ACIT CEN CIR 17 & 28, MUMBAI v. J.B BODA SEREYORS P. LTD, MUMBAI

ITA 4252/MUM/2009 | 2006-2007
Pronouncement Date: 21-05-2010 | Result: Dismissed

Appeal Details

RSA Number 425219914 RSA 2009
Assessee PAN AAACJ1384N
Bench Mumbai
Appeal Number ITA 4252/MUM/2009
Duration Of Justice 10 month(s) 11 day(s)
Appellant ACIT CEN CIR 17 & 28, MUMBAI
Respondent J.B BODA SEREYORS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 21-05-2010
Date Of Final Hearing 13-05-2010
Next Hearing Date 13-05-2010
Assessment Year 2006-2007
Appeal Filed On 10-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKOT AIAH (AM) ITA NO.4252/MUM/2009 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 17 & 28 ROOM NO.401 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. M/S. J.B. BODA SURVEYORS PVT. LTD. MAKER BHAVAN NO.1 SIR V.T. MARG NEW MARINE LINES MUMBAI-400 020. ..( RESPONDENT ) P.A. NO. (AAACJ 1384 N) ITA NO.4253/MUM/2009 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 17 & 28 MUMBAI-20. ..( APPELLANT ) VS. M/S. J.B. BODA & BROTHERS PVT. LTD. MUMBAI-400 020. ..( RESPONDENT ) P.A. NO. (AAACJ 1956 B) APPELLANT BY : SHRI BALAKRISHNAN B.K. RESPONDENT BY : MS. IN DRA G. ANAND O R D E R PER D.K. AGARWAL (JM). THESE TWO APPEALS PERTAINING TO TWO RESPECTIVE ASSESSEES PREFERRED BY THE REVENUE ARE DIRECTED AGAINST THE SEP ARATE ORDERS DATED 24.4.2009 PASSED BY THE LD. CIT(A) FOR THE ASSESSME NT YEAR ITA NO.4252 & 53/M/09 A.Y:06-07 2 2006-07. SINCE FACTS ARE IDENTICAL AND ISSUE INVOLVED IS COMMON BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. 2. FOR THE SAKE OF BREVITY THE BRIEF FACTS OF THE CASE E XTRACTED FROM ITA NO.4252/MUM/2009 IN M/S. J.B. BODA SURVEYORS PVT. LTD. FOR THE ASSESSMENT YEAR 2006-07 ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MARINE CARGO SURVEYORS SAMPLERS AN ALYSTS AND LOSS ASSESSORS. THE RETURN WAS FILED DECLARING T OTAL INCOME AT RS. 2 78 71 388/-. DURING THE COURSE OF ASSESSMENT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED REIMBURSEMENT EXPENSES RS.12 92 46 536/- UNDER THE HEAD MANAGEMENT/ADMINISTRATIVE EXPENSES TO M/S. J.B. BODA & CO. PVT. LTD. SINCE THE ASSESSEE HAS NOT DEDUCTED TDS THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID REIMBURSEMENT EXPENSES MAY NO T BE DISALLOWED BECAUSE THE CLAIM IS HIT BY THE PROVISION OF SECTION 40(A) OF THE INCOME TAX ACT 1961(THE ACT). IN RESPONSE IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT AS PER ARRANGEMENT THE PA RENT COMPANY M/S. J.B. BODA & CO. IS INCURRING ALL THE EXP ENSES AND THEN RECOVERS IT FROM THE RESPECTIVE COMPANIES AND IT IS A CASE OF REIMBURSEMENT OF EXPENSES HENCE NOT LIABLE TO DEDUCTIO N OF TDS. THE ASSESSING OFFICER AFTER CONSIDERING ASSESSEE'S EXPLANATION WAS OF THE VIEW THAT THE EXPENSES CLAIMED AS REIMBURSEMENT (OTHER T HAN THE SALARY PF AND PROFESSIONAL FEES ON WHICH THE TDS HAS BE EN DEDUCTED BY THE PARENT COMPANY) OF RS.3 35 73 125/- ON ACCOUN T OF STAFF WELFARE EXPENSES RENT GENERAL EXPENSES ELECTRICAL AND GAS CHARGES CONVEYANCE EXPENSES AND CAR HIRE CHARGES MOTOR CAR EXPENSES ETC. ON WHICH TDS HAS NOT BEEN DEDUCTED ARE NOT ALLOWABLE A S PER PROVISION OF SECTION 40(A) OF THE ACT AND ACCORDINGLY TH E ASSESSING ITA NO.4252 & 53/M/09 A.Y:06-07 3 OFFICER AFTER ADDING THE SAME TO THE INCOME OF THE ASSESS EE COMPLETED THE ASSESSMENT AT AN INCOME OF RS.6 14 44 510/- VIDE ORDE R DATED 31.12.2008 PASSED U/S.143(3) OF THE ACT. ON APPEAL B EFORE THE LD. CIT(A) THE ASSESSEE INTERALIA SUBMITTED THAT THE ASSESSEE COMPANY IS NOT LIABLE TO DEDUCT ANY TDS ON SUCH REIMBURSEMENT OF EXPENSES DUE TO THE FACT THAT AS PER THE ARRANGEMENT WITH M/S. J.B. BODA & CO. PVT. LTD. THE PARENT COMPANY OF J.B. BODA GROUP OF COMPAN IES INCURS ALL MANAGEMENT ADMINISTRATIVE EXPENSES ON BEHALF OF ALL G ROUP COMPANIES WHO SHARE THE COMMON FACILITIES AND THEN RECOVER S IT FROM THE RESPECTIVE PARTICIPANTS ON ACTUAL BASIS AS FAR AS POSSIBLE . IT WAS FURTHER SUBMITTED THAT M/S. J.B. BODA & CO. PVT. LTD. WHICH IS ACTUALLY MAKING THE PAYMENTS FOR THE EXPENDITURE HAS BEEN DEDU CTING TAX AT SOURCE AND HENCE COMPLIES WITH THE PROVISIONS OF DEDUCTIN G TAX AT SOURCE. IT WAS FURTHER SUBMITTED THAT IF THE DEDUCTION IS MADE BY THE ASSESSEE THEN IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE R ELIANCE WAS ALSO PLACED ON (I) ACIT VS. MODICON NETWORKS P. LTD. 14 SOT 204 (DEL.); (II) DECTA IN RE 237 ITR 190 (AAR) AND (II I) SEDCO FOREX INTERNATIONAL DRILLING INC. VS. DCIT 72 ITD 204(DEL.) . THE LD. CIT(A) WHILE OBSERVING THAT THE EXPENSES REIMBURSED BY THE GRO UP COMPANY TO THE FLAGSHIP COMPANY DOES NOT CONSTITUTE INCOME IN T HE HANDS OF THE LATER AND DOES NOT PARTAKE THE NATURE OF COMMISSION HE LD THAT THERE IS NO LIABILITY TO DEDUCT TAX ON PART OF THE APPELLANT COMPANY AND ACCORDINGLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.3 35 73 125/- BEING PAYMENTS MAD E TO PARENT COMPANY M/S. J.B. BODA & CO. PVT. LTD. AS ITA NO.4252 & 53/M/09 A.Y:06-07 4 COMMISSION FOR PROVIDING COMMON FACILITIES ON WHIC H TDS WAS NOT DEDUCTED AS PER PROVISIONS OF SECTION 40(A) OF THE ACT. B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) FAILED TO APPRECIATE THA T REIMBURSEMENT OF EXPENSES IS NOT EXEMPT FROM TDS PROVISIONS. 4. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JU STIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HE THEREFORE SUBMITS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE RESTORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITS THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ACIT VS. M/S. CROWE BODA & CO. PVT. LTD. IN ITA NO.4251/M/2009 FO R ASSESSMENT YEAR 2006-07 ORDER DATED 30.3.2010. SHE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL. SHE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS THE PAYMENT WAS MADE TO PARENT COMPANY M/S. J.B. BODA & CO. PVT. LTD. AS PAYMENT OF REIMBURSEMENT EXPENSES ON THE BASIS OF COST SHARING ARRANGEMENT. THIS AR RANGEMENT WAS ENTERED INTO FOR MORE EFFECTIVE COST MANAGEMENT. T HE COMMON EXPENSES ARE INCURRED FOR AND ON BEHALF OF EVERYONE IN THE GROUP. ALL THE GROUP COMPANIES REIMBURSED THE EXPENSES TO M/S. J.B. BODA & CO. PVT. LTD. ON AN EQUITABLE BASIS DETERMINED IN EARLIE R YEARS BY THE MANAGEMENT CONSULTANT. THERE IS NO MATERIAL ON RECORD TO SHOW THAT ITA NO.4252 & 53/M/09 A.Y:06-07 5 THE ASSESSEE HAS MADE PAYMENTS TO THE CONTRACTOR OR SUB-CONT RACTOR OR ACTUAL SERVICE PROVIDER. THEREFORE THE PAYMENTS MAD E TO M/S. J.B. BODA & CO. PVT. LTD. DO NOT FALL WITHIN THE PURVIEW OF SECTION 40(A)(IA) OF THE ACT. IN M/S. CROWE BODA & COMPANY (SUPRA) IT HAS BEEN HELD BY THE TRIBUNAL VIDE PARA-6 OF ITS ORDER DATED 30. 3.2010 AS UNDER :- 6. ON PLAIN READING OF ABOVE SECTION WE FIND THAT ANY INTEREST COMMISSION OR BROKERAGE RENT ROYALTY FE ES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB- CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WOR K ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTI ON HAS NOT BEEN PAID WITHIN STIPULATED PERIOD. IN TH E CASE UNDER CONSIDERATION THE ASSESSING OFFICER DID NOT SPECIFICALLY POINT OUT AS TO UNDER WHICH CLAUSE OR UNDER WHICH SUB-SECTION OF SECTION 40 THE CLAIM OF THE AS SESSEE WAS DISALLOWED. THE CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT MADE TO PARENT COMPANY M/S. J.B. BODA & CO. PVT. LTD. IS PAYMENT OF REIMBURSEMENT OF EXPENS ES AND NOT AGAINST CARRYING OUT ANY CONTRACT WORK AS A CONTRACTOR OR SUB-CONTRACTOR ON WHICH TAX IS DEDU CTIBLE AT SOURCE UNDER CHAPTER XVII-B OF THE ACT. THE ASS ESSEE HAS ESTABLISHED THAT THE PAYMENT TO THEIR PARENT CO MPANY M/S. J.B. BODA & CO. PVT. LTD. WAS NOT SUBJECT TO T DS AS PAYMENTS WERE NOT MADE AGAINST ANY CONTRACT WORK CARRIED OUT. IT IS AN ADMITTED FACT IN THE CASE CONSIDERATION THAT THE PAYMENT MADE TO PARENT COMPA NY M/S. J.B. BODA & CO. PVT. LTD. IS A PAYMENT OF REIMBURSEMENT OF EXPENSES. IN CASE OF REIMBURSEME NT OF EXPENSES THE EXPENDITURE INCURRED IS RELATED TO THE PERSON WHO WAS NOT MADE THE ORIGINAL PAYMENT. IN O THER WORDS THE PAYMENT OF EXPENDITURE IS MADE BY X-PART Y ON BEHALF OF THE Y-PARTY AND LATER ON THE SAME IS REIM BURSED TO THE X-PARTY BY Y-PARTY THE EXPENDITURE IS PERT AINING TO Y-PARTY AND NOT PERTAINING TO X-PARTY. THUS T HE PAYMENT TO M/S. J.B. BODA & CO. MADE BY THE ASSESSE E IS A SIMPLE REIMBURSEMENT. IN THE CASE UNDER CONSIDERA TION THE PARENT COMPANY M/S.J.B. BODA & CO. PVT. LTD. HA S ACTED MERELY THE ROLE OF AGENT FOR MAKING PAYMENT O F EXPENDITURE ON BEHALF OF THE ASSESSEE AND GETTING REIMBURSEMENT. THEREFORE THE PAYMENT MADE TO M/S . J.B. BODA & CO. PVT. LTD. IS NOT ON ACCOUNT OF ANY EXPENDITURE. SECTION 40(A)(IA) APPLICABLE ONLY I N A CASE ITA NO.4252 & 53/M/09 A.Y:06-07 6 OF EXPENDITURE. THE SAID SECTION CLEARLY PROVIDES THAT CERTAIN SPECIFIC EXPENDITURE WHICH IS SUBJECT TO TD S IS NOT ALLOWABLE IF THE ASSESSEE FAILED TO MAKE TDS OR AFT ER MAKING DEDUCTION OF TDS DOES NOT PAY WITHIN THE STIPULATED PERIOD. AS STATED ABOVE THE PAYMENT M ADE TO M/S. J.B. BODA & CO. PVT. LTD. IS ON ACCOUNT OF PERSONAL ACCOUNT IN THE TERMS OF ACCOUNTING PRINCIPLE PAYING AND THEN RECEIVING AMOUNT WHICH IS NOT AN EXPENDITURE I N THE HANDS OF THE ASSESSEE THEREFORE THE ASSESSING OFF ICER IS NOT CORRECT IN INVOKING SECTION 40(A)(IA) OR OTHER PROVISION OF SECTION 40 OF THE ACT. IT IS ALSO TO BE NOTED HERE THAT THERE IS NO EVIDENCE OR MATERIAL ON RECORD BASED ON WHICH IT CAN BE SAID THAT PAYMENT MADE TO M/S. J.B. BODA & CO. PVT. LTD. IS SUBJECT TO TAX DEDUCTED AT SOURCE UNDE R CHAPTER XVII-B OF THE ACT. WHETHER THE REVENUE H AS TAKEN ANY PROCEEDINGS FOR DEFAULT OF NOT MAKING TDS UNDER CHAPTER XVIIB OF THE ACT AGAINST THE ASSESSEE IS ALSO NOT ON RECORD. IN ADDITION TO ABOVE IT HAS AL SO NOTICED THAT THE ASSESSING OFFICER DID NOT DISALLOW SUCH CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR FOR ASSESSMENT YEAR 2007-08 EVEN AFTER RAISING QUERY IN THIS REGARDS. IN THE LIGHT OF THE ABOVE DISCUSSION WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN DELETI NG THE DISALLOWANCE OF RS.29 58 608/- ON ACCOUNT OF REIMBURSEMENT MADE TO PARENT COMPANY M/S. J.B. BODA & CO. PVT. LTD. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE WE FOR THE REASONS AS DISCUSSED ABOVE AND RESPECTF ULLY FOLLOWING THE ORDER OF THE TRIBUNAL HOLD THAT THE A SSESSEE IS NOT LIABLE TO DEDUCT TDS ON THE REIMBURSEMENT OF EXPENSES AND ACCOR DINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . THE GROUNDS TA KEN BY THE REVENUE ARE THEREFORE REJECTED. ITA NO.4253/MUM /2009 (A.Y. 2006-07)(REVENUES APPEAL): 7. AT THE TIME OF HEARING IT HAS BEEN AGREED BY BOTH THE PARTIES THAT THE FACTS AND THE ISSUE INVOLVED ARE SIMILAR TO THE CASE IN ITA NO.4252/M/2009 M/S. J.B. BODA SURVEYORS PVT. LTD. THEREFORE THE ITA NO.4252 & 53/M/09 A.Y:06-07 7 PLEA TAKEN BY THEM IN THAT CASE MAY BE CONSIDERED WHILE DECIDING THE ISSUE IN THE PRESENT APPEAL. 8. AFTER HEARING THE RIVAL SUBMISSIONS OF THE PARTIES A ND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDING RECORDED IN PARA 6 OF THIS ORDER WE HOLD AND ORDER ACCORDINGLY. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED . 9. IN THE RESULT REVENUES APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.5.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 21.5.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.4252 & 53/M/09 A.Y:06-07 8 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 13.5.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 14.5.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 21.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 24.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER