ADDL CIT RG 3(1), MUMBAI V. EXPOPRT CREDIT GUARANTEE CORPORATION OF INDIA LTD, MUMBAI

ITA 924/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48671 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: V MOHAN

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI VIJAY PA L RAO (JM) ITA NO.924/M/2010 ASSESSMENT YEAR 2006-07 THE DCIT CIRCLE 3(1), M/S.EXPORT CREDIT GUARANTEE CORPORATION ROOM NO.607, 6 TH FLOOR, OF INDIA LTD., 5 TH FLOOR, NIRMAL BUILDING AAYAKAR BHAVAN, MUMBAI 400 020. NARIMAN POINT, MUM BAI 400 021. PAN : AAACE 0296 K APPELLANT RESPONDENT REVENUE BY : SHRI D. SONGATE ASSESSEE BY : SHRI V. MOHAN O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.11.2009 OF CIT(A) FOR THE A.Y.2006-07. THE ONLY DISPUTE RAISED IS REGARDING DISALLOWANCE OF THE AMOUNT PAID TO EMPLOYEES RECRE ATION CLUB UNDER THE PROVISIONS OF SECTION 40A(9) OF THE INCOME-TAX ACT. THE ASSESSEE WHICH IS A GOVERNMENT COMPANY HAD MADE A CONTRIBUTION OF RS.10 LACS DURING THE YEAR TO THE EMPLOYEES RECREATION CLUB. THE ASSESSEE EXPLAI NED THAT THE CLUB HAD BEEN FOUND BY THE EMPLOYEES OF THE CORPORATION WITH A VI EW TO PROVIDE RECREATION TO THE EMPLOYEES AND THE MEMBERSHIP OF THE CLUB WAS OP EN TO ALL PERMANENT EMPLOYEES OF THE CORPORATION. THE RECREATION FACILI TIES PROVIDED BY THE CLUB ENABLED THE EMPLOYEES TO DE-STRESS WHICH IMPROVED T HEIR PERFORMANCE DURING 2 THE COURSE OF OFFICIAL WORK. IT WAS ACCORDINGLY URG ED THAT THE CLAIM SHOULD BE ALLOWED. THE AO WAS HOWEVER NOT SATISFIED BY THE EX PLANATION GIVEN AND DISALLOWED THE CLAIM UNDER THE PROVISIONS OF SECTIO N 40A(9). IN APPEAL CIT(A) FOLLOWING THE DECISION IN THE EARLIER YEAR HELD THA T THE CLAIM COULD NOT BE DISALLOWED UNDER SECTION 40A(9) AND THUS ALLOWED TH E SAME AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 2. BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMIT TED THAT THE CASE OF THE ASSESSEE WAS COVERED BY THE JUDGMENT OF HONBLE HIG H COURT OF MUMBAI IN CASE OF CIT VS BHARAT PETROLEUM CORPORATION LTD. (2 52 ITR 43) IN WHICH PAYMENT TO CLUB FORMED BY THE ASSESSEE FOR WELFARE OF THE EMPLOYEES HAS BEEN FOUND ALLOWABLE. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF AO. 3. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EXPENDITURE IN CURRED BY THE ASSESSEE ON ACCOUNT OF CONTRIBUTION TO EMPLOYEES RECREATION CL UB. THE CLUB HAD BEEN FORMED FOR PROVIDING RECREATION FACILITIES TO THE E MPLOYEES FOR THE PURPOSE OF DESTRESSING THEM WITH A VIEW TO IMPROVING THE PERFO RMANCE DURING OFFICIAL DUTIES. THE ASSESSEE HAD PAID A SUM OF RS.10 LACS T O THE CLUB DURING THE YEAR. THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF MUMBAI IN CASE OF CIT VS BHARAT PETROLEUM CORPORATI ON (SUPRA) IN SUPPORT OF THE ALLOWABILITY OF CLAIM. WE HAVE GONE THROUGH THE SAID JUDGMENT. WE FIND THAT IN THAT CASE THE ASSESSEE HAD REIMBURSED THE E XPENSES INCURRED BY THE CLUB FORMED FOR THE WELFARE OF THE EMPLOYEES. THE H IGH COURT HELD THAT THE REIMBURSEMENT OF EXPENSES INCURRED BY THE CLUB DID NOT CONSTITUTE CONTRIBUTION UNDER SECTION 40A(9) AND THEREFORE COULD NOT BE DIS ALLOWED UNDER THE SAID SECTION. IN THIS CASE THE FACTUAL POSITION IS NOT C LEAR AS TO WHETHER THE PAYMENT 3 MADE BY THE ASSESSEE WAS TOWARDS REIMBURSEMENT OF E XPENSES OR IT WAS A GENERAL CONTRIBUTION. WE THEREFORE SET ASIDE THE OR DER AND RESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER N ECESSARY EXAMINATION IN THE LIGHT OF JUDGMENT OF HONBLE HIGH COURT OF MUMBAI I N CASE OF BHARAT PETROLEUM CORPORATION (SUPRA) AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED F OR STATISTICAL PURPOSE. 5. THE DECISION PRONOUNCED IN THE OPEN COURT ON 27. 04.2011. SD/- SD/- ( VIJAY PAL RAO ) (RAJENDRA SIN GH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 27.04.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR E BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK