Sanmar Speciality Chemicals Limited, CHENNAI V. ITO (OSD), CHENNAI

ITA 1321/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4127 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 12-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1321/MDS/2016 & '& / ASSESSMENT YEAR : 2004-05. M/S SANMAR SPECIALITY CHEMICALS LIMITED, 9, CATHEDRAL ROAD, CHENNAI - 600 086. PAN : AABCS 0201 P V. THE INCOME TAX OFFICER (OSD), COMPANY CIRCLE VI(1), CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE +,)* - . / RESPONDENT BY : SHRI V. SREENIVASAN, JCIT / - 0' / DATE OF HEARING : 28.06.2017 12' - 0' / DATE OF PRONOUNCEMENT : 07.07.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-15, CHENNA I, DATED 15.02.2016 AND PERTAINS TO ASSESSMENT YEAR 2004-05. 2 I.T.A. NO.1321/MDS/16 2. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS DISALLOWANCE OF ` 9,17,500/- SAID TO BE PAID TO M/S PRICEWATERHOUSECO OPERS. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HAS PAID A SUM OF ` 21,92,500/- TO M/S PRICEWATERHOUSECOOPERS TOWARDS P ROFESSIONAL FEES. THE ASSESSEE WAS ABLE TO PRODUCE BILLS FOR ` 12,75,000/-. HOWEVER, THE BALANCE AMOUNT OF ` 9,17,500/- WAS NOT SUBSTANTIATED, THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ASSESS ING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE AND THE CIT(AP PEALS) HAS CONFIRMED THE SAME. THE LD.COUNSEL FURTHER SUBMITT ED THAT THE ASSESSEE COULD NOT PRODUCE EVIDENCE TO THE EXTENT O F ` 9,17,500/-, THEREFORE, HE LEAVES THE MATTER TO THE DISCRETION O F THE TRIBUNAL. 3. ON THE CONTRARY, SHRI V. SREENIVASAN, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT EVEN THOUGH THE ASSE SSEE CLAIMED THE PAYMENT OF PROFESSIONAL FEES PAID TO M/S PRICEWATERHOUSECOOPERS, THE ASSESSEE COULD NOT PROD UCE BILLS FOR ` 9,17,500/-, THEREFORE, THE ASSESSING OFFICER RESTRI CTED THE ALLOWANCE ONLY TO THE EXTENT OF THE AMOUNT FOR WHIC H THE BILLS WERE PRODUCED. ACCORDING TO THE LD. D.R., THE BALANCE A MOUNT OF 3 I.T.A. NO.1321/MDS/16 ` 9,17,500/- WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER, THEREFORE, THE CIT(APPEALS) CONFIRMED THE SAME. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE COULD NOT PRODUCE BILLS F OR PAYMENT OF ` 9,17,500/- TO M/S PRICEWATERHOUSECOOPERS. IN THE A BSENCE OF ANY SUPPORTING BILLS TO PROVE THE PAYMENT OF ` 9,17,500/-, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF ` 10,80,000/- TOWARDS PAYMENT MADE TO DAWN CONSULTING . 6. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT M/S BANGALORE GENEI PVT. LTD., A SUB SIDIARY COMPANY, WAS MERGED WITH M/S SANMAR ELECTRONICS COR PORATION LIMITED ON 01.04.2003 AS PER THE ORDER OF THE HIGH COURT DATED 21.02.2005. ACCORDING TO THE LD. COUNSEL, THE EXPE NDITURE CLAIMED BY THE ASSESSEE WAS IN THE NATURE OF AMALGAMATION E XPENSES 4 I.T.A. NO.1321/MDS/16 COVERED UNDER SECTION 35DD OF THE INCOME-TAX ACT, 1 961 (IN SHORT 'THE ACT'). THE ASSESSING OFFICER FOUND THAT 1/5 TH OF THE AMOUNT CAN BE ALLOWED THIS YEAR, THAT TOO IN THE HANDS OF AMAL GAMATED COMPANY, NAMELY, SANMAR ELECTRONICS CORPORATION LTD . AND NOT IN THE HANDS OF THE ASSESSEE. THE LD.COUNSEL FURTHER SUBMITTED THAT WHEN THE ASSESSEE INCURRED EXPENDITURE FOR AMALGAMA TION, IT CAN BE CLAIMED PROPORTIONATELY IN THE HANDS OF AMALGAMA TING COMPANY AS WELL AS AMALGAMATED COMPANY AS REVENUE EXPENDITU RE. THE EXPENDITURE HAS BEEN INCURRED BY BOTH THE COMPANIES PROPORTIONATELY, THEREFORE, ACCORDING TO THE LD. CO UNSEL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING T HE CLAIM OF THE ASSESSEE. THE LD.COUNSEL PLACED HIS RELIANCE ON TH E JUDGMENT OF APEX COURT IN CIT V. BOMBAY DYEING AND MANUFACTURIN G CO. LTD. (1996) 219 ITR 521. 7. ON THE CONTRARY, SHRI V. SREENIVASAN, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT HE IS PLACING RELIAN CE ON THE OBSERVATION MADE BY THE CIT(APPEALS). 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD.COUNSEL FOR THE ASSESSEE AND THE LD. DEPARTMENTA L REPRESENTATIVE AND PERUSED THE RELEVANT MATERIAL AV AILABLE ON 5 I.T.A. NO.1321/MDS/16 RECORD. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT EXPENDITURE INCURRED BY THE ASSE SSEE WAS NOT FOR EARNING OF INCOME. THE ASSESSING OFFICER HAS ALSO FOUND THAT IT CAN BE ALLOWED ONLY IN THE HANDS OF AMALGAMATED COMPANY AND NOT IN THE HANDS OF ASSESSEE-COMPANY. M/S BANGALORE GENEI PVT. LTD. WAS SAID TO BE MERGED WITH M/S SANMAR ELECTRONICS C ORPORATION LTD. THEREFORE, EVEN IF THE CLAIM OF THE ASSESSEE WAS ACCEPTED, IT HAS TO BE ALLOWED ONLY EITHER IN THE HANDS OF M/S B ANGALORE GENEI PVT. LTD. OR IN THE HANDS OF M/S SANMAR ELECTRONICS CORPORATION LTD., BEING THE AMALGAMATING COMPANY AND AMALGAMATE D COMPANY RESPECTIVELY. IT IS NOT KNOWN HOW THE EXPENDITURE WAS CLAIMED IN THE HANDS OF THE PRESENT ASSESSEE. WE HAVE ALSO CA REFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN BOMBAY DY EING AND MANUFACTURING CO. LTD. (SUPRA). IN THE CASE BEFORE THE APEX COURT, A COMPANY, NAMELY, NAWROSJEE WADIA GINNING AND PRES SING COMPANY WAS AMALGAMATED WITH ASSESSEE-COMPANY BEFOR E ASSESSMENT. THEREFORE, THE APEX COURT FOUND THAT T HE EXPENDITURE INCURRED TOWARDS PROFESSIONAL CHARGES OF THE SOLICI TORS FIRM FOR SERVICES RENDERED IN CONNECTION WITH AMALGAMATION W AS IN THE COURSE OF CARRYING ON THE ASSESSEES BUSINESS AND T HEREFORE, DEDUCTIBLE AS REVENUE EXPENDITURE. IN THE CASE ON OUR HAND, 6 I.T.A. NO.1321/MDS/16 ADMITTEDLY BANGALORE GENEI PVT. LTD. WAS SAID TO BE MERGED WITH M/S SANMAR ELECTRONICS CORPORATION LTD. THEREFORE, THE EXPENDITURE IF ANY HAS TO BE CLAIMED IN THE HANDS O F M/S SANMAR ELECTRONICS CORPORATION LTD. AND NOT IN THE HANDS O F THE ASSESSEE- COMPANY. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 7 TH JULY, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 7 TH JULY, 2017. KRI. - +056 76'0 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. / 80 () /CIT(A)-15, CHENNAI 4. / 80 / CIT-6, CHENNAI-34 5. 69 +0 /DR 6. :& ; /GF.