ACIT, New Delhi v. M/s. Sports & Leisure Apparel Ltd., New Delhi

ITA 948/DEL/2010 | 2006-2007
Pronouncement Date: 16-09-2011 | Result: Dismissed

Appeal Details

RSA Number 94820114 RSA 2010
Assessee PAN AAACS2959M
Bench Delhi
Appeal Number ITA 948/DEL/2010
Duration Of Justice 1 year(s) 6 month(s) 12 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Sports & Leisure Apparel Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 16-09-2011
Date Of Final Hearing 07-09-2011
Next Hearing Date 07-09-2011
Assessment Year 2006-2007
Appeal Filed On 05-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SHRI R.P. TOLANI JM & SHRI A.N. PAHUJA AM ITA NO.948/DEL/2010 ASSESSMENT YEAR:2006-07 ACIT CIRCLE-9(1) ROOM NO.163 C.R. BUILDING NEW DELHI V/S . M/S SPORTS & LEISURE APPAREL LTD. B-25 QUTAB INSTITUTIONAL AREA NEW DELHI (PAN:AAACS 2959 M) (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- S/SHRI M.P. RASTOGI & P.N. SHASTRI CA REVENUE BY:- ANUSHA KHURANA DR DATE OF HEARING:- 13-09-2011 DATE OF PRONOUNCEMENT:- 16-09-2011 O R D E R A.N.PAHUJA:- THIS APPEAL BY THE REVENUE FILED ON 05.03.2010 AGAI NST AN ORDER DATED 19 TH OCTOBER 2009 OF THE LD. CIT (APPEALS)-XII NEW DE LHI RAISES THE FOLLOWING GROUNDS:- 1. LEARNED CIT(A) ERRED IN LAW AND ON THE FACTS AN D CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF ` 6 50 208/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE INCOME-TAX ACT. 2. LEARNED CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF ` 7 90 472/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FOREIGN TRAV ELING TO ` 4 50 000/-. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL F ACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING LOSS OF ` 4 95 79 730/- FILED ON 30.11.2006 BY THE ITA NO.948/DEL/2010 2 ASSESSEE MANUFACTURING AND MARKETING READYMADE GAR MENTS AND ACCESSORIES WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOT ICE U/S 143(2) OF THE INCOME- TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) ISSUED ON 28 TH OCTOBER 2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER [AO IN SHORT) NOTICED THAT THE ASSESSEE PAID RENT AMOUNTIN G TO ` 6 50 208/- TO M/S HMV BANGALORE WITHOUT DEDUCTING TAX AT SOURCE U/S 194I OF THE ACT. ACCORDINGLY THE AO DISALLOWED THE AMOUNT IN TERMS OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 3. ON APPEAL THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE WHILE RELYING UPON THE DECISION DATED 31 ST MARCH 2006 OF THE ITAT IN THE CASE OF M/S BARISTA COFFEE CO. LTD.. IN ITA 319/DEL/2005. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF LEARNED CIT(A).THE LD. DR SUPPORTED THE ORDER OF AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE REFERRED TO A DECISION DATED 31 ST MARCH 2009 OF THE ITAT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 IN I.T.A. NO.319/D/05 AND CONTENDED THAT THERE WAS NO DEFAULT IN DEDUCTING TA X AT SOURCE FROM THE RENT PAYMENT. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. WE FIND THAT THE IT AT VIDE THEIR AFORESAID ORDER DATED 31 ST MARCH 2009 IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2002-03 WHILE ADJUDICATING THE ISSUE OF DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS OF COMMISSION TO FRANCHISES AND CONSIGNEE AGENTS TREA TED AS RENT BY THE AO CONCLUDED AS UNDER:- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER CAREFULLY CIRCUMSPECTING THE AVAILABLE EVIDENCE ON RECORD WHICH INCLUDE THE AGREEMENT BE TWEEN THE ASSESSEE AND THE FRANCHISEES WE ALSO COME TO THE SAME CONCLUSION AS THAT OF LD. CIT (APPEALS). THE LD. AS SESSING OFFICER HAS INCORRECTLY CONCLUDED THAT THE MINIMUM GUARANT EE AMOUNT PAID BY THE ASSESSEE IS ACTUALLY A RENT PAYMENT FOR THE PREMISES IN WHICH THE CONCERNED FRANCHISEE OPERATES HIS OUTLETS . THE NATURE OF THE PAYMENT INVOLVED IN THIS CASE IS SIMPLY A PAYME NT OF ITA NO.948/DEL/2010 3 COMMISSION AND NOT THAT OF RENT. THEREFORE THE AMO UNTS PAID TO THE CONSIGNEES AND FRANCHISEES CANNOT BE TERMED AS RENT SO AS TO ENTAIL ENHANCED DEDUCTION OF TDS UNDER SECTION 194I OF THE ACT. 7. IN SO FAR AS THE GRIEVANCE OF THE DEPARTMENT IS RELATED TO THE TDS ON RENT PAID BY BARISTA COFFEE COMPANY LTD. (BCCL) TO TUNER MORRISON LAND LTD. (TMLL) ON BEHALF OF THE ASSESSEE FOR THE PREMISES OCCUPIED BY IT BELONGING TO TMLL IS CONCER NED IT IS UNDISPUTED FACT THAT BCCL HAS ALSO DEDUCTED AND DUL Y DEPOSITED THE TDS ON SUCH RENT IN THE CAPACITY OF THE' ASSESS EE'S DDO RESPONSIBLE FOR MAKING THE PAYMENT. THE COMPANY HAS CREDITED BCCL THE NET RENT PAID AS WELL AS TDS DEPOSITED B Y IT AS DDO. THEREFORE IN THIS CASE ALSO THERE IS 'NO DEFAULT OF TDS' AS FAR AS THE RENT PAYMENT IS CONCERNED. SINCE THE RENT HAS B EEN PAID ON BEHALF OF THE ASSESSEE' BY ITS DDO WHO HAS ALSO EF FECTED THE APPROPRIATE DEDUCTIONS UNDER THE PROVISIONS OF LAW ON ASSESSEE'S BEHALF AND DULY DEPOSITED THE SAME WITH THE GOVT. IT DOES NOT CALL FOR ANY TDS YET AGAIN ON THE REIMBURSEMENT THEREOF TO THE DDO BY THE ASSESSEE. WE ARE OF THE CONSIDERED OPINION THAT THE SAID RENT CANNOT BE SUBJECTED TO THE DEDUCTION TWICE. 8. IN VIEW OF OUR FORE-GOING DISCUSSION WE HOLD THAT THE FINDING OF THE LD. CIT (APPEALS) ARE PERFECTLY IN ORDER AND NO INT ERFERENCE IS WARRANTED AT OUR HANDS. THEREFORE BOTH THE GROUNDS TAKEN BY THE REVENUE STAND DISMISSED. 5.1 IN THE LIGHT OF VIEW TAKEN BY THE ITAT IN THEIR AFORESAID DECISION IN THE ASSESSEES OWN CASE FOR THE AY 2002-03 AND INDISPU TABLY FACTS AND CIRCUMSTANCES PREVAILING IN THE YEAR UNDER CONSIDER ATION BEING PARALLEL TO THE FACTS AND CIRCUMSTANCES THAT PREVAILED IN THE AY 2 002-03 WHILE THE REVENUE HAVE NOT PLACED ANY MATERIAL BEFORE US SO AS TO ENA BLE US TO TAKE A DIFFERENT VIEW IN THE MATTER WE HAVE NO ALTERNATIVE BUT TO UPHOL D THE FINDINGS OF THE LD. CIT(A). THEREFORE GROUND NO.1 IN THE APPEAL IS DISMISSED. 6. GROUND NO.2 IN THE APPEAL RELATES TO RESTRICTIO N OF DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF `7 90 472/- TO ` 4 50 000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE CLAIM ED FOREIGN TRAVEL EXPENSES OF ` 7 90 472/- RELATING TO SHRI AMIT JUDGE AND SHRI VIK AS GUPTA DIRECTORS OF THE COMPANY. SINCE THE ASSESSEE FAILED TO SUBSTANTIATE THE PURPOSE OF THEIR FOREIGN ITA NO.948/DEL/2010 4 TRAVEL AND ITS NEXUS WITH THE BUSINESS OF THE ASSES SEE THE AO DISALLOWED THE CLAIM. 7. ON APPEAL THE LEARNED CIT(A) ALLOWED THE CLAIM IN THE FOLLOWING TERMS:- DURING THE COURSE OF APPELLATE PROCEEDINGS COMPLET E DETAILS REGARDING PURPOSE PROOF NO. OF DAYS AND EXPENSES UNDER VARIOUS HEADS WAS SOUGHT. THE FOLLOWING DETAILS WERE SUBMIT TED:- FOREIGN TRAVELING DURING THE FY 2005-06 : S.NO. NAME OF THE COUNTRY PERIOD N O. OF EXECUTIVE DESIGNATION VISITED FROM TO DAYS . . I) MR. VIKAS GUPTA MD FRANCE & UK 09. 06.05 - 16.06.05 7 II} MR. VIKAS GUPTA MD FRANCE & UK 07.1 2.05 - 14.02.05 7 III} MR. VIKAS GUPTA MD HONG KONG 09. 06.05 - 16.06.05 3 IV) MR. AMIT JUDGE CHAIRMAN FRANCE 09. 06.05 - 16.06.05 7 APART FROM THESE DETAILS AND BREAK UP OF EXPENDITUR E FOR FARE LODGING OTHER EXPENSES AND CONVEYANCE WAS GIVEN. P HOTO COPIES OF INVITATION FOR TALK WITH PARTNERS OF COMPANY/FAR E WERE PRODUCED. COPY OF THESE CORRESPONDENCES HAVE BEEN PLACED ON R ECORD. THOUGH IT HAS BEEN ESTABLISHED BY THE ASSESSEE THAT THE TRAVEL WAS UNDERTAKEN FOR MEETING/ TRADE FAIR HOWEVER THE NU MBER OF DAYS FOR STAY IN VARIOUS HOTELS IS MUCH MORE THAN MENTIONED FOR MEETING/INVITATION. THE EXPENSES CLAIMED ALSO INCLU DE EXPENSES OF LODGING OTHER EXPENSES CONVEYANCE ETC. OBVIOUSLY PERSONAL EXPENSES LIKE FOOD CONVEYANCE HAVE ALSO BE DEBITED TO THE SAID EXPENSES. ALSO AS DISCUSSED EARLIER THE NUMBER OF D AYS FOREIGN TRAVEL IS MORE AND CERTAIN PERSONAL EXPENDITURE BEI NG DEBITED TO THE SAID ACCOUNT CANNOT BE RULED OUT. HENCE THE DISALLO WANCE MADE BY THE AO IS RESTRICTED TO RS. 4 50 000/- IN STEAD OF RS. 7 90 472/-.THIS DISALLOWANCE IS BEING MADE DUE TO PERSONAL NATURE O F THE EXPENDITURE INCURRED BY THE M.D/CHAIRMAN AND THE LO NGER DURATION OF STAY THEN IS SUGGESTED BY THE CORRESPONDENCE SU BMITTED . 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A).THE LD. DR SUPPORTED THE ORDER OF AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE REFERRED TO A DECISION DA TED 5 TH APRIL 2010 IN THE APPEAL OF THE ASSESSEE FOR THE AY UNDER CONSIDERATI ON IN I.T.A. NO.569/D/2010 AND CONTENDED THAT THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. ITA NO.948/DEL/2010 5 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RECORD OF THE CASE. WE FIND THAT WHILE ADJUDICATING THE ISSUE OF DISALL OWANCE OF ` 3 40 472/- ON ACCOUNT OF FOREIGN TRAVEL UPHELD BY THE LEARNED CIT (A) THE ITAT IN THEIR AFORESAID ORDER DATED 5 TH APRIL 2010 CONCLUDED AS UNDER:- FROM THE DETAILS FILED BY THE ASSESSEE IT IS REVE ALED THAT ASSESSEES MANAGING DIRECTOR AND CHAIRMAN HAD UNDERTAKEN FOREI GN JOURNEY TO FRANCE UK HONG KONG IN THE MONTH OF JUNE 2005 D ECEMBER 2005 AND MARCH 2006. THE NUMBER OF DAYS OF JOURNEY HAS ALS O BEEN GIVEN. THE ASSESSEE GAVE THE DETAILS AND BREAK UP OF EXPENDITU RE FOR FREIGHT LODGING AND OTHER EXPENSES. PHOTOCOPIES FOR INVITATIONS FO R TALK WITH PARTNERS OF THE ASSESSEE COMPANY OR TO ATTEND FAIR WERE ALSO PR ODUCED. THE CIT(A) HAS ACCEPTED THE POSITION THAT THE TRAVELING WAS UN DERTAKEN FOR ATTENDING MEETINGS AND TRADE FAIR BUT THE CIT(A) HAS OBSERVED THAT THE NUMBER OF DAYS FOR STAY IN VARIOUS HOTELS IS MUCH MORE THAN R EQUIRED FOR ATTENDING THE MEETING. HOWEVER CIT(A) HAS NOT POINTED OUT A NY ITEM ON THE BASIS OF WHICH IT COULD BE SAID THAT STAY IN HOTEL AT THE TIME THE ASSESSEES MANAGING DIRECTOR AND CHAIRMAN VISITED THE FOREIGN COUNTRY WAS NOT FOR THE PURPOSE OF ASSESSEES BUSINESS. THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT ANY ITEM FROM THE DETAILS FILED BY THE ASSESSEE WHICH COULD SHOW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WERE NOT RELATED TO ASSESSEE COMPANY BUT WERE PERSONAL EXPENDITURE OF T HE PERSON CONCERNED WHO UNDERTAKEN THE FOREIGN JOURNEY. IN THESE CIRCUMSTANCES THE PART DISALLOWANCE OF RS. 3 90 472/- SUSTAINED BY THE CIT(A) IS NOT WARRANTED. IN THIS CONNECTION THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING TWO DECISIONS OF THE HONBLE SUPREME COURT WHICH ARE AS UNDER: 1. CIT VS. WALCHAND & CO. P. LTD. 65 ITR 381; 2. J.K. WOOLEN MANUFACTURES VS. CIT 72 ITR 612. IN THE CASE OF J.K. WOOLEN MANUFACTURES VS. CIT (SU PRA) WHERE THE PRINCIPLE LAID DOWN BY THIS COURT IN CIT VS. WALCHA ND & CO. P. LTD. (SUPRA) HAS BEEN APPLIED AND THEN THE HONBLE SUPREME COURT HAS TAKEN A VIEW THAT IN APPLYING THE TEST OF COMMERCIAL EXPEDIENCY TO DETERMINE WHETHER AN EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF ASSESSEES BUSINESS REASONABLENESS OF THE EXPENDIT URE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT O F THE INCOME-TAX DEPARTMENT. IT IS OF COURSE OPEN TO THE APPELLAT E TRIBUNAL TO COME TO A CONCLUSION EITHER THAT THE ALLEGED PAYMENT IS NOT R EAL OR THAT IT IS NOT INCURRED BY THE ASSESSEE IN THE CHARACTER OF A TRAD ER OR IT IS NOT LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE AND THEN TO DISALLOW IT. IT IS NOT THE FUNCTION OF THE TRIBUNAL TO DETERMINE THE ITA NO.948/DEL/2010 6 REMUNERATION WHICH IN THEIR VIEW SHOULD BE PAID T O AN EMPLOYEE OF THE ASSESSEE. APPLYING THE SAID PRINCIPLES TO THE PRES ENT CASE WE FIND THAT THE CIT(A) HAS NOT BROUGHT ANY MATERIAL ON RECORD T O PROVE AND ESTABLISH THAT THE FOREIGN TRAVELING EXPENSES INCURRED BY THE ASSESSEE HAS NOT BEEN INCURRED IN THE CHARACTER OF A TRADER OR IT IS NOT LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. IT IS ALSO NOT THE CASE OF THE DEPARTMENT THAT THE JOURNEY UNDERTAKEN BY TH E CONCERNED PERSONS WERE NOT RELATED TO THE BUSINESS ACTIVITY OF THE AS SESSEE COMPANY. 9.1 IN THE LIGHT OF AFORESAID VIEW TAKEN BY THE ITA T IN THE ASSESSEES APPEAL FOR THE YEAR UNDER CONSIDERATION AND THE REVENUE H AVING NOT PLACED ANY MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DI FFERENT VIEW IN THE MATTER THERE IS NO BASIS TO INTERFERE WITH THE FINDINGS OF LEARN ED CIT(A). THEREFORE GROUND NO.2 IN APPEAL IS ALSO DISMISSED. 10.. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.3 IN THE APPEAL. THEREFORE THIS GROUND IS DISMISSED. 11. NO OTHER ARGUMENT OR PLEA WAS MADE BEFORE US. 12. IN RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ACIT CENTRAL CIRCLE-9(1) ROOM NO.163 C.R. BU ILDING NEW DELHI. 2. M/S SPORTS & LEISURE APPAREL LTD. B-25 QUTAB INSTITUTIONAL AREA NEW DELHI 3. CIT (APPEALS)-XII DELHI 4. THE CIT CONCERNED. 5. THE DR ITAT G BENCH NEW DELHI 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI