORE, WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE AND TH E CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. EVEN OTHERWISE, THERE IS NO LOSS TO THE REVENUE AS THE IMPUGNED AMO UNT WAS DEPOSITED IN THE ESTATE EXCHEQUER THOUGH THROUGH DI FFERENT DEPARTMENT. SUCH A DEDUCTION/EXPENDITURE IS PERMISS IBLE UNDER THE ACT FOR WHICH WE ARE FORTIFIED BY THE RAT IO LAID DOWN IN FOLLOWING CASES:- I. CIT VS OEN INDIA LTD. (1995) 213 ITR 718 (KERALA) II. RAMBAGH PALACE HOTEL PVT. LTD. VS CIT(1995) 80 TAX MAN 303 (RAJ.) III. ADDL. CIT VS RATTAN CHAND KAPOOR (1984) 149 ITR 1, 18 TAXMAN 491 IV. CIT VS SOHAN LAL KHARAIT RAM (2007) 290 ITR 694 (PU NJ & HARY) V. CIT VS ASHOK IRON & STEEL ROLLING MILL (1992) 63 TA XMAN 489 (ALL.) VI. CIT VS A.GAJAPATHY NAIDU (1964) 53 ITR 114 (SC) VII. CIT VS NATHMAL TOLARAM (1973) 88 ITR 234 (GUJ.) INTERNATIONAL GEMOLOGICAL INSTITUTE (INDIA) PVT. LT D. ITA NO.6992/MUM/2013 5 VIII. KEDARNATH JUTE MFG. COMPANY LTD. (1971) 82 ITR 363 (SC) IX. CIT VS EXXON MOBILE LUBRICANTS (P. ) LTD. (210) 236 CTR 498/328 ITR 17 (DEL.) X. CIT VS NATIONAL CEREAL PRODUCTS LTD. (2007) 165 TAX MAN 180 (DEL.) XI. CIT VS NEW GUJARAT COTTON MILLS LTD. (1998) 230 ITR 595 (CAL.) XII. CIT VS PADMAVATI RAJE COTTON MILLS LTD. (1994), 77 TXAMN 628 (CAL.) XIII. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS CIT (1995) 80 TAXMAN 61 (GUJ.) XIV. SUTNA STONE & LIME COMPANYLTD. VS CIT (1991) 54 TAX MAN 121 (CAL.) XV. CIT VS MODIPON LTD. (NO.1) (2012) 18 TAXMAN.COM 294 (DELHI) XVI. ASSOCIATED DYESTUFF (P.) LTD. VS DY. CIT CIRCLE-1 ( 2011) 12 TAXMAN.COM 80 (AHD). THE HONBLE APEX COURT IN S.A. BUILDERS LTD. VS CI T (2007) 158 TAXMAN. 74 (SC) WHILE DELIBERATING UPON THE SCOPE AND AMBIT OF SECTION 36(1)(III) OF THE ACT READ WIT H SECTION 37(1) OF THE ACT ON ALLOWABILITY OF BUSINESS EXPENDITURE DECIDED IN FAVOUR OF THE ASSESSEE. IDENTICALLY, IN PHARMA SEAR CH VS ACIT, 21 TAXMAN.COM 44, 53 SOT 1(MUMBAI), IT WAS HELD THA T AS PER SERVICE TAX LAW, SERVICE TAX IS PAYABLE AS AND WHEN THE PAYMENT/FEES FOR UNDERLYING SERVICE PROVIDED ARE RE ALIZED. AS THE ASSESSEE FIRM HAD NOT RECEIVED THE SUM TILL THE END OF THE FINANCIAL YEAR I.E. 2006-07, QUESTION OF PAYING THE SAME DID NOT ARISE AT ALL. THUS, WE FIND NO INFIRMITY IN THE CONCLUSION INTERNATIONAL GEMOLOGICAL INSTITUTE (INDIA) PVT. LT D. ITA NO.6992/MUM/2013 6 DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL S). IT IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS HAVING NO MER IT, THEREFORE, DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 10/09/2015. SD/ - (RAJESH KUMAR) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; ) ! DATED : 29/09/2015 F{X~{T? P.S/. !.. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1% ( +, ) / THE CIT, MUMBAI. 4. 1% / CIT(A)- , MUMBAI 5. 3 4 /%!' , +,' +' 5 , / DR, ITAT, MUMBAI 6. 6# 7 / GUARD FILE. / BY ORDER, 03,% /% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI