Income Tax Appellate Tribunal - Mumbai
Eyecube Studios P. Ltd, Mumbai vs Addl Cit 8(1), Mumbai on 10 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH "E",
MUMBAI
BEFORE SHRI P. K. BANSAL, VICE PRESIDENT AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA NO.5300/MUM/2013(A.Y: 2009-10)
Eyecube Studios P. Ltd. Vs. ADDL CIT 8(1)
201, Kailash Plaza, Plot No. A-12 Opp Aayakar Bhavan, M.K. Road.
Lakshmi Indl Estate Lnk Andheri West Mumbai Pin: 400 020
Mumbai. Pin: 400053
PAN : AABCE8913C
)Appellant) (Respondent)
ITA NOs. 4747/MUM/2015 & 4748/MUM/2015, 4749/MUM/2015
(A.Ys: 2010-11, 2011-12 & 2012-13)
ADDL CIT 8(1) Vs. Eyecube Studios P. Ltd.
Aayakar Bhavan, M.K. Road. 201, Kailash Plaza, Plot No. A-12 Opp
Mumbai - 400 020 Lakshmi Indl Estate Lnk Andheri West
Mumbai- 400053
PAN : AABCE8913C
)Appellant) (Respondent)
Assessee by: Shri Shailesh Paxmae
Department by: Shri V. Juetin, Sr. AR
Date of Hearing : 03.08.2017
Date of Pronouncement: 10.08.2017
ORDER
PER PAWAN SINGH JDICIAL MEMBER;
1. This set of four appeal under section 253 of Income Tax Act (Act) are directed the order of learned CIT(A) - 16, Mumbai dated 20.06.2013 and 27.05.2005. In all the appeals common grounds of the appeal are raised, facts are also identical, thus, all the appeals were heard together and are decided by common order. For ITA No.5300/M/2013 AY 2009-10 ITA No.4747 to 4749/M/2015 AY 2010-11 to 2012-13 Eyecube Studios P. Ltd.
appreciation of facts and grounds of appeal, first, we are taking appeal for A.Y. 2009-10 in ITA. No. 5300/M/2013.
2. The assessee has raised the following grounds in appeal: -
(i) "On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the disallowance of a sum of Rs.1,93,97,555/- on account of reimbursement of rent paid by the Holding Company M/s Eros Multimedia Pvt. Ltd. by invoking the provisions of Section 40(a) (ia) of the Income Tax Act, 1961.
(ii) In any case, Ld. CIT(A) failed to appreciate that the provisions of section 40 (a)(ia) of the Income Tax Act, 1961 are not applicable on reimbursements of expenses.
(iii) The appellant crave leaves to add, amend, alter, modify and or withdraw any of the above grounds of appeal, which are without prejudice to one another."
3. Brief facts of the case are that assessee company is engaged in the business of rendering studio and services, filed its return of income on 30.09.2009. The assessment was completed on 25.03.2013 and u/s 143(1) of the Act r.w.s. 92CA (4) of the I.T. Act. The Assessing Officer while framing the assessment order besides the other addition and disallowance, disallowed a sum of Rs.1,93,97,555/- u/s 40 (a) (ia) r.w.s. 194 -1 of the I. T. Act, 1961, holding that the assessee has made the payment on account of rent without deducting TDS. On appeal before Ld.CIT(A), the action of Assessing Officer was confirmed. Further, aggrieved by the order of Ld. CIT(A) the assessee has filed present appeal before us.
4. We have heard Learned Authorized Representative of the assessee and Learned Departmental Representative for Revenue and perused the material available on record. The Ld. AR of the assessee has argued that the rent was paid by the holding company of the assessee v.i.z. Eros Multimedia P. Ltd. and the TDS was 2 ITA No.5300/M/2013 AY 2009-10 ITA No.4747 to 4749/M/2015 AY 2010-11 to 2012-13 Eyecube Studios P. Ltd.
deducted. The rental expenditure which was incurred on behalf of Assessee Company by holding company was reimbursement by Assessee. It was argued that being it was initially stage of the business and the assessee was not in a position to arrange rent therefore, it was decided to be borne by the holding company. The rent agreement was between the lesser/ licensor and the holding company. The ld AR for the assessee has placed on record the copy of the leave and license agreements executed between Sh. VIshal Jain, Sh. Vijay Jain and M/s Eros Multimedia Private Limited. It was further argued that for the subsequent assessment order i.e., in A.Ys. 2010-11, 2011-12 & 2012-13 similar disallowances were made by the Assessing Officer. However, on appeal before Ld. CIT(A) the entire disallowances was deleted. The Ld. AR of the assessee invited our attention to the appeal of revenue for AY's 2010-11, 2011-12 & 2012-13. The Ld. AR of the assessee has argued that in all the appeals ld CIT(A) allowed the similar disallowances in favour of assessee. It was argued that the revenue must follow the Principles of consistency. On the other hand, the Ld. DR of the revenue supported the orders of the authorities below. The Ld. DR for revenue argued that the assessee has not substantiated its contention before the lower authorities that the rental expenditure was borne by its holding company. The Ld. DR for the revenue further argued that the rent agreement rent/license agreement place by assessee before the Tribunal does not contains the specific clause about use or occupation of tenanted premises by any other person except the tenant/licensee. In the rent/license agreement rather there is prohibition clause that the licensor shall not allow any person to use the premises or any part thereof either along or jointly.
3ITA No.5300/M/2013 AY 2009-10
ITA No.4747 to 4749/M/2015 AY 2010-11 to 2012-13 Eyecube Studios P. Ltd.
5. We have considered the rival submissions of the parties and gone through the orders of the authorities below. The Assessing Officer during the assessment proceeding noticed that the assessee has made entries relating to the payment of lease rental of Rs.1,99,99,618/- paid to Eros Multimedia P. Ltd. The Assessing Officer after perusal of the rent agreement noticed that Eros Multimedia P. Ltd.(holding company of the assessee) which licensor of Vijay Jain by virtue of agreement dated 18.07.2007, 03.09.2007& 10.09.2007. The assessee was asked to show cause as to why the rent paid to holding company should not be disallowed u/s 40(a)(ia) the assessee contested the show cause notice and filed its reply dated 28.01.2014. In the reply the assessee contended that rent was paid by holding company and the TDS, wherever applicable was paid by the holding company. The assessee company reimbursed the said rental expenses. The contention of the assessee was not accepted by the Assessing Officer holding that therein no element of profit involved reimbursement of rent by Assessee Company. The reimbursement is liable to be TDS, the provisions of Section 194C as part the provision of Section 194-1 of the I.T. Act. The AO disallowed the entire payment of such reimbursement. The Ld. CIT(A) confirmed the disallowance holding that the assessee has made the payment on verbal agreement to Eros Multimedia P. Ltd.(holding company of the assessee) thus, the payment made by assessee company are liable to be TDS. The assessee company and holding company are part of the same group are not material for the purpose of taxation as put forth by the assessee company. The assessee company is having separately legal entity. It was further concluded that the assessee failed to prove that the payment in question as reimbursement of expenses. We have seen 4 ITA No.5300/M/2013 AY 2009-10 ITA No.4747 to 4749/M/2015 AY 2010-11 to 2012-13 Eyecube Studios P. Ltd.
that similar disallowance was made for A.Ys.2010-11, 2011-12 & 2012-13 and on the appeal on before CIT(A), the disallowance was deleted. We have noted that the Assessing Officer has not disputed that the reimbursement was that rent/license agreement was in between Shri Vijay Jain, Vishal Jain and Eros Multimedia P. Ltd. Further, it is not in disputed all the rent was paid by Eros Multimedia P. Ltd. The Assessing Officer has not brought any material on record that the no TDS was made while making the payment of rent by Eros Multimedia P. Ltd. to its lesser/licensor. The Assessing Officer has not brought on record that the assessee has any liability and relevant part of making of the payment the lesser or to the holding company on account of rent. The contention of assessee throughout the proceeding is that the assessee made a reimbursement of rental expenses which was borne by holding company.
6. The coordinated bench of the Tribunal in ACIT Vs. Result Services P. Ltd.
[2012] 23 taxmann.com 93(Delhi) held that the where holding company of assessee took a premises on rent and allowed assessee to use part of it, and there was no relationship of lessor and lessee between them, assessee had no TDS obligation under section 194-I, while reimbursing t a part of rent of holding company. The assessee reimbursed certain amount of rent to holding company without deducting TDS the provision of Section 194-1 was not applicable on the assessee.
Further, the Rajkot bench of the Tribunal in Navubha J. Chawda Vs. ITO it was held that in view of the second proviso to Section 40(a)(ia) of the Act, bench financial 2012 with effect from on 1.07.2013 r.w.s. 201 made dispute failure to deduct TDS the disallowance of expenditure should not have been made if, the 5 ITA No.5300/M/2013 AY 2009-10 ITA No.4747 to 4749/M/2015 AY 2010-11 to 2012-13 Eyecube Studios P. Ltd.
recipient has taken account into account we aforesaid interest while computing income in their hand and the paid the tax therein. Considering the above legal and factual position narrated above we find that there was no obligation on the part of the assessee to deduct or making TDS while making reimbursement of its holding company. Moreover, we have seen that the similar contention of the assessee was accepted by revenue in the appeal by Ld CIT(A) in three subsequent assessment years. Hence, the ground of appeal raised by assessee is allowed.
7. ITA. NOS.4747/MUM.2015 & 4748/MUM/2015(A.YS. 2010-11 & 2011-12.
8. The revenue has challenged the deletion of disallowance of lessee rent made by assessee u/s 40(a)(ia). As we have already allowed the appeal of the assessee on similar facts for A.Y. 2009-10. Thus, considering the decision of appeal for A.Y. 2009-10 and following the Principal of consistency, we do not find any merit in the grounds of appeal raised by the revenue. Hence, all three appeals filed by revenue are dismissed.
9. In the result, appeal of the assessee for A.Y. 2009-10 is allowed and the appeal of the revenue for A.Ys. 2010-11, 2011-12 & 2012-13 are dismissed. Order pronounced in the open court on 10th day of August, 2017.
Sd/- Sd/-
(P.K. BANSAL) (PAWAN SINGH)
VICE PRESIDENT JUDICIAL MEMBER
मुंबई / Mumbai;िदनां क/Dated 10/08/2017
आदे शकी ितिलिपअ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.6 ITA No.5300/M/2013 AY 2009-10
ITA No.4747 to 4749/M/2015 AY 2010-11 to 2012-13 Eyecube Studios P. Ltd.
3. आयकरआयु )अ पील(/ The CIT(A), Mumbai.
4. आयकरआयु / CIT
5. िवभागीय ितिनिध ,आयकरअपीलीयअिधकरण ,मुं बई/ DR, ITAT, Mumbai
6. गाडफाईल / Guard file.
आदे शानुसार/ BY ORDER, सहायकपं जीकार (Asstt.Registrar) आयकर अपीलीय अिधकरण,मुं बई / ITAT, Mum 7