M/s Tesla Transformers Ltd., Bhopal V. The ACIT 3(1), Bhopal

CO 95/IND/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8361 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 13-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRIDULA BAJPAI
• Assessee Lawyers: ANIL KHAA
• Keywords: Assessment record

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.463/IND/2012 A.Y. 2009-10 ACIT-3(1), BHOPAL :: APPELLANT VS M/S. TESLA TRANSFORMERS LTD., BHOPAL PAN AABCJ 1005 C :: RESPONDENT AND CROSS-OBJECTION NO.95/IND/2012 (ARISING OUT OF ITA NO.463/IND/2012) A.Y. 2009-10 M/S. TESLA TRANSFORMERS LTD., BHOPAL PAN AABCJ 1005 C :: OBJECTOR VS ACIT-3(1), BHOPAL :: RESPONDENT DEPARTMENT BY SMT. MRIDULA BAJPAI, CIT/DR ASSESSEE BY SHRI ANIL KHABYA, CA DATE OF HEARING 30 .1.2013 DATE OF PRONOUNCEMENT 1 2 . 2 .2013 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE AS WELL AS ASSESSEE ARE AGGRIEVED WITH THE ORDER DATED 18.5.2012 OF THE LEARNED CIT(A)-II, BHOPAL. T HE REVENUE IS IN APPEAL WHEREAS THE ASSESSEE HAS PREFERRED CROSS-OBJ ECTION. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SMT . MRIDULA BAJPAI, LD. CIT/DR AND SHRI ANIL KHABYA, LEARNED CO UNSEL FOR THE ASSESSEE. THE FIRST GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADD ITION OF RS.87,23,255/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF DISALLOWANCE OF EXCESS INTEREST EXPENDITURE. THE CR UX OF ARGUMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT OF THE ASSES SMENT ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE STRONG LY PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFO RE COMING TO ANY 3 CONCLUSION, WE ARE REPRODUCING HEREUNDER THE FINDIN GS OF THE LD. CIT(A) :- I HAVE EXAMINED THE ISSUE. DURING THE APPELLATE PR OCEEDINGS ASSESSMENT RECORDS HAVE ALSO BEEN EXAMINED. IT IS F OUND THAT THE FACT THAT TOTAL EXPENDITURE OF INTEREST AND BILL DISCOUN TING CHARGES AT RS.2,44,90,346/- IS INDEED INCURRED IS NOT DISPUTED . THE INCREASE IN INTEREST COST IS NOT A VALID REASON FOR DISALLOWANC E OF A PART OF INTEREST COST WHEN THE EXPENDITURE IS INDEED DONE. THE INCRE ASE IN TURNOVER IS COMPATIBLE WITH THE INCREASE IN INTEREST COST. IN V IEW OF THE ABOVE IT IS HELD THAT THE DISALLOWANCE OF INTEREST AT RS.87,23, 255/- IS INVALID HENCE THE SAME IS DELETED. WE FIND THAT WHILE COMING TO A PARTICULAR CONCLUSIO N, THE LEARNED CIT(A) HAS DULY EXAMINED THE ASSESSMENT RECORD AS M ENTIONED IN PARA 4.3 OF THE IMPUGNED ORDER AND FOUND THAT THE A SSESSEE DULY INCURRED THE EXPENDITURE OF INTEREST AND BILL DISCO UNTING CHARGES. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REV ENUE BY BRINGING ANY POSITIVE MATERIAL ON RECORD. INCREASE IN THE TURNOVER IS COMPATIBLE WITH THE INCREASE IN THE INTEREST COST, THEREFORE, MAKING THE DISALLOWANCE BY THE ASSESSING OFFICER OF THE PA RT OF THE INTEREST COST IS NOT JUSTIFIABLE. UNLESS AND UNTIL IT IS PRO VED THAT EITHER THE CONTRACT ITSELF WAS BOGUS OR THE EXPENDITURE WAS MA DE WITH ULTERIOR MOTIVE, NO ADDITION COULD BE MADE . THE ASSESSEE HAS DULY ESTABLISHED THE NEXUS BETWEEN THE EXPENDITURE INCUR RED VIS-A-VIS 4 FOR BUSINESS PURPOSES. THEREFORE, WE FIND NO INFIRM ITY IN THE CONCLUSION DRAWN BY THE LEARNED CIT(A). IT IS AFFIR MED. 3. ON THE ISSUE OF DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE ACT, THE REVENUE IS IN APPEAL THROUGH GROUND NO.2 W ITH REGARD TO THE ADDITION OF RS.4,79,147/- WHEREAS THE ASSESSEE IS IN CROSS- OBJECTION WITH REGARD TO MAINTENANCE OF ADDITION OF RS.1,43,120/-. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT OF THE ASSESSMENT ORDER WHERE AS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE PART RELIEF G RANTED BY THE LEARNED CIT(A). THE FINDINGS OF LD. CIT(A) ARE REP RODUCED HEREUNDER: THE FACTS OF ISSUE IN BRIEF ARE THAT THE APPELLANT HAD MADE PAYMENT OF RS.4,79,147/- TO DIRECTOR GENERAL FOREIGN TRADE (DG FT) AND THREE OTHER PARTIES. THE TDS ON THESE PAYMENTS WERE NOT DEDUCTE D HENCE A.O. DISALLOWED THESE EXPENDITURE U/S 40(A)(IA). BEFORE ME IT IS PLEADED THAT THE PAYMENT TO DGFT IS IN NATURE OF FEE WHICH IS NO T LIABLE TO TDS. IN RESPECT OF OTHER PAYMENTS THE DISALLOWANCE IS NOT D ISPUTED IN THE WRITTEN SUBMISSION. DGFT IS A DEPARTMENT OF GOVT. O F INDIA. PAYMENT OF FEE TO DGFT IS NOT LIABLE FOR TDS. TOTAL PAYMENT OF RS.3,36,027/- IS MADE TO DGFT WHICH IS NOT DISALLOWABLE U/S 40A(IA). THE OTHER PAYMENTS ARE DISALLOWABLE U/S 40A(IA). IN VIEW OF T HE ABOVE THE DISALLOWANCE U/S 40A(IA) IS REDUCED FROM RS.4,79,14 7/- TO RS.1,43,120/-. THIS GROUND OF APPEAL IS PARTLY ALLO WED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE MADE PAY MENT OF RS. 4,79,147/- TO THE DIRECTOR GENERAL OF FOREIGN TRADE AND OTHER THREE PARTIES. THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THESE 5 PAYMENTS RESULTING INTO DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE PAY MENT TO DIRECTOR GENERAL, FOREIGN TRADE, IS IN THE NATURE OF FEES, C ONSEQUENTLY, NO TAX IS TO BE DEDUCTED. ADMITTEDLY, DGFT IS A DEPAR TMENT OF GOVERNMENT OF INDIA AND THE PAYMENT IS IN THE NATUR E OF FEE, THEREFORE, NO TDS IS TO BE DEDUCTED, CONSEQUENTLY, THE STAND OF THE LEARNED CIT(A) IS AFFIRMED. SO FAR AS OTHER PAYMENT S ARE CONCERNED, THE TDS WAS LIABLE TO BE DEDUCTED BY THE ASSESSEE, CONSEQUENTLY, ON THIS ASPECT ALSO, THE STAND OF CIT(A) IS AFFIRME D. SINCE WE HAVE AFFIRMED THE STAND OF THE LEARNED CIT(A) AND THE AS SESSEE THROUGH ITS CROSS OBJECTION HAS CHALLENGED THE ADDITION OF RS.1,43,120/-, CONSEQUENTLY, THERE IS NO MERIT IN THE CROSS OBJECT ION OF THE ASSESSEE. FINALLY, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12.2.2013 . SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12. 2.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYS!30.1/8,11,12.2 6