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TMI Blog2017 (2) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... probable view that such expenses are allowable as deductions. When we considered this fact in the light of the contemporaneous advertisement charges incurred by several players in the market or by the assessee in successive years, we find that the AO's allowing the same as deduction was not without enquiry or consideration of such facts, as such, the substitution of the opinion of the Ld. Pr. CIT is not justified for revision of the same u/s. 263 of the Act. Addition of service tax - Held that:- Merely because the practical wisdom dawned over the head of the assessee or his Ld. AR at a later point of time, the same cannot become unworthy of consideration or should be looked with suspicion. Ld. Pr. CIT is under a statutory obligation to verify the liability of service tax components in the hands of the assessee and in the hands of the landlord and since the landlord is under a statutory obligation to remit it to the government, section 43B of the Act is applicable only in respect of landlord. Ld. Pr. CIT should have taken the view that in the hands of the assessee such a liability assumes the character of contractual liability as such, sec. 43B of the Act has no application. Thus we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for two years, which fact was not considered by the AO as such there needs reappraisal of facts and (iii) that the assessee debited ₹ 78,67,14,000/- under the head 'rent' which includes a sum of ₹ 3,67,21,865/- as provision for service tax on rent and scrutiny report revealed that the assessee has not paid this amount to the Government account before due date of submission of return as such, the said sum had to be disallowed and be added back to the income of the assessee. 3. To this notice, assessee submitted their written submissions dated 03.03.2016 explaining their stand in detail. Having considered all the material before him, the Ld. Pr. CIT passed an order dated 22.03.2016 u/s. 263 of the Act rejecting all the contentions of the assessee and setting aside the assessment order that was passed u/s. 143(3) of the Act directing the AO to redo the assessment on those issues. 4. Being aggrieved by the said order passed u/s. 263 of the Act, assessee preferred this appeal on the following grounds:- "1. For that on the facts and in the circumstances of the case, the CIT was unjustified in law and on facts in revising the order of assessment passed u/s. 154/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the appellant having submitted before the AO as well as before the CIT the relevant documents & evidences to substantiate that service tax payable on rent was contractual liability and not assessee's statutory liability, the CIT was unjustified in holding the assessment to be erroneous and prejudicial to the interest of the revenue on the premise that deduction for service tax liability was wrongly allowed by the AO in violation of provisions of Section 438 of the Act. 9. For that on the facts and in the circumstances of the case, the appellant having substantiated the claim of service tax payable on rent with cogent reasons in the course of assessment and the AO having accepted the appellant's submissions in respect thereof the CIT was unjustified in law in setting aside the assessment for the purpose of disallowing the said claim of ₹ 3,67,21,865/-. 10. For that on the facts and in the circumstances of the case, the order of the CIT passed u/s. 263 dated 22.03.2016 be cancelled and order of the Assessing Officer dated 04.08.2014 be restored." 5. It is the argument of the Ld. AR that, first of all, in his notice dated 17.02.2016 the Ld. Pr. CIT proposed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave mistake in resorting to compare the figures of the FYs 2010-11 with the figures of FY 2007-08 and in all fairness the Ld. Pr. CIT should have compared the same with the figures for the FY 2009-10 and 2008-09. Ld. Counsel for the assessee further submitted that in respect of the advertisement charges, the competitors of the assessee were incurring expenditure from 2.11% to 6.55% of the sales as such the assessee incurring 2.28% of the sales was quite reasonable and in the absence of any material justifying, it cannot be said that is prejudicial to the interest of revenue. 8. He further contended that section 43B of the Act has no application to the facts of this case in respect of non remittance of service tax. He submits that the retail outlets of the assessee at so many places are being run in rented premises and the liability of the assessee is to pay the gross rent to the landlord and such gross rents includes the service tax also. It is the statutory liability of the landlord to pay the service tax to the state and in so far as the liability between the assessee (being tenant) and their landlord is only a contractual liability for which section 43B has no application at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DR is that before the due date for submission of the return of income the assessee could have completed the exercise of payment of the performance bonus and since the payment of performance bonus will be on clearly delineated policies and parameters such an expenditure could have been crystallized during the relevant year itself as such, the Ld. Pr. CIT is justified in disallowing the earlier year 'personnel expenses'. In so far as the advertisement expenses are concerned, it is the submission of the Ld. DR that when the advertisement expenses scale up by ten times within two years it was for the AO to entertain a reasonable doubt and to deal with such matter in detail and want of evincing such due diligence by the part of the AO amounts to error in the assessment order so far as prejudicial to the interest of the revenue. Lastly, he submitted that in his written submission before the AO, the assessee did not advert to the statutory and contractual obligation and the plea taken by him was that since no rent could be paid due to the stay order granted by the Hon'ble Bombay High court, the assessee company did not pay the same. For these reasons he prayed to dismiss the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what he proposed to revise was the order u/s. 143(3) of the Act but not the order u/s. 154 of the Act and any discrepancy in mentioning the date thereof will not be of any help to the case of the assessee to seek annulment of the order passed u/s. 263 of the Act. Since we reached this conclusion on facts, we find that the decisions relied on by the assessee are not at all applicable to the facts of this case. On this premise, we dismiss the ground nos. 1 to 3 of assessee's appeal. 13. Now coming to the aspect of the performance bonus of the earlier years to the tune of ₹ 33,89,000/-, it is the submission of the Ld. AR that the individual performance of the employee was measured on the basis of appraisal reports prepared by the functional heads after expiry of the financial year and then the entire exercise of evaluation of the performance and determination of amount payable as bonus was to be carried out and for the FY 2009-10 such an exercise could not be finalized before July, 2010 and thereafter ultimately the bonus was paid in the salary of August, 2010 payable in the month of September, 2010. By way of page nos. 127 and 128 of paper book the assessee filed the lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to FY 2007-08. The Ld. AR submitted that in respect of the FY 2009-10 such expenses were ₹ 19,91,51,000/- whereas in respect of FY 2010-11 those were ₹ 23,22,39,000/-. According to him, such expenses constitute 2.18% in FY 2009-10 whereas 2.28% in FY 2010-11. Ld. AR also submitted before the Ld. CIT (A) that the advertisement expense constitute 2.11% of their sales in respect of Future Value Retail Ltd., 6.55% of their sales in respect of Trent Ltd. and 2.44% of their sales in respect of Shoppers Stop Ltd. who are the competitors of the assessee in the market. Ld. AR further submits that arm's length price has to be considered, and the Ld. Pr. CIT compared the figures of 2010-11 with the figures of 2007-08 which does not reflect the correct state of affairs. We find every force in the argument of the Ld. AR. Further, Ld. AR invited our attention to pages 151 and 153 of the paper book wherein the assessee clearly submitted his contentions in respect of advertisement and selling expenses. Having considered the same, the AO took a probable view that such expenses are allowable as deductions. When we considered this fact in the light of the contemporaneous advert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, having dealt with the submissions of the assessee he did not take it to a logical conclusion, but shifted his stand to direct the AO to cause a de novo enquiry. Clearly it is not permissible in view of me decisions reported in Vesuvius India Ltd. v. CIT [2012] 54 SOT 172 (URO), Damodar Valley Corpn. v. Dy. CIT 160 ITD 78 (Kol. - Trib.) and B.S. Sangwan v. ITO [2015] 67 SOT 447 (Delhi - Trib.). 19. On a careful consideration of the factual situation, in the light of the law laid down in the aforesaid decisions, we are convinced that such a course taken by the Ld. Pr. CIT is beyond the scope of section 263 of the Act and it is for the Ld. Pr. CIT to pursue his basis to initiate proceedings vide show cause notice dated 17.02.2016 to their logical conclusion. His observation that there was no proper or adequate enquiry by the AO on these aspects is a clear shift of stand which is not permissible under law. Further, the AO permitted the deduction in respect of the performance bonus under a binding precedence and the advertisement expenses and the service tax liability after thorough consideration of the information furnished and submissions made by the assessee, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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