GEHLOT ENTERPRISES P. LTD., Jaipur V. DCIT, Jaipur

ITA 124/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5001 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Assessee Lawyers: G G MUNDRA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.124/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 M/S GEHLOT ENTERPRISES PVT. LTD., M.I. ROAD, JAIPUR CUKE VS. DCIT, CIRCLE-2, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACG 8950 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO.201/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 DCIT, CIRCLE-2, JAIPUR CUKE VS. M/S GEHLOT ENTERPRISES PVT. LTD., M.I. ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACG 8950 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.G. MUNDRA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROSHANTA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.10.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 02/11/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE A S WELL AS BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-I, JAIPUR D ATED 07.12.2015 WHEREIN THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN. ASSESSEES GROUNDS OF APPEAL: (I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) IS WRONG AND HAS ERRED IN LAW IN HOLDING THAT FINANCIA L SERVICE CHARGES OF ITA NO. 124 & 201/JP/16 M/S GEHLOT ENTERPRISES, JAIPUR VS. DCIT, CIRCLE-2, JAIPUR 2 RS. 58,98,850/- CLAIMED BY APPELLANT BEING EXPENSES PERTAINING TO REIMBURSEMENT OF EXPENSES INCURRED BY THE STAFF OF ASSESSEE COMPANY ON TRAVELLING, CONVEYANCE ETC. IN RESPECT TO AVAILING FACILITY OF BANK LOAN TO CUSTOMERS FOR SELLING TRACTORS TO THEM IS PAYMENT O F FEE, COMMISSIONS ETC. TO EMPLOYEES OF COMPANY AND THE SAME IS LIABLE TO BE TAXED U/S 17 OF THE IT ACT. (II) THE LD. CIT(A) IS FURTHER WRONG IN DIRECTING THAT THE AO SHOULD ACCORDINGLY, INITIATE PROCEEDINGS AGAINST THE APPEL LANT FOR NON DEDUCTION OF TDS ON THE AMOUNT PAID TO THE EMPLOYEES WHICH DI RECTION GIVEN TO THE AO IS BEYOND HIS JURISDICTION. REVENUES GROUNDS OF APPEAL: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS. 8,17,520/- MADE BY THE AO UNDER THE PROVISIONS OF SECTION 143A R.W. RULE 8D OF THE IT RULES. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS. 58,98,850/- MADE U/S 40(A)(IA) OF I.E. ACT, 1961 NOT APPRECIATING TH E FACT THAT THE PAYMENT WAS MADE TO THE SALESMEN FOR PROVIDING SERVICES TO THE ASSESSEE FOR SELLING OF TRACTORS. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS.3,00,000/- OUT OF TELEPHONE, CONVEYANCE, TRAVELLING EXPENSES ETC. 2. AT THE OUTSET, THE LD AR SUBMITTED THAT GROUNDS RAISED BY THE REVENUE AS WELL AS BY THE ASSESSEE HAVE RECENTLY BEEN DECID ED BY THE HONBLE ITAT, JAIPUR BENCH VIDE ITS CONSOLIDATED ORDER DATED 04.0 8.2016 FOR AY 2009-10, 2010-11 AND 2011-12 IN ASSESSES OWN CASE IN ITA NO S.129,130 & 700/JP/2014 & ITA NOS 151,152 &755/JP/14. 3. THE LD AR SUBMITTED THAT SINCE THERE IS NO CHANG E IN FACTS AND CIRCUMSTANCES OF THE CASE, THE EARLIER ORDER PASSED BY THIS VERY BENCH OF THE ITA NO. 124 & 201/JP/16 M/S GEHLOT ENTERPRISES, JAIPUR VS. DCIT, CIRCLE-2, JAIPUR 3 ITAT MAY BE CONSIDERED. THE LD DR FAIRLY CONCEDED THAT THE ISSUES ARE COVERED BY EARLIER ORDER OF THIS BENCH DATED 4.8. 2016. 4. WE NOW REFER TO RELEVANT FINDINGS OF IN OUR EARL IER ORDER DATED 4.8.2016: 4.1 THE RELEVANT FINDINGS IN RESPECT OF REVENUES G ROUND NO.1 ARE AS UNDER: 4.3 WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. AS PER SECTION 14A OF THE ACT, THE AO HAS TO SATISFY HIMSE LF IN RESPECT OF THE CLAIM OF EXPENDITURE. IN THE EVENT THE AO FINDS THAT THE EXP ENDITURE RELATED TO THE EXEMPT INCOME HAVE ALSO BEEN CLAIMED BY THE ASSESSEE WHILE COMPUTING ITS INCOME, THEN THE AO IS EMPOWERED TO MAKE DISALLOWANCE IN THE MAN NER PRESCRIBED IN RULE 8D. IN THE INSTANT CASE, THE AO HAS NOT GIVEN ANY FINDING IN RESPECT OF THE DISALLOWANCE OF EXPENSES. ON THE CONTRARY, THE ASSESSEE HAS POINTED OUT THAT IT HAD SUFFICIENT OWN FUNDS AND INVESTMENT HAS BEEN MADE OUT OF ITS OWN F UNDS. THEREFORE, THE DISALLOWANCE RELATED TO THE INTEREST WAS NOT JUSTIF IED. THUS WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDERS OF THE LD. CIT (A ). 4.2 THE RELEVANT FINDINGS IN RESPECT OF REVENUES G ROUND NO.2 AND ASSESSEES GROUNDS 1-2 ARE AS UNDER: 3.4 NOW THE ISSUE TO BE ADJUDICATED IS WHETHER THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE FORM OF PAYMENTS MADE TO THE EMPLOY EES IN THE NATURE OF FINANCIAL SERVICE CHARGES IS AMENABLE TO THE PROVISIONS OF TA X DEDUCTION AT SOURCE OR NOT. THE AO HAS RELIED ON THE PROVISIONS OF SECTION 194H. A S PER THE AO, THESE PAYMENTS WERE BROKERAGE AND COMMISSION TO THE EMPLOYEES. BEF ORE THE AO, THE ASSESSEE HAS NOT FURNISHED ANY INDEPENDENT EVIDENCE EXCEPT THE V OUCHERS MADE BY ITSELF STATING THEREIN THAT CASH PAYMENT ON ACCOUNT OF EXPENDITURE INCURRED ON BANK, CUSTOMERS, PATWARI FOR ARRANGEMENT OF LOAN FILE OF TRACTOR LOA N. IT IS A NORMAL PRACTICE THAT WHEREVER THE LOAN FACILITY IS AVAILED, CERTAIN PAP ER WORK IS CARRIED OUT BY THE CONCERNED BANKER AND THE AMOUNT INCURRED ON SUCH WO RK, NORMALLY PROCESSING ITA NO. 124 & 201/JP/16 M/S GEHLOT ENTERPRISES, JAIPUR VS. DCIT, CIRCLE-2, JAIPUR 4 CHARGES ARE DEBITED TO THE LOAN ACCOUNT OF THE CONC ERNED BENEFICIARY BY THE BANKER. THIS FACILITY, THE ASSESSEE IS CLAIMING TO HAVE BEE N PROVIDED BY ITSELF FOR FACILITATING THE LOAN TRANSACTION, IN FACT IT IS CARRIED OUT BY THE BANKER ITSELF. BUT IT IS ALSO A FACT THAT BANKERS HAVE TIE-UP WITH THE VEHICLE/TRACTOR A GENCY WHO CARRIED OUT THIS KIND OF SERVICE TO THE PROSPECTIVE CUSTOMERS. THEREFORE, I N OUR CONSIDERED VIEW, BOTH THE AUTHORITIES BELOW HAVE MISDIRECTED THEMSELVES FOR N OT APPRECIATING THE FACT THAT THE NATURE OF PAYMENT AS MADE BY THE ASSESSEE IS NEITHE R A PAYMENT IN THE NATURE OF SALARY NOR RELATED TO EMPLOYER-EMPLOYEE RELATIONSHI P. THE PAYMENT IS MADE IN RESPECT OF THE EXPENDITURE CLAIMED TO HAVE BEEN INC URRED FOR FACILITATING THE LOAN TRANSACTION. THE AO IN THE ASSESSMENT ORDER HAS CO NSIDERED THIS CLAIM OF THE ASSESSEE I.E. EXPENDITURE BEING THE REIMBURSEMENT T O THE EMPLOYEES, AND REJECTED THE SAME ON THE GROUND THAT NOT A SINGLE BILL WAS A VAILABLE WITH THE ASSESSEE. IT WAS FURTHER OBSERVED THAT THESE EXPENSES WERE INCUR RED FOR THE SERVICES PROVIDED BY THE SALESMEN AND THAT THERE WAS AN ABSOLUTE ABSENCE OF EVEN A SINGLE SUPPORTING VOUCHER OR ANY OTHER DOCUMENTARY EVIDENCE WHICH COU LD PROVE ASSESSEES CLAIM THAT THE SAID EXPENSES WERE REIMBURSEMENTS TO THE SALESM EN. THE AO TREATED SUCH PAYMENT AS THE PAYMENT OF COMMISSION OR BROKERAGE T O THE EMPLOYEE. IN SUPPORT OF SUCH FINDING, THE AO HAS NOT PLACED ANY MATERIAL ON RECORD SUGGESTING THAT THESE PAYMENTS WERE IN THE NATURE OF BROKERAGE OR COMMIS SION. IN THE ABSENCE OF SUCH MATERIAL, IN OUR CONSIDERED VIEW, MERELY ON THE BAS IS OF CONJECTURES, THE PAYMENTS MADE TO THE EMPLOYEES WOULD NOT PARTAKE THE CHARACT ER OF PAYMENT OF BROKERAGE OR COMMISSION. ANOTHER ASPECT OF THE MATTER, WHICH THE AO HAS NOT APPRECIATED THAT IN THE NORMAL LOAN TRANSACTION, THE BANK MOSTLY DEBIT THE AMOUNT OF PROCESSING CHARGES. THE AO HAS ALSO NOT VERIFIED FROM THE BANK ER WHETHER THE SAID ITA NO. 124 & 201/JP/16 M/S GEHLOT ENTERPRISES, JAIPUR VS. DCIT, CIRCLE-2, JAIPUR 5 EXPENDITURES WERE DEBITED TO THE ACCOUNT OF THE LOA N BENEFICIARY BY THE BANKER OR NOT. WHETHER THERE WAS ANY AGREEMENT BETWEEN THE BA NKER AND THE ASSESSEE COMPANY IN THIS BEHALF. EVEN THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS IN SUPPORT OF ITS CLAIM THAT SUCH PAYMENTS WERE NOTHIN G BUT REIMBURSEMENT TO THE EMPLOYEES AND SUCH EXPENDITURE IS ALLOWABLE DEDUCTI ON. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE, IT WOULD BE IN THE INTEREST OF JUSTICE IF THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR DECISION AFRESH. HENCE WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO VERIFY FROM THE BANK WHETHER ANY LOAN TRANSACTION WAS CARRIED OUT AS CLAIMED BY THE ASSESSEE AND ALSO TO VERIFY WHETHER THE EXPENDITURE INCURRED IN RESPECT OF DOCUMENTATION OF THE LOAN TRANSACTION, T HE EXPENDITURE RELATED TO VERIFICATION OF TITLE DEEDS/OWNERSHIP TITLE WAS CAR RIED OUT BY THE BANKER OR BY THE ASSESSEE COMPANY. HE WOULD ALSO VERIFY WHETHER SUC H AMOUNT RELATING TO PROCESSING OF LOAN TRANSACTION WAS CLAIMED FROM THE BENEFICIARY OF THE LOAN TRANSACTION OR NOT. IF THE AO FINDS THAT THE ASSESS EE COMPANY HAD CARRIED OUT SUCH SERVICES ON BEHALF OF THE BANK AND BANK HAS NOT DEB ITED SUCH EXPENDITURE TO THE ACCOUNT OF THE CONCERNED BENEFICIARY AND BORNE BY T HE ASSESSEE COMPANY, IN THAT EVENT, HE WOULD GRANT DEDUCTION OF EXPENDITURE TO T HE ASSESSEE, INCURRED DURING THE COURSE OF BUSINESS OF THE ASSESSEE. THIS GROUND OF THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4.3 THE RELEVANT FINDINGS IN RESPECT OF REVENUES G ROUND NO.3 ARE AS UNDER: 5.3 WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. THE LD. CIT (A) HELD THAT THE EXPENSES UNDER THE HEAD TELEP HONE, CONVEYANCE AND TRAVELLING EXPENSES ARE NECESSARY FOR CARRYING ON THE BUSINESS . HE OBSERVED THAT THERE IS NO ITA NO. 124 & 201/JP/16 M/S GEHLOT ENTERPRISES, JAIPUR VS. DCIT, CIRCLE-2, JAIPUR 6 EVIDENCE TO SUGGEST THAT THE EXPENSES INCURRED BY T HE ASSESSEE WERE EITHER INFLATED OR BOGUS. AT THE TIME OF HEARING OF THE APPEAL, THE LD. D/R HAS NOT CONTROVERTED THESE FINDINGS OF THE LD. CIT (A). WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT (A), THE SAME IS HEREBY UPHELD. THE GROUND OF THE REVENUE IS REJECTED. 5. ADMITTEDLY, THERE ARE NO CHANGES IN THE FACTS AN D CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER CONSIDERATION AS COMPARED T O THE EARLIER YEARS. HENCE, FOLLOWING OUR EARLIER DECISION REFERRED SUPRA, THE FINDINGS AND DIRECTIONS CONTAINED IN THE SAID ORDER SHALL APPLY MUTATIS MUT ANDIS FOR THE IMPUNGED ASSESSMENT YEAR. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02/1 1/2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 02/11/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S GEHLOT ENTERPRISES, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE-2, JAIPUR ITA NO. 124 & 201/JP/16 M/S GEHLOT ENTERPRISES, JAIPUR VS. DCIT, CIRCLE-2, JAIPUR 7 3. VK;DJ VK;QDR@ CIT I, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-I, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 124 & 201/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR