DCIT, Ludhiana V. M/s Satyam Auto Components Ltd., Ludhiana

ITA 1167/CHANDI/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6972 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Tax effect

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJ AY GARG, JUDICIAL MEMBER ./ ITA NO. 1167/CHD/2016 ! / ASSESSMENT YEAR : 2010-11 THE DCIT, CIRCLE - 5, LUDHIANA '# M/S SATYAM AUTO COMPONENTS LTD., G.T.ROAD, HERO NAGAR, LUDHIANA $ % ./PAN NO: AACCS2689E $&/ APPELLANT ()$& /RESPONDENT & C.O. NO. 46/CHD/2017 (IN ./ ITA NO. 1167/CHD/2016) ! / ASSESSMENT YEAR : 2010-11 M/S SATYAM AUTO COMPONENTS LTD., G.T.ROAD, HERO NAGAR, LUDHIANA '# THE DCIT, CIRCLE - 5, LUDHIANA $ % ./PAN NO: AACCS2689E $&/ APPELLANT ()$& /RESPONDENT ./ 0 1 /ASSESSEE BY : SH. SUBHASH AGGARWAL, ADVOCATE 0 1 / REVENUE BY : SH. MANJIT SINGH, SR.DR 2 3 0 /4% /DATE OF HEARING : 04.02.2019 56! 0 /4% / DATE OF PRONOUNCEMENT : 26.04.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED APPEAL PREFERRED BY THE REVENUE AND CROSS OBJECTIONS BY THE ASSESSEE ARE AGAINST THE ORDER DATED 01.08 .2016 OF COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA [HEREINAFTER R EFERRED TO AS CIT(A)]. ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 2 2. FIRST WE SHALL TAKE UP APPEAL OF THE REVENUE IN ITA NO. 1167/CHD/2016. ITA NO. 1167/CHD/2016 : 3. AT THE OUTSET, BOTH THE LD. REPRESENTATIVES OF T HE PARTIES HAVE SUBMITTED THAT THE TAX EFFECT IN THE PRESENT CASE IS LESS THAN RS. 20 LACS AND, THEREFORE, THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 4. IT MAY BE NOTED THAT CBDT VIDE CIRCULAR NO. 3/20 18 DATED 11.07.2018 HAS REVISED THE MONETARY LIMIT UPTO RS.2 0 LACS FOR FILING APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL AND F URTHER VIDE PARA 13 OF THE SAID CIRCULAR IT HAS BEEN CLARIFIED THAT SAID C IRCULAR IS APPLICABLE RETROSPECTIVELY TO THE PENDING APPEALS ALSO. THE H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PRINCIPAL CIT OF INCOME TAX VS. SURINDER KUMAR SINGHAL ITA NO 406-2016 (O&M) VIDE ORDER DATED 30.1.2017 WHILE FURTHER RELYING UPON THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DHANALEKSHMI BANK LTD . (2015) 373 ITR 526 (SC), HAS DISMISSED THE APPEAL OF THE REVENUE W ITHOUT GOING INTO THE MERITS DUE TO LOW TAX EFFECT LEAVING THE QUESTION O F LAW OPEN. IN VIEW OF THE CBDT CIRCULAR NO. 03/2018 (SUPRA) AND IN THE LI GHT OF THE ABOVE REFERRED TO DECISION OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT (SUPRA), THE PRESENT APPEAL OF THE REVENUE IS DISMISSED DUE TO LOW TAX EFFECT. IT IS, HOWEVER, CLARIFIED THAT THE DISMISSAL OF THE ABOVE APPEAL SHALL NOT BE TAKEN TO BE AFFIRMATION OF THE ORDER OF THE CIT(A) ON MERITS. THE LEGAL ISSUE RAISED BY THE REVENUE IS BEING LEFT OPE N TO BE ADJUDICATED IN AN APPROPRIATE CASE. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 3 C.O. NO. 46/CHD/2017 : NOW COMING TO CROSS OBJECTIONS FILED BY THE ASSESSE E, WHEREIN, FOLLOWING CROSS OBJECTIONS HAVE BEEN RAISED:- 1. THAT THE LEARNED AO, HAS ERRED IN RESTRICTING THE DISALLOWANCE OF POOJA EXPENSES TO RS. 75,000/ OUT OF CLAIM OF RS. 1 ,47,886/-. 2. THAT THE LEARNED AO, HAS ERRED IN CONFIRMING THE DI SALLOWANCE OF RS. 5,52,897/- OUT OF FOREIGN TRAVELLING EXPENSE S OF RS. 48,23,473/- 3. THAT THE LEARNED AO, HAS ERRED CONFIRMING THE DISAL LOWANCE OF INTEREST U/S 36(L)(III) AMOUNTING TO RS. 12,25,292/ - IGNORING THE FACT THAT THE INVESTMENT IN THE FIXED ASSETS AN D CAPITAL- WORK-IN-PROGRESS WAS MADE OUT OF OWN FUNDS. 4. THAT THE ASSESSEE CRAVES PERMISSION TO ADD, AMEND O R ALTER ANY CROSS-OBJECTION AT THE TIME OF HEARING. 5. GROUND NO.1: VIDE GROUND NO.1, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN RESTRICTING THE DISALLOWANC E OF POOJA EXPENSES OF 75,000/- OUT OF THE TOTAL EXPENDITURE CLAIMED OF 1,47,886/-. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT OUT OF THE TOTAL POOJA EXPENSES OF 1,47,886/-, A SUM OF 83,316/-, WHICH WAS RELATABLE TO THE HARIDWAR UNIT OF THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). H OWEVER, THE ASSESSING OFFICER HAS WRONGLY TAKEN THE EXPENSES RE LATABLE TO HARIDWAR UNIT AS PART OF EXPENSES OF MANESAR UNIT. FURTHER, THAT THE POOJA EXPENSES RELATABLE TO THE MANESAR UNIT WERE 64,570/-. THAT ALL THESE EXPENSES ARE NORMAL DAY TO DAY POOJA EXPENSES CARRI ED OUT IN THE RESPECTIVE UNIT OF THE ASSESSEE TO MAINTAIN GOOD RE LATION WITH THE WORKERS OF THE COMPANY AND TO MAINTAIN PEACE AND HA RMONY AND THUS ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 4 WAS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. TH AT THE LD. CIT(A), WITHOUT CONSIDERING THE ABOVE SUBMISSIONS OF THE AS SESSEE HAS RESTRICTED THE DISALLOWANCE OF POOJA EXPENSES TO 75,000/- ON AD HOC BASIS. 7. AFTER HEARING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LD. CIT(A) IN REST RICTING THE AFORESAID DISALLOWANCE OF EXPENSES TO 75,000/- ON ADHOC BASIS. THE ASSESSEE HAD FURNISHED UNIT WISE DETAILS OF DAY TO DAY POOJA EXPENSES BEFORE THE LD. CIT(A). FURTHER, THE REMAND REPORT WAS ALSO CA LLED UPON BY THE CIT(A) FROM THE ASSESSING OFFICER. THE ASSESSING O FFICER HAS NOT DISPUTED THE CONTENTION OF THE ASSESSEE THAT OUT OF THE TOTAL POOJA EXPENSES OF 1,47,886/-, AN AMOUNT OF 83,316/- WAS RELATABLE TO HARIDWAR UNIT, THE TOTAL INCOME OF WHICH WAS ELIGIB LE FOR DEDUCTION U/S 80IC OF THE ACT. FURTHER, CONSIDERING THE SMALL AMO UNT OF 64,570/- INCURRED BY THE ASSESSEE FOR NORMAL DAY TO DAY POO JA EXPENSES AS COMPARED TO THE TOTAL RETURNED INCOME OF 12,94,52,310/-, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUT HORITIES IN MAKING THE AFORESAID DISALLOWANCE, AS ADMITTEDLY, THE SAID POO JA EXPENSES HAVE BEEN INCURRED IN THE PREMISES OF THE UNIT FOR THE N EED OF THE WORKERS AND TO MAINTAIN PEACE AND HARMONY AMONG THEM. GROUND NO.1 OF THE CROSS OBJECTIONS IS, THEREF ORE, ALLOWED AND THE DISALLOWANCE MADE UNDER THIS HEAD IS ORDERED TO BE DELETED. 8. GROUND NO.2 : VIDE THIS GROUND OF THE CROSS OBJECTIONS, THE ASSESSEE HAS AGITATED THE CONFORMATION OF DISALLOWA NCE OF 5,52,897/- OUT OF FOREIGN TRAVELLING EXPENSES OF 48,23,473/- ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 5 9. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE ASSESSEE HAD INCURRED TOTAL FOREIGN TRAVELLING EXPENSES OF 48,23,476/- INCLUDING THE EXPENDITURE INCURRED ON F OREIGN TRIP OF WIFE AND CHILDREN OF THE DIRECTOR OF THE COMPANY. OUT OF THE AFORESAID EXPENDITURE, THE ASSESSEE HAD ALREADY TREATED A SUM OF 7,68,277/- AS PERQUISITE IN THE HANDS OF THE DIRECTOR. THE ASSESS ING OFFICER AFTER GIVING BENEFIT OF THE AMOUNT TAKEN AS PERQUISITE IN THE HANDS OF THE DIRECTOR, DISALLOWED A SUM OF 22,99,050/- OUT OF FOREIGN TRAVEL EXPENSES INCURRED ON WIFE AND CHILDREN OF THE DIREC TOR OF THE COMPANY. THE LD. CIT(A) WHILE RELYING ON THE DECISION OF THE ITAT IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 ALLOWED THE EXPENDITURE RELATING TO THE FOREIGN TRAVEL OF THE WIFE OF THE ASSESSEE AMOUNTING TO 9,47,810/-. HOWEVER, SO FAR AS THE CLAIM OF FOREIG N TRAVEL EXPENSES OF THE CHILDREN OF THE DIRECTOR WAS CONCERNED, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAD COMP UTED TOTAL EXPENSES PERTAINING TO THE FOREIGN TRAVEL OF THE CH ILDREN AT 13,51,240/-. WHILE COMPUTING THE ABOVE EXPENSES, T HE ASSESSING OFFICER HAD TAKEN BOARDING & LODGING EXPENSES OF TH E CHILDREN @ 50% OF THE TOTAL BOARDING & LODGING OF THE VISIT. THE L D. CIT(A) OBSERVED THAT BOTH THE CHILDREN OF THE DIRECTOR WERE MINOR A ND THAT THE EXPENDITURE ATTRIBUTABLE TO BOARDING & LODGING CAN NOT BE EQUATED TO THE EXPENDITURE INCURRED AS BOARDING & LODGING OF THE DIRECTOR AND HIS SPOUSE. HE, THEREFORE, DIRECTED THE ASSESSING OFFIC ER TO TAKE 25% OF THE TOTAL BOARDING & LODGING EXPENDITURE ATTRIBUTABLE T O THE CHILDREN. HE, THEREAFTER MADE THE CALCULATION AND CONFIRMED THE D ISALLOWANCE OF 5,52,897/-. THE LD. COUNSEL FOR THE ASSESSEE, HOWEV ER, HAS DISPUTED ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 6 ONLY THE CALCULATION OF THE AFORESAID DISALLOWANCE IN TERMS OF THE RELIEF GRANTED BY THE CIT(A). FURTHER, THE LD. COUNSEL HAS SUBMITTED THAT THE ASSESSING OFFICER AFTER GIVING BENEFIT OF PERQUISIT ES DECLARED IN THE HANDS OF THE DIRECTOR DISALLOWED A SUM FOR BOARDING & LODGING EXPENSES OF THE WIFE AS WELL AS CHILDREN, THE TOTAL OF WHI CH CAME TO 20,26,861/-, HOWEVER, THE ASSESSING OFFICER MENTION ED IN THE ASSESSMENT ORDER THE AMOUNT OF DISALLOWANCE AS 22,9 9,050/-. ASSESSEE HAS DISPUTED THE CALCULATION IN THIS RESPECT. THE LD. CIT(A) HAS ALLOWED THE EXPENDITURE RELATING TO THE FOREIGN TRA VEL OF THE WIFE AS WELL AS HAS RESTRICTED THE DISALLOWANCE RELATING TO THE BOARDING & LODGING OF THE CHILDREN TO THE EXTENT OF 25% OF THE TOTAL BOARDING & LODGING EXPENDITURE AS AGAINST 50% MADE BY THE ASSE SSING OFFICER. AS NOTED ABOVE, THE LD. COUNSEL FOR THE ASSESSEE HAS D ISPUTED THE CALCULATION MADE BY THE CIT(A) IN THIS RESPECT ALSO . SINCE THERE IS A CALCULATION ISSUE, WE R ESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO RECOMPUTE / CALCUL ATE THE DISALLOWANCE MADE UNDER THIS HEAD AFTER GOING THROUGH THE ORDER OF THE ASSESSING OFFICER AS WELL AS CONSIDERING THE RELIEF GRANTED B Y THE CIT(A). 10. GROUND NO.3 : VIDE GROUND NO.3 OF THE CROSS OBJECTIONS, THE ASSESSEE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE U/S 36(1)(III ) OF THE ACT AMOUNTING TO 12,25,292/-. THE CASE OF THE ASSESSEE BEFORE THE L OWER AUTHORITIES WAS THAT THE ASSESSEE HAD OWN SUFFICIE NT FUNDS TO MEET THE INVESTMENT. THE LD. COUNSEL FOR THE ASSESSEE IN THI S RESPECT HAS SUBMITTED THAT THE ASSESSEE DURING THE YEAR HAD SHA RE CAPITAL OF 20 CORERS, RESERVES AND SURPLUSES OF 63.32 CORES TOTALLING 83.32 CORES. ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 7 APART FROM THAT, THE INCOME OF THE ASSESSEE DURING THE YEAR WAS 39.97 CORES, WHEREAS, THE INVESTMENT MADE IN THE FIXED AS SETS WERE 22.19 CRORES AND THE ADDITION IN BUILDING WAS AMOUNTING T O 4.66 CRORES. THAT THE INVESTMENT OF THE YEAR WAS MUCH LESS THAN THE RESERVES AND SURPLUS AVAILABLE WITH THE ASSESSEE. 11. THE ISSUE IS NOW SQUARELY COVERED BY THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2010] 410 ITR 466 (SC), WHEREIN, THE HON'BLE SUPREME COURT HAS AFFIRMED THE PROPOSITION OF LAW THAT IF THE OWN FUNDS / INTEREST FREE FUNDS ARE AVAILABLE WITH THE ASSESSEE TO MEET THE INVESTMENT, PRESUMPTION WILL BE THAT THE ASSESSEE HAD USED ITS OWN / INTEREST FREE FUNDS FOR THE SAID INVESTMENT. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE AND THE DISALLOWANCE MADE U/S 36(1)(III) OF THE ACT IS ORDE RED TO BE DELETED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE I S DISMISSED ON ACCOUNT OF LOW TAX EFFECT BEING HIT BY THE CBDT CIRCULAR NO . 3/2018 DATED 11.07.2018, WHEREAS, THE CROSS OBJECTIONS OF THE AS SESSEE, IN VIEW OF OUR OBSERVATIONS MADE ABOVE, ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2019 SD/- SD/- ( . . / N.K. SAINI) ( !' # / SANJAY GARG) $%& / VICE PRESIDENT ' ( /JUDICIAL MEMBER DATED : 26/ 04 /2019 .. ITA NOS. 1167/CHD/2068 & C.O.461/CHD/2017 M/S SATYAM AUTO COMPONENTS LTD., LUDHIANA 8 7 0 (/89 :9!/ / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. ()$& / THE RESPONDENT 3. 2 ;/ / CIT 4. 2 ;/ ( )/ THE CIT(A) 5. 9< (/= , 4 = , >?@A / DR, ITAT, CHANDIGARH 6. @ B3 / GUARD FILE 7 2 / BY ORDER, C / ASSISTANT REGISTRAR