DCIT 5(1), MUMBAI V. KATHERINE INDIA P.LTD, MUMBAI

ITA 7473/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4315 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRITA RANJAN
• Assessee Lawyers: ISHRAQ M CONTRACTOR
• Keywords: Capital asset; Revenue expenditure

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. JOGINDER SINGH,JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /.ITA NO.7473/MUM/2013, /ASSESSMENT YEAR-2010-11 DY. CIT-5(1) ROOM NO. 568, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS M/S. KATHERINE INDIA PVT. LTD. 23, JAY MAHAL, A-ROAD CHURCHGATE MUMBAI-400 020. PAN:AACCK 1685 N ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY :SHRI ISHRAQ M. CONTRACTOR / REVENUE BY :MS. AMRITA RANJAN / DATE OF HEARING : 03-12- 2015 / DATE OF PRONOUNCEMENT : 01.01. 2016 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.03.10.2013 OF CIT(A)-9,MUM BAI,THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS DEALING IN TELECOMMUNICATION EQUIPMENTS,FILED ITS RETURN OF INCOME ON 29.09.2010DECLARING LOSS OF RS. 3.95CRORES.THE AO COMPLETED THE ASSESSMENT ON 19.02.2013,U/S.143(3) OF THE ACT DETE RMINING THE INCOME OF THE ASSESSEE AT RS. (-)3.26 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE AD DITION MADE BY THE AO,AMOUNTING TO RS. 69.42 LAKHS UNDER THE HEAD MANAGEMENT FEES.DURING T HE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD DEBITED RS.69,42,392/-A S MANAGEMENT FEES.HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE EXPENDITURE SHOULD NOT BE DISALLOWED AS SAME WAS NOT REVENUE IN NATURE.AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE,THE AO HELD THAT THE ASSESSEE HAD MADE THE PAYMENT IN LIEU OF RECEIVING INFRASTRUCTUR E SUPPORT FOR CORPORATE DEVELOPMENT AND INDUSTRIALISATION,THAT SAME WAS TO BE TREATED AS CA PITAL EXPENDITURE. 3 .AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED T HAT THE ASSESSEE HAD ENTERED IN TO AN AGREEMENT WITH A GERMAN COMPANY TO PROVIDE MANAGEME NT SUPPORT INFRASTRUCTURE SERVICES, THAT PAYMENTS WERE NOT IN CONNECTION WITH ANY TRANS FER OF TECHNOLOGY OR FOR ACQUISITION OF CAPITAL ASSET,THAT EXPENDITURE INCURRED UNDER THE H EADS SALARY,TENT ELECTRICITY,THAT THE EXPENSES WERE FOR RUNNING THE BUSINESS,THAT THE PAYMENT WAS 4.55% OF THE TOTAL TURNOVER,THAT AS PER THE RBI GUIDELINES LIMIT FOR SUCH EXPENDITURE HAD BEEN FIXED AT 5%,THAT THE EXPENDITURE DID NOT RESULT IN ANY ENDURING BENEFIT TO THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,T HE FAA HELD THAT THE MANAGEMENT FEES PAID BY THE ASSESSEE-COMPANY WAS A ROUTINE EXPENDIT URE,THAT IT WAS NOT ONE TIME EXPENDITURE THAT WOULD RESULT IN ENDURING BENEFIT LASTING FOR S EVERAL YEARS,THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS A REVENUE EXPENDITURE.FINALLY,THE APPEAL FILED BY THE ASSESSEE WAS ALLOWED. 4 .BEFORE US,THE THE DEPARTMENTAL REPRESENTATIVE(DR)S UPPORTED THE ORDER OF THE AO.THE AR 7473/13-KATHERINE-10-11 2 STATED THAT WHILE COMPLETING THE ASSESSMENT U/S.143 (3)OF THE ACT FOR THE AY.2012-13,THE AO HAD ALLOWED THE IDENTICAL EXPENDITURE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD MADE PAYMENT TO ITS PARENT COMPANY FOR PROVIDING ASSISTANCE IN VARIOUS AREAS OF ACTUAL FUNCTIONING OF THE COMPANY AND PARTICULARLY THE REGULAR PERIODIC AUDIT BY THE QUALIFIED PERSONS,THAT THE ASSESSEE HAD TO INCUR THE SAID EXP ENDITURE ON YEARLY BASIS,THAT IN ONE OF THE SUBSEQUENT YEARS THE AO HIMSELF HAS HELD IT TO BE R EVENUE EXPENDITURE,THAT THE NATURE OF EXPENSES INCURRED CLEARLY ESTABLISH THAT SAME WERE OF REVENUE NATURE.IN OUR OPINION,ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.TH EREFORE,CONFIRMING HIS ORDER,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPE AL FILED BY THE AO IS DISMISSED ORDER PRONOUNCED IN THE OP EN COURT ON 1 ST JANUARY, 2016. 01 , 2016 SD/- SD/- ( / JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE 01.01.2016 . . . .. . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.