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Income Tax Appellate Tribunal, “H”
Before: SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the assessee is against the order of Commissioner of Income Tax (Appeals)-54, Mumbai dated 29.07.16 for AY 2011-12 on the grounds mentioned herein below:-
Indiawin Sports Pvt. Ltd.
1. The learned Commissioner of Income-tax - (Appeals - 54) {hereinafter referred to as CIT(A)} erred in confirming the action of the Asstt. Commissioner of Income-Tax 00-35, Mumbai (hereinafter referred to as AG) in disallowing of an amount of Rs.62,935/- being travelling expenses incurred on behalf of family members of players, by holding that these persons have not rendered any service to the appellant and the expenses are private expenses of individuals unrelated to the business.
The appellant submits that the travelling expenses incurred on behalf of family members of players are incurred for the purpose of business and the same should be allowed as claimed.
The CIT(A) erred in confirming the action of the AO in disallowing an amount of Rs. 60,87,867/- being 10% of hospitality expenses of Rs 6,08,78,672/- on adhoc basis by holding that the same is not related to appellants business.
The appellant submit that the hospitality expenses have been incurred in the course of carrying on business and duly supported by evidences. The appellant therefore submits that the adhoc disallowance made by Indiawin Sports Pvt. Ltd. the AO and confirmed by CIT(A) is baseless and should be deleted in total.
The appellant craves leave to add, to amend, vary or alter including by substitution any of the grounds of appeal as they or their representatives may think fit.
2. As per the facts of the present case, the assessee is a company and engaged in the business of owing, managing and operating the Mumbai team (popular name ‘Mumbai Indians’) of the Indian Premier League. The assessee filed its return of income for the year under consideration declaring total income at Rs. NIL. The AO after making various disallowances /additions has assessed total income at Rs. NIL vide the assessment order 143(3) of the Act dated 31.12.13. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee. Now before us, the assessee has preferred the appeal by raising the above grounds.
Indiawin Sports Pvt. Ltd. Ground No. 1 3. This ground raised by the assessee is against challenging the order of Ld. CIT(A) in confirming the disallowance of Rs. 62,935/- being travelling expenses incurred on behalf of family members of players, by holding that these persons have not rendered any service to the appellant and the expenses are private expenses of individuals unrelated to the business.
4. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 7 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 7.4 of its order and the same is reproduced below:-
7.4 Decision- 7.4.1 I have considered the submissions of the appellant and perused the materials available on record. The appellant has requested to delete the impugned disallowance of Rs. 62,935/- being expenses incurred on travelling of spouses/family members of the players.
Indiawin Sports Pvt. Ltd. The appellant's main contention are that the said expenditure have been incurred for furtherance of business as the presence of spouses of players, being important people, helps it in attracting sponsors as it enhances the saleability of various brands of its sponsors and further they provide moral support to the players. The contentions of the appellant are considered carefully and I am in agreement with the finding of the Ld. AO that the explanations given in justifications of claim of said expense are very general in nature and vague. No evidence has been led by the appellant to substantiate its claim that the presence of spouse/family members attracts sponsors or how it is related to business of the appellant. During the course of appellate proceedings the appellant has submitted the copies of model agreements entered into with the Players and from perusal of same it is observed that nowhere the same provides that it will be the liability of the appellant to incur travelling or other expenses for the spouse or family members of the players. Rather the clause 6.2 of such model agreement stipulates as under. 6 2 The Franchisee shall during each season (and during any period outside of a season during which the player has agreed to provide any services for the Franchisee as personal appearances) pay the following expenses of the Player in connection with his duties under this agreement: (a)Travel to and from India or, if appropriate, any other relevant location (which shall be business class subject only to availability); (b)travel to and from any match; (c)a daily allowance of INR 3,800; (d) accommodation (which shaft normally be 5 star subject only to availability)." From the above, it is evident that as per the said model agreement also the appellant is not contractually Indiawin Sports Pvt. Ltd. obliged to incur any expenditure for the spouses or family members of the players. In absence of such contractual liability the impugned expenses under consideration incurred for the spouses/family members of the players cannot be held to have been incurred for business purposes. In view of the facts and circumstances of the case, it is held that the learned AO was justified in treating the impugned expenses incurred for travelling of spouses and family members of players as not incurred for business purposes and hence ineligible for allowance. Hence the impugned disallowance made at Rs. 62,935/- is CONFIRMED. Accordingly, the Ground No. 2 raised in appeal is DISMISSED.
After having gone through the facts of the present case as well as considering orders passed by revenue authorities and judgment relied upon by the parties, we find that no evidence has been led by the assessee to substantiate the claim that the presence of spouse/family members attracts sponsors or how it is related to business of the assessee. Even in the agreement, it is no where provided that it will be the liability of the assessee to incur travelling or other expenses for the spouse or family members of the players. Thus assessee was not contractually obliged to incur any expenditure for spouses or family members of the players.
Indiawin Sports Pvt. Ltd. The Ld. CIT(A) has dealt with the above grounds after considering the facts of the present case. No new facts have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the assessee stands dismissed.
Ground No. 2 6. This ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the action of the AO in disallowing an amount of Rs. 60,87,867/- being 10% of hospitality expenses of Rs 6,08,78,672/- on adhoc basis by holding that the same is not related to assessee’s business. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities.
Indiawin Sports Pvt. Ltd. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 9 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 9.4 of its order and the same is reproduced below:-
9.4 Decision 9.4.1. I have considered the submissions of the appellant and perused the materials available on record. The appellant has requested to deleted the impugned disallowance made of Rs. 60,87,867/-. being 10% of hospitality expenses held t be incurreses. The appellant's main contentions are that the said expenses were incurred for business purposes; the expenses were backed by full supporting evidences; no personal expenses were claimed therein; such ad hoc disallowance is not permissible in law and the appellant has relied upon various judicial pronouncements in support of its claim, as detailed above. The contentions of the appellant have been considered carefully. The records suggest that similar disallowances were made by the Ld. AO in appellants own case for A.Y. 2010-11 and the Ld. CIT(A)-41, Mumbai vide his order dated 30.05.2014 in Appeal No. CIT(A)-41/ACCC-35/lT- 75/2013-14 has upheld such disallowance after holding as under. "I have considered the submissions of the appellant and perused the materials available on record. The onus is on the appellant to prove that the expenses incurred by it are wholly and exclusively for the purpose of business Indiawin Sports Pvt. Ltd. and that no personal expenses whatsoever have been claimed as deduction. At the time of assessment, the AO noted discrepancies in the quantity of meals/snacks etc. served on various dates. The appellant has not been able to clarify the discrepancies either at the time of assessment or even at the appellate stage. Admittedly, meals/snacks were provided to the players and supporting staff during matches and the number of such players and supporting staff cannot vary between 40 and 160. Thus, it is evident that the hospitality expenses do involve an element of personal expenses and, accordingly, it was fair and reasonable on part of the AO to estimate the personal element at mere 10% of the said expenses. Therefore, / do not find any error or infirmity in the action of the AO in disallowing Rs, 9,74,2501- being 10% of the hospitality expenses as having not been incurred wholly and exclusively for the purpose of business of the appellant. The disallowance made by the AC is hence confirmed." 9.4.2 The facts and circumstances of the issue under consideration in the present assessment year remain same as that of assessment year 2010-11 and hence respectfully following the decision of my learner predecessor in appellant's own case for assessment year 2010-11, it is held that the learned AC was justified in estimating 10% of hospitality expenses being personal in nature and hence not incurred wholly and exclusively for the purpose of business. Further from the perusal of order of the Hon'ble ITAT, Mumbai in appellant's own case for A.Y. 2010-11, referred above, it is observed that the appellant has accepted the decision of the Ld. CIT(A) on the issue of \1rg611owance of 10% of hospitality expenses and has not challenged the before the Hon'ble ITAT. Hence, the disallowance made at Rs. 60,87,867/- is CONFIRMED.
Indiawin Sports Pvt. Ltd. Accordingly, the Ground No. 4 raised in appeal is - DISMISSED.
The Ld. AR submitted before us that identical ground has already been decided in favour of assessee by the decision of the Co-ordinate Bench of Hon’ble ITAT in assessee’s own case in for AY 2010-11. The operative portion of the order of ITAT is reproduced below:- 5. We have considered rival contentions and carefully gone through the order of the Tribunal wherein ground No. 3 remain to be adjudicated inadvertently even though argued that at length on 22/07/2016, which amounts to mistake apparent from record. Accordingly, we have again heard the learned AR and DR on the issue of disallowance in the hands of the assessee being a Corporate entity /artificial person.
Following decisions lay down the ratio that a company being an artificial person, there cannot be any personal element in expenses incurred by a company and subsequently, no disallowance in the hands of a company can be made u/s 37 of the Act. The addition, if any, can be made in the hands of a person (e.g. employee, directors etc.) receiving such benefits.
1 Sayaji Iron & Engg. 253 ITR Gujrat HC Co. 749 (A leading judgment- IT has subsequently been followed by the Mumbai tribunal in various eases as Indiawin Sports Pvt. Ltd. under) 2 Rainkishin Textiles 16taxrnan ITATMum (P.) Ltd vs iTO n.com 57 bai (Para-8) 3 Johnson & Johnson 43 ITATMum Ltd vs ACIT (Para- axmann.co bai 35) m 255 4 KSS Ltd-{2016) vs 66 ITATMum DOT (Par-6.2) axmann.co bai m 97 5 Fairfield Atlas Ltd. 3 ITATMum VsACIT (Para-9) taxmann.c bai om 760 6 Vieshesh Films (P.) 26 SOT 64 ITATMum Ltd. Vs DOT (Para- bai 7) 7 Intersil India Ltd. 1011TD85 ITATMum VsAdd.CIT(Para 12- bai 16) 8 Markwell Hose 951TD271 ITAT Industries (P) Ltd Mumbai 7. Respectfully following the propositions laid down in above judicial pronouncements, we do not find any merit for the disallowance of 10% of the hospitality expenses on adhoc basis in the hands of the assessee being a corporate entity/artificial person.
In the result, MA filed by the assessee is allowed in terms indicated above.
On perusal of the aforementioned order, we find that the identical issue has been decided in MA No. 313/M/16 arising out of ITA 5291/M/14 for A.Y. 2010-11 in assessee’s own case, therefore following the decision of Hon’ble ITAT in MA No. Indiawin Sports Pvt. Ltd. 313/M/16 arising out of ITA 5291/M/14 for A.Y. 2010-11 in assessee’s own case, we apply the same findings in the present appeal in order to maintain judicial consistency which is applicable mutatis mutandis in the case of the assessee. Hence this ground raised by the assessee is allowed. Ground No. 3
7. This ground is general in nature, thus requires no specific adjudication.
8. In the net result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 20th Sept., 2017 Sd/- Sd/- (Shamim Yahya) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनांकDated : 20.09.2017 Sr.PS. Dhananjay