BAYER CROPSCIENCE LTD, MUMBAI V. ADDL CIT 10(3), MUMBAI

MA 753/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7788 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-07-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Assessee Lawyers: JIGER SAIYA; MRS HEMLATA BHUNGARE ARS
• Keywords: Gift; Business expenditure; Bonafide belief; Retrospective amendment; TDS
• Section: 40(a)(ia); 37(1); 194C; 254(2); 13

Judgement Text

1 MA NO.753/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) M.A. NO.753 /MUM/2018 (ARISING OUT OF ITA NO.7619/MUM/2013) (ASSESSMENT YEAR: 2008-09) & BAYER CROPSCI E N C E LTD. BAYER HOUSE CENTRAL AVENUE THANE-400 607 PAN NO: AAACB9651K VS ADDL.CIT - 10(3) AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 APPLICANT RESPONDENT APPLICANT BY SHRI JIGER SAIYA & MRS. HEMLATA BHUNGARE, ARS RESPONDENT BY SHRI R. BHOOPATHI, DR DATE OF HEARING 28/02 /2020 DATE OF PRONOUNCEMENT 28/0 7 /2020 O R D ER PER: RAJESH KUMAR: AM THE ASSESSEE HAS FILED THIS MISCELLANEOUS APPLICATI ONS U/S 254(2) OF THE I.T.ACT, 1961 AGAINST ORDER OF THE TRIBUNAL IN ITA NO.7619/MUM/2013, DATED 07/06/2018 FOR THE ASST.YEA R 2008-09. 2. THE ASSESSEE HAS NARRATED FACTS AND MISTAKES STA TED TO BE APPARENT ON RECORD FROM THE ORDER OF THE TRIBUNAL. THE RELEVANT CONTENTS OF THE MISCELLANEOUS APPLICATION FILED BY THE ASSES SEE ARE REPRODUCED AS UNDER:- 2 MA NO.753/MUM/2018 RELEVANT FACTS ONE MR. 5 5 MOHLA, AN EX-EMPLOYEE APPOINTED TO SECURE ORDERS MADE A CLAIM OF RS. 1,07,55,260 ON THE APPELLANT COMPANY IN ORDER TO SETTLE THE DISPUTE OUT OF COURT, THE AP PELLANT PAID RS.75,00,000 TOWARDS RESTRAINING MR. MOHLA FROM SHARING ANY CONFIDEN TIAL DOCUMENTS, INFORMATION, BUSINESS AND TRADE SECRETS OF THE APPELLANT WITH ANY COMPETITOR OR THIRD PARTY WITHDRAWAL OF CIVIL SUIT FILED BEFORE THE HIGH COURT OF DELHI THE ITAT HELD PAYMENT IS IN NATURE OF COMMISSIO N AND SINCE THE APPELLANT FAILED TO DEDUCT TDS U/S 194H THE AO HAS RIGHTLY DI SALLOWED SUCH EXPENDITURE U/S 40(A)(IA) (PARA 14, PG 13 OF ITAT ORDER) OUR PLEA DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS KOTAK SECURITIES LTD 203 TAXMAN 86 (BOM) NOT CONSIDERED WHILE DECIDING O N MERIT MISTAKE APPARENT FROM RECORD O RELIANCE IS PLACED ON: - SAURASHTRA KUTCH STOCK EXCHANGE LTD 305 ITR 2 27(SC) - SILICON GRAPHICS SYSTEMS H) LTD 21 SOT 471 (D EL) REF PARA 64, PG 10 OF FACT SHEET - THE APPELLAN T ADVANCED AN ARGUMENT THAT EVEN IF IT IS HELD THAT THE PAYMENT TO MR MOHL A PARTAKES THE CHARACTER OF COMMISSION, THE APPELLANT WAS UNDER BONAFIDE BELIEF THAT THE PAYMENT WAS PURELY IN THE NATURE OF COMPENSATION AND NOT COMMIS SION AND CONSEQUENTLY, TAX WAS NOT DEDUCTIBLE AT SOURCE. THIS IS FURTHER S UPPORTED BY THE FACT THAT THE AO HIMSELF DID NOT CONTEND THAT THE PAYMENT WAS IN THE NATURE OF COMMISSION. IN THIS CONTEXT THE APPELLANT PLACED RELIANCE ON THE CASE OF JURISDICTIONAL HIGH COURT IN THE CASE OF C/T VS KOTAK SECURITIES LTD 20 3 TAXMAN 86 (BOM) WHEREIN THE HON'BLE HIGH COURT HELD: 'THE ASSESSEE WAS LIABLE TO DEDUCT TAX DEDUCT AT SO URCE WHITE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXC HANGE. HOWEVER, SINCE BOTH THE REVENUE AND ASSESSEE WERE UNDER THE BONA F IDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAY MENT OF TRANSACTION CHARGES, NO FAULT CAN BE FOUND WITH ASSSESEE IN NOT DEDUCTING THE TAX AT SOURCE IN THE ASSESSMENT YEAR IN QUESTION AND CONSE QUENTLY, DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I A) IN RESPECT OF THE TRANSACTION CHARGES CANNOT BE SUSTAINED' 3 MA NO.753/MUM/2018 * DECISION OF THE COORDINATE BENCH IN THE CASE OF D CIT VS. UPS JETAIR EXPRESS P LTD 56 TAXMANN.COM 387 (MUM) NOT CONSIDERED WHILE DECIDING ON MERIT - MISTAKE APPARENT FROM RECORD O * RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: - HONDA SIEI POWER PRODUCTS LTD 295 ITR 466 (SC ) RELIANCE COMMUNICATION LTD 183 TTJ 388 (MUM) - SILICON GRAPHICS SYSTEMS (I) LTD 21 SOT 471 ( DEL) REF PARA 65, PG 10 OF FACT SHEET - RELYING ON TH E DECISION OF THE COORDINATE BENCH IN THE CASE OF DCIT VS. UPS JETAIR EXPRESS P LTD 56 TAXMANN.COM 387 (MUM) THE APPELLANT ALSO ARGUED THAT PROVISO TO SEC TION 40{A) IS RETROSPECTIVE IN NATURE AND HENCE THE AO MAY BE DIRECTED TO VERIF Y WHETHER THE PAYEE HAS PAID TAXES, AND IF HE HAS, THE SAID EXPENDITURE OUG HT NOT TO BE DISALLOWED IN THE HANDS OF THE APPELLANT. IN THE CASE OF DCIT VS. UPS JETAIR EXPRESS P LTD 56 TAXMANN.COM 387 (MUM) THE HON'BLE MUMBAI BENCH OF ITAT HELD: 'SINCE PAYMENT WAS MADE TO RESIDENT LEGAL FIRM, SAM E WAS SUBJECT TO TDS AND LIABLE FOR DISALLOWANCE U/S.40(A)(I). HOWEVER, KEEP ING IN VIEW THE PURPOSE BEHIND INSERTION OF SECOND PROVISO BY FINANCE ACT, 2012 IN SECTION 40(A)(IA), IT CAN BE SAID TO BE DECLARATORY AND CURATIVE IN NATURE AND T HEREFORE, IT SHOULD BE GIVEN RETROSPECTIVE EFFECT FROM 1-4-2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY FINANCE (NO. 1) ACT, 2004. IN VIEW OF THE ABOVE DISCUSSION, WE RESTORE THE MATTER BACK TO THE FILE OF AO TO VERIFY AS TO WHETHER THE TITUS HAS PAID TAX ON THE IMPUGNED PAYMENTS BY INCO RPORATING THE SAME IN THEIR RESPECTIVE INCOME. IF THE AO FINDS THAT THE TITUS H AS ALREADY PAID TAX BY INCLUDING SUCH PAYMENTS IN ITS INCOME, NO FURTHER TAX CAN BE COLLECTED FROM ASSESSEE WHICH AMOUNTS TO DOUBLE TAXATION AND NO DISALLOWANC E CAN BE MADE IN THE HANDS OF THE ASSESSEE U/S.4Q(A)(IA)' ALTERNATE ARGUMENT ADVANCED BY APPELLANT NOT AD JUDICATED - MISTAKE APPARENT FROM RECORD O RELIANCE IS PLACED ON: - BHARTI AIRTEL LTD 166 ITD 179 (DEL) - SILICON GRAPHICS SYSTEMS (I) LTD 21 SOT 471 ( DEI) MULA PRAVARA ELECTRIC CO- OP SOCIETY LTD 156 TTJ 51 7 (PUNE) IN RESPECT OF GROUND NO 4 RELEVANT FACTS APPELLANT INCURRED EXPENSES TO THE TUNE OF RS .19,95,476 ON GIFTS WHICH WERE GIVEN TO EMPLOYEES, DEALERS, CUSTOMERS, OTHER BUSIN ESS ASSOCIATES, AND GOVERNMENT OFFICIALS ON FESTIVE OCCASIONS 4 MA NO.753/MUM/2018 THE ITAT REJECTED THE GROUND OF THE APPELLANT BY HOLDING THAT THE EXPENSES IN THE NATURE OF GIFTS AND REWARDS ARE IN THE NATURE OF PE RSONAL EXPENSES AND HENCE CANNOT BE ALLOWED AS DEDUCTIBLE UNDER SECTION 37(1) OF THE INCOME TAX ACT 1961. THE ITAT ALSO HELD THAT MERE PAYMENT OF FBT ON SUCH EXPENSES WOULD NOT DISCHARGE THE APPELLANT'S OBLIGATION TO PROVE SUCH EXPENSES TO SA Y THAT THESE ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. (PARA 11, PG 11 OF ITAT ORDER) OUR PLEA DECISION OF COORDINATE BENCH IN THE CASE OF HANSRAJ MATHURDAS VS ITO (ITA NO 2397/MUM/2010) RELIED UPON BY THE APPELLANT NOT CONSIDERED WHILE DECIDING ON MERIT - MISTAKE APPARENT FROM RECORD RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: - HONDA SIEL POWER PRODUCTS LTD 295 ITR 466 (SC ) RELIANCE COMMUNICATION LTD 183 TTJ 388 (MUM) - SILICON GRAPHICS SYSTEMS (I) LTD 21 SOT 471 ( DEI) RELYING ON THE DECISION OF IN THE CASE OF HANSR AJ MATHURDAS VS ITO (ITA NO 2397/MUM/2010) THE APPELLANT ARGUED THAT SINCE THE APPELLANT COMPANY HAD ALREADY PAID FBT IT CAN BE CONSTRUED THAT THE EXPEN SES ARE BUSINESS EXPENSES AND INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS (PARA 45 & 46, PG 8 OF FACT SHEET) THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF HANSRAJ MATHURDAS VS ITO (ITA NO 2397/MUM/2010) LAID DOWN THE FOLLOWING PRINCIPLE : 'CIRCULAR NO. 8/2005 DATED 29-08-2005 ISSUED BY THE BOARD EXPLAINING THE PROVISIONS RELATING TO FRINGE BENEFIT TAX THUS MAKE S IT CLEAR THAT FRINGE BENEFIT TAX IS LEVIED ON THE EXPENSES INCURRED BY THE EMPLOYER IRR ESPECTIVE OF WHETHER THE SAME ARE INCURRED FOR OFFICIAL OR PERSONAL PURPOSES . IN OUR OPINION, ONCE FRINGE BENEFIT TAX IS LEVIED ON SUCH EXPENSES AS HAS BEEN DONE IN THE PRESENT CASE, IT FOLLOWS THAT THE SAME ARE TREATED AS FRINGE BENEFIT S PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLOYEES AND THE SAME HAVE TO BE A PPROPRIATELY ALLOWED AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY INCURRED B Y THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS.' * DECISION OF COORDINATE BENCH IN CASE OF AGFA INDIA P LTD VS ACIT 81 T AXMANN.COM 453 (MUM-TRIB) NOT CONSIDERED WHILE DECIDING ON MERIT MISTAKE APPARENT FROM RECORD RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: - HONDA SIEL POWER PRODUCTS LTD 295ITR 466 (SC) RELIANCE COMMUNICATION LTD 183 TTJ 388 (MUM) - SILICON GRAPHICS SYSTEMS (I) LTD 21 SOT 471 ( DEL) THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE AGFA INDIA P LTD VS ACIT 81 TAXMANN.COM 453 (MUM.TRIB) FOLLOWING THE DE CISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENG G CO VS CIT 253 ITR 749 (GUJ) HELD THAT IN CASE OF A CORPORATE ENTITY, NO D ISALLOWANCE CAN BE MADE ON ACCOUNT OF PERSONAL USE BY THE DIRECTOR/EMPLOYEES. 5 MA NO.753/MUM/2018 3. THE LD. AR FOR THE ASSESSEE REFERRING THE ORDER OF THE TRIBUNAL, INSOFAR AS, GROUND NO.5 OF APPEAL SUBMITTED THAT AL THOUGH, THE ASSESSEE HAS SUPPORTED ITS ARGUMENTS IN LIGHT OF THE DECISIO N OF JURISDICTION HIGH COURT IN THE CASE OF CIT VS KOTAK SECURITIES LTD. 0 3 TAXMANN.COM.86 (BOM.), BUT THE TRIBUNAL HAS NOT CONSIDERED SAID DE CISION, WHILE DECIDING THE ISSUE ON MERITS. THEREFORE, SAID MISTAKE CONSTI TUTES A MISTAKE APPARENT FROM THE RECORD, WHICH NEEDS TO BE RECTIFI ED U/S 254(2) OF THE I.T.ACT, 1961. THE LD. AR, FURTHER, SUBMITTED THAT ALTHOUGH, THE ASSESSEE HAS CITED VARIOUS DECISIONS BY MAKING ALTERNATIVE P ROPOSITIONS, BUT NONE OF THE PROPOSITIONS HAS BEEN CONSIDERED WHILE ADJUD ICATION THE ISSUE. THEREFORE, NON CONSIDERATIONS OF VARIOUS DECISIONS CITED BY THE ASSESSEE CONSTITUTE A MISTAKE APPARENT ON RECORD, W HICH NEEDS TO BE RECTIFIED U/S 254(2) OF THE I.T.ACT, 1961. AS REGAR DS, GROUNDS NO.4 ON DISALLOWANCES OF GIFTS AND OTHER EXPENSES, THE ITAT HAS REJECTED THE ARGUMENTS OF THE ASSESEE BY HOLDING THAT EXPENDITUR E INCURRED ARE IN THE NATURE OF PERSONAL EXPENSES AND OR NOT INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, BUT WHILE ARRIVING AT SAID CONCLUSION, IT HAS IGNORED THE DECISION OF CO-ORDINATE BENCH IN THE CA SE OF HANSRAJ MATHURDAS VS ITO ( ITA NO. 2397/MUM/2010) RELIED UPON BY THE ASSESSEE AND OTHER DECISIONS, WHICH ARE SQUARELY AP PLICABLE TO FACTS OF THE ASSESEE. THE SAID ERROR CONSTITUTES THE MISTAKE APPARENT ON RECORD, WHICH REQUIRES RECTIFICATION U/S 254(2) OF THE I.T. ACT, 1961. 4. THE LD. DR, ON THE OTHER HAND SUBMITTED THAT TH E LD. AR FOR THE ASSESSEE HAS FAILED TO MAKE OUT A CASE OF PRIMA-FAC IE MISTAKE APPARENT ON RECORD FROM THE ORDER OF THE TRIBUNAL, BUT WHAT IS SOUGHT THROUGH THE MISCELLANEOUS APPLICATION IS REVIEW THE DECISION RE NDERED BY THE TRIBUNAL IN THE GIVEN FACTS AND CIRCUMSTANCES OF TH E CASE, WHICH IS NOT 6 MA NO.753/MUM/2018 PERMISSIBLE U/S 254(2) OF THE ACT. HENCE, MISCELLA NEOUS APPLICATION FILED BY THE ASSESEE MAY BE REJECTED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MISCELLANEOUS APPLICATION FILED BY THE ASSESEE, ALONG WITH ORDER OF THE TRIBUNAL, DATED 07/06/2018 IN ITA NO. 7619/MUM/2013. WE FIND THAT T HE TRIBUNAL HAS RECORDED CATEGORICAL FINDINGS, INSOFAR AS, DISALLOW ANCES OF AMOUNT PAID TO MR. MOHLA, AN EX-EMPLOYEE FOR NON DEDUCTION OF T AX AT SOURCE U/S 194C OF THE I.T.ACT, 1961, ON THE GROUND THAT THE P AYMENT MADE TO MR. MOHLA, IS IN THE NATURE OF COMMISSION, AND THE ASSE SSEE IS REQUIRED TO DEDUCT TAX AT SOURCE U/S 194C OF THE I.T.ACT, 1961. SINCE, THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON SAID PAYMENT, THE TRIBUNAL CAME TO THE CONCLUSION THAT THERE IS NO ERROR IN DISALLOWAN CES OF SAID AMOUNT U/S 40(A)(IA) OF THE ACT. FURTHER, THE TRIBUNAL HAS CON SIDERED VARIOUS CASE LAWS CITED BY THE ASSESEE, INCLUDING THE DECISION O F CIT VS KOTAK SECURITIES LTD (SUPRA), WHILE ADJUDICATING THE ISSU E AND FIND THAT THE FACTS OF THOSE CASES ARE NOT APPLICABLE TO FACTS OF PRESE NT CASE AND HENCE, ARE NOT SPECIFICALLY DISCUSSED. FURTHER, IT IS NOT NECE SSARY TO DISCUSS EACH AND EVERY DECISION CITED BY THE PARTIES IN THE BODY OF THE ORDER. IF THE BENCH WAS TAKEN A VIEW THAT THE CASE LAWS CITED BY THE PARTIES ARE NOT RELEVENT TO THE ISSUE, THEN THOSE CASE LAWS WHICH A RE NOT RELEVENT CANNOT BE CONSIDERED AT ALL. THEREFORE, WE ARE OF THE CONS IDERED VIEW THAT THE ASSESSEE HAS FAILED TO MAKE OUT A CASE OF PRIMA-FAC IE MISTAKE APPARENT ON RECORD FROM THE ORDER OF THE TRIBUNAL, WHICH CAN BE RECTIFIED U/S 254(2) OF THE I.T.ACT, 1961. 6. AS REGARDS DISALLOWANCES OF GIFTS AND OTHER EXP ENSES GIVEN TO EMPLOYEES, DEALERS, CUSTOMERS AND OTHER BUSINESS AS SOCIATES, THE TRIBUNAL HAS RECORDED ITS CATEGORICAL FINDING IN PA RA 10 & 11 OF THE ORDER 7 MA NO.753/MUM/2018 AND DISCUSSED THE ISSUE IN LIGHT OF VARIOUS AVERMEN TS MADE BY THE ASSESEE AND HAS ALSO CONSIDERED VARIOUS CASE LAWS C ITED ON THIS ISSUE. FURTHER, THE TRIBUNAL HAS RECORDED ITS CATEGORICAL FINDING THAT EXPENDITURE INCURRED UNDER THE HEAD GIFTS AND OTHER EXPENSES GIVEN TO EMPLOYEES ETC, ARE IN THE NATURE OF PERSONAL EXPENS ES AND ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. FURTHER, IF YOU GO THROUGH THE FACT FINDI NG RECORDED BY THE TRIBUNAL IN LIGHT OF AVERMENTS MADE BY THE ASSESEE IN THE MISCELLANEOUS APPLICATION, WE FIND THAT WHAT IS SOUGHT THROUGH TH E MISCELLANEOUS APPLICATION IS TO REVIEW THE DECISION RENDERED BY T HE TRIBUNAL IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WHICH IN OUR CONSIDERED VIEW IS NOT PERMISSIBLE U/S 254(2) OF THE I.T.ACT, 1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE MISCELLANEOUS APPLICAT ION FILED BY THE ASSESSEE ON BOTH GROUNDS DOES NOT HAVE MERITS AND A CCORDINGLY, THE MISCELLANEOUS APPLICATION FILED BY THE ASSESEE IS D ISMISSED. 7. IN THE RESULT, MISCELLANEOUS APPLICATION FILED B Y THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.07 .202 0 SD/- SD/- SAKTIJIT DEY RAJESH KUMAR JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 28.07 .2020 THIRUMALESH, SR.PS 8 MA NO.753/MUM/2018 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//