Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 8622 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-02-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
K
Next Hearing Date
23-09-2014
Assessment Year
2008-2009
Appeal Filed On
07-02-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.892/MUM/2014 (ASSESSMENT YEAR 2008-09) KUONI TRAVEL (INDIA) PVT.LTD. 8 TH FLOOR, URMI ESTATE A 95, G.K.MARG, LOWER PAREL (W), MUMBAI 400 013. PAN:AAACS 0170L ...... APPELLA NT VS. THE DCIT, RG.3(2) MUMBAI- 400 020 .... RESPOND ENT APPELLANT BY : SHRI NEERAJ SHETH RESPONDENT BY : SHRI N.PADMANABHAN DATE OF HEARING : 06/02/2017 DATE OF PRONOUNCEMENT : 10/02/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-15, MUMBAI DATED 10/10/2013, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 13/02/2012. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER:- 1 ADDITION ON ACCOUNT OF REIMBURSEMENT OF EXPENSES TO AE AS PER ORDER OF TRANSFER PRICING OFFICER : 2 ITA NO.892/MUM/2014 (ASSESSMENT YEAR 2008-09) (I) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHO LDING ORDER OF TRANSFER PRICING OFFICER (TPO)/AO MAKING ADJUSTMENT OF RS. 2 ,26,10,000/- TO INCOME ON ACCOUNT OF REIMBURSEMENT OF EXPENSES TO A E BY DETERMINING ALP AT RS. NIL. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. (II) THE CIT (A) ERRED IN LAW AND FACTS IN UPHOLDI NG ORDER OF TRANSFER PRICING OFFICER (TPO)/AO TREATING REIMBURSEMENT OF EXPENSES AS PAYMENT FOR SERVICES RENDERED BY AE. THE REASONS GIVEN BY H IM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINS T THE PROVISIONS OF LAW. (III) THE CIT (A) LD. OUGHT TO HAVE HELD THAT THER E IS NO NEED TO FIND ALP OF REIMBURSEMENT OF EXPENSES AS THERE IS NO INCOME CON TENT AND IT HAS NOT RESULTED INTO ANY DIRECT OR TANGIBLE BENEFIT TO THE ASSESSEE. (IV) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT ( A) OUGHT TO ALLOWED DEDUCTION OF 5% FROM ARM'S LENGTH PRICE UNDER PROVI SO TO SECTION 92C(2) OF THE ACT. (V) THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOL DING ORDER OF LD. AO ALTERNATIVELY DISALLOWING REIMBURSEMENT OF EXPENSES U/S 40 (A)(IA) OF THE ACT FOR NON- DEDUCTION OF TDS . THE REASONS GIVEN B Y HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINS T PROVISIONS OF LAW. 2 DISALLOWANCE U/S 14 A THE LD CIT (A) ERRED IN LAW AND FACTS IN UPHOLDING FURTHER DISALLOWANCE OF RS. 10,03,074/- OUT OF EXPE NSES U/S 14A OF THE ACT WITH REFERENCE TO INVESTMENT MADE IN SUBSIDIARY COM PANIES IN ADDITION TO RS. 1,99,041/- DISALLOWED BY THE ASSESSEE IN THE RE TURN OF INCOME. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CON TRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 3. IN THIS APPEAL, ASSESSEE HAS RAISED TWO ISSUES, WHICH WE SHALL DEAL IN SERIATIM. IN SO FAR AS THE FIRST ISSUE IS CONCERN ED, THE SAME RELATES TO AN ADDITION OF RS.2,26,10,000/- MADE TO THE RETURNED INCOME. IN THIS CONTEXT, THE BRIEF FACTS ARE THAT THE ASSESSEE HAD ENTERED INTO AN INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF THE ACT ON ACC OUNT OF REIMBURSEMENT OF EXPENSES OF RS.2,26,10,000/- OF ITS ASSOCIATED ENTE RPRISE, M/S.KUONI TRAVEL HOLDINGS LTD., SWITZERLAND. BEFORE THE TRANSFER PR ICING OFFICER, ASSESSEE EXPLAINED THAT THE SAID AMOUNT WAS PAID ON ACCOUNT OF FITA ( FUTURE BUSINESS AND IT ARCHITECTURE). THE TRANSFER PRICING OFFICER CONSIDERED THE DETAILS AND 3 ITA NO.892/MUM/2014 (ASSESSMENT YEAR 2008-09) SUBMISSIONS PUT-FORTH BY THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAD NEITHER PROVED THAT SUCH SERVICES WERE ESSENTIAL FO R ITS BUSINESS NOR THAT ANY SERVICES HAD INDEED BEEN RENDERED BY THE ASSOCIATE D ENTERPRISE. CONSIDERING THAT ASSESSEE WAS NOT ABLE TO PROVE THAT THE SERVIC ES HAVE RESULTED INTO ANY DIRECT OR INTANGIBLE BENEFIT, THE TRANSFER PRICING OFFICER CONCLUDED THAT THERE WAS NO NEED TO FIND THE ARMS LENGTH VALUE OF SUCH TRANSACTION. THE TRANSFER PRICING OFFICER PROCEED TO DETERMINE THE ARM'S LENG TH PRICE AT NIL VIDE HIS ORDER DATED 27/10/2011 PASSED UNDER SECTION 92CA(3) OF TH E ACT. THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER UNDER SECTION 1 43(3) OF THE ACT BY ADDING A SUM OF RS.2,26,10,000/- TO THE RETURNED INCOME IN CONFORMITY WITH THE ORDER PASSED BY THE TRANSFER PRICING OFFICER. ADDITIONA LLY, THE ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAD NOT DEDUCTED THE REQUISITE TAX AT SOURCE ON SUCH PAYMENT AND THEREFORE, THE CORRESPONDING EXPENDITUR E WAS ALSO TO BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT. THE ASSESSING OFFICER HAS OBSERVED THAT IN CASE THE ADJUSTMENT MADE BY THE TR ANSFER PRICING OFFICER WAS NOT ULTIMATELY SUSTAINED, THE AMOUNT WOULD CONTINU E TO BE DISALLOWED IN TERMS OF SECTION 40(A)(I) OF THE ACT. THE CIT(A) H AS SUSTAINED THE STAND OF THE ASSESSING OFFICER, AGAINST WHICH ASSESSEE IS IN FUR THER APPEAL BEFORE US. 4. BEFORE US, ASSESSEE HAS MADE TWIN ARGUMENTS. FI RSTLY, IT IS CANVASSED THAT THE TRANSFER PRICING OFFICER EXCEEDED HIS JURI SDICTION IN OBSERVING THAT THE ASSESSEE WAS NOT ABLE TO PROVE RENDERING OF ANY SER VICES BY THE ASSOCIATED ENTERPRISE, INASMUCH AS SUCH A TEST WAS RELEVANT F OR THE PURPOSES OF SECTION 37(1) OF THE ACT, WHICH COULD ONLY BE DONE BY THE A SSESSING OFFICER AND IN SUPPORT OF THE SAID PROPOSITION, HE HAS RELIED UPO N THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/ S. LEVER INDIA EXPORTS LTD., 4 ITA NO.892/MUM/2014 (ASSESSMENT YEAR 2008-09) 1306 OF 2014 & OTHERS DATED 23/01/2017, COPY OF WHI CH HAS BEEN PLACED ON RECORD. ON THIS ASPECT, IT WAS CONTENDED THAT THE ISSUE AT HAND MAY BE SENT BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY TH E ALLOWABILITY OF EXPENDITURE UNDER SECTION 37(1) OF THE ACT AFTER PROVIDING AN O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4.1 IN SO FAR AS INVOKING OF SECTION 40(A)(I) OF T HE ACT BY THE ASSESSING OFFICER IS CONCERNED, THE ONLY PLEA RAISED BEFORE US IS THAT IN THE SUBSEQUENT YEAR ASSESSEE HAS DEDUCTED THE REQUISITE TAX AT SOU RCE AND, THEREFORE, SUCH SUM WOULD BECOME ALLOWABLE IN THE SUBSEQUENT YEAR. IN THIS BACK GROUND, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NO OBJECTION IF THE INVOKING OF SECTION 40(A)(I) OF TH E ACT BY THE ASSESSING OFFICER IS UPHELD IN THIS YEAR, BUT HE CONTENDED THAT THE ASSE SSING OFFICER BE DIRECTED TO VERIFY THE SUBSEQUENT DEDUCTION OF TAX AT SOURCE AN D ACCORDINGLY ALLOW DEDUCTION IN THE SUBSEQUENT YEAR. 5. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REV ENUE. SO HOWEVER, WITH REGARD TO THE PLEA OF THE ASSESSEE FOR VERIFICATION OF THE CLAIM FOR DEDUCTION IN SUBSEQUENT YEAR IS CONCERNED, THE SAME HAS NOT BEEN OPPOSED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THIS CASE, SECTION 40(A)(I) OF THE ACT HAS BEEN INVOKED TO DISALLOW TH E EXPENDITURE ON THE GROUND THAT THE REQUISITE TAX HAS NOT BEEN DEDUCTED. THE PLEA OF THE ASSESSEE IS THAT IN THE SUBSEQUENT YEAR THE REQUISITE TAX HAS BEEN D EDUCTED AND, THEREFORE, THE EXPENDITURE MAY BE ALLOWED AS DEDUCTION IN THE SU BSEQUENT YEAR. IN VIEW OF 5 ITA NO.892/MUM/2014 (ASSESSMENT YEAR 2008-09) THE AFORESAID SUBMISSION, THE ACTION OF THE ASSESSI NG OFFICER IN DISALLOWING THE EXPENDITURE IN THIS YEAR BY INVOKING OF SECTION 40 (A)(I) OF THE ACT IS HEREBY UPHELD AND IT IS FURTHER DIRECTED THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION IN THE SUBSEQUENT YEAR BE EXAMINED AS PER LAW. 6.1 IN VIEW OF THE AFORESAID, WE FIND NO REASON TO ADJUDICATE ON THE CONTROVERSY REGARDING DETERMINATION OF THE ARM'S LE NGTH PRICE AT NIL, SINCE IT WOULD MAKE NO DIFFERENCE TO THE ASSESSED INCOME, I NASMUCH AS, THE SAID EXPENDITURE IS OTHERWISE DISALLOWABLE UNDER SECTION 40(A)(I) OF THE ACT EVEN GOING BY THE STAND OF THE ASSESSEE. 6.2 THUS, ON THE FIRST ISSUE, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES ONLY. 7. THE ONLY OTHER ISSUE IN THIS APPEAL IS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT AT R S.12,02,115/- AS AGAINST OF A SUM OF RS.1,99,041/- SUO-MOTO DISALLOWED BY THE ASSESSEE. IN THIS CONTEXT, RELEVANT FACTS ARE THAT THE ASSESSING OFFICER COMPU TED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT BY APPLYING RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962( IN SHORT THE RULES) AT RS.12,02,115/-. THE SAID ACTION HAS ALSO BEEN AFFIRMED BY THE CIT(A). 8. BEFORE US, THE SHORT POINT RAISED BY THE ASSESSE E IS BASED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. DISH TV INDIA L TD. VS. ACIT, ITA NOS.2066&2067/M/2015, A.Y 2008-09 & 2009-10 DATED 2 0/12/2016, WHEREBY IT IS CANVASSED THAT DISALLOWANCE BE RECOMPUTED B Y EXCLUDING THE STRATEGIC INVESTMENTS MADE BY THE ASSESSEE IN ITS SUBSIDIARI ES. ON THIS ASPECT, THE LD. DEPARTMENTAL REPRESENTATIVE HAD NO OBJECTION AND AC CORDINGLY, THE MATTER IS 6 ITA NO.892/MUM/2014 (ASSESSMENT YEAR 2008-09) RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO R E-WORK THE AMOUNT DISALLOWABLE UNDER SECTION 14A OF THE ACT BY EXCLUD ING THE VALUE OF STRATEGIC INVESTMENTS COMPRISED IN THE TOTAL INVESTMENTS. TH US, ON THIS ASPECT ALSO ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 10/02/2017 SD/- SD/- ( AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 10/02/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI
Mehul