CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD, MUMBAI V. ASST CIT (OSD) 10(1), MUMBAI

ITA 785/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3520 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2014
• Court: TRIBUNAL
• Department Lawyers: SUDHA CHANDRAN DR
• Assessee Lawyers: ANUSHA SINGH
• Keywords: Non-deduction of tax; Bad and doubtful debts
• Section: 37; 28

Judgement Text

, , C, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.785/MUM/2014 ASSESSMENT YEAR: 2010-11 CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD.,FORMERLY KNOWN AS CRISIL MARKET WIRE LTD.,CRISIL HOUSE, CENTRAL AVENUE ROAD, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI-400076 / VS. A CIT (OSD) 10(1) AAYAKAR BHAVAN MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AABCC4655M !' / ASSESSEE BY SHRI ALIASGER RAMPURAWALA & MS. ANUSHA SINGH (AR) / REVENUE BY MS. SUDHA CHANDRAN (DR) # $ % & / DATE OF HEARING : 04/05/2016 % & / DATE OF ORDER: 25/05/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 22 {(IN SHORT CIT(A)}, DATED 15.11.2013 PASSED AG AINST CRISIL RISK & INFR 2 ASSESSMENT ORDER U/S 143(3)(II) DATED 08.02.2013 FO R THE ASSESSMENT YEAR 2010-11, ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN REMANDING THE ISSUE TO THE FILE OF THE ASSISTANT COMMISSIONER OF INCOME-TA X (OSD) - 10(1) ('AO') TO VERIFY WHETHER BAD DEBTS WR ITTEN OFF AMOUNTING TO RS. 25,38,226/- INCLUDE ANY EXPENSES INCURRED ON BEHALF OF THE CLIENTS WITHOUT APPRECIAT ING THE FACT THAT THE ENTIRE AMOUNT (INCLUDING EXPENSES INC URRED ON BEHALF OF CLIENT AMOUNTING TO RS. 58,388/-) WRIT TEN OFF AS BAD DEBTS IS AN ALLOWABLE DEDUCTION U/S. 36 (I)(VII) READ WITH SECTION 36(2) OF THE INCOME TAX ACT, 1961 (THE ACT). IT IS PRAYED THAT THE LD. AU BE DIRECTED TO ALLOW ENTIRE AMOUNT OF BAD DEBTS WRITTEN OFF AS IRRECOVERABLE U/ S 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT. WITHOUT PREJUDICE TO GROUND NO.1 , 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING TH E EXPENSES INCURRED ON BEHALF OF CLIENT AMOUNTING TO RS. 58,388/- WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT A S BUSINESS LOSS U/S. 28 OF THE ACT. IT IS PRAYED THAT THE LD. AO BE DIRECTED TO ALLOW E XPENSES INCURRED ON BEHALF OF CLIENT WRITTEN OFF IN THE PRO FIT & LOSS ACCOUNT AS BUSINESS LOSS U/S. 28 OF THE ACT. 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,70,47,032/- MADE BY THE AO UN DER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDU CTION OF TAX AT SOURCE ON EXPENSES REIMBURSED BY THE APPELLA NT TO CRISIL LIMITED, ITS PARENT COMPANY. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI ALIASGER RAMPURAWALA & MS. ANUSHA SINGH, AUTHO RISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND B Y MS. SUDHA CHANDRAN, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. CRISIL RISK & INFR 3 3. GROUND NO.1 & 2: IN THIS GROUND THE LD. COUNSEL HAS SUBMITTED THAT THE CLAIM OF BAD DEBTS WAS NOT ALLOW ED ON THE ON THE GROUND THAT THE CORRESPONDING INCOME OF THE AMOUNT WHICH WAS CLAIMED AS BAD DEBT WAS NOT SHOWN IN EARL IER YEARS. UNDER THESE CIRCUMSTANCES IT WAS SUBMITTED THAT IF IT WAS NOT ALLOWABLE AS BAD DEBT U/S 36(1) (VII), THEN, IN ANY CASE THE IMPUGNED LOSS WAS ACTUAL LOSS OF THE ASSESSEE AS IT WAS INCURRED DURING THE COURSE OF BUSINESS AND THEREFOR E, SAME WAS ALLOWABLE AS BUSINESS LOSS U/S 28 R.W.S. 37 OF THE ACT. 3.1. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE ORDE RS OF THE LOWER AUTHORITIES. 3.2. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AS WELL AS ORDERS OF THE LOWER AUTHORITIES. I T IS NOTED FROM THE PERUSAL OF THE ORDER OF THE LD. CIT(A) THAT HE ACCEPTED THE PRAYER OF THE ASSESSEE PARTLY AND DIRECTED THE AO T O DELETE THE DISALLOWANCE SUBJECT TO VERIFICATION OF THE FACT WH ETHER COMPONENT OF SERVICE TAX AND EXPENSES INCURRED BY T HE ASSESSEE ON BEHALF OF ITS CLIENTS HAS BEEN CREDITED AS INCOME BY THE ASSESSEE EARLIER. IN THIS REGARD IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LD. COUNSEL THAT IN ANY CASE ITEM S ON ACCOUNT OF REIMBURSEMENT OF EXPENSES AND SERVICE TA X PAID WERE INCURRED DURING THE COURSE OF BUSINESS AND NON -RECOVERY OF THE SAME BY THE ASSESSEE WOULD AMOUNT TO BUSINES S LOSS INCURRED DURING THE COURSE OF BUSINESS AND SHOULD B E THEREFORE, ALLOWED AS SUCH AND IN SUPPORT OF THIS P ROPOSITION RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE BOMB AY HIGH CRISIL RISK & INFR 4 COURT IN THE CASE OF HARSHAD J. CHOKSI VS. CIT 349 ITR 250 (BOM). 3.3. WE HAVE CONSIDERED THE FACTS OF THE CASE AS WELL A S CLAIM OF THE ASSESSEE MADE BEFORE US. IT IS NOTED BY US T HAT GENUINENESS OF THESE EXPENSES AND THE CLAIM MADE BY THE ASSESSEE HAS NOT BEEN DOUBTED BY THE LOWER AUTHORIT IES. THE ONLY GROUND TO REJECT THE CLAIM BY BOTH OF THE LOWE R AUTHORITIES WAS THAT THESE ITEMS WERE NOT DEDUCTABLE AS BAD DEB T, IN VIEW OF NON-COMPLIANCE OF CONDITION PROVIDED U/S 36(2). BUT, WE FIND THAT THERE IS NO DISPUTE ON THE FACT THAT BOTH OF THESE EXPENSES WERE INCURRED BY THE ASSESSEE DURING THE C OURSE OF ITS BUSINESS. UNDER THESE CIRCUMSTANCES, THESE ITEM S ARE ALLOWABLE AS BUSINESS LOSS/ EXPENSES U/S 28 R.W.S. 37 OF THE ACT. IN THE CASE OF HARSHAD J. CHOKSI (SUPRA), HON BLE BOMBAY HIGH COURT HELD IN THE SIMILAR CIRCUMSTANCES THAT E VEN IF THE AMOUNT IN QUESTION WAS NOT ALLOWABLE AS BAD DEBT, T HE CLAIM SHOULD BE CONSIDERED FOR DEDUCTION AS BUSINESS LOSS . KEEPING IN VIEW THE FACTS OF THIS CASE, WE FIND THAT THE CL AIM OF THE ASSESSEE WAS ALLOWABLE U/S 37 AND THEREFORE, THE SA ME IS DIRECTED TO BE ALLOWED GROUND NO.1 & 2 ARE ALLOWED. 4. GROUND NO.3: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF LOWER AUTHORITIES IN MAKING DISALLOWA NCE UNDER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDU CTION OF TAX AT SOURCE ON EXPENSES REIMBURSED BY THE ASSESSEE TO ITS PARENT COMPANY NAMELY CRISIL LIMITED. IN THIS REGAR D LD. COUNSEL HAS MADE FOLLOWING TWO PROPOSITIONS I.E.: CRISIL RISK & INFR 5 (I) TDS IS NOT REQUIRED TO BE DEDUCTED ON THE GROUND OF REIMBURSEMENT. (II) EVEN IF TDS IS REQUIRED TO BE DEDUCTED, NO DIS ALLOWANCE SHOULD BE MADE U/S 40(A)(IA) AS CORRESPONDING RECEI PTS HAVE BEEN ASSESSED AS INCOME IN THE HANDS OF CRISIL LIMI TED. IN SUPPORT OF FIRST PROPOSITION, HE HAS RELIED UPON THE FOLLOWING JUDGMENTS: 1. M/S. ARVIND MURJANI BRANDS PVT. LTD. V. ITO (ITA NO.6708/MUM/2010 2. ACIT V. RESULT SERVICES P. LTD.(ITA NO.2846/DEL./20 11 MUM ITAT) 3. ASK WEALTH ADVISORS (P) LTD. V. ACIT 51 TAXMANN.COM 128 (MUM TRIB) 4. DCIT V. DHAANYA SEEDS (P.) LTD. 42 TAXMANN.COM 277 (BANG. TRIB.) 5. OM INDIA TRADING CO.(P.) LTD. V. ACIT 58 TAXMANN.CO M 325 (GUWAHATI TRIB.) 6. ITO V. VISHINDA DIAMONDS 34 TAXMANN.COM 163 (MUM TRIB.) 7. KARNAVATI CO-OP, BANK LTD. V. DCIT, CIRCLE-11 17 TAXMANN.COM 163 (MUM TRIB) 8. EXPEDITORS INTERNATIONAL (INDIA) (P.) LTD. V. ACIT 118 TTJ 652 (DELHI) 9. M/S. STRATCAP SECURITIES (I.) P. LTD. V. ACIT (ITA NO.7048/MUM/2008 (MUMBAI ITAT) CRISIL RISK & INFR 6 4.1. IN ADDITION TO THE ABOVE, IT WAS ALSO SUBMITTED BY THE LD. COUNSEL THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBU NAL IN A.Y. 2008-09 WHEREIN TRIBUNAL SENT THIS ISSUE BACK TO TH E FILE OF THE AO VIDE ITS ORDER DATED 06.11.2015 IN ITA NO. 6207/MUM/2013. 4.2. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHOR ITIES AND SUBMISSIONS MADE BY BOTH THE SIDES. IT IS NOTED BY US THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN E ARLIER YEARS WHEREIN THIS ISSUE HAS BEEN SENT BACK TO THE FILE O F THE AO FOR VERIFICATION OF THE FACTS WITH THE FOLLOWING OBSERV ATIONS: 3. THE NEXT GROUND PERTAINS TO DISALLOWANCE OF RS.2,02,55,399/- MADE U/S 40(A)(IA) OF THE ACT ON A CCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON THE EXPENSES REIMBURSED BY THE ASSESSEE TO CRISIL LTD., ITS PARE NT COMPANY. 3.1. THE CRUX OF ARGUMENT ADVANCED ON BEHALF OF TH E ASSESSEE IS THAT THE ASSESSEE USED TO SHARE COMMON FACILITIES/COMMON OFFICE AND THE HOLDING COMPANY DEDUCTED TAXES WHEREVER APPLICABLE. OUR ATTENTION W AS INVITED TO PAGE 185 OF THE PAPER BOOK. IT WAS CONTE NDED THAT CERTIFICATE OF THE HOLDING COMPANY IS AVAILABL E AT PAGE 181 OF THE PAPER BOOK. ON THE OTHER HAND, THE LD. D R, STRONGLY OBJECTED TO THE CLAIM OF THE ASSESSEE BY I NVITING OUR ATTENTION TO TABLE A AT PAGE 185 OF THE PAPER BOOK. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE T HAT THE BRAKE UP OF REIMBURSEMENT OF EXPENSES IS AVAILABLE AT TABLE-A (PAGE-185) OF THE PAPER BOOK, WHICH INCLUDE S ADVERTISEMENT EXPENSES, EQUIPMENT HIRE CHARGES, EQUIPMENT MAINTENANCE CHARGES (ADMIN), EQUIPMENT MAINTENANCE (IT), PROFESSIONAL FEE, PROFESSIONAL FE ES (FEE INCLUDES OPE, RENT, ORS, RENT (STAFF), OTHER REPAIR AND MAINTENANCE, REPAIR AND MAINTENANCE (BUILDING). IF THE NATURE AND THE EXTENT OF THESE EXPENSES/CLAIMS ARE ANALYZED, IN OUR VIEW, MERELY A HUTCH POUCH HAS BEE N MADE BY THE ASSESSEE IN ITS CLAIM AND FACTUALLY THE CLAIM CRISIL RISK & INFR 7 IS NOT CLEAR, THEREFORE, THIS ISSUE IS SENT TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE AT LENGTH IN ACCORDANCE WITH LAW. THE ASSESSING OFFICE R IS ALSO DIRECTED TO EXAMINE SUCH CLAIM IN HOLDING COMPANY/ASSESSEE. THE ASSESSEES ARE DIRECTED TO PRO DUCE THE DETAILS OF THE CLAIM FOR THE EXAMINATION/VERIFI CATION BY THE LD. ASSESSING OFFICER. THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 4.3. THUS, IN THE GIVEN CIRCUMSTANCES, WE FIND THAT FAC TS BEING IDENTICAL AND NO DISTINCTION HAVING BEEN MADE BEFOR E US BY THE EITHER PARTY, WE FIND IT APPROPRIATE TO SEND THIS I SSUE BACK TO THE FILE OF THE AO. THE AO SHALL FOLLOW THE ORDER O F THE TRIBUNAL FOR A.Y. 2008-09 AND SHALL GIVE ADEQUATE OPPORTUNIT Y OF HEARING TO THE ASSESSEE BEFORE DECIDING THIS ISSUE FRESH. FURTHER, THE ASSESSEE IS FREE TO RAISE ALL LEGAL AN D FACTUAL ISSUES, INCLUDING PROPOSITION NUMBER (II) AS MENTIO NED IN EARLIER PART OF OUR ORDER. THE AO SHALL VERIFY AND DEAL WITH ALL OF THE CONTENTIONS/ISSUES AS MAY BE RAISED BY THE A SSESSEE. GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2016. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER # $ MUMBAI; ( DATED: 25 /05 /2016 CTX? P.S/. . . CRISIL RISK & INFR 8 %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. / BY ORDER, .3* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI