M/s G.V.L. Balaji Chits, Hyderabad V. ITO, Vikarabad

ITA 1044/HYD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6190 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 26-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMLAN TRIPATHY
• Assessee Lawyers: SYED JAMEELUDDIN
• Keywords: Business expenditure; Set aside
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI AKBER BASHA, ACCOUNTANT MEMBER I.T.A. NO. 1043/HYD/2010 ASSESSMENT YEAR 2004-05 I.T.A. NO. 1044/HYD/2010 ASSESSMENT YEAR 2005-06 M/S. G.V.L. BALAJI CHITS TANDOOR; PAN: AAEFG7701N VS. INCOME-TAX OFFICER, WARD-1 VIKARABAD APPELLANT RESPONDENT APPELLANT BY: SHRI SYED JAMEELUDDIN RESPONDENT BY: SHRI AMLAN TRIPATHY O R D E R PER NRS GANESAN, JM: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE COMMON ORDER PASSED BY THE CIT(A)-III, HYDERABAD DA TED 17.6.2010 AND PERTAIN TO ASSESSMENT YEARS 2004-05 AND 2005-06 . SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS, WE HEARD THE SAME TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS IS WITH REGARD TO DISALLOWANCE OF REBATE SAID TO BE GI VEN TO THE SUBSCRIBERS OF THE CHITS. SHRI SYED JAMEELUDDIN, T HE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM CONDUCTS CHIT BUSINESS. IN THE COURSE OF THE BUSIN ESS TRANSACTIONS THE ASSESSEE GAVE 1% DISCOUNT/REBATE TO THE SUBSCRIBERS WHO PAY THE SUBSCRIPTION ONE DAY IN ADVANCE TO THE NEXT DATE OF AUCTION. ACCORDING TO THE LEARNED REPRESENTATIVE FOR THE ASSESSEE IN O RDER TO ENCOURAGE THE SUBSCRIBERS TO PAY THE MONTHLY INSTALMENTS IN T IME 1% DISCOUNT WAS GIVEN. THEREFORE, ACCORDING TO THE LEARNED REPRESE NTATIVE FOR THE ASSESSEE THE DISCOUNT/REBATE GIVEN BY THE ASSESSEE TO THE SUBSCRIBERS I.T.A. NOS. 1043 & 104 4/HYD/2010 M/S. G.V.L. BALAJI CHITS ============================ 2 IS AN ALLOWABLE EXPENDITURE U/S. 37(1) OF INCOME-TA X ACT, 1961. THEREFORE, THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 3. ON THE CONTRARY, SHRI AMLAN TRIPATHY, THE LEARNE D DR, SUBMITTED THAT IT IS FOR THE SUBSCRIBER OF THE CHIT TO PAY TH E MONTHLY INSTALMENT IN TIME. ACCORDING TO THE LEARNED DR THE ASSESSEE IS ENTITLED TO COLLECT PENALTY AND INTEREST FOR DELAYED PAYMENT OF MONTHLY INSTALMENT. THEREFORE, IT IS NOT NECESSARY FOR GIVING ANY DISCO UNT/REBATE TO THE SUBSCRIBERS FOR MAKING THE PAYMENT IN TIME. ACCORD ING TO THE LEARNED DR, CHIT FUND ACT PROVIDES FOR EVERY PROTECTION TO THE CHIT FUND COMPANY TO RECOVER ITS MONEY IN TIME. THEREFORE, D ISCOUNT/REBATE SAID TO BE GIVEN BY THE ASSESSEE CANNOT BE SAID TO BE A BUSINESS EXPENDITUE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL ON RECORD. ADMITTEDLY TH E ASSESSEE IS IN THE BUSINESS OF CHIT FUNDS. NO DOUBT THE CHIT FUND ACT PROVIDES FOR LEVY OF PENALTY AND INTEREST ON THE SUBSCRIBER FOR DELAYED PAYMENT OF SUBSCRIPTION. THE CHIT FUND ACT ENABLES THE CHIT C OMPANIES TO LEVY PENALTY AND INTEREST. IT IS ONLY AN ENABLING PROVI SION. HOWEVER, IT IS FOR THE RESPECTIVE CHIT COMPANY EITHER TO LEVY PENALTY AND INTEREST OR TO WAIVE THE SAME. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE IS BOUND TO LEVY PENALTY AND INTEREST FOR THE DELAYED PAYMENT. THE ASSESSEE MAY IN ITS DISCRETION LEVY PENALTY AND INT EREST AS PROVIDED UNDER THE CHIT FUND ACT. THEREFORE, IN OUR OPINION , MERELY BECAUSE THERE IS A ENABLING PROVISION IN THE CHIT FUND ACT FOR LEVY OF INTEREST AND PENALTY FOR DELAYED PAYMENT, IT CANNOT BE SAID THAT THE DISCOUNT/REBATE SAID TO BE GIVEN BY THE ASSESSEE IS NOT FOR THE BUSINESS. IN OTHER WORDS, MERE ENABLING PROVISION IN THE CHIT FUND ACT TO LEVY PENALTY AND INTEREST FOR DELAYED PAYMENT OF SUBSCRIPTION CANNOT BE A REASON FOR COMING TO THE CONCLUSION THAT THE D ISCOUNT/REBATE IS NOT NECESSARY FOR CONDUCTING THE BUSINESS SUCCESSFULLY. I.T.A. NOS. 1043 & 104 4/HYD/2010 M/S. G.V.L. BALAJI CHITS ============================ 3 5. WHEN THE BUSINESSMAN TAKES A DECISION TO GIVE DI SCOUNT/REBATE TO THE SUBSCRIBER THE TAX AUTHORITIES CANNOT STEP I NTO THE SHOES OF THE BUSINESSMAN AND SAY THAT THE DISCOUNT/REBATE IS NOT NECESSARY FOR CONDUCTING THE BUSINESS. THE BUSINESSMAN KNOWS VER Y WELL HOW TO CONDUCT HIS BUSINESS. IN THE GIVEN CIRCUMSTANCES, IN ORDER TO AVOID COMPETITION AND TO ENCOURAGE THE SUBSCRIBERS TO PAY THE MONTHLY INSTALMENT IN TIME IF THE ASSESSEE CONSCIOUSLY DECI DES TO GIVE 1% DISCOUNT/REBATE THE TAX AUTHORITIES CANNOT SAY THAT IT IS NOT NECESSARY FOR CONDUCTING THE BUSINESS. THE TAX AUTHORITIES A T BEST CAN VERIFY WHETHER SUCH DISCOUNT/REBATE WAS GIVEN OR NOT. IN THIS CASE THE DISCOUNT/REBATE GIVEN BY THE ASSESSEE IS NOT IN DIS PUTE. THEREFORE, IN OUR OPINION, THE REBATE OF 1% GIVEN BY THE ASSESSEE TO THE SUBSCRIBERS FOR PAYMENT OF SUBSCRIPTION AMOUNT IN TIME HAS TO B E NECESSARILY CONSIDERED AS BUSINESS EXPENDITURE U/S. 37(1) OF TH E ACT. WE DO NOT FIND ANY REASON TO DISALLOW THE CLAIM OF THE ASSES SEE MERELY BECAUSE THERE IS AN ENABLING PROVISION IN THE CHIT FUND ACT FOR LEVY OF PENALTY AND INTEREST FOR DELAYED PAYMENT OF SUBSCRIPTION. 6. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE T O UPHOLD THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N OF 1% DISCOUNT/REBATE. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH NOVEMBER, 2010. SD/- (AKBER BASHA) ACCOUNTANT MEMBER SD/- (N.R.S. GANESAN) JUDICIAL MEMBER HYDERABAD, DATED 12TH NOVEMBER, 2010 TPRAO I.T.A. NOS. 1043 & 104 4/HYD/2010 M/S. G.V.L. BALAJI CHITS ============================ 4 COPY FORWARDED TO: 1. M/S. G.V.L. BALAJI CHITS, C/O. SYED JAMEELUDDIN, I.T. CONSULTANT, 16-7-302, 'ERRAM COTTAGE', AZAMPURA, HYDERABAD-500 024. 2. THE INCOME-TAX OFFICER, WARD-1, VIKARABAD. 3. THE CIT(A)-III, HYDERABAD 4 THE CIT-2, HYDERABAD 5. THE DR B BENCH, ITAT, HYDERABAD