HSBC ASSET MANAGEMTNT (I) P. LTD, MUMBAI V. DCIT 1(1), MUMBAI

ITA 7777/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75656 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 23-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 17-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBA DAS
• Keywords: Business income
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . . , . . , BEFORE SHRI B R MITTAL, JM & SHRI B R BASKARAN , AM ./I.T.A. NO.7777/MUM/2011 ( ' ' ' ' ' '' ' / ASSESSMENT YEAR : 2004-05) HSBC ASSET MANAGEMENT (I) P LTD 52/60 M G ROAD, FORT MUMBAI / VS. THE DY COMMR OF INCOME TAX 1)(1), MUMBAI ./PAN : AABCH0007N ( % /APPELLANT ) ( &'% / RESPONDENT ) % ( / APPELLANT BY : SHRI YOGESH THAR &'% ( / RESPONDENT BY : SHRI PITAMBA DAS ( + /DATE OF HEARING : 19.02.2014 ( + / DATE OF PRONOUNCEMENT : 21 FEB 2014 / O R D E R PER B R BASKARAN, AM :: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 25.8.2011 PASSED BY THE LD CIT(A)-I, MUMBAI AND IT RELATES TO THE AY 2004-05. 2. FOLLOWING TWO ISSUES ARE URGED IN THIS APPEA L. (A) VALIDITY OF REOPENING OF THE ASSESSMENT (B) CORRECTNESS OF DISALLOWANCE OF EXPENDITURE CLA IMED UNDER THE HEAD MISCELLANEOUS PROVISION OF RS.30 LACS. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF: THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT ON 28.12 .2006 ON A TOTAL INCOME OF HSBC ASSET MANAGEMENT 2 RS.3.13 CRORES. SUBSEQUENTLY, THE AO NOTICED THAT THE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF EXPLANATION 2 (C) O F SECTION 147 AS THERE WAS INCORRECT SET OFF OF CARRY FORWARD OF LOSSES AND IN CORRECT COMPUTATION OF BUSINESS INCOME ON ACCOUNT OF ALLOWANCE OF EXPENDITURE CLAIM ED UNDER THE HEAD MISCELLANEOUS PROVISIONS OF RS.30 LACS. ACCORDIN GLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 25 TH MARCH, 2009. THE AO COMPLETED THE REOPENED ASSESSMENT ON 25 TH DEC 2009 BY MAKING VARIOUS DISALLOWANCES. THE ASSESSEE CHALLENGED THE VALIDITY OF THE REOPENING O F ASSESSMENT AND ALSO OTHER DISALLOWANCES MADE BY THE AO BY FILING APPEAL BEFOR E THE LD CIT(A), WHICH WAS PARTLY ALLOWED. STILL AGGRIEVED, THE ASSESSEE HAS FLED THIS APPEAL BEFORE US. 4. WE SHALL FIRST TAKE UP THE ISSUE RELATING TO THE DISALLOWANCE OF CLAIM OF MISCELLANEOUS PROVISION OF RS.30.00 LACS MADE BY THE ASSESSEE. BEFORE AO, THE ASSESSEE SUBMITTED THAT THE MISCELLANEOUS PROVISION OF RS.30.00 LACS WAS MADE TOWARDS DIFFERENCE IN THE COLLECTION ACCOUNT OF VA RIOUS SCHEMES. THE AO TOOK THE VIEW THAT THE PROVISION SO MADE BY THE ASSESSEE RELATES TO ANTICIPATED EXPENDITURE ONLY. BY PLACING RELIANCE ON THE DE CISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. INDIAN OVERSEAS BANK (151 ITR 446), THE AO TOOK THE VIEW THAT THE PROVISION MADE IN THE ACCOUNTS FO R AN ACCRUED OR KNOWN LIABILITY ALONE IS ADMISSIBLE AS DEDUCTION UNDER THE ACT.. S INCE, THE AO TOOK THE VIEW THAT THE MISCELLANEOUS PROVISION MADE BY THE ASSESSEE TOWARDS THE DIFFERENCE IN THE COLLECTION ACCOUNT OF VARIOUS SCHEMES DO NOT FALL I N THE CATEGORY OF AN ACCRUED OR LOAN LIABILITY, HE DISALLOWED THE CLAIM OF RS.30.00 LACS MADE BY THE ASSESSEE. THE LD CIT(A) HAS ALSO CONFIRMED THE SAID ADDITION. HSBC ASSET MANAGEMENT 3 5. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ASSESSEE, BEING AN ASSET MANAGEMENT COMPANY, IS REQUIRED TO BORNE EXPENSES INCURRED BY THE MUTUAL FUNDS BY WAY OF BROKERAGE AND OTHER MARKETING FEE F OR PROMOTING THEIR VARIOUS MUTUAL FUND SCHEMES. HE SUBMITTED THAT THE MUTUAL FUNDS SPEND THESE EXPENSES AND THEN CLAIM THE SAME FROM THE ASSESSEE. HE SUBM ITTED THAT THE ASSESSEE DID NOT RECEIVE THE DETAILS OF SUCH CLAIMS BY 31.3.2004 , I.E., BY THE YEAR END, FROM THE MUTUAL FUNDS AND HENCE, IN TERMS OF REQUIREMENT OF ACCOUNTING STANDARDS, THE ASSESSEE PROVIDED FOR A SUM OF RS.30.00 LAKHS UNDER THE HEAD MISCELLANEOUS PROVISIONS TO TAKE CARE OF THOSE EXPENDITURE CLAI MS. HE FURTHER SUBMITTED THAT THE AO WAS NOT RIGHT IN TERMING THIS EXPENDITURE AS ANTICIPATED EXPENDITURE, SINCE IT WAS A KNOWN LIABILITY AND FURTHER IT RELATED TO THE YEAR UNDER CONSIDERATION. THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID A SUM OF RS. 22,81,707/- IN THE SUCCEEDING YEAR AND DEBITED THE SAME AGAINST THE PR OVISION ACCOUNT SO CREATED AND THE BALANCE OF RS. 7,18,283/- HAS ALSO BEEN OFF ERED AS INCOME IN THE SUCCEEDING YEAR. 6. ON THE OTHER HAND, THE LD DR SUBMITTED THAT THE ASSESSEE HAS MADE THE MISCELLANEOUS PROVISION DURING THIS YEAR AND DID NO T MAKE SUCH KIND OF PROVISION IN THE IMMEDIATELY PRECEDING YEAR. FURTHER THE ASSESS EE HAS NOT FURNISHED ANY DETAILS IN THIS REGARD BEFORE THE AO AND ALSO DID N OT SPECIFY THE BASIS FOR QUANTIFYING THE AMOUNT OF RS.30.00 LACS. HENCE, TH E AO TOOK THE VIEW THAT IT IS ONLY AN ANTICIPATED LIABILITY AND NOT A KNOWN LIABI LITY. HSBC ASSET MANAGEMENT 4 7. WE HAVE HEARD THE RIVAL CONTENTION AND CAREFULLY PERUSED THE RECORD. AS SUBMITTED BY THE LD D.R, WE NOTICE FROM THE COPY OF ANNUAL REPORT FILED BEFORE US THAT THE ASSESSEE DID NOT CLAIM MISCELLANEOUS PROV ISION IN THE IMMEDIATELY PRECEDING YEAR. FURTHER, WE NOTICE THAT THE ASSESS EE HAS APPENDED A NOTE IN THE ANNUAL REPORT CLARIFYING THAT THE MISCELLANEOUS PRO VISION REPRESENTS THE DIFFERENCE IN THE COLLECTION ACCOUNT OF THE VARIOUS SCHEMES. ACCORDING TO LD A.R, THE ASSESSEE IS REQUIRED TO INCUR THE EXPENDITURE TOWAR DS BROKERAGE AND MARKETING EXPENSES RELATED TO VARIOUS SCHEMES OF MUTUAL FUNDS . ACCORDING TO LD A.R, THE DETAILS OF EXPENDITURE INCURRED BY THE MUTUAL FUNDS , WHICH IS REQUIRED TO BE REFUNDED TO THEM, WILL BE KNOWN TO THE ASSESSEE ONL Y ON RECEIPT OF ACCOUNTS FROM THE MUTUAL FUNDS. HENCE, ACCORDING TO LD A.R, THE ASSESSEE WAS CONSTRAINED TO MAKE PROVISION OF RS.30.00 LAKHS TO COVER UP SUCH C LAIMS, SINCE THE SAID CLAIMS RELATE TO THE YEAR UNDER CONSIDERATION AND FURTHER IT WAS ITS LIABILITY. WHEN A SPECIFIC QUERY WAS PUT TO LD A.R AS TO WHETHER THER E IS ANY BASIS FOR ARRIVING AT THE FIGURE OF RS.30.00 LAKHS, THE LD A.R REPLIED THAT T HE ASSESSEE IS HAVING THE BASIS. HOWEVER, HE SUBMITTED THAT THE ASSESSEE HAS DISBURS ED A SUM OF RS.22,81,707/- IN THE IMMEDIATELY SUCCEEDING YEAR OUT OF THE PROVISIO N OF RS.30.00 LAKHS MADE IN THE INSTANT YEAR. 8. WHEN THE LD A.R WAS ASKED ABOUT THE DATE OF DISBURSEMENT OF THE AMOUNT OF RS.22,81,707/-, THE LD A.R INVITED OUR ATTENTION TO THE COPY OF VOUCHER PLACED AT PAGE 65 OF THE PAPER BOOK AND SUBMITTED THAT THE DI SBURSEMENT WAS MADE ON 29.09.2004. HE FURTHER SUBMITTED THAT THE AUDITED FINANCIAL STATEMENTS WERE ADOPTED ON 26.10.2004 AND BY THAT TIME, THE ASSESSE E HAD ALREADY DISBURSED THE HSBC ASSET MANAGEMENT 5 AMOUNT CITED ABOVE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS OFFERED THE BALANCE AMOUNT OF RS.7,18,293/- AS ITS INCOME IN TH E IMMEDIATELY SUCCEEDING YEAR BY CREDITING THE SAME TO CONCERNED EXPENDITURE ACCO UNT. ON PERUSAL OF THE COPY OF VOUCHER PLACED AT PAGE 65 OF THE PAPER BOOK, WE NOTICE THAT THE VOUCHER SHOWS THAT ASSESSEE HAS DISBURSED RS.22,81,707/- ON 29.09 .2004 AND THE SAME IS DEBITED TO SUNDRY CREDITORS A/C AND THE BALANCE AMOUNT OF RS.7,18,293/- IS CREDITED IN SUNDRY EXPENSES A/C. FURTHER NARRATION GIVEN IN THAT VOUCHER READS AS UNDER;- ON ACCOUNT OF: CH.NO. DIRECT-HSBC MUTUAL FUND PAY MENT TO HSBC MUTUAL FUND TOWARDS RECONCILIATION DIFFERENCE ARISING IN T HE BOOKS AS ON 31 MAR 04 AMOUNT (IN WORDS) RS. TWENTY TWO LAKH EIGHTY ONE TH OUSANDS SEVEN HUNDRED SEVEN ONLY) RS. 22,81,707.00 9. WE NOTICE THAT THE NARRATION GIVEN IN THE VO UCHER CLEARLY STATES THAT THE PAYMENT OF RS.22,81,707/- PERTAIN TO THE YEAR ENDIN G 31.3.2004, I.E., THE YEAR UNDER CONSIDERATION. SINCE THE ABOVE SAID AMOUNT W AS DISBURSED BEFORE THE DATE OF FINALIZATION OF ACCOUNTS FOR THE YEAR UNDER CONS IDERATION, THE BENCH EXPRESSED THE VIEW THAT THE CLAIM OF RS.30.00 LAKHS MADE IN T HIS YEAR MAY BE RESTRICTED TO THE ACTUAL AMOUNT OF RS.22,81,707/-. THE LD A.R FAIRLY AGREED WITH THE VIEW EXPRESSED BY THE BENCH. HOWEVER, HE SUBMITTED THAT THE BALAN CE AMOUNT OF RS.7,18,293/- HAS ALREADY BEEN OFFERED BY THE ASSESSEE IN THE IMM EDIATELY SUCCEEDING YEAR AND THE VIEW EXPRESSED BY THE BENCH WOULD RESULT IN ADD ITION OF THE SAME AMOUNT DURING THE YEAR CONSIDERATION ALSO, IN WHICH CASE T HE AMOUNT OF RS.7,18,293/- WOULD BE TAXED TWICE, I.E., DURING THE YEAR UNDER C ONSIDERATION AND ALSO IN THE SUCCEEDING YEAR. ACCORDINGLY, HE SUBMITTED THAT T HE ASSESSING OFFICER MAY BE GIVEN SUITABLE DIRECTION TO DELETE THE AMOUNT OF RS .7,18,293/- OFFERED BY THE HSBC ASSET MANAGEMENT 6 ASSESSEE IN THE SUCCEEDING YEAR, SINCE THE SAID AMO UNT IS GETTING TAXED IN THE INSTANT YEAR. 10. WHEN THESE FACTS AND DISCUSSIONS WERE PUT FO RTH TO LD D.R, HE FAIRLY SUBMITTED THAT HE DOES NOT HAVE ANY OBJECTION IN RE STRICTING THE CLAIM TO RS.22,81,707/-. WITH REGARD TO THE PLEA OF THE ASS ESSEE WITH REGARD TO THE BALANCE AMOUNT OF RS.7,18,293/-, HE SUBMITTED THAT HE IS LE AVING THE SAME TO THE DISCRETION OF THE BENCH. 11. IN VIEW OF THE FACT THAT THE ASSESSEE HAS D ISBURSED THE AMOUNT OF RS.22,81,707/- BEFORE THE FINALIZATION OF THE ACCOU NTS OF THE YEAR UNDER CONSIDERATION, WE ARE OF THE VIEW THAT THE DEDUCTI ON TOWARDS MISCELLANEOUS PROVISION MADE BY THE ASSESSEE MAY BE ALLOWED TO THE EXTENT OF THE AMOUNT CITED ABOVE. HOWEVER, WE NOTICE THAT THE SUBMISSIONS MAD E BY THE ASSESSEE AND THE COPY OF VOUCHER PRODUCED BEFORE US HAVE NOT EXAMINE D OR CONSIDERED BY THE AO. ACCORDINGLY, IN OUR VIEW, THE DEDUCTION OF RS.22,81 ,707/- MAY BE ALLOWED TO THE ASSESSEE AFTER DUE EXAMINATION OF THE TRANSACTIONS RELATING TO ITS PAYMENT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD CIT(A ) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO ALLOW THE CLAIM TO THE EXTENT OF RS.22,81,707/- AFTER SATISFYING HIMSELF A BOUT THE CLAIM OF PAYMENT MADE IN THE SUCCEEDING YEAR. 12. ACCORDING TO THE ASSESSEE, THE BALANCE AMOU NT OF RS.7,18,293/- HAS ALREADY BEEN OFFERED AS INCOME IN THE SUCCEEDING YEAR. SIN CE THE VERY SAME AMOUNT IS HSBC ASSET MANAGEMENT 7 GETTING TAXED IN THIS YEAR, IT IS REQUIRED TO BE EX CLUDED FROM THE TOTAL INCOME IN THE SUCCEEDING YEAR SINCE, UNDER THE SCHEME OF ACT, DOU BLE TAXATION OF SAME INCOME IS NOT PERMISSIBLE. IN THIS REGARD, THE ASSESSEE MAY MOVE THE ASSESSING OFFICER BY FILING NECESSARY APPLICATION AND THE ASSESSING OFFI CER IS ALSO DIRECTED TO TAKE LIBERAL APPROACH IN GRANTING RELIEF TO THE ASSESSEE IN THIS MATTER IN THE SUCCEEDING YEAR. 13. SINCE THE LD A.R WAS SATISFIED WITH THE VIE W EXPRESSED BY THE BENCH WITH REGARD TO THE CLAIM OF MISCELLANEOUS PROVISION, H E SUBMITTED THAT HE WILL NOT BE AGGRIEVED IN DISMISSING THE GROUND RELATING TO THE VALIDITY OF RE-OPENING OF ASSESSMENT. ACCORDINGLY, WE DO NOT FIND IT NECESSA RY TO DISPOSE OF THE SAME AND ACCORDINGLY CONFIRM THE ORDER OF LD CIT(A) ON THE I SSUE OF RE-OPENING. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. / '/ ( 2( 45 ( ORDER PRONOUNCED IN THE OPEN COURT ON 21 FEB 2014 . ( 21 FEB 2014 ( SD/- SD/- ( B R MITTAL ) ( B R BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; = DATED 21 ST FEB 2014 .../ RAJ , SR. PS HSBC ASSET MANAGEMENT 8 ( &@ A@ ( &@ A@ ( &@ A@ ( &@ A@/ COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. &'% / THE RESPONDENT. 3. B() / THE CIT(A)- 4. B / CIT 5. @ &, , / DR, ITAT, MUMBAI 6. ' / GUARD FILE. / BY ORDER, '@ & //TRUE COPY// / // / ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI