PricewaterhouseCoopers Private Limited, Kolkata V. ACIT, Cir-2(2), Kolkata, Kolkata

ITA 757/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1290 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOULEAN HANGSHING
• Keywords: Capital asset; Opportunity of being heard; Revenue expenditure
• Section: 143(3); 37(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI N.V. VASUDEVAN, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 757/KOL/201 7 ASSESSMENT YEAR : 2010-1 1 M/S PRICEWATERHOUSE COOPERS PVT. LTD. -VS- ACIT, CIRCLE-2(2), KOLKATA [PAN: AABCP 9181 H] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI K.M.GUPTA, AR FOR THE RESPONDENT : SHRI GOULEAN HANGSHING, CIT DR DATE OF HEARING : 18.09.2017 DATE OF PRONOUNCEMENT : 17.10.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX -1, KOLKATA [IN SHORT TH E LD CIT] IN M.NO. PR. CIT- 1/KOL/REVISION U/S. 263/2016-17/13718-21 DATED 16.0 2.2017 PASSED U/S 263 OF THE ACT AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-2, KOL KATA [ IN SHORT THE LD AO] UNDER SECTION 143(3)/144C OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 20.05.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CIT WAS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION IN THE FACTS A ND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OFF THIS ISSUE IS THAT THE ASSES SEE IS IN THE BUSINESS OF PROVIDING , INTER ALIA, MANAGEMENT CONSULTANCY SERVICES AND ALSO ACCO UNTING AND BUSINESS ADVISORY 2 ITA NO.757/KOL/2017 PRICEWATERHOUSE COOPERS PVT. LTD. A.YR.2010-11 2 SERVICES. THE COMPANYS OPERATIONS ARE AGGREGARED INTO DIFFERENT LINE OF SERVICES LIKE ADVISORY AND TAXATION SERVICES. THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY FOR THE ASST YEAR 2010-11 ON 30.3.2012 DECLARING TAXABL E INCOME OF RS 33,70,69,038/- . THE ASSESSEE FILED ITS AUDITED ACCOUNTS, TAX AUDIT REPORT, COMPUTATION OF TOTAL INCOME AND NOTES TO COMPUTATION BEFORE THE LD AO VIDE LETT ER DATED 2.4.2012. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FILED A LL SUCH DETAILS AS WERE REQUIRED TO BE FURNISHED AND WERE CALLED UPON TO BE FURNISHED BY T HE LD AO. THE ASSESSMENT WAS COMPLETED BY THE LD AO U/S 143(3) R.W.S. 144C OF TH E ACT DETERMINING TOTAL INCOME AT RS 138,14,36,330/-. THE ASSESSEE PREFERRED AN APPE AL AGAINST THE ORDER OF THE LD AO BEFORE THE LD CITA AGAINST THE ADDITIONS MADE IN TH E ASSESSMENT. LATER THE LD CIT ISSUED SHOW CAUSE NOTICE U/S 263 OF THE ACT TREATIN G THE ORDER PASSED BY THE LD AO AS ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE . ACCORDING TO LD CIT, THE ASSESSEE HAD DEBITED A SUM OF RS 1063.07 L AKHS IN ITS PROFIT AND LOSS ACCOUNT UNDER THE HEAD REPAIRS & MAINTENANCE BUILDINGS AND THAT SUBSTANTIAL PART OF THE EXPENDITURE WAS INCURRED ON INTERIOR DESIGN ETC O F VARIOUS BUILDINGS OF THE COMPANY AND THAT SUCH EXPENDITURE DOES NOT FALL UNDER THE A MBIT OF CURRENT REPAIRS AND SHOULD HAVE BEEN ADDED BACK TREATING THE SAME AS CAPITAL E XPENDITURE. THE LD CIT OBSERVED THAT THIS ASPECT HAS NOT BEEN ENQUIRED / EXAMINED BY THE LD AO IN THE ASSESSMENT PROCEEDINGS THEREBY MAKING HIS ORDER ERRONEOUS. T HE ASSESSEE REPLIED THAT THE EXPENDITURE WERE INCURRED ON RENTED / LEASED PREMIS ES AND THAT AS FAR AS RENTED PREMISES ARE CONCERNED, ALL EXPENDITURE IN RESPECT OF REPAIR S ARE ALLOWABLE AND THE RESTRICTION OF CURRENT REPAIRS IS APPLICABLE ON OWNED PREMISES AND NOT OTHERWISE. FURTHER, IT WAS SUBMITTED THAT THE EXPENDITURE INCURRED ON ACCOUNT OF RENOVATION, INTERIOR DECORATION, ETC OUGHT TO BE CONSIDERED AS AN ALLOWABLE REVENUE EXPENDITURE AS SUCH EXPENSES WERE REQUIRED TO KEEP THE OFFICE BUILDING AND PREMISES N OT ONLY OPERATIONAL BUT ALSO IN PRESENTABLE AND GOOD CONDITION, WHICH IS NECESSARY FOR SMOOTH AND EFFICIENT RUNNING OF THE BUSINESS OF THE ASSESSEE. MOREOVER, THE EXPEND ITURE INCURRED ON ACCOUNT OF REPAIRS AND MAINTENANCE OF OFFICE BUILDING DID NOT BRING AN Y CAPITAL ASSET INTO EXISTENCE. HENCE 3 ITA NO.757/KOL/2017 PRICEWATERHOUSE COOPERS PVT. LTD. A.YR.2010-11 3 IT WAS SUBMITTED THAT A PLAUSIBLE VIEW HAS BEEN TAK EN BY THE LD AO IN THIS REGARD IN THE LIGHT OF VARIOUS DECISIONS AND ACCORDINGLY THE SAME CANNOT BE SUBJECT MATTER OF REVISION U/S 263 OF THE ACT. 4. THE LD CIT OBSERVED THAT THE LD AO HAD NOT INQUI RED INTO THE ELIGIBILITY OF INTERIOR DESIGN AND LAYOUT OF OWNED OFFICE PREMISES, GUEST H OUSES ETC U/S 37(1) OF THE ACT OR UNDER ANY OTHER SECTIONS OF THE ACT. THE LD AO HA D NOT EXAMINED THE APPLICABILITY OF SECTION 30 OF THE ACT. ACCORDINGLY HE HELD THAT A BSOLUTELY NO ENQUIRY WAS CARRIED OUT WITH REGARD TO ALLOWABILITY OF REPAIRS & MAINTENAN CE BUILDINGS BY THE LD AO IN THE ASSESSMENT PROCEEDINGS AND NON-ENQUIRY ITSELF WOULD MAKE THE ORDER OF THE LD AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. BASED ON THESE OBSERVATIONS, HE SET ASIDE THE ASSESSMENT ORDER DATED 20.5.2014 TO F RAME THE ASSESSMENT AFRESH AFTER CONSIDERING THE AFORESAID OBSERVATIONS. AGGRIEVED , THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, P RICEWATERHOUSECOOPERS PRIVATE LIMITED (HERE-IN-AFTER REFERRED TO AS 'PWCP L' /,THE APPELLANT' /,THE ASSESSEE') RESPECTFULLY CRAVES LEAVE TO PREFER AN A PPEAL AGAINST THE ORDER DATED 16 FEBRUARY 2017 ISSUED BY THE LEARNED PRINCIPAL CO MMISSIONER OF INCOME-TAX - 1, KOLKATA ('LD. PR. CIT') ON THE FOLLOWING GROUN DS: 1. ON THE FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER DATED 16 FEBRUARY 2017 PASSED BY THE LD. PR. CIT UNDER SE CTION 263 OF THE INCOME-TAX ACT, 1961 ('THE ACT') IS WITHOUT JURISDICTION, BAD IN LAW, AND IS LIABLE TO BE QUASHED. 2. ON THE FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. PR. CIT ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT WITHOUT SATISFYING THE PRE-CONDITIONS NECESSARY FOR ASSUMPTION OF SUCH JUR ISDICTION I.E. AN ERROR IN ASSESSMENT ORDER MUST BE AN ERROR OF LAW OR FACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. PR. CIT ERRED IN INVOKING HIS JURISDICTION UNDER SECTION 263 OF THE ACT ON AN ISSUE WHICH HAS BEEN 4 ITA NO.757/KOL/2017 PRICEWATERHOUSE COOPERS PVT. LTD. A.YR.2010-11 4 ALREADY CONSIDERED BY THE ASSESSING OFFICER WHILE C OMPLETING THE ASSESSMENT ORDER DATED 20 MAY 2014 UNDER SECTION 143(3)/144C O F THE ACT. 4. ON THE FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. PR. CIT ERRED IN PASSING THE ORDER UNDER SECTION 263 OF THE ACT ON THE BASIS OF MERE CONJECTURE AND SURMISE, WITHOUT CONSIDERING THE DET AILED SUBMISSIONS MADE BY THE APPELLANT ON FACTS AS WELL AS IN LEGAL POSITION OF LAW ON ALLOWABILITY OF EXPENDITURE INCURRED ON RENTED PREMISES. THE APPELLANT SUBMITS THAT THE ABOVE GROUNDS ARE IN DEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT DESIRES LEAVE TO ADD TO OR ALTER, BY DELETION, SUBSTITUTION OR OTHERWISE, ANY OR ALL OF THE ABOVE GROUNDS OF OBJEC TIONS, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. 5. THE LD AR STATED THAT THE ASSESSEE HAD ENCLOSED THE DETAILED NOTES TO COMPUTATION OF TOTAL INCOME WHICH WAS FILED BEFORE THE LD AO ON 2. 4.2012 WHEREIN IT WAS CLEARLY STATED THAT THE EXPENDITURE IN THE SUM OF RS 1063.07 LAKHS TOWARDS EXPENDITURE FOR REPAIRS AND MAINTENANCE OF BUILDINGS WERE INCURRED IN REPAIRING AND RENOVATION, WHICH INCLUDED INTERALIA OBTAINING INTERIOR DESIGN AND LAYOUT OF T HE OFFICE AND INCIDENTAL EXPENSES ON INTERIOR WORK AT VARIOUS BUILDINGS AND RENTED PROPE RTY OF THE ASSESSEE. SUCH EXPENSES WERE REQUIRED TO KEEP THE OFFICE BUILDING AND PREMI SES NOT ONLY OPERATIONAL BUT ALSO IN PRESENTABLE AND GOOD CONDITION, WHICH IS NECESSARY FOR SMOOTH AND EFFICIENT RUNNING OF THE BUSINESS OF THE ASSESSEE. THE ASSESSEE ALSO P LACED RELIANCE ON CERTAIN JUDGEMENTS IN SUPPORT OF ITS CLAIM OF REVENUE EXPENDITURE THEREON . THE SAME IS ENCLOSED IN PAGE 67 OF THE PAPER BOOK. ALONG WITH THIS, THE ASSESSEE HAD ALSO FILED DETAILED NOTES ABOUT SOME OTHER 5 ITEMS OF EXPENDITURE INCLUDING THE DE TAILS ABOUT FOREIGN EXCHANGE LOSS. THE LD AR ARGUED THAT THE LD AO HAD GONE THROUGH TH E SAME AND HAD MADE DISALLOWANCE OF THE FOREIGN EXCHANGE LOSS WHILE COMPLETING THE A SSESSMENT. HENCE IT SHOULD BE DEEMED THAT THE LD AO HAD DULY EXAMINED THE OTHER P OINTS INCLUDED IN THE SAID NOTES WHICH ADMITTEDLY INCLUDED NOTE ON REPAIRS AND MAINT ENANCE OF BUILDINGS. IN FACT THE LD AO CALLED FOR DETAILS OF ALL EXPENSES DEBITED TO PR OFIT AND LOSS ACCOUNT. THE ASSESSEE IN 5 ITA NO.757/KOL/2017 PRICEWATERHOUSE COOPERS PVT. LTD. A.YR.2010-11 5 RESPONSE THEREON REQUESTED THE LD AO TO CALL FOR SP ECIFIC ITEMS OF EXPENDITURE WHICH REQUIRED EXAMINATION AS FILING OF DETAILS OF ALL EX PENDITURE DEBITED IN PROFIT AND LOSS ACCOUNT WOULD BE VERY VOLUMINOUS. THEREAFTER THE LD AO DID NOT CALL FOR ANY SPECIFIC ITEMS OF EXPENDITURE FOR EXAMINATION. HE FURTHER ARGUED THAT SIMILAR DISALLOWANCE WAS MADE IN ASST YEAR 2005-06 AND THE LD CITA HAD DELET ED THE SAME AND NO FURTHER APPEAL WAS PREFERRED BY THE REVENUE AGAINST THIS ORDER TO TRIBUNAL. THE ORDER OF THE LD CITA WAS PASSED FOR THE ASST YEAR 2005-06 ON 4.2.2013 AN D THE IMPUGNED ASSESSMENT ORDER WAS PASSED BY THE LD AO ON 20.5.2014. HENCE THE OR DER OF THE LD CITA FOR ASST YEAR 2005-06 WAS VERY MUCH AVAILABLE BEFORE THE LD AO BE FORE THE DATE OF COMPLETION OF ASSESSMENT, WHICH HAS BEEN DULY TAKEN INTO CONSIDER ATION BY THE LD AO AND THATS WHY HE DID NOT DEEM IT FIT TO POSE ANY QUERY REGARDING THE ALLOWABILITY OF REPAIRS AND MAINTENANCE OF BUILDINGS. IN RESPONSE TO THIS, T HE LD DR VEHEMENTLY RELIED ON THE ORDER OF THE LD CIT AND ARGUED THAT THE LD CIT HAD NOT GIVEN ANY DIRECTION TO THE LD AO TO CONSIDER THIS ISSUE OF REPAIRS AND MAINTENANCE O F BUILDINGS IN A PARTICULAR MANNER. IT IS A SIMPLE SET ASIDE MADE BY THE LD CIT TO THE LD AO TO FRAME THE ASSESSMENT AFRESH AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND HENCE NO FAULT COULD BE FOUND IN THE SAID REVISION ORDER OF THE LD CIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD FILED THE DETAILS OF REPAIRS AND MAINTENANCE OF BUILDINGS BEFORE THE LD CITA AS UNDER :- 6 ITA NO.757/KOL/2017 PRICEWATERHOUSE COOPERS PVT. LTD. A.YR.2010-11 6 WE FIND FROM THE ENTIRE PAPER BOOK FILED BY THE ASS ESSEE THAT NO QUERY WAS INDEED RAISED BY THE LD AO IN THE COURSE OF ASSESSMENT PROCEEDING S WITH REGARD TO THE ISSUE OF REPAIRS AND MAINTENANCE OF BUILDINGS. INFACT THE LD AO CAL LED FOR DETAILS OF ALL EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AT THE INITIAL STAGE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE IN RESPONSE THEREON REQUESTED THE LD AO TO CALL FOR SP ECIFIC ITEMS OF EXPENDITURE WHICH REQUIRED EXAMINATION AS FILING OF DETAILS OF ALL EX PENDITURE DEBITED IN PROFIT AND LOSS ACCOUNT WOULD BE VERY VOLUMINOUS. THEREAFTER THE LD AO DID NOT CALL FOR ANY SPECIFIC ITEMS OF EXPENDITURE FOR EXAMINATION. THE RELIANC E PLACED BY THE LD AR ON THE NOTE FILED ALONG WITH COMPUTATION OF TOTAL INCOME WOULD NOT COME TO THE RESCUE OF THE ASSESSEE AS ADMITTEDLY THE SAID NOTE DID NOT CONTAI N ANY BREAK UP OF REPAIRS AND MAINTENANCE SO AS TO WARRANT FURTHER EXAMINATION BY THE LD AO. THE SAID NOTE ONLY STATED THAT ASSESSEE HAD INCURRED EXPENDITURE TOWAR DS RENTED PREMISES AND THE SAME HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. WE HOLD THAT THERE WAS NO OCCASION FOR THE LD AO TO EXAMINE THE ALLOWABILITY OF REPAIRS AND MA INTENANCE OF BUILDINGS AND WHETHER THE SAME IS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE OR WHETHER THE SAME IS CAPITAL OR REVENUE IN NATURE. WE FIND THAT ABSOL UTELY NO QUERY WAS RAISED OR ANY ENQUIRY WAS CARRIED OUT BY THE LD AO IN THIS REGARD . HENCE THIS IS A CLEAR CASE OF LACK OF ENQUIRY ON THE PART OF THE LD AO FOR WHICH THE REVI SIONARY JURISDICTION U/S 263 OF THE ACT COULD BE INVOKED BY THE LD CIT. IT HAS ALREADY BEE N HELD THAT MERE NON-ENQUIRY OF AN ITEM ITSELF WOULD MADE THE ORDER OF THE LD AO ERRON EOUS AND PREJUDICIAL TO THE INTEREST 7 ITA NO.757/KOL/2017 PRICEWATERHOUSE COOPERS PVT. LTD. A.YR.2010-11 7 OF THE REVENUE AS HAS BEEN HELD BY THE HONBLE SUPR EME COURT IN THE CASE OF RAMPRIYA DEVI SARAOGI VS CIT REPORTED IN 67 ITR 84 (SC) AND TARA DEVI AGGARWAL VS CIT REPORTED IN 88 ITR 323 (SC). WHEN THE REQUISITE ENQUIRY THAT IS WARRANTED IN THE FACTS OF THE INSTANT CASE WAS NOT MADE, THEN THAT ITSELF WOULD MAKE THE ORDER OF THE LD AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE REVISION ORDER PASSED BY THE LD CI T U/S 263 OF THE ACT. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 17.10.2017 SD/- SD/- [N.V. VASUDEVAN] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 17.10.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S WATERHOUSE COOPERS PVT. LTD, BLOCK-EP, PLOT- Y-14, SALT LAKE CITY, SECTOR-V, KOLKATA- 700091. 2. ACIT, CIRCLE-2(2), AAYAKAR BHAWAN, P-7, CHOWRING HEE SQUARE, KOLKATA-700069. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S