M/s Kakkar Complex Steels Pvt. Ltd, Hoshiarpur V. The Jt. Commissioner of Income Tax, Jalandhar

ITA 149/ASR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4545 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-05-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISHRA LD
• Assessee Lawyers: ASHWANI KALIA LD

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.149(ASR)/2017 ASSESSMENT YEAR:2011- 12 M/S. KAKKAR COMPLEX STEELS PVT. LTD. 7KM, JALANDHAR ROAD, HOSHIARPUR PAN:AAACK9865A VS. JT. CIT RANGE-II, JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. ASHWANI KALIA (LD. CA ) RESPONDENT BY: SH. A.N. MISHRA (LD. DR) DATE OF HEARING: 15.05.2018 DATE OF PRONOUNCEMENT: 31.05.2018 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE/APPELLANT, ON FEELING AGGRIEVED AGAINST THE ORD ER DATED 06.12.2016, IMPUGNED HEREIN, PASSED BY THE LD. CIT(A) -2, JALANDHAR, U/S 250(6) OF THE I.T. ACT, 1961 (HEREINAF TER CALLED AS THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEA L. 1. THAT THE LD. CIT(A)-1, JALANDHAR HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.14,66,64 0/- OUT OF DIRECTORS SALARY. ITA NO.149/ASR/2017 (A.Y:2011-12) MS KAKKAR COMPLEX STEELS PVT. LT D. DY. CIT 2 2. THAT THE LD. CIT(A)-1, JALANDHAR HAS ERRED IN C ONFIRMING THE DISALLOWANCE OF RS.80,130/- OUT OF CAR REPAIR EXPEN SES INVOKING THE PROVISION OF SECTION 40(A)(IA). 3. THAT THE ORDER OF THE CIT(A)-1, JALANDHAR IS BAD IN LAW AND ON FACTS. 3. THE BRIEF FACTS ARE ALREADY ON RECORD, HENCE, THE SAME A RE NOT REPEATED HEREIN FOR THE SAKE OF CONVENIENCE AND BR EVITY. 4. AT THE OUTSET, IT IS OBSERVED THAT THERE IS 9 DAYS DELA Y IN FILING OF THE APPEAL WHICH HAS BEEN EXPLAINED BY THE LD. AR BY GIVING REASONING TO THE EFFECT THAT ALL THE DOCUMENTS I NCLUDING THE PAYMENT OF RS.10,000/- FOR APPEAL FILING FEE WAS COMPLETED/DEPOSITED BY 25 TH FEB. 2017, HOWEVER, THE APPEAL WAS SUPPOSED TO BE SIGNED BY THE DIRECTOR OF THE COMPANY SRI DIPAN KUMAR WHO IS LIVING IN DELHI BUT DUE TO HIS WIF E'S ILL HEALTH HE COULD NOT COME TO AMRITSAR IN TIME, AS A RESULT OF WH ICH THE SIGNING OF DOCUMENTS REQUIRED FOR FILING THE APPEAL GO T DELAYED WHICH RESULTED INTO 9 DAYS DELAY IN THE FILING OF THE APPEAL. IT WAS FURTHER SUBMITTED BY THE LD. AR THAT THERE IS N O WILLFUL DEFAULT BUT DELAY HAS OCCURRED DUE TO CIRCUMSTAN CES BEYOND THE CONTROL OF THE APPELLANT, WHICH IS EVIDENT FROM THE FACT THAT THE APPEAL FILING FEE WAS DEPOSITED ON 23 RD JANUARY, 2017 AS PER THE RECEIPT CHALLAN ENCLOSED WITH THE APPEA L PAPERS. THE LD. DR OBJECTED TO THE CONDONATION OF DELAY. WE HAVE CONSIDERED THE SUBMISSIONS OF PARTIES, AS THE REA SON STATED ABOVE BY THE LD. AR SEEMS TO BE LOGICAL, GENUINE AND REASONABLE, HENCE, WE ARE INCLINED TO CONDONE THE DELAY OF 9 DAYS WHICH ARE VERY MEAGER, HENCE, THE DELAY IS CONDON ED. ITA NO.149/ASR/2017 (A.Y:2011-12) MS KAKKAR COMPLEX STEELS PVT. LT D. DY. CIT 3 6. NOW COMING TO THE GROUND NO.1 OF THE APPEAL, WHEREB Y THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS.14,66,6 40/- OUT OF DIRECTORS SALARY, ON THE PREMISES THAT AN AMOUNT OF RS.21 LAKH HAS ONLY BEEN CHARGED OUT OF THE TOTAL DIRECTOR(S) SALARY OF RS.84 LAC, WHICH COMES TO 25% OF THE TOTAL EXPENSES BOOKED ON THIS ACCOUNT. IT IS WELL SETTLED THAT EACH YEAR ASSESSMENT I S DISTINCT AND SEPARATE. AS AGAINST THIS, EVEN IF ONE GOES BY THE FIGURE OF ADJUSTED TURNOVER GIVEN BY THE APPELLANT, IN THE COURSE OF APPELLATE PROCEEDINGS, WHICH ARE RS.30.64 CRORES FOR THE MAIN UNIT AND RS.15.44 CRORES FOR THE EOU. THUS, THE ALLO CATION OF DIRECTOR(S) SALARY EVEN ON THIS ACCOUNT WOULD COME TO ABOU T 50% I.E., RS,42 LACS SHOULD HAVE BEEN ALLOCATED TO THE E OU. THEREFORE, IT WAS HELD BY THE LD. CIT(A) THAT AO HAS BEEN JUST AND FAIR IN MAKING A DISALLOWANCE OF RS.14,66,640/- ON ACCOUNT OF DIRECTORS SALARY DEBITED TO THE MAIN UNIT. THE LD. AR CLAIMED THAT THE MAIN UNIT OF THE ASSESSEE COMPANY IS MORE THAN 40 YEARS OLD AND THE EOU WAS SET UP FOR THE YEAR 2005 AND SINCE THEN, ONE OF THE DIRECTOR SH. GAUTAM KAKAR IS THE INCHARGE OF THE EOU AND ALMOST EXCLUSIVELY LOOKING AFTER THE WORKING OF THE EOU. HE WAS DEVOTING SOME TIM E TO THE WORKING OF THE MAIN UNIT IN ORDER TO CO-ORDINATE THE WORKING OF THE TWO UNITS AND DURING THE YEAR UNDER CONSIDERATION, THE TOTAL SALARY OF 27 LACS WAS PAID TO SH. GAUTAM KAKAR AND OUT OF THE SAME, 21 LAC WAS DEBITED IN THE BOOKS OF EOU AND 6 LACS DEBITED IN THE BOOKS OF MAIN UNIT. THE SALARIES OF OTHER TWO D IRECTORS WHO WERE LOOKING AFTER THE MAIN UNIT WERE DEBITED T O THE ACCOUNT OF MAIN UNIT AS IN THE EARLIER YEARS. THE LD. A O WHILE ITA NO.149/ASR/2017 (A.Y:2011-12) MS KAKKAR COMPLEX STEELS PVT. LT D. DY. CIT 4 FRAMING THE ASSESSMENT, HAS HELD THAT THE SALARY OF DIRECT ORS DEBITED TO EOU IS NOT IN PROPORTION TO ITS TURNOVER I N COMPARISON TO THE MAIN UNIT AND ACCORDINGLY HE WORKED OUT THE DI SALLOWANCE OF RS.14,66,640/-. IT WAS FURTHER SUBMITTED THAT THE A SSESSEE HAS ALREADY TRANSFERRED A SUM OF RS.18,00,000/- OUT OF GENERAL ADMINISTRATIVE EXPENSES FROM MAIN UNIT TO THE EOU TO CO VER UP ANY SUCH DEFICIENCY. IT WAS FURTHER SUBMITTED THAT NO SUCH DISALLOWANCE HAS EVER BEEN MADE, EXCEPT IN THE ASSESSMENT YEAR 2009-10 WHICH WAS ALSO DELETED BY THE LD. CIT(A) VIDE ITS ORDER DATED 10.01.2014. 7. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW. 8. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD A S WELL CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES, AS IT IS CLEARLY REFLECTS FROM THE FACT THAT EOU WAS SET UP IN THE YEAR 2 005 AND SINCE THAN ONE OF THE DIRECTOR OF THE COMPANY SH. GAUTA M KAKKAR HAS BEEN WORKING AS INCHARGE OF THE EOU AND EXCLUSIVELY LOOKING AFTER THE WORKING OF THE EOU AND SALARY TO THE TUNE OF RS.21,00,000/- WAS DEBITED IN THE BOOKS OF EOU AND REST AMOUNT OF RS.6,00,000/- DEBITED IN THE BOOKS OF M AIN UNIT. REASON WHICH HAS BEEN EXPLAINED BY THE LD. AR FOR PAYI NG THE SALARY AT THE HIGHEST AMOUNT FROM THE EOU BECAUSE SH. GAUTAM KAKKAR IS MAINLY LOOKING AFTER THE WORKING OF THE EO U. IT IS ALSO CLEARLY REFLECTS FROM THE BALANCE SHEET AS ON 31 ST MARCH, 2011, ITA NO.149/ASR/2017 (A.Y:2011-12) MS KAKKAR COMPLEX STEELS PVT. LT D. DY. CIT 5 THAT THE PROVISION OF RS.18,00,000/- HAS BEEN CLEARLY SH OWN AS OTHER ADMINISTRATIVE CHARGES UNDER THE HEAD OF ADMINIS TRATIVE EXPENSES IN SCHEDULED-D IN ORDER TO COVER UP THE DEFICIEN CY, IF ANY, AS IT IS NOT A CASE OF THE REVENUE THAT THE TWO DI RECTORS WHO LOOKING AFTER THE MAIN UNIT ALSO INVOLVED IN EOU , HENCE WE ARE UNABLE TO UNDERSTAND AS TO HOW THE SALARIES OF THE OTHER DIRECTORS WHO WERE WORKING FOR THE MAIN UNIT HAS ALSO B EEN CONSIDERED, WHILE ALLOCATING THE DIRECTOR(S) SALARY TO TH E TUNE OF 50% EACH IN THE MAIN UNIT AND EOU. EVEN THE ADDITION UNDER THE HEAD UNDER CONSIDERATION WAS NEVER BEEN MAD, EXCEPT IN THE ASST. YEAR: 2009-10 WHICH ALSO STANDS DELETED BY THE LD. CIT(A) VIDE ITS ORDER DATED 10.01.2014. ON THE AFORESAID ANA LYZATION AS WELL THE REASON THAT JUDICIAL PROPRIETY DEMANDS THAT CO NSISTENCY HAS TO BE FOLLOWED, THE ADDITION UNDER CONSIDERATION CA NNOT BE MADE. HENCE, WE DO NOT HAVE ANY HESITATION TO DELETE T HE SAID DISALLOWANCE AS UPHELD BY THE LD. CIT(A). NOW COMING TO GROUND NO.2, AS IT RELATES TO THE CONFIRMATION OF THE DISALLOWANCE OF RS.80,130/- OUT OF CAR EXPENSES INVOKING THE PROVISIONS OF SEC.40(A)(IA), AS IT WAS SUBMITTED BY THE LD. COUNSEL THAT PROVISION OF SEC.194C ARE NOT APPLICABLE IN THIS CASE AS THE SECTION APPLIES TO WORK CONT RACT AS THEE IS NO CONTRACT IN THE INSTANT CASE THE BILLS ARE BA SIC FOR PURCHASE OF SPARES IN WHICH VAT IS DULY CHARGED BY THE DEA LERS AND EVEN OTHERWISE THE LABOUR CHARGES WAS FRAMED NOMIN AL FOR THE FITTING OF THE SPARES. EVEN THE COMPANIES RELEASES T HE VEHICLE ONLY AFTER RECEIVING THE FULL PAYMENT AND DO NOT ALL OW ANY ITA NO.149/ASR/2017 (A.Y:2011-12) MS KAKKAR COMPLEX STEELS PVT. LT D. DY. CIT 6 DEDUCTION FROM THESE PAYMENTS. THERE IS NO REGULAR DEA LING WITH THESE PARTIES. FURTHER FROM THE BILLS WHICH DULY REFLECT S THERE ARE THE BIG COMPANIES AND THEY HAVE DULY ACCOUNTED FOR THE RECEIPTS IN THEIR BOOKS AS INCOME AND HAD PAID THE TAX THEREON IN ACCORDANCE WITH PROVISIONS OF LAW. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS THE ASSESSEE HAS TAKEN THE STAND THAT PARTIES INVOLVED IN THE INSTANT CASE ON WHOSE BASIS, THE ADDITION HAS BEEN MADE AND CONFI RMED QUA DISALLOWANCES OF EXPENSES FOR NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT MU ST HAVE ALREADY DEPOSITED THE DUE TAX BY INCLUDING THE AMOUN TS INVOLVED IN THE INSTANT CASE, IN THEIR INCOME TAX RETURN. IN THE SAID CIRCUMSTANCES, WE ARE INCLINED TO SET ASIDE THE ADDITION A S CONFIRMED BY THE LD. CIT(A) AND RESTORE BACK TO THE FI LE OF LD. AO TO DECIDE AFRESH IN VIEW OF THE PROVISO OF SEC.40(A)(IA ) READ WITH SEC.201(1)(A) OF THE ACT AS WELL AS IN VIEW OF THE HINDUSTAN COCO COLA BEVERAGE PVT. LTD. VS. CIT (SUPRA). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE PARTLY ALLOWED AND REST ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .05.2018. SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDIC IAL MEMBER DATED:31.05.2018 /PK/ PS. ITA NO.149/ASR/2017 (A.Y:2011-12) MS KAKKAR COMPLEX STEELS PVT. LT D. DY. CIT 7 COPY OF THE ORDER FORWARDED TO: (1) M/S. KAKKAR COMPLEX STEELS PVT. LTD., HOSHIARPU R (2) THE JT. CIT, RANGE-III, JALANDHAR (3) THE CIT(A)-2, JALANDHAR (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER