TMI Blog2018 (4) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... ile computing fringe benefit tax liability and due fringe benefit tax was separately paid by the assessee on these expenses. It is also not the grievance of the Revenue that these expenses were not incurred wholly and exclusively for the purposes of the business of the assessee. Under these situations it was incumbent on the Revenue to have come out with specific disallowance by going through each of the expenses to come to the conclusion that these expenses were not incurred wholly and exclusively for the purposes of the business or were bogus expenses which has not been done by the authorities below rather an adhoc disallowance has been made by the authorities below on certain assumptions which is not sufficient to fasten tax liability in the instant case. Thus disallowance as was made by the AO and as confirmed by learned CIT(A) is not sustainable and is hereby ordered to be deleted. Additions made owing to difference in AIR statement - Held that:- The assessee has filed American Express Bank Credit Card statements in paper book filed with the tribunal. The assessee has filed an application for admission of additional evidence under Rule 29 of Income-Tax (Appellate Tribunal) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These two appeals, filed by the assessee, being ITA No. 1658/Mum/2013 1629/Mum/2015 for assessment year(s) 2009-10 2010-11 respectively are directed against separate appellate orders dated 11.01.2013 and 22.02.2014 passed by learned Commissioner of Income-tax(Appeals)-3, Mumbai (hereinafter called the CIT(A) ) learned CIT(A)-4,Mumbai for AY 2009-10 and 2010-11 respectively, the appellate proceedings had arisen before learned CIT(A) from separate assessment orders dated 28-12-2011 25.02.2013 respectively passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ) for assessment year(s) 2009-10 2010-11. 2. First we shall take up appeal of the assessee for AY 2009-10 in ITA No. 1658/Mum/2013. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) in ITA no. 1658/Mum/2013 for AY 2009-10 read as under- 1. The learned CIT(A)-3, has erred in confirming disallowance of interest of ₹ 4,14,548/- made by the learned Assessing Officer concluding that there is an element of diversion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Bank at the interest rate of 10.5% per annum while the interest charged from said sister concern was only 9% p.a.. The AO observed that the assessee had paid interest of ₹ 2,76,36,508/- during the year and consequently differential interest being 1.5% to the tune of ₹ 4,14,548/- was brought to tax by the AO by relying on decisions of Hon ble Madras High Court in the case of K. Somusundaram Bros. v. CIT 238 ITR 939 and Hon ble Bombay High Court in the case of Phelta Sugar Works Limited (208 ITR 989) vide assessment order dated 28.12.2011 passed by the AO u/s 143(3), which was later confirmed by learned CIT(A) while disposing of first appeal vide appellate order dated 11.01.2013 passed by learned CIT(A). 5. Now, the assessee has filed an second appeal with tribunal. The learned counsel for the assessee submitted at the outset that authorities below erred in disallowing the interest to the tune of ₹ 4.14 lacs. It was submitted that in earlier years, the borrowings were made from LIC on the interest rate of 9% p.a. and it is only in the month of January 2009, the loan was raised from Kotak Mahindra Bank Limited at the interest of 10.5% p.a.. It was submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at higher rate of interest @10.5% p.a. which were advanced to this subsidiary company at lower rate of interest @9% p.a.. The assessee has disputed this finding of fact by the AO by contending that major borrowing were from LIC which was on the interest rate @9% p.a. and it is only at fag-end of the year in January 2009, the borrowings were made from Kotak Mahindra Bank Limited on the interest rate @10.5% p.a. which cannot be benchmarked in the manner done by the AO to disallow the differential interest @1.5% for the whole year on the total deposit advanced to the subsidiary company namely Whistling Woods International Limited. Secondly, it is the claim of the assessee that the amounts were advanced keeping in view commercial expediency and no disallowance is warranted. The assessee had relied upon decision of Hon ble Supreme Court in the case of S A Builders Limited(supra) and Hero Cycles Private Limited(supra). These contentions of the assessee requires verification by the AO as it required investigation of facts. In our considered view, the matter need to be set aside and restored to the file of the AO for fresh adjudication of the issue on merits in accordance with law after gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee submitted that ad-hoc disallowance has been made on presumption that there is personal element in these expenses keeping in view nature of expenses and that these expenses were paid in cash, without bringing any specific incriminating reasons for disallowance. Our attention was drawn by learned counsel for the assessee to page no. 176 and 178 of the paper book filed with the tribunal, to show the manner in which self vouchers were made to pay for small petty day to day expenses. It was submitted that there is no personal element in these expenses. It was also contended that fringe benefit tax was also paid by the assessee on all these expenses for the impugned year under consideration. Attention was drawn to copy of income-tax return filed with Revenue which is placed in paper book /page 1-3, wherein fringe benefit was declared to the tune of ₹ 25,56,971/- and Fringe Benefit tax of ₹ 8,69115/- was paid by the assessee for the impugned assessment year. The learned DR would rely on the appellate order of learned CIT(A). 9. We have considered rival contentions and perused the material on record. We have observed that expenses to the tune of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate tax regime namely fringe benefit tax whose purpose was indeed to collect tax keeping in view perquisite element in these expenses which are for the benefit of the employees. The separate regime of taxation called Fringe Benefit Tax was introduced vide Finance Act, 2005. The relevant extract of Budget Speech of the Hon ble Finance Minister while introducing Fringe Benefit Tax in Finance Bill, 2005 is reproduced hereunder: 160 . I have looked into the present system of taxing perquisites and I have found that many perquisites are disguised as fringe benefits, and escape tax. Neither the employer nor the employee pays any tax on these benefits which are certainly of considerable material value. At present, where the benefits are fully attributable to the employee they are taxed in the hands of the employee; that position will continue. In addition, I now propose that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer. However, transport services for workers and staff and canteen services in an office or factory will be outside the tax net. The tax is not a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO to be factually incorrect and hence the additions to the tune of ₹ 2,49,162/- was made by the AO to the income of the assessee as an unexplained expenditure u/s 69C, vide assessment order dated 28.12.2011 passed by the AO u/s 143(3). Later disallowance on this count was reduced by the AO to ₹ 2,23,216/- vide rectification order dated 05.01.2012 passed by the AO u/s 154 of the 1961 Act. The assessee carried the matter in appeal before learned CIT(A) and filed additional evidences by way of affidavits and statement of American Express Bank Credit Cards to contend that no disallowance is warranted but learned CIT(A) refused to admit additional evidences and appeal of the assessee stood dismissed by learned CIT(A), vide appellate order dated 11.01.2013 passed by learned CIT(A). 11. Aggrieved by the appellate order dated 11.01.2013 passed by learned CIT(A), the assessee has come in an appeal before the tribunal. The assessee has also filed American Express Bank Credit Card statements in paper book filed with the tribunal. The assessee has filed an application for admission of additional evidence under Rule 29 of Income-Tax (Appellate Tribunal) Rules, 1963, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) who dismissed the same vide appellate order dated 11.01.2013. 13. Aggrieved by the appellate order dated 11.01.2013 passed by learned CIT(A), the assessee has filed second appeal before the tribunal. The learned counsel drew our attention to the orders of the authorities below but no substantive arguments were advanced nor any evidence is brought to our notice by learned counsel to justify that these expenses were incurred wholly and exclusively for the business of the assessee and that the ingredients of provisions of Section 37(1) are duly complied with. The learned DR relied upon the order of learned CIT(A). After hearing both the parties and on perusal of material on record including orders of the authorities below, we are of the considered view that the assessee could not establish by way of cogent evidences that these expenses to the tune of ₹ 51,4,804/- claimed to be incurred towards foreign travel expenses for visiting foreign countries by Mr Subhash Ghai, Chairman and Director as well by Sh. Rahul Puri were incurred wholly and exclusively for the purposes of the business of the assessee and under these circumstances we hold that the assessee could not esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited Balance Sheet of the assessee which is placed in the paper book/page 12 to contend that the share capital of the assessee was ₹ 11.29 crores as at 31-03-2009 and 31-03-2008, while reserves and surplus were to the tune of ₹ 115.29 crores as at 31-30-2009 and ₹ 113.84 crores as at 31-03-2008, while investments are to the tune of ₹ 68.22 cores as at 31-03-2009 and ₹ 68.45 crores as at 31-03-2008. Perusal of the schedule of investments will reveal that inter-corporate deposit of ₹ 28.51 crores as at 31-03-2009 ( ₹ 23.25 crores as at 31-03- 2008) is also included in the total investments held by the assessee. There was also debit balance of ₹ 51.3 lacs as at 31-03-2009 towards miscellaneous expenditure which ought to be reduced from assessee s own funds ( ₹ 102.61 lacs as at 31-03-2008), but still the assessee s own funds are higher than average investment held by the assessee and in our considered view, presumption will apply that the assessee invested its own funds towards making investments in securities, as held by Hon ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Limited (2009) 313 ITR 340(Bom.) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
