Nanavati Motors Pvt.Ltd., Surat V. The ACIT.,Circle-1, Surat

CO 38/AHD/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1686 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: J P SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE - 1, ROOM NO. 108, AYAKAR BHAVAN, MAJURA GATE, SURAT - 395001 (APPELLANT) VS M/S. NANAVATI MOTORS PVT. LTD. PLOT NO. 328, INCHHAPORE, BHATPORE INDUSTRIAL ESTATE, M AGDALLA ROAD, SURAT - 395007 PAN: AACCN5905E (RESPONDENT) M/S. NANAVATI MOTORS PVT. LTD. PLOT NO. 328, INCHHAPORE, BHATPORE INDUSTRIAL ESTATE, MAGDALLA ROAD, SURAT - 395007 PAN: AACCN5905E (CROSS OBJECTOR ) VS THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE - 1, ROOM NO. 108, AYAKAR BHAVAN, MAJURA GATE, SURAT - 395001 (RESPONDENT) I T A NO . 2183 / A HD/2 0 12 A SSESSMENT YEAR 200 9 - 10 CO NO. 38/AHD/2013 (IN ITA NO. 2183/AHD/2012) ASSESSMENT YEAR 200 9 - 10 I.T.A NO. 2183 /AHD/20 12 & CO NO. 38/AHD/2013 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. NANAVATI MOTORS PVT. LTD 2 REVENUE BY : S H RI ALBINUS TIRKEY , SR. D . R. ASSESSEE BY: S H RI J.P. SHAH , A.R. DATE OF HEARING : 10 - 12 - 2 015 DATE OF PRONOUNCEMENT : 18 - 12 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBE R : - THIS REVENUE S APPEAL AND ASSESSEE S CROSS OBJECTION FOR ASSESSMENT YEAR 2009 - 10, AR ISE FROM ORDER OF THE CIT(A) - I, SURAT DATED 23 - 07 - 2012 IN APPEAL NO. CAS - I/289/2011 - 12 , IN PROCEEDINGS UNDER SECTION 246A(1)(A) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE REVENUE RAISED THREE SUBSTANTIVE GROUNDS INTER ALIA SEEKING TO RESTORE ADDITIONS OF RS. 14,37,918/ - ON ACCOUNT OF DISALLOWANCE OF EXCESS ENTRY TAX, RS. 5,81,694/ - ARISING FROM INCENTIVE EXPENSES AND RS. 6,11,191/ - MADE ON ACCOUNT OF DIS ALLOWANCE OF PETROL AND LUBRICANT EXPENSES BY RESTRICTING THIS LAST FIGURE TO RS. 2,44,476/ - ; AS MADE IN ASSESSMENT ORDER DATED 30 - 12 - 2011. THE ASSESSEE S CROSS OBJECTION IN TURN SEEKS TO DELETE THE ENTIRE ADDITION AMOUNT OF PETROL AND LUBRICANT EXPENSE S HEREINABOVE. IT HAS FILED ITS CROSS OBJECTION AFTER LAPSE OF DUE TIME IN FILING. A CONDO - NATION PETITION DATED 20 - 01 - 2013 STATING REASONS THEREOF. THE I.T.A NO. 2183 /AHD/20 12 & CO NO. 38/AHD/2013 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. NANAVATI MOTORS PVT. LTD 3 REVENUE FAILS IN CONTROVERTING THE CORRECTNESS OF THE SAME. WE CONDONE THIS DEL A Y ACCORDINGLY. THIS CROSS OBJECTION IS ADMITTED ON MERITS. 3 . WE COME TO REVENUE S FIRST GROUND QUA ADDITION OF R S. 14,37,918/ - ARISIN G ON ACCOUNT OF DISALLOWANCE OF EXCESS ENTRY TAX. THE ASSESSING OFFICER NOTICED DIFFERENCE IN VALUE OF PURCHASES AS DECLARED IN PAYMENT OF ENTRY TAX AND THAT STATED IN BOOKS. HE VERIFIED AUDIT REPORT REVEALING ENTRY TAX EXPENSES OF RS. 6,14,27,426/ - WHEREAS THE AMOUNT PAYABLE WAS RS. 5,99,89,508/ - RESULTING IN REFUNDABLE AMOUNT OF RS. 14,37,918/ - IN THE VERY FINANCIAL YEAR. HE ALLEGED OVER STATEMENT TO THE EXTENT INDICATED HEREINABOVE AS WELL FURNISHING OF NON - SATISFACTORY FOR THE IMPUGNED ADDITION . THE SAME STANDS DELETED IN THE LOWER APPELLATE PROCEEDINGS AS UNDER: - 9.1 IN NUT SHELL APPELLANT MADE A MISTAKE IN WORKING AMOUNT OF PURCHASE S FOR ENTRY TAX PURPOSE AND MADE EXCESS PAYMENT OF ENTRY TAX TO THE TUNE OF RS. 14,37,918/ - THE ASSESSING OFFICER DID NOT FIND ANY DISCREPANCY IN THE PURCHASES SHOWN IN THE TRADING / P & L ACCOUNT. VAT AUDIT REPORT ALSO CONFIRM EXCESS PAYMENT OF ENTRY TAX TO THE ABOVE EXTENT. THE APPELLANT GETS SET OFF OF ENTRY TAX PAID AGAINST PAYMENT OF VAT ON SALES MADE BY IT. DUE TO EXCESS PAYMENT OF ENTRY TAX, THE DEBIT SIDE OF TRADING / P & L ACCOUNT GOES UP BY RS 14, 37, 918/ - HOWEVER, APPELLANT FOLLOWS INCLUSIVE MET HOD FOR VALUATION OF CLOSING STOCK AND SALES AS FAR AS VAT AND ENTRY TAX IS CONCERNED. DUE TO EXCESS PAYMENT OF ENTRY TAX OF RS 14, 37, 918/ - APPELLANT GOT EXCESS SET OFF AGAINST VAT TO THAT EXTENT. IF THIS MISTAKE HAD NOT HAPPENED, APPELLANT WOULD HAVE PA ID LESS ENTRY TAX TO THE EXTENT OF RS. 14,37,918/ - HOWEVER, IN THAT CASE, IT WOULD PAID EXCESS VAT TO THE SAME EXTENT DUE TO REDUCTION IN SET OFF AVAILABLE. THEREFORE, THE NET DEBIT IN TRADING / P & L ACCOUNT, WOULD HAVE BEEN I.T.A NO. 2183 /AHD/20 12 & CO NO. 38/AHD/2013 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. NANAVATI MOTORS PVT. LTD 4 THE SAME. TO FURTHER EXPLAIN T HIS PAYMENT LET US CONSIDER DETAILS FURNISHED BY THE APPELLANT: - A] TOTAL TAXES PAYABLE ON TURNOVER /OUT PUT RS 8,26,21,322 B] SET OFF TAXES PAID AS ENTRY TAX AND VAT RS. 6,47,71,707 ON PURCHASES MADE WITHIN GUJARAT C] BALANCE PAID/ PAYABLE BY CHA LLAN RS 1,78,49,615 THEREFORE, ANY REDUCTION IN (B) WILL INCREASE (C) AND THERE WILL BE NO EFFECT ON PROFIT. THEREFORE, THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF APPELLANT. 4 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE CASE FILE. IT HAS COME ON RECORD THAT THERE IS NO EFFECT ON ASSESSEE S PROFITS AS PER ILLUSTRATIONS HEREINABOVE. THE REVENUE FAILS IN REBUTTING THIS CRUCI AL FINDING. NOR DOES IT POINT OUT ANY LACK OF GENUIN EN ESS IN ASSESSEE S PAPER BOOK FORMING PART OF THE CASE FILE. WE SEE NO REASON TO INTERFERE IN THIS BACKDROP OF FACTS AND CIRCUMSTANCES SINCE THE CIT(A) HAS ACCEPTED ASSESSEE S EXPLANATION BASED ON VAT AUDIT REPORT AND P & L ACCOUNTS AS WELL AS ITS INCLUSIVE METHOD FOR VALUATION OF ITS CLOSING STOCK. WE ACCORDINGLY AF FIRM LOWER APPELLATE FINDINGS . THIS FIRST SUBSTANTIVE GROUND IS REJECTED. 5 . WE COME TO REVENUE S SECOND GROUND QUA INCENTIVE EXPENSE S DISALLOWANCE OF RS. 5 , 81 , 694/ - . THE ASS ESSEE CLAIMED TO HAVE PAID INCE NTIVE EXPENSE S OF RS. 18,45,581/ - COMPRISING OF NOMINAL SUMS OF RS. 200 / - TO 400/ - PAID TO ITS WORKERS. THE IMPUGNED SUM OF RS. 5 , 81 , 694/ - WAS SET ASIDE AS PAYABLE . THE ASSESSEE SUBMITTED THE SAME TO HAVE BEEN RELATED TO THE TIME PERIOD FROM OCT, 09 ONWARDS I.T.A NO. 2183 /AHD/20 12 & CO NO. 38/AHD/2013 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. NANAVATI MOTORS PVT. LTD 5 PAID IN SUCCEEDING ASSESSMENT YEAR. THE A SSESSING OFFICER QUESTIONED GENUINENESS AND TURNED THE SAME TO INFLATION OF EXPENSES RESULTING IN THE IMPUGNED DISALLOWANCE . THE CIT(A) ACCEPTS ASSESSEE S SUBMISSION AS FOLLOWS: - 11.4 FROM A PERUSAL OF THE ASSESSMENT ORDER AS WELL AS APPELLANT 'S SUBMIS SION, IT IS NOTICED THAT ONLY REASON FOR MAKING SUCH A DISALLOWANCE GIVEN BY THE ASSESSING OFFICER IS THAT THE PAYMENT HAS BEEN MADE IN ASSTT YEAR 2010 - 11 ( I.E. TILL OCTOBER 2009). HOWEVER, ON PERUSAL OF THE INCENTIVE SHEETS AND VOUCHERS FILED BY THE APPE LLANT, IT IS ALSO NOTICED THAT THE INCENTIVE OF SMALL AMOUNTS IS PAYABLE FOR EACH MONTH TO VARIOUS EMPLOYEES. ELABORATE CALCULATION SHEET REGARDING THE SAME ARE MAINTAINED. THEREFORE, THE FACT THAT INCENTIVE HAS BEEN PAID LATE, DOES NOT LEAD TO A CONCLUSIO N THAT IT IS UNVERIFIABLE. THE AMOUNT OF INCENTIVES PAID TO EACH EMPLOYEES IS VERY SMALL AND DETAILED WORKING OF THE SAME IS ALSO VERIFIABLE. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE, IS DELETED AND THE APPEAL IS ALLOWED. 6. WE HAVE HEARD BOTH SIDES. THE ASSESSEE S CASE IS THAT THE IMPUGNED SUM REPRESENTS INCENTIVE PAID TO ITS WORKERS ON MATERIALIZING SALES, ACHIEVEMENT OF SERVICE INCOME TARGET, INSURANCE AND FOR CONVINCING PURCHASERS TO OBTAIN FINANCIAL THROUGH ITS NETWORK. T HERE IS NO DISPUTE THAT IDENTICAL PAYMENTS STOOD MAD E TILL OCT, 2008 OF THE RELEVANT PERIOD YEAR WERE MADE UP TO THE CLOSURE OF THE RELEVANT PREVIOUS YEAR. SIMILAR INCENTIVE S IN QUESTION HAVE BEEN DISBURSED TILL OCT, 2009. THE RE VENUE IS FAIR ENOUGH IN N OT DISPUTING THE SAME. WE HOLD IN THESE FACTS THAT THE ASSESSEE HAS FINALIZED THESE PAYMENTS IN SUCCEEDING ASSESSMENT YEARS AFTER TAKING CONSIDERATION ALL RELEVANT FACTS AND CIRCUMSTANCES RELATING TO THE I.T.A NO. 2183 /AHD/20 12 & CO NO. 38/AHD/2013 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. NANAVATI MOTORS PVT. LTD 6 INCENTIVE IN QUESTION. THE REVENUE DOES NOT POINT ANY FACTUAL OR LEGAL ERROR THEREIN. ITS SECOND SUBSTANTIVE GROUND STANDS REJECTED . 7. THIS LEAVES US WITH RE VENUE S THIRD GROUND RELATING TO ADDITION OF R S. 6,11,191/ - RELATING TO DISALLOWANCE RELATING TO PETROL AND LUBRICATING EXPENSES. THE C IT(A) RE STRICTS THE SAME TO RS. 2,44,47 6/ - . THE ASSESSEE S SOLE SUBSTANT IVE GROUND IN ITS CROSS OBJECTION SEEKS TO DELETE THIS PART SUM AS WELL. THIS SUM REPRESENTS PETROL, OIL AND LUBRICANT EXPENSES INCLUDING FREE PETROL GIVEN IN NEW CARS SOLD TO CUSTOMERS, SIM ILAR EXPENSES OF LUBRICANTS AND OIL ETC INCURRED ON DEMO CARS AND THE ONE INCURRED ON PIC K AND DROP FACILITY FOR CARING OF CARS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS AMOUNT WAS BORNE BY THE CUSTOMERS AS WELL AND COULD NOT HELD TO HAVE BEEN INCU RRED FOR THE PURPOSE OF THE BUSINESS ONLY. HE WENT ON TO DIS ALLOW 50% OF THE TOTAL CLAIM AMOUNTING TO RS . 12,22, 382/ - ; COMING TO RS. 6,11,191/ - IN ASSESSMENT ORDER. THE CIT(A) RESTRICTS THIS DISALLOWANCE FROM 50% TO 20% RESULTING IN CONFIRMATION OF A SUM OF RS. 2,44,476/ - SUBJECT MATTER OF BOTH PARTIES GRIEVANCE. 8. WE HAVE HEARD RIVAL CONTENTI ONS. RELEVANT FACTS NARRATED HEREINABOVE ARE NOT REPEATED FOR THE SAKE OF BREVITY. BOTH THE LOWER AUTHORITIES HAVE NOT ADVERTED TO ASSESSEE S BOOKS OF AC COUNT OR BILLS AND VOUCHERS COU PLED BY ITS EXPLANATION FOR INVOKING THE IMPUGNED DISALLOWANCE. IT HAS COME ON RECORD THAT THE SAME HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS IN GIVING FREE PETROL BEING FILLED UP IN NEW CARS PURCHASED, DEMO VEHICLES AND PICK AND DROP FACILITY . WE FIND I.T.A NO. 2183 /AHD/20 12 & CO NO. 38/AHD/2013 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. NANAVATI MOTORS PVT. LTD 7 THAT THE ASSESSING OFFICER HAS NOT VERIFIED EVEN A SINGLE CUSTOMER TO TEST THIS GENUINENESS. WE HOLD I N THESE FACTS THAT BOTH THE LOWER AUTHORITIES HAVE MADE THIS DISALLOWANCE ON MERE ASSUMPTION S AND PRESUMPTIONS NOT SUPPORTED BY ANY EVIDENCE; WHATSOEVER. WE ACCEPT ASSESSEE S CROSS OBJECTION AND REJECT REVENUE S THIRD SUBSTANTIVE GROUND. 9. REVENUE S APPEAL ITA 2183/AHD/2012 FAILS. ASSESSEE S CO 38/AHD/2013 IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 18 - 12 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 18 /12 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,