MAERSK INDIA PVT.LTD.(AS SUCCESSOR TO NEDLOYD INDIAA PVT.LTD.)(FORMERLY KNOWN AS P &O NEDLLOYD INDIA PVT.LTD.), MUMBAI v. THE ASST. C.I.T., RANGE-5(2), MUMBAI

ITA 5885/MUM/2008 | 2004-2005
Pronouncement Date: 09-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 588519914 RSA 2008
Assessee PAN AAACP4058N
Bench Mumbai
Appeal Number ITA 5885/MUM/2008
Duration Of Justice 5 year(s) 6 month(s) 14 day(s)
Appellant MAERSK INDIA PVT.LTD.(AS SUCCESSOR TO NEDLOYD INDIAA PVT.LTD.)(FORMERLY KNOWN AS P &O NEDLLOYD INDIA PVT.LTD.), MUMBAI
Respondent THE ASST. C.I.T., RANGE-5(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 09-04-2014
Date Of Final Hearing 03-04-2014
Next Hearing Date 03-04-2014
Assessment Year 2004-2005
Appeal Filed On 25-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G B ENCH MUMBAI !'# $ % BEFORE SHRI VIJAY PAL RAO JM AND SHRI N.K. BIL LAIYA AM ./ I.T.A. NO.5885/MUM/2008 ( & & & & / ASSESSMENT YEAR :2004-05 A N D ./ I.T.A. NO.1290/MUM/2011 ( & & & & / ASSESSMENT YEAR :2005-06 M/S. MAERSK INDIA PVT. LTD. EMPIRE INDUSTRIES COMPLEX 414 SENAPATI BAPAT MARG LOWER PAREL MUMBAI-400 013 / VS. THE ACIT 5(2) AAYAKAR BHAVAN MUMBAI-400 020 ' $ ./ ( ./ PAN/GIR NO. : AAACP 4058N ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') / APPELLANT BY: SHRI NIRAJ SHETH *+') - / RESPONDENT BY: SHRI R.K. SAHU SHRI KISHORE DHULE - ./$ / DATE OF HEARING : 03.04.2014 01& - ./$ / DATE OF PRONOUNCEMENT :09.04.2014 2 / O R D E R PER N.K. BILLAIYA AM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF THE LD. CIT(A)-5 MUMBAI PERTAINING TO A. YRS. 2004-05 & M/S. MAERSK INDIA PVT. LTD. 2 2005-06. AS COMMON ISSUES ARE INVOLVED IN BOTH THE SE APPEALS THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 5885/M/08 2004-05 2. THE FIRST GROUND RELATES TO THE UPHOLDING OF THE DISALLOWANCE OF 10% PERTAINING TO EXPENDITURE INCURRED ON TELEPHONE AND TELEX ENTERTAINMENT AND STAFF WELFARE. 3. THE AO HAS CONSIDERED THIS ISSUE AT PARA- 6 7 & 8 OF HIS ORDER. THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA-2 OF HIS ORDER. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ON IDENTICAL FACTS AND FOR IDENTICAL REASONS ADDITIONS WERE MADE IN A.Y. 2002-03 AND 2003-04 WHICH ADDITIONS TRAVELLED UPTO THE TRIBUNAL AND THE TRIBUNAL HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR O F THE ASSESSEE. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2002-03 AND 2003-04 IN ITA NOS. 3690 & 3507/M/06 AND C.O. NO. 3 37/M/06 AND ITA NO. 2180 & 1932/M/07 AND C.O. NO. 178/M/07. TH E TRIBUNAL IN A.Y. 2002-03 AT PARA 14 16 & 21 HAVE CONSIDERED TH E DISALLOWANCES MADE UNDER THE HEAD TELEPHONE AND TELEX ENTERTAINM ENT EXPENSES AND STAFF WELFARE EXPENSES RESPECTIVELY. FACTS AND ISS UE BEING IDENTICAL RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO ORDIN ATE BENCH THE DISALLOWANCES MADE UNDER THESE HEADS ARE DIRECTED T O BE DELETED. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 6. GROUND NO. 2 RELATES TO THE ADHOC DISALLOWANCE O F 10% PERTAINING TO MISCELLANEOUS EXPENDITURE. M/S. MAERSK INDIA PVT. LTD. 3 7. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AT PARA- 11 OF HIS ORDER. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED RS. 4 6 63 451/- UNDER THE HEAD MISCELLANEOUS EXPENSES. ON VERIFYING THE DE TAILS THE AO NOTICED THAT CERTAIN EXPENSES CANNOT BE SAID TO BE INCURRED FOR BUSINESS PURPOSES. THE AO WENT ON TO DISALLOW 10% OF THE EXPENSES MAKI NG AN ADDITION OF RS. 4 66 345/-. 8. THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE OF THE ASSESSEE AT PARA-3 OF HIS ORDER WHEREIN THE LD. CIT(A) OBSERVED THAT THE DISALLOWANCE OF 10% IN THE FACTS AND CIRCUMSTANCES OF THE CASE OUT OF MISCELLANEOUS EXPENSES ARE JUSTIFIED AS IT IS NOT E XCESSIVE EITHER. 9. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE HAS GIVEN COM PLETE DETAILS IN RESPECT OF EXPENDITURES CLAIMED UNDER THE HEAD MISCELLANEOU S EXPENSES. THE EXPENSES WHICH WERE CONSIDERED BY THE AO WERE FULLY RELATED WITH THE BUSINESS OF THE ASSESSEE AND WERE INCURRED FOR THE PURPOSE OF CARRYING ON THE BUSINESS. THE LD. COUNSEL FURTHER SUBMITTED TH AT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED AND THERE FORE THERE WAS NO REASON FOR MAKING ANY ADHOC DISALLOWANCE. REFERRIN G TO THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE OF ACIT VS ARTHUR ANDERSON & CO 5 SOT 393 (MUM) THE LD. COUNSEL SUBMITTED THAT IN THAT CASE THE TRIBUNAL HAS DELETED THE ADHOC DISALLOWANCES. 10. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTING THE FINDINGS OF THE LOWER AUTHORITIES RELIED UPON THE D ECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE OF SEVENTILAL KANTILAL & C O IN ITA NO. 397/M/2011. M/S. MAERSK INDIA PVT. LTD. 4 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISIO NS RELIED UPON BY BOTH SIDES. THE EXPENDITURES WHICH WERE CONSIDERED BY TH E AO WERE AS UNDER: I) HOUSEHOLD SHIFTING CHARGES RS. 43 800/- II) MISCELLANEOUS CUSTOM CHARGES RS. 41 817/- III) SPEED MONEY RS. 1 350/- IV) GIFT VOUCHERS RS. 3 000/- V) RELOCATION COST RS. 2 49 300/- 12. WE FIND THAT THE HOUSEHOLD SHIFTING CHARGES AND RELOCATION COST WERE INCURRED FOR SHIFTING OF EMPLOYEES FROM ONE LOCATIO N TO ANOTHER WHICH CAN BE SAID TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HOWEVER THE EXPENDITURE INCURRED ON ACCOUNT OF CUS TOM CHARGES GIFT VOUCHERS FOR MTNL CANNOT BE CONSIDERED U/S. 37(1) O F THE ACT. THE TOTAL EXPENDITURE UNDER THESE TWO HEADS COMES TO RS. 44 817/-. THESE EXPENDITURES ARE TO BE DISALLOWED AND IN RESPECT OF THE BALANCE AMOUNT IN OUR CONSIDERED VIEW AN ADDITION OF 5% OF THE TOTAL EXPENDITURE WOULD MEET THE ENDS OF JUSTICE. WE THEREFORE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 5% OF THE TOTAL MISCELLANEOUS EXPENDITURE CLAIME D AFTER DEDUCTING EXPENDITURE ON ACCOUNT OF CUSTOM CHARGES AND GIFT V OUCHERS FOR MTNL WHICH WE HAVE CONFIRMED IN TOTO. GROUND NO. 2 IS PARTLY ALLOWED. 13. GROUND NO. 3 RELATES TO DEPRECIATION ON LEASEHO LD IMPROVEMENTS MADE IN EARLIER ASSESSMENT YEARS 1998-99 AND 1999-2000. 14. THIS ISSUE HAS BEEN DECIDED BY THE LD. CIT(A) A T PARA-5.2 OF HIS ORDER. THE LD. CIT(A) HELD AS UNDER: I HAVE GONE THROUGH THE ARGUMENTS AND SUBMISSIONS OF THE LD. AR AS WELL AS THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER. I FIND THAT THIS GROUND IS CONSEQUENTIAL IN CASE THE ORDER M/S. MAERSK INDIA PVT. LTD. 5 OF HONBLE ITAT FOR THE A.Y. 1998-99 IS REVERSED BY HONBLE MUMBAI HIGH COURT AND THE ACTION OF THE LD. AO IS U PHELD FOR A.Y. 1998-99. THE APPELLANT WOULD BE FREE TO AGITA TE THIS ISSUE BEFORE THE LD. AO IN SUCH EVENTUALITY. SINCE THIS GROUND IS NOT YET MATURED IT IS DISMISSED. 15. CONSIDERING THE FINDINGS OF THE LD. CIT(A) WE DO NOT FIND ANY REASON TO INTERFERE WITH THEM. GROUND NO. 3 IS ACC ORDINGLY DISMISSED. 16. GROUND NO. 4 RELATES TO DISALLOWANCE IN RESPECT OF CLUB MEMBERSHIP FEES. 17. THE AO HAS DISCUSSED THIS DISALLOWANCE AT PARA- 12 OF HIS ORDER. THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED CLUB E XPENSES AT RS. 5 30 900/- OUT OF WHICH THE AO WAS OF THE OPINION T HAT AN AMOUNT OF RS. 4 00 000/- WILL GIVE THE ENDURING BENEFIT TO THE AS SESSEE AND CANNOT BE CONSIDERED AS REVENUE EXPENDITURE AND DISALLOWED TH E SAME. 18. THE LD. CIT(A) HAS CONSIDERED THE GRIEVANCE OF THE ASSESSEE VIDE PARA-6 OF HIS ORDER AND AT PARA 6.1 THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS INCURRED RS. 40 00 000/- IN FINANCIAL YEAR 1998-99 WHICH WAS CLAIMED AS DEFERRED REVENUE EXPENDITURE TO BE C LAIMED PROPORTIONATELY FOR 10 FINANCIAL YEARS. THE LD. CIT (A) WAS OF THE FIRM BELIEF THAT THE ASSESSEE SHOULD HAVE CLAIMED DEPREC IATION BY ESTABLISHING THAT CLUB MEMBERSHIP FEE IS A DEPRECIABLE ASSETS. NECESSARY DIRECTIONS WERE GIVEN TO THE AO WHILE THE ADDITION OF RS. 4 00 000/- WAS CONFIRMED. 19. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN A.Y. 1998-99 THE ASS ESSEE INCURRED AN EXPENDITURE OF RS. 40 00 000/- UNDER THE HEAD CLUB MEMBERSHIP FEES WHICH WAS TREATED BY IT AS DEFERRED REVENUE EXPENDI TURE TO BE CLAIMED M/S. MAERSK INDIA PVT. LTD. 6 PROPORTIONATELY IN 10 FINANCIAL YEARS AND ACCORDING LY THE ASSESSEE HAS BEEN CLAIMING RS. 4 00 000/- EVERY YEAR. THEREFORE THE SAME SHOULD BE ALLOWED. THE ASSESSEE RELIED UPON THE DECISION OF MADRAS INDUSTRIAL INVESTMENT CORPN. 225 ITR 802. 20. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD INCURRED EXP ENDITURE IN 1998-99 AND SINCE THEN RS. 4 00 000/- IS BEING ALLOWED. NO NEW FACTS HAVE BEEN BROUGHT ON RECORDS; THEREFORE WE FIND NO REASON TO DISALLOW THIS EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. W E ACCORDINGLY DIRECT THE AO TO ALLOW THE CLAIM OF RS. 4 00 000/-. GROUN D NO. 4 IS ACCORDINGLY ALLOWED. 21. GROUND NO. 5 IS CHARGING OF INTEREST U/S. 244A. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRES SING THIS GROUND. THE SAME IS DISMISSED AS NOT PRESSED. 22. `THE ADDITIONAL GROUND RELATING TO THE ALLOWABI LITY OF LEASEHOLD IMPROVEMENT MADE DURING THE YEAR AS REVENUE EXPENDI TURE HAS ALSO NOT BEEN PRESSED AND THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 23. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1290/MUM/2011 A.Y. 2005-06 24. GROUND NO. 1 RELATES TO THE ADHOC DISALLOWANCE IN RESPECT OF TELEPHONE AND TELEX EXPENSES. M/S. MAERSK INDIA PVT. LTD. 7 25. A SIMILAR ISSUE HAS BEEN CONSIDERED BY US IN I TA NO. 6885/M/2008 FOR A.Y. 2004-05 VIDE GROUND NO. 1 AT P ARA 2 TO5 OF THIS ORDER THEREFORE ON SIMILAR LINES SIMILAR REASON S GROUND 1 IS ALLOWED. 26. GROUND NO. 2 RELATES TO THE DISALLOWANCE ON ACC OUNT OF FOREIGN TRAVEL EXPENSES. 27. THE AO HAS CONSIDERED THIS DISALLOWANCE AT PARA -8 OF HIS ORDER. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPEN SES UNDER THE HEAD FOREIGN TRAVEL AT RS. 22 72 218/-. THE AO FURTHER OBSERVED THAT IN THE PREVIOUS YEAR UNDER SIMILAR CIRCUMSTANCES DISALLO WANCE @ 50% WAS MADE OUT. ACCORDINGLY THE AO DISALLOWED 50% OF TH E EXPENSES AT RS. 11 36 109/-. 28. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE HOLDI NG THAT THE ASSESSEE HAS NOT EXPLAINED WHETHER THE TRAVEL WAS T O FURTHER EXPAND BUSINESS TO MEET CLIENTS TO TRAIN . THE LD. CIT(A ) WAS OF THE OPINION THAT COMMERCIAL EXPEDIENCY HAS NOT BEEN ESTABLISHED. TH E ADDITION WAS CONFIRMED. 29. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT ON IDENTICAL REASONS THE DISALLOWANCE MADE IN A.Y. 20 04-05 BY THE AO WAS DELETED BY THE LD. CIT(A) AND THE REVENUE HAS NOT F ILED ANY APPEAL AGAINST THIS FINDING OF THE LD. CIT(A). THEREFORE THERE IS NO BASIS FOR TAKING A DIFFERENT VIEW FOR THE YEAR UNDER CONSIDER ATION. 30. THE LD. DR STRONGLY RESISTED TO THIS SUBMISSION OF THE ASSESSEE STATING THAT FACTS OF EACH YEAR ARE DIFFERENT AND THE ASSESSEE HAS NOT FILED ANY DETAILS IN RESPECT OF ITS CLAIM. M/S. MAERSK INDIA PVT. LTD. 8 31. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LO WER AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE . IN A .Y. 2004-05 THE AO HAS MADE SIMILAR DISALLOWANCE GIVING THE SAME REASO NS WHICH DISALLOWANCE WAS DELETED BY THE LD. CIT(A) AND THE REVENUE HAS ACCEPTED THE FINDING OF THE LD. CIT(A). IN THE YEA R UNDER CONSIDERATION THE ENTIRE DISALLOWANCE IS ON SIMILAR LINES THEREF ORE WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW THAN THE PREVIOUS Y EAR. WE ACCORDINGLY DIRECT THE AO TO DELETE THE ADDITION. 32. GROUND NO. 3 RELATES TO THE ADHOC DISALLOWANCE UNDER THE HEAD MISCELLANEOUS EXPENSES. 33. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN A.Y 2004-05 VIDE ITA NO. 5885/M/08 FOR A.Y. 2004-05. HOWEVER THIS YEAR THE DETAILS OF EXPENSES UNDER THE HEAD CUSTOM CHARGES AND GIFT VOU CHERS ARE NOT BEFORE US. WE ACCORDINGLY DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 5% WHICH WILL MEET THE ENDS OF JUSTICE . IN ADDITION T O THIS IN RESPECT OF EXPENSES UNDER THE HEAD CUSTOM CHARGES AND GIFT VOU CHERS. THE ISSUE IS RESTORED BACK TO THE FILES OF THE AO. THE ASSESSEE IS DIRECTED TO FILE THE DETAILS OF EXPENDITURES UNDER THE HEAD CUSTOM CHARG ES AND GIFT VOUCHERS AND THE AO IS DIRECTED TO DISALLOW THE SAME IN TOTO IN ADDITION TO RESTRICTING THE DISALLOWANCE AT 5% OF TOTAL MISCELL ANEOUS EXPENDITURE AFTER DEDUCTING THE EXPENDITURE INCURRED UNDER THE HEAD C USTOM CHARGES AND GIFT VOUCHERS. GROUND NO. 3 IS PARTLY ALLOWED. 34. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF RS. 450900/- UNDER THE HEAD CLUB EXPENSES. M/S. MAERSK INDIA PVT. LTD. 9 35. IN SO FAR AS DISALLOWANCE OF RS. 4 00 000/- IS CONCERNED WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED BY US IN ITA NO . 5885/M/08 FOR A.Y. 2004-05 VIDE GROUND NO. 4 AT PARA 16 TO 20. FOR S IMILAR REASONS WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 4 00 00 0/-. IN RESPECT OF EXPENDITURE OF RS. 50 900/-. WE FIND THAT NO DETA ILS HAVE BEEN GIVEN WE THEREFORE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE ASSESSEE IS DIRECTED TO FILE DETAILS IN RESPECT OF THE EXPENDIT URE OF RS. 50 900/-. THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER CON SIDERING THE DETAILS FILED BY THE ASSESSEE AND AFTER GIVING A REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. 36. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 5885/M/08 FOR A.Y. 2004-05 IS PARTLY ALLOWED AND T HE APPEAL FILED BY THE ASSESSEE IN ITA NO. 1290/M/2011 FOR A.Y. 2005-06 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL 2014 . 2 - 1& $ 3 45 09.04.2014 1 - 6 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 4 DATED 9.4.2014 . . ./ RJ SR. PS M/S. MAERSK INDIA PVT. LTD. 10 2 2 2 2 - -- - *. *. *. *. 7&. 7&. 7&. 7&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 96 *. / DR ITAT MUMBAI 6. 6: ; / GUARD FILE. 2 2 2 2 / BY ORDER +. *. //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) / ITAT MUMBAI