DCIT 14(2)(1), MUMBAI V. CITICORP MARUTI FINANCE LTD, NEW DELHI

ITA 7285/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8386 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: A V SONDE
• Keywords: Corroborative evidences; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI G. MANJUNATHA , ACCOUNTANT MEMBER ITA NO . 7285 /MUM. /2014 ( ASSESSMENT YEAR : 20 07 08 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 14(1)(21), MUMBAI . APPELLANT V/S M/S. CITICORP MARUTI FINANCE LTD. [NOW MERGED WITH CITICORP FINANCE (INDIA) LTD.], JEEVAN BHARTI BUILDING CANNAUGHT PLACE, NEW DELHI PAN AAACC5029L . RESPONDENT ASSESSE E BY : SHRI A.V. SONDE REVENUE BY : SHRI RAJAT MITTAL DATE OF HEARING 07.11.2017 DATE OF ORDER 23.11.2017 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 8 TH SEPTEMBER 201 4 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) X , DELHI, FOR THE ASSESSMENT YEAR 20 07 08 . 2 . IN TOTAL, DEPARTMENT HAS RAISED FIVE GROUNDS. 3 . GROUNDS NO.4 AND 5, BEING GENERAL IN NATURE DO NOT REQUIRE ADJUDICATION. 2 M/S. CITICORP MARUTI FINANCE LTD. 4 . IN GROUND NO.1, THE DEPARTMENT HAS CHALLENGED ALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION OF ` 21,17, 250, TOWARDS LOAN PROCESSING CHARGES. 5 . BRIEF FACTS ARE, THE ASSESSEE A NON BANKING FINANCE COMPANY (NBFC) IS ENGAGED IN H IRE, PURCHASE, FINANCE AND LOAN BUSINESS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST OCTOBER 2007, DECLARING LOSS OF ` 12,06,02,070. DURING THE ASSESSMENT PROCEEDINGS, ON EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS TAKEN LOAN FROM CITI BANK FOR WHICH A SUM OF ` 21,17,250, HAS BEEN PAID TO THE BANK TOWARDS LOAN PROCESSING CHARGES. HE FOUND THAT THE ASSESSEE HAS DEBITED THE SAID AMOUNT TO THE PROFIT & LOSS ACCOUNT. BEING OF THE VIEW THAT LOAN PROCESSING CHARGES PAID BY THE ASSESSEE IS CAPITAL IN NATURE, HE CALLED UPON THE ASSESSEE TO JUSTIFY ITS CLAIM. IN RESPONSE TO THE QUERY RAISED , THOUGHT , THE ASSESSEE SUBMITTED THAT DEDUCTION CLAIMED IS ALLOWABLE, HOWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. HE HELD THAT THE LOAN PROCESSING CHARGES PAID BY THE ASS ESSEE IS CAPITAL IN NATURE, HENCE, CANNOT BE ALLOWED. ACCORDINGLY, HE ADDED BACK AN AMOUNT OF ` 21,17,250. THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE LEARNED COMMISSIONER (APPEALS). 3 M/S. CITICORP MARUTI FINANCE LTD. 6 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE DECISIONS RELIED UPON HELD THAT LOAN PROCESSING CHARGES PAID BY THE ASSESSEE WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS AND BY INCURRING SUCH EXPENDITURE NEITHER ANY NEW ASSET WAS CREAT ED NOR ANY ENDURING BENEFIT HAS ACCRUED TO THE ASSESSEE. HE ALSO FOUND THAT WHILE DECIDING THE ISSUE OF IDENTICAL NATURE IN CASE OF ASSESSEES SISTER CONCERN, THE TRIBUNAL HAS ALLOWED LOAN PROCESSING CHARGES AS REVENUE EXPENDITURE. ACCORDINGLY, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 7 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LEARNED COUNSELS APPEARING FOR BOTH THE PARTIES HAVE SUBMITTED BEFORE US THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL REFERRED TO BY THE LEARNED COMMISSIONER (APPEALS). KEEPING IN VIEW THE AFORESAID SUBMISSIONS OF BOTH THE LEARNED COUNSELS, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUND RAISED. 8 . IN GROUND NO.2, T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF AN AMOUNT OF ` 4,80,84,411, TOWARDS LO ANS SOURCING FEES PAID TO MARUTI UDYOG LTD. BEING OF THE VIEW THAT BY INCURRING SUCH EXPENDITURE, ASSESSEE HAS DERIVED ENDURING BENEFIT , THE ASSESSING OFFICER HAS TREATED IT AS CAPITAL EXPENDITURE AND ACCORDINGLY ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED BY THE 4 M/S. CITICORP MARUTI FINANCE LTD. ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). 9 . AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EXAMINING FACTS AND MATERIAL ON RECORD, THE LEARNED COMMISSIONER (APPEALS) FOUND THAT THE LOAN SOURCING FEES WAS PAID TO MARUTI UDYOG LTD. AND IS AMORTIZED OVER THE PERIOD OF LOAN AGREEMENT. HE FOUND THAT ONLY THE AMOUNT WHICH IS AMORTIZABLE FOR THE CURRENT YEAR HAS BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. HE ALSO FOUND THAT THE ASSESSING OFFICER HAS NOT PROVIDED ANY BASIS WHY HE CONSIDERS THE EXPENDITURE AS CAPITAL IN NATURE. FURTHER, THE LEARNED COMMISSIONER (APPEALS) FOUND THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 09, SIMILAR DEDUCTION CLAIMED BY THE ASSESSEE WAS ALLOWED BY THE FIRST APPELLATE AUTHORITY. ACCORDINGLY, HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 10 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LEARNED COUNSELS APPEARING FOR BOTH THE PARTIES HAVE AGREED BEFORE US THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN PRECEDING ASSESSMENT YEAR. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED COUNSELS APPEARING FOR THE PARTIES, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING GROUND RAISED. 5 M/S. CITICORP MARUTI FINANCE LTD. 11 . IN GROUND NO.3, THE DEPARTMENT HAS CHALLENGED THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN GRANTING PARTIAL REL IEF TO THE ASSESSEE IN RESPECT OF SALES PROMOTION EXPENSES. 12 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING THE PROFIT & LOSS ACCOUNT FOUND THAT THE ASSESSEE HAS CLAIMED SALES PROMOTION EXPENSES OF ` 10,75,34,132. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE EXPENDITURE CLAIMED SHOULD NOT BE DISALLOWED AS WAS DONE IN THE PRECEDING ASSESSMENT YEAR. IN RESPONSE, ASSESSEE JUSTIFYING ITS CLAIM SUBMITTED SOME SUPPORTING EVIDENCE. HOWEVER, THE ASSESSING OFFICER OPINING THAT COMPLETE V ERIFICATION OF THE EXPENDITURE C OULD NOT BE MADE IN THE ABSENCE OF SUPPORTING EVIDENCE AND THERE IS SUBSTANTIAL INCREASE IN THE EXPENDITURE COMPARED TO THE PRECEDING ASSESSMENT YEAR , DISALLOWED 10% OUT OF THE TOTAL EXPENDITURE CLAIMED. ACCORDINGLY, HE ADDED BACK AN AMOUNT OF ` 1,07,53,413. THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE LEARNED COMMISSIONER (APPEALS). IN THE COURSE OF HEARING BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE FURNISHED THE BIFURC ATION OF SERVICE CHARGES CLAIMED UNDER THE HEAD ADMINISTRATIVE AND OTHER EXPENSES. THE LEARNED COMMISSIONER (APPEALS) FOUND THAT THE ADMINISTRATIVE AND OTHER EXPENSES COMPRISES OF SEVERAL EXPENSES AND WERE INCU RRED TOWARDS T ECHNOLO GY S ERVICES; C OLLECTION 6 M/S. CITICORP MARUTI FINANCE LTD. S ERVICES; S ALES P ROMOTION S ERVICES; E SERVE C OLLECTION AND WR IT E OF F C OLLECTION S ERVICES. 13 . HE FOUND THAT EXPENDITURE TOWARDS SALES PROMOTION ACCOUNTS FOR ` 74,62,146 ONLY. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO DISALLOW 10% OUT OF SALES PROMOTION EXPENSES OF ` 74,62,146. 14 . LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, THE ASSESSEE HAS NOT ONLY CREDITED AN AMOUNT OF ` 10,75,34,132 TO THE PROFIT & LO SS ACCOUNT TOWARDS SALES PROMOTION EXPENSES BUT IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE ITSELF HAS SUBMITTED THAT THE SAID AMOUNT WAS INCURRED FOR SALES PROMOTION EXPENSES. THEREFORE, THE LEARNED COMMISSIONER (APPEALS) WAS NO T JUSTIFIED IN ACCEPTING THE SUBMISSIONS OF THE ASSESSEE FOR SALES PROMOTION EXPENSES WERE TO THE TUNE OF ` 74,62,146 ONLY. HE FURTHER SUBMITTED, THE ASSESSEE HAS NOT PRODUCED ANY BIFURCATION OR EVIDENCE BEFORE THE ASSESSING OFFICER TO DEMONSTRATE THAT SAL ES PROMOTION EXPENSES WAS ` 74,62,146. HE, THEREFORE, SUBMITTED THE ISSUE MAY BE RESTORED TO THE ASSESSING OFFICER FOR FRESH VERIFICATION. 15 . WE HAVE HEARD THE PARTIES. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE EXPENDITURE OF ` 10,75,34,132, SHOWN UNDER THE HEAD ADMINISTRATIVE AND OTHER EXPENSES WAS TOWARDS DIFFERENT TYPES OF SERVICES RECEIVED BY THE ASSESSEE AND SALES PROMOTION SERVICES IS ONE 7 M/S. CITICORP MARUTI FINANCE LTD. AMONGST THEM. HE SUBMITTED, AFTER CONSIDERING THE BIFURCATION OF EXPENSES INCURRED BY THE ASSESSEE, THE LEARNED COMMISSIONER (APPEALS) HAS DISALLOWED 10% OF ` 74,62,146, WHICH WAS INCURRED TOWARDS SALES PROMOTION EXPENSES. HE SUBMITTED, THE MATTER CAN BE RESTORED BACK TO THE ASSESSING OFFICER FOR VERIFICATION. AS COULD BE SEEN, THE ASSESSI NG OFFICER HAS DISALLOWED 10% OF THE EXPENSES INCURRED TOWARDS SALES PROMOTION. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. UNDISPUTEDLY, THE ASSESSEE HAS NOT CHALLENGED 10% DISALLOWANCE OUT OF SALE S PROMOTION EXPENSES SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS). THE GRIEVANCE OF THE DEPARTMENT IS ONLY CONFINED TO THE QUANTIFICATION OF SALES PROMOTION EXPENSES CLAIM ED TO HAVE BEEN INCURRED BY THE ASSESSEE. AS COULD BE SEEN, THE ASSESSING OFFICER HAS OBSERVED THAT IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS DEBITED ` 10,75,34,132, TOWARDS SALES PROMOTION EXPENSES. HOWEVER, BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE FURNISHED BIFURCATION OF THE EXPENSES CLAIMED OF ` 10.75 CRORE. AS STAT ED BY THE ASSESSEE, THE AFORESAID AMOUNT COMPRISE S OF DIFFERENT COMPONENT OF SERVICES AVAILED BY THE ASSESSEE WHICH ALSO INCLUDES SALES PROMOTIONS SERVICES. AS PER BIFURCATION SUBMITTED BEFORE THE LEARNED COMMISSIONER (APPEALS), THE EXPENSES INCURRED TOWARDS SA LES PROMOTION WAS TO THE TUNE OF ` 74,62,146 AND ON THAT BASIS, THE LEARNED COMMISSIONER (APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO DISALLOW 10% OF ` 8 M/S. CITICORP MARUTI FINANCE LTD. 74,62,146. THUS, FROM THE AFORESAID FACTS, IT IS EVIDENT THAT THE ASSESSEE HAS BROUGHT FRESH FACTS BE FORE THE LEARNED COMMISSIONER (APPEALS) INSOFAR AS IT RELATES TO QUANTUM OF SALES PROMOTION EXPENSES WHICH WAS NEVER FILED BEFORE THE ASSESSING OFFICER . I N VIEW OF THE AFORESAID WE ARE INCLINED TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM AND DISALLOW 10% OUT OF SALES PROMOTION EXPENSES CLAIMED BY THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 16 . IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPE N COURT ON 23.11.2017 SD/ - G. MANJUNATHA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 23.11.2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI