ITXA1742_17.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.1742 OF 2017 Pr. Commissioner of Income Tax-25 Appellant Vs. ITD CEM INDIA JV Respondent Mr. Sham Walve for Appellant Mr. Tanzil Padvekar for Respondent. CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : JANUARY 20, 2020 P.C. : Heard Mr. Walve, learned standing counsel Revenue for appellant and Mr. Padvekar, learned counsel for respondent. 2. This appeal has been preferred by Revenue under Section 260- of Income Tax Act, 1961 assailing legality and correctness of order dated 19.10.2016 passed by Income Tax Appellate Tribunal, Mumbai Bench, I , Mumbai (briefly Tribunal hereinafter) in respect of Income Tax Appeal No.1246/Mum/2015 for assessment year 2011-12. 3. Two questions have been proposed as substantial questions of law, which are as under: 1. Whether on facts and in circumstances of case and in law, Tribunal erred in confirming decision of Commissioner of deleting disallowance made by assessing officer with respect to administrative expenses to tune of Rs.1,22,03,188.00 and on account of salary u/s.40(a)(ia) of Act to tune of Rs.3,27,57,782.00 even though disallowed amount represented contractual payments covered under Section 194C and assessee had failed to deduct tax before claim of deduction thereof as expenditure? 2. Whether on facts and in circumstances of case and in law, Tribunal erred in deleting addition 1/4 ::: Uploaded on - 27/01/2020 ::: Downloaded on - 01/02/2020 10:20:54 ::: ITXA1742_17.doc made by assessing officer pertaining to salaries and confirmed by Commissioner on account of disallowance u/s.40(ba) of Income Tax Act, 1961, even though said payment was made by assessee which was AOP to its member, holding that provision of Section 40(ba) does not get attracted to present case? 4. From reading of two questions as proposed by Revenue what is discernible is that there were two disallowances made by Assessing Officer which were deleted by first appellate authority i.e., Commissioner of Income Tax (Appeals) as affirmed by Tribunal. First is administrative expenses to tune of Rs.1,22,03,188.00 and other relates to salary for amount of Rs.3,27,57,782.00. 5. During course of arguments, learned standing counsel Revenue has fairly placed before Court copy of order of this Court in case of Commissioner of Income Tax Vs. ITD CEM India JV, (2018) 405 ITR 533 (Bom) and submits that same issue was gone into by this Court in respect of same assessee for assessment year 2008-09. Regarding deletion of disallowance under head of administrative expenses , it was held that it was concurrent finding of fact and no substantial question of law arose therefrom. However, on question of deletion of amount of salary which was disallowed by Assessing Officer under Section 40(ba) of Income Tax Act, 1961, same was remanded back to Tribunal for fresh decision on merit and in accordance with law. 6. We have perused judgment of this Court in CIT Vs. ITD Cem India JV (supra) and we concur with views expressed therein. However, for sake of convenience, relevant portion of decision is extracted hereunder:- 22. Assessing Officer noticed that assessee had not deducted Tax at Source while making payment on account of administrative expenses. That was paid by Joint Venture to their Indian company, namely ITD Cementation India Limited. payment was hit, according to Assessing Officer, by Section 40(a)(ia) and thus disallowable. 2/4 ::: Uploaded on - 27/01/2020 ::: Downloaded on - 01/02/2020 10:20:54 ::: ITXA1742_17.doc Assessing Officer also held that even under Section 40(ba) this expense shall not be allowed because in case of Association Of Persons, any payment of salary or remuneration by whatever name called, is not allowable. 23. assessee contended that there were fresh materials to support it's contentions. Commissioner of Income Tax (Appeals) therefore directed Assessing officer to consider further documents and submit remand report. On remand, assessee submitted that it reimbursed expenses (administrative expenses) to ITD Cementation India Limited. They were incurred on behalf of assessee. Thereafter, debit notes were raised on assessee by ITD Cementation India Limited. These facts were checked and verified by Assessing Officer and he found same to be correct. However, in remand, he could not give any categorical finding, and therefore left matter to Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals), after considering remand report and detailed arguments, sustained disallowance on account of non deduction of Tax at Source by referring to Section 40(a)(ia). That is how assessee approached Tribunal. assessee inter alia contended that no disallowance has been made in assessment years 2006-2007 and 2007-2008 which assessment was framed under Section 143(3) of IT Act. Thus, consistent stand should be taken and similar treatment should be given to accounts as in preceding assessment years. alternate argument is made and is noted in paragraph 49 of Tribunal's order. departmental representative referred to remand report and thereafter supported finding of Commissioner of Income Tax (Appeals). There were written submissions filed by assessee's representative. In consideration of this issue as well, we note that Tribunal has made identical observations and to some extent it's observations in paragraphs 15 to 21 accord with paragraphs 50 to 55. However, we are of firm view that Section 40(ba) was referred in passing, but not attracted as far as disallowance of administrative expenses in sum of Rs.2,39,64,463/-. Once Assessing Officer has checked debit notes raised by ITD Cementation India Limited and they were test checked and amount of expenditure claimed by assessee was verified and genuineness of same has been proved, then, we do not see any reason to interfere with finding of fact recorded in paragraph 54 of Tribunal's order. All more, when Section 40(ba) was not attracted as far as this disallowance is concerned. 24. Despite his persuasive ability, when Mr. Ahuja would submit that even reframed question (a-1) is substantial question of law, we are unable to agree with him. We affirm findings of fact by Tribunal and dismiss this Appeal to that 3/4 ::: Uploaded on - 27/01/2020 ::: Downloaded on - 01/02/2020 10:20:54 ::: ITXA1742_17.doc extent. 25. However, we have expressed our displeasure and unhappiness at manner in which Tribunal approached matter/issue insofar as applicability of Section 40(ba) (question no. 10(a) reproduced above) of IT Act is concerned, we allow this Appeal. We set aside Tribunal's order to that extent. We restore issue to file of Tribunal for being decided afresh on merits and in accordance with law. Tribunal shall not be influenced in any manner by it's earlier observations. We also clarify that when we note rival contentions, beyond that exercise, we have expressed no opinion on correctness of these contentions. All of them are open insofar as this issue is concerned for being raised before Tribunal. There will be no order as to costs. 7. Therefore and considering above, on point of deletion of disallowance of salary amount, matter is remanded back to Tribunal for fresh decision on merit and in accordance with law. 7.1. Needless to say that Tribunal shall not be influenced in any manner by its earlier decision which we have set aside. 8. appeal is accordingly disposed of. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) Minal Parab 4/4 ::: Uploaded on - 27/01/2020 ::: Downloaded on - 01/02/2020 10:20:54 ::: Pr. Commissioner of Income-tax-25 v. ITD CEM India JV