DCIT 10(1), MUMBAI V. MESDAN INDIA P LTD, MUMBAI

ITA 7142/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9542 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 7142/MUM/2010(A.Y. 2007-08) THE ACIT, RANGE 10(1), ROOM NO.455, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020. (APPELLANT) VS. M/S. MESDAN INDIA PVT. LTD. 41/B, KURLA KAMGAR NAGAR, S.G. BARVE ROAD, KURLA (E), MUMBAI - 400 024. PAN:AACCM 0842R (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN RESPONDENT BY : SHRI SANJAY PANE DATE OF HEARING : 26/11/2012 DATE OF PRONOUNCEMENT : 3 0/11/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE REVENUE. IT IS D IRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-21,MUMBAI DATED 6/8/2010 FOR A SSESSMENT YEAR 2007- 08. THE GROUND OF APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.25,66,555/ - MADE ON ACCOUNT OF BONUS PAID TO MANAGING DIRECTOR WITHOUT APPRECIATING THE FACT THAT THE BONUS ACCRUED ONLY DURING THE THREE MONTHS FALLING IN THE SUBSEQU ENT YEAR AS PER THE EMPLOYMENT AGREEMENT. 2. THE ISSUE IS STATED TO BE COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 28/2/2011 IN ITA NO.2211/MUM/2010 FOR A.Y.2006-07. FOR THE SAKE OF COMPLETENESS THE RELEVANT PORTION OF THE SAID ORDER OF THE TRIBUNAL IS REPRODUCED BELOW: ITA NO. 7142/MUM/2010(A.Y. 2007-08) 2 3. THE FIRST DISPUTE IS REGARDING DISALLOWANCE OF EXPENDITURE OF RS.24,64,144/- INCURRED ON ACCOUNT OF PAYMENT TO M ANAGING DIRECTOR. THE AO NOTED FROM THE EMPLOYMENT AGREEMEN T THAT BONUS WAS PAYABLE ONCE A YEAR WITHIN THREE MONTHS EXCEEDI NG THE END OF THE FISCAL YEAR BUT NOT BEFORE ONE YEAR EMPLOYMENT HAVE BEEN COMPLETED. THE AO THEREFORE CONCLUDED THAT THE BONU S ACCRUE ONLY AFTER THE END OF THE RELEVANT ACCOUNTING YEAR. HE T HEREFORE DISALLOWED THE CLAIM. IN APPEAL ASSESSEE SUBMITTED THAT THE BONUS AS PER THE EMPLOYMENT AGREEMENT WAS PAYABLE EACH YE AR AND ONLY THE COMPUTATION WAS TO BE MADE IN THE NEXT YEAR WHE N THE PROFIT FIGURE OF THE COMPANY BECAME AVAILABLE. CIT(A) AGRE ED WITH THE SUBMISSION THAT BONUS ACCRUED TO THE MANAGING DIREC TOR IN THE YEAR UNDER CONSIDERATION BUT WAS PAYABLE IN SUBSEQUENT YEAR. HE THEREFORE ALLOWED THE CLAIM ARRIVED BY WHICH THE RE VENUE IS IN APPEAL. 3.1 WE HAVE HEARD THE LEARNED DR, PERUSED THE RECOR DS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REG ARDING ALLOWABILITY OF EXPENDITURE ON ACCOUNT OF BONUS TO MANAGING DIRECTOR. AS PER THE EMPLOYMENT AGREEMENT THE BONUS WAS PAYABLE EVERY YEAR BUT THE PAYMENT WAS ACTUALLY TO BE MADE AFTER THE END OF THE RELEVANT ACCOUNTING PERIOD. IT IS A SETTLED LEG AL POSITION THAT EXPENDITURE HAS TO BE ALLOWED IN THE YEAR IN WHICH THE LIABILITY HAD BEEN INCURRED EVEN IF THE QUANTIFICATION AND ACTUA L PAYMENT IS DONE LATER. THE 1IABI1ITY ON ACCOUNT OF BONUS ACCRUED TO THE ASSESSEE FOR THE RELEVANT ACCOUNTING YEAR THOUGH THE ACTUAL QUAN TIFICATION WAS TO BE MADE LATER. WE THEREFORE SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN ALLOWING THE CLAIM AND THE SAME IS THEREFORE UPHELD . 3. IT MAY BE MENTIONED HERE THAT FOR THIS YEAR ALSO THE FACTS ARE SIMILAR. A SUM OF RS.25,66,555/- WAS PAID AS BONUS TO THE MANA GING DIRECTOR. THE PAYMENT HAS BEEN MADE IN PURSUANCE OF AN AGREEMENT OF EMPLOYMENT DATED 1/6/2000 WHICH WAS REVISED ON 1/5/2003 AND BONUS HA S BEEN PAID AFTER 31/3/2007. IT WAS THE CONTENTION OF THE ASSESSEE T HAT BONUS PAYABLE TO MANAGING DIRECTOR DEPEND UPON PROFITABILITY OF THE ASSESSEE COMPANY AND THE PROFITABILITY CAN BE WORKED OUT ONLY AFTER AUDIT O F THE ACCOUNTS OF THE ASSESSEE COMPANY. THE FACTS WERE SIMILAR IN RESPECT OF ASSE SSMENT YEAR 2006-07. THEREFORE, AFTER HEARING BOTH THE PARTIES, RESPECTF ULLY FOLLOWING AFOREMENTIONED ITA NO. 7142/MUM/2010(A.Y. 2007-08) 3 DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR IMM EDIATE PRECEDING YEAR, WE DECLINE TO INTERFERE IN THE DELETION OF DISALLOWAN CE MADE BY LD. CIT(A). 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF NOV. 2012 SD/- SD/- (SANJAY ARORA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH NOV. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R B BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.