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Income Tax Appellate Tribunal, BENCH “SMC”,MUMBAI
Before: SHRI D.KARUNAKARA RAO & SHRI PAWAN SINGH
Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JM: 1. This appeal by assessee filed u/s 253 of the Income-tax Act (‘Act’) is directed against the order of Ld. Commissioner of Income-tax (Appeals) [for short ‘the CIT(A)] –12, Mumbai dated 13.10.2014 for Assessment Year (AY) 2010-11. The assessee has raised the following grounds of appeal: GROUND I:
1. On the facts and the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) - 12, Mumbai ("the CIT(A)") erred in confirming the action of the Deputy Commissioner of Income-tax - 6(2), Mumbai ("the A.O.) in making disallowance of Rs. 58,92,067/- u/s. 40(a)(ia) of the Income-tax Act, 1961 ("the Act") on the alleged ground that tax was not deducted at source.
2. The CIT(A) also erred in observing that amount paid is for: a. utilisation of the premises of Roots Corporation Limited; b. operation of the restaurant; c. utilisation of equipment / plant & machinery/ furniture & fixture.
3. The CIT(A) also erred in stating that if the payment does not fall in categories stipulated in TDS provisions u/s. 40(a)(ia) of the Act, then such payment is not a revenue expenditure incurred for the purpose of business.
4. The Appellant prays that payment of Rs. 58,92,067/- be held as a payment outside the purview of tax deduction provisions and allowed as revenue expenditure. WITHOUT PREJUDICE TO ABOVE:
2 Forbes Concept Hospitality Services Private Limited GROUND II: 1. The Appellant prays that the payment to Roots Corporation Limited for "Food & Beverage Management Services" be held as "revenue sharing".
The assessee further vide application dated 02.08.2016 raised the following additional grounds of appeal:
1.1. On the facts and in circumstances of the case and in law, the Hon'ble Commissioner of Income tax (Appeal)-12, ("CIT(A)") erred in holding that tax ought to have been deducted either under section 194C, 194H or 194J (in addition to section 1941 as contended by the AO) of the Income Tax Act, 1961 ("the Act"). 1.2. The CIT(A) erred in enhancing the scope of disallowance and consequently the assessment for the year under consideration without following the provisions of section 251 (2) of the Act. 1.3. 1.3 The CIT(A) ought to have issued show cause notice to the Appellant and provided reasonable opportunity to the Appellant against the enhancement. Thus, the CIT(A)'s action was not in accordance with provisions of section 251(2). 1.4. The Appellant prays that the order of the CIT(A) be held as bad in law to the extent of invocation of provisions of section 194C, section 194H and section 194J of the Act.
3. Brief facts of the case are that the assessee-company is engaged in the business of providing catering facilities( services) to various companies, filed its return of income for relevant AY on 01.10.2010 declaring total income at Nil. The assessment was completed u/s 143(3) of the Act on 25.03.2013. In the assessment, the Assessing Officer (AO) made the disallowance of Rs. 58,92,067/- u/s 40(a)(ia) holding that assessee has paid this amount towards F & B outlet fee and has not deducted TDS on the amount which is in the nature of payment of rent as defined in section 194 I of the Act. On appeal, the disallowance was sustained. Thus, further aggrieved by the order of ld. CIT (A), the assessee has filed the present appeal before us raising the various grounds of appeal.
4. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue. The ld. AR of the assessee argued that similar disallowance was made in AYs 2007-08 and 2008-09 and the assessee filed appeal to the Tribunal, wherein the Co-ordinate Bench of this Tribunal restored the similar issue to the file of CIT(A). The ld DR for the Revenue has not disputed the contention urged by ld. AR. We have considered the contention of the parties and seen the order of Co-ordinate Bench in & 6985/Mum/2014 for AYs 2007-08 and 2008-09 wherein the identical grounds of appeal was considered by the Co-ordinate Bench and pass the following order:
12. Therefore considering the afore mentioned factual as well as legal position we are of the considered view that in the present case, the CIT(A) has dealt with this issue and modified the assessment by dealing with section 194C and 194J of the Act for which specific show cause notice or opportunity has not been given to the assessee.
On the other hand Ld. DR relied upon the orders passed by Revenue Authorities and even on merits Id. DR submitted that the judgment rendered by Hon’ble ITAT Mumbai Bench in the case of' Kamat Ilotels (I) Ltd. vs. ITO' 78 ITD 241 is not applicable under the facts and circumstances ?f the present case as in the afore mentioned case the payment was not at fixed price but rather the payment was fluctuating in nature. And even in para no. 34 of the said judgment the following observation has been made: "In the view we have taken as above, it is not necessary for us to examine the two subsidiary contentions raised by Mr. Pardiwalla viz., that there was no actual payment by the assessee under the agreements and therefore, there is no liability to deduct tax and that when the payee has paid the tax on the royally/commission on the footing that they were income from business, the Assessing Officer had no jurisdiction to demand the lax from the assessee." 14. From the above findings, it is clear that Hon'ble .High Court has not examined the two subsidiary contentions with regard to making of actual payment by the assessee and liability to deduct the tax and moreover.ias per the facts of the present case, the Ld. DR also submitted that in the present' case the premises in which the business of the assessee is being carried out/is owned by RCL and the assessee had operated its business as that of running a “Food and beverages outlet/restaurant." As and by way of consideration for the use of said premises as well as for operation of restaurant activities at 'the said premises. The assessee is paying certain percentage of revenue generated from the said business carried out at the said premises. In addition the assessee is also making payment of fixed amount of Rs.60,000/- per month upto the minimum revenue of Rs.4,00,000/- per month and thereafter 17% per month on the incremental .above Rs.4 lakh per month. Be that as it may at this stage we are not going into the merits of the case regarding the deductions made by AO or CIT(A) since there, is legal lacuna in the present case as the CIT(A) has not complied with the mandatory provision of section 251 (2) of the Act, before modifying /enhancing assessment u/s 194J and 194C of the Act. Therefore considering factual as well as legal position we remit the case back to the file of CIT(A) for fresh decision on aforesaid points. 15. Keeping in view the interest of justice, we remit the matter back to the file of CIT(A) with a direction to provide a reasonable opportunity to the assessee, regarding applicability of section of 1941 and 194C of the Act and thereafter to pass afresh order after providing a opportunity of hearing to the assessee. (A.Y. 2008-09) 16. After analyzing the above orders we find that identical question involved in the present case has already been decided in the above ITA No.6984/Mum/2014. Therefore keeping in view our own decision and in order to maintain judicial consistency which is applicable mutatis mutandis in the case of the assessee. We pass same orders in this appeal also.” 5. In view of the above referred decision of the Co-ordinate Bench, the Grounds of appeal raised in the present appeal are also restored to the file of ld. CIT(A) to decide 4 Forbes Concept Hospitality Services Private Limited the issue afresh in accordance with the direction contained in ITA No. 6984 & 6985/Mum/2014 dated 26.10.2016. Needless to order that the ld CIT (A) shall provide adequate opportunity while deciding the case.
In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 7th December, 2016. Sd/- Sd/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 07/12/2016 S.K.PS Copy of the Order forwarded to :