ACIT CIR-2, Jamshedpur V. M/s RSB Transmission (I) Ltd, Jamshedpur

ITA 171/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9597 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL
• Assessee Lawyers: S K PODDAR; DEVESH PODDARADV
• Keywords: Capital asset; Depreciation; Additional evidence; Corroborative evidences
• Section: 40(a)(ia)

Judgement Text

1 ITA NO. 171 /RAN/ 201 6 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO. 171 /RAN/201 6 A .Y. : 20 06 - 20 07 ACIT, CIRCLE - 2, JAMSHEDPUR V S M/S RSB TRANSMISSION (I) LTD. VITH PHASE, INDUSTRIAL AREA, ADITYAPUR, JAMSHEDPUR P AN NO. : A ABCR 3925 R (APPELLANT ) . RESPONDENT REVENUE BY :SHRI P.K.MONDAL, JCIT ASSESSEE BY : SHRI S.K.PODDAR & DEVESH PODDAR,ADV. DATE OF HEARING : 2 5 . 05 .201 8 DATE OF PRONOUNCEMENT : 28.05 .201 8 O R D E R PER PAVAN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), JAMSHEDPUR , DATED 28.03.2016 , FOR THE ASSESSMENT YEAR 2006 - 07 , WHEREIN THE REVENUE HAS RAISED THE FOLLOWI NG GROUND : - 1 . ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACT AND IN LAW IN DELETING THE ENTIRE ADDITION OF RS. 20,92,121/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. 2 . ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACT AND IN LAW IN ALLOWING RELIEF OF RS. 23,67,089/ - AGAINST THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF CONSULTANCY EXPENSES/FEE FOR TECHNICAL SERVICES. 3 . ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) ERRED ON FAT AND IN LAW IN ALLOWING RELIEF OF RS. 35,85,890/ - AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER ON DISALLOWANCE OF 2 ITA NO. 171 /RAN/ 201 6 INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE TO SISTER CONCERN/COMPANIES. 4 . ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACT AND IN LAW IN ALLOWING RELIEF OF RS. 10,45,877/ - AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DEFERRED REVENUE EXPENSES. 5 . ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACT AND IN LAW IN ALLOWING RELIEF OF RS. 1,72,14,959/ - AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON FIXED ASSETS. 6. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACT AND IN LAW IN ALLOWI NG RELIEF OF RS. 41,37,297/ - AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENSES BEING CAPITAL IN NATURE. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING, ASSEMBLING & MATCHING OF AUTO COM PONENTS AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 30.11.2006 WITH TOTAL INCOME AT RS. 51,04,313/ - . THE ASSESSEE HAS ALSO FILED FBT RETURN ON 30.11.06 DECLARING VALUE OF FRINGE BENEFITS AT RS.66,59,185/ - AND PAID FRINGE BENEFIT TAX AT RS.22,77,115/ - . THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT AND SELECTED FOR SCRUTINY UNDER CASS . SUBSEQUENTLY NOTICE U/S.142( 1 ) & 143(2) OF THE ACT TO THE ASSESSEE WAS ISSUED. IN COMPLIANCE THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED ALL THE REQUIRED RELEVANT DOCUMENTS AND THE CASE WAS DISCUSSED. THE AO ON PERUSAL OF THE BAN STATEMENTS DOCUMENTS PRODUCED BY THE ASSESSEE , MADE ADDITIONS UNDER THE HEADS FOREIGN TRAVEL EXPENSES, CONSULTANCY EXPENSES/FEE FOR TECHNICAL SERVICES, INTEREST ON ACCOUN T OF INTEREST FREE ADVANCE TO SISTER CONCERN, DEFERRED REVENUE EXPENSES, DEPRECIATION ON FIXED ASSETS AND EXPENSES BEING CAPITAL IN NATURE AND ASSESSED THE TOTAL 3 ITA NO. 171 /RAN/ 201 6 INCOME AT RS. 1,24,83,770/ - AND PASSED ORDER U/S.143(3) OF THE ACT, DATED 30.12.2008 . 3 . AGGRIE VED BY THE ASSESSMENT ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS LD. AR OF THE ASSESSEE ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS AND LD.CIT(A) HAVING CONSIDERED THE FINDINGS AND THE SUBMISSIONS OF THE AS SESSEE DEALT ON THE DISPUTED ISSUES AND DELETED THE ADDITION MADE UNDER THE ABOVE HEAD S AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4 . AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 5 . BEFORE US, LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITIONS IN RESPECT OF THE CLAIMS MADE BY THE ASSESSEE AND ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS CATEGORICALLY MADE A CALCULATION AND MADE THE ADDITIONS, HOWEVER, THE CIT(A) HAS NOT TAKEN INTO CONSIDERATI ON THE FINDINGS OF THE ASSESSING OFFICER, AND PRAYED FOR ALLOWING THE APPEAL. 6 . CONTRA, LD. A R RELIED ON THE ORDER OF CIT(A) . 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE, WE FIND THAT WHILE DECIDING THE DISPUTES ISSUES OF DISALLOWANCE MADE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES, CONSULTANCY EXPENSES/FEE FOR TECHNICAL SERVICES, INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE TO SISTER CONCERN, DEFERRED REVENUE EXPENSES, DEPRECIATION ON FIXED ASSETS AND EXPENSES BEING CAPITAL IN NATURE AND ASSESSED, THE 4 ITA NO. 171 /RAN/ 201 6 CIT(A) HAS TAKEN ALL THE FACTS, SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF AO AND ALSO THE CIT(A) HAS CALLED FOR REMAND REPORT FROM THE AO AND HAS GIVEN A CATEGORICAL FINDING IN DEALING WITH THE ABOVE ISSUES AND DELETED THE SAME. THE OBSERVATIONS OF THE CIT(A) IN REGARD TO THE ABOVE ADDITIONS ARE AS UNDER : - REGARDING DISALLOWANCE ON ACC OUNT OF FOREIGN TRAVEL EXPENSES : - 4.3 I HAVE GONE THROUGH THE ORDER OF THE LEARNED AO AS WELL AS THE REMAND REPORT AND THE WRITTEN SUB MISSION MADE BY THE APPELLANT. THE QUESTION OF ADMISSIBILITY OF EXPENDITURE ON VISIT TO FOREIGN COUNTRY SHOULD NOT BE APPROACHED FROM THE POINT OF VIEW AS TO WHETHER SUCH VISIT RESULT IMMEDIATELY IN THE EARNING OF PROFIT. ALL THAT REQUIRES THAT THE EXPENDI TURE SHOULD NOT BE PERSONAL BUT SHOULD BE WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS AS STATED IN BOARDS CIRCULAR NO.4 DATED 19.06.1950 IN THE CASE OF SINDHIYA INVESTMENT PVT. LTD. VS. CIT (2010) 40 SOT 239 (MUMBAI) HAS HELD THAT TRAVELLIN G EXPENDITURE CANNOT BE DISALLOWED MERELY BECAUSE THERE IS NO BUSINESS OF THE ASSESSEE IN FOREIGN COUNTRY IN RELEVANT PREVIOUS YEARS. THE ASSESSEE ENCLOSED SUPPORTING EVIDENCES RELYING UPON THE FACTS AND VARIOUS ASPECT, I AM OF THE VIEW FOREIGN TOUR CONDU CTED IS INCIDENTAL TO BUSINESS AND THEREFORE THE ADDITION MADE AMOUNTING TO RS.20,92,121/ - MADE BY THE AO IS HEREBY DELETED. REGARDING DISALLOWANCE ON ACCOUNT OF CONSULTANCY EXPENSES/FEE FOR TECHNICAL SERVICES : 5.3 I HAVE GONE THROUGH THE ORDER OF THE LEARNED AO AS WELL AS THE REMAND REPORT AND THE WRITTEN SUBMISSION MADE BY THE APPELLANT. SECTION 40(A)(IA) IS A SECTION WHICH STATES THAT NOTWITHSTANDING ANYTHING TO CONTRARY OF SECTION 30 TO 38, THE EXPENSES CLAIM WILL NOT BE ALLOWABLE IF THE EXPENSES H AS BEEN CLAIMED AS EXPENDITURE WHICH HAS BEEN PAID TO NON - RESIDENT OR FOREIGN COMPANY. THIS DISALLOWANCE IS TO BE RESORTED BY THE AO IF AND ONLY IF THE ASSESSEE HAS MADE CLAIM OF EXPENSES IN PROFIT AND LOSS ACCOUNT. WHEN THERE IS NO CLAIM OF EXPENSES THE DISALLOWANCE DOES NOT ARISE AT ALL. BASED ON ABOVE ADDITION MADE AMOUNTING TO RS.23,67,039/ - IS HEREBY DELETED. 5 ITA NO. 171 /RAN/ 201 6 REGARDING DISALLOWANCE OF INTEREST ON ACCOUNT OF INTEREST FREE ADVANCE TO SISTER CONCERN/COMPANIES : - 7.3 I HAVE GONE THROUGH THE ORDER OF TH E LEARNED AO AS WELL AS THE REMAND REPORT AND THE WRITTEN SUBMISSION MADE BY THE APPELLANT. THE AO IN HIS ORDER STATED THAT INTEREST FREE LOAN HAS BEEN GIVEN TO SISTER CONCERN WHEREAS THE ASSESSEE HAS BEEN STATING THAT IT IS AN ADVANCE FOR PURCHASING CAPIT AL GOODS FROM SISTER CONCERN. THE HONBLE SUPREME COURT IN THE CASE OF S.A.BUILDERS LTD. VS. CIT(2007) 158 TAXMANN 74 (SC) HAS HELD THAT WHILE HOLDING COMPANY HAS A DEEP INTEREST IN THE SISTER CONCERN AND THE HOLDING COMPANY ADVANCES BORROWED MONEY TO A SU BSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PURPOSE, THE HOLDING COMPANY WOULD ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON BORROWED CAPITAL. THE ALLAHABAD TRIBUNAL IN THE CASE OF CIT VS. RADICO KHETAN LTD. (2005) 142 TAXMANN 68 1 (ALLAHABAD) HAS HELD THAT IF THERE WAS SUFFICIENT FUND OTHER THAN BORROWED MONEY AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL, SHARE APPLICATION MONEY, RESERVES AND SURPLUSES FOR DIVERTING A PARTICULAR SUM TO IT SISTER CONCERN, IT COULD NOT B E SAID THAT THE LOAN ADVANCE TO THE SISTER CONCERN CAME OUT OF BORROWED MONEY. IN THIS CASE THE ASSESSEE HAD SUFFICIENT FUND IN THE FORM OF SHARE CAPITAL, RESERVE AND SURPLUS. BASED ON THE ABOVE FACTS THE ADDITION MADE AMOUNTING TO RS.35,85,809/ - IS HEREBY DELETED. REGARDING DISALLOWANCE ON ACCOUNT OF DEFERRED REVENUE EXPENSES: - 8.3 I HAVE GONE THROUGH THE ORDER OF THE LEARNED AO AS WELL AS THE REMAND REPORT AND THE WRITTEN SUBMISSION MADE BY THE APPELLANT. FROM THE PERUSAL OF BALANCE SHEET ANDOTHER DETAI LS AND SECTION 35D OF THE IT ACT, IT CAN EASILY BE ASCERTAIN THAT THE EXPENSE RELATES TO PRIOR PERIODS OF COMMENCEMENT OF BUSINESS WHICH IS ALLOWABLE IN FIVE SUCCESSIVE YEAR AND IS TO BE ALLOWED. ONCE IT IS ESTABLISHED THAT THE CLAIM IS REGULATED U/S.35D, THE AO IS BOUND TO ALLOW THE SAME AS PER STATUTORY PROVISION. BASED ON THE ABOVE FACTS THE ADDITION MADE AMOUNTING TO RS. 10,45,877/ - IS HEREBY DELETED. REGARDING DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON FIXED ASSETS: 9 .3 I HAVE GONE THROUGH THE ORDER OF THE LEARNED AO AS WELL AS THE REMAND REPORT AND THE WRITTEN SUBMISSION MADE BY THE APPELLANT. I AM SATISFIED WITH THE ASSESSEES SUBMISSION THAT HE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THESE EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDI NGS BECAUSE OF THE FACTS 6 ITA NO. 171 /RAN/ 201 6 THAT THE ASSESSEE COMPANY HAS VARIOUS DETAILS AT DIFFERENT PLACES AND THE SAME COULD NOT BE COLLECTED AT THE TIME OF ASSESSMENT. I FIND THAT ASSESSEES CASE IS COVERED UNDER RULE 46A(A) WHEREAS EXISTING OF ANY ONE CIRCUMSTANCES IS SUFFICIENT TO ADMIT THE ADDITIONAL EVIDENCE PRODUCE BEFORE THE COMMISSIONER APPEALS. ACCORDINGLY I ADMIT THE ADDITIONAL EVIDENCE WHICH SATISFY THAT THE CAPITAL ASSET HAS BEEN PURCHASED BY THE ASSESSEE FOR HIS PUNE PLANT AND PUT TO USE ALSO. ACCORDINGLY AD DITION AMOUNTING TO RS. 1,72,14,959/ - IS HEREBY DELETED. REGARDING DISALLOWANCE ON ACCOUNT OF EXPENSES BEING CAPITAL IN NATURE : - 10.3 I HAVE GONE THROUGH THE ORDER OF THE LEARNED AO AS WELL AS THE REMAND REPORT AND THE WRITTEN SUBMISSION MADE BY THE APPEL LANT. THE AO IN HIS REMAND REPORT HAS STATED THE ASSESSEE DID NOT FILE ANY SUCH EXPLANATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FROM THE ORDER OF THE AO IT IS NOT FOUND ANYWHERE AS TO WHETHER ANY EXPLANATION ON THIS ISSUE HAS BEEN CALLED FOR. EVEN IF THE AO WILL LOOK INTO THE TRADING AND P & L ACCOUNT WHICH SCHEDULE HE CAN EASILY ASCERTAIN AS TO WHETHER THE EXPENSES HAS BEEN CLAIMED OR NOT. THEREFORE, THE ACTION OF THE AO IS AGAINST THE BASIC ACCOUNTING PRINCIPLE AS WELL AS THE PROVISION OF THE ACT . AS THERE IS NO CLAIM, THE DISALLOWANCE OF THE SAME IS TOTALLY UNJUSTIFIED. BASED ON THE ABOVE FACTS THE ADDITION MADE AMOUNTING TO RS. 41,37,297 / - IS HEREBY DELETED. 8. LD. DR COULD NOT BRING ANY NEW FACT TO CONTROVERT THE ABOVE FINDINGS OF CIT(A). IN O UR VIEW THE CIT(A) HAS PASSED A REASONED ORDER AND DEALT ON THE DISPUTED ISSUES AFTER CONSIDERING ALL THE ASPECTS. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ABOVE FINDINGS OF CIT(A) AND THE SAME IS UPHELD AND THE GROUNDS OF APPEAL OF REVEN UE ARE DISMISSED. 9 . IN THE RESULT, APPEAL OF THE REVEN UE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 / 05 /201 8 SD/ - SD/ - ( N.S.SAINI ) ( PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI , DATED 28 / 05 /201 8 PRAKASH KUMAR MISHRA , SR. PS 7 ITA NO. 171 /RAN/ 201 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, //TRUE COPY// SR.PS, ITAT, RANCHI 1. THE APPELLANT ACIT, CIRCLE - 2, JAMSHEDPUR 2. THE RESPONDENT M/S RSB TRANSMISSION (I) LTD. VITH PHASE, INDUSTRIAL AREA, ADITYAPUR, JAMSHEDPUR 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE.