Assistant Commissioner of Income tax, Mangalore V. M/s Delta Infralogistics (worldwide), Mangalore

ITA 1439/BANG/2014

• Counselvise Citation: 143921114 RSA 2014
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K SHANKAR PRASAD JT
• Assessee Lawyers: V NARENDRA SHARMA
• Keywords: Business expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1439/BANG/2014 ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), MANGALORE. VS. M/S. DELTA INFRALOGISTICS (WORLDWIDE), [FORMERLY M/S.HML AGENCIES] NO.201, VEEKAY TOWERS, KULUR BANGRA ROAD, KULUR, MANGALORE 575 013. PAN : AAACH 7083B APPELLANT RESPONDENT APPELLANT BY : DR. K. SHANKAR PRASAD, JT. CIT(DR) RESPONDENT BY : SHRI V. NARENDRA SHARMA, ADVOCATE DATE OF HEARING : 13.04.2015 DATE OF PRONOUNCEMENT : 08.05.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 13.8.2014 OF THE CIT(APPEALS)-VI, BANGALORE RELATING TO A.Y. 201 0-11. ITA NO.1439/BANG/2014 PAGE 2 OF 5 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF ACTING AS CLEARING AND FORWARDING AGENTS MAINLY IN THE MANGAL ORE PORT TRUST (MPT). THE ASSESSEE CLAIMED AS A DEDUCTION A SUM OF RS.4,6 7,64,763 ON ACCOUNT OF PAYMENT MADE TO LABOURERS AT MPT. IN THE BUSINE SS OF FORWARDING, CLEARING AND STEVEDORING, THE ASSESSEE HAS TO ENGAG E WORKERS OF MPT ALONE. THE WAGES ARE PAID TO THE WORKERS BY THE PO RT TRUST AUTHORITIES. THE ASSESSEE HAS TO PAY THE CHARGES TO MPT ONLY TOW ARDS WAGES PAYABLE TO WORKERS, WHO IN TURN PAY THE SAME TO THE WORKERS . APART FROM THE PAYMENT MADE TO PORT AUTHORITIES, THE ASSESSEE ALSO PAYS WAGES DIRECTLY TO WORKERS. ACCORDING TO THE REVENUE, SUCH PAYMENT WH ICH IS REFERRED TO AS SPEED MONEY WAS ILLEGAL AND HIT BY EXPLANATION TO SECTION 37(1) OF THE ACT. ACCORDING TO THE ASSESSEE, SUCH PAYMENTS ARE MADE KEEPING IN MIND THE EXISTENCE OF THE BUSINESS AND WITH A VIEW TO EN SURE TIMELY COMPLETION OF THE WORK. THE AO, THEREFORE, DISALLOWED 20% OF THE EXPENDITURE ON ACCOUNT OF SPEED MONEY, WHICH RESULTED IN AN ADDITI ON OF RS.93,52,953 TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOLL OWING THE DECISION RENDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002-03 TO 2009- 10, DELETED THE ADDITION MADE BY THE AO. THE CIT(AP PEALS), IN PARTICULAR, PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN ITA NO.1120/BANG/2012 DATED 26.7.2013 FOR THE A.Y. 2009-10, WHEREIN THE T RIBUNAL FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF KONKAN ITA NO.1439/BANG/2014 PAGE 3 OF 5 MARINE AGENCIES, 313 ITR 308 (KAR), DELETED THE DISALLOWANCE MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE FIND THAT THE ISSUE HAS BEEN DEALT WITH AND D ECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ITA NO.1120/BANG/20 12 FOR A.Y. 2009-10 BY ORDER DATED 26.7.2013. THE RELEVANT PORTION OF T HE ORDER IS REPRODUCED BELOW:- 4.3.2 WE FIND FROM THE RECORD, AND AS BROUGHT TO OUR NOTICE BY THE LEARNED AUTHORISED REPRESENTATIVE, THAT THIS VERY SAME ISSUE OF DISALLOWANCE OF EXPENDITURE INCURRED FOR S PEED MONEY WAS THE SUBJECT MATTER OF APPEAL AND ADJUDICATION B EFORE A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S O WN CASE FOR ASSESSMENT YEAR 2005-06. IN THE SAID ORDER IN ITA NO.1209/BANG/2009 DT.30.6.2010, AT PARA 5 ON PAGES 4 & 5 THEREOF THIS TRIBUNAL HAS UPHELD THE CIT(APPEALS)S ORDER DELETING THE DISALLOWANCE ON ACCOUNT OF PAYMENT OF SPEED MONEY WHICH IS EXTRACTED AND READS AS UNDER : 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND MINUT ELY PERUSED THE RECORDS FURNISHED BEFORE US. THE FOLLO WING FACTS OF THE CASE HAVE MERITS AND CANNOT BE BRUSHED ASIDE. 1) THE PAYMENTS ARE MADE TO THE LABORERS EMPLOYED UNDER POOLING ARRANGEMENTS CANALIZED BY THE NEW MANGALORE PORT TRUST. 2) THE ASSESSEE OCCUPATION IS CLEARING & FORWARDING AGENT WHICH REQUIRES HIGH INTEGRITY AND GOODWILL. 3) THE ASSESSEE HAS TO ENTIRELY DEPEND ON THE LABOUR FORCE TO EXECUTE ITS WORK AND THUS KEEP UP THE GOODWILL AND CREDIBILITY. ITA NO.1439/BANG/2014 PAGE 4 OF 5 4) SINCE THE LABORERS ARE ARRANGED BY POOLING, THE ASSESSEE DOES NOT HAVE DIRECT CONTROL ON THEM IN ORDER TO EXTRACT FULL WORK FROM THEM. 5) IN ORDER TO EXTRACT PROPER WORK FROM THE LABORERS INCENTIVES HAVE TO BE PAID SO THAT SPEEDY AND TIMEL Y DISPOSAL OF CARGO CAN BE EFFECTED. ABOVE ALL THESE FACTS WE ARE ALSO OF THE VIEW THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE CIT AND ANOTHER VS. KONKAN MARINE AGENCIES REPORTED IN 323 ITR 308 ON WHICH THE LEARNED CIT (APPEALS) HAD PLACED RELIANCE SQUARELY APPLIES TO THE CASE IN HAND. THE HON'BLE HIGH COUR T HELD : THAT TAKING INTO CONSIDERATION THE ASSESSEE'S BUSINESS AND THE PREVAILING PRACTICE IN THE TRADE, WHEREBY PAYMENTS HAD TO BE MADE BY FIRMS LIKE THE ASSESSEE IN ORDER TO ENSURE THAT THE WORK OF HANDLING GOODS WAS DONE WITHIN REASONABLE TIME AND EMERGENCY OPERATIONS OF CARGO HANDLING WERE DONE BEYOND WORKING HOURS, SUCH PAYMENTS WERE MADE EITHER THROUGH LABOUR OR WORKERS UNION. IT COULD NOT BE CONSIDERED TO BE PROHIBITED BY LAW. THE ASSESSEE COULD NOT BE EXPECTED TO TAKE RECEIPTS FROM INDIVIDUAL WORKERS OR MAKE PAYMENT BY WAY OF CHEQUES. THE PAYMENT WAS MADE BY THE ASSESSEE FOR BUSINESS PURPOSES AND THE EXPENDITURE HAD BEEN INCURRED IN THE ORDINARY COURSE OF BUSINESS. THEREFORE, THE DEDUCTION WAS ALLOWABLE BY WAY OF BUSINESS EXPENDITURE. 6. FROM THE ABOVE DISCUSSIONS AND THE RULINGS OF T HE HON'BLE JURISDICTIONAL HIGH COURT, WE FIND IT PROPE R TO CONFIRM THE DECISION OF THE LEARNED CIT (APPEALS ). IT IS ORDERED ACCORDINGLY. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESS MENT YEAR 2005-06 IN ITA NO.1209/BANG/2009 DT.30.6.2010, WE U PHOLD THE ORDER OF THE LEARNED CIT(APPEALS) IN DELETING THE D ISALLOWANCE OF RS.88,32,641 MADE BY THE ASSESSING OFFICER ON ACCOU NT OF PAYMENT OF SPEED MONEY / INCENTIVES. IT IS ORDERED ACCORDINGLY. ITA NO.1439/BANG/2014 PAGE 5 OF 5 6. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL CITED SUPRA IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF THE CIT (APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MAY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 8 TH MAY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.