DCIT, BHILWARA V. M/s. Chhabra Syncotex Limited, BHILWARA

ITA 146/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78212 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-07-2014
• Assessment Year: misc
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Depreciation; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 145 & 146/JODH/2014 (A.Y. 2009-10 & 2010-11) DCIT, CIRCLE, VS. M/S. CH HABRA SYNCOTEX LTD., BHILWARA. OPP. WATER WORKS, PUR ROAD, BHILWARA. PAN NO. AACCC 9236 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NONE DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 24/07/2014. DATE OF PRONOUNCEMENT : 25/07/2014. O R D E R PER N.K. SAINI, A.M THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED A GAINST THE COMMON ORDER DATED 19/12/2013 OF LD. CIT(A), AJMER. SINCE THE ISSUES INVOLVED ARE COMMON AND THE APPEALS WERE HEARD TOGE THER, SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. 2 THE COMMON GROUND RAISED IN BOTH THESE APPEALS REA DS AS UNDER:- 2 THE LD. CIT(A), AJMER IN THE PRESENT FACTS AND CI RCUMSTANCES OF THE CASE HAS ERRED IN:- ALLOWING DEPRECIATION ON HIGHER RATE ON POWER EVACU ATION INFRASTRUCTURE FACILITY, SUPPLY AND INSTALLATION OF HT ELECTRICAL YARD & TRANSMISSION LINE AND CIVIL WORK, WITHOUT APPRECIATING THE FACTS OF THE C ASE. 3. AT THE TIME OF HEARING, NOBODY WAS PRESENT ON BEHA LF OF THE ASSESSEE BUT THE WRITTEN SUBMISSIONS HAVE BEEN FURN ISHED. WE THEREFORE, PROCEEDED EXPARTE QUA THE ASSESSEE AND THE APPEALS ARE DECIDED ON MERITS AFTER HEARING THE LEARNED D.R. AND CONSIDERI NG THE WRITTEN SUBMISSIONS FURNISHED BY THE LEARNED COUNSEL FOR TH E ASSESSEE. 4. IT IS NOTICED THAT THE ISSUE IN QUESTION RELATING TO THE HIGHER RATE OF DEPRECIATION ON POWER EVACUATION INFRASTRUCTURE ETC . IS COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 20/11/2013 IN I.T. A.NO. 217/JODH/2012 FOR THE A.Y. 2008-09 IN THE CASE OF ACIT, UDAIPUR V S. K.K. ENTERPRISES WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PA RA 19 WHICH READ AS UNDER:- 19. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ES AND THE MATERIAL AVAILABLE ON THE RECORD, IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08 IN I.T.A.N O. 438/JU/2010 VIDE ORDER DATED 20/09/2012, WHEREIN THE RELEVANT FINDIN GS HAVE BEEN GIVEN IN PARA 24, WHICH READS AS UNDER:- 24. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND MATERIAL AVAILABLE ON RECORD, WE ARE OF THE OPINION THAT THE LD CIT(A) HAS PASSED A JUST ORDER WHICH IS IN CONSONANCE WIT H THE EARLIER ORDER 3 OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF DCIT, BHILWARA VS M/S SARVODAYA SUITINGS PVT LTD, BHILWARA (SUPRA). IN TH E INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE INSTALLED A WINDMI LL. FOR INSTALLING A WINDMILL, CIVIL WORK & FOUNDATION WAS DONE BY INCUR RING AN EXPENDITURE OF RS. 34,60,760/-, WITHOUT DOING THE C IVIL CONSTRUCTION WORK INCLUDING FOUNDATION WORK, IT WAS NOT POSSIBLE TO INSTALL THE WINDMILL. SIMILARLY, THE ELECTRIC ITEMS, COMPONENT AND INSTALLATION WERE NECESSARY FOR THE WINDMILL, BECAUSE IN THE ABS ENCE OF THESE COMPONENTS AND ELECTRIC ITEMS IT WAS NOT POSSIBLE F OR THE WINDMILL TO PRODUCE ELECTRICITY. THEREFORE, IT WAS ALSO AN INT EGRAL PART OF THE WINDMILL. IN THE INSTANT CASE, THE ASSESSEE PAID A SUM OF RS. 31,25,000/- TO M/S SUZLON ENERGY LTD THROUGH WHOM T HE WINDMILL WAS INSTALLED. THE SAID PAYMENT WAS NON-REFUNDABLE. THE SAID EXPENDITURE WAS MADE FOR THE INSTALLATION OF THE WINDMILL AND I F THERE WAS NO SUCH WINDMILL INSTALLATION, THE ASSESSEE COULD NOT HAVE INCURRED SUCH EXPENSES, THEREFORE, EXPENDITURE INCURRED ON COMMON POWER EVACUATION WAS DIRECTLY RELATED TO THE WINDMILL AND THE ASSESSEE WAS ENTITLED FOR HIGHER DEPRECIATION. WE, THEREFORE, C ONSIDERING THE TOTALITY OF FACTS DO NOT SEE ANY INFIRMITY IN THE O RDER OF LD CIT(A) ON THIS ISSUE. 5. SO, BY RESPECTFULLY FOLLOWING THE AFORESAID REFERR ED TO ORDER, WE DO NOT SEE ANY MERIT IN THE APPEALS OF THE DEPARTMENT ON THIS ISSUE. 6 . ONE ANOTHER ISSUE HAS BEEN RAISED IN I.T.A.NO. 14 6/JODH/2014 WHICH RELATES TO THE DELETION OF ADDITION OF RS. 1, 50,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION EXPENSE S. 7 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD CLAIMED COMMISSION EXPENSES OF RS. 72,32,626/- WHICH WERE MORE 4 THAN THE EXPENSES CLAIMED IN THE LAST YEAR AT RS. 6 6,01,953/-. THE ASSESSING OFFICER ASKED THE ASSESSEE ABOUT THE JUST IFICATION OF THE EXPENSES. THE ASSESSEE SUBMITTED AS UNDER:- SIR, WE HAVE ALSO BEEN ASKED TO SUBMIT THE COMPLETE DETAIL ABOUT CONSULTANCY CHARGES, COMMISSION PAYMENT AND SALES I NCENTIVE PAID DURING THE PERIOD OF 018/04/2009 TO 31/03/2010. SO, WE ARE ENCLOSING HEREWITH THE DETAIL COPIES O F LEDGER ACCOUNTS OF CONSULTANCY CHARGES, COMMISSION ACCOUNT AND SALES I NCENTIVE ACCOUNT SHOWING THE COMPLETE DETAIL THEREOF. FURTHER, ALL THE PAYMENTS MADE UNDER THE HEAD OF CONSULTANCY CHARGES AND COMMISSION ARE COVERED UNDER TDS, AND T DS WAS ALSO DEDUCTED AND DEPOSITED FROM TIME TO TIME. 8 . THE ASSESSING OFFICER OBSERVED THAT THE COMMISSIO N EXPENSES WERE ALLOWED TO THE TRADERS ON THE SWEET WILL OF THE ASS ESSEE AND NO DOCUMENTARY EVIDENCE REGARDING JUSTIFICATION OF THE INCREASED EXPENDITURE DURING THE YEAR WAS FURNISHED. HE THER EFORE, DISALLOWED A LUMP SUM AMOUNT OF RS. 1,50,000/- AND ADDED THE SAM E TO THE DECLARED INCOME OF THE ASSESSEE. 9 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER:- 1. AT THE OUTSET, IT IS SUBMITTED THAT MAKING PAYM ENT OF SUCH COMMISSIONIS NOT NEW TO THE ASSESSEE THIS YEAR IN A S MUCH AS THIS HAS BEEN A PAST LONG PRACTICE IN AS ALL OVER IN THE PAS T I.E. SINCE LAST 15 YEARS, SINCE SUCH COMMISSION IS BEING PAID IN THE S IMILAR MANNER AND 5 METHOD. IT IS SUBMITTED THAT THOUGH NOT DOUBTED OR DISPUTED BY THE AO ALSO BECAUSE (HE HAS FOCUSED ONLY ON THE JUSTIFI CATION OF THE INCREASED AMOUNT OF EXPENDITURE) YET HOWEVER FOR CO MPLETENESS IT IS SUBMITTED THAT THE ASSESSEE HAS APPOINTED VARIOUS A GENTS THROUGH WHOM SALES ARE BEING AFFECTED. APART FROM OTHER DU TIES THE AGENTS ARE SUPPOSED TO PROCURE ORDERS AND ALSO TO ENSURE R ECOVERY OF THE CONSIDERATION FROM THE DEALERS. THE AGENTS ARE PAI D COMMISSION AT A FIXED PERCENTAGE OF THE SALE VALUE WHICH HAS BEEN V ARYING. AS REGARDS THE JUSTIFICATION IN THE INCREASE, IT IS SUBMITTED THAT RATE OF COMMISSION PAID THIS YEAR @ 2% WAS INCREASED FROM L AST YEAR @ 1.8%. THEREFORE, THE VARIATION THIS YEAR IS ONLY B ECAUSE OF THE INCREASED RATE. 2. ALL PAYMENTS HAS BEEN MADE BY THE CHEQUE ONLY AN D EVEN TDS WHEREVER APPLICABLE, HAS BEEN DEDUCTED AS EVIDENT F ROM THE CONFIRMATIONS (PB 60-88) IN MAJOR CASES ONLY FILED TO THE AO. ALL THE AGENTS ARE REGULAR INCOME TAX ASSESSEES AND THEIR COMPLETE ADDRESS AND PAN NO. ARE MENTIONED ON THE CONFIRMATIONS. N OTABLY NONE OF THE AGENTS INCLUDES ANY RELATIVE OR ANY PERSON SPEC IFIED U/S 40A(2). 3. THE BARE PERUSAL OF THE IMPUGNED ORDER SHALL REV EAL THAT THE SAID DISALLOWANCE HAVE BEEN MADE SIMPLY ON SURMISE AND C ONJECTURES ON ESTIMATED BASIS. NO SPECIFIC INSTANCE HAS BEEN GIV EN. IT IS SELLTED THAT A BUSINESSMAN IS THE BEST JUDGE TO TAKE CARE OF ITS OWN INTEREST & TO TAKE DECISIONS AND THE AO IS NOT SUPPOSED TO INTERV ENE THEREIN NOR, HE CAN REPLACE THE ASSESSEE. KINDLY REFER T.T. PVT. L TD. VS. ITO (1980) 121 ITR 551 (KAR), CIT VS. UDHOJI SHRIKRISHNADAS (1983) 139 ITR 827 (MP), JK WOOLEN MANUFACTURERS 72 ITR 612 (SC) 4. NO BASIS AT ALL: IT IS FURTHER SUBMITTED THAT TH E LD. AO HAS NOT AT ALL PROVIDED ANY BASIS WHATSOEVER FOR MAKING THE ESTIMA TED DISALLOWANCE OF RS. 1,50,000/-. THEREFORE, ALSO TH E ENTIRE DISALLOWANCE, SO MADE MAY KINDLY BE DELETED IN FULL . THE SAID DISALLOWANCE THEREFORE, BE DELETED IN FUL L. 10 . THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, DELETED THE ADDITION BY OBSERVING AS UNDE R:- 6 I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE ASSESSEE HAS APPOINTED VARIOUS AGENTS FOR PROCURING ORDERS FOR THE SALES AND ENSURE THE RECOV ERY OF CONSIDERATION FROM THE DEALERS. THE COMMISSION HAS BEEN GIVEN AT THE FIXED PERCENTAGE OF THE SALE VALUE. THE COMMISSION HAS INCREASED FR OM 1.8% IN THE LAST YEAR TO 2% DURING THE YEAR. THE PAYMENTS HAVE BEEN MADE BY CHEQUES AND TDS HAS BEEN DEDUCTED. FURTHER, ASSESSEE HAD FILED THE CONFIRMATIONS IN MAJOR CASES BEFORE THE AO IN THE RESPECT OF THE COMMISSIO N PAYMENT AND NONE OF THE AGENTS HAVE BEEN STATED TO BE PERSONS SPECIFIED U/S 40A(2) OF THE I.T. ACT. IN ABOVE CIRCUMSTANCES, IT IS APPARENT THAT T HE ABOVE PAYMENTS ARE FOR THE COMMERCIAL EXPEDIENCY AND GENUINENESS OF TH E PAYMENT HAS NOT BEEN DOUBTED. NOW THE DEPARTMENT IS IN APPEAL. 11 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED D.R., WHO MAINLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER, BUT COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A). I N THE PRESENT CASE, IT APPEARS THAT THE ASSESSEE FILED THE CONFIRMATIONS I N MAJORITY OF THE CASES BEFORE THE ASSESSING OFFICER AND NONE OF THE AGENTS HAS BEEN STATED TO BE A PERSON SPECIFIED U/S 40A(2) OF THE ACT. IN THE I NSTANT CASE, THE COMMISSION WAS PAID FOR PROCURING THE SALES ORDERS AND TO ENSURE RECOVERY OF CONSIDERATION FROM THE DEALERS. THEREF ORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADHOC DISAL LOWANCE WITHOUT ANY BASIS AND THE LD. CIT(A) RIGHTLY DELETED THE SAME. WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS IS SUE. 7 12. IN THE RESULT, BOTH THE APPEALS OF THE DEPARTMENT A RE DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 25 TH JULY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH JULY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY, ITAT, JODHPUR.