M/s Swadhyay Printers Pvt. Ltd., V. The DCIT, 1(2),

ITA 151/IND/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9420 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-01-2010
• Assessment Year: misc
• Appeal Filed On: 12-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN

Judgement Text

PAGE 1 OF 6 I.T.A.NO. 151/IND/2007 SWADHYAYA PRINTER PVT.LTD., INDORE IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAECS0315H I.T.A.NO.151/IND/2007 A.Y. : 2003-04 SWADHYAYA PRINTER PRIVATE LIMITED, DY. CIT, 1(2), PLOT NO.16A IDA, VS INDORE. SCHEME NO.71, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI AMIT SURANA, C. A. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 05/01/2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A) DATED 13.09.2006, FOR THE ASSESSMENT YEAR 20 03-04. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN UPHOLDING THE DISALLOWANCE AT RS. 85, 000/- OUT OF TOTAL PAGE 2 OF 6 I.T.A.NO. 151/IND/2007 SWADHYAYA PRINTER PVT.LTD., INDORE DISALLOWANCE OF RS. 1,30,000/- MADE BY THE ASSESSIN G OFFICER IN RESPECT OF JOB WORK CHARGES PAID TO M/S. SWADHYAY MANDIR. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF PACKAGING PRODUCT. THE A.O. FOUND THAT THE ASSESSEE HAD PAID MACHINERY RENT OF RS. 2,04,000/- AND JOB W ORK CHARGES AT RS. 2,53,556/- TO M/S. SWADHYAY MANDIR, A PARTNERSHIP F IRM, WHEREIN RELATIVES OF THE DIRECTORS WERE PARTNERS. HENCE, PR OVISIONS OF SECTION 40A(2)(B) WERE APPLICABLE. THE A.O., THEREAFTER, FO UND THAT THIS FIRM HAD LET OUT MACHINERY TO THE ASSESSEE COMPANY AND FROM THE ACCOUNTS OF THIS FIRM, IT COULD BE INFERRED THAT SUCH FIRM WAS BASIC ALLY A TRADING CONCERN ONLY. THE A.O., ACCORDINGLY, HELD THAT SINCE THE MA CHINERY HAD BEEN LET OUT BY THIS FIRM TO THE ASSESSEE COMPANY, HENCE, TH E PAYMENT OF JOB WORK CHARGES WAS NOT JUSTIFIED AND APPEARED TO BE AN INT ERNAL ARRANGEMENT. HENCE, HE DISALLOWED 50% THEREOF AMOUNTING TO RS. 1 .30 LAKHS. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THAT PAYMENT O F MACHINERY RENT AND JOB WORK CHARGES WERE TWO DIFFERENT THINGS, HENCE, THE A.OS BASIC PREMISE WAS NOT CORRECT. THE ASSESSEE ALSO SUBMITTE D THAT ASSESSEES MANUFACTURING PROCESS INVOLVED VARIOUS JOBS, SOME O F WHICH WERE DONE BY THE ASSESSEE COMPANY ITSELF AND SOME OF THE JOBS WERE OUT SOURCED TO M/S. SWADHYAY MANDIR. HOWEVER, THE RATES WERE COMPE TITIVE AND NO PAGE 3 OF 6 I.T.A.NO. 151/IND/2007 SWADHYAYA PRINTER PVT.LTD., INDORE TRANSPORTATION COST WERE INCURRED AS THIS FIRM WAS ALSO OPERATING FROM THE SAME LOCATION. IT WAS ALSO CONTENDED THAT IN THE EA RLIER YEARS JOB WORK CHARGES WERE ALSO PAID TO THIS FIRM AND NO DISALLOW ANCE HAD BEEN MADE. HENCE, UNDER THE SAME SET OF FACTS, NO, DISALLOWANC E COULD BE MADE IN THIS YEAR. IT WAS ALSO CONTENDED THAT M/S. SWADHYA Y MANDIR HAD ALSO PAID THE TAX AT THE SAME RATE. HENCE, NO TAX EVASIO N OR REDUCTION WAS INVOLVED. THE LD. CIT(A), HOWEVER, CONFIRMED THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER IN PRINCIPLE FOR THE REASON T HAT THE ASSESSEE FAILED TO GIVE DETAILS OF COMPARABLE CHARGES FOR THE WORK DON E BY THE SISTER CONCERN, HOWEVER, HE REDUCED THE RATE OF DISALLOWAN CE TO 1/3 RD AS AGAINST 50 % ADOPTED BY THE ASSESSING OFFICER AND ALSO HELD THAT IT WOULD TAKE CARE OF EXCESS JOB WORK CHARGES AS WELL AS EXCESS L EASE RENTAL PAID BY THE ASSESSEE COMPANY FOR MACHINERY. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL NARRATED THE FACTS, ARGUED THE MATTER AT LENGTH AND PLACED STRONG RELIANCE ON THE WRITTEN SU BMISSIONS FILED BEFORE THE LD. CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE , ON THE OTHER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT( A). 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. PAGE 4 OF 6 I.T.A.NO. 151/IND/2007 SWADHYAYA PRINTER PVT.LTD., INDORE 7. IT IS NOTED THAT THE A.O. HAS MADE THIS DISALLOWANC E MAINLY FOR THE REASON THAT THE SAID FIRM HAD ALREADY LET OUT I TS MACHINERY TO THE ASSESSEE FIRM, HENCE, IT COULD NOT CARRY OUT THE JO B WORK ACTIVITIES, WHICH, IN OUR OPINION, CANNOT BE A CORRECT BASIS, UNLESS I T IS PROVED THAT AFTER LETTING OUT SUCH MACHINERY, THE SAID FIRM COULD NOT CARRY OUT SUCH JOB WORK ACTIVITIES. NO MATERIAL HAS BEEN BROUGHT ON RE CORD BY THE ASSESSING OFFICER IN THIS REGARD. WE ALSO FIND THAT BEFORE TH E LD. CIT(A), THE ASSESSEE HAS SUBMITTED THE NATURE OF JOB WORK ACTIV ITIES CARRIED OUT BY THE SAID FIRM IN THE YEAR UNDER CONSIDERATION AND HAS ALSO POINTED OUT THAT SIMILAR CHARGES HAD BEEN PAID IN THE EARLIER YEARS AS WELL AND NO DISALLOWANCE HAD BEEN MADE. IT IS FURTHER NOTEWORTH Y THAT THE PRIMARY ONUS IN A CASE COVERED BY THE PROVISIONS OF SECTIO N 40A(2)9B) LIES ON THE REVENUE AUTHORITIES AND NOT ON THE ASSESSEE, HENCE, WITHOUT BRINGING COMPARABLE CASES ON RECORD, NO SUCH DISALLOWANCE CA N BE MADE. IN THIS VIEW OF THE MATTER, WE HOLD THAT NO SUCH DISALLOWAN CE IS WARRANTED. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED . 8. IN GROUND NO. 2(I) AND 2(II), THE ISSUE INVOLVED IS REGARDING CONFIRMATION OF DISALLOWANCE BY THE CIT(A) OUT OF T ELEPHONE EXPENSES AND OUT OF VEHICLE EXPENSES. 9. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED TELEPHONE EXPENSES AT RS. 1,08,927/- AND VEHICLE RUNNING AND MAINTENANCE EXPENSES PAGE 5 OF 6 I.T.A.NO. 151/IND/2007 SWADHYAYA PRINTER PVT.LTD., INDORE AT RS. 1,41,594/-. THE A.O. DISALLOWED 1/10 TH OF BOTH THESE EXPENSES ON ACCOUNT OF ELEMENT OF PERSONAL USE. THE LD. CIT(A) REDUCED THE DISALLOWANCE OUT OF TELEPHONE EXPENSES TO RS. 5,000 /- AND CONFIRMED THE ACTION OF A.O. IN REGARD TO DISALLOWANCE OUT OF VEH ICLE EXPENSES. 10. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS AND CONTENDED AND IN CASE OF ASSESSEE BEING A COMPANY N O DISALLOWANCE ON ACCOUNT OF ELEMENT OF PERSONAL USE COULD BE MADE. T HE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, PLACED STRONG RE LIANCE ON THE ORDER OF THE LD. CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. IT IS NOTED THAT THE ASSESSEE IS A COMPANY AND THE A.O. HAS DISALLOWED THESE EXPENSES ON ACCOUNT OF ELEMENT OF PERSONAL USE BY THE DIRECTORS WITHOUT BRINGING ANY MATERIAL ON RECORD T O THAT EFFECT AND SINCE THE ASSESSEE IS A COMPANY, NO SUCH DISALLOWANCE, IN OUR OPINION, CAN BE MADE. WE ARE FURTHER OF THE OPINION THAT IF THE A.O . WANTED TO DISALLOW SOME OF THESE EXPENSES, HE COULD HAVE DONE IF HE WO ULD HAVE PROVED THAT SUCH EXPENSES WERE INCURRED FOR NON-BUSINESS PURPOS ES AND NOT OTHERWISE. IN THIS VIEW OF THE MATTER, WE ACCEPT GR OUND NO.2 OF THIS APPEAL ALSO. PAGE 6 OF 6 I.T.A.NO. 151/IND/2007 SWADHYAYA PRINTER PVT.LTD., INDORE 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH JANUARY, 2010. CPU* 78D121