1 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 IN INCOME TAX APPELLATE TRIBUNAL BENCH: KOLKATA [Before Shri P.M. Jagtap, AM & Shri K. Narasimha Chary, JM] I.T.A No. 1513/Kol/2008 Assessment Year: 2004-05 Deputy Commissioner of Income-tax, Vs. M/s. T.M. International Logistic Ltd. Circle-8, Kolkata. (PAN: AABCT5399M) (Appellant) (Respondent) & C.O. No. 109/Kol/2008 In I.T.A No. 1513/Kol/2008 Assessment Year: 2004-05 M/s. T.M. International Logistic Ltd. Vs. Deputy Commissioner of Income-tax Circle-8, Kolkata. (Cross Objector) (Respondent) & I.T.A No. 1914/Kol/2008 Assessment Year: 2005-06 Deputy Commissioner of Income-tax, Vs. M/s. T.M. International Logistic Ltd. Circle-8, Kolkata. (PAN: AABCT5399M) (Appellant) (Respondent) & C.O. No. 133/Kol/2008 In I.T.A No. 1914/Kol/2008 Assessment Year: 2005-06 M/s. T.M. International Logistic Ltd. Vs. Deputy Commissioner of Income-tax Circle-8, Kolkata. (Cross Objector) (Respondent) Date of hearing: 28.09.2016 Date of pronouncement: 04.10.2016 For Revenue : Shri R. K. Kureel, JCIT For Assessee/Cross Objector: Shri Manish Sheth, CA & Shri Nimish Kumar, CA ORDER 2 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 Per Bench: Both these appeals by revenue and cross objections by assessee are arising out of order of CIT(A)-VIII, Kolkata vide Appeal No. 233/CIT(A)-VIII/Cir-8/Kol/06-07 and 752/CIT(A)VIII/Kol/07-08 dated 29.05.2008 and 03.06.2008. Assessments were framed by DCIT, Circle-8, Kolkata u/s. 143(3) of Income Tax Act, 1961 (hereinafter referred to as Act ) for AYs 2004-05 and 2005-06 vide his separate orders dated 29.12.2006 and 31.12.2007. Since some of grounds are common and facts are identical, we dispose of both appeals and CO by this consolidated order. 2. Brief facts are that assessee is Indian company engaged in business, inter alia, terminal port operations including development, operation and maintenance thereof, logistics solutions provider and agency work. With their Head office at Kolkata, Assessee engaged in ort activities at Haldia, Paradeep and Mumbai. At Haldia they have activities at berth No 12 and it is eligible for deductions under section 80-IA, and others not eligible for deductions under section 80-IA of Act. 3. For AY 2004-05, they filed their return of income on 31.10.2004 declaring income of Rs.12,174,610/- computed under provisions other than section 115JB of Act. By way of order dated 29.12.2006 passed under section 143(3) of Act, Assessment Officer, determined income of Assessee as Rs. 11,51,27,120/- after making various additions. Such additions, for purpose of this appeal, are disallowance of claim under section 80-IA of Act, expenses for repairs and maintenance of building, on account of 14A of Act, disallowance of telephone expenses to extent of 5% thereof , expenses relating to repairs and maintenance on building at Kolkata, allowability of club expenditure etc. 4. So also for AY 2005-06, they filed their return of income on 31.10.2005 declaring income of Rs.11,38,54,010/- computed under provisions other than section 115JB of Act. By way of order dated 31.12.2007 passed under section 143(3) of Act, Assessment Officer, determined income of Assessee as Rs.15,66,22,310/- after making various additions. Such additions, for purpose of this appeal, are disallowance of claim under section 80-IA of Act, expenses for repairs and maintenance of building, on 3 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 account of 14A of Act, disallowance of commission to non-executive directors, allowability of club expenditure etc. 5. Aggrieved by said orders, Assessee preferred two different appeals before learned CIT(A), and learned CIT(A) by way of impugned orders deleted certain additions based on disallowance of deductions under section 80-IA, section 14A of Act read with Rule 8D of Rules etc. 6. Challenging said orders of learned CIT(A), in respect of AY 2004-05 Revenue carried matter in appeal in ITA 1513/Kol/2008 and Assessee preferred appeal in CO 109/Kol/2008 on following grounds: Grounds of ITA No. 1513/Kol/2008 1. That Ld.CIT(A) erred in facts and circumstances of case and in law in allowing assessee's appeal in respect of claim of deduction u/s.80IA of Income Tax Act,1961 even when assessee-company is operating from Berth No.12 of Haldia dock and not operating and maintaining Haldia Port Dock. 2. That Ld.CIT(A) erred in facts and circumstances of case and in law in allowing assessee's appeal in respect of claim of deduction u/ s.80IA of Income Tax Act,1961 even when assessee has not furnished any evidence in respect of purchase of Plant & Machinery as requested. assessee also did not segregate direct and indirect expenses in P & L a/ c. No separate computation has been made so as to identify direct and indirect expenses attributable to unit eligible for deduction u/s.8OIA. 3. That Ld.CIT(A) erred in facts and circumstances of case and in law in allowing assessee's appeal in respect of claim of Repairs & Maintenance expenses on basis of details filed by assessee during appellate proceedings even when these details were not forwarded to A.O. for verification. 4. That Ld.CIT(A) erred in facts and circumstances of case and in law in allowing assessee's in respect of disallowance u/ s.14A by holding that provisions of section 14A(2) and (3) do not apply to instant year even when this section was introduced w.e.f. 01.04.1962. 5. That Ld.CIT(A) erred in facts and circumstances of case and in law in deleting addition in respect of telephone expenses ignoring findings of A.O. that telephones and mobiles were installed at residential addresses of employees and that non-business use of such telephones cannot be ruled out. Grounds of C.O. No. 109/Kol/2008 1. That on facts and circumstances of case, learned CIT (Appeals) failed to appreciate that assessment order was barred by limitation, void ab initio and should have been quashed. 2. That on facts and in circumstances of case, CIT(Appeals) erred in upholding disallowance of Rs.8,243/- incurred on account of repair to building. 4 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 3. That on facts and in circumstances of case, CIT(Appeals) erred in upholding disallowance on account of club membership expenses. Like wise challenging said orders of learned CIT(A), in respect of AY 2005- 06 Revenue carried matter in appeal No ITA 1914/Kol/2008 and Assessee preferred appeal in CO 133/Kol/2008 on following grounds: Grounds of ITA No. 1514/Kol/2008 I. That Ld. CIT(A) erred on facts and circumstance of case and in law in allowing claim of deduction u/s.80lA of Income Tax Act, 1961 . 2. That Ld. CIT(A) erred on facts and circumstance of case and in law in allowing claim of repairs & maintenance expenses of Rs.8,57,861/- of Haldia unit, although assessee failed to give complete details of this expenditure in course of assessment proceedings. 3. That Ld. CIT(A) erred on facts and circumstance of case and in law in allowing payment of Rs.10 lakhs to non-executive director, although no details, copy of resolution, nature of service provided by above director could be given in course of assessment proceedings. 4. That Ld. CIT(A) erred on facts and circumstance of case and in law in deleting addition of Rs.2,77,121/- which was made u/s.14A of Income Tax Act, 1961. Grounds of C.O. No. 133/Kol/2008 1. That on facts and circumstances of case, learned CIT(Appeals) failed to appreciate that assessment order was barred by limitation, void ab initio and should have been quashed. 2. That on facts and in circumstances of case, CIT(Appeals) erred in upholding disallowance on account of club membership expenses. Grounds 1 and 2 in ITA 1513/Kol/2008 and ground No.1 in ITA 1914/Kol/2008 7. It is argument of learned AR that Assessee is undertaking deriving income from business referred to in Sub-section 4 of Section 80-IA, and gross total income of assessee includes any profits and gains deduction of amount equal to hundred per cent of profits and gains derived from such business for ten consecutive assessment years. According to him, previous years relevant for AY 2004-05 and 2005-06 are second and third years of claim of deduction under section 80-IA in respect of Berth No 12. He submitted that for first year of claim in AY 2003-04, Assessing Officer disallowed claim for deduction under section under section 80-IA, but on appeal 5 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 learned CIT(A) allowed claim and same was confirmed by ITAT. While allowing deduction of full claim, Assessing Officer observed as follows: It is found from assessment records that separate profit & loss account & balance sheet was prepared for Berth No. 12, Haldia Dock Complex. These documents were submitted along with return of income. Further, it is found that as per provision of Act, there is no need for assessee to give evidence of acquisition of new plant and machinery for eligible unit for claiming deduction u/s.80lA of Income Tax Act, 1961 because assessee maintains port. As per Circular No. 10/2005 dated 16.12.2005, business activity of assessee in relation to Berth No. 12. Haldia Dock Complex falls within meaning of "Port" in Explanation below Section 80(IA)(i)(c) of Income Tax Act, 1961." Learned AR submits that learned CIT(A) having taken cognizance of same, adopted consistent approach in respect of same Assessee for these two years also. 8. We have perused material papers on record. coordinate Bench of this Tribunal in ITA NO 450/Kol/2007 dated 30.10.2007 in case of Assessee s own case in respect of AY 2003-04 confirmed finding of learned CIT(A) to effect that Assessee is entitled to deductions under section under section 80-IA of Act. Rule of consistency, as laid down by Hon ble Kerala High Court in CIT Vs. N.P.Mathew 280 ITR 44, demands that department should adopt consistent approach on issue in respect of same Assessee in different years. While respectfully following decision of coordinate Tribunal in ITA NO 450/Kol/2007 dated 30.10.2007 and decision of Hon ble Kerala High Court, we find that findings of learned CIT(A) on this aspect are proper and legal. No need to interfere with same. Hence these grounds are dismissed. Grounds 3 in ITA 1513/Kol/2008 and ground No.2 in ITA 1914/Kol/2008 9. On this aspect, it is argument of learned AR that at Paradeep, Mumbai and Haldia they have their activities and at Haldia itself they have two activities one at Berth No12 which is eligible for deduction under section 80-IA of Act and at other places not eligible for deduction under section 80-IA of Act. During AY 2004-05 assessee incurred expenditure of Rs.7,12,810/- towards repair and maintenance charges for units at Haldia which are not eligible for deduction u/s. 80IA of Act whereas same were Rs.2,91,148/- in respect of berth no. 12 which is eligible for deductions u/s. 80IA of 6 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 Act. So also, in respect of year 2005-06 assessee incurred Rs.5,57,861/- towards repair and maintenance charges in respect of units which are not eligible for deduction u/s.80IA of Act. According to Assessee they have debited expenditure relating to ports not eligible for deduction under section 80-IA of Act in their account books, they have not debited same in account books of Berth No 12 eligible for deduction under section 80-IA of Act. Learned AR submitted that Assessing Officer, without proper examination of facts, disallowed expenditure relating to other unit of Haldia Port. Learned AR further submitted that even for Assessment Year 2003-04 Assessing Officer disallowed expenditure for repairs and maintenance in respect of unit not eligible for deduction under section 80-IA of Act. However, on appeal learned CIT(A) deleted addition made on this score and department has not preferred any appeal. 10. Ld. CIT(A) in impugned order, on this aspect observed that in year 2003-04 issue was decided in favour of assessee by CIT(A) and same was upheld by Tribunal. While following orders of earlier years and also rule of consistency, Ld. CIT(A) decided this issue in favour of assessee. We do not find any need to interfere with this finding of Ld. CIT(A) and dismiss these grounds of appeal for both years. Grounds 4 in ITA 1513/Kol/2008 and ITA 1914/Kol/2008 11. It is argument of Ld. AR that in year 2006-07 and 2007-08 also, there was disallowance of expense u/s. 14A of Act and Ld. CIT(A) after considering submissions restricted disallowance to 1% of dividend income because provisions of Rule 8D have no application prior to AY 2008-09. coordinate bench of this Tribunal in ITA No. 377 & 378/Kol/2012 and C.O. Nos. 37 & 38/Kol/2012 upheld findings of CIT(A) while observing as follows: 7.1. There is no dispute to fact that Rule 8D is not applicable prior to A.Yr.2008-09. contention of assessee before Ld.CIT(A) and before us that no expenditure has been incurred to earn exempt income and therefore we find no infirmity in order of Id. CIT(A) in sustaining disallowance @ l % of exempt dividend income. Our view find support from decision of Kolkata Tribunal in case of DCIT vs M/s.Varanasi Commercial Ltd., vide ITA NO.15391K01l2011 order dated 07.03.2012 for A.yr.2007-08. 7 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 "3. After hearing rival submissions and on careful perusal of materials available on record keeping in view of fact that since assessment year involved in this appeal is relating to A. Yr. 2007-08 as per decision of Hon'ble Bombay High Court in case of Godrej and Boyee Mfg. Pvt. Ltd. (supra) relied upon by ld. Counsel for assessee, Rule 8D is not applicable in assessment year under consideration. This Tribunal has been taking consistent view of sustaining disallowance u/s 14A at 1% of dividend income. Accordingly we direct AO to disallow 1% of dividend income as expenditure relevant to earning of dividend income. We order accordingly. " Thus ground no. 2 of revenue is dismissed. 12. Thus ground no.2 of revenue is dismissed. These appeals relating to assessment years 2004-05 and 2005-06 to which years Rule 8D of Rules has no application. Rule of consistency, as laid down by Hon ble Kerala High Court in CIT Vs. N. P. Mathew 280 ITR 44 (Ker) demands that same approach should be adopted in respect of same assessee in different years. While respectfully following decision of coordinate bench of this Tribunal referred supra, we hold that findings of Ld. CIT(A) in impugned orders on this ground needs no interference and accordingly, we dismiss these two grounds. Grounds 5 in ITA 1513/Kol/2008 13. This ground relates to disallowance of telephone expenses to extent of 5% by AO on ground that expenses on account of personal calls by employees of company were debited and also expenses for residential phones and mobile phones were claimed. AO further observed that element of non business use cannot be ruled out. However, Ld. CIT(A) found that such allegation was without any material and unsustainable. On this aspect, assessee relied on decisions reported in Sayaji Iron & Engg. Co. Vs. CIT 253 ITR 749 (Guj) and Intersil India Ltd. Vs. ACIT 101 ITD 85 (Mum), and it is submitted that since assessee is corporate entity, there cannot be any personal expenditure. It is further submitted that in respect of AY 2005-06 Ld. CIT(A) deleted such addition based on ad hoc disallowance in telephone expenses and department has not preferred any appeal against such finding. On careful consideration of orders of authorities below judgments cited by assessee and also in view of fact that as against deletion of disallowance of portion of telephone charges department preferred no appeal, we find that order of Ld. CIT(A) is consistent with 8 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 judgment of Hon ble Kerala High Court in N. P. Mathew, supra and we uphold same. This ground is dismissed accordingly. Grounds 3 in ITA 1513/Kol/2008 14. AO disallowed sum of Rs.10,00,000/- said to have been paid to non executive directors of company, on ground that no details resolution, nature of service provided by them etc. were not furnished before AO. However, Ld. CIT(A) observed that similar disallowance was deleted by Ld. CIT(A) in respect of AY 2003-04 and such finding of Ld. CIT(A) was approved by Tribunal. He further observed that even in respect of AY 2004-05 Ld. CIT(A) allowed such claim. In view of this set of circumstances, and need to follow rule of consistency, we allow such claim by upholding finding of Ld. CIT(A). With this view of matter this ground of revenue s appeal is dismissed. Ground No 1 in Co 109/Kol/2008 And Co 133/Kol/2008 15 So far as these grounds are concerned, there is no dispute that AO passed orders well within time inasmuch as assessment order for AY 2004-05 was passed on 29.12.2006 and 2005-06 was passed on 31.12.2007. contention of assessee is that such orders were received at office of assessee by courier on 29.01.2007 and 28.01.2007 respectively. Inasmuch as assessment orders were passed well within time stipulated by section 153 of Act, assessee cannot be allowed to plead that orders are barred by limitation and bad under law. We do not find any merit in these grounds and accordingly dismiss same. Ground No 2 in Co 109/Kol/2008 16. AO disallowed expenses relating to repairs and maintenance on building located at Kolkata to tune of Rs.8243/-. Ld. CIT(A) after looking into papers found that earlier such disallowance was confirmed by Tribunal for AY 2003-04. We have gone through order dated 30.10.2007 in ITA N0. 450 & 282/Kol/2007. Vide paragraph no. 8 to 11 ITAT discussed this aspect and found that disallowance on this aspect was reasonable as premises occupied by assessee does not belong to them but 9 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 belong to sister concern. No new facts are brought to our notice and finding in appeal above hold good. We, therefore, find no need of any interference on this aspect. Hence, this ground of Cross Objection of assessee is dismissed. Ground No 3 in Co 109/Kol/2008 And Ground No 2 in Co 133/Kol/2008 17. On aspect of allowability of club expenditure AO disallowed club payments of Rs.7,260/- as club membership, Rs.36,022/- towards club services and Rs.5,500/- towards entrance fee for AY 2004-05 and Rs.7,10,320/- towards club entrance fee, Rs.1,09,303/- as club services for AY 2005-06. Ld. CIT(A) disallowed such expenditure holding that it was covered by orders of CIT(A) for AY 2003- 04. 18. It is argument of Ld. Counsel for assessee that CIT(A) confirmed disallowance of membership fee for years 2003-04 and was upheld by Hon ble ITAT as such balance amount relating to club services may be allowed as business expenditure. In view of decision of Hon ble Supreme Court in CIT Vs. United Glass Manufacturing Co. Ltd., Civil Appeal No. 30146 of 2008 dated 13.09.2012, membership expenses of club incurred by assessee are allowable as deduction u/s. 37(1) of Act. Ld. AR fairly conceded that club membership is to individual whereas expenditure relating to club services and entrance fee are for business purpose. In these circumstances, we uphold disallowance of expenditure relating to club membership for both assessment years. However, disallowance in respect of club services are entrance fee are relatable to United Glass Manufacturing Co. Ltd., supra, we delete disallowance relating to club services and entrance fee. To this extent these two grounds of cross objections of assessee are allowed in part. 19. In result, appeals of revenue are dismissed and cross objections of assessee are allowed in part. Order is pronounced in open court on 04.10.2016 Sd/- Sd/- (P. M. Jagtap) (K. Narasimha Chary) Accountant Member Judicial Member Dated : October, 2016 Jd.(Sr.P.S.) 10 ITA Nos. 1513 & 1914/Kol/2008 & CO No.109/Kol/2008 T.M. International Logistic Ltd. AY 2004-05 & 2005-06 Copy of order forwarded to: 1. APPELLANT DCIT, Circle-8, Kolkata. 2 Respondent M/s. T.M. International Logistic Ltd., Tata Centre, 43, J. L. Nehru Road, Kolkata-71. 3. CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar. Deputy Commissioner of Income-tax, Circle-8, Kolkata v. M/s. T.M. International Logistic Ltd