URC Construction (P) Ltd., Erode V. ACIT, Erode

ITA 1870/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4877 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 21-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI; A V SREEKANTH JC
• Keywords: Business expenditure; Non-deduction of tax; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 40A(3); 143(3); 147; 148; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , .. ' #$, & '( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.2759, 2760 & 1870/MDS/2016 * +* / ASSESSMENT YEARS : 2008-09, 2012-13 & 2007-08 M/S URC CONSTRUCTION (P) LTD., #119, POWER HOUSE ROAD, ERODE 638 001. PAN : AAACU 2425 Q V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, ERODE 638 001. (-./ APPELLANT) (/0-./ RESPONDENT) ./ ITA NO.1871/MDS/2016 * +* / ASSESSMENT YEAR : 2007-08 M/S BHARATHI CONSTRUCTIONS, #119, POWER HOUSE ROAD, ERODE 638 001. PAN : AABFB 9308 F V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, ERODE 638 001. (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANTS BY : SH. PHILIP GEORGE, ADVOCATE /0-. 1 2 / RESPONDENT BY : DR. MILIND MADHUKAR BHUSARI, CIT & SHRI A.V. SREEKANTH, JCIT ' 1 3& / DATE OF HEARING : 14.03.2017 45+ 1 3& / DATE OF PRONOUNCEMENT : 20.04.2017 2 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE APPEALS FILED BY TWO DIFFERENT ASSESSEES ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER O F INCOME TAX (APPEALS)-3, COIMBATORE. WHEN THE ASSESSEE, M/S UR C CONSTRUCTIONS (P) LTD., HAS FILED APPEALS FOR ASSES SMENT YEARS 2008-09, 2012-13 & 2007-08, THE OTHER ASSESSEE, M/S BHARATI CONSTRUCTIONS, HAS FILED APPEAL FOR ASSESSMENT YEAR 2007-08. SINCE COMMON ISSUES ARISE FOR CONSIDERATION IN ALL THESE APPEALS, WE HEARD THESE APPEALS TOGETHER AND DISPOSING OF TH E SAME BY THIS COMMON ORDER. 2. BOTH THE ASSESSEES HAVE RAISED ISSUE OF LIMITATI ON IN THEIR RESPECTIVE APPEALS IN I.T.A. NO. 2759, 1870 & 1871/ MDS/2016. THEREFORE, LETS TAKE THESE APPEALS FIRST FOR ADJUD ICATION. 3. SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT FOR ALL THE ASSESSMENT YEARS, THE AS SESSMENTS WERE COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961 (IN SHORT 'THE ACT'). AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD, CAME TO A CONCLUSION T HAT THE 3 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 ASSESSEES HAVE NOT DEDUCTED TAX. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER HAS NO NEW INFORMATION AFTER PROCESSING OF THE ASSESSMENT ORDER. THERE WAS NO NEGLIGENCE ON T HE PART OF THE ASSESSEES IN FURNISHING RELEVANT MATERIAL IN COMPLE TING THE ASSESSMENT. REFERRING TO THE ORDERS OF THE ASSESSI NG OFFICER, THE LD.COUNSEL SUBMITTED THAT IT IS A CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER. 4. REFERRING TO PAGE 52 OF THE PAPER-BOOK, THE LD.C OUNSEL FOR THE ASSESSEES SUBMITTED THAT THIS IS A COPY OF REAS ONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING. THE ASSESSEES FILED ENTIRE MATERIAL, WHICH WERE AVAILABLE BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL FI LED BY THE ASSESSEES, CONSIDERED THE ISSUE OF DEDUCTION OF TAX AND ALLOWED THE CLAIM OF THE ASSESSEES. REFERRING TO THE ASSESSMEN T ORDER FOR THE ASSESSMENT YEAR 2007-08 IN THE CASE OF BOTH THE ASS ESSEES, THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OFFICER, IN FACT, EXAMINED EACH AND EVERY ASPECT AND ENQUIRY WAS ALSO MADE THR OUGH INSPECTOR, THEREFORE, IT CANNOT BE SAID THAT THERE WAS ANY NEGLIGENCE ON THE PART OF THE ASSESSEES. HENCE, ACCORDING TO THE LD. COUNSEL, THE ASSESSMENT ORDER IN BOTH THE CASES IS BARRED BY LIMITATION. 4 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 5. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, TH E LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEES FAILED TO DEDUCT TAX. NO DOUBT, IN THE ORIGINAL ASSESSMEN T, THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEES. SUBSE QUENTLY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 O F THE ACT FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE A CT. THE LD. D.R. VERY FAIRLY SUBMITTED THAT FOR ALL THE THREE Y EARS UNDER CONSIDERATION, THE ASSESSING OFFICER HAS REOPENED T HE ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. HOWEVER, THE LD. D.R. SUBMITTED THAT THERE WAS FAIL URE ON THE PART OF THE ASSESSEES IN FURNISHING NECESSARY PARTICULARS W HICH WERE REQUIRED IN COMPLETING THE ASSESSMENTS. 6. REFERRING TO PARA 6.4 OF THE ORDER OF THE CIT(AP PEALS), THE LD. D.R. SUBMITTED THAT THE AUDIT REPORTS SUBMITTE D UNDER SECTION 44AB OF THE ACT DO NOT DISCLOSE THE FULL AND TRUE P ARTICULARS. REFERRING TO EXPLANATION 1 TO SECTION 147 OF THE AC T, THE LD. D.R. SUBMITTED THAT BY MERELY PROVIDING BOOKS OF ACCOUNT AND OTHER MATERIAL, IT CANNOT BE SAID THAT THE ASSESSEES HAVE FURNISHED ALL THE RELEVANT MATERIAL. THE AUDIT REPORTS DO NOT SAY TH AT THE HIRE CHARGES HAVE BEEN PAID DURING THE RELEVANT ASSESSMENT YEARS . SINCE THE 5 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 AUDIT REPORTS DO NOT DISCLOSE THE PARTICULARS FULLY AND TRULY, THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEES IN FURNISHI NG THE PARTICULARS IN COMPLETING THE ASSESSMENTS. THEREFORE, THE PROV ISO TO SECTION 147 OF THE ACT IS NOT APPLICABLE TO THE FACTS OF TH E CASE. HENCE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HA S RIGHTLY REOPENED THE ASSESSMENTS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. A COPY OF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT IN THE CASE OF THE ASSESSEE, M/S URC CONSTRUCTION (P) LTD., IS AVA ILABLE AT PAGE 52 OF THE PAPER-BOOK. FOR THE PURPOSE OF CONVENIEN CE, THE REASONS RECORDED BY THE ASSESSING OFFICER IS REPRODUCED HER EUNDER:- THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194I FOR THE PAYMENTS EXCEEDING ` 1,20,000/- IN RESPECT OF PAYMENTS TOWARDS MACHINERY HIRE CHARGES AMOUNTING T O ` 4,89,06,168/-. AS THE ASSESSEE HAD FAILED TO DEDUCT TDS ON SUCH PAYMENTS, THE EXPENSES ARE BOUND TO BE DISAL LOWED U/S. 40(A)(IA) OF INCOME-TAX ACT. ALSO IT IS SEEN IN THE FORM 3CD, AGAINST ITEM NO.27 (B) THE AUDITOR WAS REQU IRED TO REPORT THE DETAILS OF NON-COMPLIANCE WITH THE TD S PROVISION IN CHAPTER XVII B OF THE I.T. ACT. THE AU DITOR HAS QUANTIFIED ONLY CERTAIN ITEMS OF NON-COMPLIANCE AND OMITTED TO MENTION THE OTHER ITEMS SUCH AS MACHINER Y HIRE CHARGES PAID IN EXCESS OF THE PRESCRIBED LIMITS . THIS FAILURE ON THE PART OF THE ASSESSEE RESULTED IN UND ER ASSESSMENT OF INCOME. I HAVE THEREFORE, REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT 6 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 WITHIN THE MEANING OF SECTION 147 OF THE INCOME-TAX AC T, DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASST. YEAR 2007-08 . SIMILAR REASONS HAVE BEEN RECORDED BY THE ASSESSING OFFICER IN THE CASE OF OTHER ASSESSEE, M/S BHARATHI CONSTRUCTIONS, ALSO. 8. FROM THE ABOVE IT APPEARS THAT THE ALLEGATION AG AINST THE ASSESSEES IS NON-DEDUCTION OF TAX AT THE TIME OF PA YMENT. A COPY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT IN THE CASE OF M/S URC CONSTRUCTION PVT. LTD. IS AVAIL ABLE AT PAGE 68 OF THE PAPER-BOOK. THE ASSESSING OFFICER, AFTER CO NSIDERING THE FACTS THAT THE ASSESSEE BEING CIVIL CONTRACTORS, AS KED THE ASSESSEE TO FURNISH LIST OF SHAREHOLDERS, TDS CERTIFICATE, D ETAILS OF OPENING STOCK, WORK IN PROGRESS DETAILS, PURCHASE DETAILS, DETAILS OF SUB- CONTRACT PAYMENTS, PAYMENT OF WAGES, INTEREST, ETC. BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO CALLED UPON THE ASSESSEE TO PRODUCE THE DETAILS OF SECURED LOAN AVA ILED FROM BANK AND OTHER FINANCIAL INSTITUTIONS. THE ASSESSING OF FICER HAS ALSO CONDUCTED ENQUIRY THROUGH INSPECTOR OF INCOME-TAX I N ORDER TO ASCERTAIN GENUINENESS OF SUNDRY CREDITORS. AFTER E XAMINING THE MATERIAL, THE ASSESSING OFFICER OBSERVED AS FOLLOWS AT PAGE 2 OF THE 7 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 ASSESSMENT ORDER, COPY OF WHICH IS AVAILABLE AT PAG E 69 OF THE PAPER-BOOK IN THE CASE OF M/S URC CONSTRUCTION PVT. LTD.:- ON A PERUSAL OF DETAILS FILED, IT IS SEEN THAT THE ASSESSEE HAS NOT INCLUDED TDS RECEIPTS OF ` 13,57,306 AS INCOME. HENCE, THE SAME IS BROUGHT TO TAX. (ADD: ` 13,57,306) THE ASSESSEE HAS DEFAULTED IN TDS PAYMENTS ON AUD IT FEES AND HIRE CHARGES PAID OF ` 44,45,185. HENCE THE SAID SUM OF ` 44,45,185 IS DISALLOWED U/S. 40(A)(IA) OF THE INCOME-TAX ACT , 1961. (ADD: ` 44,45,185) 9. THEREFORE, IT IS OBVIOUS THAT THE ENTIRE TDS CER TIFICATES, OPENING STOCK, GROSS RECEIPTS FROM CONTRACTORS, DET AILS OF PURCHASE, LIST OF SHAREHOLDERS, COPY OF CURRENT ACCOUNT, COPY OF SALES TAX, GENERAL EXPENSES CLAIMED BY THE ASSESSEE, VEHICLE H IRE CHARGES WERE AVAILABLE BEFORE THE ASSESSING OFFICER. 10. NOW THE CONTENTION OF THE REVENUE BEFORE THIS T RIBUNAL IS THAT THE AUDIT REPORTS UNDER SECTION 44AB OF THE AC T DO NOT DISCLOSE CORRECT AND FULL PARTICULARS. THE ASSESSEES HAVE F URNISHED ALL THE DETAILS BEFORE THE ASSESSING OFFICER. THE AUDITOR, WHO PREPARED THE REPORT UNDER SECTION 44AB OF THE ACT, IS EXPECTED T O EXAMINE ALL THE MATERIALS AND RECORD THE SAME IN THE REPORT PREPARE D UNDER SECTION 44AB OF THE ACT. IF THE AUDITOR FAILS TO RECORD T HE LAPSES COMMITTED 8 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 BY THE ASSESSEE, THE ASSESSEE CANNOT BE BLAMED FOR THE SAME. AUDITOR BEING EXPERT IN ACCOUNTANCY, HE HAS TO EXAM INE THE MATERIAL INDEPENDENTLY AND PREPARE THE REPORT AS REQUIRED UN DER SECTION 44AB OF THE ACT. THE ASSESSEE, AT THE BEST, CAN PR ODUCE ALL THE RELEVANT MATERIAL BEFORE THE AUDITOR FOR THE PURPOS E OF PREPARING THE AUDIT REPORT. 11. PREPARATION OF AUDIT REPORT IS THE EXCLUSIVE FU NCTION OF AUDITOR, THEREFORE, IF AT ALL THERE WAS ANY NEGLIGE NCE AND OMISSION TO DISCLOSE CORRECT FACT IN THE REPORT PREPARED UNDER SECTION 44AB OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE CANNOT BE FOUND FAULT. IF THE ASSESSEE SUPPRESSES ANY MATERIAL EITHER BEFORE THE AUDITOR OR BEFORE THE ASSESSING O FFICER, THEN WE MAY SAY THERE WAS NEGLIGENCE ON THE PART OF THE ASS ESSEE. IN THIS CASE, THE ASSESSING OFFICER HIMSELF CALLED UPON THE ENTIRE DETAILS OF GROSS RECEIPTS, TDS CERTIFICATES, DETAILS OF OPENIN G STOCK, WORK IN PROGRESS, PAYMENT OF WAGES, PAYMENT OF INTEREST, PA YMENT OF VEHICLE HIRE AND MACHINERY CHARGES, COPY OF SALES T AX ORDER, ETC. THEREFORE, WHEN THE ASSESSEE HAS FURNISHED ALL THE DETAILS WHICH ARE REQUIRED IN COMPLETING ASSESSMENTS, THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT MERE OMISSION OF AUDITOR TO MENTION CERTAIN 9 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 ITEMS IN THE AUDIT REPORT PREPARED UNDER SECTION 44 AB OF THE ACT, THAT ALONE CANNOT BE A REASON TO SAY THAT THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEES FURNISHED ALL THE DETAILS, THERE WAS NO NEGLIGENCE ON THE PART OF THE ASSESSEES, HENCE, PRO VISO TO SECTION 147 OF THE ACT WOULD COME INTO OPERATION. IN VIEW OF THE ABOVE, THE ORDER PASSED BY THE ASSESSING OFFICER IS BARRED BY LIMITATION. THEREFORE, IT CANNOT STAND IN THE EYE OF LAW. ACCO RDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW FOR ALL THE THREE YEA RS ARE SET ASIDE AND THE APPEALS OF THE ASSESSEES STAND ALLOWED. 12. NOW COMING TO I.T.A. NO.2760/MDS/2016, THE FIRS T GROUND OF APPEAL IS WITH REGARD TO DISALLOWANCE OF TRAVEL EXP ENSES TO THE EXTENT OF ` 10,64,857/-. 13. SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE MANAGING DIRECTOR AND HIS WIFE T RAVELLED TO SINGAPORE FOR A BUSINESS TRIP. IN FACT, THE MANAGI NG DIRECTOR TRAVELLED TO SINGAPORE FOR PURCHASE OF MACHINERY. THE ASSESSEE HAS ALSO CLAIMED THE EXPENDITURE INCURRED BY THE SO N OF THE MANAGING DIRECTOR AS STAFF WELFARE EXPENSES. THERE FORE, THE 10 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING T HE CLAIM OF THE ASSESSEE. 14. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE MAN AGING DIRECTOR SHRI DEVARAJAN WAS SAID TO HAVE TRAVELLED TO SINGAP ORE FOR PURCHASE OF MACHINERY. BUT, NO MATERIAL WAS FILED BEFORE TH E ASSESSING OFFICER OR BEFORE THE CIT(APPEALS) OR BEFORE THIS T RIBUNAL TO SUPPORT ITS CONTENTION. THE ASSESSEE HAS ALSO CLAIMED THE EXPENDITURE INCURRED ON SHRI D. KABILAN, SON OF SHRI DEVARAJAN, FOR HOLIDAY TRIP. THE ASSESSEE CLAIMED THE SAME AS STAFF WELFARE EXPE NSES. ACCORDING TO THE LD. D.R., THE EXPENDITURE INCURRED FOR HOLIDAY TRIP CANNOT BE A BUSINESS EXPENDITURE. THE ASSESSEE HAS ALSO CLAIMED THE FLIGHT CHARGES PAID TO SHRI SURENDRA P. SHAH. ACCORDING TO THE LD. D.R., THESE EXPENDITURES ARE PERSONAL NATURE, T HEREFORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF ` 10,64,857/- 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE EXPENDITURE SAID TO BE INCURRED BY THE ASSESSEE FOR TRAVELLING TO SINGAPORE, USA, ETC. EVEN THOUGH THE ASSESSEE CLAIMS THAT THE MANAGING DIRECTORS TRAVEL TO SINGAPORE WAS FOR PURCHASE OF MACHINERY, NO 11 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 MATERIAL WAS PRODUCED EITHER BEFORE THE LOWER AUTHO RITIES OR BEFORE THIS TRIBUNAL. THE TRAVEL OF SHRI DEVARAJAN, MD AL ONG WITH HIS WIFE FOR A HOLIDAY CANNOT BE CONSTRUED AS BUSINESS EXPEN DITURE AT ALL. THE CLAIM OF EXPENDITURE ON SHRI SURENDRA P. SHAH C ANNOT BE CONSTRUED AS BUSINESS EXPENDITURE AT ALL. THEREFOR E, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 16. THE NEXT ISSUE IS DISALLOWANCE OF ELECTRICITY C HARGES OF ` 3,45,210/-. 17. SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE ELECTRICITY CHARGES INCURRED BY THE ASSESSEE IN THE EARLIER YEAR WAS ADJUSTED BY THE ELECTRICITY BO ARD AGAINST THE DEPOSIT DURING THE YEAR UNDER CONSIDERATION. SINCE THE INTIMATION WAS SENT ABOUT ADJUSTMENT DURING THE YEAR UNDER CON SIDERATION, THE LIABILITY WAS CRYSTALIZED DURING THIS YEAR, THEREFO RE, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER. 12 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 18. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ELE CTRICITY CHARGES RELATE TO THE YEAR 2010. THE ASSESSEE HAS NOT FILE D ANY EVIDENCE TO SHOW THAT WHEN THE LIABILITY WAS CRYSTALIZED. SINC E THE ELECTRICITY CHARGES RELATE TO 2010, IT CANNOT BE SAID THAT IT C RYSTALIZED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE CIT(A PPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE NOW CLAIMS THAT THE INTIMATION OF ADJUSTMENT OF ELE CTRICITY CHARGES AGAINST THE DEPOSIT WAS RECEIVED DURING THE YEAR, T HEREFORE, THE LIABILITY CRYSTALIZED DURING THE YEAR. THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT THE LIABILITY WAS FOR THE Y EAR 2010. MERELY BECAUSE IT WAS ADJUSTED DURING THE YEAR UNDER CONSI DERATION, IT CANNOT BE SAID THAT THE LIABILITY ACCRUED DURING TH IS YEAR. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME CANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. THERE FORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 13 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 20. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF ` 4,87,460/-, THE EXPENDITURE INCURRED BY THE ASSESSE E FOR HIGHER EDUCATION OF THE EMPLOYEE. 21. SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THAT ONE SHRI S. KATHIRVEL, A GRADUA TE ENGINEER TRAINEE, JOINED THE ASSESSEE-COMPANY ON 03.08.2011 AND HE WAS PAID A SALARY OF ` 12,643/- PER MONTH. THE ASSESSEE-COMPANY SPONSORED THE SAID SHRI KATHIRVEL FOR POST GRADUATE PROGRAMME IN ADVANCE CONSTRUCTION AND ALSO PAID THE FEES. SINCE THE EMPLOYEE WAS SPONSORED FOR HIGHER EDUCATION IMMEDIATELY AFTE R APPOINTMENT, THE ASSESSING OFFICER DOUBTED THE CLAIM. ACCORDING LY HE DISALLOWED THE SAME. ACCORDING TO THE LD. COUNSEL, THE EXPEND ITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED UNDER SECTION 37 OF THE ACT. 22. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT SHRI S. KATHIRVEL JOINED THE COMPANY ON 03.08.2011. ADMITTEDLY, HE W AS SPONSORED FOR POST GRADUATE PROGRAMME AND THE ASSESSEE ALSO P AID THE TUITION FEE. THE ASSESSEE HAS NOT OBTAINED ANY BON D FROM THE SAID SHRI KATHIRVEL AND THERE WAS NO COMPULSION ON THE P ART OF SHRI KATHIRVEL TO WORK FOR THE ASSESSEE-COMPANY. ACCORD ING TO THE LD. 14 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 D.R., IN THE ABSENCE OF ANY DETAILS REGARDING THE B OND OR AGREEMENT BETWEEN THE EMPLOYEE AND THE ASSESSEE-COMPANY, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASS ESSEE. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT ONE SHRI S. KATHIRVEL JOINED THE ASSES SEE-COMPANY ON 03.08.2011 AND HE WAS SPONSORED FOR HIGHER EDUCATIO N FOR THE ACADEMIC YEAR 2012-14. THE ASSESSEE COULD NOT PROD UCE ANY MATERIAL TO SHOW THAT THE SAID SHRI KATHIRVEL AGREE D TO WORK FOR THE COMPANY EVEN AFTER COMPLETION OF HIGHER EDUCATION. NO BOND WAS PRODUCED EITHER BEFORE THE ASSESSING OFFICER OR BEF ORE THE CIT(APPEALS) OR BEFORE THIS TRIBUNAL AND NO AGREEME NT WAS ALSO PRODUCED. THEREFORE, AS RIGHTLY OBSERVED BY THE AS SESSING OFFICER, THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE HIG HER EDUCATION OF SHRI S. KATHIRVEL WAS NOT FOR BUSINESS PURPOSE. WH EN THERE WAS NO COMPULSION ON THE PART OF SHRI S. KATHIRVEL TO SERV E THE ASSESSEE AFTER COMPLETING HIGHER EDUCATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE EXPENDITURE CANNOT BE CONSTRUED AS REVENUE EXPENDITURE. THEREFORE, THE CIT(APPEALS) HAS RIGHT LY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 15 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 24. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF ` 22,36,549/- TOWARDS MARRIAGE RECEPTION OF SON OF MA NAGING DIRECTOR. 25. WE HAVE HEARD SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSESSEE AND DR. MILIND MADHUKAR BHUSARI, THE LD. D EPARTMENTAL REPRESENTATIVE. ADMITTEDLY, THE EXPENDITURE WAS IN CURRED IN MARRIAGE RECEPTION OF THE SON OF THE MANAGING DIREC TOR. IT IS OBLIGATION OF THE PARENT TO MEET THE MARRIAGE EXPEN DITURE OF THE RESPECTIVE CHILDREN. THE MARRIAGE EXPENDITURE CANN OT BE CONSTRUED AS BUSINESS EXPENDITURE OF THE ASSESSEE-COMPANY. T HEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 26. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF ` 7,79,899/- FOR SETTING UP OF SUBSIDIARY. 27. WE HAVE HEARD SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSESSEE AND DR. MILIND MADHUKAR BHUSARI, THE LD. D EPARTMENTAL REPRESENTATIVE. THE ASSESSEE ADMITTEDLY INCURRED ` 7,79,899- TOWARDS SETTING UP OF SUBSIDIARY IN OMAN. EXPENDIT URE FOR SETTING UP OF SUBSIDIARY IS CAPITAL EXPENDITURE. THEREFORE , THE CIT(APPEALS) 16 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 28. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO THE EXPENDITURE INCURRED ON WATER CONNECTION. 29. SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE ASSESSEE HAS INCURRED ` 2,96,500/- FOR GETTING WATER CONNECTION FOR NEW OFFICE AT BANGALORE. HOWE VER, THE ASSESSEE COULD NOT PRODUCE ANY RECEIPT FOR PAYMENT. 30. WE HAVE HEARD DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENTAL REPRESENTATIVE ALSO. IN THE ABSENCE O F ANY MATERIAL EVIDENCE / RECEIPT FOR PAYMENT OF ` 2,96,500/- FOR GETTING WATER CONNECTION FOR NEW OFFICE AT BANGALORE, THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTL Y CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBU NAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 31. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF ` 16,59,967/- TOWARDS HIGHER EDUCATION OF VICE PRESID ENT (OPERATIONS) OF THE COMPANY. 17 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 32. SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE VICE PRESIDENT (OPERATIONS) IS N ONE OTHER THAN THE SON OF MANAGING DIRECTOR. SINCE SHRI P. RAMPRA SAD IS WORKING AS VICE PRESIDENT (OPERATIONS) WITH THE ASSESSEE-CO MPANY, THE ASSESSEE CLAIMS THE EXPENDITURE AS REVENUE EXPENDIT URE. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(AP PEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AS SESSING OFFICER. 33. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT ADMITTE DLY, THE ASSESSEE INCURRED THE EXPENDITURE IN HIGHER EDUCATI ON OF SHRI P. RAMPRASAD, THE SON OF MANAGING DIRECTOR. DURING TH E PERIOD, THE ASSESSEE DID NOT PAY ANY SALARY. THEREFORE, ACCORD ING TO THE LD. D.R., IT DOES NOT MEAN TO SAY THAT SHRI P. RAMPRASA D WORKED AS VICE PRESIDENT OF THE ASSESSEE-COMPANY. THIS EXPEN DITURE WAS INCURRED FOR HIGHER EDUCATION OF THE MANAGING DIREC TORS SON, THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 34. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. EVEN THOUGH THE 18 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 ASSESSEE CLAIMS THAT THE MANAGING DIRECTORS SON SH RI P. RAMPRASAD WAS WORKING AS VICE PRESIDENT OF THE ASSE SSEE- COMPANY, DURING THE RELEVANT PERIOD, HE WAS NOT ALL OWED TO CONTINUE AS EMPLOYEE OF THE ASSESSEE-COMPANY. THE MATTER MA Y STAND DIFFERENTLY IN CASE SHRI P. RAMPRASAD WAS GRANTED S TUDY LEAVE AND SALARY WAS BEING PAID DURING THE STUDY PERIOD. IN THIS CASE, ADMITTEDLY, NO SALARY WAS PAID TO HIM AND HE WAS NO T TREATED AS EMPLOYEE OF THE ASSESSEE-COMPANY DURING THAT PERIOD . THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT IS TH E RESPONSIBILITY OF THE RESPECTIVE PARENT TO PROVIDE EDUCATION TO HIS S ON. THEREFORE, THE MANAGING DIRECTOR OF THE COMPANY IS PERSONALLY RESPONSIBLE FOR MEETING THE EXPENDITURE OF HIS SONS EDUCATION. TH E EXPENDITURE INCURRED BY THE ASSESSEE FOR PROVIDING HIGHER EDUCA TION TO THE MANAGING DIRECTORS SON CANNOT BE CONSIDERED AS BUS INESS EXPENDITURE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 35. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF TH E ACT. 19 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 36. WE HAVE HEARD SH. PHILIP GEORGE, THE LD.COUNSEL FOR THE ASSESSEE AND DR. MILIND MADHUKAR BHUSARI, THE LD. D EPARTMENTAL REPRESENTATIVE. THE ASSESSING OFFICER DISALLOWED T HE PAYMENT MADE BY THE ASSESSEE-COMPANY EXCEEDING ` 20,000/-. HOWEVER, THE CIT(APPEALS) RESTRICTED THE CLAIM OF THE ASSESS EE TO 50%. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE PAYMENT WAS MADE EXCEEDING ` 20,000/- PER DAY, THE SAME HAS TO BE DISALLOWED. HOWEVER, THE CIT(APPEALS) RESTRICTED IT TO 50%. TH EREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 37. IN RESULT, THE APPEALS OF THE ASSESSEES IN I.T. A. NOS.2759/MDS/2016, 1870/MDS/2016 AND 1871/MDS/2016 ARE ALLOWED. HOWEVER, I.T.A. NO. 2760/MDS/2016 IS DISM ISSED. ORDER PRONOUNCED ON 20 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ( . . ' #$ ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 20 TH APRIL, 2017. KRI. 20 I.T.A. NOS.2759, 2760, 1870 & 1871/MDS/16 1 /3#8 98+3 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. ' :3 () /CIT(A)-3, COIMBATORE 4. PRINCIPAL CIT-2, COIMBATORE 5. 8; /3 /DR 6. * < /GF.