Smt. Anju Saraf, Nagpur V. Assistant Commissioner of Income-Tax,Circle-I, Nagpur

ITA 16/NAG/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1574 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: SUDESH BANTHIA
• Keywords: Business expenditure; Commercial expediency
• Section: 80IB; 37

Judgement Text

1 ITA NOS. 06 & 16/NAG/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 06/NAG/2012 ASSESSMENT YEAR : 2007 - 08. ASSTT. COMMISSIONER OF INCOME - TAX, MRS. ANJU SARAF, CENTRAL CIRCLE - 2(2), NAGPUR. VS. NAGPUR. APPELLANT. RESPON DENT. I.T.A. NO.16/NAG/2012 ASSESSMENT YEAR : 2007 - 08. SMT. ANJU SARAF, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CIRCL E - I, NAGPUR. PAN AETPS5421E APPELLANT. RESPONDENT. DEPARTMENT BY : SMT. SUMAN MALIK. A SSESSEE BY : SHRI SUDESH BANTHIA. DATE OF HEARING : 18 - 11 - 2015. DATE OF PRONOUNCEMENT : 4 TH DECEMBER , 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THESE ARE CROSS APPEALS EMANATING OUT OF THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 11 - 10 - 2011 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. ASSESSEES APPEAL: 2. THE ISSUE RAISED IS THAT THE CIT(APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE I.T. ACT 2 ITA NOS. 06 & 16/NAG/2012 3. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AT THE OUTSET IN THIS CASE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ON MERITS THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004 - 05 WHEREIN ON IDENTICAL ISSUE AND ON IDENTICAL F ACTS THE TRIBUNAL HAS HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IB. 4. PER CONTRA LEARNED D.R. HAS STATED THAT THE ITATS DECISION HAS NOT ELABORATELY DISCUSSED THE ISSUE AND HENCE THE SAME IS NOT APPLICABLE ON THE FACTS OF THIS CASE. 5. UPON CAREFUL CONSIDERATION WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004 - 05 VIDE ORDER DATED 24 - 07 - 2009 HAD HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IB. THE AO HAS NOT FOLLOWED THE ITATS ORDER ON THE GROUND THAT THE DEPARTMENT HAS FILED THE APPEAL AGAINST THE DECISION BEFORE THE HONBLE HIGH COURT. LEARNED CIT(APPEALS) HAS NOT ACCEPTED THE ITATS DECISION ON THE GROUND THAT THE TRIBUNAL W AS NOT PROPERLY APPRISED OF THE FACTS. WE FIND THAT SINCE THE FACTS ARE IDENTICAL AND IN ASSESSEES OWN CASE THE TRIBUNAL HAS DECIDED THE ISSUE, JUDICIAL DISCIPLINE MANDATES THAT WE FOLLOW THE ORDER OF THE TRIBUNAL. WE FURTHER NOTE THAT THE REVENUE HAS ALREADY FILED APPEAL BEFORE THE HONBLE HIGH COURT IN INCOME TAX APPEAL NO . 76 OF 2010. IN THIS VIEW OF THE MATTER SINCE THE HONBLE JURISDICTIONAL HIGH COURT HAS NOT REVERSED THE DECISION OF ITAT, WE FOLLOW THE ABOVE SAID ORDER OF ITAT IN ASSESSEES OWN CASE. HENCE WE SET ASIDE THE ORDER OF LEARNED CIT(APPEALS) AND HOLD THAT TH E ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB. 6. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 7. REVENUES APPEAL: THE GROUNDS OF APPEAL READ AS UNDER : 3 ITA NOS. 06 & 16/NAG/2012 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF ELECTRICITY EXPENDITURE OF RS.10,17,959/ - IGNORING THE FACT THAT THE CLAIM OF THE ASSESSEE IS INCORRECT BEING CONTRADICTORY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD NO ELECTRIC CONNECTION, HENCE THE QUESTION OF ALTERNATE ARGUMENT OF DG SET FOR EMERGENCY POWER BREAKS DOES NOT ARISE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DIRECTING T HE ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF WIND MILL MAINTENANCE EXPENSES OF RS.13,36,833/ - . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT DISALLOWANCE CANNOT BE MADE IF NO SECTION UNDER WHICH THE DI SALLOWANCE MADE IS NOT MENTIONED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT DISALLOWANCE OF BUSINESS EXPENDITURE CAN BE MADE U/S 37 OF THE ACT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN IGNORING THE FACT THAT THE AMOUNT CLAIMED AS EXPENDITURE IS NOT COMMENSURATE WITH THE MARKET PRICE. 8. APROPOS GROUND OF DELETION OF ADDITION OF ELECTRICITY EXPENDITURE. ON THIS ISSUE THE AO NOTED THAT THE ASSESSEE HAS PAID ELECTRICITY E XPENDITURE OF RS.10,17,959/ - TO SISTER CONCERN M/S R.B. SETH SHRIRAM NARSINGDAS. THE AO WHILE MAKING THE DISALLOWANCE RELIED ON THE STATEMENT OF SMT. ANJU SARAF RECORDED ON 07 - 12 - 2009 BEFORE THE ACIT, CIRCLE - 1, NAGPUR WHEREIN IT HAS BEEN STATED THAT CRUSHI NG AND SCREENING MACHINES ARE RUN ON GENERATOR AND THERE IS NO ELECTRICITY CONNECTION IS AVAILABLE FOR RUNNING CRUSHING AND SCREENING MACHINES. IN SUBMISSION BEFORE THE AO IT HAS BEEN CLAIMED THAT THERE WAS AN ALTERNATE ARRANGEMENT WITH M/S RBSSN WITH WHOM POWER HAS ALSO BEEN SHARED. THE AO HAS FURTHER HELD THAT THE CONTENTION OF THE ASSESSEE IS AFTER THOUGHT AND THIS IS NOT A GENUINE EXPENDITURE. 4 ITA NOS. 06 & 16/NAG/2012 9. BEFORE THE LEARNED CIT(APPEALS) IT WAS SUBMITTED THAT THE ASSESSEE HAS NEVER STATED THAT THERE WAS NO EXPEND ITURE CLAIMED ON ELECTRICITY BY THE UNIT. AS THE ASSESSEE HAD NO ELECTRICITY CONNECTION OF ITS OWN AND THEREFORE HAD ENTERED INTO AN AGREEMENT WITH M/S RBSSN FOR OBTAINING CONTINUOUS SUPPLY OF POWER. THE EXPENDITURE IS INCURRED OUT OF COMMERCIAL EXPEDIENCY AND WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AMOUNT IS PAID BY CHEQUE AS PER AGREEMENT. IN THE CASE OF RBSSN ONLY THE NET EXPENSES HAVE BEEN ALLOWED. THEREFORE THERE IS NO CASE MADE OUT THAT EXPENDITURE HAS BEEN WRONGLY CLAIME D AND IS TO BE DISALLOWED. 10. CONSIDERING THE ABOVE, LEARNED CIT(APPEALS) HELD AS UNDER : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. IT IS AN UNCONTROVERTED FACT THAT THE ASSESSEE IS DOING THE BUSINESS FROM THE SAME PREMISES AS A SISTER CONCER N. THERE IS NO SEPARATE ELECTRICITY CONNECTION HELD BY ASSESSEE. AS POINTED OUT BY AR THE AGREEMENT WITH M/S RBSSN THE ASSOCIATE CONCERN WAS TO ENTER INTO FOR CONTINUOUS SUPPLY OF ELECTRICITY AND POWER. THE EXPENDITURE IS DULY SUPPORTED BY BILLS AND VOUCHE RS. MERELY BECAUSE THE EXPENDITURE WAS PAID TO SISTER CONCERN THERE IS NO GROUND FOR DISALLOWANCE MADE BY AO. I AM THEREFORE OF THE OPINION THAT AO HAS NOT MADE OUT A CASE FOR DISALLOWANCE ELECTRICITY EXPENDITURE. AO IS THEREFORE DIRECTED TO DELETE THE ADD ITION MADE. 11. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT IS CLEAR THAT THE ASSESSEE HAS PAID THE EXPENDITURE ON ACCOUNT OF ELECTRICITY TO ITS ASSOCIATE CONCERN. THE EXPENDITUR E IS DULY SUPPORTED BY BILLS AND VOUCHERS. SUCH EXPENDITURE WERE CLAIMED IN EARLIER YEARS AND WERE ALLOWED. MERELY BECAUSE THE EXPENDITURE WAS PAID TO SISTER CONCERN, THE SAME CANNOT BE DISALLOWED. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT(APPEALS) ON THIS ISSUE. 5 ITA NOS. 06 & 16/NAG/2012 13. APROPOS THE ISSUE OF DELETION OF ADDITION ON ACCOUNT OF WIND MILL MAINTENANCE EXPENSES. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.16,36,832/ - AND RS.28,06,000/ - PAYABL E TO M/S VISTA RRB LTD. BEFORE THE AO THE ASSESSEE HAS STATED THAT THE BILLS FOR MAINTENANCE FOR THE PERIOD 17 - 09 - 2008 TO 16 - 09 - 2007 OUT OF WHICH RS. 16,36,833/ - WAS INCURRED DURING THE YEAR AND THE BALANCE WAS TRANSFERRED TO PREPAID EXPENSES ACCOUNT. THE AO HAS EXAMINED THE AGREEMENT FOR MAINTENANCE CHARGES WITH M/S VISTA RRB LTD. WHEREIN THE ONLY ANNUAL RATE PER MACHINE IS RS. 5 LACS AND TOTAL CHARGES RS.28,06,000/ - INCLUDING SERVICE CHARGES. THE AO HAS COMPARED THE AGREEMENT ENTERED INTO BY ASSESSEE WIT H AGREEMENT OF OTHER COMPANY NAMELY M/S ENERCON INDIA LTD. IN THE CASE OF MOIL, SUZION WIND CO. LTD. AND STATED T HAT EXPENDITURE INCURRED BY THE ASSESSEE IS EXCESSIVE AND UNREASONABLE. THE AO HAS STATED THAT M/S VISTA RRB INDIA LTD. IS A ASSOCIATED COMPAN Y AND THE PAYMENT MADE TO SAID COMPANY APPEARS EXCESSIVE. THE AO, THEREFORE, RESTRICTED THE ALLOWANCE TO RS. 6 LACS ON THE BASIS OF ACTUAL MAINTENANCE FOR LESS THAN YEAR AND DISALLOWED RS.13,36,833/ - . 14. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE SUBM ITTED THAT THE PAYEE IS NOT COVERED U/S 40A(2)(B) AS IT IS A LIMITED COMPANY BASED IN CHANNAI AND IS NOT AN ASSOCIATE COMPANY WITH THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THESE AMOUNTS WERE PAID BY ACCOUNT PAYEE CHEQUE IN PURSUANCE TO A CONTRACT AND I NVOICE AND THE RECEIPTS WERE PRODUCED. CONSIDERING THE ABOVE, LEARNED CIT(APPEALS) HELD AS UNDER : I HAVE CAREFULLY CONSIDERED THE ISSUE AS POINTED OUT BY APPELLANT. AO HAS NOT STATED UNDER WHICH SECTION OF THE ACT THIS EXPENDITURE IS REQUIRED TO BE DISALLOWED. ALTHOUGH AO HAS RELIED ON THE MAINTENANCE EXPENDITURE PAID BY OTHER CONCERNS FOR MAINTENANCE AND IT IS ASCERTAINABLE WHETHER THE INSTANCES ARE COMPARABLE. FURTHER NO SPECIFIC INSTANCE OF ANY 6 ITA NOS. 06 & 16/NAG/2012 NON GENUINE PAYMENT IS BROUGHT ON RECORD BY AO. IT IS CLEAR THAT AO WAS UNDER A MISCONCEPTION THAT M/S VISTA RRB LTD. WAS AN ASSOCIATE CONCERN OF THE ASSESSEE . THEREFORE THERE IS NO GROUND FOR DENIAL OF EXPENDITURE. AO IS DIRECTED TO DELETE THE ADDITION MADE. 15. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 16. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE AOS MAIN PLANK OF ARGUMENT IS THAT THE EXPENDITURE INCURRED WAS EXCESSIVE. FOR THIS HE HAS COMPARED SOME AGREEMENTS ENTERED INTO WITH OTHER CONCERNS WITH THE PAYEE. WE AGREE WITH THE LEARNED CIT(APPEALS) THAT NO CASE HAS BEEN MADE OUT AS TO WHETHER THE MAINTENANCE CHARG ES PAID BY OTHERS WERE COMPARABLE TO THE ONE PAID BY THE ASSESSEE. HENCE IN OUR CONSIDERED OPINION THE AO IS TRYING TO ENTER INTO SHOES OF THE BUSINESSMAN TO DECIDE AS TO HOW HE SHOULD ENTER INTO AN AGREEMENT. NO CASE HAS BEEN MADE OUT THAT THE PAYMENTS A RE BOGUS OR THE SERVICES WERE NOT RENDERED. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. THE APPEAL OF THE REVENUE IS DISMISSED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF DEC. , 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 4 TH DEC. , 2015. 7 ITA NOS. 06 & 16/NAG/2012 COPY FORWARDED TO : 1. SMT. ANJU SARAF, C - 2, YOGESHWAR GANGA APARTMENT, RAMDASPETH, NAGPUR - 10. 2. ACIT, CIRCLE - 1,, NAGPUR. 3. C.I.T., CONCERNED 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT , NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.