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Commissioner of Income Tax-19 (2) Versus M/s. ITD CEM India JV

2017 (9) TMI 740 - BOMBAY HIGH COURT

Disallowance U/s 40(ba) - payments made by the assessee to ITD Cementation India Limited were only on account of salary and related expenses - Held that:- Consistent stand should be taken and similar treatment should be given to the accounts as in the preceding assessment years. The alternate argument is made and is noted in paragraph 49 of the Tribunal's order. The departmental representative referred to the remand report and thereafter supported the finding of the Commissioner of Income Tax (A .....

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ecked debit notes raised by the ITD Cementation India Limited and they were test checked and the amount of expenditure claimed by the assessee was verified and the genuineness of the same has been proved, then, we do not see any reason to interfere with the finding of fact recorded in paragraph 54 of the Tribunal's order. All the more, when Section 40(ba) was not attracted as far as this disallowance is concerned. - Despite his persuasive ability, when Mr. Ahuja would submit that even the re .....

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ue to the file of the Tribunal for being decided afresh on merits and in accordance with law. - INCOME TAX APPEAL NO. 1826 OF 2014 - Dated:- 4-9-2017 - S. C. DHARMADHIKARI & PRAKASH D. NAIK, JJ. Mr. Abhay Ahuja a/w Mr. P. A. Narayanan for the Appellant Mr. Riyaz S. Padvekar a/w Mr. Sameer Dalal and Mr. Tanzil R. Padvekar for the Respondent. P.C. : 1. This Appeal of the Revenue challenges the order passed by the Income Tax Appellate Tribunal, Bench at Mumbai in Income Tax Appeal No.4225/Mum/2 .....

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ate Authority CIT(A) 30, Mumbai dated 26th March, 2012 is contrary to law. Ground nos. 2 and 4 read as under : 2. On the facts and circumstances of the case and in law the Hon'ble Commissioner of Income Tax (Appeals)30 has erred in upholding the action of the AO in disallowing reimbursement of salary and related expenses to the tune of ₹ 4,99,19,593/for non-deduction of TDS u/s 40(a)(ia). 4. On the facts and circumstances of the case and in law the Hon'ble Commissioner of Income Ta .....

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he order of the Assessing Officer and that of the Commissioner, we find that Section 40(ba) of the IT Act was also invoked and applied. The relevant finding on that aspect of the matter can be found in the order of the Assessing officer. In paragraph no. 4.2 and while dealing with the issue related to salary of the employees of ITD Cementation India Limited, the Assessing Officer held as under: 4.2 Salary related to employees of ITD Cementation India Ltd. An amount of ₹ 4,99,19,593/has bee .....

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whatever name called, made by such association, body or member of such association shall not be allowed as deductible expenditure. 6. In Appeal before the First Appellate Authority as well, the matter was approached by the First Appellate Authority in the light of applicability of Section 40(ba) of the IT Act. 7. That aspect is dealt with by the First Appellate Authority in paragraph 5.4 of the order dated 26th March, 2012 (page 36 of the paper book). 8. Thus, the First Appellate Authority had b .....

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o ITD Cementation India Private Limited, who has claimed the same by raising debit notes on the assessee. The Assessing Officer in the remand report (made after remand) held that these payments made cannot be called as payment made to contractor in terms of Section 193C of the IT Act. Although these payments were routed through the current account of the coventurer that requires deduction of TDS as per the provisions of Section 192 of the IT Act. The Assessing Officer in the remand report also s .....

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ction 40(a) (ia) of the IT Act. Pertinently, the Assessing Officer also noted in the order that the said disallowance is also warranted by the provisions of Section 40(ba). That is because in the case of association of persons, any payment of interest, salary, bonus, commission or remuneration by whatever name called, made by such association to a member of such association shall not be allowed as deductible expenditure. Therefore, on this ground also, the salary and related expenses need to be .....

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salary and related expenses, bank guarantee and administrative expenses paid by the Joint Venture to ITD Cementation India Limited. 10. The Tribunal approached the matter by bifurcating the disallowance in relation to salary and administrative expenses. The Tribunal, after noting the rival contentions and particularly the argument that no disallowance has been made in the assessment years 2006-2007 and 2007-2008 which were framed under Section 143(3), proceeded further to hold that the departme .....

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ssessee to ITD Cementation India Limited were only on account of salary and related expenses. 12. Then it purports to divert it's attention to Section 40(ba) of the IT Act, but proceeds to state that this provision is specific. It calls for disallowance of payment of any kind by the association of persons to it's members. Then it holds that it could have accepted the arguments of the departmental representative had the member of the assessee been an individual. Because the provision seek .....

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efore us two substantial questions of law. 14. However, when it came to deletion of the addition of ₹ 4,99,19,593/, Mr. Ahuja would submit that the finding of the Tribunal in that regard raises a substantial question of law. 15. The counsel for the assessee on the other hand, would submit that there is no question of invoking Section 40(ba) of the IT Act and merely because the Assessing Officer has referred to it does not mean that the Tribunal was obliged to render any finding about its a .....

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ad the member of the assessee were an individual, because, the provision has the enrichment of members through back door. But here is the case of a company, which is a separate juridical person, distinct from its shareholders/directors. In the instant case, the payment has been made on account of reimbursement of an expense made by the company. Here the question of enrichment of a member does not arise, as has been held earlier that there is no profit element. 22. In such a circumstance, provisi .....

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an AOP (Association Of Persons) or body of individuals (other than a company or a cooperative society or a society registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India) any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such association or body to a member of such association or body. There are three Explanations below the same. 17. We have not found from the Tribunal' .....

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t is identical to TDS, namely, Tax Deducted at Source. We are unhappy with the abbreviations and short forms in the Tribunal's order. We do not see who is reluctant, either one who dictates or one who takes down the same, but such abbreviations and shortcuts increase burden on the higher Courts. We would caution the Tribunal that hereafter it should indicate somewhere in the order as to what the abbreviations used by it stand for. 19. In the circumstances, we proceed to admit this Appeal on .....

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uestion of law. We are unable to agree with him. That relates to a disallowance of administrative expenses at The concurrent finding in that regard of the Assessing Officer and the Commissioner of Income Tax (Appeals) has been set aside. 21. The Tribunal discussed this issue from paragraph 40 of the order under challenge. 22. The Assessing Officer noticed that the assessee had not deducted the Tax at Source while making payment on account of administrative expenses. That was paid by the Joint Ve .....

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ner of Income Tax (Appeals) therefore directed the Assessing officer to consider the further documents and submit a remand report. On remand, the assessee submitted that it reimbursed the expenses (administrative expenses) to ITD Cementation India Limited. They were incurred on behalf of the assessee. Thereafter, debit notes were raised on the assessee by ITD Cementation India Limited. These facts were checked and verified by the Assessing Officer and he found the same to be correct. However, in .....

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7+2008 which assessment was framed under Section 143(3) of the IT Act. Thus, a consistent stand should be taken and similar treatment should be given to the accounts as in the preceding assessment years. The alternate argument is made and is noted in paragraph 49 of the Tribunal's order. The departmental representative referred to the remand report and thereafter supported the finding of the Commissioner of Income Tax (Appeals). There were written submissions filed by the assessee's repr .....

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