NYK LINE (INDIA) P. LTD, MUMBAI V. DIT (I & CI), MUMBAI

ITA 7576/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5212 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMARLD
• Assessee Lawyers: FARROKH IRANI LD SR
• Keywords: Reopening of assessment; Business expenditure; Question of law; Revised return; TDS
• Section: 143(3)

Judgement Text

ITA NO.7576/MUM/2016 NYK LINE INDIA PRIVATE LIMITED ASSESSMENT YEAR :2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7576/MUM/2016 ( / ASSESSMENT YEAR:2010-11 ) NYK LINE (IN DIA) PVT. LTD. UNIT 1205-1208, 12 TH FLOOR WINDFALL BUILDING, SAHAR PLAZA COMPLEX NR JB NAGAR METRO STATION MATHURDAS VASANJI ROAD ANDHERI, MUMBAI 400 059 / VS. D CIT - CIRCLE 1 ( 3 ) (1) AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. '# ./ ./PAN/GIR NO. AAACT-3273-H ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) A PPELLANT BY : SH. FARROKH IRANI LD. SR. COUNSEL R ESPONDENT BY : SHRI LOVE KUMAR-LD. DR / DATE OF HEARING : 07/08/2019 / DATE OF PRONOUNCEMENT : 21/08/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-3, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-3/DCIT-1(3)/IT-97/2014-15 DATED 13/10/2016 ON FOLLOWING GROUNDS OF APPEAL: - ITA NO.7576/MUM/2016 NYK LINE INDIA PRIVATE LIMITED ASSESSMENT YEAR :2010-11 2 DOUBLE TAXATION OF CDC INCOME OF RS.6,60,63,093 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE CDC INCOME OF RS.6,60,63,093 PERTAINING TO AYS 2004-05, 2006-07, 2007-08, 2008-0 9 AND 2009-10 AND OFFERED TO TAX IN THE AY 2010-11 IS RIGHTLY ASSESSED TO TAX IN THE AY 2010-11. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T THE LEARNED AO SHOULD HAVE BEEN CONSISTENT IN HIS APPROACH IN TAXING CDC INCOME AND SHOULD HAVE ALLOWED APPROPRIATE RELIEF TO THE APPELLANT IN THE CURRENT ASSESSMENT Y EAR. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE SAME INCOME CANNOT BE TAXED TWICE I.E. FIRST IN THE ASSESSMENT YEARS 2004-05, 2 006-07, 2007-08, 2008-09, AND AGAIN IN THE AY 2010-11 AND ACCORDINGLY THE SAID INCOME DESE RVED TO BE DELETED FROM THE AY 2010- 11. 4. THE LEARNED CIT(A) ERRED IN HOLDING THAT APPELLA NT IS AT LIBERTY TO OFFER THE INCOME OF THE EARLIER YEAR'S BY FILING REVISED RETURNS OF RESPECT IVE PREVIOUS ASSESSMENT YEARS AND THEN CLAIM MODIFICATION/ REDUCTION IN CURRENT YEAR I.E. AY 2010-11. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE TI ME-LIMIT FOR FILING REVISED RETURNS FOR THE AFORESAID ASSESSMENT YEARS HAS EXPIRED. 5. WITHOUT PREJUDICE, THE LEARNED CIT(A) OUGHT TO H AVE DIRECTED THE LEARNED AO TO TAX CDC INCOME OF RS.6,60,63,093 ON PROTECTIVE ASSESSMENT B ASIS TILL THE SAID MATTER ATTAINS FINALITY BY HIGHER TAX AUTHORITIES IN THE AYS 2004-05, 2006- 07, 2007-08, 2008-09 AND 2009-10. DISALLOWANCE OF ENTERTAINMENT AND MISCELLANEOUS EXP ENSES 6. THE LEARNED CIT(A) ERRED IN CONFIRMING ADHOC DIS ALLOWANCE OF RS.3,58,949, BEING 10% OF ENTERTAINMENT EXPENDITURE MADE BY THE LEARNED AO , HOLDING THE SAID EXPENSE TO BE NON- BUSINESS EXPENSES. 7. THE LEARNED CIT(A) ERRED IN CONFIRMING ADHOC DIS ALLOWANCES OF RS.5,28,544 BEING 10% OF MISCELLANEOUS EXPENDITURE MADE BY THE LEARNED AO , HOLDING THE SAID EXPENSE TO BE AS NON-BUSINESS EXPENSES. 8. THE LEARNED CIT(A) ERRED IN MENTIONING THAT THE APPELLANT FAILED TO EXPLAIN ABOUT THE LACK OF EVIDENCES. THE LEARNED CIT(A) SHOULD HAVE APPREC IATED THE DETAILED EXPLANATIONS FURNISHED BY THE APPELLANT IN RESPECT OF ENTERTAINM ENT AND MISCELLANEOUS EXPENSES. 9. WITHOUT PREJUDICE, THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE HON'BLE ITAT'S DECISION IN THE APPELLANT'S OWN CASE FOR THE AY 04- 05 AND AY 05-06 WHEREIN THE HON'BLE ITAT HAS DELETED THE ADHOC DISALLOWANCE OF MISCELLA NEOUS EXPENSES AND RESTRICTED DISALLOWANCE IN RESPECT OF ENTERTAINMENT EXPENSES T O 5%. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT 10. THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE L EARNED AO TO RE-COMPUTE THE INTEREST UNDER SECTION 234C OF THE ACT AFTER ALLOWING CREDIT FOR THE TAXES DEDUCTED AT SOURCE AS CLAIMED IN THE RETURN OF INCOME. LEVY OF INTEREST UNDER SECTION 234D OF THE ACT 11. THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE L EARNED AO TO DELETE THE ERRONEOUS LEVY OF INTEREST OF RS.2,24,480 UNDER SECTION 234D OF TH E ACT. INITIATION OF PROCEEDINGS FOR LEVY OF PENALTY UNDER SECTIONS 271(L)(C) OF THE ACT 12. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT THE LEARNED AO HAS ERRED IN INITIATING PROCEEDINGS FOR THE LEVY OF PENALTY UNDE R SECTION 271(L)(C) OF THE ACT. ITA NO.7576/MUM/2016 NYK LINE INDIA PRIVATE LIMITED ASSESSMENT YEAR :2010-11 3 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESI DENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS SHIPPING AGENT OF ITS OVERSEAS PRINCIPLE, WAS ASSESSED FOR IMPUGNED AY U/S 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 ON 26/03/2014 WHER EIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.14.98 CRORES AFTE R CERTAIN DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.14.7 4 CRORES FILED BY THE ASSESSEE ON 14/10/2010 WHICH WAS LATER ON REVIS ED ON 30/03/2012 MARGINALLY REVISING THE RETURNED INCOME. 2.2 WHILE COMPUTING THE INCOME, THE ASSESSEE OFFERE D TO TAX CONTAINER DETENTION CHARGES (CDC) AGGREGATING TO RS.9.34 CRORES PERTAINING TO CURRENT ASSESSMENT YEARS AS WELL AS EARLIER ASSESSM ENT YEARS. HOWEVER, DURING ASSESSMENT PROCEEDINGS, IT WAS PLEADED THAT CDC OF RS.6.60 CRORES WERE ALREADY ADDED TO THE INCOME OF THE ASSE SSEE WHILE FRAMING THE ASSESSMENT OF THOSE EARLIER YEARS AND THEREFORE , THE SAME SHOULD NOT BE TAXED AGAIN IN THE ASSESSMENT YEAR UNDER CON SIDERATION. HOWEVER, LD. AO, INTER-ALIA, NOTICING THAT THE ADDITIONS MADE IN EARLIER YEARS WAS NOT ACCEPTED BY THE ASSESSEE AND THE SAME WAS UNDER CHALLENGE BEFORE APPELLATE AUTHORITIES, REJECTED TH IS PLEA AND TREATED THE AGGREGATE AMOUNT OF RS.9.34 CRORES AS THE INCOME OF THE ASSESSEE. 2.3 THE ASSESSEE WAS SADDLED WITH ANOTHER ADHOC ADD ITION OF 10% AGAINST ENTERTAINMENT EXPENSES OF RS.35.89 LACS AND MISCELLANEOUS EXPENSES OF RS.52.85 LACS CLAIMED BY THE ASSESSEE D URING THE YEAR SINCE THE EXPENDITURE WAS NOT SUPPORTED BY PROPER B ILLS. THE DISALLOWANCE ON THIS ACCOUNT WORKED OUT TO BE RS.8. 87 LACS. ITA NO.7576/MUM/2016 NYK LINE INDIA PRIVATE LIMITED ASSESSMENT YEAR :2010-11 4 3. THE STAND OF LD. AO, UPON CONFIRMATION BY LEARNE D FIRST APPELLATE AUTHORITY ON THE ABOVE ISSUES, IS UNDER CHALLENGE B EFORE US. 4. THE LEARNED SR. COUNSEL FOR ASSESSEE, SHRI FARRO KH IRANI, AT THE OUTSET, PLEADED THAT THE ASSESSEE WOULD NOT BE PRES SING THE GROUND RELATING TO TAXABILITY OF CONTAINER DETENTION CHARGES (CDC) IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN A SSESSEES OWN CASE IN REVENUES APPEAL FOR AY 2008-09 ITA NO.1330 OF 2016 DATED 04/02/2019 WHICH FOLLOWS EARLIER DECISION OF HONBL E COURT FOR AY 2009- 10 ITA NO.1497 OF 2016 DATED 30/01/2019. FOR EASE O F REFERENCE, WE EXTRACT HEREINBELOW THE RELEVANT OBSERVATION OF HON BLE HIGH COURT IN AY 2009-10: - 2. THE RESPONDENT ASSESSEE IS A SHIPPING AGENT PRO VIDING SUCH SERVICES TO ITS PRINCIPAL ONE NYK JAPAN. THE ASSESSEE IN THE PROCES S OF PROVIDING SUCH SERVICES IN INDIA TO SUCH FOREIGN BASE COMPANY, RECEIVES COMMIS SION. THE DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE REVOLVES AROUND THE CONTAI NER DETENTION CHARGES ('CDC' FOR SHORT). THE ASSESSEE UNDER PECULIAR CIRC UMSTANCES OF THE CASE, THOUGH RECEIVED CERTAIN AMOUNTS FOR AND ON BEHALF OF PRINC IPAL, DID NOT OFFERED TO TAX IMMEDIATELY ON THE GROUND THAT THERE WAS DELAY IN H OLDING SUCH SUMS ON BEHALF OF THE PRINCIPAL. IT IS ONLY UNDER A LETTER DATED 25 TH MAY, 2009 WRITTEN BY THE PRINCIPAL, ACCORDING TO THE ASSESSEE, THAT THE INCOME ACCRUED TO THE ASSESSEE. THE ASSESSEE, THEREFORE, ACCOUNTED FOR SUCH INCOME IN THE RETURN FILED FOR ASSESSMENT YEAR 2010- 11. THIS RELATED TO THE ENTIRE PERIOD FROM THE YEAR 1993 ONWARDS. THE REVENUE ARGUES THAT SUCH INCOME SHOULD BE TAXED IN EACH SEP ARATE YEAR DURING WHICH SUCH CHARGES WERE COLLECTED. THE TRIBUNAL HOWEVER, HOLD IN FAVOUR OF THE ASSESSEE INTER ALIA OBSERVING THAT THE INCOME ACCRUED TO THE ASSESSEE O NLY UPON THE PRINCIPAL WRITING SAID LETTER ON 25 TH MAY, 2009. 3. QUITE APART FROM THE VIEW OF THE TRIBUNAL BEING PLAUSIBLE ON THE FACTS OF THE CASE, WE ALSO NOTE THAT THE ASSESSEE HAS ALREADY OF FERED THE INCOME TO TAX IN THE ASSESSMENT YEAR 2010-11. THE REVENUES ATTEMPT AT T AXING SUCH INCOME IN RESPECT OF INDIVIDUAL YEAR HAS FAILED ON SEVERAL OCCASIONS SINCE THE REOPENING OF ASSESSMENT WAS NOT PERMITTED. WE WONDER WHETHER IN SUCH CIRCUMSTANCES, IT IS EVEN BE PRUDENT FOR THE REVENUE TO PURSUE THIS LINE . ADDITIONALLY, WE RECORD THE STATEMENT OF THE COUNSEL FOR THE ASSESSEE THAT IN O RDER TO PROTECT THE ASSESSEE AGAINST DOUBLE TAXATION, THE ASSESSEE HAS FILED APP EAL BEFORE THE TRIBUNAL IN RELATION TO ASSESSMENT YEAR 2010-11 AND KEPT THE QUESTION OF TAXING THE ENTIRE INCOME IN THE SAID YEAR ALIVE SO THAT IN CASE THE REVENUE SUC CEEDS IN THE PRESENT APPEAL AND SIMILAR OTHER PROCEEDINGS, THE ASSESSEE CAN AT LEAS T PROTECT ITSELF FROM BEING TAXED ITA NO.7576/MUM/2016 NYK LINE INDIA PRIVATE LIMITED ASSESSMENT YEAR :2010-11 5 ALL OVER AGAIN FOR ASSESSMENT YEAR 2010-11. HE STAT ED ON INSTRUCTIONS THAT IF THE REVENUE IS NOT ALLOWED TO SHIFT THE INCOME THIS YEA R, THE ASSESSEE WOULD NOT PRESS ITS APPEAL BEFORE THE TRIBUNAL ON THIS GROUND FOR A SSESSMENT YEAR 2010-11. 4. UNDER THE CIRCUMSTANCES, NO QUESTION OF LAW ARIS ES. 5. THE TAX APPEAL IS DISMISSED. KEEPING IN VIEW THE SAME, THIS GROUND IS TREATED AS DISMISSED, BEING NOT PRESSED. 5. SO FAR ADHOC DISALLOWANCE OF 10% AGAINST ENTERTA INMENT AND MISCELLANEOUS EXPENSES IS CONCERNED, WE FIND THAT T HE ISSUE STOOD COVERED IN ASSESSEES FAVOR BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2004-05 ITA NO.6708/MUM/ 2008 ORDER DATED 06/05/2011 WHEREIN THE DISALLOWANCE HAS BEEN RESTRICTED TO 5% OF EXPENDITURE EXCEPT STAFF WELFARE AND MISCELLANEOUS EXPENDITURE (WHICH HAS BEEN DELETED IN FULL). THIS ORDER HAS SUBSEQUEN TLY BEEN FOLLOWED IN AY 2005-06 ITA NO.4839/MUM/2010 ORDER DATED 07/09/2 012. RESPECTFULLY FOLLOWING THE SAME, WE RESTRICT THE AD HOC ADDITION TO 5% OF ENTERTAINMENT EXPENDITURE OF RS.35,89,491/- WHICH C OMES TO RS.1,79,475/-. THE ADHOC DISALLOWANCE AGAINST MISCE LLANEOUS EXPENDITURE STAND DELETED IN FULL. THIS GROUND STAN DS PARTLY ALLOWED. 6. THE NEXT GROUND PERTAINS TO CORRECT COMPUTATION OF INTEREST U/S 234C. IT WOULD SUFFICE TO DIRECT LD. AO TO COMPUTE INTEREST AS PER LAW AFTER GRANTING DUE TDS CREDIT TO THE ASSESSEE. THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. THE NEXT GROUND IS RELATED WITH COMPUTATION OF I NTEREST U/S 234D. THE LD. SR. COUNSEL HAS PLEADED THAT NO REFUND WAS EVER ISSUED TO THE ASSESSEE AND THEREFORE, THE SAID INTEREST IS NOT PA YABLE. THE LD. AO IS ITA NO.7576/MUM/2016 NYK LINE INDIA PRIVATE LIMITED ASSESSMENT YEAR :2010-11 6 DIRECTED TO VERIFY THE SAME AND CHARGE INTEREST AS PER LAW, IF ANY. THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 8. THE LAST GROUND IS RELATED WITH INITIATION OF PE NALTY. THE SAME BEING CONSEQUENTIAL AND PREMATURE IN NATURE, WOULD NOT RE QUIRE ANY ADJUDICATION ON OUR PART. 9. IN RESULT, THE APPEAL STANDS PARTLY ALLOWED TO T HE EXTENT INDICATED IN THE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 21/08/2019 SR.PS, JAISY VARGHESE !'#' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. . ( ) / THE CIT(A) 4. . / CIT CONCERNED 5. /0 &)1 , 1 , / DR, ITAT, MUMBAI 6. 023 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.