Income Tax Appellate Tribunal - Delhi
Iffco Tokio General Insurance Co. Ltd., ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'C' NEW DELHI
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER
AND
SHRI T.S.KAPOOR, ACCOUNTANT MEMBER
I.T.A .No.-5771/Del/2011
(ASSESSMENT YEAR-2007-08)
DCIT, VS Iffco Tokio General Insurance Co. Ltd.,
Circle-11(1), 4th & 5th Floor, Plot No.-3,
New Delhi. Sector-29. Gurgaon-122001.
PAN-AAACI7573H
(APPELLANT) (RESPONDENT)
I.T.A .No.-5880/Del/2011
(ASSESSMENT YEAR-2007-08)
Iffco Tokio General Insurance Co. Ltd., VS DCIT,
th th
4 & 5 Floor, Plot No.-3, Circle-11(1),
Sector-29. Gurgaon-122001. New Delhi.
PAN-AAACI7573H
(APPELLANT) (RESPONDENT
Appellant by: Smt. Shumana Sen, Sr. DR
Respondent by: Sh. Aseem Chawla, CA.
ORDER
PER DIVA SINGH, JM
These are two cross-appeals filed by the revenue and the assessee against the order dated 28.10.2011 of CIT(A)-XV, New Delhi pertaining to 2007-08 assessment year.
2. Both these appeals are being decided by a common order for the sake of convenience as ground no-2 of the department and the sole ground of the assessee are against the same issue as partial relief has been granted by the CIT(A) against 2 I.T.A .Nos.-5771 & 5880/Del/2011 the finding, both the parties are arguing. For ready-reference, the grounds raised by the respective parties read as under :-
I.T.A .No.-5771/Del/2011 "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,50,000/-
made on account of disallowance u/s 14A read with Rule 8D, of the I.T. Rules, 1962.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.47,30,967/- made on account of disallowance of courtesies & Entertainment expenses.
3. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing."
I.T.A .No.-5880/Del/2011 "1. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-XV, New Delhi ['CIT(A)'] has erred in sustaining the disallowance on an ad-hoc basis, amounting to Rs.10,00,000 out of the disallowance of expenditure under the head Courtesies and Entertainment Expenses of Rs.47,30,967 made by the Assessing Officer ('Ld AO') disregarding the provisions of Section 37 of the Income Tax Act, 1961.
1.1 That the Learned CIT(A) has erred in stating that no proper vouchers or details of Courtesies and Entertainment Expenses were available.
The appellant craves leave to add, alter, amend or vary the above grounds of appeal at or before the time of hearing."
3. Ld. Sr. DR inviting attention to the assessment order pages 1 & 2 stated that the AO required the assessee to explain why the expenses for the interest free income of Rs.17,45,000/- should not be disallowed u/s 14A of the Income Tax Act. In response thereto, it was submitted on behalf of the assessee that tax free income represents interest earned on tax free infrastructure bonds of Rs. 3 crore and this was one time investment made in assessment year 2003-2004. As such after 3 I.T.A .Nos.-5771 & 5880/Del/2011 having made the investment, no expenses were incurred to earn the exempt income u/s 10(23)(G) as such it was argued no disallowance for the exempt income should be made u/s 14A. The Ld. Sr. DR submitted that the AO has worked out expenses on account of administrative expenses @ 0.5% thereby the disallowance of Rs.1,50,000/- should be sustained. Reliance was placed upon the judgement of the Delhi High Court in the case of Maxopp Investment Ltd. 50 Taxmann.com 390. The Ld. Sr. DR inviting attention to the impugned order stated that the CIT(A) has granted relief on the basis of the order of the Tribunal in assessee's own case as such heavy reliance has been placed upon the assessment order.
4. Ld. AR on the other hand relying upon the impugned order contended that the consistent view pan India as far as the issue is concerned is consistently in favour of the assessee as this view laid down in the case of Bajaj Allianz General Insurance Co. Ltd vs ACIT (2010) 130 TTJ 398 (Pune) has been consistently followed by Delhi, Mumbai & Pune Benches etc. For the said purpose, reliance was placed upon the order of the Mumbai Bench in the case of Kotak Mahindra Old Mutual Life Insurance Ltd. vs ACIT in ITA No.-2901/Mum/2010 (AY-2007-
08) (copy of the same was filed); ICICI Prudential Insurance Co. Ltd. vs ACIT (2013) 140 ITD 41 (Mum.) and Oriental Insurance Co. Ltd. vs ACIT (2010) 130 TTJ 388 (Del.).
4.1. Inviting attention to the same, it was his submission that the detailed findings in ICICI Prudential Insurance Co. Ltd. vs ACIT, internal page 30 para 42, 4 I.T.A .Nos.-5771 & 5880/Del/2011 the findings are at page 31 para 45 fully support assessee's case. It was stated that the issue has been addressed at length wherein it has been categorically held that the insurance company governed by its own special Act is required to compute its income in terms of section 44 of the said Act and in the circumstances, section 14A of the Income Tax Act is not applicable. Apart from that it was also submitted that the assessee would also rely upon without prejudice on the arguments on facts that
(a) no expenses have been given by the assessee in the relevant year for making the investment; (b) that no expenses have been identified by the AO to show that they have been incurred by the assessee qua the said investment; (c) Rule 8D in terms of the judgement of the Delhi High Court has been held by Maxopp Investment is not applicable to the year under consideration; and (d) no satisfaction has been recorded by the AO qua the disallowance.
5. In reply, the Ld. Sr. DR placed reliance upon the assessment order and was not able to state on query whether the orders of the Tribunal followed by the CIT(A) have been reversed or not in the face of the stated stand of the assessee that the decisions hold sway.
6. We have heard the rival submissions and perused the material available on record and the judgements and orders which have been referred to for our consideration have also been taken into consideration. It may be relevant at this point of time to reproduce the relevant findings of the CIT(A) which is under challenge:-
5 I.T.A .Nos.-5771 & 5880/Del/2011
"7. I have gone through the above submissions of the appellant and have also perused the ITAT's order in appellant's own case for Assessment Year 2004-05 and have gone through the judgements cited above. In my view, this issue has been clearly dealt by the Hon'ble ITAT in their order dated 26.03.2009 in appellant's own case for Assessment year 2004-05. The ITAT has in no uncertain term, after analyzing the decisions of General Insurance Co. vs CIT (1999) (240 ITR 139) (SC) has held that in view of provisions of Section 44, read with Rule 5 of the First Schedule, the provisions of Section 14A are not applicable in the appellant's case. 7.1. In view of the above stated facts, I find no reason to agree with the decision of the AO, hence the addition of Rs.1,50,000 made under Section 14A to be deleted."
6.1. We find ourselves in agreement with the findings of the CIT(A). It is seen that the CIT(A) has relied upon the assessee's own case decided by a Co-ordinate Bench in ITA No.-213/Del/2008 placed in pages 68-70 of the paper book wherein page 67, the Co-ordinate Bench was placed to observe as under :-
"3. We have considered the facts of the case and rival submissions. The order of the Tribunal in the case of Oriental Insurance Co. Ltd. (supra) was based upon the decision of Hon'ble Supreme Court in the case of General Insurance Co. of India Ltd. vs CIT(1999) 240 ITR 139, in which the apex court categorically held that the provisions contained in section 44 are special provisions dealing with computation of the profits of insurance business. Looking to the decision and the order, it is held that the profits of the business had to be computed in accordance with section 44 and Rule 5 of the First Schedule. The learned DR was not able to point out error in the disallowance computed by the learned CIT (Appeals). Therefore, it is held that there is no such error in his order, which requires correction from us. Thus, grouno.-3 is dismissed."
6.2. On a perusal of the same in the peculiar facts and circumstances, we find no infirmity in the impugned order. Respectfully following the order of the Tribunal, ground no-1 of the department is dismissed.
6 I.T.A .Nos.-5771 & 5880/Del/2011
7. The facts qua ground no.-2 of the department and the ground no-1 of the assessee are found recorded at page 2 para 5 of the assessment order. The same are reproduced for ready-reference :-
"5. Courtesies & Entertainment Expenses :
During the course of assessment proceedings, it has been observed that the assessee has shown courtesies & entertainment expenses amounting to Rs.1,62,66,000/-. The assessee was asked to justify. The assessee's representative attended and submitted that the assessee is in the field of General Insurance. It has 36 officers spread all over the country. The expenses on account of courtesies and entertainment are business necessities for business promotions and also includes staff refreshment in the office during working hours. The assessee's arguments are considered but the same are not acceptable and accordingly disallowance of Rs.47,30,967/- being 30% of Rs.1,57,69,889/- is made and added to the total income. Penalty u/s 271(1) is initiated separately on this issue."
7.1. In appeal before the CIT(A), the arguments advanced are reproduced at pages 8-9 in the impugned order considering which relying upon the past history of the assessee, the issue was decided vide para 9 restricting the disallowance to Rs.10,00,000/-. Aggrieved by which both the department and assessee are in appeal before the Tribunal.
8. Ld. Sr. DR relying upon the assessment order contended that on facts the action of the CIT(A) in sustaining the disallowance to only Rs.10,00,000/- is not sufficient as there is a categorical finding on record that there was absence of proper vouchers and details.
9. The Ld. AR on the other hand assailed the action of the CIT(A) on the ground that the action of sustaining the disallowance to the extent of 7 I.T.A .Nos.-5771 & 5880/Del/2011 Rs.10,00,000/- thereby retaining the addition of said amount of Rs.10,00,000/- is not correct either on law or on facts. It was his submission that in the peculiar facts and circumstances of the case, the CIT(A) was not justified in sustaining the addition relying upon the position for 2004-05 assessment year as in the facts of that year the assessee was saddled with the peculiar situation where it had neither raised a cross-objection nor filed a cross-appeal and this fact is noted by the Tribunal in para 4.2 in that year as only the departmental appeal was being considered which was dismissed. In the facts of the present case, it was submitted that the assessee had raised the ground challenging the action of the CIT(A) as such the said order need not be followed. Inviting attention to the paper book page 39-52, it was his submission that it contained the entire submission before the CIT(A). Addressing the facts, inviting attention to the paper book page no-87, it was his submission that a major portion of this expenditure has been subjected to fringe benefit tax and this would amount to a double addition. Accordingly even on this alternative argument, the addition sustained is not warranted on facts.
10. Ld. Sr. DR in response contended that even if whatever tax has been paid by the assessee as fringe benefit tax u/s 115WE(3), it would not be sufficient to cover the entire amount. It was argued that even then a disallowance is warranted on facts.
11. We have heard the rival submissions and perused the material available on record. On a careful consideration of the entire factual matrix, we are of the view that in the peculiar facts and circumstances of the case, it is considered necessary 8 I.T.A .Nos.-5771 & 5880/Del/2011 that a view is arrived at after taking into consideration the relevant facts. We considered it necessary in the light of the arguments advanced before the Bench that the AO shall examine the position of double taxation vis-à-vis the amounts which already stood offered to tax u/s Fringe Benefit Tax. The past position can be considered but simply because it was not challenged in the earlier year is not a good enough reason to resort to ad hocism the AO is directed to ascertain the correct facts and then decided the issue in accordance with law by way of speaking order after giving the assessee a reasonable opportunity of being heard. The impugned order as such is set aside, ground no-1 of the assessee and ground no-2 of the revenue are allowed for statistical purposes.
12. In the result, the appeal of the revenue is partly allowed and the appeal of the assessee is allowed for statistical purposes.
The order is pronounced in the open court on 21st of June 2013.
Sd/- Sd/-
(T.S.KAPOOR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 21/06/2013
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI