NOMURA STRUCTURED FINANCE SERVICES PVT LTD.,MUMBAI V. DY DIRECTOR OF INCOME TAX-15(1)(2), MUMBAI

ITA 6666/MUM/2024

AI Insights

The case involves Nomura Structured Finance Services Private Limited appealing against the order of the Commissioner of Income Tax (Appeals) which upheld the adjustments made by the CPC to the assessee's declared income for the assessment year 2022-23. The primary contention was regarding the inclusion of VAT/GST refunds in the taxable income, which the assessee argued were not recorded in the profit and loss account as per their consistent accounting policy. The CIT(A) had dismissed the appeal, referencing the tax audit report, but the Tribunal found that the CIT(A) did not adequately address the assessee's accounting practices which excluded these refunds from the profit and loss account.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470675 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2022-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONIKA H. PANDE
• Assessee Lawyers: DHANESH BAFNA; HARDIK NIRMAL; HINAL SHAH
• Section: 143(1); 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “B”, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 6666/Mum/2024 Assessment Year 2022-23 Nomura Structured Finance Services Private Limited 9th Floor, Winchester, Off High Street, Powai Business District, Mumbai – 400076. PAN: AABCL 4233 E Vs. DDIT – 15(1)(2), Mumbai (Appellant) (Respondent) Present for: Assessee by : Shri Dhanesh Bafna, Shri Hardik Nirmal & Ms. Hinal Shah Revenue by : Ms. Monika H. Pande, Sr. DR Date of Hearing : 06.02.2025 Date of Pronouncement : 19.03.2025 O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: The appeal of the assessee for the assessment year 2022-23 is directed against the order dated 04.10.2024 passed by the Commissioner of Income Tax, Appeal [CIT(A)]. The assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the ld. Additional/Joint Commissioner of Income-tax (Appeals) 7. Kolkata ['CIT(A)'] erred in confirming the action of the Deputy Director of Income Tax, Centralized Processing Centre ('the CPC) of computing the total income at Rs. 21,63,19,774 as against total income of Rs. 17,03,40,020 declared by the Appellant in its return of income. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the CPC while processing the return under section 143(1) of the Income-tax Act, 1961 (the Act') in ITA No. 6666/Mum/2024 Nomura Structured Finance Services Private Limited A.Y. 2022-23 2 respect of refund of Value Added Tax (VAT)/ Goods and Service Tax (GST) aggregating to Rs. 4,61,01,105. 3. On the fact and circumstances of the case Ld. CIT(A) erred in making an addition/adjustment of VAT/GST refund aggregating to Rs. 4,61,01,105 without appreciating the fact that the Appellant follows exclusive method of accounting and corresponding VAT/GST credits and debits have not been routed through Profit & Loss Account and thus as no expenditure on payment of VAT/GST is claimed, refund of the same is not liable to tax. 4. On the facts and in the circumstances of the case and in law, Ld. CIT(A)/the CPC has erred in making a proposed adjustment under section 143(1)(a)(ii) of the Act without appreciating the fact that the said clause deals with incorrect claim apparent from return of income. 5. On the facts and in the circumstances of the case and in law, the CPC has erred in levying the additional interest under Section 234B of the Act amounting to Rs. 11,93,118. 6. On the facts and in the circumstances of the case and in law, the CPC has erred in levying the additional interest under Section 234C of the Act amounting to Rs. 6,33,145 without appreciating the fact that said interest is levied on returned income.” 2. Fact in brief is that return of income declaring total income of Rs. 17,03,40,020/- was filed on 25.11.2022. The CPC vide intimation u/s 143(1) dated 07.08.2023 made adjustment in respect of Value Added Tax (VAT) and Goods and Services Tax (GST) refund of Rs. 5,42,62,952/- to the total income of the assessee. As a result of total income was computed u/s 143(1) to the amount of Rs. 17,04,50,120/- as against total income from profit and gain from business and profession shown by the assessee at Rs. 12,43,49,015/-. ITA No. 6666/Mum/2024 Nomura Structured Finance Services Private Limited A.Y. 2022-23 3 3. The assessee filed appeal before the ld. CIT(A) and submitted that as per the accounting policy assessee has not debited any payment of VAT/GST to the profit and loss account and similarly no refund amount pertaining to VAT/GST has been credited to the profit and loss account. Therefore, the assessee submitted that the CPC has incorrectly made the adjustment merely on the basis of tax audit report without considering this fact. However, the ld. CIT(A) has dismissed the appeal of the assessee after referring the reporting of refund income in the tax audit report. 4. Heard both the sides and perused the material on record. The assessee has categorically submitted before the ld. CIT(A) along with relevant evidences that as per the accounting policy consistently followed over the years expenditure pertaining to VAT/GST which were not debited to the profit and loss account while computing the total income. Correspondingly, refund amount received out of such VAT/GST payment was also not routed through the profit and loss account. The assessee also explained that information pertaining to VAT/GST was reflected in the tax audit report under clause 16(b) only for the purpose of disclosure of information pertaining to VAT/GST. After perusal of the material on record, we find that ld. CIT(A) has not disproved the claim of the assessee that it had neither debited the expenditure pertaining to VAT/GST to the profit and loss account and nor credited the corresponding refund amount as per the accounting policy followed by the assessee company consistently over the number of years. In the light of the above facts and ITA No. 6666/Mum/2024 Nomura Structured Finance Services Private Limited A.Y. 2022-23 4 circumstances, it is evident that assessee is following exclusive method of accounting therefore the decision of ld. CIT(A) in sustaining the impugned adjustment made by the CPC without disproving the corresponding material referred by the assessee is not justified. Accordingly, the appeal of the assessee is allowed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 19.03.2025. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 19.03.2025 Biswajit, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent: 3. The CIT 4. The DR //True Copy// [ By Order Assistant Registrar ITAT, Mumbai Benches, Mumbai "