Yash Automotive Pvt Ltd, Mirzapur V. ACIT, Mirzapur

ITA 18/ALLD/2009

• Counselvise Citation: 1820714 RSA 2009
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTA VA
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 18/ALLD./2009 ASSTT. YEAR : 2005-06 YASH AUTOMOTIVE PVT. LTD., VS. A.C.I.T., RANGE-II I, PAIRAYA TOLA, MIRZAPUR. MIRZAPUR. (PAN : AAACY 2249 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVEEN GODBOLE, C.A. RESPONDENT BY : SHRI Y.P. SRIVASTAVA, D.R. DATE OF HEARING : 05.11.2012 DATE OF PRONOUNCEMENT OF ORDER : 08.11.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LD. CIT(A), ALLAHABAD DATED 29.10.2008 FOR THE ASSESSMENT YEAR 2005-06. 2. GROUNDS NOS. 1 & 2 ARE GENERAL IN NATURE AND ARE , ACCORDINGLY, REJECTED. 3. ON GROUND NO. 3, 4 & 5, THE ASSESSEE CHALLENGED THE ADDITION OF RS.3,29,331/- OUT OF SUBVENTION PAYMENT. DURING THE YEAR, THE ASSESSEE COMPANY HAS MADE PAYMENTS TO FINANCING COMPANIES, I.E., CIT Y CORPORATION, HDFC, ICICI, MAGMA AND ALF, TERMING AS SUBVENTION CHARGES. THOUG H THE ASSESSEE HAS TERMED ITA NO. 18/ALLD./2009 2 THIS PAYMENT AS SUBVENTION, THE ASSESSING OFFICER C AME TO THE CONCLUSION THAT IT IS NOTHING BUT A PAYMENT OF COMMISSION IN THE GARB OF SUBVENTION. IT WAS OBSERVED THAT IT IS ALSO AN ESTABLISHED FACT THAT BANKS AND FINANCING COMPANIES EITHER CHARGE INTEREST OR COMMISSION FOR THE SERVICES RENDERED BY THEM, LIKE WE PAY COMMISSION CHARGES WHEN WE GO TO MAKE A BANK DRAFT. THE ASSESS EE WHILE EXPLAINING THE MEANING OF SUBVENTION HAS GIVEN SOME DICTIONARY MEA NING THAT SUBVENTION MEANS A GRANT FROM THE GOVERNMENT, ETC. IN SUPPORT OF ENT ERPRISE OF PUBLIC IMPORTANCE. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. THE ASSESSEE CLAIMED TO BE A DEALER OF COMMERCIAL MOTOR VEHICLES AND HAS TO RUN AS PER PRINCIPLES OF COMMERCIAL EXPEDIENCY AND HAS TO FOLL OW THE PRUDENT BUSINESS PRACTICES. THE PRIME MOTIVE IS TO MAXIMIZE THE PROF IT. THEREFORE, NOMENCLATURE OF ACCOUNTING HEAD UNDER WHICH SUCH PAYMENTS ARE MADE, I.E., SUBVENTION MEANING SUBSIDY IS IMMATERIAL. THE LD. CIT(A) ALSO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE BECAUSE THE PAYMENTS ARE MADE TO FINANCERS OF THE LOAN, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE PAYMENT A S COMMISSION IN NATURE AND ACTION OF THE ASSESSING OFFICER WAS UPHELD BY DISAL LOWING THE AMOUNT U/S. 40(A)(IA), AS THE ASSESSEE HAS NOT DEDUCTED ANY TAX ON THIS AMOUNT. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE SIMILAR ISSUE WAS CONSIDERED BY THE ITAT, ITA NO. 18/ALLD./2009 3 ALLAHABAD BENCH IN THE CASE OF M/S. COMMERCIAL AUTO SALES VS. JCIT IN ITA NO. 02/A/2009 AND VIDE ORDER DATED 12.05.2011, SIMILAR ADDITION HAS BEEN DELETED. THE FINDINGS OF THE TRIBUNAL IN THIS CASE IN PARA 6 ARE REPRODUCED AS UNDER : 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE FIND THE ARGUMENTS MADE BY THE LEAR NED COUNSEL MR. ASHISH BANSAL, ADVOCATE CONVINCING ON THE BASIS OF FACTS ON RECORD THAT PAYMENTS MADE BY THE FINANCER ON BEHALF OF THE CUSTOMER WHICH IS EXTRA CREDIT BY AN AMOUNT WHICH IS FURTHER ALLOWED AS A DISCOUNT TO THE CUSTOMER WHICH IN TERMS UNDER THE SCHEME OF FIN ANCER IS RECEIVED FROM THE MANUFACTURER CANNOT FALL UNDER THE PROVISI ON OF SEC. 40(A)(IA) OF THE ACT. SINCE THE ASSESSEE IS UNDER N O OBLIGATION TO GIVE A COMMISSION TO A PERSON TO WHOM THE GOODS ARE SOLD A ND THEREFORE THE SAID PAYMENT DOES NOT FALL U/S. 194 H OF THE ACT FO R DEDUCTION OF TAX AT SOURCE. THE ORDER OF LEARNED CIT(A) IS REVERSED ON THE ISSUE AND THE ADDITION SO SUSTAINED AMOUNTING TO RS.1015543/- IS DIRECTED TO BE DELETED. THUS GROUND NO. 1 TO 4 OF THE ASSESSEE ARE ALLOWED. 5. ON THE OTHER HAND, THE LD. DR RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. 6. ON CONSIDERATION OF FACTS OF THE CASE IN THE LIG HT OF ORDER OF ITAT, ALLAHABAD BENCH IN THE CASE OF M/S. COMMERCIAL AUTO SALES (SU PRA), WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE REFORE, FOLLOWING THE ABOVE ORDER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AN D DELETE THE ADDITION. IN THE RESULT, GROUND NO. 3, 4 & 5 OF THE APPEAL OF THE AS SESSEE ARE ALLOWED. 7. ON GROUND NO. 6, 7 & 8, THE ASSESSEE CHALLENGED ADDITION OF RS.2,33,757/- OUT OF INTEREST PAYMENT TO FINANCERS. THE ASSESSEE HAS MADE INTEREST PAYMENT TO ITA NO. 18/ALLD./2009 4 M/S. MAGMA LEASING LTD., TATA MOTORS AND INTEREST O N VEHICLE LOANS. SINCE TDS WAS NOT DEDUCTED, THEREFORE, THE ASSESSING OFFICER DISALLOWED THESE PAYMENTS AND ADDITIONS WERE MADE U/S. 40(A)(IA) OF THE IT ACT. T HE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT IN FACT IT WAS THE PAYMENT AGAINST HIRE PURCHASE AGREEMENT AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS IN TERMS OF I NSTRUCTION OF BOARD NO. 1425 DATED 16.11.1981. THE LD. CIT(A) DID NOT DECIDE THE CONTENTION OF THE ASSESSEE AND HELD THAT THERE IS A INTEREST ELEMENT THEREON, THER EFORE, THE ADDITION HAS TO BE UPHELD. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND REFERRED TO PAPER BOOK PA GES 36, 37 AND 38, WHICH ARE THE HIGHER PURCHASE AGREEMENT AND THE REGISTRATION CERTIFICATE TO SHOW THAT THE TRANSACTION WAS OF HIRE PURCHASE IN NATURE. THEREFO RE, THE DISALLOWANCE IS UNJUSTIFIED. ON THE OTHER HAND, THE LD. DR RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE LD. CI T(A). THE ASSESSEE HAS FILED HIRE PURCHASE AGREEMENT AS WELL AS THE DOCUMENTS OF REGI STRATION IN SUPPORT OF THE CONTENTION THAT THE TRANSACTION WAS IN FACT HIRE PU RCHASE IN NATURE. THE LD. CIT(A) ITA NO. 18/ALLD./2009 5 DID NOT DECIDE THE ISSUE IN THE LIGHT OF THE DOCUME NT FILED BY THE ASSESSEE IN TERMS OF THE BOARDS CIRCULAR. THE LD. CIT(A) INSTEAD OF DECIDING THE ISSUE IN PROPER PERSPECTIVE HAD GONE ON A DIFFERENT WAY CONSIDERING THE AMOUNT HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT AS EXPENSES, ON WHIC H TDS IS NECESSARY. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AN D RESTORE THIS ISSUE TO HIS FILE WITH THE DIRECTION TO RE-DECIDE THIS ISSUE IN TERMS OF T HE BOARDS CIRCULAR RELIED UPON BY THE ASSESSEE AND IN THE LIGHT OF THE DOCUMENTS PROD UCED BY THE ASSESSEE ON THE ISSUE. IN THE RESULT, GROUNDS NOS. 6 TO 8 OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10. ON GROUND NO.9, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.25,000/- OUT OF OTHER SELLING EXPENSES. THE ASSESSING OFFICER HAS D ISALLOWED SUM OF RS.50,000/- UNDER THE HEAD POOJA KIT EXPENSES AND OTHER SELLING EXPENSES AND THE ASSESSEE HAS CLAIMED OTHER SELLING EXPENSES AT RS.13,44,583/-, P OOJA KIT EXPENSES AT RS.95,246/-, ANNUAL DAY EXPENSES AT RS.1,52,435/- A ND SAKAL MAHOTSAVA EXPENSES AT RS.1,27,852/- AND THE AGGREGATE OF THE SAME COME S TO RS.13,75,533/-, OUT OF WHICH THE ASSESSING OFFICER DISALLOWED RS.50,000/- ON ACCOUNT OF THE FACT THAT THEY ARE NOT FULLY COVERED BY THIRD PARTY VOUCHERS. THE LD. CIT(A) RESTRICTED THE ADDITION TO RS.25,000/-. ITA NO. 18/ALLD./2009 6 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT THE ADDITION IS WHOLLY UNJUSTIFIED. THE ASSESSING OFFIC ER HAS NOT GIVEN ANY PLAUSIBLE REASON FOR MAKING DISALLOWANCE ON THIS HEAD. THE AS SESSEE IS A COMPANY AND STATED TO HAVE INCURRED EXPENDITURE FOR BUSINESS PURPOSE. THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO WHICH OF THE VOUCHER WAS NOT VERI FIABLE OR NOT ADMISSIBLE EXPENSE. IT APPEARS TO BE ADHOC ADDITION AND ACCORD INGLY, THE ADDITION IS DELETED BY SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW. GROUND NO. 9 OF APPEAL OF THE ASSESSEE IS ALLOWED. 12. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 10. THE SAME IS, ACCORDINGLY, DISMISSED AS NOT PRESSED. 13. ON GROUND NO. 11 TO 16, THE ASSESSEE HAS CHALLE NGED THE ADDITION OF RS.93,456/- OUT OF TRAVELING AND CONVEYANCE EXPENSE S, TELEPHONE EXPENSES AND VEHICLE EXPENSES. THE ASSESSING OFFICER NOTED THAT IN ASSESSMENT YEAR 2003-04, SIMILAR DISALLOWANCES HAVE BEEN MADE ON ACCOUNT OF PERSONAL USER WHICH IS CONFIRMED BY THE LD. CIT(A). THEREFORE, FOLLOWING T HE EARLIER HISTORY AND THAT NO LOG BOOK HAS BEEN PRODUCED, THE ASSESSING OFFICER M ADE DISALLOWANCE OF 5%, 5% AND 10% EACH AND MADE THE ADDITION OF RS.93,456/-. THE LD. CIT(A) UPHELD THE ADDITION AND DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO. 18/ALLD./2009 7 14. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT IT IS AN ADHOC ADDITION MADE BY THE ASSESSING OFFICER OUT OF VARIOUS EXPENSES. THE ASSESSEE IS A COMPANY AND IS LEGAL ENTITY. IT COULD NOT HAVE ANY PERSONAL USER OF THESE EXPENSES. THEREFORE, THE VERY BASIS OF THE AS SESSING OFFICER IN MAKING ADDITION IS UNJUSTIFIED. FURTHER, WHAT HAPPENED IN EARLIER YEAR IS NOT ALWAYS RELEVANT TO MAKE ROUTINE DISALLOWANCE IN SUBSEQUENT YEARS. THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO WHICH OF THE EXPENSES ARE OF INADMISSIBLE NATURE. CONSIDERING THE ABOVE, WE ARE OF THE VIEW THAT THE ADDITIONS ARE WHOLLY UNJUSTIFIED. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND DELETE THE ADDITION. IN THE RESULT, GROUNDS NOS. 11 TO 16 OF A PPEAL OF THE ASSESSEE ARE ALLOWED. 15. GROUND NO. 17 IS REGARDING CHARGING OF INTEREST , WHICH IS MANDATORY AND CONSEQUENTIAL. THE SAME IS, ACCORDINGLY, DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- ITA NO. 18/ALLD./2009 8 COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY