Income Tax Appellate Tribunal - Mumbai
Tata Asset Management Ltd, Mumbai vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH 'F', MUMBAI
Before Shri D.K. Agarwal (JM) and Shri Pramod Kumar (AM)
I.T.A.No.4665/Mum/2010
Assessment Year :2007-08
The Dy. Commissioner of Income-tax-2(3),
R.No.555, Aayakar Bhavan,
Mumbai 400 020.
Vs.
M/s. Tata Asset Management Ltd.,
Fort House, Upper Gr. Floor,
221, Dr. D.N. Road, Fort,
Mumbai. 400 001
PAN: AAACT 1458 L
(Appellant)
(Respondent)
Appellant by : Shri Subachan Ram
Respondent by : Shri Farrokh Irani
O R D E R
PER D.K. AGARWAL, JM:
This appeal preferred by the revenue is directed against the order dated 02.03.2010 passed by the Learned Commissioner of Income-tax (Appeals) for the assessment year 2007-08.
2. Briefly stated, the facts of the case are that the assessee company is engaged in the business as an asset management company for Tata Mutual Fund (TMF). It filed its return of income declaring total income at 8,69,91,800/-. However, the assessment was completed at an income of 36,70,49,580/- including the disallowance of Scheme Expenses of 8,32,75,381/- and leave encashment of 4,06,140/- vide order dated 5.11.2009 passed under section 143(3) of the Income-tax Act, 1961 ("the Act"). On appeal, the learned CIT(A) while partly allowing the appeal deleted both the disallowances made by the Assessing Officer.
3. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us.
4. Ground No. 1 is general in nature and in the absence of any specific plea, the same is, therefore, rejected.
5. Ground Nos. 2 & 3 are against the deletion of disallowance of scheme expenses of ` 8,32,75,381/-.
6. Brief facts of the above issue are that during the course of assessment, it was, inter alia, observed by the Assessing Officer that it is seen from Schedule XVII to the Financial Statements, the assessee has debited marketing, advertisement and other expenses of ` 5,99,12,017/- and brokerage and incentives of ` 2,33,63,364/- under the head "Scheme Related Expenses". The assessee was asked to file various details of the above expenses and also asked to show cause as to why the same should not be disallowed. In response, the assessee filed its written reply dated 23.10.2009 and 30.10.2009 wherein the assessee after relying on certain decisions of the Tribunal, wherein it has been held that scheme expenses are eligible as business deduction, inter alia, submitted that the scheme expenses have been incurred wholly and exclusively for its business expenses and hence the same should be allowed. However, the Assessing Officer did not allow the same with the observation that "It is seen from the records of the Department that both the cases of Mumbai Tribunal laid down by the assessee have not been accepted by the Department. Assessee's submissions in this regard the scheme related expenses of ` 8,32,75,381/- are therefore hereby disallowed".
7. On appeal, the Learned CIT(A) observed that (i) the Assessing Officer has given no reasons for making the impugned disallowance except for saying that the department has not accepted the decision of the Tribunal in the cases quoted by the appellant. Thus the Assessing Officer accepted the facts of the quoted cases were not distinguishable; (ii) that no identical disallowance has been made in any earlier year in which similar expenses were claimed and duly allowed in the assessment proceedings and (iii) that the A.R. of the appellant has furnished justification in detail for allowance of the impugned deductions by presumig the basis on which the Assessing Officer could have possibly made the disallowance in question and held that there being no basis for the disallowance and hence he deleted the addition made by the Assessing Officer.
8. At the time of hearing, the learned Departmental Representative supports the order of the Assessing Officer.
9. On the other hand, the learned counsel for the assessee while relying the assessee's submissions made before the Assessing Officer and the Learned CIT(A) also relied on the following decisions:
Sr.No. Particulars Page No. of the Paper Book 1 I.T.A.T,Mumbai Bench decision in the case of Franklin Templeton Asset Management (India) Pvt.Ltd. ITA No. 4967-70/M/2008 for AYs. 2001-02 to 2005-06 41-48 2 I.T.A.T.Chennai Bench decision in the case of First India Asset Management (P) Ltd. v. DCIT 14 DTR (Chennai) 402 49-60 3 I.T.A.T Mumbai Bench decision in Alliance Capital Asset Management (India)Pvt. Ltd. v. DCIT, ITA No.1299/M/2002 for AY 1998-99 61-64 4 I.T.A.T Mumbai Bench decision in ACIT v. M/s.Templeton Asset Management (I) Pvt. Ltd. , ITA No. 4697/M/2006 AY: 2000-01 65-69 5 I.T.A.T Mumbai Bench decision in ITA No.270/M/2010 in the case of ACIT vs. M/s. Canara Robeco Asset Management Co. Ltd.
2010 TIOL 663 I.T.A.T (Mum) In the light of the above decisions he submits that since the facts of the assessee's case are identical to the facts of the case decided by the Tribunal (supra), therefore, the Learned CIT(A) was fully justified in deleting the disallowance made by the Assessing Officer and, therefore, the order passed by the learned CIT(A) be upheld.
10. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute. We further find that it is also not in dispute that the assessee has claimed the scheme related expenses - marketing, advertisement and other expenses of ` 5,99,12,017/- and brokerage and incentives of ` 2,33,63,364/- totaling to ` 8,32,75,381/- vide Schedule XVII of the Profit & Loss Account appearing at page 20 of the assessee's paper book. It was disallowed by the Assessing Officer merely on the ground that the department has not accepted the decision of the Tribunal in which the reliance was placed by the assessee. However, the learned CIT(A) has allowed the same on the ground that no such disallowance was made in earlier years and the assessee has furnished justification for allowance of the impugned deductions.
11. In the aforesaid decisions relied on by the learned counsel for the assessee it has been consistently held that the assessee, an asset management company, managing a mutual fund, having incurred mutual fund launch expenses and the mutual fund promotion expenses in view of contractual obligation under the tripartite agreement, same were allowable as deduction.
12. In the absence of any contrary decision and/or distinguishable feature brought on record by the revenue, we respectfully following the consistent view of the Tribunal hold that the scheme related expenses amounting to ` 8,32,75,381/- incurred by the assessee on marketing, advertisement and others, brokerage and incentives are allowable expenses under section 37(1) of the Act and accordingly, we are inclined to uphold the order of the learned CIT(A) in allowing the same. The grounds taken by the revenue are, therefore, rejected.
13. Ground No. 4 is against the deletion of disallowance of ` 4,06,140/- on account of leave encashment.
14. Brief facts of the above issue are that it was observed by the Assessing Officer that the assessee vide letter dated 07.07.2009 has claimed deduction for provision of ` 4,06,140/- towards earlier years leave encashment. According to the Assessing Officer as the same was not claimed either in the original return of income or by way of revised return, the assessee's request cannot accepted in view of the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 157 Taxman 1 (SC); (2006) 284 ITR 323 (SC) and accordingly he disallowed the same.
15. On appeal, the Learned CIT(A) observed that (i) that the deduction for leave encashment should have been allowed u/s. 43B of the Act on payment basis even though the same was not claimed by way of a revised return; (ii) that the impugned deduction on payment basis was legally admissible claim which should have been allowed to the appellant especially in view of the CBDT Circular requiring the Assessing Officer not to take advantage of assessee's ignorance to collect more tax out of him than the liability due from him and (iii) that further this deduction needs to be allowed on the face of the fact that the appellant had offered additional income of ` 5.25 crores through the same letter through which the said deduction was claimed. Therefore, in equity also, the AO was bound to allow a small deduction of ` 4,06,140/- when the additional income of ` 5.25 crores was assessed by him, and, accordingly, he held that the AO has wrongly added the amount of ` 4,06,140/- whereas the said amount should have been allowed as deduction and hence he allowed the same.
16. At the time of hearing, the learned Departmental Representative while relying on the order of the Assessing Officer submits that since the assessee has not claimed the deduction of ` 4,06,140/- in the return of income or in the revised return, therefore, following the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra), the Learned CIT(A) was not justified in allowing the same and hence, the disallowance made by the Assessing Officer be restored.
17. on the other hand, learned counsel for the assessee submits that the assessee has claimed deduction of leave encashment of ` 4,06,140/- vide letter dated 7.7.2009 appearing at page 71-72 of the assessee's paper book, wherein the on the first page of the letter the assessee has offered additional income of ` 5.25 crore which has been taxed by the Assessing Officer. On the next page of the said letter the assessee has claimed deduction of leave encashment of ` 4,06,140/- on the basis of actual payment which is allowable under section 43B supported by the extract of Tax Audit Report appearing at page 70 of the assessee's paper book but the same was disallowed by the Assessing Officer on the ground that it was not claimed in the return or revised return of income. He further submits that on the same spirit on which the AO has taxed the income of ` 5.25 crore, the AO should have allowed the deduction of payment of leave encashment of ` 4,06,140/-. With regard to the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) relied on by the Learned Departmental Representative, he submits that the I.T.A.T Mumbai Bench in the case of Chicago Pneumatic India Ltd. v. DCIT (15 SOT 252 (Mum) and the I.T.A.T Ahmedabad Bench decision in the case of Kisan Discretionary Family Trust v. ACIT (2008) 113 TTJ (Ahd) 918, wherein the Tribunal after considering the CBDT Circular No. 14(XL-35) dated 11.4.1955, Circular No. F.81/27/65-IT (B) dated 18.5.1965, Article 265 of the Constitution of India and the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) has allowed the claim of the assessee on similar facts and circumstances of the case. Reliance was also placed on the decision of the Tribunal in the case of Essar Oil Ltd. v. DCIT and vice-versa and others in ITA No. 3661 & 2827/M/2000 and others for the assessment years 1994-95 and 1995-96, order dated 26.4.2007. The learned counsel for the assessee submits that in the decision of the Tribunal in the case of M/s. Mahindra Engg. & Chemical Products Ltd. v. ITO (ITA Nos. 1258 to 1261/Mum/2010 for the assessment years 2001-02 to 2004-05, wherein the Tribunal has observed that when the claim was made before the AO without revising the return, such claim is not allowable and the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) would clearly apply, submits that the said decision of the Tribunal is distinguishable and not applicable to the facts of the assessee's case as in the said decision, there is no reference to he decisions of the Co-ordinate Bench of the Tribunal in Chicago Pneumatic India Ltd. (supra), Kisan Discretionary Family Trust (supra) and Essar Oil Ltd. (supra). He further submits that in the said decision even CBDT Circulars and Articles 265 of the Constitution of India were also not referred. He further submits that the facts of the assessee's case are quite different as to the facts of the case of the Tribunal in M/s. Mahindra Engg. & Chemical Products Ltd. v. ITO (supra) inasmuch as, in the assessee's case the AO on the basis of same very letter has assessed the additional income of the assessee at ` 5.25 crores, therefore, the AO has considered the said letter as a valid letter in the eyes of law and hence on equity basis, it was the duty of the AO to allow the legal claim of the assessee on leave encashment of ` 4,06,140/-. He, therefore, submits that the order passed by the Learned CIT(A) in allowing the claim of the assessee be upheld.
19. We have carefully heard the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the assessee vide letter dated 07.07.2009 has claimed the deduction of leave encashment of ` 4,06,140/- on the basis of actual payment made by him. It is also not in dispute that such claim was not made in the original return of income or by filing a revised return of income. It was disallowed by the AO as the assessee has not filed the revised return for claiming such deduction following the decision of the Hon'ble Apex Court in the case of Goetze (India) Ltd. (supra). However, it was allowed by the Learned CIT(A) on the ground that it is a legal claim and secondly, according to the CBDT circular requiring the AO not to take advantage of the assessee's ignorance to collect more tax and thirdly the AO has accepted the additional offer of income of ` 5.25 crores through the same letter through which the said deduction was claimed. Before us the claim of the revenue is that since the assessee has failed to furnish the revised return claiming such deduction, therefore, the same in view of the decision of the Hon'ble Supreme Court the case of Goetze (India) Ltd.(supra) is not allowable. Per contra, the claim of the assessee is that since the Revenue on the basis of the same letter has taxed the additional income of ` 5.25 crores, therefore, on equity basis, CBDT Circulars, Article 265 of the Constitution of India and the decision of the Tribunal (supra), it is an allowable deduction.
20. After considering the facts and circumstances of the case, we find that it is not in dispute that the claim of leave encashment of ` 4,06,140/- is a legal claim allowable under section 43B of the Act. It is settled law that there is no prohibition on the powers of the Tribunal to entertain the legal claim of the assessee arising in assessment proceedings. Reference may be made to National Thermal power Co. Ltd. vs. CIT (1998) 229 ITR 383(SC), wherein it has been held that "The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. ..... We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax(Appeals). Both the assessee was well as the Department have a right to file an appeal/cross objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier".
21. In the case of CIT v. Ramco International (2011) 332 ITR 306 (P&H) Their Lordships after considering the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd., (2006) 284 ITR 323(SC) has held (head note) "Held, dismissing the appeal, that the Tribunal had considered that issue and found that according to Form 10CCB filed during the assessment proceedings, the claim of the assessee was admissible. The assessee was not making any fresh claim and had duly furnished and submitted the Form for the claim under section 80-IB, there was no requirement of filing any revised return".
22. In the case of CIT v. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Delhi) the AO disallowed the claim of the assessee on the ground that "since the claim for the deferred revenue expenditure of ` 15,58,500/- was not claimed by the assessee in the return of income for the assessment year 1990-91, the same is not allowed". Their Lordships after considering the decision of the Hon'ble Apex Court in the case of Goetze (India) Ltd. (supra) has held (Head note) "Held, dismissing the appeal, that there was no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arose in the matter and for the just decision of the case. There was no infirmity in the order of the Tribunal".
23. In Chicago Pheumtic India Ltd. v. DCIT (2007) 15 SOT 252)(Mum), it has been observed and held by the Tribunal (Page 274):
"......As far as the decision of the Hon'ble Apex Court in the case of Goetze (India) Ltd. (supra) is concerned, there is no dispute that the same is binding on everybody concerned. In the said decision, the Hon'ble Apex Court has also ruled that Appellate Tribunal may adjudicate the issue if a claim is made by any party subject to satisfaction of prescribed rules, hence, even the Hon'ble Apex Court has not barred the assessee raise it's legal claim before Appellate authorities...."
24. In Kisan Discretionary Family Trust (supra) it has been held that the assessee returning certain interest in the revised return on accrual basis is not precluded from claiming the same as exempt during the course of assessment without filing revised return, on the ground that there was no contract for payment of interest on accrual basis. The Tribunal after considering the decision of the Hon'ble Apex Court in Goetze (India) Ltd. (supra) and CBDT Circulars held that such claim of exemption/non-taxability of particular income can be entertained by the Tribunal.
25. The CBDT as back as in 1955 issued a circular No. 14(XL-35),dated 11th April, 1955 wherein the Board has recognized the fact that responsibility for claiming refunds and relief rests with the assessee as imposed by law, even then the Board has directed the officers to draw the attention of the assessees in respect of any refunds or reliefs to which they are eligible, which they have not claimed for some reason or other.
26. Further, the Board also issued Circular F.No.81/27/65-IT(B) dated 18th May,1965, defining the duties of PROs in providing assistance to the public in filing correct return and making eligible claims.
27. In the case of Essar Oil Ltd. (supra) the Tribunal after considering various CBDT Circulars and the decision of the Hon'ble Apex Court in the case of NTPC Ltd. (229 ITR 303); UCO Bank (237 ITR 889) and in the case of Shelly Products and Anr. (261 ITR 367) and various decisions and Circulars has held as under:
"Having regard to these decisions, in our view the order of the CIT(A) cannot be found fault with. The learned Departmental Representative to the query from the Bench has fairly admitted that there is nothing in Goetze (India) Ltd., which prevents the Tribunal from entertaining any fresh claim if the same can be entertained in the light of the available material on the face of the record. Anything to the contrary of the proposition will only negate the principle laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co.Ltd. (supra). We therefore confirm his order. It may be mentioned that we have taken this view after considering the fact that in all other years the department has accepted these expenses and allowed deduction as claimed by the assessee"
28. In the case of Mr. Gnanesh V. Lakhia v. Addl. CIT (ITA No. 1823Mum/2010 - A.Y. 2006-07) Order dated 8th April, 2011, in which one of us (Judicial Member) was a party, the Tribunal after considering all the decisions including the CBDT Circulars has held that merely because the assessee has made claim of short term capital gain as against correct claim of long term capital gain on sale of shares by filing belated re-revised return is not sufficient to hold that that the assessee is not entitled to the claim the sale of shares as long term capital gain.
29. In the case of Mahindra Engg. & Chemical Products Ltd. (supra) the Tribunal after considering the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) has held that in the case before us the claim was disallowed not merely because the agreement was terminated in the financial year 2000-01, but it was disallowed because it was held to be capital in nature and that the issue is still pending for adjudication as pointed out by the learned counsel for the assessee before the Learned CIT(A). Therefore, the interest of the assessee is not affected. In view of this discussion, the order of the CIT(A) was confirmed.
30. Applying the ratio of the above decisions to the facts of the present case, we find that in the case before us, since the AO has partly accepted the assessee's letter dated 07.07.2009 taxing the additional income of ` 5.25 crores and did not accept the assessee's claim of deduction of ` 4,06,140/- on the ground that the assessee has not made the claim on the revised return, we are of the view that once the AO has accepted the said letter as a valid letter and taxed the substantial income of the assessee at ` 5.25 crores, he cannot reject the other part of the letter claiming legal deduction of ` 4,06,140/-. Further, since the claim of the assessee of ` 4,06,140/- is a legal claim and it is not the case of the revenue that such legal claim is not allowable u/s.43B of the Act. Further more in the instant case, the Ld.CIT(A) has accepted the claim of the assessee under his powers provided under the Act. His powers are vide enough as has been held by the Hon'ble Supreme Court in CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225(SC) wherein it has been held that the powers of the AAC are vide enough to be co-terminous with those of the A.O., so that he can do and direct the A.O. to do what he has failed to do so. In view of the matter, we are of the view that the assessee is entitled to claim the legal deduction supported by the audit report. Since the above legal claim was not examined by the Assessing Officer nor by the Learned CIT(A), therefore, we are of the view that in the interest of justice the matter should go back to the file of the Assessing Officer and accordingly we set aside the order passed by the Revenue Authorities on this account and send back the matter to the file of the AO to decide the same afresh and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the revenue is, therefore, partly allowed for statistical purposes.
31. In the result, the Revenue's appeal stands partly allowed for statistical purposes.
Order pronounced in the open court on this 5th day of Aug, 2011.
Sd sd
(Pramod Kumar) (D.K. Agarwal)
Accountant Member Judicial Member
Mumbai, dated the 5th Day of Aug, 2011.
kn
Copy to:
The Assessee
The DCIT -2(3), Mumbai
The CIT-2, Mumbai.
The CIT(A)-6, Mumbai
The DR 'F' Bench, Mumbai By order
/True copy/
Asst. Registrar, ITAT, Mumbai
PAGE 12
ITA No.4665/Mum/2010
M/s. Tata Asset Management Ltd.