ITO 12(2)(3), MUMBAI V. GOLDMAN SECURITIES P. LTD, MUMBAI

ITA 7531/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2379 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KISHORE PATEL
• Keywords: Business expenditure; Wholly owned subsidiary
• Section: 143(3); 14A; 115JB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI B.R.BASKARAN (AM) AND SHRI RAM LAL NEGI ( JM) ITA NO 7530 & 7531/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 THE ITO - 12(2)(3), ERSTWHILE INCOME-TAX OFFICER 9(1)(4), MUMBAI, ROOM NO. 224, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.MARG, MUMBAI- 400 020. VS. M/S. GOLDMAN SECURITIES P. LTD., SPICE TOWER, CTS-R-10, PHASE II, ANAND NAGAR, NEW LINK ROAD, JOGESHWARI (W), MUMBAI- 400 102. PAN:- AACCG6342C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. MAURYA PRATAP RESPONDENT BY : SHRI. KISHORE PATEL DATE OF HEARING: 2 0/07 / 2016 DATE OF PRONOUNCEMENT: 19/10/20 16 O R D E R PER RAM LAL NEGI, JM THESE TWO APPEALS HAVE BEEN PREFERRED BY THE REVENUE AGAINST TWO ORDERS DATED 29/09/2014 PASSED BY THE LD. CIT(APPEALS)-19 MUMBAI, FOR THE ASST. YEARS 2010-11 & 2011-12, WHEREBY THE LD. CIT(A) ALL OWED THE APPEALS FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDERS PASSED BY TH E A.O. SINCE BOTH THE APPEALS PERTAIN TO THE SAME ASSESSEE FOR DIFFERENT ASST. YEARS AND ISSUES INVOLVED ARE COMMON IN BOTH THE APPEALS, THE SAME W ERE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO 7530-31/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 ITA NO. 7530/MUM/2014 A.Y. 2010-11 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, M /S. GOLDMAN SECURITIES P. LTD., ENGAGED IN THE BUSINESS OF GLOBAL MONEY TRANS FER (GTM) UNDER THE BRAND NAME INSTANT CASH(IC), FILED ITS RETURN OF INCOME , DECLARING THE TOTAL INCOME OF RS. 10,45,663/-. SINCE THE TAX LIABILITY AS PER MAT BEING BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961 (IN SHORT THE AC T) WAS HIGHER THAN THE COMPUTATION AS PER INCOME TAX, THE ASSESSEE COMPANY PAID THE TAX LIABILITY AS PER MAT COMPUTATION. THE ASSESSMENT ORDER WAS COMPL ETED U/S 143(3) OF THE ACT, DETERMINING THE TOTAL INCOME AT RS. 2,55,52,77 8/- AFTER MAKING DISALLOWANCE OF RS. 2,44,94,440/- CLAIMED BY THE A SSESSEE COMPANY TOWARDS PAYMENT OF COMMISSION AND DISALLOWANCE OF RS 12,66 5/-U/S 14A OF THE ACT. IN THE FIRST APPEAL, THE LD. CIT(A DELETED THE ADDITIO NS MADE BY THE AO. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST IM PUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS OF AP PEAL:- 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DIRECTING THE A.O TO AL LOW THE ENTIRE EXPENDITURE OF RS. 2,44,94,440/- INCURRED AS PAYMEN T OF COMMISSION TO SUB-AGENTS IGNORING THE FACT THAT THE SUB-AGENTS HAS DENIED ANY TRANSACTION WITH ASSESSEE COMPANY IN REP LY TO QUERIES RAISED U/S 133(6) OF THE I.T.ACT, DURING ASSESSMENT PROCEEDINGS? 2. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT M/S. WALL STRE ET FINANCE (WSFL) WAS THE TRUSTEE FOR THE WHOLE PERIOD I.E.01/04/2009 TO 31/03/2010, OF BUSINESS TRANSACTION IGNORING THE FA CT THAT THE TRUST PERIOD WAS ONLY BETWEEN THE APPOINTED DATE I.E 01/0 1/2009 AND THE EFFECTIVE DATE I.E. 24/08/2009 AND THE BUSINESS TRANSACTION WAS BEYOND SUCH TIME? 3 ITA NO 7530-31/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 3. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSEE COMPANY FAILED TO MAKE SUBMISSIONS ON THE FACT THAT THE AMOUNT CLAIMED UNDER THE HEAD COMMISSION WAS NOT CLAIMED BY M/S. WALL STREET FINANCE LTD. (WSFL) IN THE BOOKS OF ACCOUNT FOR THE YEAR ENDED 31/03/2010? 3. BEFORE US THE LD. DR SUBMITTED THE APPELLANT/ASS ESSEE IS ENGAGED IN THE BUSINESS OF GLOBAL MONEY TRANSFER (GTM) UNDER THE B RAND NAME INSTANT CASH. THE ASSESSEE BECAME 100% SUBSIDIARY OF WALL STREET FINANCE LTD. (WSFL), IN PURSUANCE OF A SCHEME OF DEMERGER APPROV ED BY THE HON,BLE BOMBAY HIGH COURT VIDE ORDER DATED 17/07/2009. DURI NG THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE SHOWING GROSS RECE IPT OF RS. 2.84 CRORES FROM THE SAID BUSINESS, CLAIMED EXPENSES OF RS. 2.44 CRO RES TOWARDS PAYMENT OF COMMISSION TO 143 SUB-AGENTS. THE AO NOTICED THAT T HE SUB AGENTS CONFIRMED THE TRANSACTIONS IN QUESTION WITH WFSL AND NOT WITH THE ASSESSEE; THE ORIGINAL LICENSE FOR THE GTM BUSINESS WAS IN THE NAME OF WSF L. AND THE RESERVE BANK OF INDIA GRANTED THE LICENSE IN THE NAME OF THE APP ELLANT/ASSESSEE ONLY IN SEPT., 2010. THE LD. DR FURTHER SUBMITTED THAT IN V IEW OF THE AFORESAID FACTS THE LD. CIT(A) HAS WRONGLY ALLOWED THE EXPENSES OF RS. 2.44 CRORES CLAIMED BY THE ASSESSEE TOWARDS PAYMENT OF COMMISSION TO SUB-A GENTS CONTRARY TO THE REASONED FINDINGS OF THE AO. 4. ON THE OTHER HAND THE LD. AUTHORISED REPRESENTAT IVE (AR) OF THE ASSESSEE SUBMITTED THAT IN PURSUANCE OF A SCHEME OF DEMERGER APPROVED BY THE HON,BLE BOMBAY HIGH COURT VIDE ORDER DATED 17/07/2009, THE APPELLANT/ASSESSEE BECAME A 100% SUBSIDIARY OF WALL STREET FINANCE LTD .(WSFL). THE ORDER APPROVING THE DEMERGER OF THE ASSESSEE FROM WSFL PA SSED BY THE HONBLE HIGH COURT HAS VALIDATED THE APPELLANTS ACTION. SINCE T HE ASSESSEE HAS CARRIED ON BUSINESS IN DURING THE ASSESSMENT YEAR UNDER CONSID ERATION IN TERMS OF THE APPROVED SCHEME, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IS NOT 4 ITA NO 7530-31/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 PERMISSIBLE UNDER LAW. MOREOVER, WHEN THE AO IS NOT DISPUTING THE BUSINESS, HE SHOULD ALSO ALLOW THE EXPENSES CLAIMED BY THE AS SESSEE. THEREFORE, THE ORDER PASSED BY THE LD. CIT(A) DOES NOT SUFFER FROM ANY L EGAL OR FACTUAL INFIRMITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE DOCUMENTS PLACED ON RECORD BY THE PARTIES. WE NOTICE THAT THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE FOR THE REASONS THAT AL L THE CONFIRMATIONS FILED BY THE SUB-AGENTS ARE IN THE NAME OF WFSL, ALL CERTIFI CATES FOR TAX DEDUCTION AT SOURCE ARE IN THE NAME OF WFSL AND NOT IN THE NAME OF THE ASSESSEE. THE ASSESSEE FAILED TO SUBMIT ANY PROOF TO ESTABLISH AN Y CORRESPONDENCE WITH THE SUB-AGENTS WITH REFERENCE TO ITS CONTINUATION OF TH E INSTANT CASH BUSINESS AFTER THE DEMERGER. THE ORDER OF THE HONBLE HIGH C OURT DOES NOT CONTAIN ANY CLAUSE WHICH AUTHORIZES THE ASSESSEE TO CONTINUE TH E SAID BUSINESS IN THE NAME OF WSFL EVEN AFTER DEMERGER. MOREOVER, THE ASS ESSEE MADE AN APPLICATION TO THE RBI FOR MONEY CHARGE LICENSE ONL Y IN DECEMBER 2009 AND THE SAID LICENSE WAS GRANTED ON 30 SEPTEMBER 2010. 6. ON THE OTHER HAND, THE LEARNED CIT(A) HAS ALLOW ED THE APPEAL OF THE ASSESSEE HOLDING THAT IT IS NOT THE CASE OF AO THAT THE ASSESSEE DID NOT CARRY ON THE BUSINESS DURING THE RELEVANT PERIOD. THE APPELL ANT HAD SHOWN GROSS RECEIPTS OF RS. 2.84 CRORES FROM THE INSTANT CASH B USINESS AGAINST WHICH IT HAD CLAIMED EXPENSES OF RS. 2.44 CRORES PAID TO 143 SUB -AGENTS AS COMMISSION. SINCE BUSINESS OF THE ASSESSEE IS NOT IN DISPUTE TH E AO SHOULD HAVE ALLOWED THE BUSINESS EXPENDITURE OF THE ASSESSEE. THEREFORE , WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS RIGHTLY ALLOWED THE BU SINESS EXPENDITURE OF THE ASSESSEE. NO DOUBT THE ORIGINAL LICENSE FOR THE GTM BUSINESS WAS IN THE NAME WSFL AND THE RBI GRANTED THE LICENSE IN THE NAME OF THE APPELLANT ONLY IN SEPTEMBER, 2010. BUT THE REASONS POINTED OUT BY THE AO DO NOT SUGGEST THAT THE BUSINESS WAS NOT CARRIED ON BY THE ASSESSEE DUR ING THE ASSESSMENT YEAR UNDER CONSIDERATION. 5 ITA NO 7530-31/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 7. AS POINTED OUT BY THE LD. CIT(A), THE RELEVANT CLAUSES OF THE SCHEME CONTEMPLATE AS UNDER: CLAUSE 4.1.3- WITH EFFECT FROM THE APPOINTED DATE AND UPON THE SCHEME BECOMING EFFECTIVE, ANY STATUTORY LICENSES, PERMISSIONS OR APPROVALS OR CONSENTS HELD BY WSFL REQUIRED TO CARR Y ON OPERATIONS OF THE INSTANT CASH DIVISION SHALL STAND VESTED IN OR TRANSFERRED TO GSPL WITHOUT ANY FURTHER ACT OR DEED, AND SHALL BE APPROPRIATELY MUTATED BY THE STATUTORY AUTHORITIES CONCERNED THER EWITH IN FAVOUR OF GSPL AND THE BENEFIT OF ALL STATUTORY AND REGULA TORY PERMISSIONS, ENVIRONMENTAL APPROVALS AND CONSENTS, REGISTRATION OR OTHER LICENSES AND CONSENTS SHALL VEST IN AND BECOME AVAILABLE TO GS PL AS IF THEY WERE ORIGINALLY OBTAINED BY GSPL. CLAUSE 9.1.-(A) WSFL, IN RELATION TO THE INSTANT CA SH DIVISION SHALL CARRY ON AND IS DEEMED TO HAVE CARRIED ON ITS BUSIN ESS AND ACTIVITIES AND SHALL STAND POSSESSED OF ITS ENTIRE BUSINESS AN D UNDERTAKING IN TRUST FOR GSPL AND SHALL ACCOUNT FOR THE SAME TO GS PL. (B) ALL THE INCOME OR PROFITS ACCRUING OR ARISING TO WSFL IN RELATION TO THE INSTANT CASE DIVISION SHALL FOR ALL PURPOSES BE TREATED THE INCOME, PROFITS, COSTS, CHARGES EXPENSES AND LO SSES, AS THE CASE MAY BE, OF GSPL. CLAUSE 11- SUBJECT TO THE OTHER PROVISIONS CONTAINI NG THE SCHEME, ALL CONTRACTS, DEEDS, BOLTS AGREEMENTS AND OTHER INSTRU MENTS OF WHATEVER NATURE TO WHICH WSFL, IN RELATION TO THE I NSTANT CASH DIVISION, IS A PART, SUBSISTING FOR HAVING EFFECT I MMEDIATELY BEFORE THE SCHEME COMING INTO EFFECT, SHALL BE IN FULL FOR CE AND EFFECT IN FAVOUR OF GS PL AND MAYBE ENFORCED AS IF INSTEAD OF WSFL, IN RELATION TO THE INSTANT CASH DIVISION, GSPL HAD BEE N A PARTY THERETO. 6 ITA NO 7530-31/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 CLAUSE 14-ANY STATUTORY LICENSES, PERMISSIONS, AP PROVALS OR CONSENTS TO CARRY ON THE OPERATION OF THE WSFL, IN RELATION TO THE INSTANT CASH DIVISION, SHALL STAND VESTED IN OR DEE D AND SHALL BE APPROPRIATELY MUTATED BY STATUTORY AUTHORITIES CONC ERNED IN FAVOUR OF GS PL UPON THE VESTING AND TRANSFER OF THE UNDER TAKINGS PURSUANT TO THE SCHEME, INSOFAR AS THEY RELATE TO THE INSTAN T CASH DIVISION, THE BENEFIT OF ALL STATUTORY AND REGULATORY PERMISS IONS, LICENSES, ENVIRONMENTAL APPROVALS AND CONTENTS, SALES TAX REG ISTRATIONS OR OTHER LICENSES AND CONTENTS SHALL VEST AND BECOME A VAILABLE TO GS PL PURSUANT TO THIS SCHEME. 8. FROM THE CONTENTS OF THE SCHEME AFORESAID IT CA N BE CONCLUDED THAT THE APPELLANT WAS AUTHORISED TO CARRY ON THE BUSINESS I N QUESTION WITHOUT FULFILLING ANY FURTHER CONDITIONS. THE APPELLANT/AS SESSEE CARRIED ON THE BUSINESS DURING THE RELEVANT ASSESSMENT YEAR UNDER THE AFORESAID SCHEME APPROVED BY THE HONABLE HIGH COURT. HENCE, THE LD CIT(A) HAS RIGHTLY HELD THAT SINCE THE CONDUCT OF THE APPELLANT HAS BE EN COMPLETELY AND ABSOLUTELY GOVERNED BY THE APPROVED SCHEME, THE ASS ESSEE HAS RIGHTLY CLAIMED THE EXPENSES INCURRED IN CONNECTION WITH IT S BUSINESS. THEREFORE, IN OUR OPINION, THE IMPUGNED ORDER PASSED BY THE LD CIT(A) DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY TO INTER FERE WITH. WE ACCORDINGLY UPHOLD THE FINDINGS OF THE LEARNED CIT (A) AND DISM ISS THE GROUNDS OF APPEAL OF THE REVENUE. ITA NO. 7531/MUM/2014 A.Y. 2011-12 THE FACTS AND CIRCUMSTANCES OF THE PRESENT APPEAL A RE SIMILAR TO THE ASSESSEES OWN CASE ITA NO.7530/M/2014 FOR THE ASSE SSMENT YEAR 2010-11 EXCEPT THE AMOUNT OF RECEIPTS AND EXPENSES CLAIMED AND THE ISSUES INVOLVED IN THE PRESENT CASE ARE ALSO IDENTICAL TO THE SAID CAS E AND SINCE WE HAVE DISMISSED 7 ITA NO 7530-31/MUM/2014 ASSESSMENT YEAR: 2010-11 & 2011-12 THE APPEAL OF THE REVENUE IN THE AFORESAID CASE, WE ALSO DISMISSED THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2011-12 FOR THE SAME REASONS. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 19 TH OCT 2016 SD/- SD/- ( B.R.BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED:19/10/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA