ACIT, Jaipur V. ANURAG SALES SORPORATION, Jaipur

ITA 185/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5521 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Section: 143(3); 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 185/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. CUKE VS. M/S ANURAG SALES CORPORATION, 31, MEGHDHAN COMMERCIAL COMPLEX, AMBE BARI, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AADFA 2342 J VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI.K @ C.O. NO. 23/JP/2013 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 185/JP/2013) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S ANURAG SALES CORPORATION, 31, MEGHDHAN COMMERCIAL COMPLEX, AMBE BARI, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AADFA 2342 J IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI RAJEEV SOGANI (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/11/2015 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 22/01/2016 ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 2 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISES FROM THE ORDER DATED 13/12/2011 PASSED BY THE LEARNED CI T(A)-II, JAIPUR FOR A.Y. 2009-10. THE GROUND OF REVENUES APPEAL AND GRO UNDS OF THE ASSESSEES C.O. ARE AS UNDER:- GROUND IN REVENUES APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN:- I) DELETING THE ADDITION OF RS. 20,000/- MADE BY TH E A.O. ON ACCOUNT OF TRANSPORT EXPENSES WITHOUT APPRECIATIN G THE FACT THAT THE ADDITION MADE BY THE A.O. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AS DISCUSSED AT PAGE 3 OF THE ASSESSMENT ORDER. II) DELETING THE ADDITION OF RS. 18,20,952/- MADE B Y THE A.O. ON ACCOUNT OF DISALLOWANCE OF PURCHASES HOLDING THAT THE PURCHASES WAS REFLECTED IN THE CLOSING STOC K BUT IGNORED THE FACT THAT THE ADDITION WAS MADE BY T HE A.O. ON LOGICAL BASIS AS HOW IT IS POSSIBLE THAT THE GOODS PURCHASED FROM JAMMU ON LAST DAY OF THE FINANCIAL YEAR COULD BE CONSIDERED AND INCLUDED IN THE CLOSING STOCK, WHICH WAS NOT RECEIVED BY HIM TILL 02/04/2010. III) REDUCING THE ADDITION TO RS. 28030/- OUT OF AD DITION OF RS. 2,16,000/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) FOR PAYMENT OF GODOWN RENT WITHOUT TDS WITHOUT APPRECIATING THE FACT THAT SECTIO N 40(A)(IA) IS APPLICABLE ON ALL THE AMOUNTS PAYABLE, WHETHER ACTUALLY PAID OR OUTSTANDING AT THE END OF T HE FINANCIAL YEAR. ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 3 IV) DELETING THE ADDITION OF RS. 14000/- MADE BY TH E A.O. ON ACCOUNT OF DISALLOWANCE OF PENALTY ON SERVICE TAX WITHOUT IGNORING THE FACT THAT AR OF THE ASSESSEE HIMSELF ADMITTED VIDE HIS LETTER DATED 19/12/2011 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT IT WAS INADVERTENTLY NOT ADDED TO THE INCOME WHILE FILIN G THE RETURN AS DISCUSSED IN PAGE 4 OF THE ASSESSMENT ORDER. V) DELETING THE ADDITION OF RS 9386/- MADE ON ACCOU NT OF DISALLOWANCE OF CLUB FEES HOLDING THAT THE EXPENSES ON CLUB FEE WERE WHOLLY FOR BUSINESS PROMOTIONS BUT IGNORING THAT THE CLUB FEE FOR DIRECTOR IS PERSONAL NATURE EXPENSES AND COULD NOT BE CONSIDERED FOR THE PURPOS ES OF BUSINESS PROMOTION. VI) DELETING THE ADDITION OF RS. 8,33,092/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES RELYING ON THE DECISION OF ITAT IN ASSESSEES OWN CASE IN A.Y. 2005-06 AND HOLDING THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE ADVANCES IN THE FORM OF PA RTNERS CAPITAL ACCOUNT FOR GIVING TO OTHER PARTIES BUT IGN ORING THE FACT THAT THE FACTS OF THE CASES RELIED UPON BY THE A.O. AT PAGE NO. 8 OF ASSESSMENT ORDER (238 ITR 939, 187 ITR 363, 265 ITR 250) ARE SIMILAR TO THE PRESENT CASE. GROUND IN ASSESSEES C.O. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN NOT ACCEPTING THE FACTUAL ASPECT THAT NO TDS WAS DEDUCTABLE AS NO SINGLE PAYEE WAS PAID RENT IN EXCESS OF RS. 1,20,000/- P.A.. THE ACTION OF THE LD CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FAC TS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY GIVING FULL RELIEF IN RESPECT OF RENT PAYMENT ALLOWING COMPLETE DEDUCTION OF RS. 2,16 ,000/- BY ACCEPTING THE FACTUAL ASPECT THAT NO SINGLE PAYE E WAS PAID RENT IN EXCESS OF RS. 1,20,000/- P.A. ATTRACTI NG ANY DISALLOWANCE U/S 40(A)(IA). ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 4 2. FIRST GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 20,000/- UNDER THE HEAD TRANSPORT EXPENSES. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF IRON, STEEL WIRES, RODS A ND ALUMINIUM RODS. THE ASSESSEE FILED RETURN ON 16/7/2009 DECLARING TOTAL INCOME AT RS. 38 LACS. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX, 1961 (IN SHORT THE ACT). THE LD ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAD PURCHASED THE ALUMINIUM SCAP FROM ASHOK INDUSTRIES AND TATA STEEL BUT NO EXPENSES OF TRANSPORTATION HAD BEEN DEBITED BY T HE ASSESSEE. SAME GOODS HAD BEEN SOLD ON SAME DAY TO M/S JRK INDUSTR Y, WHICH WAS TRANSPORTED THROUGH DIFFERENT VEHICLES AND SALES WER E MADE TO DIFFERENT PERSONS. FURTHER NO EXPENSES FOR LOADING AND UNLOAD ING WERE DEBITED. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD ON THIS ISSUE. THE ASSESSEE SUBMITTED THAT M/S ASHOK TRANSPOR T COMPANY SUBMITTED BILL ON MONTHLY BASIS AND BILL OF M/S ASH OKA TRANSPORT COMPANY AND AIREN METALS WERE COMBINED, WHICH WAS NOT FOUND C ONVINCING TO HIM, THEREFORE, HE MADE ADDITION OF RS. 20,000/-. THE LD CIT(A) HAD DELETED THE ADDITION BY OBSERVING THAT THE GOODS PURCHASED FROM TATA STEEL LTD. WERE DIRECTLY SOLD OUT , IN TRANSIT, ON THE SAME DATE, IN OTHER WORDS, THE GOODS WERE TRANSPORTED DIRECTLY FROM ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 5 BUSINESS PREMISES OF THE TATA STEEL LTD. TO THE PURC HASER PARTY AND THEREFORE TRANSPORT EXPENSES WERE NOT CLAIMED BY THE APPELLANT WITH RESPECT TO THE PURCHASES MADE FROM TATA STEEL LTD. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. HOWEVER, THE LD AR FOR THE ASSESSEE HAS REI TERATED THE ARGUMENTS MADE BEFORE THE LD CIT(A) AND ALSO ARGUED THAT THE G OODS SO PURCHASED FROM M/S TATA STEEL LTD. WERE ON TO PAY. HE HAS DRA WN OUR ATTENTION ON PAGE NO. 2 OF THE PAPER BOOK. THEREFORE, THE ASSESSE E HAS NOT REQUIRED TO INCUR ANY EXPENDITURE ON TRANSPORT, LOAD AND UNLOAD ING. HE HAS FURTHER REFERRED THE INVOICES NO. AT PAGE 2 TO 11 OF PAPER BOOK INCLUDING SALE INVOICES AND PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BO TH THE PARTIES AND FIND THAT THE ADDITION MADE BY THE LD ASSESSING OFFICER WAS NOT JUSTIFIED. THEREFORE, WE UPHOLD THE ORDER OF LD CIT(A) . ACCORDINGLY, REVENUES APPEAL ON THIS GROUND IS DISMISSED. 3. THE SECOND GROUND OF REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 18,20,952/- MADE BY THE ASSESSING O FFICER ON ACCOUNT OF DISALLOWANCES OF PURCHASES. THE LD ASSESSING OFFICER OBSERVED THAT THE ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 6 ASSESSEE HAD PURCHASED ALUMINIUM WIRE ROD AMOUNTING TO RS. 16,83,264/- FROM JAMMU AND SAME GOOD WAS TAKEN IN T HE PURCHASE ACCOUNT ON 31/3/2009 BUT THE ASSESSEE HAD INCLUDED THESE PURCHASES IN PURCHASE REGISTER ON 31/3/2009, BUT ON VERIFICATION OF DOCUMENTS MAINTAINED BY THE ASSESSEE, IT WAS FOUND THAT THESE GOODS WERE REACHED AT JAIPUR ON 2/4/2009, THEREFORE, THE ASSESSING OFF ICER DID NOT CONSIDER THESE PURCHASES FOR THE YEAR UNDER CONSIDERATION. TH ESE GOODS WERE ALSO INCLUDED IN THE CLOSING STOCK OF THE ASSESSEE. THE A SSESSEE SUBMITTED THAT IF THE ASSESSING OFFICER NOT CONSIDERED THESE PURCH ASES, THEN IT SHOULD NOT BE INCLUDED IN CLOSING STOCK BUT THIS ARGUMENT WAS N OT FOUND CONVINCING TO THE ASSESSING OFFICER. ACCORDINGLY, HE MADE ADDI TION OF RS. 18,20,952/-. IN FIRST APPEAL, THE LD CIT(A) HAD DELETED THIS ADD ITION BY OBSERVING THAT THE ASSESSEE PURCHASED THESE GOODS AND QUANTIT Y HAS BEEN DISCLOSED IN THE CLOSING STOCK. THE LD DR HAS ARGUED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS REQUIRED TO BE CONFIRMED AS GOODS HAD NO T BEEN RECEIVED BY THE ASSESSEE ON 31/3/2009. THE AR OF THE ASSESSEE HAS AR GUED THAT THE PURCHASE TRANSACTION IS TAX NEUTRAL AS WHATEVER PURC HASES WERE MADE ON 31/3/2009 BY THE ASSESSEE FIRM WERE ALSO INCLUDED IN THE CLOSING STOCK FOR ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 7 THE RELEVANT FINANCIAL YEAR. THEREFORE, THERE IS NO MATERIAL EFFECT ON THE INCOME OF THE ASSESSEE FIRM. WE HAVE CONVINCED WITH THE SUBMISSION MADE BY THE L D AR AND FINDINGS GIVEN BY THE LD CIT(A), THEREFORE, WE UPHOLD THE ORDER OF THE LD CIT(A). ACCORDINGLY, THE REVENUES APPEAL ON THIS GR OUND IS DISMISSED. 4. THE THIRD GROUND OF THE REVENUES APPEAL AND GROU ND OF THE ASSESSEES C.O. ARE AGAINST REDUCING/CONFIRMING THE ADDITION OF RS.28,030/- U/S 40(A)(IA) OF THE ACT OUT OF TOTAL A DDITION OF RS. 2,16,000/-. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED RENT OF GODOWN NO. 17 AND 18 AT TRANSPORT NAGAR, JAIPUR. IT I S ONE PREMISES, HOWEVER, TO AVOID THE TDS LIABILITY, HE HAS DIVIDED T HE SAME ON THREE EQUAL PART OF RS. 72,000/- EACH. THESE TOTAL PAYMEN TS ON ACCOUNT OF GODOWN RENT WAS PAID AT RS. 2,16,000/- TO THE PERSON COVERED U/S 40A(2)(B) OF THE ACT. ACCORDINGLY, HE DISALLOWED WHOL E RENT. 5. IN FIRST APPEAL, THE LD CIT(A) PARTLY ALLOWED THE APPEAL BY OBSERVING THAT THE HONBLE ITAT, VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 16 ITR (TRI) 1 (VISAKHAPATN AM) (SB) HAS HELD THAT SECTION 40A(IA) IS APPLICABLE WHERE AMOUNTS ARE OUTSTANDING OR ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 8 REMAINING PAYABLE AT THE END OF THE YEAR AND RELYIN G UPON THIS DECISION THE ASSESSING OFFICER WAS DIRECTED TO DELETE RS. 1,8 7,970/- OUT OF RS. 2,16,000/- AS THIS AMOUNT OF RENT HAD BEEN PAID WHIL E RENT TOTALING TO RS. 28,030/- WAS REMAINING PAYABLE AS ON 31/3/2009. THER EFORE, SHE CONFIRMED THE ADDITION OF RS. 28,030/-. 6. NOW BOTH THE PARTIES ARE IN APPEALS AS WELL AS C.O . BEFORE US. THE LD DR HAS ARGUED THAT THE HONBLE SPECIAL BENCH DEC ISION HAS BEEN STAYED BY THE HONBLE ANDHRA PRADESH HIGH COURT, THEREFORE , WHOLE AMOUNT IS TO BE CONSIDERED FOR DISALLOWANCE U/S 40A(IA) OF THE AC T. 7. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REL IED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF AMALENDU SAHOO & ORS. VS ITO & ORS (2003) 264 ITR 16 (CAL.) WHEREIN THE HONBLE C OURT HAS HELD THAT THE CO-OWNER HAVING LET OUT THE PROPERTY INDIVIDUALL Y THE TENANT WAS NOT REQUIRED TO MAKE ANY DEDUCTION OF TAX AT SOURCE U/S 194(1) IF THE RENT PAYABLE TO EACH OWNER WAS NOT IN EXCESS OF RS. 1,20,0 00/- PER MONTH. THIS SUBMISSION WAS MADE BEFORE THE LD CIT(A) BUT SHE HAD NOT CONSIDERED THE FACT IS THAT THE GODOWN WAS OWNED BY T HE THREE PERSONS NAMELY SHRI VINOD SANGHI, SHRI ANURAG SANGHI AND SH RI PRAMOD SANGHI @ RS. 72,000/- PER MONTH. THEREFORE, BY FOLLOWING THE H ONBLE CALCUTTA HIGH ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 9 COURT DECISION, NO TDS IS LIABLE TO BE DEDUCTED. THE HONBLE ALLAHABAD HIGH COURT HAD CONSIDERED THIS ISSUE IN THE CASE OF CIT VS VECTOR SHIPPING SERVICES (P) LTD. (2013) 357 ITR 642 (ALLAHABAD), WHO HAS CONSIDERED THE HONBLE ITAT, VISAKHAPATNAM SPECIAL BENCH DECISION I N THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (SUPRA) AND CONFIRMED THE FINDING OF SPECIAL BENCH, WHICH WAS CHALLENGED BEFORE THE HON'BLE SUPREME COURT, WHO HAD DISMISSED THE SLP. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AFTER CONSIDE RING BOTH THE SIDES, IT IS EVIDENT THAT THE ASSESSEE HAD NOT SUBMITTED ANY EVI DENCE THAT BOTH THE GODOWNS WERE AGREED TO BE RENTED OUT SEPARATELY. THERE IS ALSO NO EVIDENCE THAT HOW THIS RENT HAD BEEN DIVIDED AMONGST THREE PERSONS OF OWNER OF GODOWN NOS. 17 AND 18. ACCORDINGLY, BOTH I.E . REVENUES APPEAL AND C.O. OF THE ASSESSEE, ON THIS GROUND, ARE DISMI SSED. 9. THE GROUNDS NO. 4, 5 AND 6 ARE AGAINST DELETING T HE ADDITION OF RS. 14,000/- ON ACCOUNT OF PENALTY ON SERVICE TAX, RS. 8,386/- ON ACCOUNT OF CLUB FEES AND RS. 8,33,092/- ON ACCOUNT OF DISALLOWA NCE OF INTEREST EXPENSES. THE LD ASSESSING OFFICER FOUND THAT THE AS SESSEE HAD DEBITED RS. 14,000/- ON ACCOUNT OF PENALTY AND AS PER ASSES SING OFFICER THE ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 10 ASSESSEE HAD ADMITTED THIS MISTAKE INADVERTENT. THE REFORE, THE ASSESSING OFFICER MADE ADDITION OF RS. 14,000/- IN THE INCOME OF THE ASSESSEE. THE ASSESSEE ALSO CLAIMED CLUB FEES EXPENSES AT RS. 8,3 86/-. THE PAYMENT OF PERSONAL USE OF FACILITY BY THE PARTNER OF THE FIRM IS NON-BUSINESS PURPOSES. THE SAME WAS DISALLOWED BY THE ASSESSING OFF ICER. SIMILARLY, THE ASSESSEE HAD CLAIMED INTEREST PAYMENT OF RS. 28 ,02,412/-, THE ASSESSEE HAD ADVANCED LOAN TO VARIOUS PERSONS AS SC HEDULE GIVEN UNDER THIS HEAD IN ASSESSMENT ORDER FROM WHICH NO INTERES T HAS BEEN CHARGED BY THE ASSESSEE, THEREFORE, HE DISALLOWED THE INTERE ST @ 12% ON TOTAL AMOUNT OUTSTANDING AT RS. 69,42,453/-. AFTER CONSID ERING THE ASSESSEES REPLY AS WELL AS THE CASE LAWS RELIED UPON BY THE ASS ESSEE BEFORE THE ASSESSING OFFICER I.E. THE DECISION OF HONBLE CALC UTTA HIGH COURT IN THE CASE OF CIT VS/ BRITANNIA INDUSTRIES LTD. (2006) 28 0 ITR 525 (CAL), SPECIAL BENCH DECISION IN THE CASE OF JCIT VS. ITC LTD. (200 8) 115 TTJ (KOL) (SB) 45. AFTER CONSIDERING THE ABOVE DECISIONS, THE LD A SSESSING OFFICER HELD THAT THE INTEREST FREE FUND WERE USED BY THE ASSESSE E IN CAPITAL AND LOAN ADVANCES AT RS. 69,42,453/- BESIDES OTHER FIXED ASS ETS AND CURRENT ASSETS WERE USED BY THE ASSESSEE. THE JUDGMENT RELIED UPON BY THE ASSESSEE BEFORE HIM WAS NOT FOUND APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS: ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 11 (I) K. SOMASUDARAM & BROS VS. CIT 238 ITR 939 (MAD. ) (II) CIT VS HR SUGAR FACTOR PVT. LTD. 187 ITR 363 (A LL). (III) INDIAN SAVING PRODUCTS LTD. VS CIT 265 ITR 25 0 (RAJ.) (IV) S.A. BUILDERS VS. CIT 288 ITR 1 (SC). THEREFORE, HE DISALLOWED THE INTEREST AT RS. 8,33,092 /- U/S 36(I)(III) OF THE ACT. 10. THE ASSESSEE HAS CHALLENGED THESE ISSUES BEFORE THE LD CIT(A), WHO HAD ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY RELYING ON THE DECISION OF HONBLE ITAT, DELHI BENCH IN THE CASE OF ITO VS VIRTUE FINANCIAL SERVICES PVT. LTD. (2012) 19 ITR (TRIB) 57 (DELHI) WHEREIN THE HONBLE BENCH HAS HELD THAT THESE PAYMENTS AS COMPE NSATORY IN NATURE AND NOT PENAL. ACCORDINGLY, SHE ALLOWED THE APPEAL O N THESE ISSUES. THE CLUB EXPENSES WERE HELD ALLOWABLE IN THE CASE OF CIT V S. SUNDARAM INDUSTRIES LTD. (1999) 240 ITR 335 (MAD) BY HOLDING THAT AMOUNT SPENT ON CLUBS MEMBERSHIP FEES OF COMPANYS DIRECTORS BE ING TO PROMOTE THE FOSTER COMPANYS BUSINESS, WHICH IS ALLOWABLE AS BUSI NESS EXPENSES. FOR THE INTEREST, THE LD CIT(A) HAS HELD AS UNDER:- 14. IT IS SEEN THAT THE AO NOTED THAT THE ASSESSEE MADE TOTAL INTEREST FREE ADVANCES TO THE TUNE OF RS 69,42,453 ON WHICH HE WORKED OUT DISALLOWABLE INTEREST @12% TO RS 8,33,09 2. ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 12 AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEEN TH AT IN THE APPELLANTS OWN CASE FOR AY 2005-06 THE INTEREST HAD BEEN ALLOWED TO THE APPELLANT BY THE HONBLE ITAT IN ITA N O. 101/JP/2009 VIDE ORDER DATED 24 TH JULY, 2009 HOLDING THAT THE ASSESSEE WAS HAVINGSUFFICIENT INTEREST FREE ADV ANCES FOR GIVING THE ADVANCES TO VARIOUS PARTIES. HERE INTER EST FREE FUNDS IN THE FORM OF PARTNERS CAPITAL WERE CONSIDERE D BY HONBLE ITAT. THUS THE ISSUE IS COVERED BY THE JUDGME NT OF THE HONBLE ITAT IN APPELLANTS OWN CASE AS THIS YEAR AS PER BALANCE SHEET THE APPELLANT HAS PARTNERS CAPITAL TO TALING TO RS 94,19,716, WHICH IS INTEREST FREE AND THE INTEREST F REE ADVANCES WERE MADE AGGREGATING TO RS 69,42,453 ONLY, THEREFORE THE AO IS DIRECTED TO DELETE THE INTEREST DISALLOWANCE OF RS 8,33,092. 11. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFO RE THE LD CIT(A) AND FURTHER ARGUED THAT THE PAYMENT OF RS. 14,000 MADE BY THE ASSESSEE FIRM ,WAS ON ACCOUNT OF DELAY IN SUBMITTED THE SERVICE TA X RETURNS. SUCH PAYMENTS ARE COMPENSATORY IN NATURE AND NOT ON ACCO UNT OF INFRACTION OF ANY LAW. SINCE THESE WERE NOT PENAL IN NATURE, FOR WHI CH HE RELIED ON THE DECISION OF HONBLE ITAT (DELHI BENCH) IN THE CASE OF INCOME TAX OFFICER VS. VIRTUE FINANCIAL SERVICES PVT. LTD. [2012] 19 ITR ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 13 (TRIB) 57 (DELHI). WITH REGARD TO THE PAYMENT MADE FOR MEMBERSHIP TO THE CLUB AMOUNTING TO RS. 8,386/- , IT IS SUBMITTED THE SAID EXPENDITURE WAS INCURRED WHOLLY 8S EXCLUSIVELY FOR PROMOTING & F OSTERING THE BUSINESS OF THE ASSESSEE FIRM AND THUS DESERVES TO BE ALLOWED UNDER SECTION 37(1) OF INCOME TAX ACT. RELIANCE WAS ALSO PLACED ON THE DE CISION OF HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. SUNDARAM INDUST RIES LTD. (SUPRA). HE FURTHER ARGUED THAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06, THE INTEREST HAS BEEN ALLOWED TO THE ASSESS EE FIRM BY THE HONBLE ITAT IN ITA NO. 101/JP/2009 VIDE ORDER DATED 24 TH JULY 2009 HOLDING THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FR EE ADVANCES FOR GIVING THE ADVANCES TO VARIOUS PARTIES . THUS THE ISSUE WAS COVERED BY THE JUDGMENT OF THE HONBLE ITAT IN THE ASSESSEE FIR MS OWN CASE. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS A FACT THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE ADVANCES FOR GIVING THE ADVANCES TO VARIOUS PARTIES AND THERE IS MIXED FUNDS. THE PRESUMPTION GO ES THAT THE ASSESSEE HAS ADVANCED INTEREST FREE FUND TO THE DEBTORS. WE ALSO FIND MERIT IN THE ORDER OF THE LD CIT(A). THEREFORE, WE UPHOLD THE ORDER OF THE LD CIT(A). ITA 185/JP/2013 & CO 23/JP/2013_ ACIT VS. M/S ANURAG SALES CORP. 14 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND C. O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/2016. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 22 ND JANUARY, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-4, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S ANURAG SALES CORPORATION, JAIPUR . 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 185/JP/2013 & C.O. 23/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR