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Income Tax Appellate Tribunal, BENCH “I”, MUMBAI
Before: SHRI D.KARUNAKARA RAO & SHRI PAWAN SINGH
Assessee by : Ms. Aakanksha Ahuja AR Revenue by : Sh. Sambit Mishra (DR) Date of hearing : 16.02.2017 Date of Pronouncement : 15.03.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JM: 1. This appeal by assessee u/s 253 of the Income-tax Act (‘the Act’) is directed against the order of Ld. Commissioner of Income Tax (Appeals) [for short ‘the CIT(A)] –16, Mumbai dated 30.04.2013 for Assessment Year (AY) 2010-11. The assessee has raised the following grounds of appeal:
1. The learned CIT(Appeals) erred in law and on the facts of the case in confirming the disallowance under section 40(a)(v) Rs.6,86,899/-. ( Ground 1&2 )
2. Brief facts of the case are that the assessee company is engaged in the business of analytics and marketing services, filed its return of income for relevant AY on 07.10.2010 declaring loss of Rs. 9,45,61,736/-. The assessment was completed u/s 143(3) of the Act on 26.03.2013. The Assessing Officer (AO) while passing the assessment order besides the other disallowance, disallowed a sum of Rs. 6,86,899/- under section40(a)(v) holding that the assessee has not filed any evidence if such payment of tax was a part of the ‘contract of employment’ of employee or there was any such practice for payment of tax of the employee. On appeal before Commissioner (Appeals) the disallowance under section 40(a)(v) was confirmed. Thus, further aggrieved by the order of ld CIT (A), the assessee has filed the present appeal before us.
We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The learned AR of the assessee argued that assessee in its tax audit report inadvertently has shown an amount of Rs. 6,86,899/- as inadmissible under section 40(a)(v). The assessee also submitted Form No. 16 issued to its employee for the assessment year 2010-11. The assessee submitted during the assessment proceeding that they have provided only accommodation perquisite of Rs. 70,782/-. No other non-monetary perquisite was provided to the employee. The assessee did not pay tax on the non-monetary perquisite by way of accommodation provided to employee and therefore, no exemption was claimed under section 10(10 CC). The salary expenses have been taxed in the hand of employee; the assessee has deducted tax at source from the salary of employee and therefore has not borne any part of tax. In the alternative the learned AR of the assessee argued that revise computation of income of employee was not submitted before the lower authorities and prayed that matter may be restored back to the lower authorities for verification. It was further argued that the assessee is ready to file the affidavit of tax Auditor. On the other hand learned AR for the revenue argued that the assessee has intentionally and deliberately filed the report of auditor where it has been specifically mentioned that a sum of Rs. 6,86,899/-paid to at the tax expenses of an employee inadmissible under section 40(a)(v) of the Act. The assessee has not disallowed the amount while computing its total income.
We have considered the rival contention of the parties and further gone through the order of authorities below. The assessing officer while framing assessment order noticed that under Clause 17(f) of tax Audit Report, the Auditor has qualified a sum of Rs. 6,86,899/- paid to income tax expenses of an employee inadmissible under section 40(a). However, the assessee had not disallowed this amount while computing its total income. The assessee was asked to explain as to why the same should not be disallowed. The assessee filed its reply vide reply dated 22nd Nov 2012. In the reply the assessee contended that the amount of income tax of an employee namely Mr Joss Arizce has been included while computing his taxable income under the head salary. This amount is taxed in the hands of employee, it has been treated as salary expenses and deduction has been claimed for these expenses. The assessee again vide its letter dated 11th March 2013 contended that income tax has been inadvertently shown in the tax Audit Report as the amount is inadmissible. The photocopy of Form No 16 issued to employee for relevant assessment year was also filed showing that it was non- monetary perquisite provided to the employee. The assessee company also filed the confirmation from the Auditors. The contention of assessee was not accepted by Assessing Officer holding that assessee has not produced any evidence to show if the said payment of tax was part of ‘term and condition’ of the employment or if there is such practice of paying income tax of the employee by the assessee company and whether tax has been deducted and paid to the government of on these payments. The learned Commissioner income tax (Appeals) confirmed the disallowance on the similar line holding that that no credible explanation has been furnished by assessee.
We have seen that despite the direction of the Tribunal dated 02.01.2017 the assessee has not filed the affidavit of the tax Auditor who had prepared the Audit report to substantiate its claim. We have further noticed that the return of income of employee (Mr. Jose Arizpe) for assessment year 2010-11 is filed for the first time before his Tribunal only on 15.02.2017. Thus, considering the submission of the ld AR for the assessee, we restore the case to the file of ld CIT(A) to examine and consider the return of income of the employee (Mr. Jose Arizpe). The assessee is also directed to file the affidavit of the tax Auditor before ld CIT(A) to substantiate their claim. After considering the affidavit of tax Auditor so filed and