What did the Tribunal hold?

The Tribunal held that the CIT(A) was correct in deleting the addition, following previous precedents set by the Tribunal in the assessee's own cases for earlier assessment years. These precedents were not altered by any higher authority.

The assessee, engaged in credit card operations, claimed business expenditure for tax deducted on service charges paid to Visa/Mastercard International as per contractual obligation. The Assessing Officer disallowed this expenditure.

What were the issues?

Whether tax deducted on service charges paid to international credit card companies, borne out of contractual obligation, is an allowable business expenditure.

ACIT vs Bobcards Ltd | s.143(3) | ITAT Mumbai 2016

Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI

Before: SHRI G.S. PANNU & SHRI AMARJIT SINGH

For Appellant: Shri Yash Shah &, Shri Dalpat Shah

For Respondent: Shri Deepak Ripote

Hearing: 18/07/2016Pronounced: 22/07/2016

Both the appeals by the Revenue relating to Assessment Years 2010-11 & 2011-12 involve a common issue and therefore they have been clubbed together and heard together and a consolidated order is being passed for the sake of convenience and brevity.

Assessment Year 2010-11 is taken as a lead case. This appeal of the Revenue is directed against the order of CIT(A)-4, Mumbai dated 23.12.2014, which in turn has arisen from order passed by the Assessing Officer dated 16.02.2013 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).

2 M/s. Bobcards Ltd. & 1437/Mum/2015

In this appeal, Revenue has raised the following Ground of appeal:

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the tax deducted on the service charges paid for the services provided by Visa/Mastercard International, ignoring the pertinent fact that this payment was not an expenditure in the hands of the assessee and had not been incurred for the purpose of the assessee’s business and consequently, the TDS paid was not an allowable deduction.

4. Briefly put, the relevant facts are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of credit card operations and financing payments through credit cards, debit cards and forex operations. In the course of assessment proceedings, the Assessing Officer noticed that assessee had paid tax in respect of the charges for services provided by Visa/Mastercard International on the ground that such an expenditure was borne out of contractual obligation. The claim of the assessee was that in terms of the agreement with Visa/Mastercard International, assessee was required to bear the tax liability on payment made by assessee to such companies and, therefore, during the year under consideration an amount of Rs.44,83,888/- was claimed as business expenditure on this count. The Assessing Officer, however, disallowed the expenditure on the basis of his stand in the earlier years. The CIT(A) noticed that the Tribunal in the assessee’s own case for (i) Assessment Years 2003-04, 2004-05 & 2005- 06 vide 2475, 6527/Mum/2010 dated 20.6.2012; (ii) Assessment Year 2007-08 vide ITA No. 7678/Mum/2010 dated 18.9.2012 and (iii) Assessment Year 2008-09 vide ITA No.

3 M/s. Bobcards Ltd. & 1437/Mum/2015 7660/Mum/2011 dated 5.4.2013 has deleted such addition and following the aforesaid precedents, he has since deleted the addition in the instant year also. Against such a decision of the CIT(A), Revenue is in appeal before us.

Before us, it was a common point between the parties that the precedents relied upon by CIT(A) in order to delete the addition continue to hold the field and they have not been altered by any higher authority. As a consequence, in view of the aforesaid precedents, there is no error on the part of CIT(A) in deleting the addition, which we hereby affirm. In the result, appeal of the Revenue for Assessment Year 2010-11 is dismissed.

Insofar appeal for Assessment Year 2011-12 is concerned, the issue as well as the facts and circumstances are pari materia to those considered by us in the Revenue’s appeal for Assessment Year 2010-11 in the earlier paragraphs; and, thus our decision in the appeal for Assessment Year 2010-11 shall mutatis mutandis apply for Assessment Year 2011-12 also.

Resultantly, captioned appeals of the Revenue are dismissed.

Order pronounced in the open court on 22nd July, 2016.

ACIT 2(1)(1), MUMBAI vs. BOBCARDS LTD, MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments