ACIT (OSD) 2(1), MUMBAI V. BOB CARDS LTD, MUMBAI

ITA 8656/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3805 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI D. MANMOHAN, V. P. AND SHRI SANJAY AROR A, A. M. ITA NO. 8656/MUM/2010 ASSESSMENT YEAR: 2006-07 DY. CIT 2(1), AAYAKAR BHAVAN, R. NO. 561, 5 TH FLOOR, M. K. ROAD, MUMBAI-400 020 VS. BOB CARDS LTD. ESPERANCE, 1 ST FLOOR, SHAHID BHAGAT SINGH MARG, COLABA, MUMBAI-400 001 [ PAN NO: AAACB 1989 L ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVIN VARMA RESPONDENT BY : SHRI DALPAT SHAH DATE OF HEARING : 21.01.2013 DATE OF PRONOUNCEMENT : 10.04.2013 ORDER PER SANJAY ARORA, A.M. : THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)4, MUMBAI (CIT(A) FOR SHO RT) DATED 29.09.2010, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT H EREINAFTER) VIDE ORDER DATED 19.12.2008. 2.1 AT THE VERY OUTSET IT WAS SUBMITTED BY THE LD. AR, THE ASSESSEES COUNSEL, THAT THE REVENUES APPEAL RAISES TWO ISSUES, PER GROUND NOS. 2 AND 3 OF THE APPEAL, BOTH OF WHICH ARE SQUARELY COVERED IN THE ASSESSEES FAVOUR BY TH E ORDERS BY THE TRIBUNAL IN ITS OWN CASE FOR THE EARLIER YEARS. WITH REGARD TO THE FIRST ISS UE, I.E., THE DISALLOWANCE IN THE SUM OF RS.13,86,848/- U/S.40(A)(IA) ON ACCOUNT OF NON DEDU CTION OF TAX AT SOURCE (TDS), HE ITA NO. 8656/MUM/2010 (A.Y. 2006-07) DY. CIT VS. BOB CARDS LTD. 2 WOULD ADVERT OUR ATTENTION TO THE ORDER BY THE TRIB UNAL IN ITS CASE FOR A.Y. 2007-08 (IN ITA NO.7678/MUM/2010 DATED 18.09.2012/PB PGS.1-4), WHICH PLACES RELIANCE ON THE TRIBUNALS ORDER FOR THE PRECEDING YEARS, BEING A.Y S. 2003-04 TO 2005-06 (IN ITA NOS. 4882, 2475,6527/MUM/2010 DATED 20.06.2012/PB PGS. 5 -10), DRAWING OUR ATTENTION TO THE RELEVANT PARTS OF THE SAID ORDERS. SIMILARLY, FOR THE SECOND ISSUE, I.E., THE DISALLO WANCE IN THE SUM OF RS.47.27 LAKHS, EFFECTED U/S. 36(1)(VII) R.W.S. 36(2), HE WOULD DRA W OUR ATTENTION TO ORDER BY THE TRIBUNAL IN THE ASSESSEES CASE FOR A.YS. 2003-04 TO 2005-06 (SUPRA), AND WHICH IN TURN FOLLOWS AN ORDER BY IT FOR A.Y. 2002-03 (IN ITA NO. 500/MUM/06 DATED 29.10.2007/PB PGS. 11-13). THE SAME, HE WOULD FURTHER SUBMIT, ALSO FORMS THE BASIS OF THE DELETION BY THE LD. CIT(A) IN THE FIRST APPEAL. 2.2 THE LD. DR COULD NOT REBUT THE SAID CONTE NTIONS BY THE LD. AR, DURING THE COURSE OF THE HEARING. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 GD. # 1 OF THE REVENUES APPEAL IS GENERA L IN NATURE, WARRANTING NO ADJUDICATION. 3.2 THE ASSESSEE IS A DOMESTIC COMPANY ENGAGED IN T HE CREDIT-CARD BUSINESS AS WELL AS ITS FINANCING, REGISTERED AS A NON-BANKING FINANCIA L COMPANY (NBFC) WITH THE RESERVE BANK OF INDIA (RBI). IN TERMS OF THE AGREEMENT ENTE RED BY IT WITH THE INTERNATIONAL CREDIT CARD AGENCIES, I.E., VISA AND MASTER CARD, THE ASSE SSEE IS ALSO TO BEAR THE TAX ON THE PAYMENTS MADE THERETO. ACCORDINGLY, THE TDS, AS EX IGIBLE ON PAYMENTS, IS GROSSED UP, AND THE PAYMENTS MADE ACCORDINGLY. THE FIRST APPELL ANT AUTHORITY HAS ALLOWED RELIEF TO THE ASSESSEE FOLLOWING THE DECISION IN THE CASE OF CIT VS. STANDARD POLYGRAPH MACHINES PVT. LTD. [2000] 243 ITR 788 (MAD). AS WOULD BE APPARENT FROM THE FOREGOING, THIS IS A RECURRING FEATURE IN THE ASSESSEES CASE. AS SUCH, THERE IS NO MERIT IN THE REVENUES ARGUMENT THAT THE ASSESSEE HAD NOT SUPPLIED IT WITH THE COPY OF THE RELEVANT AGREEMENTS. FURTHER, WHEN THE TDS IS GROSSED-UP AND PAYMENT MAD E ACCORDINGLY, THERE IS NO MERIT IN THE ARGUMENT THAT TAX-FREE PAYMENTS COULD NOT BE AL LOWED OR, ALTERNATIVELY, THE ASSESSEE ITA NO. 8656/MUM/2010 (A.Y. 2006-07) DY. CIT VS. BOB CARDS LTD. 3 WOULD NOT BE ENTITLED TO DEDUCTION IN RESPECT OF TH E TAX LIABILITY OF THE PAYEE; THE PAYMENT BEING ONLY IN TERMS OF THE CONTRACTUAL AGREEMENT IN DISCHARGE OF A TRADE LIABILITY. THE ASSESSEE HAS CONSISTENTLY FOUND FAVOUR WITH THE TRI BUNAL, WHICH HAS IN THE MATTER RELIED ON DECISIONS, AS IN THE CASE OF STANDARD POLYGRAPH MACHINES PVT. LTD. (SUPRA) AND S . TAKENAKA VS. CIT [1999] 237 ITR 112 (KAR). UNDER THE CIRCUMSTANCES, WE FIND NO MERIT IN THE REVENUES CASE. 3.3 THE SECOND ISSUE IS AGAIN A RECURRING ISSUE, FO R WHICH THE ASSESSEE FOUND FAVOUR WITH THE TRIBUNAL ON THE BASIS OF THE AMENDED PROVI SION OF SECTION 36(1)(VII), SO THAT A CLAIM FOR BAD DEBT, FOR BEING ELIGIBLE FOR DEDUCTIO N, NEED NOT BE SUPPORTED BY A DEMONSTRATIVE PROOF OF THE DEBT BECOMING BAD, AND T HAT IT WOULD BE SUFFICIENT IF THE AMOUNT OF DEBT IS WRITTEN OFF IN THE ACCOUNTS AS IR RECOVERABLE. AGAIN, THERE IS NO MERIT IN THE REVENUES CASE THAT THE ASSESSEE, BEING A NBFC, IS NOT IN THE BUSINESS OF MONEY LENDING, SO THAT THE PROVISION OF SECTION 36(2) IS NOT SATISFIED. THE TRIBUNAL HAS DRAWN SUPPORT FROM THE DECISIONS BY THE HIGHER COURTS OF LAW, AS IN THE CASE OF T.R.F. LTD. VS. CIT [2010] 323 ITR 397 (SC) AND CIT VS. STAR CHEMICALS (BOMBAY) P. LTD. [2009] 313 ITR 126 (BOM), AMONG OTHERS, SO THAT THE MATTER OUG HT TO BE CONSIDERED AS SETTLED. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON THIS 10 TH DAY OF APRIL, 2013 SD/- - SD/- ( D. MANMOHAN ) ( SANJAY ARORA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 10.04.2013 ITA NO. 8656/MUM/2010 (A.Y. 2006-07) DY. CIT VS. BOB CARDS LTD. 4 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. CONCERNED 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI