DCIT 5(2), MUMBAI V. MOBILE 2 WIN INDIA P.LTD, MUMBAI

ITA 7215/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0898 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 01-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: ACHAL BANGANI
• Keywords: Gift; Bad and doubtful debts
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 7215 /MUM/ 2014 : (A.Y : 2010 - 11 ) DCIT - 5(2)(2), MUMBAI (APPELLANT) VS. M/S. MOBILE 2 WIN INDIA PVT. LTD., 601, 6 TH FLOOR, SPRING TOWER, ISLAND CITY CENTRE, G.D. AMBEDKAR MARG, DADAR, MUMBAI 400 014 (RESPONDENT) PAN : AADCM6165C APPELLANT BY : SHRI M.C. OMI NINGSHEN, DR RESPONDENT BY : SHRI ACHAL BANGANI DATE OF HEARING : 29 / 03 /201 7 DATE OF PRONOUNCEMENT : 26 /0 4 /201 7 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 9 , MUMBAI DATED 22.9.2014 , PERTAINING TO THE ASSESSMENT YEAR 2010 - 11 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 15.3.2013 UNDER SECTION 14 4 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. 2. IN ITS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO ESTABLISH THE AMOUNT OF RS.14,20,135/ - WAS SPENT ON SAREES AND UTENSILS WHICH WERE DISTRIBUTED TO ITS CLIENTS AND, HENCE, THE ENTIRE EXPENDITURE SHOULD HAVE BEEN DISALLOWED AS NOT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO ESTABLISH THAT THE ENTIRE TRAVELLING EXPENSES OF RS. 4,85,858/ - , CONVEYANCE EXPENSES OF RS.6,55,311/ - , TELEPHONE EXPENSES OF RS.5,56,800/ - , OTHER EXPENSES OF RS.55,07,516/ - HAD BEEN LAID OUT OR EXTENDED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE AND HENCE, ERRED IN HOLDING THAT NO ADHOC DISALLOWANCE COULD BE MADE OUT OF THE SAID EXPENDITURE ? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE HAD NOT ESTABLISHED THAT THE BAD DEBTS WRITTEN OFF RS.1,88,94,107/ - HAD BEEN OFFERED AS INCOME DURING THE YEAR OR IN THE EARLIER ASSESSMENT YEARS ? THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND THE ORDER OF THE AO BE RE STORED. 3. BEFORE ADJUDICATING THE SPECIFIC GROUNDS OF APPEAL, THE BRIEF BACKGROUND OF THE DISPUTE CAN BE SUMMARIZED AS FOLLOWS. THE RESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER - ALIA, ENGAGE D IN THE BUSINESS OF PROVIDING ENTERPRISE/CONTENT INFORMATION AND SOLUTIONS NAMELY 3 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. MARKETING CAMPAIGNS, SALES LINKED PROMOTIONS, MARKET RESEARCH, CRM PROJECTS, SMS COMPETITION/POLLS/VOTING, ALERTS, SOLUTIONS , ETC . FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON, IT FILED A RETURN OF INCOME ON 14.10.2010 DECLARING A TOTAL INCOME OF NIL AFTER ADJUSTING THE BROUGHT FORWARD LOSSES OF EARLIER YEARS AGAINST THE INCOME OF THE CURRENT YEAR. THE ASSESSMENT ORDER REVEALS THAT THE ASSESSMENT HAS BEEN FINALIZED ON AN EX - PARTE BASIS U/S 144 OF THE ACT NOTICING THE ABSENCE OF THE ASSESSEE. IN THE FINAL ASSESSMENT, THE ASSESSING OFFICER DID NOT CONSIDER THE BROUGHT FORWARD LOSSES AND TOOK INTO CONSIDERATION THE INCOME OF THE CURRENT YEAR AS DECLARED BY THE ASSESSEE. FURTHE R, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD CLAIMED EXPENSES UNDER VARIOUS HEADS IN THE PROFIT & LOSS ACCOUNT AMOUNTING TO RS.5,54,85,803/ - AND HE PROCEEDED TO DISALLOW 20% OF THE SAME NOTING THAT NO DETAILS WERE FURNISHED INSPITE OF OPPORTUNITIES HAV ING BEEN ALLOWED. IN THIS MANNER, THE TOTAL INCOME WAS ASSESSED AT RS.3,75,16,150/ - . 4. THE ASSESSEE - COMPANY HAD CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) CHALLENGING THE ASSESSMENT ON VARIOUS GROUNDS. THE ASSESSEE CHALLENGED THE ASSESSMENT OF IN COME U/S 144 OF THE ACT AND ALSO MADE DETAILED WRITTEN SUBMISSION S . THE ASSESSEE ALSO POINTED OUT THAT THE PROFIT FOR THE YEAR UNDER CONSIDERATION WAS HIGHER THAN IN THE EARLIER ASSESSMENT YEARS WHERE IT HAD SUFFERED LOSSES ; AND, THEREFORE, THERE WAS NO J USTIFICATION FOR MAKING THE HIGH - PITCHED ASSESSMENT. THE VARIOUS SUBMISSIONS PREFERRED BY THE ASSESSEE WERE NOTED BY THE CIT(A) AND HE CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER ALSO. THE CIT(A) HAS SINCE CONSIDERED THE SUBMISSIONS PUT FORTH B Y THE ASSESSEE AND THE REMAND REPORT OF THE ASSESSING OFFICER AND ALLOWED SUBSTANTIAL 4 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. RELIEF. AGAINST SOME OF THE RELIEFS ALLOWED BY THE CIT(A), REVENUE IS IN APPEAL BEFORE US ON THE ABOVESTATED GROUNDS OF APPEAL. 5. INSOFAR AS GROUND OF APPEAL NO. 1 IS CONCERNED, THE SAME RELATES TO AN EXPENDITURE OF RS.14,20,135/ - , WHICH WAS PART OF BUSINESS PROMOTION EXPENSES OF RS.16,25,624/ - DEBITED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER HAD DISALLOWED 20% OF THE TOT AL EXPENDITURE IN THE ASSESSMENT ORDER. IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER SUBMITTED THAT THE SUM OF RS.14,20,135/ - WAS INCURRED TOWARDS PURCHASE OF SAREES WHICH WAS NOT AN ALLOWABLE EXPENDITURE. THE CIT(A) NOTED THAT SUCH EXPENDITURE WERE INCURRED ON GIFT ITEMS WHICH WERE DISTRIBUTED TO LARGE NUMBER OF CLIENTS AND CONSIDERING THE NATURE OF BUSINESS, HE RESTRICTED THE DISALLOWANCE TO 50% OF SUCH EXPENDITURE. 6. BEFORE US, THE LD. DR REITERATED THAT THE ENTIRE EXPENDITURE OUGHT TO HAVE BEEN DISALLOWED AND THAT THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO 50% OF SUCH EXPENDITURE. 7. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE DEFENDED THE ORDER OF CIT(A) BY POINTING OUT THAT THE EXPENDITURE WAS INCURRED ON DISTRIBUTION OF ITEM TO THE CLIENTS AND, THEREFORE, THE DISALLOWANCE SUSTAINED BY THE CIT(A) WAS MORE THAN REASONABLE FROM THE POINT OF VIEW OF R EVENUE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL STANDS AND FIND NO REASON TO INTERFERE WITH THE CONCLUSION OF THE CIT(A). THE CIT(A) HAS SPECIFICALLY 5 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. REFERRED TO THE NATURE OF BUSINESS OF ASSESSEE WHICH, INTER - ALIA, INVOLVES SMS COMPETITION/POLLS/VOTING, ETC. IT WAS EXPLAINED BEFORE THE LOWER AUTHORITIES THAT THE EXPENDITURE OF RS.14,20,135/ - IS TOWARDS PURCHASE OF GIFT ITEMS OF SAREES AND UTENSILS, ETC. WHICH WERE MEANT FOR DISTRIBUTION TO THE CLIENTS. BE THAT AS I T MAY, IN OUR VIEW, THE CIT(A) HAS ESTIMATED 50% OF THE EXPENDITURE AS BEING ALLOWABLE, AND IN THE ABSENCE OF ANY SPECIFIC INFIRMITY BEING SHOWN BY THE REVENUE, WE AFFIRM HIS DECISION. THUS, ON THIS ASPECT, REVENUE FAILS. 9. THE SECOND GROUND RAISED BY T HE REVENUE IS FLOWING FROM THE ORDER OF CIT(A) WHEREBY HE HAS NOT ACCEPTED THE PLEA OF ASSESSING OFFICER MADE IN THE REMAND REPORT THAT THE EXPEN DITURE ON TRAVELLING EXPENSES RS.4,85,858/ - , CONVEYANCE EXPENSES RS.6,55,311/ - , TELEPHONE EXPENSES RS.5,5 6,800/ - AND OTHER EXPENSES RS.55,07,516/ - BE SUBJECT TO DISALLOWANCE @ 10%. IN THIS CONTEXT, IT IS NOTICEABLE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD DISALLOWED 20% OF SUCH EXPENDITURE AND DURING THE REMAND PROCEEDINGS, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER REPORTED TO THE CIT(A) THAT 10% OF SUCH EXPENDITURE BE DISALLOWED. THE CIT(A) DID NOT ACCEPT THE RECOMMENDATIONS OF THE ASSESSING OFFICER AS , ACCORDING TO HIM, THE EXPENDITURE DEBITED IN THE MAJOR HE ADS OF EXPENSES LIKE POWER AND FUEL, RENT, SALARIES AND WAGES, ETC. DID NOT REQUIRE ANY AD - HOC DISALLOWANCE AND FURTHER THAT HE HAD CONFIRMED SOME DISALLOWANCE OUT OF SALES PROMOTION EXPENSES. THEREFORE, HE REJECTED THE RECOMMENDATIONS OF ASSESSING OFFICE R FOR AD - HOC DISALLOWANCE OF 10% UNDER OTHER HEADS OF EXPENSES. CONSIDERING THE DISCUSSION MADE BY THE CIT(A) AND NOTING THAT THE 6 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. RECOMMENDATIONS OF THE ASSESSING OFFICER WAS FOR AD - HOC DISALLOWANCE, AS DISTINCT FROM ANY SPECIFIC INFIRMITIES, WE FIND NO R EASON TO INTERFERE WITH THE DECISION OF CIT(A) IN ALLOWING THE ENTIRE EXPENDITURE QUA THE AFORESAID HEADS OF EXPENSE . THUS, ON THIS ASPECT ALSO, REVENUE FAILS. 10. INSOFAR AS THE LAST GROUND OF APPEAL IS CONCERNED, THE SAME RELATES TO THE CLAIM OF BAD DE BTS WRITTEN - OFF AMOUNTING TO RS.1,88,94,107/ - . THE CONTENTION OF REVENUE IS THAT THE CLAIM HAS BEEN ALLOWED BY THE CIT(A) WITHOUT REQUIRING THE ASSESSEE TO ESTABLISH THAT THE CORRESPONDING INCOME HAS BEEN OFFERED TO TAX BY THE ASSESSEE DURING THE YEAR OR IN AN EARLIER ASSESSMENT YEAR. 11. NOTABLY, THE ASSESSMENT ORDER REVEALS THAT THE BAD DEBTS OF RS.1,88,94,107/ - FORMED PART OF THE TOTAL EXPENSES OF RS.5,54,85,803/ - , WHICH WAS SUBJECT TO AD - HOC DISALLOWANCE OF 20% BY THE ASSESSING OFFICER. BEFORE THE CI T(A), ASSESSEE HAD FILED WRITTEN SUBMISSIONS, WHICH HAS BEEN REPRODUCED IN THE IMPUGNED ORDER. IN PARA 17 OF THE WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED IN PARA 4.1 OF THE ORDER OF CIT(A), WE FIND THAT THE ASSESSEE FURNISHED THE DETAILS OF BILLING DONE TO PARTIES IN LAST THREE YEARS AND ALSO ASSERTED THAT THE BAD DEBTS WERE IN RESPECT OF INCOME WHICH WERE OFFERED TO TAX IN EARLIER YEARS. ASSESSEE ALSO ASSERTED BEFORE THE CIT(A) THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS WRITTEN OFF ALL OLD B ALANCES WHICH WERE NOT RECEIVABLE OR PAYABLE AND IN THAT LIGHT, ATTENTION OF CIT(A) WAS ALSO DRAWN TO THE FACT THAT THE SUM OF RS.1,11,94,671/ - WAS ALSO CREDITED IN THE PROFIT & LOSS ACCOUNT IN RESPECT OF CREDIT BALANCE S WRITTEN - BACK . FURTHER, IN RESPONSE TO THE REMAND REPORT OF THE ASSESSING OFFICER , 7 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. ASSESSEE ALSO ASSERTED THAT THE ASSESSING OFFICER HAD ACCEPTED DURING THE REMAND PROCEEDINGS THAT THE CLAIM FOR BAD - DEBTS W AS ALLOWABLE AND THAT THE STAND OF THE ASSESSING OFFICER IN THE REMAND REPORT WAS CON FINED TO OTHER EXPENSES. THE AFORESAID ASSERTION OF THE ASSESSEE MADE BEFORE THE CIT(A) IS ALSO STRENGTHENED BY THE CONTENTS OF THE REMAND REPORT EXTRACTED BY THE CIT(A) IN PARA 5.1 OF HIS ORDER, WHICH IS REPRODUCED HEREINAFTER : - IT IS FURTHER OBSERVED THAT THOUGH THE ASSESSEE HAS FILED COPIES OF LEDGER ACCOUNTS OF OTHER EXPENSES EXCLUDING BAD DEBTS BILLS/VOUCHERS ARE FILED PARTLY. ON VERIFICATION OF THE SAME, IT HAS BEEN NOTICED THAT IN SOME EXPENSES, PROPER SUPPORTING DOCUMENTARY EVIDENCE ARE NOT AVAILABLE. THEREFORE, IN MY VIEW, THE ASSESSEES CLAIM OF THESE EXPENSES MAY BE RESTRICTED TO 10% AS AGAINST 20% DISALLOWED IN THE ASSESSMENT ORDER. 12. IT IS I N THIS BACKGROUND, THE ORDER OF THE CIT(A) HAS TO BE APPRECIATED. T HE AFORESAID CLEARLY SUGGESTS THAT SO FAR AS THE CLAIM OF BAD DEBTS IS CONCERNED, IN THE REMAND REPORT THE ASSESSING OFFICER HAD NOT RAISED ANY OBJECTION REGARDING ITS ALLOWABILITY. THEREFORE, THE CIT(A) WAS QUITE JUSTIFIED IN ALLOWING THE CLAIM OF ASSESSEE. IN ANY CASE, TH E GROUND RAISED BY THE REVENUE IS MISPLACED BECAUSE ASSESSEE HAD CLEARLY ASSERTED IN THE SUBMISSIONS TO THE CIT(A) THAT THE DEBTS IN QUESTION WERE IN RESPECT OF INCOME S WHICH W ERE OFFERED TO TAX IN THE EARLIER YEARS. THERE IS NO REPUDIATION TO THIS ASSERTI ON OF THE ASSESSEE EVEN IN THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER TO THE CIT(A) AND, THEREFORE, WE FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE. THUS, ON THIS ASPECT ALSO, REVENUE FAILS. 8 ITA NO. 7215/MUM/2014 M/S. MOBILE2WIN INDIA PVT. LTD. 13. IN THE RESULT, APPEAL OF THE REVEN UE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 T H APRIL, 2017. SD/ - SD/ - ( AMARJIT SINGH ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 2 6 T H APRIL , 201 7 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, H BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI