ACIT CEN CIR 30, MUMBAI V. SARVAMANGAL MERCANTILE CO. LTD, MUMBAI

ITA 1052/MUM/2013

• Counselvise Citation: 105219914 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.1052/M/2013 ASSESSMENT YEAR: 2009-10 DCIT, CENT. CIR-30, ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. SARVAMANGAL MERCANTILE CO. LTD., 1076, DR. E. MOSES ROAD, WORLI, MUMBAI 400 018 PAN: AAACS5526L (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIJAY MEHTA, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 24.06.2015 DATE OF PRONOUNCEMENT : 24.06.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 21.11.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE SOLE GROUND RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.32,44,679/- MADE BY THE ASSESSING OFFICER (HE REINAFTER REFERRED TO AS THE AO) ON ACCOUNT OF DISALLOWANCE OUT OF SALARY EXPENS ES. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESS MENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED T OTAL SALARY EXPENSES OF RS.35,87,416/-. THE AO REQUIRED THE ASSESSEE TO JU STIFY THE CLAIM IN THIS RESPECT. THE ASSESSEE FILED DETAILS OF THE SALARY EXPENSES. AFTER CONSIDERING ITA NO.1052/M/2013 M/S. SARVAMANGAL MERCANTILE CO. LTD. 2 THE SUBMISSIONS OF THE ASSESSEE, THE AO ALLOWED A S UM OF RS.3,42,737/- UNDER THE HEAD SALARY. HOWEVER, HE DISALLOWED THE REMAIN ING AMOUNT OF RS.32,44,679/- OBSERVING THAT THE ASSESSEE COULD NO T EXPLAIN THE JUSTIFICATION FOR PAYING THE ABOVE SAID SALARY EXPENSES. HE HELD THAT IT WAS A CASE OF REDUCING THE PROFITS THROUGH CLAIM OF INFLATED EXPE NSES. HE, THEREFORE, ADDED BACK THE AMOUNT OF RS.32,44,679/- INTO THE INCOME O F THE ASSESSEE. 3. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE EX PLAINED THAT THE COMPANY HAD ALREADY BEEN INCURRING LOSSES AND HENCE THERE WAS NO REASON FOR THE ASSESSEE TO INFLATE ITS EXPENSES. IT WAS FURTH ER EXPLAINED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF SHARE TRADIN G AND TRADING IN AYURVEDIC PRODUCTS. THE ASSESSEE COMPANY TOOK THE SERVICES OF OTHER COMPANYS STAFF FOR ITS BUSINESS PURPOSES AND THERE FORE DEBIT NOTES WERE RAISED FOR THE SERVICES PERFORMED. UPON THE ABOVE EXPLANA TION OF THE ASSESSEE, THE LD. CIT(A) DIRECTED THE ASSESSEE TO EXPLAIN THE SER VICES RENDERED BY THE BORROWED STAFF OF THE OTHER COMPANY AND THE NECESSI TY FOR TAKING SUCH SERVICES. HE ALSO DIRECTED THE ASSESSEE TO FURNISH STATEMENT SHOWING TURNOVER AND SALARY PAID FOR THE LAST THREE YEARS. THE ASSESSEE PROVID ED THE NECESSARY DETAILS AND EXPLAINED THAT THE ASSESSEE COMPANY FOR ITS TRADING ACTIVITIES REQUIRED STAFF FOR VARIOUS WORKS SUCH AS BUYING AND SELLING OF PRODUCT S, DELIVERY OF PRODUCTS, COLLECTION AND PAYMENT OF CHEQUES, BANKING ACTIVITI ES AND SUNDRY RELATED BUSINESS ACTIVITIES. IT WAS EXPLAINED THAT SINCE T HE ASSESSEE COMPANY DID NOT HAVE ITS OWN SUFFICIENT STAFF, HENCE THE ASSESSEE W AS TAKING REGULAR SERVICES OF OTHER COMPANYS EMPLOYEES FOR THE LAST THREE YEARS. BY DOING SO, THE ASSESSEE COMPANY WAS ALSO SAVED FROM VARIOUS LEGAL FORMALITI ES RELATING TO THE EMPLOYEES SUCH AS PROVIDENT FUND, ESIC ETC. IT WAS FURTHER EXPLAINED THAT SINCE IT WAS DIFFICULT TO GET EXPERIENCED EMPLOYEES , HENCE THE SERVICES OF THE EMPLOYEES WERE CONTINUED IRRESPECTIVE OF THE TURNOV ER OF THE COMPANY. THE ITA NO.1052/M/2013 M/S. SARVAMANGAL MERCANTILE CO. LTD. 3 LD. CIT(A), AFTER CONSIDERING THE FACTS AND CIRCUMS TANCES AND EVIDENCES ON THE FILE, OBSERVED THAT THE SALARY PAYMENT MADE DURING THE CURRENT YEAR WAS REDUCED FOR 50% WHEN COMPARED TO PREVIOUS YEAR. TH E COMPANY THEREFORE HAD REDUCED ITS STAFF, BUT HAD RETAINED CERTAIN EXPERIE NCED STAFF TO CONTINUE ITS BUSINESS ACTIVITIES. IT WAS ALSO OBSERVED BY HIM T HAT THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES ON REGULAR BASIS FOR THE LAST THREE YEARS AND THAT IN THE EARLIER ASSESSMENT YEARS NO SUCH DISALLOWANC E WAS MADE BY THE AO. THE LD. CIT(A), THEREFORE, CONSIDERING THE YEAR WIS E TURNOVER, DETAILS OF SALARY PAYMENT AND THE EXPLANATION OFFERED BY THE ASSESSEE , HELD THAT THE SALARY EXPENDITURE HAD BEEN INCURRED FOR THE PURPOSE OF BU SINESS. HE, THEREFORE, DELETED THE ADDITIONS SO MADE BY THE AO. 4. BEFORE US, THE LD. D.R. COULD NOT POINT OUT ANY DISTINGUISHING FACT OR CIRCUMSTANCE WHICH MAY POINT OUT ANY DEFECT IN THE WELL REASONED ORDER OF THE LD. CIT(A). WE, THEREFORE, ARE NOT INCLINED TO INT ERFERE IN THE IMPUGNED ORDER OF THE LD. CIT(A) AND THE SAME IS THEREFORE UPHELD. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.06.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: .10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI ITA NO.1052/M/2013 M/S. SARVAMANGAL MERCANTILE CO. LTD. 4 THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.