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Income Tax Appellate Tribunal, ‘E‘ BENCH
Before: SHRI M.BALAGANESH & SHRI SANDEEP SINGH KARHAIL&
आदेश / O R D E R PER M. BALAGANESH (A.M):
These appeals in ITA No.1044/Mum/2022 & 1045/Mum/2022 for A.Y.2016-17 & 2018-19 preferred by the order against the revision order of the ld. Pr.Commissioner of Income Tax-Mumbai-1, u/s.263 of the Act dated 27/03/2022 for the A.Y. 2016-17 & 2018-19.
2 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
Identical issues are involved in both these appeals and hence, they are taken up together and disposed of by this common order for the sake of convenience.
The only effective issue to be decided in this appeal is as to whether the ld. PCIT was justified in invoking revisionary jurisdiction u/s.263 of the Act in the facts and circumstance of the instant case.
We have heard rival submissions and perused the materials available on record. The assessee is engaged in the business of health insurance. The return of income for the A.Y.2016-17 was filed by the assessee on 03/11/2016 declaring total loss of Rs.171,37,13,328/-. During the course of assessment proceedings, various details were called for by the ld. AO from time to time and the same were duly furnished by the assessee.
3.1. The ld. AO also referred the matter to ld. Transfer Pricing Officer u/s.92CA (1) after obtaining necessary approval from PCIT (1), Mumbai for benchmarking for determination of arm’s length price of international transactions carried out by the assessee. The ld. TPO passed an order u/s.92CA(1) of the Act dated 13/09/2019 by making ‘Nil’ adjustment.
3.2. The ld. AO on being satisfied with the replies furnished by the assessee framed the assessment u/s.143(3) of the Act on 18/12/2019 accepting the returned loss of the assessee.
3.3. This assessment was sought to be revised by the ld. PCIT by invoking revision jurisdiction u/s.263 of the Act. The ld. PCIT in the first show-cause notice issued to the assessee observed that on perusal of the
3 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
profit and loss account for A.Y.2016-17, it was seen that the assessee company had debited an amount of Rs.16,45,16,738/- under the head ‘Information Technology related expenses and Rs.10,91,91,824/- under the head ‘equipment software and amenities’. In the opinion of the ld. PCIT, these expenses are enduring in nature and would give enduring benefit to the assessee and consequentially have to be treated as capital expenditure. In the opinion of the ld. PCIT, the said expenses were allowed by the ld. AO without making any enquiries. Accordingly, the ld. PCIT treated the order passed by the ld. AO as erroneous in as much as it is prejudicial to the interest of the Revenue and passed revision order u/s.263 of the Act setting aside the order of the ld. AO.
3.4. We find from the perusal of the factual paper book filed comprising of pages 1 to 325, the ld. AO had raised a specific query vide notice u/s.142(1) of the Act dated 18/11/2019 during the course of assessment proceedings more specifically with regard to information technology related expenses and equipments software and amenities charges. The said notice u/s.142(1) of the Act contains an annexure which contains the details to be furnished by the assessee in a specific format. The said notice also show-caused the assessee as to why the said expenditure should not be treated as ‘capital’ in nature. Notice u/s.142(1) of the Act dated 18/11/2019 together with annexure given by the ld. AO to the assessee during the course of assessment proceedings are enclosed in pages 127-129 of the factual paper book. The assessee in response to the said notice furnished the reply vide letter dated 10/12/2019 which are reproduced hereunder:-
4 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
5 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
6 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
7 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
8 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
9 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
10 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
11 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
3.5. The aforesaid submissions made by the assessee before the ld. AO goes to prove that in response to specific query raised by the ld. AO, the assessee has furnished the detailed submissions furnishing the complete description and nature of services for which payments are made together with relevant supporting documents in the form of agreements etc., and had also furnished legal submission thereon as to why the said expenditure should be treated only as Revenue expenditure and not capital expenditure. This goes to prove that the ld. AO had made adequate and requisite enquiries during the course of assessment
12 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
proceedings and had correctly applied the provisions of the Act and had decided the issue by granting deduction as revenue expenditure in accordance with law. Hence, this is not a case of lack of enquiry or the ld. AO not carrying out requisite enquiries for enabling the ld. PCIT to invoke revisionary jurisdiction u/s.263 of the Act. In fact, the assessee in response to show-cause notice issued by the ld. PCIT had duly drawn attention of the ld. PCIT by furnishing the said replies before him also. The ld. PCIT had not bothered to even look into these submissions and proceeded to treat the order of the ld. AO as erroneous and prejudicial to the interest of the Revenue on the ground that no enquiries were carried out by the ld. AO. We have no hesitation to hold that order of the ld. PCIT is grossly erroneous in the instant case and the order of the ld. AO is not erroneous. Hence, we have no hesitation in quashing the revision order passed by the ld. PCIT u/s.263 of the Act for the A.Y.2016-17. Accordingly, the grounds raised by the assessee are allowed.
With regard to A.Y.2017-18, the issues are identical and specific enquiries were raised by the ld. AO for A.Y.2017-18 raised specific enquiry vide notice u/s.142(1) of the Act dated 18/11/2019 together with the Annexure exactly identical to that raised by him for A.Y.2016-17. The said notice together with the Annexure are enclosed in pages 137-139 of the factual paper book. The replies filed by the assessee before the ld. AO in response to the said specific query were made by the assessee vide letter dated 10/12/2019 which are enclosed in pages 129 to 136 of the factual paper book. Hence, the decision rendered for A.Y.2016-17 shall apply mutatis mutandis for A.Y.2017-18 also.
13 ITA No.1044 & 1045/Mum/2022 M/s. Manipal Cigna Health Insurance Co. Ltd.,
In the result, both the appeals of the assessee are allowed.
Order pronounced on 11/08/2022 by way of proper mentioning in the notice board.
Sd/- Sd/- (SANDEEP SINGH KARHAIL) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 11/08/2022 KARUNA, sr.ps
Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file. //True Copy//
BY ORDER,
(Sr. Private Secretary / Asstt. Registrar) ITAT, Mumbai