Pragati Green Meadows & Resorts Pvt.Ltd., Hyd, Hyderabad V. ACIT, Circle-16(3), Hyd, Hyderabad

ITA 949/HYD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6218 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 14-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Audit objection; Assessment record; Reason to believe
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA.NO.949/HYD/2015 ASSESSMENT YEAR 2006-2007 M/S. PRAGATI GREEN MEADOWS & RESORTS P. LTD., HYDERABAD. PAN AACCP5283H VS. ACIT, CIRCLE-16(3) HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.264/HYD/2013 ASSESSMENT YEAR 2006-2007 ACIT, CIRCLE-16(3) HYDERABAD. VS. M/S. PRAGATI GREEN MEADOWS & RESORTS P. LTD., HYDERABAD. PAN AACCP5283H (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALIMOHAN RAO FOR REVENUE : SHRI A. SITARAMA RAO DATE OF HEARING : 06.02.2017 DATE OF PRONOUNCEMENT : 10.02.2017 ORDER PER G. PAVAN KUMAR, J.M. THE CROSS-APPEALS ARE FILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-V, HYDERABAD VIDE ITA NO. 0374/DC-16(3)/CIT(A)-V/2011-12, DATED 27.11.2012 PASSED UNDER SECTION 115WE(3) R.W.S 115WG OF THE I.T. ACT. FOR THE SAKE OF CONVENIENCE, WE TAKE-UP THE FACTS NARRATED IN THE REVENUE APPEAL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH IN LAW AND IN FACTS OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSES FAILED TO PROVIDE ANY EXPLANATION ON WHY THE MARKETING 2 ITA.NO.264/H/2013 & ITA.NO.949/HYD/2015 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. EXPENSES ARE INCLUDED UNDER THE HEAD SALE PROMOTIONS INCLUDING PUBLICITY. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE EXPENSES INCURRED OF RS.61,22,590 FOR THE EVENT CLEARLY ATTRACT THE PROVISIONS OF SECTION 115WB(2)(L). 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE EXPENSES INCURRED OF RS. 14,68,243 FOR THE WERE PAID TO THE AGENTS CLEARLY ATTRACT THE PROVISIONS OF SECTION 115WB(2)(L). 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF LAND DEVELOPMENT AND SALE AND FILED ITS RETURN OF INCOME ON 28.11.2006 WITH TOTAL INCOME OF RS.2.15.85.945 AND ALSO FILED FRINGE BENEFITS TAX RETURN DISCLOSING VALUE AT RS.15,30,961 AND THE FBT RETURN WAS PROCESSED UNDER SECTION 115WE(1) OF THE ACT ON 03.10.2007. THE ASSESSING OFFICER ON PERUSAL OF THE ASSESSMENT RECORD FOUND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE TOWARDS SALES PROMOTION INCLUDING PUBLICITY WHICH IS SUBJECT TO THE FRINGE BENEFIT TAX. HENCE THE ASSESSMENT WAS REOPENED BY RECORDING THE REASONS. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS FILED RETURN OF FBT FOR THE A.Y. 2006- 07 WITH VALUE OF FRINGE BENEFITS OF RS.15,30,961 ON 28.11.2006 AND WHEREAS PAYMENTS DEBITED TO P&L A/C RS.1,97,19,663 TOWARDS SALES PROMOTIONS INCLUDING PUBLICITY THEREFORE, THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT THERE IS DISCREPANCY OF SHORT COMPUTATION OF VALUE OF FRINGE BENEFIT AND IS OF THE OPINION THAT THE VALUE OF FRINGE BENEFITS TO BE DETERMINED AT RS.38,40,464 AND HAS REASON TO BELIEVE THAT THE VALUE OF FRINGE BENEFITS HAS TO BE CHARGED TO TAX AND ESCAPED THE ASSESSMENT AND FURTHER ISSUED NOTICE UNDER SECTION 115WH. IN COMPLIANCE TO THE NOTICE, THE LD. A.R. OF THE ASSESSEE APPEARED AND EXPLAINED THE CLAIM AND FURNISHED DETAILS OF CALCULATION OF FRINGE BENEFITS TAX BREAK-UP, MARKETING EXPENSES AND LEDGER ACCOUNT COPIES. 3 ITA.NO.264/H/2013 & ITA.NO.949/HYD/2015 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. WHEREAS THE ASSESSING OFFICER IN THE COURSE OF HEARING PROCEEDINGS FOUND THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE OF RS.1,97,19,662 WHICH IS AS UNDER : 31 ST EVENT PROGRAMME 61,22,590.00 MARKETING PROMOTIONAL EXPENSES 1,21,28,829.60 TRAVEL ALLOWANCE PAID TO AGENTS 14,68,243.00 TOTAL 1,97,19,662.60 3. THE ASSESSING OFFICER ON APPLYING THE PROVISIONS OF SECTION 115WB(2)(L) FRINGE BENEFIT TAX TO THE EMPLOYEES FOUND THE EXPENDITURE PERTAINING TO THE CELEBRATIONS OF 31 ST EVENT IS NOT ALLOWABLE AS SUCH EXPENDITURE ON MEETING OR GET-TOGETHER OF EMPLOYEES AND THEIR FAMILY MEMBERS IS ALLOWABLE ONLY FOR INDEPENDENCE DAY OR REPUBLIC DAY AND DISALLOWED THE VALUE OF FRINGE BENEFITS RS.38,40,464 AND PASSED ORDER UNDER SECTION 115WE(3)R.W.S 115WG DATED 25.11.2011. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. A.R. OF THE ASSESSEE ARGUED THE GROUNDS AND SUBMITTED THAT THE PROVISIONS OF FRINGE BENEFIT TAX DOES NOT ARISE AS THIS EXPENDITURE PERTAINS TO THE AGENTS AND THE EVENT OF 31 ST CELEBRATIONS DOES NOT COME UNDER DEEMED BENEFIT TO THE EMPLOYEES. THE LD. A.R. FILED DETAILS OF THE CLAIM OF EXPENDITURE AND ALSO CONTROVERT THE FINDINGS OF THE ASSESSING OFFICER. WHEREAS, THE LD. CIT(A), ON PERUSAL OF THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE HAS ALREADY OFFERED THE FRINGE BENEFITS VALUE AND THEREFORE, RS.38,40,464 IS NOT LIABLE FOR FBT AND SHALL NOT BE TREATED AS DEEMED FRINGE BENEFIT AS THE ASSESSEE HAS FILED DETAILS OF EXPENDITURE WITH CALCULATION OF FBT FURTHER ADMINISTRATIVE EXPENDITURE DOES NOT FORM PART OF DEEMED BENEFIT OR COME UNDER THE PURVIEW OF FRINGE BENEFIT PERQUISITE AND 4 ITA.NO.264/H/2013 & ITA.NO.949/HYD/2015 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. THE LD. CIT(A) HAS DEALT ON THE WRITTEN SUBMISSIONS AT PARA 5.1 OF THE ORDER AND HELD THE ACTION OF THE ASSESSING OFFICER IS WITHOUT MERIT AND DELETED THE ADDITION OF VALUE OF FRINGE BENEFIT BY ORDER DT. 27.11.2012. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS FILED WITH TRIBUNAL. THE LD. D.R. ARGUED THE NATURE OF EXPENDITURE DIVIDED INTO THREE CATEGORIES AND PRAYED THAT THE EXPENDITURE HAS BEEN INCURRED FOR BENEFIT OF EMPLOYEES AND WHEREAS THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 115WB(2)(L) AND FURTHER THERE IS NO CLARITY ON EXEMPTION WHICH IS AVAILABLE ONLY TO THE FESTIVALS AND PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT(A). 6. PER CONTRA, THE LD. A.R. OF THE ASSESSEE RELIED ON THE ORDERS OF THE CIT(A) AND SUBMITTED THAT 31 ST EVENT HAS BEEN CONDUCTED ON THE CALENDER YEAR ENDING FALLS IN F.Y. 2005-06 RELEVANT TO A.Y. 2006-07 AND DREW ATTENTION TO THE APPLICABILITY OF PROVISIONS OF FBT TO THE EMPLOYEES AND GAVE CATEGORICAL SUBMISSIONS ON MARKETING EXPENSES, AND FILED PAPER BOOK ON THE VALUE OF FRINGE BENEFIT. THE LD. A.R. ALSO RELIED TRIBUNAL DECISION ON THE SIMILAR ISSUE IN THE CASE OF M/S KOTAK COMMODITY SERVICES LTD. VS. DCIT , ITA.NO.7271/MUM/2011, DT. 16-01-2013 FOR THE A.Y. 2006-2007 WHERE DEEMED FRINGE BENEFITS AND APPLICABILITY OF FBT TO THE EMPLOYEES HAS BEEN DEALT. THE LD. A.R. EXPLAINED THE NATURE OF EXPENDITURE PERTAINS TO BUSINESS PROMOTION AND SUBSTANTIATED THE EXPENDITURE WITH THE VOUCHERS AND EXPLAINED THAT THE LD. ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE AND PRAYED FOR DISMISSAL OF REVENUE APPEAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE CRUX OF THE 5 ITA.NO.264/H/2013 & ITA.NO.949/HYD/2015 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. ISSUE RAISED BY THE LD. D.R. THAT PROVISIONS OF FBT ARE APPLICABLE TO THE EXPENDITURE AS IT RELATES TO THE EMPLOYEES WHEREAS THE LD. A.R. DREW OUR ATTENTION TO THE PAPER BOOK AT PAGE 28 WHERE THE TOTAL EXPENDITURE OF RS.1,97,19,662 WAS DISCLOSED AND THE BIFURCATION WAS PROVIDED IN RESPECT OF 31 ST EVENT WITH ADVERTISEMENT EXPENSES OF RS.10,83,104 AND 31 ST EVENT EXPENDITURE OF RS.50,39,486 TOTAL AGGREGATING TO RS.61,22,560. SIMILARLY, THE LD. A.R. DREW OUR ATTENTION TO PAGE 30 WHERE THE ADVERTISEMENT EXPENDITURE OF 31 ST EVENT IS SUPPORTED BY THE LEDGER ACCOUNT AND AT PAGE 31 THE AMOUNT OF RS.18 LAKHS WAS PAID TO ARTIST SHANTANU MUKARGI FOR 31 ST EVENT. THE MARKETING PROMOTIONAL EXPENSES ARE INCURRED FOR BUSINESS PROMOTION AND THE TRAVELING ALLOWANCES PAID TO AGENTS ARE IN THE NATURE OF REIMBURSEMENT AND NOT TO THE EMPLOYEES. WE HAVE PERUSED THE PAPER BOOK AND THE LEDGER ACCOUNT AND FOUND THAT THE EVENT HAS OCCURRED ON 31 ST DECEMBER AND IS IN THE NATURE OF BUSINESS PROMOTION. THEREFORE, WE DO NOT FIND ANY BENEFIT DERIVED BY THE EMPLOYEES. SIMILARLY, THE LD. A.R. SUBMITTED THAT THE AMOUNT PAID TOWARDS THE AGENTS IS IN THE NATURE OF REIMBURSEMENT OF TRAVELLING ALLOWANCE AND WE FIND THE REVENUE IN THE ASSESSMENT OR IN THE APPEAL PROCEEDINGS COULD NOT IDENTIFY THAT THIS EXPENDITURE HAS BEEN INCURRED DIRECTLY ON THE EMPLOYEES BUT RELIED ONLY ON THE ASSESSEES FINANCIAL STATEMENTS. CONSIDERING THE APPARENT FACTS, WE ARE OF THE VIEW THAT THE SAID EXPENDITURE FALLS OUT OF THE PURVIEW OF THE FBT PROVISIONS AND CANNOT BE BROUGHT UNDER DEEMING PROVISIONS. ACCORDINGLY, WE ARE OF THE OPINION THAT THE ADDITION ON ACCOUNT OF VALUE ON FRINGE BENEFIT CANNOT BE SUSTAINED. WE FIND THAT THE LD. CIT(A) HAS DEALT ON THE DISPUTED SSUE AND DISCUSSED SUBMISSIONS OF THE ASSESSEE AND THE PROVISIONS AND DELETED THE ADDITION. HENCE WE ARE NOT 6 ITA.NO.264/H/2013 & ITA.NO.949/HYD/2015 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHOLD THE SAME AND THE APPEAL OF THE REVENUE IS DISMISSED. 8. NOW, WE TAKE-UP ASSESSEES APPEAL ITA NO. 264/HYD/2013 WHERE ASSESSEE HAS RAISED THE GROUNDS FOR THE FIRST TIME BEFORE THE TRIBUNAL CHALLENGING THE ISSUE OF NOTICE UNDER SECTION 115WH OF THE ACT DATED 25.02.2011. THE LD. A.R. AT THE TIME OF HEARING SUBMITTED AND RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT REPORTED IN (1998) 229 ITR 383 (SC) ON RAISING THE GROUND BEFORE THE TRIBUNAL. WE FIND THAT THE GROUND RAISED BY THE ASSESSEE IS IN ORDER AND WE ADMIT THE SAME. 9. PER CONTRA, THE LD. D.R. SUBMITTED THAT THE NOTICE ISSUED IS IN ORDER AND DUE TO AUDIT OBJECTION THE SAID INFORMATION WAS CONSIDERED BY THE CONCERNED CIT. THE LD. D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER AND EXPLAINED THAT THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 115WE(1) OF THE ACT ON 03.10.2007 AND NOTICE UNDER SECTION 115WH WAS ISSUED ON 25.02.2011 WITHIN 4 YEARS WHEREAS THE A.R. SUBMITTED THAT THE NOTICE CANNOT BE ISSUED BASED ON THE AUDIT OBJECTION. WE FIND REOPENING BY ISSUE OF NOTICE WAS WITHIN 4 YEARS. HENCE, CONSIDERING THE APPARENT FACTS AND PROVISIONS, WE ARE OF THE OPINION THAT THE REOPENING PROCEEDINGS ARE VALID AND WE UPHOLD THE SAME AND APPEAL OF THE ASSESSEE IS DISMISSED. 7 ITA.NO.264/H/2013 & ITA.NO.949/HYD/2015 M/S. ARANI AGRO OIL INDUSTRIES LTD., HYDERABAD. 10. IN RESULT, APPEAL OF THE REVENUE AND APPEAL OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.02.2017. SD/- SD/- (B. RAMAKOTAIAH) (G. PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 10 TH FEBRUARY, 2016 VBP/- COPY TO 1. DCIT, CIRCLE-1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. ARANI AGRO OIL INDUSTRIES LTD., FLAT NO.305-B, PANCOM BUSINESS CENTRE, AMEERPET, HYDERABAD. 3. CIT(A)-V, HYDERABAD. 4. CIT-1, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE.