M/S. INDIA HOUSING. ,KOLKATA vs. DCIT, CIR-54, KOLKATA, KOLKATA
What did the Tribunal hold?
The Tribunal recalled its previous order and decided to re-examine ground No.3. Following a co-ordinate bench's decision and a High Court ruling, the Tribunal allowed ground No.3, finding the supervision charges to be an allowable business expenditure.
What were the facts?
The assessee filed miscellaneous applications to correct an error in a previous order where ground No.3 concerning supervision charges was allowed for statistical purposes. The assessee argued this issue was covered in their favour by a co-ordinate bench.
What were the issues?
Whether supervision charges paid by the assessee were a legitimate business expenditure and if the previous order correctly adjudicated this issue.
Which sections of the Income-tax Act were involved?
Section 37(1),Section 40A(ii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA BENCH “B”, MUMBAI
Before: SHRI. RAJESH KUMAR & ANIKESH BANERJEE
The assessee filed the miscellaneous applications No. 36 & 37/KOL/2024 arising out of & 1219/KOL/2023. It was pointed out that ground No.3 pertaining to the issue of supervision charges, which was incidental to the business of the assessee, was covered in favour of the assessee, by the order of the co-ordinate bench of the ITAT, Kolkata Bench, vide order dated 11/12/2019 in for A.Y. 2011-12, whereas the Tribunal set aside the issue to the Ld.AO for further verification whether the same issue was duly covered by the order of the co-ordinate bench of Kolkata and vide paragraph 18 has inadvertently held that “Considering the above ground nos. 1, 2, 3 & 6 are allowed for statistical purposes,”. The assessee therefore, pleads that the mistake may be corrected.
We heard the parties and perused the records. We find that the averment made by the assessee is borne out of record. Accordingly, we recall our order dated 15/03/2024 in & 1219/KOL/2023 to decide the issue in ground No.3 afresh. As a result, the miscellaneous applications filed by the assessee are allowed. ITA No.1218 & 1219/KOL/2023 3. Ground No.3 in both these appeals is recalled vide paragraph 2 above, for deciding the issue afresh. Upon hearing the parties we find that the ground pertains to disallowance of supervision charges is covered in favour of the assessee by the decision of the co-ordinate bench vide order dated 11/12/2019 in 3 M.A. No36 & 37 /KOL/21024 & 1219 /KOL/2023 India Housing ITA No.125/KOL/2015 for A.Y. 2011-12, whereby the co-ordinate bench dismissed the ground raised
by the revenue by observing as under:-
15. We note that the supervision charges have been paid by assessee as per an agreement. The assessee has deducted tax at source while making payment. The payment was made through banking channel. The Id. Assessing Officer was aware about the assessee^s agreement. The assessee has paid service tax on the mall management expenses and, therefore, there arises no occasion of doubting genuineness of the expenses. The Id. Assessing Officer has not demonstrated as to how the expenditure incurred by the assessee for giving overall mall management supervision work to M/s. Sahara Prime City Ltd. was in excess of the fair market value of service or facility or was not as per legitimate needs of the business of the assessee. The maintenance of huge mall having area of 2,50,000 sq. ft., the assessee has to incur management supervision charges. Moreover, AO has not rejected books of accounts of the assessee and assessment is framed by AO under section 143(3) of the Act. Based on the factual position narrated above, we are of the view that there is no infirmity in the order of Id. CIT(A). We note that for eligibility of an allowance u/s 37(1) of the Act, there should be a nexus between the expenditure and the purpose of the business and the expenditure should have been wholly and exclusively laid out for that purpose. Once these facts are established, the revenue cannot justifiably claim to put itself in the arm chair of business man or in a position of the Board of Director and assumed the role of ascertaining how much is reasonable expenditure having regard to the circumstances of the case. We note that the assessee has incurred management supervision charges for the purpose of business and if the expenditure is incurred Cross Objection No.l6/Kol/2015 & M/s India Housing bona fide in relation to business activity then it would be an allowable expenditure. That being so, we decline to interfere in the order passed by Id. CIT(A), his order on this issue is hereby accepted and grounds of appeal raised by the Revenue is dismissed."
4 M.A. No36 & 37 /KOL/21024 & 1219 /KOL/2023 India Housing 4. We further observe that the issue was challenged before the Hon’ble High Court of Calcutta bearing of 2020, copy of which is enclosed at paper book page 135 wherein the Hon’ble Calcutta High Court ruled that the deletion of addition made by the Assessing Officer on supervision charge under section 40A(ii) of the Income Tax Act,1961 was a purely factual exercise and perversity in the order was not shown.
In view of the above, respectfully following the precedents, we allow ground No.3 of the assessee.
Accordingly, grounds 3 & 4 are allowed, grounds 1,2 & 6 are allowed for statistical purpose and grounds No.5,7 & 8 are general in nature which need no adjudication. Facts and circumstances in being identical, the decision arrived at in ITA No.1219/KOL/2023 also. 6. In the result, & 1219/KOL/2023 are partly allowed for statistical purpose. Order pronounced in the open court on 28th day of November 2024. Sd/- Sd/- (RAJESH KUMAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, दिन ांक/Dated: 28/11/2024 Pavanan 5 M.A. No36 & 37 /KOL/21024 & 1219 /KOL/2023 India Housing
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