GRAMEEN CAPITAL INDIA P.LTD, MUMBAI V. ASST CIT 12(2)(2), MUMBAI

ITA 7024/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3487 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE HONBLE SHRI SHAMIM YAHYA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 7024 /MUM/2016 ( / ASSESSMENT YEAR: 2013 - 14 ) M/S. GRAMEEN CAPITAL INDIA LTD., 402, 5TH FLOOR, 36 TURNER ROAD, OPP. TAWA HOTEL, BANDRA (W), MUMBAI 400 051 PAN: / VS. ASST. COMMISSIONER OF INCOME TAX 12(2)(2), MUMBAI ./ ./ PAN NO. AACCG9490K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SASHANK DUNDU , AR / RESPONDENTBY : SHRI V. VIDHYADHAR , DR / DATE OF HEARING : 04/06 /201 8 / DATE OF PRONOUNCEMENT : 21/08/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 20, MUMBAI DATED 19.07 .16 F OR AY 2013 - 14 . 2 I.T.A. NO. 7024 /MUM/201 6 M/S. GRAMEEN CAPITAL INDIA LTD., 3. THE ONLY ISSUE RAISED IN BOTH THE GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF SALARY TO EMPLOYEES COST TO THE EXTENT OF RS.1,09,89,815/ - BY LD. CIT(A) AS MADE BY THE AO BY RESTRICTING THE EMPLOYEES COST TO 91% OF THE RECEIPTS WHICH RE SULTED INTO DISALLOWANCE OF RS. 1,09,89,815/ - . 4 . LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED BEFORE US THAT THE PRESENT CASE IS FULLY COVERED BY THE ORDER OF HON BLE ITAT IN ITA NO. 783/MUM/16 F OR AY 2011 - 12 AND ITA NO. 5231/MUM/16 FOR AY 2012 - 1 3 IN ASSESSEES OWN CASE WHEREIN THE IDENTICAL GROUNDS RAISED IN THE PRESENT APPEAL HAVE ALREADY BEEN DECIDED ON MERITS. 5 . ON THE OTHER HAND, LD. DR FAIRLY AGREED TO THE CONTENTION OF LD. AR THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 6 . WE HAVE HEARD BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF HONBLE ITAT 3 I.T.A. NO. 7024 /MUM/201 6 M/S. GRAMEEN CAPITAL INDIA LTD., IN ITA NO. 783/MUM/16 FOR AY 2011 - 12 AND ITA NO. 5231/MUM/16 FOR AY 2012 - 13 IN ASSESSEES OWN CASE. THE OPERATIVE PORTION OF THE ORDER OF HONBLE ITAT PASSED IN ITA NO. CONTAINED IN PARA NO. 3 TO 6, WHICH IS REPRODUCED BELOW: - 3. AT THE OUTSET, THE LD. COU NSEL OF THE ASSESSEE SUBMITTED BEFORE THE BENCH THAT THE CASE OF THE ASSESSEE IS COVERED IN ITS FAVOUR BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ITS OWN CASE IN ITA NO.783/M/2016 FOR A.Y. 2011 - 12 VIDE ORDER DATED 13.12.17 WHEREIN IDENTIC AL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. A.R. PRAYED THAT SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE THE SAME RATIO SHOULD BE FOLLOWED IN THE CURRENT YEAR AND THE APPEAL OF THE ASSESSEE MAY BE ALLOWED. 4. THE L D. D.R. FAIRLY AGREED TO THE CONTENTION OF THE LD. A.R. THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL PLACED BEFORE US. WE FIND THAT THE IDENTICAL ISSUE HA S BEEN DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.783/M/2016 FOR A.Y. 2011 - 12 VIDE ORDER DATED 13.12.17 IN ASSESSEES OWN CASE. THE RELEVANT PARA IS REPRODUCED AS UNDER: 4 I.T.A. NO. 7024 /MUM/201 6 M/S. GRAMEEN CAPITAL INDIA LTD., 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AN D CIRCUMSTANCES OF THE CASE. AFTER GOING THROUGH THE CASE RECORDS AND ARGUMENTS OF BOTH THE SIDES, WE FIND THAT THE AO HAS SIMPLY HELD THE EMPLOYEES COST UNREASONABLY WITHOUT POINTING OUT ANY DEFECT. THE ASSESSEE PRODUCED COMPLETE BILLS AND VOUCHERS AND GE NUINENESS OF PAYMENT OF EMPLOYEE COST IS NOT DOUBTED BY THE ASSESSING OFFICER. BY APPLYING THE FORMULA OF RECEIPT/ EXPENSES RATIO OF AY 2010 - 11 I.E. AT 91% OF THE RECEIPTS AND APPLYING THE SAME, HE DISALLOWED THE EMPLOYEE COST AT 41,84,901/ - . NO DOUBT TH E ASSESSEE IS INCURRING LOSSES YEAR AFTER YEAR, BUT THAT IT DOES NOT MEAN THE SALARY CANNOT BE ALLOWED TO THE ASSESSEE. WE FIND THAT THIS COMPANY WAS INCORPORATED IN THE YEAR 2007 AS PART OF GLOBAL GRAMEEN FAMILY; IT INVOLVES THE BUSINESS OF PROMOTING MICR O FINANCE IN INDIA AND ENABLING ACCESS TO CAPITAL FOR MICRO FINANCE INSTITUTIONS. THIS WAY, THIS COMPANY EARNS ADVISORY FEES FROM ADVISER MICRO FINANCE INSTITUTIONS. IN EARLIER YEAR, THE SAME SALARY WAS ALLOWED WHILE FRAMING ASSESSMENT UNDER SECTION 143(3) AND NO SUCH DISALLOWANCE WAS MADE. IT WAS THE CONTENTION OF THE LEARNED COUNSEL BEFORE US, THAT THE SALARY PAID WAS IN ORDER TO CONTRACT 5 I.T.A. NO. 7024 /MUM/201 6 M/S. GRAMEEN CAPITAL INDIA LTD., AND RETAIN TALENTED EMPLOYEES AND IT WAS COMMENSURATE WITH THE DUTIES AND PROFILE OF EMPLOYEES. THE LEARNED COUNSEL FO R THE ASSESSEE RELIED ON THE DECISION OF JK WOOLLEN MANUFACTURERS VS. CIT (1972) 72 ITR 612 (SC), WHEREIN IT IS HELD AS UNDER: - 'COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF THE BUSIN ESS, REASONABLENESS OF THE EXPENDITURE HAS TO BE ADJUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE INCOME - TAX DEPARTMENT. AN EMPLOYER IN FIXING THE REMUNERATION OF HIS EMPLOYEES IS ENTITLED TO CONSIDER THE EXTENT OF HIS BUSINESS, THE NATURE OF THE DUTIES TO BE PERFORMED AND THE SPECIAL APTITUDE OF THE EMPLOYEE, FUTURE PROSPECTS OF EXTENSION BY THE BUSINESS AND A HOST OF OTHER RELATED CIRCUMSTANCES. IT IS NOT THE FUNCTION OF THE TRIBUNAL TO DETERMINE THE REMUNERATION WHICH IN THEIR VIEW SHOUL D BE PAID TO AN EMPLOYEE OF THE ASSESSEE.' 6. IT IS CLEAR FROM THE ABOVE THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE AO CANNOT STEP INTO THE SHOES OF BUSINESSMAN FOR DECIDING THE 6 I.T.A. NO. 7024 /MUM/201 6 M/S. GRAMEEN CAPITAL INDIA LTD., REASONABLENE SS AND THUS ALLOWED THE APPEAL OF THE ASSESSEE. MAINTAINING THE CONSISTENCY WITH THE EARLIER YEAR DECISION , WE ALLOW THE APPEAL OF THE ASSESSEE BY SETTING ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO ACCORDINGLY. AFTER HAVING GONE TH ROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND HONBLE ITAT AS MENTIONED ABOVE IN ASSESSEES OWN CASE , WE FIND THAT THE IDENTICAL ISSUE S HAVE ALREADY BEEN DECIDED BY THE HONBLE ITAT IN ASSESSEES OW N CAS E FOR AY 2011 - 12 & 2012 - 13 IN ITA NOS. 783/MUM/16 AND ITA NO. 5231/MUM/16. T HEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF HONBLE ITAT AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY , WE APPLY THE SAME FINDINGS IN THE PRESENT CASE WHICH ARE APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE . THEREFORE, WE ORDER ACCORDINGLY. 7 I.T.A. NO. 7024 /MUM/201 6 M/S. GRAMEEN CAPITAL INDIA LTD., 7 . IN THE NET RESU LT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST . 2018 SD/ - SD/ - ( SHAMIM YAHYA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 21 . 08 .201 8 SR.PS . DHANANJAY / 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 F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI