M/s Raj Transmission Engg. Ltd., Chandigarh V. ACIT, Chandigarh

ITA 179/CHANDI/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7774 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N K SAINI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R. SOOD, AM AND MS. SUSHMA CHOWLA, JM ITA NO. 179/CHD/2012 ASSESSMENT YEAR: 2007-08 RAJ TRANSMISSION ENGG LTD V. A.C.I.T. PLOT NO. 705, INDUSTRIAL AREA CIRCLE 2(1), CHAND IGARH PHASE 1 CHANDIGARH AADCR 2722 C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NIRAJ JAIN ASSESSEE BY: SHRI N.K. SAINI DATE OF HEARING: 20.06.2012 DATE OF PRONOUNCEMENT: 25.06.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROU NDS THROUGH WHICH DISALLOWANCES OF VARIOUS EXPENSES WHICH HAS BEEN MA DE BY THE ASSESSING OFFICER AND ENHANCED BY THE LD. CIT(A), HAVE BEEN C HALLENGED. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASS ESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TRANSMI SSION TOWERS. DURING THE YEAR IT WAS STATED THAT SOME MANUFACTURING HAD TAKE N PLACE BUT NO SALES WERE EFFECTED. THE ASSESSEE-COMPANY HAS ALSO RECEIVED C ONSULTANCY CHARGES AMOUNTING TO RS. 3,39,000/-. VARIOUS EXPENSES HAVE BEEN CLAIMED AND ULTIMATELY RETURN DECLARING LOSS OF RS. 2,99,615/- WAS FURNISHED. THE ASSESSING OFFICER MADE VARIOUS DISALLOWANCES AS PER DETAILS B ELOW:- (A) DISALLOWANCE OF RS. 1,88,844/- ON ACCOUNT OF INTER EST PAID AND BANK CHARGES BECAUSE THE ASSESSEE HAD PAID INTEREST FREE LOANS TO BHAWANI STEELS AND RAJ ENGINEERING WORKS. (B) DISALLOWANCE OF RS. 43,000/- ON ACCOUNT OF DEPRECI ATION BECAUSE THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT SHOWN ANY ELECTRICITY EXPENSES, THEREFORE, ACCORDING TO HIM MACHINES WERE NOT OPERATED. 2 (C) A SUM OF RS. 28,287/- BECAUSE THE EXPENSES THROUGH VARIOUS VOUCHERS LISTED AT PAGE 4 OF THE ASSESSMENT ORDER WERE NOT V OUCHED. (D) A SUM OF RS. 74,800/- ON ACCOUNT OF SALARY AND WAG ES BECAUSE EVIDENCE OF THE SAME WAS NOT AVAILABLE. 3 . ON APPEAL, THE LD. CIT(A) NOTED THAT THE ASSESSEE H AD BASICALLY CLAIMED EXPENSES WHICH ARE DETAILED AS PER SCHEDULE K, L, M WHICH ARE AS UNDER: SCHEDULE K PERSONAL EXPENSES DIRECTORS SALARY RS. 75,000.00 SCHEDULE L FINANCIAL EXPENSES INTEREST PAID RS. 134,054.00 OTHER EXPENSES BANK CHARGES RS. 46,790.00 SCHEDULE M ADMINISTRATIVE & OTHER EXPENSES ADVERTISEMENT RS. 8,000.00 AUDIT FEE RS. 11,236.00 FEE & TAXES RS. 300.00 FUEL EXPENSES RS. 22,230.00 INSURANCE CHARGES RS. 3,704.00 LEGAL & PROFESSIONAL RS. 10,553.00 PRELIMINARY EXPENSES W/OFF RS. 35,500.00 PRINTING & STATIONERY RS. 2,753/- RENT RS. 338,250.00 SALARY RS. 24,000/- STAFF WELFARE RS. 3,626.00 SUBSCRIPTION RS. 3,200.00 TELEPHONE EXPENSES RS. 6,771.00 TRAVELLING & CONVEYANCE RS. 2,348.00 WAGES RS. 50,800.00 TOTAL RS. 523,271.00 4. ACCORDING TO THE LD. CIT(A), THESE EXPENSES COUL D NOT BE RELATED TO THE CONSULTANCY CHARGES AND ACCORDINGLY HE DISALLOWED THE SAME AND DIRECTED THE ASSESSING OFFICER TO ASSESS THE INCOME OF THE ASSES SEE ON POSITIVE INCOME OF RS. 3,39,000/-. 5. BOTH THE PARTIES WERE HEARD IN DETAIL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. THE LD. COUNSEL OF THE ASSESSEE HAD VEHEMENTLY ARGUED THAT MANY OF THE EXP ENSES DO RELATE TO 3 CONSULTANCY CHARGES. FOR EXAMPLE THE DIRECTORS WER E QUALIFIED AND RS. 75,000/- PAID TO THE DIRECTOR IS RELATED TO THE CON SULTANCY CHARGES. SIMILARLY OTHER ADMINISTRATIVE EXPENSES ARE OF GENERAL EXPENS ES LIKE AUDIT FEE, FEES AND TAXES, PAYMENT TO OTHER STAFF, RENT, TRAVELING AND CONVEYANCE CHARGES AND TELEPHONE DO RELATE TO CONSULTANCY CHARGES. THEREF ORE, THESE EXPENSES HAVE BEEN WRONGLY DISALLOWED BY THE LD. CIT(A). 7. THE LD. DR FOR THE REVENUE HAD STRONGLY SUPPORTE D THE ORDERS OF LOWER AUTHORITIES. WE FIND SOME FORCE IN THE SUBMISSIONS THAT SOME OF THE GENERAL EXPENSES AND FEE, SALARY PAID TO THE DIRECTORS AT R S. 75,000/- MAY HAVE SOME CONNECTION WITH THE CONSULTANCY CHARGES. AT THE SA ME TIME ITEMS LIKE FUEL EXPENSES, INSURANCE CHARGES, RENT, WAGES CAN NOT PO SSIBLY HAVE ANY RELATION WITH THE CONSULTANCY CHARGES. THEREFORE, CONSIDERI NG THE OVERALL CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ESTIMAT ED EXPENSES OF RS. 2.00 LAKHS IS ALLOWED WHICH WOULD MEET THE ENDS OF JUSTICE. R EST OF THE EXPENSES IN ANY CASE IS RELATED TO PRODUCTION OF TOWERS AND SHOULD HAVE BEEN INCLUDED IN THE CLOSING STOCK. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW EXPENSES OF RS. 2.00 LAK HS AGAINST THE CONSULTANCY INCOME AND ASSESS THE INCOME OF THE ASSESSEE AT RS. 1,39,000/-. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON 25 .06. 2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25.06.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 4