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2016 (5) TMI 575 - ITAT MUMBAI

2016 (5) TMI 575 - ITAT MUMBAI - TMI - Revision u/s 263 - Non deduction of tds on payments made in pursuance of Cost Allocation and Recharge Agreement’- disallowance u/s. 40(a)(ia) - Held that:- When the Assessing Officer examined the material called for and placed before him by the assessee, which fact is admitted by the Ld. CIT, and the Assessing Officer took a correct possible view in the matter, the order of assessment cannot be termed to be erroneous and prejudicial to the interest of the R .....

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ncome of the recipient so as to cast a liability upon the assessee for deduction of tax at source on such payments and, therefore, disallowance u/s. 40(a)(ia) of the Act is not warranted. We find that the very same issue was considered by a Co-ordinate bench of this Tribunal in the assessee’s own case for the assessment year 2009- 10 holding that payments made by the assessee in pursuance of Cost Allocation and Recharge Agreement’ between the assessee and ‘GSISPL’ was purely on account of reimbu .....

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3 of the Income Tax Act, 1961(in short the Act ) passed by the CIT -I, Mumbai vide order dated 18/2/2015 for assessment year 2010-11. 2. The facts of the case, briefly, are as under:- 2.1 The assessee company is a non-banking finance company engaged in stock broking, investment banking, trading, insurance and securitization of loans, pass through certificates, public sector/corporate bonds, debentures, certificates of deposits and Government of India Securities. The assessee company, formerly kn .....

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ct vide order dated 27/11/2013, wherein the income of the assessee was accepted as returned at ₹ 7,44,23,710/- under the normal provisions of the Act and Book Profits under section 115JB of the Act was computed at ₹ 5,30,67,670/-. 2.2 The CIT -I, Mumbai, on a perusal of the records of assessment, observed that the assessee had incurred reimbursement of cost recharge expenses amounting to ₹ 3,17,37,719/-, on which tax was not deducted at source while making the said payments to .....

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ISPL . Thus, similarly for assessment year 2010-11, the year under consideration, the assessee has claimed reimbursement of cost recharge expenses of ₹ 3,17,37,719/- on which TDS has not been deducted and paid and, therefore, the same was to be disallowed under section 40(a)(ia) of the Act. 2.3 In response to the show cause notice, the assessee contended as summarized by the CIT that:- (i) the Assessing Officer had looked into the reimbursement of cost recharge expenses claimed and was ful .....

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d the disallowance made on account of non-deduction of tax at source on re-imbursement of expenses. Therefore, if the Assessing Officer has adopted one view, the CIT in 263 proceedings, cannot adopt a different view as this constitutes a change of opinion which is not permissible in revision proceedings. It was accordingly urged by the assessee that the Ld. CIT, drop the revisionary proceedings. 2.4 The Ld. CIT on an analysis of the material on record observed that the assessee had made a paymen .....

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efore, TDS on the said payment is to be made. The Ld. CIT was of the view that while the Assessing Officer has looked into the details on record, he has not examined the entire arrangement to see whether the recipient is earning any income in this transaction and failure on the part of the Assessing Officer to do so has rendered the order of assessment to be erroneous and prejudicial to the interest of Revenue. In that view of the matter, the Ld. CIT cancelled the order of assessment dated 27/11 .....

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T-I, Mumbai, the assessee has preferred this appeal raising the following grounds:- General ground: 1. erred in initiating and passing the order under section 263 of the Act disallowing the reimbursements paid to Goldman Sachs (India) Securities Private Limited (GSISPL) under section 40(a)(ia) of the Act on account of nondeduction of tax at source; 2. erred in concluding that a recurring reimbursement under a cost sharing agreement automatically suggests an income element associated with the pay .....

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ed; Learned AO has taken one possible legal view 4. erred in not appreciating the fact that the learned AO had taken one legally possible view (which is affirmed by the Commissioner of Incometax (Appeals) [CIT(A)] order in the case of the Appellant itself in AYs 200910 and 201112) and hence, the order under section 263 of the Act is liable to be quashed; and Merger of order 5. erred in not appreciating the fact that the issue under consideration was a subject matter of adjudication before the CI .....

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ssee. The fact is that all the material in relation to reimbursement of expenses was placed before the Assessing Officer in assessment proceedings vide letter dated 9/1/2013, copy placed at pages 47 to 55 of the Paper Book and the Ld. CIT in the impugned order has accepted that the Assessing Officer had looked into them. The specific submissions with respect to the re-imbursement of expenses to GSISPL were at paras 3 to 3.23/ pages 48 to 55 of the paper book, wherein inter-alia, it was submitted .....

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no tax is required to be deducted at source when the payment is in the nature of reimbursement of expenses since there is no element of income embedded therein:- (i) J.B.Boda Surveyors Pvt. Ltd. (ITA No.4252/Mum/2009) (ii) Mahyco Monsanto Biotech (India) Ltd. (ITA No.5842/Mum/2012) (iii) CIT vs. Siemens Aktiongesellschaft (310 ITR 320)(Bom) (iv) Bayer Material Science Pvt. Ltd. (ITA No.7977/Mum/2010) 4.1.2 The Ld. Sr. Counsel contended that the facts as submitted above clearly establish that the .....

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ttedly, not the case of the Ld. CIT. In these circumstances, it is contended, that the Ld. CIT cannot substitute his views on a particular issue in respect of which the Assessing Officer has already taken a view in the matter that is sustainable in law and therefore, the proposed revision of the order of assessment for assessment year 2010-11 amounts to nothing but a change of opinion which is not permissible under the provisions of section263 of the Act . In support of the above proposition, th .....

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uto Ltd. (2010) 332 ITR 167 (Del) (ii) CIT vs. Nirma Chemical Works (P) Ltd. (2009) 309 ITR 67 (Guj) 4.1.4 The Ld. Sr. Counsel, placing reliance on the decision of the Hon ble Bombay High Court in the case of CIT vs. Reliance Communication Ltd. in ITA No.1816 of 2013 dated 28/03/2016, argued that, as discussed earlier, since all the relevant details /expenditure on the reimbursement made by the assessee to GSISPL were submitted to the Assessing Officer during the course of assessment proceedings .....

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erroneous in so far as it is prejudicial to the interest of Revenue. It was finally contended that in the light of the facts and circumstances of the case, the Ld. CIT was not justified in assuming justification for invoking the provisions of Section 263 of the Act. 4.2 On the merits of the case, the assessee submits that where expenses have been incurred by the recipient; in this case GSISPL on behalf of the assessee and the same were reimbursed to GSISPL, such reimbursement are mere recoupment .....

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2009-10 (ITA No.2518/Mum/2013). It was also submitted that in the case on hand, while the Assessing Officer had made disallowance of reimbursement of expenses under section40(a)(ia) of the Act on account of non-deduction of tax in assessment years 2009-10 and 2011-12, the Ld. CIT(A) had deleted these disallowances and the order of Ld. CIT(A) for assessment year 2009-10 was upheld by the Co-ordinate in ITA No.2518/Mum/2013 dated 4/9/2015 (supra). Therefore, the impugned order of the Ld. CIT under .....

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ssessing Officer s failure to look into the records of the assessee to ascertain the income associated in these transactions of reimbursement, rendered the order both erroneous and prejudicial to the interest of Revenue. It was contended that there is no question of there being two views on this issue as it is clear that there is income associated with the reimbursement of expenses to GSISPL and, therefore, the assessee was liable to deduct tax at source. 4.4.1 We have head the rival contentions .....

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sing Officer in the course of assessment proceedings vide letter dated 9/1/2013(copy placed at page 47 to 55 of the Paper Book) and 30/10/2013, whereby it was submitted, inter-alia, that since the said expenditure was mere reimbursement of expenditure, no TDS was made thereon by the assessee while making the payments to GSISPL as ostensibly there was no income element embedded therein. We find from perusal of the impugned order that the Ld. CIT has himself admitted that the aforesaid details wer .....

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nt of expenses. In our view, the undisputed fact that the Assessing Officer called for and examined the details field by the assessee on the aforesaid issue of reimbursement of expenses to GSISPL , means that the Assessing Officer has already taken a view in the matter; that is possibly sustainable in law, i.e. that no tax was required to be deducted at source on aforesaid reimbursement of expenses to GSISPL . In coming to the view that no TDS is to be deducted when the payment is in the nature .....

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ficer, filed by the assessee and examined by the Assessing Officer in the course of assessment proceedings and a possible view, sustainable in law, is taken by him, the impugned revision order, in our view is nothing but a change of opinion by the Ld. CIT which is not permissible under the provisions of section 263 of the Act. In coming to this view, we place reliance on the following judicial pronouncements of the Hon'ble Supreme Court in Malabar Industrial Company Ltd.(supra) and Max India .....

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ent proceedings in the case on hand that all material relevant to the issue of reimbursement of expenses by the assessee to GSISPL were filed by the assessee before the Assessing Officer. It can be inferred that the Assessing Officer examined the same and was satisfied with the details filed and took a possible view in the matter. This view of the Assessing Officer has also been upheld by the Co-ordinate bench in the assessee s own case for AT 2009-10 in ITA No.2518/Mum/2013 dated 4/09/2015 on t .....

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art, what the Tribunal found and on all the three items highlighted by Mr. Tejveer Singh is that there were materials before the Assessing Officer. The Assessing Officer made enquiries about the above referred aspects and which have been noted by the Commissioner. The assessee made submissions by placing all relevant documents before the Assessing Officer. Thus the case does not fall within the parameters laid down in the decision of the Hon ble Supreme Court and other High Courts. The mere fact .....

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ng Officer took a perfectly correct or a possible view, then, the order passed by him cannot be termed as erroneous insofar as it is prejudicial to the interest of the Revenue. The Commission of Income tax was not, therefore, justified in invoking section 263 of the Act. Taking into account the facts and circumstances of the case, as discussed above from para4.4.1 to 4.4.3 of this order, placing reliance inter-alia, on the various judicial pronouncements referred to (supra), we also draw support .....

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suming jurisdiction u/s. 263 of the Act for assessment year 2010-11 in the case on hand and, therefore, cancel the impugned order passed u/s. 263 of the Act on 18/2/2015 for assessment year 2010-10 in the case on hand. 4.5.1 Even on merits, we concur with averments of the assessee that where expenses incurred by GSISPL on its behalf and the same are reimbursed, it is a mere-recoupment of expenses. It would not constitute income of the recipient so as to cast a liability upon the assessee for ded .....

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