M/s Sreerama Finance and Chit funds, Hyderabad V. ITO, Vikarabad

ITA 1071/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53726 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHAKAR RAO
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' , HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1071/HYD/10 : ASSTT. YEAR 2007-08 M/S. SREERAMA FINANCE AND CHIT FUNDS, TANDUR, R.R. DISTRICT ( PAN AATPY 7983 K ) V/S. INCOME-TAX OFFICER, WARD-1, VIKARABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.A.SAI PRASAD RESPONDENT BY : SHRI SUDHAKAR RAO DATE OF HEARING 12 . 10 .2011 DATE OF PRONOUNCEMENT 4.11.2011 O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YE AR 2007-08 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS). 2. GROUNDS OF APPEAL OF THE ASSESSEE ARE AS UND ER- 1) THE ORDER OF THE LEARNED FIRST APPELLATE AUTHOR ITY IS NOT CORRECT EITHER ON FACTS OR IN LAW AND IN BOTH. 2) THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUS TIFIED IN CONFIRMING THE DISALLOWANCE OF RS.8,63,100 REPRESENTING REBAT E ALLOWED TO THE SUBSCRIBERS AND RS.1,35,950 REPRESENTING SPECI AL DISCOUNT ALLOWED TO THE SUBSCRIBERS. 3) THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE REBATE AND SPECIAL DISCOUNT ARE ALLOWA BLE U/S. 37 OF THE INCOM E TAX ACT BEING THE EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF APPELLAN T. 4) THE LEARNED FIRST APPELLATE AUTHORITY IS UNJUSTI FIED IN UPHOLDING THE DISALLOWANCE ESPECIALLY WHEN THE GENUINENESS OF THE EXPENDITURE IS NOT DOUBTED BY THE ASSESSING OFFICER. ITA NO.1071/HYD/11 M/S. SREERAMA FINANCE AND CHIT FUNDS, TANDUR 2 5) THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE PAYMENT OF REBATE IS AUTHORIZED BY BYE-L AWS OF THE APPELLANT BUSINESS. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REBATE AND SPECIAL DISCOUNT WAS ALLOWED TO THE SUBSCRIBERS O F THE CHIT FUND AND THEREFORE, ARE ALLOWABLE UNDER S.37 OF THE INCOME-TAX ACT. HE SUBMITTED THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINES S OF THE ASSESSEE AND THE REVENUE HAS NOT DOUBTED THE GENUINENESS OF THE EXPE NDITURE. HE SUBMITTED THAT THE PAYMENT OF REBATE AND SPECIAL DISCOUNT WER E AUTHORIZED BY THE BYE-LAWS OF THE ASSESSEES BUSINESS. HE RELIED ON THE DECIS ION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN GVL BALAJI CHITS, TANDOOR V/S. ITO (ITA NO.1043-1044/HYD/2010) DATED 12.11.2010, WHEREIN IDENTICAL ISSUE WAS DECID ED IN FAVOUR OF THE ASSESSEE. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS OPP OSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . HE SUBMITTED THAT THE EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND THEREFORE, IS NOT ALLOWABLE UND ER S.37 OF THE ACT. HE SUBMITTED THAT EVEN WITHOUT ALLOWING REBATE OR SPEC IAL DISCOUNT, SUBSCRIBERS ARE BOUND TO MAKE PROMPT PAYMENT TO THE ASSESSEE FIRM A ND THEREFORE, THE TEST OF BUSINESS CONSIDERATION HAS FAILED IN THIS CASE. HE RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT GENUINENESS OF THE REBATE AND SPECIAL DISCOUNT ALLOWED TO THE S UBSCRIBERS OF THE ASSESSEE WAS NOT DOUBTED BY THE REVENUE AUTHORITIES. THE EXPEND ITURE WAS INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND IT COULD NOT BE SAID THAT THE EXPENDITURE WAS INCURRED FOR OTHER THAN BUSINESS CONSIDERATION. THE CLAIM OF THE ASSESSEE THAT THE PAYMENT OF REBAT E AND SPECIAL DISCOUNT WAS APPROVED BY THE BYE-LAWS OF THE ASSESSEES BUSINESS COULD NOT BE CONTROVERTED BY THE REVENUE. WE FIND THAT THE ARGUMENT OF THE L EARNED DEPARTMENTAL REPRESENTATIVE THAT EVEN OTHERWISE THE SUBSCRIBERS TO THE CHIT ARE BOUND TO ITA NO.1071/HYD/11 M/S. SREERAMA FINANCE AND CHIT FUNDS, TANDUR 3 MAKE PAYMENT OF THEIR SUBSCRIPTION TO THE CHIT FUND COMPANY BY THE DUE DATE AS STIPULATED IN THE CHIT AGREEMENT, IS DEVOID OF ANY MERIT, AS EXPENDITURE INCURRED BY THE ASSESSEE TO ENSURE AND ENCOURAGE THE SUBSCR IBERS TO MAKE PROMPT AND TIMELY PAYMENT OF THEIR INSTALMENT, IS FOR BUSINESS CONSIDERATION ONLY AND ACCORDINGLY ALLOWABLE UNDER S.37(1) OF THE ACT. IT IS FOR THE ASSESSEE TO CONDUCT ITS BUSINESS IN ORDER TO MAXIMISE ITS BUSINESS AND REVENUE AUTHORITIES COULD NOT INTERFERE AND STEP INTO THE SHOES OF THE BUSINESS- MAN TO SAY WHETHER THE DISCOUNT/REBATE WAS ESSENTIAL FOR THE CONDUCT OF TH E BUSINESS. THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE TRIBUNAL IN THE CASE OF G.V.L. BALAJI CHITS TANDOOR V/S. ITO, CITED SUPRA, WHEREIN SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, AND DISCOUNT/REB ATE WAS HELD AS ALLOWABLE BUSINESS EXPENDITURE UNDER S.37(1) OF THE ACT. ACCO RDINGLY, WE DECIDE THE ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE IN FAVOUR OF THE ASSESSEE AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 4 TH NOVEMBER, 2011 SD/- SD/- (CHANDRA POOJARI) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 4.11.2011 COPY FORWARDED TO: 1. M/S. SREERAMA FINANCE AND CHIT FUNDS, (TANDUR, R.R. DISTRICT) C/O,. SHRI CH.PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOK NAGAR, HYDERABAD 20 2. INCOME - TAX OFFICER, WARD - 1 , VIKARABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) III HYDERABAD 4. COMMISSIONER OF INCOME - TAX - II HYDERABAD 5. T HE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.