Ganpati Enterprises, Muzaffarnagar V. DCIT, Muzaffarnagar

ITA 1052/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7144 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 18-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NOS.1052 & 1053/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 GANPATI ENTERPRISES, 842, SOUTH CIVIL LINES, MUZAFFARNAGAR. PAN: AAFFG3043C VS. DCIT, CIRCLE-1, MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANKIT GUPTA, ADVOCATE DEPARTMENT BY : NONE DATE OF HEARING : 18.07.2016 DATE OF PRONOUNCEMENT : 18.07.2016 ORDER PER R.S. SYAL, AM: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE SEPARATE ORDERS PASSED BY THE CIT(A) ON 29.12.2014 IN RELATION TO THE ASSESSMENT YEARS 2010-11 AND 2011-12. SINCE SOME OF THE ISSUES RAISED ITA NOS.1052 & 1053/DEL/2015 2 IN THESE APPEALS ARE COMMON, I AM PROCEEDING TO DIS POSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 2. THE DEPARTMENT HAS REQUESTED FOR ADJOURNMENT IN ALL THE CASES, INCLUDING THE PRESENT APPEALS, FIXED TODAY FOR HEAR ING BEFORE THE BENCH BY GIVING THE REASON THAT: SR. DR IS NOT AVAILABLE . THERE IS NEITHER ANY ONE FROM THE SIDE OF THE REVENUE TO REPRESENT THE R EVENUE NOR TO EXPLAIN THE REASONS AS TO WHY THE BENCH BE ALLOWED TO CRASH . THE LD. AR STRONGLY OPPOSED TO THE GRANTING OF ADJOURNMENT. I AM SATISFIED THAT THE REVENUES PRAYER FOR ADJOURNMENT CANNOT BE ACCEPTED . THE SAME IS, THEREFORE, REJECTED AND THE APPEALS ARE BEING TAKEN UP FOR DISPOSAL ON MERITS EX PARTE QUA THE REVENUE. ASSESSMENT YEAR 2010-11 3. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST ADDITION OF RS.10,16,428/- BY DISALLOWING SALARY AND INTEREST P AID TO PARTNERS AFTER ADOPTING THE STATUS OF THE ASSESSEE AS AN AOP. 4. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE TH AT THE ASSESSEE FILED ITS RETURN IN THE STATUS OF A `FIRM BY FURNISHING A CO PY OF PARTNERSHIP DEED. ITA NOS.1052 & 1053/DEL/2015 3 THE AO, RELYING ON HIS VIEW TAKEN FOR EARLIER YEARS , DID NOT GRANT THE STATUS OF FIRM TO THE ASSESSEE AND ASSESSED IT AS AN AOP. RESULTANTLY, CLAIM OF SALARY AND INTEREST PAID TO PARTNERS WAS A LSO DENIED. ON PAGE NO.3 OF THE ASSESSMENT ORDER, THE AO HAS RECORDED T HAT FOR THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07, THE STATUS OF THE ASSESSEE WAS TREATED AS AOP, WHICH WAS CONFIRMED BY THE LD.CIT(A), BUT, THE ASSESSEE GOT RELIEF FROM THE TRIBUNAL AGAI NST WHICH THE REVENUE WAS IN APPEAL. THE LD. CIT(A) UPHELD THE ASSESSMENT ORDER. 5. AFTER HEARING THE LD. AR AND PERUSING THE RELEVA NT MATERIAL ON RECORD, I FIND THAT THE ISSUE OF GRANTING AOP STATU S TO THE ASSESSEE AND THE CONSEQUENTIAL DISALLOWANCE OF INTEREST AND SALA RY TO PARTNERS IS NO MORE RES INTEGRA IN VIEW OF THE ORDER PASSED BY THE TRIBUNAL FOR EAR LIER YEARS ACCEPTING THE ASSESSEES STATUS AS THAT OF A `FIRM AND ACCORDINGLY ALLOWING DEDUCTION ON ACCOUNT OF SALARY AND INTERES T TO PARTNERS. RESPECTFULLY FOLLOWING THE PRECEDENT, I OVERTURN TH E IMPUGNED ORDER ON THIS ISSUE AND DIRECT TO GRANT THE STATUS OF `FIRM TO THE ASSESSEE AND ALSO ALLOW DEDUCTION ON ACCOUNT OF SALARY AND INTEREST T O PARTNERS. ITA NOS.1052 & 1053/DEL/2015 4 6. THE ONLY OTHER ISSUE WHICH SURVIVES IS AGAINST T HE CONFIRMATION OF ADDITION OF RS.1,44,367/- ON ACCOUNT OF DISALLOWANC E OUT OF INTEREST ON SECURITY/LICENCE FEE. THE ASSESSEE DEBITED A SUM O F RS.1,44,367/- AS INTEREST ON SECURITY/LICENCE FEE. ON BEING CALLED UPON TO JUSTIFY THE DEDUCTION, THE ASSESSEE SUBMITTED THAT SUCH INTERES T WAS ON DELAYED PAYMENT OF SECURITY AND LICENCE FEE. THE AO TREATE D IT AS PENAL IN NATURE AND MADE DISALLOWANCE FOR THE SAME. THE LD. CIT(A) ECHOED THE ASSESSMENT ORDER ON THIS ISSUE. 7. AFTER CONSIDERING THE SUBMISSIONS ADVANCED BY TH E LD. AR AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS OBS ERVED THAT THE ASSESSEE PAID INTEREST DUE TO DELAYED PAYMENT OF SECURITY AN D LICENCE FEE. IN FACT, SUCH LICENCE FEE AND SECURITY WERE PAID BEFORE THE DUE DATE THROUGH ACCOUNT PAYEE CHEQUE, BUT, THE EXCISE DEPARTMENT CH ARGED INTEREST ON THE SAME BECAUSE OF SOME TIME TAKEN BY THEM IN CLEA RING/ENCASHING OF THE DEMAND DRAFT/ACCOUNT PAYEE CHEQUE. THIS FACT I S EVIDENT FROM PAGE 9, PARA 3.3 OF THE IMPUGNED ORDER. ONCE THE ASSESS EE HAS PAID SECURITY AND LICENCE FEE IN TIME AND THE EXCISE DEPARTMENT H AS CHARGED INTEREST ITA NOS.1052 & 1053/DEL/2015 5 BECAUSE OF TIME TAKEN IN CLEARING/ENCASHING OF THE DEMAND DRAFT, ETC., THE PAYMENT OF SUCH INTEREST AMOUNTING TO RS.1,44,367/- CANNOT BE CONSTRUED AS PENAL IN NATURE SO AS TO ATTRACT DISAL LOWANCE IN TERMS OF EXPLANATION 1 TO SECTION 37(1) OF THE ACT. THIS EX PENDITURE INCURRED FOR THE PURPOSE OF BUSINESS DESERVES TO BE AND IS HEREB Y ALLOWED IN FULL. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ASSESSMENT YEAR 2011-12 . 9. THE FIRST TWO ISSUES, NAMELY STATUS OF FIRM AND ALLOWING OF DEDUCTION FOR SALARY AND INTEREST TO PARTNERS AND I NTEREST ON SECURITY/LICENSE FEE ARE SIMILAR TO THOSE FOR THE A SSESSMENT YEAR 2010- 11. FOLLOWING THE VIEW TAKEN HEREINABOVE, THESE IS SUES ARE DECIDED IN FAVOUR OF THE ASSESSEE. 10. THE ONLY OTHER GROUND WHICH SURVIVES FOR CONSID ERATION IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.80,500/- OUT OF `EXCISE CONSUMPTION MONEY. ITA NOS.1052 & 1053/DEL/2015 6 11. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE TH AT THE ASSESSEE DEBITED RS.80,500/- IN ITS PROFIT & LOSS ACCOUNT. AS THE A O WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE IN SUPPO RT OF DEDUCTION FOR THE SUM, HE MADE THIS DISALLOWANCE. THE LD. CIT(A) CONFIRMED THE SAME. 12. AFTER HEARING THE LD. AR AND PERUSING THE REL EVANT MATERIAL ON RECORD, I FIND THE DETAIL OF SUCH PAYMENT AMOUNTING TO RS.80,500/- ON PAGE 19 OF THE PAPER BOOK. THIS REPRESENTS 13 SEPA RATE PAYMENTS MADE BY THE ASSESSEE BY MEANS OF DEPOSIT IN STATE BANK O F INDIA THROUGH CHALLANS ISSUED BY EXCISE AUTHORITIES. COPIES OF S UCH CHALLANS ARE AVAILABLE FROM PAGES 20 ONWARDS OF THE PAPER BOOK. FROM THESE CHALLANS, IT IS CLEAR THAT THESE AMOUNTS WERE CHARG ED BECAUSE OF CERTAIN IRREGULARITIES FOUND BY THE INSPECTOR AT THE TIME O F INSPECTION OF THE SHOPS. THE LD. AR EXPLAINED THAT THE INSPECTOR CHA RGED THESE AMOUNTS ON ACCOUNT OF PETTY ISSUES, WHICH ARE NOT OF PENAL NATURE. IN MY CONSIDERED OPINION, THESE EXPENSES ARE INCIDENTAL T O THE CARRYING ON OF ITA NOS.1052 & 1053/DEL/2015 7 THE BUSINESS AND, HENCE, CANNOT BE DISALLOWED. I, THEREFORE, GRANT DEDUCTION FOR THIS AMOUNT. 13. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.07.20 16. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 18 TH JULY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.