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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
"ी जो"ग"दर "संह, "या"यक सद"य एवं "ी अ"वनी तनेजा, लेखा सद"य, के सम" Before Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member Assessment Year: 2010-11 Crisil Risk and Infrastructure ACIT (OSD) 10(1) Solutions Ltd.,Formerly Known as Aayakar Bhavan बनाम/ Crisil Market Wire Ltd.,Crisil Mumbai-400020 Vs. House, Central Avenue Road, Hiranandani Business Park, Powai, Mumbai-400076 (Assessee) (Revenue) P.A. No.AABCC4655M "नधा"रती क" ओर से / Assessee by Shri Aliasger Rampurawala & Ms. Anusha Singh (AR) Ms. Sudha Chandran (DR) राज"व क" ओर से / Revenue by 04/05/2016 सुनवाई क" तार"ख / Date of Hearing : 25/05/2016 आदेश क" तार"ख /Date of Order: आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), Mumbai- 22 {(in short ‘CIT(A)’}, dated 15.11.2013 passed against 2 Crisil Risk & Infr… assessment order u/s 143(3)(ii) dated 08.02.2013 for the Assessment Year 2010-11, on the following grounds: “
1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in remanding the issue to the file of the Assistant Commissioner of Income-tax (OSD) - 10(1) ('AO') to verify whether bad debts written off amounting to Rs. 25,38,226/- include any expenses incurred on behalf of the clients without appreciating the fact that the entire amount (including expenses incurred on behalf of client amounting to Rs. 58,388/-) written off as bad debts is an allowable deduction u/s. 36 (i)(vii) read with section 36(2) of the Income tax Act, 1961 (the Act). It is prayed that the Ld. AU be directed to allow entire amount of bad debts written off as irrecoverable u/s 36(1)(vii) read with section 36(2) of the Act. Without prejudice to ground no.1,
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the expenses incurred on behalf of client amounting to Rs. 58,388/- written off in the Profit & Loss account as business loss u/s. 28 of the Act. It is prayed that the Ld. AO be directed to allow expenses incurred on behalf of client written off in the Profit & Loss account as business loss u/s. 28 of the Act.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in confirming the disallowance of Rs. 1,70,47,032/- made by the AO under section 40(a)(ia) of the Act on account of non-deduction of tax at source on expenses reimbursed by the Appellant to CRISIL Limited, its parent company.”
During the course of hearing, arguments were made by Shri Aliasger Rampurawala & Ms. Anusha Singh, Authorised Representative (AR) on behalf of the Assessee and by Ms. Sudha Chandran, Departmental Representative (DR) on behalf of the Revenue.
3 Crisil Risk & Infr…
Ground No.1 & 2: In this ground the Ld. Counsel has submitted that the claim of bad debts was not allowed on the on the ground that the corresponding income of the amount which was claimed as bad debt was not shown in earlier years. Under these circumstances it was submitted that if it was not allowable as bad debt u/s 36(1) (vii), then, in any case the impugned loss was actual loss of the assessee as it was incurred during the course of business and therefore, same was allowable as business loss u/s 28 r.w.s. 37 of the Act.
3.1. On the other hand, Ld. DR has relied upon the orders of the lower authorities.
3.2. We have gone through the submissions made by both the sides as well as orders of the lower authorities. It is noted from the perusal of the order of the Ld. CIT(A) that he accepted the prayer of the assessee partly and directed the AO to delete the disallowance subject to verification of the fact whether component of service tax and expenses incurred by the assessee on behalf of its clients has been credited as income by the assessee earlier. In this regard it has been brought to our notice by the Ld. Counsel that in any case items on account of reimbursement of expenses and service tax paid were incurred during the course of business and non-recovery of the same by the assessee would amount to business loss incurred during the course of business and should be therefore, allowed as such and in support of this proposition reliance was placed on the judgment of Hon’ble Bombay High 4 Crisil Risk & Infr… Court in the case of Harshad J. Choksi vs. CIT 349 ITR 250 (Bom).
3.3. We have considered the facts of the case as well as claim of the assessee made before us. It is noted by us that genuineness of these expenses and the claim made by the assessee has not been doubted by the lower authorities. The only ground to reject the claim by both of the lower authorities was that these items were not deductable as bad debt, in view of non-compliance of condition provided u/s 36(2). But, we find that there is no dispute on the fact that both of these expenses were incurred by the assessee during the course of its business. Under these circumstances, these items are allowable as business loss/ expenses u/s 28 r.w.s. 37 of the Act. In the case of Harshad J. Choksi (supra), Hon’ble Bombay High Court held in the similar circumstances that even if the amount in question was not allowable as bad debt, the claim should be considered for deduction as business loss. Keeping in view the facts of this case, we find that the claim of the assessee was allowable u/s 37 and therefore, the same is directed to be allowed ground no.1 & 2 are allowed.
Ground No.3: In this ground the assessee has challenged the action of lower authorities in making disallowance under section 40(a)(ia) of the Act on account of non-deduction of tax at source on expenses reimbursed by the Assessee to its parent company namely CRISIL Limited. In this regard Ld. Counsel has made following two propositions i.e.:
5 Crisil Risk & Infr… (i) TDS is not required to be deducted on the ground of reimbursement. (ii) Even if TDS is required to be deducted, no disallowance should be made u/s 40(a)(ia) as corresponding receipts have been assessed as income in the hands of CRISIL Limited.
In support of first proposition, he has relied upon the following judgments: 1. M/s. Arvind Murjani Brands Pvt. Ltd. v. ITO (ITA No.6708/Mum/2010 2. ACIT v. Result Services P. Ltd.(ITA No.2846/Del./2011 Mum ITAT) 3. ASK Wealth Advisors (P) Ltd. v. ACIT 51 taxmann.com 128 (Mum Trib) 4. DCIT v. Dhaanya Seeds (P.) Ltd. 42 taxmann.com 277 (Bang. Trib.) 5. OM India Trading Co.(P.) Ltd. v. ACIT 58 taxmann.com 325 (Guwahati Trib.) 6. ITO v. Vishinda Diamonds 34 taxmann.com 163 (Mum Trib.) 7. Karnavati Co-op, Bank Ltd. v. DCIT, Circle-11 17 taxmann.com 163 (Mum Trib) 8. Expeditors International (India) (P.) Ltd. v. ACIT 118 TTJ 652 (Delhi) 9. M/s. Stratcap Securities (I.) P. Ltd. v. ACIT (ITA No.7048/Mum/2008 (Mumbai ITAT)
6 Crisil Risk & Infr… 4.1. In addition to the above, it was also submitted by the Ld. Counsel that similar issue came up before the Tribunal in A.Y. 2008-09 wherein tribunal sent this issue back to the file of the AO vide its order dated 06.11.2015 in ITA No. 6207/Mum/2013. 4.2. We have gone through the orders of the lower authorities and submissions made by both the sides. It is noted by us that similar issue came up before the Tribunal in earlier years wherein this issue has been sent back to the file of the AO for verification of the facts with the following observations: “3. The next ground pertains to disallowance of Rs.2,02,55,399/- made u/s 40(a)(ia) of the Act on account of non-deduction of tax at source on the expenses reimbursed by the assessee to CRISIL Ltd., its parent company. 3.1. The crux of argument advanced on behalf of the assessee is that the assessee used to share common facilities/common office and the holding company deducted taxes wherever applicable. Our attention was invited to page 185 of the paper book. It was contended that certificate of the holding company is available at page 181 of the paper book. On the other hand, the ld. DR, strongly objected to the claim of the assessee by inviting our attention to table –A at page 185 of the paper book. 3.2. We have considered the rival submissions and perused the material available on record. We note that the brake up of reimbursement of expenses is available at table-A (Page-185) of the paper book, which includes advertisement expenses, equipment hire charges, equipment maintenance charges (Admin), equipment maintenance (IT), professional fee, professional fees (fee includes OPE, rent, ors, rent (staff), Other repair and maintenance, repair and maintenance (Building). If the nature and the extent of these expenses/claims are analyzed, in our view, merely a hutch pouch has been made by the assessee in its claim and factually the claim 7 Crisil Risk & Infr… is not clear, therefore, this issue is sent to the file of the Assessing Officer to examine the claim of the assessee at length in accordance with law. The Assessing Officer is also directed to examine such claim in holding company/assessee. The assessees are directed to produce the details of the claim for the examination/verification by the ld. Assessing Officer. Thus, this ground of the assessee is allowed for statistical purposes only.”
4.3. Thus, in the given circumstances, we find that facts being identical and no distinction having been made before us by the either party, we find it appropriate to send this issue back to the file of the AO. The AO shall follow the order of the Tribunal for A.Y. 2008-09 and shall give adequate opportunity of hearing to the assessee before deciding this issue fresh. Further, the assessee is free to raise all legal and factual issues, including proposition number (ii) as mentioned in earlier part of our order. The AO shall verify and deal with all of the contentions/issues as may be raised by the assessee. Ground No.3 is allowed for statistical purposes.
In the result, this appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 25th May, 2016. (Joginder Singh) (Ashwani Taneja) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER मुंबई Mumbai; "दनांक Dated: 25 /05 /2016 ctàxÄ? P.S/."न.स.