DCIT CEN CIR 5(4), MUMBAI V. WADHAWAN RETAIL P.LTD, MUMBAI

ITA 771/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4066 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJORE SATISHCHANDRA RAMSEVAK
• Assessee Lawyers: NIRAV VORA
• Keywords: Business income; Depreciation; Tax effect
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 771 / MUM/20 1 7 ( ASSESSMENT YEAR : 2012 - 13 ) DCIT - CC - 5(4) R.NO.1927, 19 TH FLOOR, AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 VS. M/S. WADHWAN RETAIL PVT LTD., GROUND FLOOR MADHAVA BUILDING BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN/GIR NO. AAACW6147R ( APPELLANT ) .. ( RESPONDENT ) ITA NO. 6926 /MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. WADHWAN RETAIL PVT LTD., GROUND FLOOR MADHAVA BUILDING BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 VS. ACIT - CC - 5(4) 19 TH FLOOR, AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 PAN/GIR NO. AAACW6147R ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY SHRI RAJORE SATISHCHANDRA RAMSEVAK ASSESS EE BY SHRI NIRAV VORA DATE OF HEARING 23 / 10 /201 8 DATE OF PRONOUNCEMENT 24 / 10 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A)53, MUMBAI DATED 30/09/2016 FOR A.Y. 2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T. ACT. ITA NO. 771/MUM/2017 & 6926/MUM/2017 M/S. WADHMAN RETAIL PVT. LTD., 2 2. AT THE OUTSET, LEARNED AR P OINTED OUT THAT THE TAX EFFECT IN THE APPEAL FILED BY REVENUE IS LESS THAN RS. 20 LAKHS , THEREFORE, IN VIEW OF THE CBDT CIRCULAR NO. 3/2018 DATED 11.07.2018, THE APPEAL DESERVES TO BE DISMISSED. 3. WE HAVE GONE THROUGH THE GROUND TAKEN BY THE REVENUE AND F OUND THAT TAX EFFECT IN THE APPEAL FILED BY REVENUE IS LESS THAN RS.20 LAKHS, THEREFORE, THE APPEAL FILED BY REVENUE IS DISMISSED. 4. LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2008 - 09 WHEREIN ALL THE THREE GRO UNDS HAVE BEEN RESTORED TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS. IT WAS ALSO POINTED OUT THAT PRESENTLY AGAINST THE ORDER PASSED BY AO GIVING EFFECT TO THE ORDER PASSED BY ITAT, THE MATTER IS PENDING BEFORE THE CIT(A). 5. WE HAVE HEARD RIVAL CONTENTI ONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT IN THE COURSE OF ASSESSMENT AO HAS DISALLOWED PRELIMINARY EXPENSES OF RS.21,40,759/ - . TRIBUNAL IN ITS ORDER DATED 04/01/2016 FOR THE A.Y.2008 - 09 CONSIDERED THE SI MILAR ISSUE AND MATTER HAS BEEN RESTORED BACK TO THE FILE OF THE AO, WHICH IS PRESENTLY PENDING BEFORE THE CIT(A), THEREFORE, IN ALL FAIRNESS, WE RESTORE THIS MATTER ALSO TO THE FILE OF CIT(A) FOR DECIDING IN TERMS OF DIRECTION GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 04/01/2016. 6. ASSESSEES CLAIM OF DEPRECIATION ON GOODWILL WAS ALSO DECLINED BY THE LOWER AUTHORITIES. IT WAS POINTED OUT BY LEARNED AR THAT ISSUE IS COVERED BY THE DECISION OF HONBLE SUPREME COURT IN CASE OF SMIFS SECURITIES LTD., 348 ITR 3 02. WE FOUND THAT THIS ISSUE WAS ALSO DEALT WITH BY THE TRIBUNAL AT ITA NO. 771/MUM/2017 & 6926/MUM/2017 M/S. WADHMAN RETAIL PVT. LTD., 3 PARA 9 OF ITS ORDER AND MATTER WAS RESTORED BACK WHICH IS PRESENTLY PENDING BEFORE THE CIT(A), THEREFORE, GROUND NO.3 OF ASSESSEES APPEAL IS ALSO RESTORED BACK TO THE FILE OF CIT(A) FOR D ECIDING IN TERMS OF DIRECTION GIVEN BY THE TRIBUNAL . 7. LAST GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE OF LEASE AND CONDUCTING FEES SERVICE TAX. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE EXPENDITURE TO THE EXTENT OF RS.88 ,85,124/ - DEBITED UNDER THE HEAD 'LEASE & CONDUCTING FEES' PERTAINED TO SERVICE - TAX LIABILITY FOR THE PRIOR PERIOD. THE SAME WAS DISALLOWED BY THE A.O. AND ADDED BACK TO THE IN COME OF THE ASSESSEE COMPANY. DURING THE COURSE OF APPELLATE PROCEEDINGS, IT IS SUBMITTED THAT THE ASSESSEE COMPANY HAD INCURRED AND PAID A SUM OF RS. 1 ,27,70,158/ - TOWARDS LEASE RENTAL WHICH INCLUDED SERVICE - TAX PAID AMOUNTING TO RS.88,85,124/ - . IN THIS CONNECTION, IT IS STATED THAT DURING THE PERIOD FROM 2007 TO 2009, THE ASSESSEE CO MPANY HAD OBTAINED VARIOUS LEASEHOLD PROPERTIES IN DIFFERENT CITIES ACROSS INDIA. AS PER THE LEASE AGREEMENTS, THE ASSESSEE COMPANY WAS LIABLE TO PAY LEASE RENTAL ALONG WITH TAXES APPLICABLE THEREON. SUBSEQUENTLY, IT IS POINTED OUT THAT THE SERVICE - TAX LAW WAS AMENDED WHEREBY THE SERVICES IN NATURE OF LEASE AND CONDUCTING FEES WERE BROUGHT TO SERVICE - TAX REGIME VIDE NOTIFICATION NO.23/2007 - ST. HOWEVER, IT IS SUBMITTED THAT THE LEVY OF SERVICE TAX ON LEASING SERVICES HAS CONSTITUTIONALLY BEEN CHALLENGED BY T HE RETAILERS ASSOCIATION OF INDIA BY FILING AN APPEAL BEFORE HIGH COURT WHICH HAD REJECTED THE APPEAL. BEING AGGRIEVED BY THE DECISIONS OF THE HON'BLE HIGH COURT, ITA NO. 771/MUM/2017 & 6926/MUM/2017 M/S. WADHMAN RETAIL PVT. LTD., 4 FURTHER APPEAL IS SAID TO HAVE BEEN FILED BEFORE THE HON'BLE SUPREME COURT OF INDIA, WHICH PA SSED INTERIM STAY ORDER. IN VIEW OF THE ABOVE JUDGMENT, IT IS SUBMITTED THAT THE LEASE RENTAL PAID FROM 01.06.2007 HAS BEEN SUBJECT MATTER OF SERVICE - TAX. IT IS CLAIMED THAT THE ASSESSEE COMPANY BEING MEMBER OF THE SAID RETAILER ASSOCIATION OF INDIA HAS BE EN DIRECTED TO PAY THE SAID LIABILITY OF SERVICE - TAX. IT IS ALSO CLAIMED THAT DURING THE YEAR UNDER REVIEW, THE ASSESSEE COMPANY HAD PAID A SUM OF RS.88,85,124/ - TOWARDS SERVICE - TAX ON LEASE RENTAL. THUS, IT IS CONTENDED THAT THE SAID LIABILITY EMERGED DUR ING THE YEAR UNDER CONSIDERATION AND THEREFORE IT CANNOT BE CONSIDERED AS PRIOR PERIOD ITEM. RELIANCE IS PLACED IN THIS REGARD ON DECISION OF IN FOLLOWING JUDICIAL DECISIONS : - SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V. C1T 213ITR 523 (GUJ) C IT V. JAGATJIT INDUSTRIES LIMITED. (ITA NO.848/2010, DELHI HIGH COURT) 8. IN VIEW OF THE ABOVE FACTUAL AND LEGAL SUBMISSIONS, IT IS URGED THAT THE SERVICE - TAX PAID ON LEASE RENTAL WAS NOT PRIOR PERIOD ITEM AND HENCE THE SAME MAY BE ALLOWED . 9. BY THE IMPU GNED ORDER CIT(A) RESTORED THE MATTER BACK TO THE FILE OF THE AO WITH THE FOLLOWING OBSERVATION: - 7.3.2 THE APPELLANT CLAIMS TO HAVE PAID A SUM OF RS.88,85,125/ - TOWARDS SERVICE - TAX ON LEASE RENTALS. IT IS SUBMITTED THAT THE SAID LIABILITY HAD EMERGED DUR ING THE RELEVANT PERIOD AND COULD NOT BE CONSIDERED A PRIOR PERIOD ITEM. IN THIS REGARD, I FIND MERIT IN THE APPELLANT'S PLEA THAT THE LIABILITY TO PAY SERVICE - TAX HAD ARISEN DURING THE RELEVANT PERIOD IN PURSUANCE TO THE INTERIM ORDER OF THE HON'BLE SUPRE ME COURT DATED 14.10.2011 AND HENCE THE A.O. WAS NOT JUSTIFIED IN TREATING THE SAME AS A PRIOR PERIOD EXPENDITURE. HOWEVER, SINCE THE SERVICE - TAX LIABILITY IS A STATUTORY LIABILITY,'IT IS HELD THAT THE ISSUE WILL BE GOVERNED BY THE PROVISIONS OF SECTION 43 B OF THE ACT. THEREFORE, IT IS HELD THAT THE APPELLANT WILL BE ELIGIBLE TO CLAIM DEDUCTION OF SERVICE - TAX ITA NO. 771/MUM/2017 & 6926/MUM/2017 M/S. WADHMAN RETAIL PVT. LTD., 5 LIABILITY IN COMPUTING THE BUSINESS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY IT. IN OTHER WORDS, THE AMOUNT OF DEDUCTION WILL BE RESTRICTED TO THE AMOUNT ACTUALLY PAID BY IT ON OR BEFORE THE DUE DATE APPLICABLE IN ITS CASE FOR FURNISHING THE RETURN OF INCOME U/S.!39(L) AND SUBJECT TO THE PROOF OF SUCH PAYMENT HAVING BEEN FURNISHED ALONG WITH THE RETURN. IN THESE CIRCUMSTANCES, T HE A.O. IS DIRECTED TO VERIFY THE APPELLANT'S CLAIM FOR DEDUCTION IN LIGHT OF THE PROVISIONS OF SECTION 43B AND ALLOW DEDUCTION TO THE EXTENT THE AMOUNT WAS ACTUALLY PAID AND PROOF OF PAYMENT THEREOF WAS FURNISHED ALONG WITH THE RETURN FOR THE A.Y. UNDER C ONSIDERATION. WITH THIS DIRECTION, GROUND NO.5 OF THE PRESENT APPEAL IS TREATED AS ALLOWED. 10. IT WAS BROUGHT TO OUR NOTICE BY LEARNED AR THAT AO HAS ALLOWED THE AMOUNT PAID UP TO THE DUE DATE OF FILING RETURN IN LIGHT OF THE PROVISIONS OF SECTION 43B A ND THE MATTER IS PRESENTED PENDING BEFORE CIT(A). IT WAS ALSO BROUGHT TO OU R NOTICE THAT SIMILAR ISSUE DEALT BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 30/09/2016. IN ALL FAIRNESS THIS ISSUE IS ALSO RESTORED BACK TO THE FILE OF CIT(A) FOR DEC IDING AFRESH AS PER LAW, KEEPING IN VIEW DIRECTIONS GIVEN BY THE TRIBUNAL IN THE ORDER DATED 30/09/2016, WE DIRECT ACCORDINGLY. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS APPEAL OF ASSESSEE IS ALLOWED IN PART IN TERMS INDICATED HEREINABO VE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 10 /201 8 SD/ - ( RAM LAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 10 /201 8 KARUNA SR. PS ITA NO. 771/MUM/2017 & 6926/MUM/2017 M/S. WADHMAN RETAIL PVT. LTD., 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//