ICICI SECURITIES PRIMARY DEALERSHIP LTD.(FORMERLY KNOWN AS ICICI SECURITIES LTD.), MUMBAI V. ADDL.C.I.T. RG.3(2), MUMBAI

ITA 7285/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87969 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 13-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RONAK G DOSHI

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI . , , !' ! . . #$% & '() , ' BEFORE SHRI D MANMOHAN, VICE PRESIDENT & SHRI N K B ILLAIYA, AM ' ./ ITA NO.7285/MUM/2011 * '+* / ASSESSMENT YEAR 2008-09 ICICI SECURITIES PRIMARY DEALERSHIP LTD. (FORMERLY KNOWN AS ICICI SECURITIES LTD.), ICICI CENTRE, H K PAREKH MARG, CHURCHGATE 400 020 PAN AAACI0995H VS. THE ADDL. CIT RANGE 3(2), MUMBAI. ( ,- /APPELLANT) ( ./,- /RESPONDENT) APPELLANTS BY : SHRI RONAK G DOSHI RESPONDENT BY : SHRI AKHILENDRA YADAV ' ' 0 1& / DATE OF HEARING :13.01.2015. 2+ 0 1& / DATE OF PRONOUNCEMENT : 16.01.2015 (3 (3 (3 (3 / O R D E R PER N K BILLAIYA, AM: THIS IS AN APPEAL BY THE ASSESSEE PREFERRED AGAINS T THE ORDER OF THE CIT(A)-7, MUMBAI, DATED 18.07.2011 PERTAINING TO A.Y. 2008-09 . THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION OF RS.2.34 CRORES MADE ON ACCOUNT OF PROCUREMENT EXPEN SES PAYABLE TO ICICI BANK. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BROKER-DEALER REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMI SSION AND MEMBER OF NATIONAL ASSOCIATION OF SECURITIES. WHILE SCRUTINIZING THE RETURN OF INCOME FOR THE YEAR UNDER ITA NO.7285/MUM/2011 AY 2008-09 2 CONSIDERATION THE AO NOTICED THAT THE ASSESSEE HAS DEBITED IN THE PROFIT AND LOSS ACCOUNT RS.20.15 CRORES ON ACCOUNT OF PROCUREMENT E XPENSES. THE ASSESSEE WAS ASKED TO PROVIDE DETAILS OF THE SAME. AFTER GOING THROUGH THE DETAILS THE AO OBSERVED THAT THE ASSESSEE HAS DEBITED PROCUREMENT EXPENSES OF RS.10.33 CORERS, WHICH INCLUDED PROVISIONS OF RS.2.33 CRORES. THE A SSESSEE WAS ASKED TO JUSTIFY THE BASIS OF PROVISION AND HE ALLOWABILITY THEREOF. IT WAS SUBMITTED ON BEHALF THE ASSESSEE THAT THE PROVISION IN QUESTION WAS REVERSE D IN A.Y. 2010-11. THE AO WAS NOT CONVINCED. ACCORDING TO HIM THE PROVISION FOR THE YEAR UNDER CONSIDERATION WAS NOTHING BUT A CONTINGENT LIABILITY AND CANNOT BE AL LOWED AS EXPENDITURE. THE AO DISALLOWED THE PROVISION OF RS.233 CRORES. AGGRIEV ED, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AND REITERATED ITS CLAIM. THE CIT(A) OBSERVED THAT THE ASSESSEE WAS ELIGIBLE TO MAKE THE PAYMENT TO THE IC ICI BANK @ RS.30 LACS PER ISSUE FOR MAKING USE OF THE RETAIL NETWORK AND INFRASTRUC TURE OF ICICI BANK AS PER AGREEMENT DATED 19 TH JULY 2004 ENTERED INTO BETWEEN THE ASSESSEE AND IC ICI BANK. THE CIT(A) FURTHER OBSERVED THAT THERE IS NO OTHER AGREEMENT OTHER THAN THIS FOR THE SAID PAYMENT. REFERRING TO THE EMAILS AND OTHE R CORRESPONDENCE RELIED UPON BY THE ASSESSEE, THE CITA) OBSERVED THAT THERE WAS NO REASON FOR SUCH CORRESPONDENCE WHEN THE BUSINESS ITSELF WAS DISCONTINUED. THE CIT (A) ALSO OBSERVED THAT THE PROVISION MADE BY THE ASSESSEE WAS NOT AT ALL ACTUA LLY PAID BUT THE SAME WAS ADDED BACK TO THE INCOME OF THE ASSESSEE IN A.Y. 2010-11. THE CIT(A) WAS CONVINCED THAT THE AO WAS COMPLETELY JUSTIFIED IN HIS ACTION WHILE MAKING THE SAID DISALLOWANCE. AGGRIEVED BY THIS FINDING OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 3. THE COUNSEL FOR THE ASSESSEE ONCE AGAIN REITERAT ED THE CLAIM OF PROCUREMENT EXPENSES QUA PROVISION TO SUBSTANTIATE ITS CLAIM, H E FURTHER DREW OUR ATTENTION TO THE EMAIL CORRESPONDENCES EXHIBITED AT PAGES 7, 8 A ND 9 OF THE PAPER-BOOK. IT IS THE SAY OF THE COUNSEL THAT THESE EMAILS CLEARLY SH OW THAT THERE WAS AN AGREEMENT FOR THE INCREASE OF CURRENT RATE OF RS.30 LACS PER IPO TO RS. 50 LACS FOR IPOS HANDLED DURING THIS FINANCIAL YEAR. THE COUNSEL CONCLUDED BY SAYING THAT THE CLAIM OF THE PROVISION IS OF AN ASCERTAINED LIABILITY AND, THERE FORE, ALLOWABLE. THE COUNSEL RELIED UPON THE DECISION OF THE TRIBUNAL, DELHI BENCH IN T HE CASE OF YUM! RESTAURANTS ITA NO.7285/MUM/2011 AY 2008-09 3 (INDIA) (P.) LTD. 33 TAXMAN.COM 644. THE DR STRONG LY SUPPORTED THE ORDER OF THE FIRST APPELLATE AUTHORITY. 4. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CARE FULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT DOCUMENTARY EVIDENCE BROUGHT TO OUR NOTICE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS CREA TED PROVISION OF RS.2.33 CRORES IN RESPECT OF PROCUREMENT EXPENSES. IT IS ALSO AN UND ISPUTED FACT THAT THE CLAIM OF THE HIKE FROM RS.30 LACS TO RS.50 LACS IS ONLY SUPPORTE D BY INTERNAL EMAIL CORRESPONDENCE. THERE IS NOT TACIT AGREEMENT TO SU PPORT THE CLAIM. INTERESTINGLY, THE BUSINESS WAS DISCONTINUED IN AUGUST 2007, WE FA IL TO UNDERSTAND AS TO WHY THE ASSESSEE WAS PERSUADING THE MATTER IN SUBSEQUENT YE ARS FOR THE HIKE IN THE PROCUREMENT CHARGES. IT IS CLEAR THAT THE ASSESSEE HAS MADE PROVISION FOR LIABILITY, WHICH WAS NOT WARRANTED AT ALL FOR THE YEAR UNDER C ONSIDERATION. THE DECISION RELIED UPON BY THE ASSESSEE IS TOTALLY MISPLACED INASMUCH AS IN THAT CASE THE LIABILITY WAS CRYSTALLIZED DURING THE CURRENT ASSESSMENT YEAR. H OWEVER, IN THE PRESENT CASE THERE IS NO QUESTION OF CRYSTALLIZATION OF LIABILITY AS T HE ENTIRE LIABILITY WAS UNWARRANTED AND UNCALLED FOR. WE, THEREFORE DECLINE TO INTERFERE W ITH THE FINDINGS OF THE CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JANUARY, 2015. SD/- SD/- (D MANMOHAN) (N K BILLAIYA) /VICE PRESIDENT & & & & '() '() '() '() / ACCOUNTANT MEMBER MUMBAI; 5( DATED :16 TH JANUARY, 2015. SA ITA NO.7285/MUM/2011 AY 2008-09 4 (3 (3 (3 (3 0 00 0 .1# .1# .1# .1# 6#+1 6#+1 6#+1 6#+1 / COPY OF THE ORDER FORWARDED TO : 1. ,- /THE APPELLANT. 2. ./,- / THE RESPONDENT. 3. 7 ( ) / THE CIT(A), MUMBAI. 4. 7 / CIT 5. #'89 .1 , , / DR, J BENCH, ITAT, MUMBAI (3 ' / BY ORDER, '/#1 .1 //TRUE COPY// / ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI