H-ONE, MUMBAI V. ACIT 15(3), MUMBAI

ITA 765/MUM/2013

• Counselvise Citation: 76519914 RSA 2013
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 22-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JITENDRA KUMAR
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI , ,, , BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 765/MUM/2013 (ASSESSMENT YEAR: 2007-08) H-ONE, GROUND FLOOR, BABA HOUSE, M. V. ROAD, ANDHERI (EAST), MUMBAI -400 093 .: PAN: AADFH 7681 P VS ACIT- 15(3), MATRU MANDIR, OPP. BHATIA HOSPITAL, MUMBAI -400 004 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. R. LAKSHMINARAYANAN RESPONDENT BY : SHRI JITENDRA KUMAR !' # $% /DATE OF HEARING : 05-01-2015 &'( # $% / DATE OF PRONOUNCEMENT : 18-02-2015 ORDER , , , , : :: : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 26, MUMBAI, DATED 14.01.2010, WHEREIN, THE FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. THE ORDER PASSED BY THE LEARNED CIT (A) IS BAD IN LAW. 2. THE LEARNED CIT (A) ERRED IN NOT DELETING THE AD DITION OF RS. 6,83,670/- MADE BY THE A.O. BEING SERVICE TA X PAID BY THE APPELLANT. 3.THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT PAID THE SAID SERVICE TAX ON A/C OF COMME RCIAL EXPEDIENCY WHICH WAS PAYABLE BY ITS CLIENTS. 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT IN SOME CASES CLIENTS PAY ONLY THE PROFESSIONAL FEES AND AR E UNWILLING TO PAY SERVICE TAX AND THE APPELLANT DOES NOT WANT TO ENTER IN TO LITIGATION WITH THEM DUE TO LON G BUSINESS DEALINGS. 5. IT IS PRAYED THAT THE ADDITION RS. 6,83,670/- MA Y PLEASE BE DELETED. 6. THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTE R, H-ONE ITA 765/M/2013 2 AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL . 2. IN THE GOA, SOLITARY ISSUE THREADS ALL THE GROUNDS, THEREFORE, GROUNDS NO. 1 TO 5 DEALT WITH COMMONLY. 3. THE FACTS ARE THAT IN THE ASSESSMENT PROCEEDING AO NOTICED THAT THE ASSESSEE HAS PAID RS. 6,83,670/-, WHICH WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID THE ASSESSEE ON BEHALF OF ITS CLIENTS. ON EXPLANATION GATHERED FROM THE ASSE SSEE, THE AO FOUND OUT THAT OUT OF TOTAL SERVICE TAX LIABILITY OF R S. 23,21,302/-, THE ASSESSEE COULD COLLECT RS. 16,37,630/-. SINCE THE SERVICE TAX IS A LIABILITY OF THE ASSESSEE AS PER SERV ICE TAX ACT AND DEFAULT OF THE SAME WOULD INVITE PENAL PROCEEDINGS, THE ASSESSEE SIDELINED THE LIABILITY AND CONSEQUENTIAL PENAL PROCEEDINGS UNDER THE SERVICE TAX ACT. 4. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT THE ASSE SSEE DID NOT COLLECT SERVICE TAX OUT OF COMMERCIAL EXPEDIENCY AN D PLACING RELIANCE ON THE DECISION OF CATALYSTS AND CHEMICALS INDIA VS CIT, REPORTED IN 166 ITR 769, THE KERALA HIGH CO URT STATES, EXPENSE INCURRED FOR COMMERCIAL EXPEDIENCY SHALL BE ALLOWED, IF IT FACILITATED THE CARRYING ON THE BUSINESS. THE AO DISREGARDED THE EXPLANATION OF THE ASSESSEE AND ADDED IT BACK TO THE INCOME OF THE ASSESSEE. 5. AGAINST THIS ORDER, THE ASSESSEE APPROACHED THE CIT (A), WHO SUSTAINED THE ORDER OF THE AO, PLACING RELIANCE ON TH E DECISION OF THE COORDINATE BENCH OF THE ITAT AT MUMBAI IN THE CASE OF M/S PHARMA SEARCH VS ACIT, ITA NO. 7303/MUM/2010. 6. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IN NOW B EFORE THE ITAT. 7. BEFORE US, THE AR POINTED OUT THAT THE REVENUE AUTH ORITIES WRONGLY RELIED ON THE ORDER OF PHARMA SEARCH ( SUPRA ), AS THE H-ONE ITA 765/M/2013 3 COORDINATE BENCH WAS NOT SEIZED WITH THE ISSUE AS THAT OF THE ASSESSEE. 8. THE AR FURTHER POINTED OUT THAT THE RATIO LAID DOWN BY HONBLE KERALA HIGH COURT IN THE CASE OF CATALYSTS AND CHEMICALS INDIA (WEST ASIA) LTD. ( SUPRA ) IS SQUARELY APPLICABLE ON THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ISSUE CA ME UP BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. KAYPEE MECHANICAL INDIA (P.) LTD., REPORTED IN 223 TAXMAN 34 6 (GUJ) HELD, ASSESSEE PAID UP SAID AMOUNT THOUGH IT WAS NOT HIS PRIMARY LIABILITY AND TREATED IT AS BUSINESS EXPENDIT URE . THE HONBLE GUJARAT HIGH COURT ALLOWED IT AS BUSINESS EXPENDIT URE. THE AR THEREFORE PLEADED THAT THE INCURRING OF EXPENSE OF RS. 6,88,670/- BE ALLOWED, PLACING RELIANCE ON THE ABOVE CITED CA SE LAWS. 9. THE DR PLACED HEAVY RELIANCE ON THE DECISIONS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THERE WAS NO INFIR MITY IN THE ORDER. 10. WE HAVE HEARD THE ARGUMENTS AND PURSUED THE ORD ERS OF THE REVENUE AUTHORITIES AND THE DETAILS FILED BY THE ASSESSEE. 11. UNDISPUTEDLY, THE CLAIM OF THE ASSESSEE HAVE BEEN NO N- RECEIPT OF SERVICE TAX FROM ITS CLIENT, WHICH IN ANY CASE IS A LIABILITY OF THE CLIENT. BUT TO HAVE SMOOTH BUSINESS AND COMMERCIAL EXPEDIENCY, THE ASSESSEE PAID THE AMOUNTS, NO T COLLECTED FROM THE CLIENTS, ON THIS BEHALF. IT IS ALSO A FACT THAT THE REVENUE AUTHORITIES HAVE NOT QUESTIONED THE BUSINESS CH ARACTER OF PAYMENT. HENCE IT IS TO ACCEPTED TO BE A PAYMENT MADE FOR THE PURPOSES OF BUSINESS. THE RESIDUAL ISSUE BEFORE US IS, WHETH ER THIS PAYMENT IS TO BE ALLOWED OR NOT. H-ONE ITA 765/M/2013 4 12. HONBLE KERALA HIGH COURT AND HONBLE GUJARAT HIGH COURT HAVE DELVED ON THE ISSUE OF COMMERCIAL EXPEDIENCY A ND AN EXPENDITURE WHICH IS PRIMARY LIABILITY OF THE CLIENT, AND HAVE ALLOWED THE CLAIM OF THE ASSESSEE. 13. READING BOTH THE ORDERS OF THE HONBLE KERALA HIGH COURT & HONBLE GUJARAT HIGH COURT TOGETHER, WE ARE OF THE OP INION THAT THE SERVICE TAX AS PAID BY THE ASSESSEE ON BEHALF OF THE CLIENTS IS AN EXPENSE PERTAINING TO BUSINESS. WE, THEREFORE, RESPECTFULLY RELYING ON THE DECISIONS OF THE ABOVE HONBLE HIGH COURTS, HOLD THAT RS. 6,83,670/- SHOULD BE ALLOWED. 14. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE AO TO DELETE THE ADDITION AS MADE. GROUNDS NO. 1 TO 5 ARE THEREFORE ALLOWED. 15. THUS, THE APPEAL AS FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2015. SD/- SD/- ( ) ( ) , , , , , , , , (R C SHARMA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 18 TH FEBRUARY, 2015 $/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A) -26, MUMBAI. 4) THE CIT-15, MUMBAI/CIT -15, MUMBAI. 5) -'./ $! , , / THE D.R. H BENCH, MUMBAI. 6) /01 2 COPY TO GUARD FILE. H-ONE ITA 765/M/2013 5 ,3! / BY ORDER / / TRUE COPY / / 4 / 5 6 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS