ITO, CHITTORGARH V. M/s. Rajasthan Diesels, CHITTORGARH

ITA 111/JODH/2014

• Counselvise Citation: 11123314 RSA 2014
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 43B; 37(1); 194C; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 111 / JU/ 20 1 4 ASSESSMENT YEAR: 200 9 - 1 0 THE INCOME - TAX OFFICER VS. M/S RAJASTHAN DIESELS WARD 1 10 - A, OLD INDUSTRIAL AREA CHITTORGARH CHITTORGARH PAN NO. AADFR 4380 D (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI SANDEEP JHANWAR DEPARTMENT B Y : SHRI JAI SINGH , DR DATE OF H EARING : 2 2 . 0 9 .20 1 4 DATE OF PRONOUNCEMENT : 25 . 0 9 . 201 4 ORDER PER HARI OM MARATHA , J .M. TH IS APPEAL BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT (A) , UDAIPUR DATED 06 . 1 2 .20 1 3 PERTAINING TO A.Y 20 09 - 10 . 2 2. GROUND NOS 1 AND 1.1 ARE AGAINST THE DELETION OF D ISALLOWANCE OF TTS COMMISSION EXPENSES OF RS. 10,39,000/ - . 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DEALER IN TRACTORS AND THIS COMMISSION HAS BEEN PAID TO SUB - DEALERS. THE REVENUE HAS TAKEN A STAND THAT ASSESSEE HAS FAILED TO PROVE THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. FOR THIS PURPOSE, THE AO POINTED OUT CERTAIN DEFECTS, LIKE OVERWRITING ON THE VOUCHER, HANDMADE VOUCHER, NO MENTION IN TRIPARTITE AGREEMENT WITH COMPANY ABOUT THE PAYMENT OF COMMISSION TO SUB - DEALER ETC. THE LD. AO HAS ALSO APPLIED PROVISIONS OF SECTION 40(A)(IA) BY OBSERVING THAT TDS WAS MADE IN THE MONTH OF MARCH ONLY WHILE THE CREDITS AS PER VOUCHERS WERE TO BE MADE EARLIER TO MARCH DURING THE ENTIRE FINANCI AL YEAR. ACCORDING TO ASSESSING OFFICER, AS THE ASSESSEE HAS VIOLATED PROVISIONS OF SECTION 40(A)(IA) AND HENCE THE EXPENDITURE IN QUESTION SHOULD NOT BE ALLOWED. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). 2.2 THE LD. CIT(A), VIDE PARA 2 F OUND THAT THE ENTIRE EXPENDITURE WA S DISALLOWED DUE TO THE MINOR DEFECTS WHICH ARE NOT JUSTIFIED. THE ASSESSING OFFICER SHOULD HAVE BROUGHT ON RECORD SOME 3 MATERIAL/EVIDENCE ON RECORD TO ESTABLISH THAT THE APPELLANT HAS NOT PAID ANY COMMISSION TO SUB - DE ALER AND APPELLANT HAS CLAIMED THESE EXPENDITURE ONLY WITH A VIEW TO REDUCE TAX LIABILITY. NO ENQUIRY TO THIS EFFECT HAS BEEN CONDUCTED BY AO AND IN ABSENCE OF SUCH ENQUIRIES THE COMMISSION SO PAID AFTER DEDUCTING TAX AT SOURCE CAN NOT BE DISALLOWED. HE OBS ERVED THAT SUCH COMMISSION WAS PAID AND ALLOWED IN EARLIER YEARS ALSO. THE CIT(A) HAS ALSO OBSERVED THAT THE COMMISSION HAS BEEN CREDITED TO PARTIES ACCOUNT ON 30 TH AND 31 ST MARCH AS PER L EDGER ACCOUNTS AND THE ASSESSEE HAS DEDUCTED TAX AT SOURCE AT THAT T IME AND DEPOSITED THE SAME WITHIN THE TIME ALLOWED FOR FILING THE RETURN OF INCOME U/S 139(1) OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT] . THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAS CREDITED THE SAID SUM BEFORE 30 TH OR 31 ST MARCH TO THE ACCOUNT OF PARTY IN ITS BOOKS OF ACCOUNT. ACCORDING TO HIM THE ASSESSING OFFICER HAS NOT MADE OUT A CASE WHERE IN THE ENQUIRIES FROM PAYEES, IT IS FOUND THAT THEY HAD RECEIVED THE COMMISSION ON EARLIER DATES. IN SUCH CIRCUMSTANCES, NO ADVERSE INFERENCE COULD BE DRAWN. HE ALSO RELIED ON THE JUDGEMENT OF ITAT, JAIPUR IN CASE OF JVVNL VS. DCIT, 123TTJ88, ITAT SPECIAL BRANCH, VISHAKHAPATTANAM, IN THE CASE OF MERLYN SHIPPING & TRANSPORT VS. ADDL CIT, 136 ITD 23 WHERE IT WAS HELD THAT PROVISIONS OF SECTION 40 (A)(IA) CAN BE APPLIED ONLY ON THE PAYMENTS DUE AT THE END OF 4 FINANCIAL YEAR BUT NOT PAID. AS NO PAYMENT IS DUE TO PARTIES AS ON 31.03.2009 THE DISALLOWANCE COULD NOT HAVE BEEN MADE. HE ACCORDINGLY DELETED THE DISALLOWANCES. 2.3 THE L D. DR RELIED ON THE O RDER OF ASSESSING OFFICER. 2.4 ON THE OTHER HAND THE L D. AR SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE COMMISSION IS PAID TO SUB - DEALERS AS PER AGREED TERMS AND TDS HAS ALSO BEEN MADE. THIS IS ALSO AS PER THE PRACTICES GENERALLY FOLLOWED IN THE TRADE AND FURTHER AS PER PRACTICES FOLLOWED OVER THE YEARS. ACCORDINGLY, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) WHERE HE OBSERVED THAT A.O DID NOT MAK E A PROPER CASE TO SAY THAT THIS EXP ENDITURE SHOULD NOT BE ALLOWED U /S 37(1) OF THE ACT. HE FUR THER SUBMITTED THAT COMMISSION HAS BEEN CREDITED AND PAID IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ONLY IN THE MONTH OF MARCH, 2009. THE VOUCHERS OR THE OTHER DOCUMENTS ARE NOT RELEVANT BUT WHAT IS RELEVANT FOR APPLICATION OF SECTION 194H IS ENTRIES MADE I N BOOKS OF ACCOUNT/LEDGER OF THE PARTY AND ACCORDINGLY PROVISIONS OF TDS HAVE BEEN DULY COMPLIED BY THE ASSESSEE. HE FURTHER MENTIONED THAT EVEN IF THE TDS IS CONSIDERED TO HAVE BEEN MADE BEFORE MARCH 2009, IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) AM ENDED BY THE FINANCE ACT, 2010, 5 NO DISALLOWANCE CAN BE MADE IF SUCH TDS IS DEPOSITED PRIOR TO DUE DATE OF FILING RETURN U/S 139(1). HE PLACED RELIANCE ON THE JUDGEMENT OF THIS BENCH IN CASE OF DCI VS. RAJASTHAN ART EMPORIUM, 161/JODH/2011, (ORDER DATED 05/ 06/2013) WHEREIN THE SAID AMENDMENT HAS BEEN CONSIDERED TO BE OF CLARIFICATORY IN NATURE WHILE DEALING WITH CASE FOR THE A.Y. 2007 - 08. SIMILAR VIEW HAS BEEN EXPRESSED BY ITAT, MUMBAI IN THE CASE OF BAPUSAHEB NANASAHEB DHUMAL VS. ACIT, 40 SOT 361 (MUMBAI). 3. W E HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS BEEN MAKING THE PAYMENT OF COMMISSION TO SUB - DEALERS YEAR TO YEAR AND IT IS PRACTISE OF THE TRADE. FURTHER, THE PAYMENT HAS ACTUALLY BEEN MADE AND TDS IS ALSO DONE. IN SUCH CIRCUMSTANCES IT IS NOT CORRECT TO ALLEGE THAT THE EXPENDITURE IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS E SPECIALLY WHEN THE PAYEES ARE NOT RELATIVES OF ASSESSEE. FURTHER, WHEN THE CREDITS/PAYMENTS IN THE LEDG ER ACCOUNTS IS MADE IN THE MONTH OF MARCH, 2009 THE ASSESSEE HAS RIGHTY MADE TDS IN MARCH AND DEPOSITED IT BEFORE THE DUE DATE U/S 139(1) TO CLAIM THE DEDUCTION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) IN SUCH CIRCUMSTANCES. WE ACCORDINGLY UPHOLD THE ORDER 6 OF CIT(A) ON THIS ACCOUNT. WE ALSO OBSERVE THAT EVEN IF TDS WAS LIABLE TO BE MADE BEFORE MARCH, 2009 AND THE ASSESSEE HAD DEDUCTED IT DURING THE YEAR AND DEPOSITED BEFORE THE DUE DATE OF FILING RETURN U/S 139 (1), NO DISALLOWANCE COULD HAVE BEEN MADE IN VIEW OF OUR DECISION IN THE CASE OF RAJASTHAN ART EMPORIUM (SUPRA) WHEREIN IT WAS HELD THAT THE AMENDMENT MADE BY THE FINANCE ACT, 2010 IN SECTION 40(A)(IA) IS CLARIFICATORY IN NATURE. A CORDINGLY , WE DISMISS GRO UND NO. 1 AND 1.1 OF THE R APPEAL. 4. THE SECOND GROUND OF APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS. 1,44,800/ - MADE OUT OF SALES PROMOTION EXPENSES. 4.1 BRIEFLY STATED, THE FACTS RELATING TO THIS GROUND ARE THAT THE THE ASSESSEE CLAIMED A SUM OF RS. 6,83,317/ - AS EXPENDITURE TOWARDS SALES PROMOTION EXPENSES AGAINST CLAIM OF RS. 4,65,721/ - IN THE EARLIER YEAR. WHEN ASKED FOR THE DETAILS THE AO FOUND THAT IT IS INCENTIVE PAID TO 4 EMPLOYEES OF THE ASSESSEE OF WHICH INCENTIVE OF RS. 1,44,800/ - WAS PAID TO MR. BANSRAJ SHUKLA WHO IS ACCOUNTANT OF ASSESSEE. THE AO NOTICED THAT THE ACCOUNTANT D ID NOT HAVE ANY ROLE IN SALES ACTIVITY AND ACCORDINGLY DISALLOWED THE SUM OF RS. 1,44,800/ - . IN APPEAL T HE L D. CIT(A) HAS DELETED THE DISALLOWANCE BY POINTI NG OUT THAT THE PAYEE HAS 7 BEEN INVOLVED IN SALES ACTIVITY IN PRECEDING YEARS ALSO AND NO SUCH DISALLOWANCE WAS MADE. HE FOUND THAT THIS AMOUNT HAS BEEN ACTUALLY PAID AND ASSESSING OFFICER DID NOT BROUGHT ANYTHING ON RECORD TO PROVE THE ASSESSEES CLAIM AS INCORRECT. MERELY OBSERVING THAT ACCOUNTANT HAS NO ROLE IN SALES IS NOT SUFFICIENT THAT TOO WITHOUT EXAMINING THE PERSON OR BRINGING ANY OTHER MATERIAL ON RECORD. HE ACCORDINGLY DELETED THE DISALLOWANCE. 4.2 BEFORE US THE L D. D/R RELIED ON THE AS SESSMEN T ORDER WHILE THE L D. A . R SUPPORTED THE ORDER OF CIT(A). 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. WE DO N O T FIND ANY REASON TO DISAGREE WITH THE L D. CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE CA SE WHERE THE DISALLOWANCE OF ACTUALLY PAID INCENTIVE IS MADE MERELY BY POINTING OUT THAT THE PAYEE IS ACCOUNTANT. S IMILAR PAYMENTS TO OTHER PERSONS HA VE BEEN CONSIDERED ALLOWABLE BY THE A.O . FURTHER , THERE CANNOT BE DENIAL OF A SITUATION THAT ONE EMPLOYEE IS PERFORMING VARIOUS ROLES IN AN ORGANISATION. WE ARE , THEREFORE , IN FULL AGREEMENT WITH THE FINDINGS GIVEN BY THE CIT(A) AND UPHOLD THE SAME. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 8 5. GROUND NO 3 IS TAKEN AGAINST THE DELETION OF DISALLOWANCE OF WORK SHOP MAINTENANCE EXPENSES OF RS. 2,50,589/ - . 6. FACTS RELATING THIS GROUND ARE THAT D URING THE YEAR THE ASSESSEE CLAIMED WORK SHOP MAINTENANCE EXPENSES TO THE EXTENT OF RS. 2,75,039/ - AS AGAINST CLAIM OF RS. 2,25,000 / - IN THE PRECEDING YEAR. THE AO NOTICED THAT TWO PAYMENTS OF RS. 75,109/ - AND RS. 75,480/ - WERE MADE ON 31.03.2009 TO KOTHARI METAL TOWARDS IRON PURCHASE AND PAYMENT OF RS. 1 LAKH WAS MADE TO RAJENDRA SINGH RATHORE ON 31.03.2009 ON WHICH TDS U/S 194C WAS MADE. ON THIS BASIS LD. AO CONCL UDED THAT EXPENDITURE OF RS. 2,50,589/ - WAS A CAPITAL EXPENDITURE. THE CIT(A) HAS DELETED THE DISALLOWANCE BY POINTING OUT THAT DISALLOWANCE HAS BEEN MADE WITHOUT SUFFICIENT BASIS AND WITHOUT MAKING ANY ENQUIRY. 6.1 BEFORE US T HE L D. D . R RELIED ON THE A SSESSMENT ORDER WHILE THE LD. A. R SUPPORTED THE ORDER OF CIT (A) AND SUBMITTED THAT THE ASSESSEE HAS NOT CONSTRUCTED ANYTHING NEW AND THEREFORE QUESTION OF CONSIDERING IT AS CAPITAL EXPENDITURE DOES NOT ARISE. 9 6.2 WE HAVE HEARD THE RIVAL PARTIES AND HAVE C AREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE ARE IN FULL AGREEMENT WITH LD. CIT(A) THAT AO DID NOT POINT OUT ANY GOOD REASON TO TREAT THE EXPENDITURE IN QUESTION AS A CAPITAL EXPENDITURE. HE HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT SOME NEW AS SET HAS COME INTO EXIST ENCE BY INCURRING THIS EXPENDITURE. ACCORDINGLY , WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE IN THIS CASE IS NOT JUSTIFIED AND HAS RIGHTLY BEEN DELETED BY THE CIT(A). THEREFORE, WE DISMISS THIS GROUND OF APPEAL . 7. THE FOURTH AND THE LAST GROUND OF APPEAL IS AGAINST DELETION OF DISALLOWANCE OF PF AND ESI OF RS. 33,404/ - . 7.1 AS PER TAX AUDIT REPORT THE EMPLOYEES CONTRIBUTION TO THESE FUNDS HAVE BEEN MADE BEYOND THE PRESCRIBED TIME LIMIT UNDER THE RELEVANT ACT, THOUGH T HE PAYMENTS WERE MADE WITHIN THE TIME LIMIT OF FILING RETURN U/S 139(1). THE A.O APPLIED THE PROVISIONS OF SECTION 36(1)(VA) OF THE ACT AND DISALLOWED THE SAME. THE CIT(A) DELETED THE DISALLOWANCE FINDING BY HOLDING THAT THE PROVISIONS OF SECTION 43B OF T HE ACT ARE APPLICABLE. 10 7.2 THE L D. D/R RELIED ON THE ASSESSMENT ORDER AND SUBMITTED THAT THE PROVISION S OF SECTION 36(1)(VA) OF THE ACT ARE APPLICABLE ON EMPLOYEES CONTRIBUTION TOWARDS PF & ESI AND NOT SECTION 43B. 7.3 THE L D. A . R ON THE OTHER HAND REL IED ON JUDGEMENT OF MUMBAI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CHEMICALS LTD., 107 DTR 105 WHEREIN THE EMPLOYEES CONTRIBUTION TO PF & ESI HAS BEEN FOUND ALLOWABLE IF THE SAME IS PAID TILL THE DUE DATE OF FILING RETURN OF INCOME U/S139(1) OF THE ACT . 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. W E FIND THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE JUDGEMENT OF MUMBAI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CH EMICAL LTD. (SUPRA) WHEREIN EVEN THE EMPLOYEES CONTRIBUTION TO PF AND ESI HAS BEEN FOUND ALLOWABLE IF PAID PRIOR TO THE DUE DATE OF FILING RETURN U/S 139 (1). THE HIGH COURT HAS REFERRED THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSION L TD. 319ITR306(SC). WE ACCORDINGLY REJECT THIS GROUND OF APPEAL ALSO. 11 8 . IN THE RESU LT, THE APPEAL OF THE REVENUE IN ITA NO. 111 /JU/2014 FOR A.Y. 2009 - 10 STANDS DISMISSED. ORDER PRON OUNCED IN THE COURT ON 25 TH SEPTEMBER , 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEM B ER DATED : 25 TH SEPTEMBER , 201 4 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR SENIOR PRIVATE SECRETARY ITAT, JODHPUR