SODEXO FOOD SOLUTIONS INDIA P. LTD( FORMERLY KNOWN AS RADHAKRISHNA HOSPITALITY SERVICES P.LTD), MUMBAI v. ADDL CIT 8(3), MUMBAI

ITA 2813/MUM/2012 | 2007-2008
Pronouncement Date: 22-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 281319914 RSA 2012
Assessee PAN AAACR2547Q
Bench Mumbai
Appeal Number ITA 2813/MUM/2012
Duration Of Justice 1 year(s) 5 month(s) 27 day(s)
Appellant SODEXO FOOD SOLUTIONS INDIA P. LTD( FORMERLY KNOWN AS RADHAKRISHNA HOSPITALITY SERVICES P.LTD), MUMBAI
Respondent ADDL CIT 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-10-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 22-10-2013
Date Of Final Hearing 22-10-2013
Next Hearing Date 22-10-2013
Assessment Year 2007-2008
Appeal Filed On 25-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ITA NO. 2813/M/12 ASSESSMENT YEAR: 2007 - 08 M/S. SODEXO FOOD SOLUTIONS INDIA PVT. LTD. (FORMERLY KNOWN AS R ADHAKRISHNA HOSPITALITY SERVICES PVT. LTD.) GEMSTAR COMMERCIAL COMPLEX 1 ST FLOOR RAMCHANDRA LANE EXTENSION KANCHPADA MALAD (W) MUMBAI - 400 064 PAN: AA AC R2547Q VS. THE A DDITIONAL COMMISSIONER OF INCOME TAX RANGE - 8(3) AAYAKAR BHAVAN M.K ARVE MARG MUMBAI 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.A. GOHEL REVENUE BY : SHRI S. GHOSH D.R. DATE OF HEARING : 22.10.13 DATE OF PRONOUNCEMENT : 22.10.13 O R D E R PER SANJA Y GARG JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 28.02.12. GROUND NO.1: DISALLOWANCE UNDER SECTION 14A 2. WITHOUT GOING INTO THE FACTUAL MATRIX OF THE CASE IT MAY BE OBSERVED THAT THE ASSESSMENT YEAR IN THIS CASE IS 2007 - 08 AND THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT ADOPTING THE RULE 8D OF THE INCOME TAX RULES 1962. IN APPEAL THE LD. CIT(A) THOUGH HELD THAT RULE ITA NO. 2813/M/12 M/S. SODEXO FOOD SOLUTIONS INDIA PVT. LTD. 2 8 D OF THE INCOME TAX RULES 1962 WAS NOT APPLICABLE FOR THE ASSESSMENT YEAR IN QUESTION BUT HE HIMSELF PRESCRIBED CERTAIN FORMULA/CALCULATION WHICH ACCORDING TO ASSESSEE IS AKIN TO RULE 8D OF THE INCOME TAX RULES 1962 AND DIRECTED THE AO TO REWORK THE DISALLOWANCE ACCORDINGLY. T HE AS SESSEE THUS HAS ASSAILED THE ACTION OF THE LD. CIT(A) IN DIRECTING THE AO TO REWORK THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AS PER THE FORMULA/CALCULATIONS PRESCRIBED BY HIM VIDE THE ORDER UNDER APPEAL. 3. IT MAY BE OBSERVED THAT IN THE CASE OF G ODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81 THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D R.W.S. 14A(2) IS NOT ARBITRARY OR UNREASONABLE BUT CAN BE APPLIED ONLY IF THE ASSESSEE'S METHOD IS NOT SATISFACTORY. IT HAS BEEN FURTHER HELD THAT RULE 8D IS NOT RETROSPECTIVE AND APPLIES FROM A.Y. 2008 - 09. FOR THE YEARS FOR WHICH RULE 8D IS NOT APPLICABLE AND IN THE EVENT THAT THE AO IS NOT SATISFIED WITH THE EXPLANATION/WORKING GIVEN BY THE ASSESSEE DISALLOWANCE U/S. 14A HAS TO BE MADE ON A REASONABLE BAS IS. ALMOST SIMILAR VIEW HAS BEEN EXPRESSED BY HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. & OTHERS V. CIT 247 ITR 162. 4. IT MAY ALSO BE OBSERVED THAT IN THE CASE IN HAND THE ASSESSE E HAD GIVEN EXPLANATION THAT THERE CANNOT BE ANY DISALLOWANCE U/S. 14A IN THE CASE OF THE ASSESSEE . HOWEVER THE AO TOTALLY IGNORED THE WORKING GIVEN BY THE ASSESSEE AND APPLIED RULE 8D IN A MECHANICAL MANNER. AS PER THE LAW LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81 AND ALSO BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF 'MAXOPP INVESTMENT LTD.' (SUPRA) THE AO WAS REQUIRED TO INDICATE COGENT AND CONVINCING REASONS WHILE REJECTING THE WORKING/ CALCULATIONS GIVEN BY THE ASSESSEE. HE WAS REQUIRED TO EXAMINE THE ACCOUNTS OF THE ASSESSEE FIRST AND ITA NO. 2813/M/12 M/S. SODEXO FOOD SOLUTIONS INDIA PVT. LTD. 3 THEN IF HE WOULD NOT HAVE BEEN SATISFIED WITH THE CORRECTNESS OF THE CLAIM ONLY THEN HE WAS REQUIRED TO WORK OUT THE DISALLOWANCE ON SOME REASONABLE BAS IS AND NOT AS PER RULE 8D . HOWEVER NO SUCH EXAMINATION WAS MADE OR SATISFACTION WAS RECORDED BY THE AO. THE LD. CIT(A) THOUGH OBSERVED THAT RULE 8D WAS NOT APPLICABLE IN THIS CASE BUT DIRECTED THE AO TO WORK OUT THE DISALLOWANCE ACCORDING TO THE FORMU LA PRESCRIBED BY HIM WHICH ACCORDING TO THE ASSESSEE IS AKIN TO THE RULE 8D. IN OUR VIEW T HE PROPER COURSE FOR THE LD.CIT(A) WAS TO REMAND BACK THE CASE TO ASSESSING OFFICER DIRECTING HIM TO ADOPT SOME REASONABLE BASIS ALSO TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE IN THIS BEHALF AND NOT TO HIMSELF PRESC RIBE ANY FORMULA OR CALCULATION WHICH ACCORDING TO THE ASSESSEE IS AKIN TO THE RULE 8D. 5. SO IN VIEW OF OUR ABOVE OBSERVATIONS WE SET ASIDE THE DISALLOWANCE MADE BY THE CIT(A) AND REMAND THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DULY CONSIDER THE WORKING GIVEN BY THE ASSESSEE AND IF THE AO WILL NOT BE SATISFIED WITH THE WORKING GIVEN BY THE ASSESSEE HE WILL HAVE TO RECORD COGENT AND CONVINCING REASONS FOR THE SA ME AND THEREAFTER TO CALCULATE THE DISALLOWANCE ON SOME REASONABLE BASIS AS PER THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA) GROUND NO.2 6 . IN THE SECOND GROUND THE ASSESSEE HAS CHALLENG ED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 1446100/ - OUT OF DISALLOWANCE OF RS. 23 95 919/ - MADE BY THE AO IN RESPECT OF G ATE EXPENSES BY INVOKING THE EXPLANATION TO SECTION 37(1) OF THE INCOME TAX ACT. ITA NO. 2813/M/12 M/S. SODEXO FOOD SOLUTIONS INDIA PVT. LTD. 4 7 . IT HAS BEEN BROUGHT T O OUR NOTICE THAT THE SIMILAR ISSUE HAD BEEN RAISED BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 IN ITA NO.4162/M/06 AND ITA NO.2393/M/07 RESPECTIVELY DECIDED BY A COMMON ORDER DT. 3 0 .07.09 . T HE CO - OR DINATE BENCH OF THE TRIBUNAL WHILE DEALING WITH THE ISSUE HAS OBSERVED AS UNDER: 17. A T THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT A SIMILAR ISSUE RELATING TO THE ALLOWABILITY OF GATE EXPENSES HAS BEEN DECIDE D BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 1999 - 2000. HOWEVER AS POINTED OUT BY THE LEARNED D.R. AND FAIRLY AGREED BY THE LD. COUNSEL FOR THE ASSESSEE A SIMILAR ISSUE HAD AGAIN COME UP FOR CONSIDERATION BEFORE THE TRIBUN AL IN ASSESSEES OWN CASE FOR A.Y. 2001 - 02 AND VIDE ORDER DATED 10.07.06 PASSED IN ITA NO.2716/M/05 AND 2630/M/05 THE TRIBUNAL DECIDED THE SAME IN PARA 13 TO 15 OF ITS ARE AS UNDER: AS REGARDS GROUND NO.3 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THESE EXPENSES ARE IN THE NATURE OF TIPS AND ARE ONLY CUSTOMARY PAYMENTS MADE BY THE EMPLOYEES OF THE ASSESSEE COMPANY WHILE VISITING VARIOUS PORTS SHIPS AND INSTALLATIONS AND THEREFORE THE PROVISIONS OF EXPLANATION 1 TO SEC.379(1) OF THE ACT ARE NOT AT ALL APPLICABLE IN THE CASE OF SUCH EXPENSES. HE FURTHER SUBMITTED THAT THIS ISSUE HAD COME UP BEFORE THE G BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1999 - 2000 IN ITA NO. 6006/M/02 WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSE E. THE LD. D.R. HOWEVER RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT EXPLANATION 1 TO SEC. 37 IS APPLICABLE TO ANY ILLEGAL PAYMENTS AND THE TIPS TO THE GOVERNMENT OFFICIALS ARE NOTHING BUT ILLEGAL. HAVING REGARD HEARD BOTH THE P ARTIES WE ARE IN AGREEMENT WITH THE ARGUMENTS OF THE LD. D.R. THAT THE GOVERNMENT EMPLOYEES ARE PROHIBITED TO ACCEPT ANY SUCH PAYMENTS AND THE EXPENSES INCURRED BY THE ASSESSEE ON THIS ACCOUNT ARE CLEARLY ILLEGAL PAYMENTS AND CANNOT BE ALLOWED AS DEDUCTIO N. IN THIS VIEW OF THE MATTER THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 18. AS IS CLEARLY EVIDENT FROM THE RELEVANT PORTION OF THE TRIBUNALS ORDER FOR A.Y. 01 - 02 A SIMILAR ISSUE RELATING TO ALLOWABILITY OF GATE EXPENSES HAS BEEN D ECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE AND THAT TOO AFTER TAKING INTO CONSIDERATION ITS EARLIER DECISION RENDERED IN A.Y. 1999 - 2000. WE THEREFORE FOLLOW THE SAID DECISION RENDERED BY THE ITA NO. 2813/M/12 M/S. SODEXO FOOD SOLUTIONS INDIA PVT. LTD. 5 TRIBUNAL FOR A.Y. 2001 - 02 AND UPHOLD THE IMPUGNED ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF GATE EXPENSES. GROUND NO.4 OF ASSESSEES AP PEAL IS ACCORDINGLY DISMISSED. 8 . A PERUSAL OF THE ABOVE REPRODUCED FINDINGS OF THE CO - ORDINATE BENCH OF THE TRIBUNAL REVEALS THAT THE ISSUE UN DER CONSIDERATION IS SQUARELY COVERED BY THE ABOVE SAID JUDGMENT OF THE TRIBUNAL AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. HENCE RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO - ORDINATE BENCH OF THE TRIBUNAL GIVEN IN EARLIER YEARS IN THE CASE OF A SSESSEE ITSELF THIS GROUND OF APPEAL OF THE ASSESSEE IS HEREBY DISMISSED. 9 . IN VIEW OF OUR ABOVE OBSERVATIONS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.10. 2013. SD/ - SD/ - ( RAJENDRA SINGH ) ( SANJAY GARG ) ACCOUNT ANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 22.10. 2013. * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT ( A) CONCERNED MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR ITAT MU MBAI.