M/s Siemens Westing House Services Co Ltd., Kakinada V. The DCIT, Circle-1, Kakinada

CO 9/VIZ/2004

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5174 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 year(s) 2 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-09-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-04-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 30-06-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: D S SUNDER SINGH
• Keywords: Salary income
• Section: 37

Judgement Text

ITA NO.367 OF 04 SIEMENS WESTINGHOUSE SERVICES, KAKI KNADA PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.367/VIZAG/2004 ASSESSMENT YEAR: 2000-01 DY.COMMISSIONER OF INCOME TAX, CIRCLE-1 KAKINADA VS. SIEMENS WESTINGHOUSE SERVICES COMPANY LTD., GODAVARI PROJECT OFFICE, KAKINADA (APPELLANT) (RESPONDENT) GIR NO. S-23 CO NO.09/VIZAG/2004 (ARISING OUT OF ITA NO.367/VIZAG/2004) ASSESSMENT YEAR: 2000-01 SIEMENS WESTINGHOUSE SERVICES COMPANY LTD., GODAVARI PROJECT OFFICE, KAKINADA VS. DY.COMMISSIONER OF INCOME TAX, CIRCLE-1 KAKINADA (RESPONDENT) GIR NO. S-23 (APPELLANT) APPELLANT BY: SHRI D.S. SUNDER SINGH, DR RESPONDENT BY: NONE ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 1-3-2004 PASSED BY LEARNED CIT(A), RAJAHMUNDRY AND THEY RELATE TO THE ASSESSMENT YEAR 2000-01. THE ASSESSEE HEREIN DID NOT APPEAR BEFORE THE BENCH ON SEVERAL OCCASIONS AND HENCE THE DEPARTMENT WAS DIRECTED TO SERVE THE NOTI CE OF HEARING. ACCORDINGLY IT HAS BEEN INTIMATED BY THE DEPARTMENT THAT THE NOTICE WAS SERVED BY AFFIXTURE AT THE ADDRESS GIVEN BY THE ASS ESSEE. ON THE DATE OF PRESENT HEARING ALSO, NONE APPEARED ON BEHALF OF TH E ASSESSEE AND HENCE WE PROCEED TO DISPOSE THE APPEAL AS WELL AS CROSS O BJECTIONS EX-PARTE, QUA THE ASSESSEE. ITA NO.367 OF 04 SIEMENS WESTINGHOUSE SERVICES, KAKI KNADA PAGE 2 OF 5 2. WE NOTICE THAT THE REGISTRY HAS ISSUED A DEFECT MEMO TO THE ASSESSEE IN THE CROSS OBJECTIONS FILED BY THE ASSES SEE. THOUGH THE DEFECT MEMO WAS ISSUED WAY BACK IN MAY 2008, THE ASSESSEE HAS NOT RECTIFIED THE DEFECT SO FAR. BESIDES THE ABOVE, THE ASSESSEE HAS NOT PLACED ANY MATERIAL IN SUPPORT OF THE GROUNDS RAISED IN THE CROSS OBJEC TIONS. IN VIEW OF THE ABOVE, WE DISMISS THE CROSS OBJECTIONS FILED BY THE ASSESSEE. 3. IN THE APPEAL FILED BY THE REVENUE, FOLLOWING THR EE ISSUES ARE CONTESTED: A) PROFESSIONAL CHARGES = RS.1,20,000/- B) CAR EXPENSES = RS. 3,81,254/- C) HOME LEAVE TRAVEL EXPENSES = RS. 4,68,531/- 4. THE ASSESSEE HEREIN IS A U.S COMPANY ENGAGED IN THE BUSINESS OF PROVIDING SPECIALIZED SERVICES RELATING TO OPERATIO N AND MAINTENANCE OF POWER PLANTS. THE ASSESSEE ENTERED INTO A PROJECT S ERVICES AGREEMENT WITH ROLLS ROYCE INDUSTRIAL (POWER) INDIA LTD., A U.K. CO MPANY TO PROVIDE SERVICES RELATING TO OPERATIONS AND MAINTENANCE OF A 208 MW COMBINED CYCLE POWER PLANT LOCATED AT KAKINADA, ANDHRA PRADE SH. ACCORDINGLY THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS. THE APPEAL FILED BY THE ASSESSEE BEFORE THE LEARNED CIT (A) WAS PARTLY ALLOWED. AGGRIEVED BY THE RELIEF GIV EN BY THE LEARNED CIT (A) IN RESPECT OF THE THREE ITEMS CITED ABOVE, THE REVE NUE HAS FILED THIS APPEAL BEFORE US. 5. THE FIRST ISSUE RELATES TO DISALLOWANCE OF PROFE SSIONAL CHARGES OF RS.1,20,000/-. THE ASSESSING OFFICER HAS STATED THA T THE SAID PAYMENT WAS MADE IN CONNECTION WITH PREPARATION OF INCOME TAX R ETURN FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 1999-2000. THE ASSESSING OFFICER TOOK THE VIEW THAT THE FEE PAID TO THE CHARTERED ACCOUNT ANTS FOR PREPARATION AND FILING OF INCOME TAX RETURNS IS NOT AN ALLOWABLE EX PENDITURE, BY PLACING RELIANCE ON THE DECISION OF THE HON'BLE RAJASTHAN H IGH COURT IN THE CASE OF ASSOCIATED STONES INDUSTRIES (KOTAH) LTD., VS. CIT (2002) 123 TAXMAN 643. ITA NO.367 OF 04 SIEMENS WESTINGHOUSE SERVICES, KAKI KNADA PAGE 3 OF 5 5.1 THE LEARNED CIT (A) NOTICED THAT THE CHARTERED ACCOUNTANT OF THE ASSESSEE HAS FILED A LETTER DATED 31-3-2003 BEFORE THE ASSESSING OFFICER BY CLARIFYING THAT THE IMPUGNED AMOUNT OF RS.1,20,000/ - WAS PAID TO THEM FOR RENDERING ACCOUNTING SERVICES FOR PREPARING THE BOO KS OF ACCOUNTS FOR THE YEAR ENDED 31-3-1999. IT WAS ALSO STATED THAT THE S ERVICES WERE RENDERED DURING THE YEAR ENDED 31-3-2000 AND ACCORDINGLY THE ASSESSEE CONTENDED BEFORE THE LEARNED CIT(A) THAT THE SAID EXPENDITURE IS ALLOWABLE. THE ASSESSEE ALSO RELIED ON THE DECISION OF HON'BLE BOM BAY HIGH COURT IN THE CASE OF R.B.BANSILAL ABIRCHAND SPINNING & WEAVING M ILLS VS. CIT (81 ITR 34) TO CONTEND THAT THE EXPENSES FOR PREPARING RETURN O F INCOME, REPRESENTATION BEFORE THE TAX AUTHORITIES ARE ADMISSIBLE IN COMPUT ING THE INCOME OF THE ASSESSEE. THE LEARNED CIT ALSO NOTICED THAT THE HON 'BLE SUPREME COURT IN THE CASE OF H.S.SHIVAKANTAPPA VS. COMMISSIONER OF A GRICULTURAL INCOME TAX (204 ITR 349) HAS REVERSED THE DECISION OF HON'BLE KERALA HIGH COURT BY HOLDING THAT THE EXPENDITURE INCURRED FOR THE PURPO SE OF PREPARING RETURN OF INCOME IS ALLOWABLE AS AN EXPENDITURE U/S 5(J) OF T HE AGRICULTURAL INCOME TAX ACT. ACCORDINGLY THE LEARNED CIT (A) DELETED THE IM PUGNED ADDITION OF RS.1,20,000/-. 5.2 WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESEN TATIVE IN THIS REGARD AND ALSO PERUSED THE RECORD. WE NOTICE THAT THE CHARTERED ACCOUNTANTS OF THE ASSESSEE HAS CLARIFIED THAT THE IMPUGNED AMOUNT OF RS.1,20,000/- WAS RECEIVED BY THEM IN CONNECTION WI TH RENDERING OF ACCOUNTING SERVICES. EVEN OTHERWISE, THE HON'BLE S UPREME COURT IN THE CASE OF H.S. SHIVAKANTAPPA, (SUPRA) HAS HELD THAT T HE FEES PAID FOR THE PURPOSE OF PREPARING INCOME TAX RETURN IS ALLOWABLE UNDER SECTION 5(J) OF THE AGRICULTURAL INCOME TAX ACT. WHILE RENDERING TH E SAID DECISION THE HON'BLE APEX COURT HAS APPLIED THE PRINCIPLES THAT ARE APPLICABLE IN THE INTERPRETATION OF SECTION 37 OF THE INCOME TAX ACT. SINCE THE LEARNED CIT(A) HAS DECIDED THE ISSUE BY FOLLOWING THE DECIS ION OF HON'BLE SUPREME COURT, WE DO NOT FIND ANY INFIRMITY IN THE DECISIO N OF THE LEARNED CIT (A). 6. THE NEXT ISSUE RELATES TO DISALLOWANCE OF RS.3, 81,254/- PERTAINING TO CAR EXPENSES INCURRED BY THE ASSESSEE. THE ASSESSIN G OFFICER NOTICED THAT ITA NO.367 OF 04 SIEMENS WESTINGHOUSE SERVICES, KAKI KNADA PAGE 4 OF 5 THE ASSESSEE HAS ACCOUNTED FOR RS.3,81,254/- PERTAI NING TO THE CAR EXPENSES UNDER THE HEAD SALARIES AND ALLOWANCES. THE ASSESSING OFFICER NOTICED THAT THE CARS WERE ALSO USED BY THE EMPLOYE ES FOR THEIR PERSONAL PURPOSES. HENCE THE ASSESSING OFFICER ASKED FOR DE TAILS OF PERQUISITE VALUE OF CAR INCLUDED IN THE SALARY OF THE EMPLOYEES. SIN CE THE SAID DETAILS WERE NOT FURNISHED, THE ASSESSING OFFICER DISALLOWED THE ABOVE SAID AMOUNT. 6.1 BEFORE THE LEARNED CIT (A) THE ASSESSEE CONTEND ED THAT THE PROVISION OF CAR TO ITS EMPLOYEES IS IN ACCORDANCE WITH THE E MPLOYMENT CONTRACT ENTERED WITH THEM. THE LEARNED CIT (A) ALSO NOTICED FROM THE EMPLOYMENT AGREEMENT PERTAINING TO A PERSON NAMED MR. PATRICK GRIFFIN THAT SAID EMPLOYEE AND HIS FAMILY ARE ENTITLED FOR VEHICLE FO R THEIR PERSONAL PURPOSES ALSO. FURTHER THE LEARNED CIT (A) ALSO NOTICED THAT THE PERQUISITE VALUE OF CAR, AS PER INCOME TAX RULES, WAS FOUND INCLUDED IN THE SALARY INCOME OF MR.GRIFFIN. ACCORDINGLY THE LEARNED CIT (A) DELETE D THIS ADDITION. 6.2 THERE IS NO DISPUTE WITH REGARD TO THE FACT THA T THE CAR HAS BEEN PROVIDED TO THE EMPLOYEES IN ACCORDANCE WITH THE TE RMS OF CONTRACT ENTERED WITH THEM. THERE IS ALSO MERIT IN THE SUBMISSION OF THE ASSESSEE MADE BEFORE THE LEARNED CIT (A) THAT THE PERQUISITE VALU E OF CAR IS COMPUTED IN ACCORDANCE WITH THE INCOME TAX RULES WITHOUT MAKING ANY COMPARISON WITH THE ACTUAL EXPENDITURE INCURRED IN THIS REGARD BY T HE ASSESSEE COMPANY. FURTHER THE LEARNED CIT (A) ALSO NOTICED THE FOLLOW ING CLAUSE IN THE SERVICE AGREEMENT AND HELD THAT THE VEHICLE WAS PREDOMINANT LY USED FOR THE PURPOSE OF BUSINESS. YOU AND YOUR FAMILY WILL BE PROVIDED WITH A VEHICL E AND A DRIVER IN ORDER FOR YOU TO TRAVEL TO THE SITE AND CARRY OU T YOUR WORK SUCCESSFULLY AND FOR LOCAL TRAVEL FOR YOUR FAMILY. IN VIEW OF THE FOREGOING, WE DO NOT FIND ANY INFIRMI TY IN THE DECISION OF THE LEARNED CIT (A) IN GIVING RELIEF ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF HO ME LEAVE TRAVEL EXPENSES OF RS.4,68,531/- PERTAINING TO AN EMPLOYEE NAMED MR.GRAFFIN. THE SAID EXPENDITURE WERE INCURRED IN THREE INSTALM ENTS VIZ., RS.190131+RS.213659/- + 64741/-. THE ASSESSING OFFI CER WAS OF THE VIEW ITA NO.367 OF 04 SIEMENS WESTINGHOUSE SERVICES, KAKI KNADA PAGE 5 OF 5 THAT THE SAID EXPENDITURE WAS PERSONAL IN NATURE AN D NOT RELATED TO THE BUSINESS AND ACCORDINGLY DISALLOWED THE SAME. THE L EARNED CIT (A) HAS DISCUSSED THE DETAILS OF THIS EXPENDITURE IN PARA 3 .9 (I) TO PARA 3.9 (V) (B). ON A CAREFUL PERUSAL OF THE ORDER OF THE LEARNED CI T (A) ON THIS ISSUE, WE NOTICE THAT THE LEARNED CIT (A) HAS NOT GIVEN ANY D ECISION ON THIS ISSUE, THOUGH HE HAS DISCUSSED ABOUT THE FACTS RELATING TO THIS EXPENDITURE IN DETAIL. IN FACT, ON READING OF PARA 3.9 (V) (B), I T APPEARS THAT THE LEARNED CIT (A) HAS GIVEN RELIEF OF RS.4,68,531/-, YET HOWE VER, THE LEARNED CIT (A) HAS ACTUALLY GIVEN HIS DECISION ON THE EXPENDITURE OF RS.4,472/- PERTAINING TO TRAVEL OF MR.GRIFFIN TO HYDERABAD FOR CUSTOM CLE ARANCE OF PERSONAL ITEMS, WHICH WAS ALSO DISALLOWED. THUS THE LEARNED CIT(A ) HAS FAILED TO RENDER ANY DECISION ON THE PRESENT ISSUE BEFORE US. IN THE SE CIRCUMSTANCES, WE DEEM IT PROPER TO SET ASIDE THIS MATTER TO THE FILE OF THE LEARNED CIT (A) IN ORDER ENABLE HIM TO DISPOSE OF THIS ISSUE AND WE OR DER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREAT ED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:09-09-2010 COPY TO 1 THE DY.COMMISSIONER OF INCOME TAX CIRCLE-1, KAKINA DA 2 M/S SIEMENS WESTINGHOUSE SERVICES COMPANY LTD., G ODAVARI PROJECT OFFICE, 70-17-25/1 NEAR NFCL, NAGARJUNA ROAD, KAKIN ADA 3 4. THE CIT RAJAHMUNDRY THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM