ACIT, CHENNAI V. M/s. KCP Sugar and Industries Corporation Ltd., CHENNAI

ITA 1154/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1066 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-02-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: K R ADIVARAHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NO. 1154/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(4), CHENNAI 600 034. (APPELLANT) V. M/S KCP SUGAR AND INDUSTRIES CORPORATION LTD., RAMAKRISHNA BUILDINGS, 239, ANNA SALAI, CHENNAI 600 006. PAN : AAACK2325F (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI K.R. A DIVARAHAN O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANCE IS THAT CIT(APPEALS) DELETED THE DISALLOWANCE OF RS.20,03,2 54/- MADE BY THE A.O. ON CANE DEVELOPMENT EXPENDITURE. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING SUGAR, INDUSTRIAL ALCOHOL, ETC., H AD CLAIMED FOR THE I.T.A. NO. 1154/MDS/10 2 RELEVANT PREVIOUS YEAR CANE DEVELOPMENT EXPENDITURE OF RS.1,00,16,269/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS REQUIRED TO PRODUCE EVIDENCES AND VOUCHERS FOR SUCH CLAIM. THOUGH THE ASSESSEE PRODUCED LEDGER AND OTHER DETAI LS, ASSESSING OFFICER WAS OF THE OPINION THAT IT COULD NOT PRODUC E VOUCHERS IN FULL FOR VERIFICATION. HE, THEREFORE, MADE AN AD HOC DISAL LOWANCE OF 20% OF THE CLAIM, COMING TO RS.20,03,254/-. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT RS.62,55,951/- WAS THE COMPENSATION GIVEN TO CANE GROWERS FOR LOSS OF SUGARCANE CROPS ON ACCOUNT OF PEST ATTA CKS, DISEASE, NATURAL CALAMITIES, ETC. BALANCE OF RS.37,60,318/- , AS PER THE ASSESSEE, WAS INCURRED FOR REPAIR OF ROADS. ASSESS EE POINTED OUT THAT COMPLETE DETAILS OF EXPENDITURE WERE PRODUCED BEFORE THE A.O. ALONG WITH A DETAILED NOTE JUSTIFYING SUCH OUTGO. IT WAS POINTED OUT THAT SIMILAR CANE DEVELOPMENT EXPENDITURE WAS INCUR RED ON REGULAR BASIS IN EARLIER FINANCIAL YEARS ALSO. MAIN ARGUME NT OF THE ASSESSEE WAS THAT THE PAYMENTS WERE ALL BY ACCOUNT PAYEE CHE QUES AND THERE WAS NO CAUSE FOR DISALLOWANCE. LD. CIT(APPEALS) WA S APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, THE DISALLOWANC E MADE BY THE A.O. WAS NOT SUSTAINABLE SINCE THESE WERE ESSENTIALLY IN CURRED BY THE I.T.A. NO. 1154/MDS/10 3 ASSESSEE AS A GOOD CORPORATE CITIZEN FOR CREATING A N ATMOSPHERE IN WHICH IT COULD PROCEED WITH ITS BUSINESS AND FOR EN SURING THE SMOOTH OPERATION OF ITS BUSINESS. FURTHER, ACCORDING TO C IT(APPEALS), THE PAYMENTS WERE ALSO MADE BY ACCOUNT PAYEE CHEQUES. 4. NOW, BEFORE US, THE LEARNED D.R. STRONGLY ASSAIL ING THE CIT(APPEALS)S ORDER, SUBMITTED THAT THE DISALLOWAN CE WAS MADE FOR THE REASON THAT ASSESSEE COULD NOT PRODUCE VOUCHERS IN SUPPORT OF ITS CLAIM. 5. PER CONTRA, THE LEARNED A.R. SUPPORTED THE ORDER OF LD. CIT(APPEALS). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THE DISALLOWANCE MADE BY THE A.O. NOT FOR A REASON THAT IT WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E. THE DISALLOWANCE WAS ONLY MADE FOR A REASON THAT ASSESS EE FAILED TO PRODUCE VOUCHERS IN FULL FOR VERIFICATION. THERE I S NO DISPUTE THAT PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES BY THE ASSESSEE. WHEN THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE S AND PAYMENTS WERE IN THE NATURE OF COMPENSATION TO CANE GROWERS AND REPAIRS OF ROADS, JUST FOR A REASON THAT ALL VOUCHE RS WERE NOT AVAILABLE, I.T.A. NO. 1154/MDS/10 4 THE DISALLOWANCE OUGHT NOT HAVE BEEN MADE. EVEN IF SUCH DISALLOWANCE WAS WARRANTED, THE A.O. WAS DUTY-BOUND TO POINT OUT WHICH WERE THE EXPENDITURES FOR WHICH ASSESSEE WAS UNABLE TO PRODUCE VOUCHERS AND HE OUGHT HAVE LIMITED THE DISA LLOWANCE TO SUCH EXTENT. IN THESE CIRCUMSTANCES, WE ARE OF THE OPIN ION THAT CIT(APPEALS) WAS FULLY JUSTIFIED IN DELETING THE DI SALLOWANCE MADE ON AD HOC BASIS. NO INTERFERENCE IS CALLED FOR. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON THE TWENTY SECOND DAY OF FEBRUARY, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND FEBRUARY, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-III, CHENNAI (4) CIT, CHENNAI-I, CHENNAI (5) D.R. (6) GUARD FILE