Perfect Accounting & Shared Services Private Limited , Kolkata V. I.T.O.,Ward-11(1), Kolkata

ITA 1119/KOL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0025 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 13-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Gift; Business expenditure
• Section: 143(3); 201; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1 119 / KOL / 201 9 ASSESSMENT YEAR :2014-15 PERFECT ACCOUNTING & SHARED SERVICES PVT. LTD., 2-E, GROUND FLOOR, ALIPORE AVENUE, KOLKATA-700 027 [ PAN NO.AABCP 9729 R ] V/S . INCOME TAX OFFICER WARD-11(1), 6 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT NONE /BY RESPONDENT SMT. RANU BISWAS, ADDL. CIT-DR /DATE OF HEARING 17-12-2019 /DATE OF PRONOUNCEMENT 23-12-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-25 KOLKATAS O RDER DATED 28.03.2019 PASSED IN CASE NO. 370/CIT(A)-25/KOL/2018-19, IN PROCEEDIN GS U/S 143(3) OF THE INCOME TAX ACT, 1961; THE ACT. CASE CALLED TWICE. NONE APPEARS AT ASSESSEES BEHES T. IT IS ACCORDINGLY PROCEEDED EX PARTE . 2. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE STRONGLY SUPPORTING BOTH THE LOWER AUTHORITIES ACTION DISALLOWING THE A SSESSEES GIFTS MADE TO ITS STAFF MEMBERS AMOUNTING TO 5,45,413/- AND CLAIMED AS STAFF WELFARE EXPENSES. C ASE FILE PERUSED WITH THE ABLE ASSISTANCE OF MRS. BISWAS. ITA NO.1119/KOL/2019 A.Y. 2014-15 PERFECT ACCOUNTING & SHARED SERVICES PVT. LTD. VS . ITO WD-11(1), KOL. PAGE 2 3. THE CIT(A)S DETAILED DISCUSSION AFFIRMING THE A SSESSING OFFICERS ACTION DISALLOWING THE IMPUGNED STAFF WELFARE EXPENDITURE OF 5,45,413/- READS AS UNDER:- 5. I HAVE GONE THROUGH THE CONTENTION OF THE ASSES SEE, THE ORDER PASSED BY THE AO AND THE SUBMISSIONS MADE BY THE APPELLANT. THE DECISION OF THIS APPEAL IS QIVEN AS UNDER:- 5.1 IN THIS CASE THE FIRST GROUND OF APPEAL RELATES TO THE ISSUE OF DISALLOWANCE OF RS. 545413/- UNDER THE HEAD OF STAFF WELFARE EXPENSES INCURRED B Y THE APPELLANT. WHILE DISALLOWING THE EXPENDITURE THE AO HAS OBSERV ED AS UNDER:- 'STAFF WELFARE EXPENSES: THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT DEBITED OF RS.1234849/- AS EXPENSES TOWARD STAFF WELFARE EXPENSES OUT OF TH E AMOUNT RS.545413/- PAID BY THE ASSESSEE BIRTHDAY GIFT, MARRIAGE GIFT, DIWALI GIFT ETC. AND RS.689436/- PAID BY THE ASSESSEE FOR TEA AND TIFFIN EXPENSES-MR. S.K. PITTY, AR OF THE A SSESSEE APPEARED ON 12/08/2016 AND FURNISHED A LEDGER COPY OF SUCH EXPENSES, FURTHER, M. PITTY APPEARED ON 18/10/2016 AND HE IS REQUESTED TO EXPLAIN STAFF WELFARE EXPENSES PAID TO STAFF FOR MARRIAGE GIFT, BIRTHDAY GIFT, DIWALI GIFT ETC WHY IT SHALL NOT BE DISALLOWED. THE AR OF THE ASSESSEE FURNISHES A WRITTEN SUBMISSI ON WHERE HE STATED THAT 'DURING THE F.Y 2013- 14, THE ASSESSEE COMPANY HAS GIVEN GIFT TO IT S STAFF ON THE OCCASION OF THEIR MARRIAGE/MARRIAGE OF THEIR FAMILY MEMBERS (SISTER/B ROTHER), THE AMOUNT OF GIFT GIVEN WAS APPROXIMATE RS.5100 AT THE TIME OF MARRIAGE OF STAF F MEMBER, THE AMOUNT OF GIFT GIVEN AT THE TIME OF MARRIAGE OF BROTHER /SISTER OF STAFF MEMBER WAS APPROXIMATE RS.2100. THE COMPANY HAS ALSO PAID CERTAIN GIFTS OF HIGHER AMOUNTS WHERE THE STAFF GETTING MARRIAGE IS ASSOCIATED WITH THE COMPANY FOR LONGER TERM I.E.4 TO 5 YEARS, THE EXPENSES WERE GENUINELY INCURRED FOR THE PURPOSE OF STAFF WELFARE ONLY. THE INTENTION BE HIND GIFTS OF HIGHER AMOUNTS WAS TO ENCOURAGE STAFF MEMBER TO REMAIN ASSOCIATED WITH TH E COMPANY FOR A LONGER TIME. SINCE, THESE EXPENSES ARE NECESSARY FROM BUSINESS PERSPECT IVE, THE SAME SHOULD BE ALLOWED AS BUSINESS EXPENSES. WE WOULD ALSO LIKE TO BRING TO Y OUR NOTICE THAT THE CORE OF OUR BUSINESS IS ITS EMPLOYEES AND THIS MAY BE TREATED AS A STEP TOW ARDS RETAINING THE OF EMPLOYEES SPECIALLY THE ONES WHO ASSOCIATED WITH US 4 TO 5 YEARS. CONSIDERING THE SUBMISSION OF THE ASSESSEE AND FIND THAT THE EXPENDITURE MADE BY THE ASSESSEE IS NON-COMMERCIAL OR NONETRADING NATURE. HOWEVER, THE ENTIRE EXPENSES MADE BY THE ASSESSEE AMONG THEIR STAFF MEMBERS NOT TO THE C LIENTS, IF IT WAS BUSINESS PERSPECTIVE OF THE ASSESSEE THEN IT HAD TO BE DISTRIBUTED AMONG TH E CLIENT MEMBERS NOT ONLY THE STAFF MEMBERS. HENCE, THE EXPENDITURE MADE BY THE ASSESSE E OF RS.545413/- IS BEING DISALLOWED U/S. 37 OF THE I.T, ACT, 1961 AS IT IS COMPLETELY P ERSONAL IN NATURE AND ADDED BACK TO THE TOTAL INCOME.' ITA NO.1119/KOL/2019 A.Y. 2014-15 PERFECT ACCOUNTING & SHARED SERVICES PVT. LTD. VS . ITO WD-11(1), KOL. PAGE 3 IN THIS CASE PERUSAL OF FACTS SHOWS THAT THE APPELL ANT HAS MADE GIFT TO THE STAFF AT MARRIAGE OCCASION APART FROM SEPARATE CLAIM OF STAFF WELFARE EXPENSES. THE GIFT TO THE STAFF FAMILY MEMBER HAS BEEN JUSTIFIED AS A STAFF WELFARE EXPENS ES. IN THIS REGARD IT IS PERTINENT TO MENTION HERE THAT THE FAMILY MEMBERS ARE NOT STAFF OF THE C OMPANY AND IT CANNOT BE SAID THAT IT WAS KIND OF INCENTIVE IN LIEU OF THEIR WORK GIVEN TO TH EIR STAFF RATHER IT WAS PURELY GIFT IN NATURE WHICH HAS BEEN GIVEN AT A MARRIAGE OCCASION AT THE FAMILY MEMBER OF THE STAFF. THEREFORE I AM AGREE WITH THE FINDING OF THE AO. THE ACTION OF THE AO IS UPHELD AND GROUND OF APPEAL IS DISMISSED. GROUND NO. 2 OF THE APPEAL RELATES TO THE DISALLOWA NCE OF RS. 206831/- UNDER THE HEAD OF STAFF WELFARE EXPENSES INCURRED BY THE ASSESSEE COMPANY F OR TEA AND TIFFIN EXPENSES. WHILE DISALLOWING THE SAME THE AO HAS OBSERVED AS U NDER:- 'MOREOVER, THE ASSESSEE PAID RS,689436/- FOR TEA AN D TIFFIN EXPENSES. MR. S.K. PITTY, AR OF THE ASSESSEE APPEARED ON 12/08/2016 AND FURNISHED A LEDGER COPY OF SUCH EXPENSES, NO OTHER DOCUMENT FURNISHED REGARDING - EXPENSES. THE ENTIRE EXPENSES MAID BY THE ASSESSEE THROUGH CASH. HOWEVER, CONSIDERING SUCH EXPENSE' BE ING INCIDENTAL TO ASSESSEE'S DAY TO DAYS BUSINESS ACTIVITIES, ONLY 30% OF RS.689436/- I.E. . 20683 /-IS BEING DISALLOWED ON ESTIMATE BASIS WHICH IS ADDED) BACK TO THE TOTAL INCOME.' IN THIS REGARD THE APPELLANT WAS ASKED TO SUBMIT THE DETAILS. IN ORDER TO PROVE HIS BONA FIDE THE APPELLANT SUBMITTED ITS DETAILS WHICH WERE SENT TO THE AO FOR EXAMINATION. THE AO IN HIS REMAND REPORT DATED 12.02.2019 HAS ST ATED AS UNDER: ' ON EXAMINATION OF 'TEA & TIFFIN EXPENSES'(DEBITED UNDER STAFF WELFARE EXPENSES), THE ASSESSEE COMPANY PRODUCED LEDGERS AND CASH MEMOS/VO UCHERS/CHITS ETC. BEFORE THE UNDERSIGNED AT THE TIME OF HEARING AND THE SAME HAV E BEEN EXAMINED ON TEST CHECK BASIS AND FOUND CORRECT.' KEEPING IN VIEW OF THE FACT THE AO HAS FOUND IT COR RECT AFTER DUE EXAMINATION THEREFORE THE ADDITION MADE BY THE AO IS HEREBY DELETED AND GROUN D OF APPEAL IS ALLOWED. 4. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDED THAT THE LEARNED LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE ASSES SEES STAFF WELFARE EXPENSES IN QUESTION SINCE THE SAME COULD NOT HAVE BEEN HELD HA S INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. SHE RE ITERATED THE FACTS THAT THE ASSESSEES CLAIM TO HAVE MADE GIFTS TO ITS STAFF ME MBERS ON MARRIAGE AND OTHER SIMILAR OCCASIONS IS NOT ALLOWABLE. THERE IS ADMITT EDLY NO DISPUTE BETWEEN THE PARTIES ABOUT THE GENUINENESS OF THE ASSESSEES CLA IM. WE NOTICE IN THIS BACKDROP ITA NO.1119/KOL/2019 A.Y. 2014-15 PERFECT ACCOUNTING & SHARED SERVICES PVT. LTD. VS . ITO WD-11(1), KOL. PAGE 4 THAT THE TRIBUNALS CO-ORDINATE BENCH DECISION IN BHARAT HEAVY ELECTRICALS LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (2005) 98 TTJ 565 (DEL) HOLDS HAT AN ASSESSEES EXPENDITURE INCURRED ON STAFF WELFARE AR E ALLOWABLE A BUSINESS EXPENDITURE U/S. 37 OF THE ACT. WE EXPRESS OUR AGRE EMENT WITH THE SAME AND HOLD THAT THE LEARNED LOWER AUTHORITIES HAVE ERRED DISAL LOWING ASSESSEES IMPUGNED CLAIM. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE STA FF WELFARE EXPENSES DISALLOWANCE OF 5,45,413/-. CONSEQUENTIAL COMPUTATION TO FOLLOW AS PER LAW. 5. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 23/12/2019. SD/- SD/- ( &) (( &) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP )- 23 / 12 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-PERFECT ACCOUNTING & SHARED SERVICES PVT. LTD. 2-E, GR. FL, ALIPORE AVENUE, KOLKATA-27 2. /RESPONDENT-ITO WARD-11(1) 6 TH FLOOR, AAYAKAR BHAWAN, P-7,CHOWRINGHEE SQUARE, KOLKAT A-700 069 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. ((4, 4, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 4,