CRR Leathers, CHENNAI V. ITO, CHENNAI

ITA 1372/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8377 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: S SRIDHAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1372/MDS/2016 ( / ASSESSMENT YEAR: 2006-07) M/S. CRR LEATHERS, 9/5, PATNOOL SADRARJUNG STREET, PERIAMET, CHENNAI-600 003. VS THE INCOME TAX OFFICER, BUSINESS WARD-X(3) CHENNAI. PAN:AAAFC4173G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. SUPRIYO PAL, JCIT /DATE OF HEARING : 4 TH AUGUST, 2016 /DATE OF PRONOUNCEMENT : 18 TH OCTOBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 5, CHENNAI DATED 02.03.2016 IN ITA NO.96/CIT(A)-5/1 3-14 PASSED UNDER SECTION 115WE(3) R.W.S. 115WG & 250(6 ) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN THIS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS AS FOLLOWS :- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER WHO HAD COMPUTED THE TAXABLE FRINGE BENEFIT OF RS.2,52,750/- UNDER SECTION 115WE(3) R.W.S 115WG OF THE ACT. 2 ITA NO.1372/MDS/2016 II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED ASSESSING OFFICER WITH RESPECT TO REOPENING OF THE ASSESSMENT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN LEATHER FILED ITS RETURN OF FRINGE BENEFITS UNDER SECTION 1 15WD OF THE ACT ON 01.11.2006 DECLARING TAXABLE FRINGE BENEFITS AS NIL. INITIALLY, THE RETURN WAS PROCESSED UNDER SECTION 1 15WE(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BECAUSE IT WAS FOUND THAT THE ASSESSEE HAD INCURRED STAFF WELFARE EXPENSES OF RS.13,08,707/-, STAFF TELEPHON E EXPENSES OF RS.4,96,125/- AND STAFF TRAVELLING & C ONVEYANCE EXPENSES OF RS.3,72,100/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, IT WAS EXPLAINED BY THE ASSESSEE THAT STAFF WELFARE EXPENSES OF RS.13,08,707/- INCLUDED AN AMOU NT OF RS.6,60,023/- PAID FOR EFFLUENT TREATMENT CHARGES, STAFF TELEPHONE EXPENSES OF RS.4,96,125/- INCLUDED AN AMO UNT OF RS.2,53,140/- BEING POSTAGE, TELEGRAM AND COURIER C HARGES. AFTER GIVING ALLOWANCE FOR THE SAME, THE LEARNED AS SESSING OFFICER COMPUTED THE TAXABLE FRINGE BENEFITS AS FOL LOWS:- 3 ITA NO.1372/MDS/2016 EXPENSES DEBITED TO P & L A/C. AMT. IN RS. PERCENTAGE OF EXPENSES TO BE TREATED AS FBT U/S.115WC AMOUNT PROPOSED TO BE TREATED AS FBT U/S.115WC STAFF WELFARE EXPENSES (13,08,707-660023) 6,488,684/- 20% 1,29,736 TELEPHONE EXPENSES INCLUDED IN POSTAGE, TELEGRAM & TELEPHONES (496125 253140) 2,42,985 20% 48,597 TRAVELLING & CONVEYANCE 3,72,100 20% (UPTO A.Y,2006-07) 74,420 TOTAL 2,52.753 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESS ING OFFICER ACCEPTING THE FINDINGS OF THE LEARNED ASSES SING OFFICER. 5. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ENTIRE EXPENSES MADE BY THE ASSE SSEE WILL NOT BE COVERED UNDER THE PROVISIONS OF SECTION 115W E OF THE ACT BECAUSE THOSE EXPENSES WERE RELATED TO THE COND UCT OF THE REGULAR BUSINESS OF THE ASSESSEE AND NOT FOR PR OVIDING ANY INDIVIDUAL OR COLLECTIVE BENEFITS TO THE EMPLOY EES OF THE ASSESSEE. IT WAS THEREFORE PLEADED THAT THE TAXABLE FRINGE 4 ITA NO.1372/MDS/2016 BENEFIT COMPUTED BY THE LEARNED ASSESSING OFFICER M AY BE DELETED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. ON PERUSING THE ORDER OF THE REVENUE, WE FIND THAT THE REVENUE HAS NOT MADE ANY CATEGORIC AL FINDING ON THE BENEFITS DERIVED BY THE EMPLOYEES IN DIVIDUALLY OR COLLECTIVELY. IN THE ABSENCE OF ANY SUCH FINDING , IT CAN BE ONLY PRESUMED THAT THE EXPENSES ARE DIRECTLY RELATE D FOR DISCHARGING THE BUSINESS OBLIGATIONS OF THE ASSESSE E. IN SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT T HE PROVISIONS OF SECTION 115WE WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THEREFORE, WE HEREBY DIRECT THE LE ARNED ASSESSING OFFICER TO DELETE THE TAXABLE FRINGE BENE FIT OF RS.2,52,750/- COMPUTED BY THE LEARNED ASSESSING OFF ICER 5 ITA NO.1372/MDS/2016 WHICH IS UPHELD BY THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS). 8. SINCE WE HAVE DECIDED THE CASE ON MERIT, WE REF RAIN FROM ADJUDICATING THE ISSUE WITH RESPECT TO REOPEN ING WHICH WILL BE ONLY ACADEMIC. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH OCTOBER, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 18 TH OCTOBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF