Rifah Shoes Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1017/CHNY/2014

• Counselvise Citation: 101721714 RSA 2014
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: RAGHAV PRASAD B ACA
• Keywords: Depreciation; Business expenditure; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1017/MDS/2014 ( )( / ASSESSMENT YEAR : 2010-11 M/S RIFAH SHOES PVT. LTD., FLAT A, BSR ELYSIUM, NO.221/865, POONAMALLEE HIGH ROAD, KILPAUK, CHENNAI - 600 010. PAN : AABCR 3805 J V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(4), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. RAGHAV PRASAD B., ACA -.+, / 0 / RESPONDENT BY : SH. S. DAS GUPTA, JCIT 1 / 2% / DATE OF HEARING : 13.04.2015 3') / 2% / DATE OF PRONOUNCEMENT : 22.05.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) V, CHENN AI, DATED 24.12.2013 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2 I.T.A. NO.1017/MDS/14 2. SH. RAGHAV PRASAD, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS WITH REGARD TO DISALLOWANCE OF BUSINESS PROMOTION EXPENSES TO T HE EXTENT OF ` 15,77,819/-. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAD TO INCUR CERTAIN EXPENDITURE IN ENTERTAINING TH E CUSTOMERS IN THE HOTEL. THE PAYMENTS WERE MADE THROUGH CREDIT CARD. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER DISAL LOWED 30% OF THE EXPENDITURE ON ESTIMATE BASIS. THE CIT(APPEALS) CO NFIRMED THE SAME. ON A QUERY FROM BENCH, HOW THE EXPENDITURE I NCURRED IN PAYMENTS TO SPA, HOTELS AT MECCA & MEDINA RELATE TO BUSINESS PURPOSE? THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD TO NECESSARILY ENTERTAIN ITS CUSTOMERS IN SPA, HOTE LS, ETC. THEREFORE, THESE ARE RELEVANT TO BUSINESS EXPENDITU RE. 3. ON THE CONTRARY, SHRI S. DAS GUPTA, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT THE PAYMENTS MADE TO HOTELS, SPA AND PURCHASE OF APPARELS CANNOT BE CONSIDERED TO BE BUSINESS EXPENDITURE. THESE ARE ALL PERSONAL EXPENDITURE OF THE DIRECTORS OF THE COMPANY. THEREFORE, IT CANNOT BE ALLOWED AS BU SINESS EXPENDITURE. 3 I.T.A. NO.1017/MDS/14 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. ADMITTEDL Y, PAYMENTS WERE MADE THROUGH CREDIT CARD TO HOTELS/RESORTS, DI SNEY VACANCY PURCHASE, APPARELS, DEPARTMENTAL STORES, SPA, ETC. THESE EXPENSES WERE PERSONAL IN NATURE. THERE IS NO MATE RIAL ON RECORD TO SHOW HOW THESE PAYMENTS ARE GOING TO PROMOTE THE BUSINESS OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADD ITION TO THE EXTENT OF ` 4,73,345/-. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. 6. SH. RAGHAV PRASAD, THE LD. REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY HAS DEBITED AN AMOUNT OF ` 22,14,876/- ON ACCOUNT OF FOREIGN TRAVEL. THE ASSE SSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE FOREIGN TRAVE L HAS BEEN MADE IN CONNECTION WITH BUSINESS OF THE ASSESSEE. THE A SSESSEE HOWEVER COULD NOT FILE THE ENTIRE BILLS AND VOUCHER S BEFORE THE ASSESSING OFFICER. THE ASSESSEE WAS ABLE TO FILE B ILLS AND VOUCHERS ONLY TO THE EXTENT OF ` 8,24,256/-. THEREFORE, THE ASSESSING OFFICER DISALLOWED A SUM OF ` 13,90,620/-. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONFIRMED THE ADDITION MADE BY THE ASS ESSING OFFICER. 4 I.T.A. NO.1017/MDS/14 ACCORDING TO THE LD. REPRESENTATIVE, THE FACT THAT THE DIRECTORS OF THE ASSESSEE-COMPANY UNDERTOOK FOREIGN TRAVEL IS NOT DI SPUTED. THEREFORE, THE ENTIRE CLAIM OF THE ASSESSEE HAS TO BE ALLOWED. 7. ON THE CONTRARY, SHRI S. DAS GUPTA, THE LD. D.R. SUBMITTED THAT INSPITE OF REPEATED REQUESTS, THE ASSESSEE COU LD NOT FILE ANY BILLS AND VOUCHERS EXCEPT ONLY TO THE EXTENT OF ` 8,24,256/-. IN THE ABSENCE OF MATERIAL TO PROVE THE EXPENDITURE, ACCOR DING TO THE LD. D.R., THE ASSESSING OFFICER RESTRICTED THE CLAIM ON LY TO THE EXTENT THE ASSESSEE FILED THE BILLS AND VOUCHERS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSES SEE CLAIMED EXPENDITURE RELATING TO FOREIGN TRAVEL. THE ASSESS EE COULD NOT FILE ANY DETAILS. HOWEVER, THE BILLS AND VOUCHERS TO TH E EXTENT OF ` 8,24,256/- WERE FILED. IN RESPECT OF THE BALANCE E XPENDITURE, NO MATERIAL WAS FILED BY THE ASSESSEE. THEREFORE, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTL Y CONFIRMED THE ADDITION TO THE EXTENT OF ` 13,90,620/- ON ACCOUNT OF FOREIGN TRAVEL. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(APPEALS). ACCORDINGLY, THE SAME IS CONFIRMED. 5 I.T.A. NO.1017/MDS/14 9. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE OF ` 15,53,226/- TOWARDS REPAIRS AND RENEWALS. 10. SH. RAGHAV PRASAD, THE LD. REPRESENTATIVE. SUBM ITTED THAT THE ASSESSEE-COMPANY DEBITED AN AMOUNT OF ` 25,88,711/- UNDER THE HEAD REPAIRS AND RENEWALS. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE INCURRED EXPENDITURE F OR CONSTRUCTION OF COMPOUND WALL AND RELAYING OF CONNECTING ROADS. ACCORDING TO THE LD. REPRESENTATIVE, MAJOR EXPENSES HAD BEEN USE D FOR CONSTRUCTION OF WALL AND RELAYING OF CONNECTING ROA DS. ACCORDING TO THE LD. REPRESENTATIVE, THE COMPOUND WALL WAS DAMAG ED DUE TO HEAVY RAIN. THE ASSESSEE HAS ALSO CONSTRUCTED TEMP ORARY DINING HALL FOR THE WORKERS IN THE FACTORY. THE LD. REPRE SENTATIVE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON ESTIMATE BASIS AND DISALLOWED THE SUM OF ` 15,53,226/-. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOUND T HAT THE EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER IS IN THE NATURE OF CAPITAL, THEREFORE, THE ASSESSING OFFICER SHOULD AL LOW DEPRECIATION. ACCORDING TO THE LD. REPRESENTATIVE, THESE EXPENSES ARE REVENUE IN NATURE. THEREFORE, THE ENTIRE EXPENDITURE OUGHT TO HAVE BEEN ALLOWED. 6 I.T.A. NO.1017/MDS/14 11. ON THE CONTRARY, SHRI S. DAS GUPTA, THE LD. D.R . SUBMITTED THAT THE CONSTRUCTION OF DINING HALL FOR THE WORKER S, CONSTRUCTION OF CONNECTING ROADS AND WALLS ARE CAPITAL IN NATURE. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE SAME AS C APITAL EXPENDITURE. THE LD. D.R. FURTHER SUBMITTED THAT T HE ASSESSEE DID NOT FILE ANY PROOF WITH REGARD TO REPAIRS AND EXPEN DITURE ON CONSTRUCTION OF TEMPORARY STRUCTURE. ACCORDING TO THE LD. D.R., THE WALLS AND ROADS CANNOT BE TREATED AS TEMPORARY STRU CTURE. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED ` 15,53,226/- ON ESTIMATE BASIS. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSES SEE CLAIMS THAT A SUM OF ` 25,88,711/- WAS INCURRED IN REPAIRS AND RENEWALS OF COMPOUND WALL, RELAYING OF CONNECTING ROADS AND CON STRUCTION OF TEMPORARY DINING HALL FOR THE WORKERS. IF IT IS A CONSTRUCTION OF NEW WALL AND NEW ROADS, IT CAN BE A CAPITAL EXPENDITURE , BUT, IF IT IS REPAIRS AND MAINTENANCE OF EXISTING WALLS AND ROADS , THEN DEFINITELY IT IS A REVENUE EXPENDITURE. THE ASSESSEE CLAIMS T HAT A TEMPORARY DINING HALL WAS CONSTRUCTED FOR THE WORKERS IN THE FACTORY. IT IS NOT KNOWN THE NATURE OF CONSTRUCTION MADE BY THE ASSESS EE. WHEN THE ASSESSEE CLAIMS THAT THESE ARE ALL REVENUE EXPENDIT URE, THE 7 I.T.A. NO.1017/MDS/14 ASSESSING OFFICER ESTIMATED 60% OF THE SAME AS CAPI TAL EXPENDITURE. THE DETAILS WITH REGARD TO THE NATURE OF CONSTRUCTION OF THE DINING HALL ARE NOT AVAILABLE ON RECORD. THERE FORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND THE ISSUE O F REPAIRS AND RENEWALS IS REMITTED BACK TO THE FILE OF THE ASSESS ING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH TO FIND OUT WHETHER IT IS A CONSTRUCTION OF NEW COMPOUND WALL A ND ROADS. THE ASSESSING OFFICER SHALL ALSO RECONSIDER THE NATURE OF TEMPORARY STRUCTURE MADE BY THE ASSESSEE FOR DINING HALL. TH E ASSESSING OFFICER SHALL THEREAFTER DECIDE THE ISSUE IN ACCORD ANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22 ND MAY, 2015 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) (. !'# ! ) ( . . . ) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 22 ND MAY, 2015. KRI. 8 I.T.A. NO.1017/MDS/14 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-V, CHENNAI 4. 1 92 /CIT-V, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.