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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-3, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-3/DCIT-1(3)/IT-97/2014-15 dated 13/10/2016 on following grounds of appeal: - NYK Line India Private Limited Assessment Year :2010-11 Double taxation of CDC income of Rs.6,60,63,093 1. The learned CIT(A) erred in confirming that the CDC income of Rs.6,60,63,093 pertaining to AYs 2004-05, 2006-07, 2007-08, 2008-09 and 2009-10 and offered to tax in the AY 2010-11 is rightly assessed to tax in the AY 2010-11.
2. The learned CIT(A) erred in not appreciating that the learned AO should have been consistent in his approach in taxing CDC income and should have allowed appropriate relief to the appellant in the current assessment year.
3. The learned CIT(A) ought to have appreciated that the same income cannot be taxed twice i.e. first in the assessment years 2004-05, 2006-07, 2007-08, 2008-09, and again in the AY 2010-11 and accordingly the said income deserved to be deleted from the AY 2010- 11.
4. The learned CIT(A) erred in holding that appellant is at liberty to offer the income of the earlier year's by filing revised returns of respective previous assessment years and then claim modification/ reduction in current year i.e. AY 2010-11. The learned CIT(A) failed to appreciate that the time-limit for filing revised returns for the aforesaid assessment years has expired.
5. Without prejudice, the learned CIT(A) ought to have directed the learned AO to tax CDC income of Rs.6,60,63,093 on protective assessment basis till the said matter attains finality by higher tax authorities in the AYs 2004-05, 2006-07, 2007-08, 2008-09 and 2009-10.
Disallowance of Entertainment and Miscellaneous Expenses 6. The learned CIT(A) erred in confirming adhoc disallowance of Rs.3,58,949, being 10% of entertainment expenditure made by the learned AO, holding the said expense to be non- business expenses.
7. The learned CIT(A) erred in confirming adhoc disallowances of Rs.5,28,544 being 10% of miscellaneous expenditure made by the learned AO, holding the said expense to be as non-business expenses.
The learned CIT(A) erred in mentioning that the appellant failed to explain about the lack of evidences. The learned CIT(A) should have appreciated the detailed explanations furnished by the appellant in respect of entertainment and miscellaneous expenses.
Without prejudice, the learned CIT(A) ought to have followed the Hon'ble ITAT's decision in the appellant's own case for the AY 04-05 and AY 05-06 wherein the Hon'ble ITAT has deleted the adhoc disallowance of miscellaneous expenses and restricted disallowance in respect of entertainment expenses to 5%.
Levy of interest under section 234C of the Act 10. The learned CIT(A) ought to have directed the learned AO to re-compute the interest under section 234C of the Act after allowing credit for the taxes deducted at source as claimed in the return of income.
Levy of interest under section 234D of the Act 11. The learned CIT(A) ought to have directed the learned AO to delete the erroneous levy of interest of Rs.2,24,480 under section 234D of the Act.
Initiation of proceedings for levy of penalty under sections 271(l)(c) of the Act 12. The learned CIT(A) ought to have appreciated that the learned AO has erred in initiating proceedings for the levy of penalty under section 271(l)(c) of the Act.
NYK Line India Private Limited Assessment Year :2010-11 2.1 Facts in brief are that the assessee being resident corporate assessee stated to be engaged as shipping agent of its overseas principle, was assessed for impugned AY u/s 143(3) read with Section 144C of the Income-Tax Act, 1961 on 26/03/2014 wherein the income of the assessee was determined at Rs.14.98 Crores after certain disallowances as against returned income of Rs.14.74 Crores filed by the assessee on 14/10/2010 which was later on revised on 30/03/2012 marginally revising the returned income. 2.2 While computing the income, the assessee offered to tax container detention charges (CDC) aggregating to Rs.9.34 Crores pertaining to current assessment years as well as earlier assessment years. However, during assessment proceedings, it was pleaded that CDC of Rs.6.60 Crores were already added to the income of the assessee while framing the assessment of those earlier years and therefore, the same should not be taxed again in the assessment year under consideration. However, Ld. AO, inter-alia, noticing that the additions made in earlier years was not accepted by the assessee and the same was under challenge before appellate authorities, rejected this plea and treated the aggregate amount of Rs.9.34 Crores as the income of the assessee. 2.3 The assessee was saddled with another adhoc addition of 10% against entertainment expenses of Rs.35.89 Lacs and miscellaneous expenses of Rs.52.85 Lacs claimed by the assessee during the year since the expenditure was not supported by proper bills. The disallowance on this account worked out to be Rs.8.87 Lacs.
NYK Line India Private Limited Assessment Year :2010-11 3. The stand of Ld. AO, upon confirmation by learned first appellate authority on the above issues, is under challenge before us.
The learned Sr. Counsel for assessee, Shri Farrokh Irani, at the outset, pleaded that the assessee would not be pressing the ground relating to taxability of container detention charges (CDC) in view of the decision of Hon’ble Bombay High Court rendered in assessee’s own case in revenue’s appeal for AY 2008-09 of 2016 dated 04/02/2019 which follows earlier decision of Hon’ble Court for AY 2009- 10 ITA No.1497 of 2016 dated 30/01/2019. For ease of reference, we extract hereinbelow the relevant observation of Hon’ble High Court in AY 2009-10: -
The respondent assessee is a shipping agent providing such services to its principal one NYK Japan. The assessee in the process of providing such services in India to such foreign base company, receives commission. The dispute between the assessee and the Revenue revolves around the Container Detention Charges ("CDC" for short). The assessee under peculiar circumstances of the case, though received certain amounts for and on behalf of principal, did not offered to tax immediately on the ground that there was delay in holding such sums on behalf of the principal. It is only under a letter dated 25th May, 2009 written by the principal, according to the assessee, that the income accrued to the assessee. The assessee, therefore, accounted for such income in the return filed for Assessment Year 2010- 11. This related to the entire period from the year 1993 onwards. The Revenue argues that such income should be taxed in each separate year during which such charges were collected. The Tribunal however, hold in favour of the assessee inter alia observing that the income accrued to the assessee only upon the principal writing said letter on 25th May, 2009.
Quite apart from the view of the Tribunal being plausible on the facts of the case, we also note that the assessee has already offered the income to tax in the Assessment Year 2010-11. The Revenue’s attempt at taxing such income in respect of individual year has failed on several occasions since the reopening of assessment was not permitted. We wonder whether in such circumstances, it is even be prudent for the Revenue to pursue this line. Additionally, we record the statement of the Counsel for the assessee that in order to protect the assessee against double taxation, the assessee has filed appeal before the Tribunal in relation to Assessment Year 2010-11 and kept the question of taxing the entire income in the said year alive so that in case the Revenue succeeds in the present appeal and similar other proceedings, the assessee can at least protect itself from being taxed NYK Line India Private Limited Assessment Year :2010-11 all over again for Assessment Year 2010-11. He stated on instructions that if the Revenue is not allowed to shift the income this year, the assessee would not press its appeal before the Tribunal on this ground for Assessment Year 2010-11.
4. Under the circumstances, no question of law arises.
The tax appeal is dismissed. Keeping in view the same, this ground is treated as dismissed, being not pressed.
5. So far adhoc disallowance of 10% against entertainment and Miscellaneous Expenses is concerned, we find that the issue stood covered in assessee’s favor by the decision of this Tribunal in assessee’s own case for AY 2004-05 order dated 06/05/2011 wherein the disallowance has been restricted to 5% of expenditure except staff welfare and miscellaneous expenditure (which has been deleted in full). This order has subsequently been followed in AY 2005-06 ITA No.4839/Mum/2010 order dated 07/09/2012. Respectfully following the same, we restrict the adhoc addition to 5% of entertainment expenditure of Rs.35,89,491/- which comes to Rs.1,79,475/-. The adhoc disallowance against miscellaneous expenditure stand deleted in full. This ground stands partly allowed.
The next ground pertains to correct computation of interest u/s 234C. It would suffice to direct Ld. AO to compute interest as per law after granting due TDS credit to the assessee. This ground stands allowed for statistical purposes.
The next ground is related with computation of interest u/s 234D. The Ld. Sr. Counsel has pleaded that no refund was ever issued to the assessee and therefore, the said interest is not payable. The Ld. AO is NYK Line India Private Limited Assessment Year :2010-11 directed to verify the same and charge interest as per law, if any. This ground stands allowed for statistical purposes. 8. The last ground is related with initiation of penalty. The same being consequential and premature in nature, would not require any adjudication on our part. 9. In result, the appeal stands partly allowed to the extent indicated in the order. Order pronounced in the open court on 21st August, 2019.
Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 21/08/2019 Sr.PS, Jaisy Varghese आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.