Deep Industries Limited, Ahmedabad V. The Dy.CIT., Circle-1, Ahmedabad

ITA 1825/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6621 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Bad and doubtful debts
• Section: 14A

Judgement Text

ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNA L C BENCH,AHMEDAB AD. (BEFORE SHRI BHAVNESH SAINI AND SHRI A. K. G ARODIA) I.T.A. NO. 1825/AHD/2009 (ASSESSMENT YEAR: 2004 -2005 ) DEEP INDUSTRIES LIMITED, OPP. SURYANARAYAN BUNGALOW, SABAFRMATI KALOL STATE HIGHWAY, SABARMATI, AHMEDABAD-380 005. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: AAACD 6915 E APPELLANT BY : SHRI SAKAR SHARMA. RESPONDENT BY : SHRI BHUVNESH KULSHRESTHA, SR. D. R. ( )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A)- VI, AHMEDABAD DATED 28-1-2009 FOR ASSESSMENT YEAR 2 004-05. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. LD. CIT (A) ERRED ON FACTS AND IN LAW IN CONFIR MING ADDITION OF RS.142 LACS AS INCOME OF APPELLANT IN RESPECT OF GA S COMPRESSION CHARGES FOR GANDHAR PROJECT HOLDING THAT THE SAME A CCRUED TO THE APPELLANT DURING THE YEAR. ACTION OF LD. CIT(A) BY CONFIRMING ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 2 ADDITION HAS RESULTED INTO DOUBLE TAXATION IN THE H ANDS OF SAME AMOUNT OF INCOME. 2. LD. CIT (A) ERRED ON FACTS AND IN LAW IN NOT ADJ UDICATING ISSUE RELATING TO ALTERNATIVE ISSUE RAISED BY ASSESSING O FFICER AS TO APPLICABILITY OF PROVISIONS OF SECTION 14A IN RESPE CT OF GAS COMPRESSOR RUNNING AND MAINTENANCE EXPENSES OF RS. 90,86,580/- . HE OUGHT TO HAVE HELD THAT PROVISIONS OF SECTION 14A DOES NOT A PPLY ON THE FACTS AND CIRCUMSTANCES OF CASE AS EXPENDITURE INCURRED D O NOT RELATE TO EARNING OF EXEMPT INCOME. 3. LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMI NG ACTION OF ASSESSING OFFICER IN NOT ALLOWING DEDUCTION OF AMOU NT ALREADY BROUGHT TO TAX IN EARLIER ASSESSMENTS BUT NOT REALI ZED TO THE APPELLANT FROM ONGC LTD., ON ACCOUNT OF NON ADMISSION OF LIAB ILITY BY ONGC LTD. BY HOLDING THAT APPELLANT IS NEITHER ENTITLE T O CLAIM DEDUCTION OF BAD DEBTS U/S. 36(1)(VII) OR U/S.28 AS BUSINESS LOS S EVEN THOUGH REQUISITE CONDITIONS HAVE BEEN FULFILLED BY THE APP ELLANT. 4 . THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CONFIR MING ADDITION OF RS. 8,47,248/- BEING AMOUNT OF DEDUCTIO N MADE BY ONGC LTD. FOR NON FULFILLMENT OF CONTRACTUAL OBLIGATIONS IN TIME WITHOUT APPRECIATING THAT ISSUE HAS BEEN SETTLED IN FAVOUR OF THE APPELLANT BY ITAT IN ITA NO.3216/AHD/2007 FOR A.Y. 2001-02. 5. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CON FIRMING ADDITION OF RS. 10,72,714/- ON ACCOUNT OF DISALLOW ANCE OF FOREIGN TRAVELING EXPENSES MECHANICALLY. 3. IT IS SUBMITTED BY THE LD. AR OF THE ASSESSEE TH AT GROUND NO.1 IS WITHDRAWN AND SINCE THE ISSUE INVOLVED IN GROUND NO .2 AND NO.3 IS ALTERNATIVE ISSUE TO THE ISSUE INVOLVED IN GROUND N O.1,, HENCE THESE GROUNDS I.E. GROUND NO.2 AND GROUND NO.3 ARE TO BE REJECTED . ACCORDINGLY THESE THREE GROUNDS I.E. GROUND NO.1 TO 3 ARE REJECTED. ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 3 4. REGARDING GROUND NO.4, THE FACTS ARE THAT IT IS NOTED BY THE AO IN PARAGRAPH 5 OF THE ASSESSMENT ORDER THAT AS PER AUD IT REPORT, THE ASSESSEE HAS CLAIMED DEDUCTION OF PENALTIES OF RS. 5,73,300/- AN D RS. 2,73,948/- TOTALING RS.8,47,248/-. THE AO ASKED THE ASSESSEE TO EXPLAIN WHY THE SAME SHOULD NOT BE DISALLOWED. IN REPLY, IT WAS SUBMITTED BY T HE ASSESSEE BEFORE THE AO THAT THE PENALTY OF RS. 8,47,248/- WAS RECOVERED BY ONGC LTD./ IOC LTD., FOR NON FULFILLMENT OF THE CONTRACTUAL OBLIGATION A ND HENCE, THE SAME IS ALLOWABLE EXPENDITURE U/S. 37. AO WAS NOT SATISFIED AND HE DISALLOWED THE SAME. WHILE DOING SO, HE PLACED RELIANCE ON THE DE CISION OF HON. MADRAS HIGH COURT IN THE CASE OF CIT VS. RANE BRAKE LINING S LTD. (2001) 115 TAXMAN 367 (MAD.) AND ALSO IN THE CASE OF BHARAT C OMMERCE AND INDUSTRIES LTD. VS. CIT (1998) 230 ITR 733. BEING AGGRIEVED, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT IS SUBMITTED BY LD. AR OF THE ASSESSEE THAT T HIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 IN ITA NO.648/AHD/2007 DATE D 11-3-2010, COPY OF WHICH IS AVAILABLE ON PAGES 45 TO 49 OF THE PAPER BOOK. THE LD. D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUT HORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2003-04. WE FIND THAT IN THAT YEAR ALSO, SIMILAR DISALLOWANC E WAS MADE ON ACCOUNT OF SHORTAGE AND LD RECOVERY BY ONGC AND INTEREST ON TD S AND IN THAT YEAR ALSO, THE A.O. MADE THE DISALLOWANCE BY STATING THA T SUCH PENALTIES CHARGED ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 4 BY ONGC ARE NOT ALLOWABLE. IN THAT YEAR, THE TRIBU NAL FOLLOWED ANOTHER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2001-02 AND IN THAT YEAR, IT IS NOTED BY THE TRIBUNAL THAT THE CIT (A) HAD FOLLOWED THE DECISION OF HON. JURISDICTIONAL HIGH COURT IN THE C ASE OF ADDL. C.I.T. AHMEDABAD VS. ARVIND MILLS LTD., 19 ITR 212, WHEREI N IT WAS HELD THAT FOR BREACH OF CONTRACT AND/OR NOT FULFILLING THE CONTRA CTUAL OBLIGATION, COMPENSATION/PENALTY WOULD AMOUNT TO A BUSINESS EXP ENDITURE/BUSINESS LOSS. SINCE IN THE PRESENT YEAR ALSO, THE FACTS ARE IDENT ICAL, WE DO NOT FIND ANY REASON TO TAKE CONTRARY VIEW IN THE PRESENT YEARS A ND HENCE BY RESPECTFULLY FOLLOWING THE EARLIER TRIBUNAL DECISIONS IN ASSESSE ES OWN CASE, WE HOLD THAT THESE PAYMENTS TO ONGC AND IOC CAN NOT BE DISALLOWE D BY INVOKING THE PROVISIONS OF EXPLANATION TO SECTION 37(1). THEREFO RE, THIS DISALLOWANCE IS DELETED. GROUND NO.4 OF THE ASSESSEE IS ALLOWED. 7. REGARDING GROUND NO.5, THE FACTS ARE THAT, IT IS NOTED BY THE AO IN PARAGRAPH 6 OF THE ASSESSMENT ORDER THAT THE ASSESS EE HAS CLAIMED EXPENSES OF RS. 10,22,714/- FOR FOREIGN TRAVELING OF DIRECTO RS. THE A.O. ASKED THE ASSESSEE TO FURNISH VARIOUS DETAILS IN THIS REGARD WHICH INCLUDED (A) COPY OF BOARD RESOLUTION, (B) NAME OF DIRECTORS WHO UNDERTO OK FOREIGN TRAVELING AND WHO ACCOMPANIED THEM, (C) PLACES VISITED/PERSON S CONTRACTED AND HEADWISE EXPENDITURE, (D) PURPOSE OF VISIT WITH SUP PORTING EVIDENCE, (E) COPY OF THEIR REPORT AFTER VISITING FOREIGN COUNTRI ES, (F) DATE OF DEPARTURE AND ARRIVAL WITH COPIES OF PASSPORTS EVIDENCING THE SAM E. IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT IN REPLY TO THESE SIX QUERIES, THE ASSESSEE HAS SIMPLY COMPLIED WITH THE FIRST QUERY OF FURNISHING XEROX COPY OF GENERAL BOARD RESOLUTION FOR FOREIGN TOURS OF DIRECTORS AND THE ASSESSEE ALSO FURNISHED XEROX COPIES OF PASSPORTS BUT THE IMPORTA NT QUERIES I.E. WHO ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 5 ACCOMPANIED DIRECTORS, PLACES VISITED AND PERSONS C ONTACTED, HEAD-WISE EXPENDITURE, COPY OF REPORT OF DIRECTORS AFTER VISI TING FOREIGN COUNTRY ETC., WERE NOT FURNISHED. UNDER THESE FACTS, THE AO DISA LLOWED ENTIRE AMOUNT OF DIRECTORS FOREIGN TRAVELING EXPENSES CLAIMED BY TH E ASSESSEE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURT HER APPEAL BEFORE US. 8. IT IS SUBMITTED BY THE A.R. OF THE ASSESSEE THAT ON PAGE 20 OF THE PAPER BOOK, IS THE COPY OF BOARD RESOLUTION IN THIS REGAR D. INVITATION TO VISIT USA FOR FOREIGN TOUR IS AVAILABLE ON PAGE-21 OF THE PAP ER BOOK AND ON PAGES- 22 TO 29 ARE FOREIGN TOUR REPORTS AND DETAILS OF EXPEN DITURE OF SHRIPARAS S.SAVLA AND SHRI RUPESH K.SAVLA WHO UNDERTOOK THE FOREIGN V ISITS. IT IS SUBMITTED BY LD. A.R. OF THE ASSESSEE THAT IT HAS BEEN ADMITTED BY THE DIRECTORS IN THEIR REPORT THAT THEIR SPOUSES AND ONE CHILD ALSO ACCOMP ANIED THEM AND DETAILS OF THEIR EXPENDITURE IS AVAILABLE AND HENCE THE EXPENS ES INCURRED FOR SPOUSE AND CHILD MAY BE DISALLOWED BUT NOT THE ENTIRE EXPENDIT URE. THE LD. D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BEL OW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERU SED MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT AS PER THE INDEX OF THE PAPER BOOK OF 49 PAGES, PAGE N O. 1 TO 29 WERE SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT (A). H ENCE, THESE DOCUMENTS TO WHICH OUR ATTENTION WAS DRAWN BY THE ASSESSEE WERE NOT AVAILABLE BEFORE THE A.O. BECAUSE THESE WERE SUBMITTED BEFORE THE LD. CI T (A). IN THE CERTIFICATE OF PAPER BOOK, IT IS SPECIFICALLY CERTIFIED THAT TH E DOCUMENTS AT SR.NO.1 TO 3 WERE SUBMITTED ONLY TO THE CIT (A). HENCE, IT IS AD MITTED POSITION THAT THESE DOCUMENTS WERE NOT MADE AVAILABLE BY THE ASSESSEE T O THE A.O. IT APPEARS ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 6 THAT LD. CIT (A) HAS NOT ADMITTED THESE DOCUMENTS B ECAUSE THESE DOCUMENTS WERE SUBMITTED BEFORE HIM FOR THE FIRST TIME ALTHOU GH THERE IS NO DISCUSSION IN THE ORDER OF THE LD. CIT (A) IN THIS REGARD. UND ER THESE FACTS, WE FEEL THAT IN THE INTEREST OF JUSTICE, THESE DOCUMENTS SHOULD BE ADMITTED AND CONSIDERED FOR THE PURPOSE OF DECIDING THIS ISSUE BUT SINCE TH ESE WERE NOT SUBMITTED BY THE ASSESSEE BEFORE THE A.O., THIS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR THE FRESH DECISION. HENCE, WE SET ASIDE THE OR DER OF LD. CIT (A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF TH E A.O. THE ASSESSEE HAS TO FURNISH ALL THE RELEVANT DOCUMENTS BEFORE THE AO IN THIS REGARD AND AFTER CONSIDERING THE SAME, AO SHOULD PASS NECESSARY ORDE R AS PER LAW. THE A.O. SHOULD KEEP IN MIND THAT IT WAS SUBMITTED BY THE AR BEFORE US THAT THE TOUR EXPENDITURE OF SHRI PARAS S. SAVLA FOR RS.5,60,996/ - INCLUDES EXPENDITURE OF RS. 1,64,939/- FOR THE TOUR OF PRITIBEN SAVLA AND EXPENDITURE OF RS. 1,09,197/- IS ALSO INCLUDED FOR SHANIL SAVLA AND ON LY RS.2,86,859.06 WAS INCURRED FOR THE TOUR OF MR. PARAS SAVLA. SIMILARLY OUT OF TOTAL EXPENDITURE INCURRED FOR RUPESH SAVLA OF RS.3,64,639/-, ONLY RS .1,95,925/- WAS INCURRED FOR RUPESH SAVLA AND THE BALANCE OF RS.1,68,714/- W AS INCURRED FOR SHITAL SAVLA, SPOUSE OF MR. RUPESH SAVLA. IT WAS THE SUBMI SSION OF THE LD. AR OF THE ASSESSEE THAT FOR THE EXPENDITURE INCURRED ON S POUSE AND FAMILY MEMBERS OF THE DIRECTORS, THE DEDUCTION MAY BE DISALLOWED B UT THE SAME SHOULD BE ALLOWED IN RESPECT OF TRAVELING EXPENSES OF DIRECTO RS. HENCE WE CONFIRM THE DISALLOWANCE TO THE EXTENT OF EXPENSES INCURRED FOR THE TOUR OF PRITIBEN SAVLA RS. 1,64,639/- AND FOR THE TOUR OF SHANIL SAVLA RS. 1,09,197/- AND RS.1,68,714/- FOR THE TOUR OF SHITAL SAVLA. FOR THE BALANCE AMOUNT OF EXPENDITURE ON DIRECTORS FOREIGN TRAVELING, A.O. S HOULD DECIDE THE MATTER AFRESH AFTER CONSIDERING THE DOCUMENTS AND EVIDENCE S TO BE FURNISHED BY THE ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 7 ASSESSEE BEFORE HIM AND AFTER ALLOWING REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THE GROUND NO.5 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED IN THE TERMS AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 -05 -2011. SD/- SD/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER. A CCOUNTANT MEMBER. AHMEDABAD. DATED: 13 - 0 5- 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.1825/AHD/2009 . ASSESSMENT YEAR 2004-05 8 1.DATE OF DICTATION 11 -5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 12 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 12 - 5 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 13 - 5 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 13 - 5 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13 - 5 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..