Income Tax Appellate Tribunal - Mumbai
R-Pac (India) Pvt. Ltd., Mumbai vs Department Of Income Tax on 8 April, 2013
आयकर अपील य अ धकरण "D"
यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
ी म मोहन, उपा य एवं
ी डी. क णाकरराव,ु लेखा सद य के सम ।
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND
SHRI D. KARUNAKARA RAO, AM
आयकर अपील सं./I.T.A. No.6797/M/2011
( नधारण वष / Assessment Year:2008-2009)
Income Tax Officer-8(3)(3), बनाम/ M/s. R-Pac (India) Pvt. Ltd.,
R.No.202, Aayakar Bhavan, Vs. 10, Pushpakunj, Natwarnagar,
M.K. Road, Mumbai-400020. Road No.3, Jogeshwari (East),
Mumbai - 400 060.
थायी ले खा सं . /PAN :AABCR 8633 E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Ashutosh Ranjhans, DR
यथ क ओर से/ Respondent by : Shri M. Subramaniyan
सन
ु वाई क तार ख /Date of Hearing :8.4.2013
घोषणा क तार ख /Date of Pronouncement :15.5.2013
आदे श / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the Revenue on 7.10.2011 is against the order of CIT (A)- 18, Mumbai dated 14.7.2011 for the assessment year 2008-2009.
2. In this appeal, Revenue raised the following grounds which read as under:
"1.On the facts and in the circumstances of the case and in law, the CIT (A) erred in deleting the disallowance made u/s 40(a)(ia) amounting to Rs. 5,65,692/- without appreciating the relevant facts and without considering the CBDT's cir No. 715 dated 8.8.1995, as per which TDS is applicable on payments of actual reimbursements as well.
2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in deleting the disallowance made by the AO on account of Electricity expenses amounting to Rs. 4,87,359/-....."
3. First ground relates to the disallowance of Rs. 5,65,692/- u/s 40(a)(ia) of the Act. In this regard, the case of the AO is that the said amount attracts the provision of section u/s 40(a)(ia) of the Act, though the said amounts are mere 2 reimbursements paid by the assessee to M/s. APP Graphics Pvt. Ltd, who incurred on accounts of water-electricity-security charges etc on behalf of assessee.
4. During the first appellate proceedings, on examining the nature of expenses, the CIT (A) came to the conclusion that the said amounts are reimbursement expenses and such reimbursement does not attract the provisions of section 40(a)(ia) of the Act. The judgment of the jurisdictional High Court in the case of CIT vs. Siemens Aktiongesellschaft (2008 TIOL 569 HC-Mum) was relied and the same is relevant for the proposition that where there is no element of income and the payment by way of reimbursement of expenses does not attract the provisions of section 40(a)(ia) of the Act. Accordingly, CIT (A) directed the AO to delete the disallowance. Aggrieved, Revenue carried the matter in appeal before the Tribunal by raising the ground no.1 mentioned above.
5. During the proceedings before us, Ld DR relied on the order of the AO.
6. On the other hand, Ld Counsel for the assessee relied on the order of the CIT (A).
7. We have heard both the parties on the issue raised in ground no.1 and perused the orders of the Revenue Authorities. Nothing is brought to our notice that the impugned payments contain the profit element passed on to the payee. There is no doubt that the circular apply to the payments which contains the income element. Considering the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Siemens Aktiongesellschaft (supra) for the proposition that when there is no element of income and the payment is only the reimbursement of expenses then no disallowance can be made u/s 40(a)(ia) of the Act, we find no reason to interfere with the order of the CIT (A). As such, nothing is brought to our notice by the Revenue that the said expenses are not cases of reimbursement and no contrary decision was also brought to our notice by the revenue. Therefore, the order of the CIT(A) does not call for any interference on this issue. Accordingly, ground no.1 raised by the Revenue is dismissed.
38. Ground no.2 relates to disallowance of expenses on account of electricity expenses amounting to Rs. 4,87,359/-. During the assessment proceedings, AO disallowed Rs. 4,87,359/- being 50% of the total aggregate electricity charges of Rs. 9,74,718/- debited to P&L Account. But the fact is that Rs. 9,74,718/- has two segments ie (i) Rs. 4,16,350/- paid to MSEDC Ltd towards the electricity expenses for assessee's office premises at Suraj House and (ii) Rs. 4,63,415/- reimbursed to APP Graphics Pvt. Ltd being assessee's share of electricity expenses for manufacturing storage cum logistic set-up at Navi Mumbai. It is the case of the assessee that no expenses need to be disallowed as the whole of it was spent for business purposes of the assessee only. Matter travelled to the CIT(A).
9. During the first appellate proceedings, on appreciating the submissions made by the assessee, CIT (A) directed the AO to delete the addition on account of electricity expenses. Para 4 and 4.1 of the impugned order are relevant in this regard. Aggrieved with the decision of the CIT (A), Revenue filed an appeal before the Tribunal by raising the ground no.2 mentioned above.
10. During the proceedings before us, Ld DR relied on the order of the AO.
11. On the other hand, Ld Counsel for the assessee relied on the order of the CIT (A) and reiterated the submissions made before the first appellate authority.
12. We have heard both the parties and perused the orders of the Revenue Authorities as well as the material placed before us. It is relevant to extract para 4 and 4.1 of the order of the CIT (A) and the same is as under:
"4. The Ld AO vide para 8 of the assessment order disallowed Rs. 4,87,359/- being 50% of the total electricity charges incurred by the assessee company during the financial year 2007-08 under the erroneous assumption / finding that the aggregate of electricity charges of Rs. 9,74,718/- debited to Profit & Loss Account is for office premises at Suraj House , Ghodbunder, Thane. The factual position is that the aggregate of electricity charges of Rs. 9,74,718/- comprise electricity charges of Rs.4,16,350/- directly paid to MSEDC Ltd. for office premises at Suraj House (hired on leave and license basis from Suraj Realtors). Rs. 4,63,415/- reimbursed to APP Graphics Pvt. Ltd., being assessee's share of electricity charges for the manufacturing, storage cum logistic set-up at Mahape Navi Mumbai (already fully disallowed by the AO in para 3 to 6 of his assessment order and discussed under point 2 above) and Rs. 94,953/- for branch office of the erroneous assumption that the electricity bill is for Shop No.1 to 4 of Suraj Realtors and that the assessee occupies 4 only one administrative office at 2/F Suraj House. The facts are that the assessee has hired the entire 2nd Floor (referred as 2/F) in Suraj House, which admeasured approx Rs.5000/- sq.ft. Carpet area and which houses six executive cabins, one design room, one computer server cabin, one big conference hall, one cafeteria and open space at the centre with cubicles and office modular furniture to accommodate around 25 employees. Further, separate space for display of product range of the company and space for storage of records is also provided within the said hired 2nd Floor of Suraj House. The builder had designed the entire floor to have four distinct shops with four different electricity meters and it was only at the request of the assessee that the proposed four distinct shops were clubbed into one premises covering the entire 2nd floor and accordingly was designated as 2/F, while entering into the leave and license agreement with the assessee. However, the electricity bills continued to be issued by Public Utility Agency MSEDC Ltd., on the basis of four electricity meters separately installed on the second floor, which was supposed to have four shops as per the original plan envisaged by the builder Suraj Realtors . Since, the entire 2nd Floor was occupied by the assessee, which comprised the area of 4 shops originally envisaged by the builder, the assessee had to pay the electricity charges for the entire premises used / occupied by the assessee. The learned Assessing Officer did not seek any clarification on the unwarranted assumptions he has made in the assessment order and in the process has landed up with multiple disallowances on account of electricity charges in the aggregate at Rs. 9,50,774/- as against the total electricity charges booked and debited to Profit & Loss Account at Rs. 9,74,718/-. For your Honor's kind perusal we have enclosed herewith the extract of ledger account of Electricity charges incurred by the assessee for the financial year 2007-08 (page No.66 to 70 of the annexure) and 4 bills per month paid by the assessee to MSEDCL during the 12 months of financial year 2007-08, for hired 2nd floor premises in Suraj House (page nos. 71 to 128 of the annexure). Copy of the leave and license agreement entered into with Suraj Realtors by the assessee for hire of 2nd floor premises in Suraj House is attached (page nos. 129 to 142 of the annexure). Suffice is to say that there is no reason for the assessee company to be imprudent to pay electricity charges which does not belong to it. Certificate received from Suraj Realtors on the stated position of 4 electricity meters installed on the 2nd floor premises let out to assessee and the requirement of payment of the said 4 bills by the assessee due to the fact that the whole of the 2nd floor premises are occupied by the assessee is enclosed for your kind perusal. 4.1. I have considered the submissions aof the learned Counsel and in view of the facts brought on record and submissions made - AO is directed to delete the disallowance. Thus, this ground of appeal is allowed."
13. The above extraction contains both the facts relating to this ground and the conclusion of the CIT (A). CIT (A) concludes that the impugned expenditure was incurred by the assessee solely in respect of the properties used by the assessee for business purposes. Before us, nothing is brought to our notice that the said facts require any changes. Considering the business nature of the expenditure, the assessee entitled to claim the same as an allowable deduction. No disallowance is called for. Considering the above, we are of the opinion that the direction given by the CIT (A) for deletion of the addition on account of electricity charges, does not 5 call for any interference. Accordingly, ground no.2 raised by the Revenue is dismissed.
14. In the result, appeal filed by the Revenue is dismissed.
प रणामतः राज व क अपील खा रज क जाती है ।
Order pronounced in the open court on 15.5.2013. .
आदे श क घोषणा खुले यायालय म दनांकः 15.5.2013 को क गई ।
Sd/- Sd/-
(D. MANMOHAN) (D. KARUNAKARA RAO)
उपा य /VICE PRESIDENT लेखा सद य / ACCOUNTANT MEMBER
मंब
ु ई Mumbai; दनांक Dated 15.5.2013.
व. न.स./ OKK , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-
4. आयकर आयु / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT,
Mumbai
6. गाड फाईल / Guard file.
स या पत त //True Copy//
आदे शानस
ु ार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai