Income Tax Appellate Tribunal - Mumbai
M/S Bob Cards Ltd. , Mumbai vs Department Of Income Tax on 1 April, 2013
ITA No.7660 of 2011 BOB Cards Ltd Mumbai
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" Bench, Mumbai
Before Shri B. Ramakotaiah, Accountant Member
& Dr. S.T.M. Pavalan, Judicial Member
ITA No.7660/Mum/2011
(Assessment year: 2008-09)
ACIT 2(1) Aayakar Bhavan, Vs. M/s BOB Cards Ltd,
Room No.561, 5th Floor, Magnet House,
M.K. Road, Mumbai 400020 Dougall Road,
Fort, Mumbai 400038
PAN: AAACB 1989 L
(Appellant) (Respondent)
Department by: Shri Mohit Jain, DR
Assessee by: Shri Dalpal Shah
Date of Hearing: 01/04/2013
Date of Pronouncement: 05/04/2013
ORDER
Per B. Ramakotaiah, A.M.
This is a Revenue appeal against the orders of the CIT (A)-4 Mumbai, dated 08.08.2011. The issue in this appeal is with reference to the claim of non reimbursable tax of `.18,86,481 paid to Master Cards/Visa Cards included under the head "Operating Expenses". Assessee claimed that as per the agreement with Visa/Master Cards, the company is required to make payment without deduction of tax and therefore, such payment of TDS was over and above the service charges payable to Visa/Master Card Agencies. Accordingly the company grossed up the service charges paid to Visa/Master Cards under section 195A and paid tax thereon and the grossed up value was charged as business expenditure in Profit & Loss A/c. AO however, did not allow the grossed up portion as expenditure whereas the CIT (A) following the orders in earlier years from AY 2003-04 to 2007-08 allowed the claim.
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2. At the outset it was submitted that this issue is covered in favour of assessee and against the Revenue by the orders of the ITAT in earlier years in ITA Nos.4882, 2475, 6527/Mum/2010 dated 20.06.2012 and further in ITA Nos.7678/Mum/2010 for AY 2007-08 dated 18.09.2012. Since the issue is covered by the order of the ITAT, for the sake of record the order in AY 2007-08 vide Para No.4 is extracted which is as under:
"4. We have heard the rival submissions and perused the material placed before us in the case under consideration. AO has admitted that from the agreement entered into between the assessee-company and the Master/VISA Card agencies, the assessee- company had to bear the tax liability. Payment of TDS was made in pursuance of the agreement entered in to between the assessee company and the VISA/Master card International. In our opinion payment made as a result of a contractual liability is an allowable expenditure. FAA has rightly placed reliance on the case of Standard Polygraph Machines P. Ltd (supra) in this regard. Secondly, we find that the same issue has been decided in favour of the assessee by the orders of the Tribunal delivered for earlier AYs. 'I' Bench of the ITAT, Mumbai has decided the issue as under :
"13.The fourth ground relates to deletion of the disallowance of Rs.36,37,533/- being amount deducted as TDS on payments in respect of charges for services provided by Visa/Master card International.
14.During the course of assessment proceedings the AO found that during the year under consideration assessee has made payments to Visa/Master Card International on account of their charges for the services provided by them to the assessee. The TDS was deducted by the assessee on such payments was to the tune of Rs. 36,37,533/~ which was claimed by the assessee as deduction in the Profit & Loss Account .The AO sought explanation from the assessee and pointed out why this sum being TDS should not be disallowed as the same is not a liability of the assessee. The assessee pointed out that as per agreement with Visa & Master Page 2 of 4 ITA No.7660 of 2011 BOB Cards Ltd Mumbai Card International, the assessee was required to bear the tax liability of these companies. However, this contention of the assessee did not find favour with AO who was of the opinion that this payment was not an expenditure of the assessee as the same is not incurred for the assessee's business.
15.When the matter was agitated before the Ld. CIT(A), CIT(A) after considering the submissions and agreement held that this amount is allowable in view of the decision in the case of CIT Vs Standard Polygraph Machines Pvt. Ltd 243 1TR 788 and accordingly deleted the addition and allowed the appeal.
16. Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before us.
17.Before us, the Ld. Departmental Representative reiterated the submissions made by AO. The Ld. Counsel for the assessee relied upon the decision of CIT Vs Standard Polygraph Machines Pvt. Ltd (supra) and the of S. Takenaka Vs CIT 237 1TR 212 (Karnataka)
18.We have heard the rival submissions and perused the orders of lower and also the orders relied upon by the Ld. Counsel. We find that identical facts, Hon'ble Madras High Court in the case of CIT Vs Standard Polygraph Machines Pvt. Ltd (supra) has allowed the claim holding that amount paid was only to the discharge of the liability which liability the assessee had taken to pay as part of the agreement entered into. 4 I.TA. No. 7678/Mum/2010 M/s. BOB Cards Ltd.
The amount so paid as tax has been held to be the amount payable between the collaborator and the assessee. The Tribunal decided that the amount so paid by the assessee was only in discharge of a liability which it had undertaken in terms of the agreement. Similar view has been taken by Hon'ble Karnataka High Court in the case of S.Takenaka Vs CIT 237 1TR 212 (supra). We find that the facts and issues are identical Page 3 of 4 ITA No.7660 of 2011 BOB Cards Ltd Mumbai with those of the above cited cases therefore respectfully following the decisions of Hon'ble High Courts cited herein above, this ground raised by the Revenue is dismissed."
Respectfully following the orders of the co-ordinate bench, we decide Ground Nos. 1-2 against AO".
3. Respectfully following the orders of the Coordinate Bench, we decide the grounds raised against the Revenue.
4. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 5th April, 2013 Sd/- Sd/-
(Dr.S.T.M. Pavalan) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 5th April, 2013.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "B " Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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