ACIT, Circle-12(2), Kolkata, Kolkata V. M/s Shree Baidyanath Ayurved Bhawan Pvt. Ltd., Kolkata

ITA 1871/KOL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6554 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHERJEE
• Assessee Lawyers: S M SURANA
• Section: 143(3)

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1871 / KOL / 20 16 ASSESSMENT YEAR :2012-13 ACIT, CIRCLE-12(2), AAYAKAR BHAWAN, P-7, 6 TH FLOOR, CHOWRINGHEE SQUARE, KOLKATA-69 V/S . M/S SHREE BAIDYANATH AYURVED BHAWAAN PVT. LTD., 1, GUPTA LANE, KOLKATA-006 [ PAN NO.AAECS 5408 D ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT, DR /BY RESPONDENT SHRI S.M. SURANA, ADVOCATE /DATE OF HEARING 08-02-2018 /DATE OF PRONOUNCEMENT 20-04-2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 15.07.2016. ASSESSMENT WAS FRAMED BY JCIT, RANGE-12, KOLKATA U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 20.03.2015 FOR ASSESSMENT YEAR 2012-13. SHRI ARINDAM BHATTACHERJEE, LD. DEPARTMENTAL REPRES ENTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI S.M. SURANA LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE. 2. SOLITARY ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFI CER FOR 48,63,719/- ON ACCOUNT OF EXPENSE INCURRED FOR DEVELOPMENT OF FUT URE MANAGERIAL STAFF. ITA NO.1871/KOL/2016 A.Y. 201 2-13 ACIT, CIR-12(2), KOL. VS. M/S SHREE BAIDY ANATH AYURVED BHAWAN, PVT. LTD. PAGE 2 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND ENGAGED IN BUSINESS OF MANUFACTURING & MARKETING OF PHARMACEUTICALS PRODUCTS, AYURVEDIC AND HERBAL MEDICINES. THE ASSES SEE DURING THE YEAR HAS CLAIMED AN EXPENSE OF 48,63,719/- IN ITS PROFIT AND LOSS ACCOUNT ON ACCOU NT OF COST OF SCHOLARSHIP EXPENSE. ON QUESTION BY THE AO ABOUT THE NEXUS OF SUCH EXPENDITURE WITH THE BUSINESS, THE ASSESSEE SU BMITTED AS UNDER:- NOTE-29 OF AUDITED ACCOUNTS UNDER MISCELLANEOUS EX PENSES CONTAINS RS.48,63,719.14 INCURRED ON ACCOUNT OF SCHOLARSHIP EXPENSES. SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. IS A PRIV ATE LIMITED COMPANY AND IS BEING RUN BY ACTIVE INVOLVEMENT OF F AMILY MEMBERS OVER A PERIOD OF GENERATIONS. THE COMPANY INCURS EX PENDITURE ON EDUCATING THE NEXT GENERATION MEMBERS SO THAT, WHEN THEY TAKEOVER, THEY WILL TAKE THE COMPANY IN SAME GROWTH PATH. IF NOT, THE COMPANY MIGHT SUFFER AND NOT COPE WITH THE THEN RACE. THAT IS WHY WE HAVE A PRESENCE IN THE MARKET FOR MORE THAN 100 YEARS VICE VERSA THERE ARE SO MANY COMPANIES IN THE MARKET WHICH VANISHES OVER A PERIOD OF TIME DUE TO CHANGE OF TECHNIQUES. MORE SO THESE NEXT GEN ERATION MEMBERS WILL BE FUTURE DIRECTORS OF THE COMPANY. AS A MATTER OF POLICY THE COMPANY PREFERS EDUCATING THE EXECUTIVES WHO WILL BE SERIOUSLY INVOLVED IN THE BUSINESS OF THE C OMPANY. IF AT ALL COMPARISON IS TO BE MADE BETWEEN THE GENERAL EMPLOY EES AND RELATIVE EMPLOYEES IT IS OBVIOUS THE RELATIVE EMPLOYEES ARE EXPECTED TO PUT MORE EFFORT THAN NORMAL EMPLOYEES. DUE TO THE ENDEAVOUR AND EXPENDITURES ON SCHOLARSHI P, OPERATIONS AND BUSINESS ARE PERFORMED WITH EASE. FURTHER, THE COMP ANY UNDERTAKES FROM THESE RELATIVES WHO PURSUES FOREIGN EDUCATION, WILL SERVE THE COMPANY FOR A MINIMUM PERIOD OF 5 TO 10 YEARS WHEN THEY COMPLETE THEIR EDUCATION. THE COMPANY IS A CLOSELY HELD PRIV ATE LIMITED COMPANY AND IT IS MOST DESIRABLE THAT SENIOR EXECUTIVES POS T AND PRESENCE BE MANNED BY MEMBERS BELONGING TO ENTERPRENEURS FAMIL Y WHO ARE QUALIFIED AD FIT FOR THE POST. THUS IN THE FINANCIA L YEAR 2011-12 RELATING TO THE ASSESSMENT YEAR 2012-13 PRESENTLY UNDER ASSESSM ENT REVIEW, A SUM OF RS.48,63,719.14 HAS BEEN EXPENDED ON SCHOLAR SHIP WHO ARE RELATIVES OF THE DIRECTORS. BREAKUP OF EXPENDITURE ARE RS.34,41,628/- HAS BEEN FOR MR RISHI RAJ SHARMA AND RS.14,22,091.1 4 FOR MS VEDIKA SHARMA. FURTHER MR. RISHI RAJ SHARMA HAVE COMPLETED HIS STUDIES AND HAVE JOINED THE COMPANY AT NAINI BRANCH AS BUSINESS ANALYST. PRESENTLY HIS REMUNERATION IS RS.20,000/- PM WHICH IS MUCH BELOW THE MARKET RATE OF THE PROFESSIONALS HAD THE COMPANY HI RED OUTSIDERS. MS. VEDIKA SHARMA IS PURSUING WITH HER STUDIES. ITA NO.1871/KOL/2016 A.Y. 201 2-13 ACIT, CIR-12(2), KOL. VS. M/S SHREE BAIDY ANATH AYURVED BHAWAN, PVT. LTD. PAGE 3 HOWEVER, AO OBSERVED THAT THERE IS NO PROVISION UND ER THE ACT FOR ALLOWING THE DEDUCTION OF THE EXPENSES FOR THE DEVELOPMENT O F FUTURE MANAGERIAL STAFF. THEREFORE, THESE EXPENSES CANNOT BE HELD AS INCURRE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. AS SUCH, AO WAS OF THE VIEW THAT THESE EXPENSES ARE IN THE NATURE OF PERSONAL EXPENSES OF THE DIREC TORS/ PROMOTERS AND THEIR RELATIVES. THEREFORE THE SAME CANNOT BE ALLOWED AS DEDUCTION. ACCORDINGLY, AO ADDED THE SUM OF 48,63,719/- TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 4. GROUND NO.2 THIS GROUND PERTAINS TO THE DISALLOWANCE OF SCHOLAR SHIP EXPENSE INCURRED BY THE ASSESSEE IN AN AMOUNT OF 48,63,719/-. THE AO HAD DISALLOWED THE EXPENDITURE AS NARRATED IN THE ASSES SMENT ORDER FOR THE REASON THAT THE SAID EXPENDITURE HAD NOT BEEN INCUR RED FOR THE PURPOSE OF BUSINESS BUT RATHER FOR PERSONAL PURPOSE. ON THI S MATTER, I HAVE ALREADY GIVEN MY FINDINGS AND DECISION IN THE APPEL LANTS OWN CASE FOR THE AY 2011-12 IN ITA NO.476/CIT(A)-V/R-12/KOL/14-1 5 DATED 20.07.2015 WHEREIN THE SIMILAR MATTER HAD ALREADY B EEN DECIDED IN FAVOUR OF THE APPELLANT AS DISCUSSED THEREIN. THERE FORE, FOLLOWING THE PRINCIPLES OF CONSISTENCY THE AO IS DIRECTED TO ALL OW THE CLAIM OF THE APPELLANT IN THIS REGARD FOR THIS YEAR AS WELL. THI S GROUND STANDS ALLOWED ACCORDINGLY. THE REVENUE, BEING AGGRIEVED BY THIS ORDER OF LD. C IT(A) IS IN APPEAL BEFORE US. 5. BEFORE US LD. DR FOR THE REVENUE SUBMITTED THAT IT IS NOT CLEAR WHETHER THE PERSONS ON WHOM THE SCHOLARSHIPS EXPENSES WERE INCURRED HAVE JOINED THE SERVICES WITH THE ASSESSEE. THE ORDER OF LD. CI T(A) IS VERY CRYPTIC AND HE HAS JUST RELIED ON THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE PERTAINING TO ASSESSMENT YEAR 2011-12. THERE CAN BE FACTUAL DIFFERENCE BETWEEN THE AYS 2011-12 AND 2012-13 THEREFORE, THE ADDITION CANNOT BE DELETED MERELY RELYING ON THE ORDER OF EARLIER YEAR . THE BASIS OF DELETING THE ADDITION MADE BY THE ASSESSING OFFICER IN THE EARLI ER ASSESSMENT YEAR BY LD. CIT(A) MAY BE DIFFERENT WITH THE FACTS OF THE CURRE NT YEAR. THEREFORE LD. CIT(A) ITA NO.1871/KOL/2016 A.Y. 201 2-13 ACIT, CIR-12(2), KOL. VS. M/S SHREE BAIDY ANATH AYURVED BHAWAN, PVT. LTD. PAGE 4 SHOULD BE DIRECTED TO RE-EXAMINE THE ISSUE. HE ALSO SUBMITTED THAT THE ORDER OF LD. CIT(A) IS SILENT ABOUT THE SERVICES RENDERED BY SUCH PERSONS. HE VEHEMENTLY RELIED ON THE ORDER OF AO. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUBMITTE D THAT THE REVENUE AGAINST THE ORDER OF LD. CIT(A) FOR AY 2011-12 FILE D AN APPEAL BEFORE TRIBUNAL, HOWEVER, THE HON'BLE TRIBUNAL WAS PLEASED TO DELETE THE ADDITION MADE BY AO IN ASSESSEES OWN CASE IN ITA NO.1146/KOL/2015 PERT AINING TO AY 2011-12 DATED 17.10.2017. LD. AR RELIED ON THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH SIDE S AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FI ND THAT CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1146 /KOL/2015 (SUPRA) HAVING IDENTICAL FACTS & CIRCUMSTANCES HAS DECIDED THE IMP UGNED ISSUE IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT EXTR ACT OF THIS ORDER IS REPRODUCED BELOW:- 2.4 WE HAVE HEARD THE RIVAL SUBMISSION.SS WE FIND THAT THE ISS9UE UNDER DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE ORDER OF THIS TRIBUNAL FOR THE ASST YEA R 2010-11 IN ITA NO.90/KOL/2015 DATED 23.8.2017 WHEREIN IT WAS HELD AS UNDER:- 2. AFTER HEARING THE RIVAL CONTENTIONS WE FIND THA T THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A NO.1314/KOL/2014 FOR A Y 2009-10 ORDER DATED 23.02.2017 HAD CONSIDERED THE VERY SAME ISSUE IN THE EARLIER ASSESSMENT YEAR AT PARA 4.3 HELD AS FOL LOWS: 4.3 HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE I S MERIT IN THE SUBMISSIONS OF THE ASSESSEE, AS THE PROPOSITION S CANVASSED BY LD. AR FOR THE ASSESSEE ARE SUPPORTED BY THE JUDGMENT CITED BY HIM AND FACTS NARRATED BY HIM ABOVE. AS LD. AR FOR THE ASSESSEE HAS POINTED OUT THAT AFT ER COMPLETION OF THE HIGHER STUDY THEY JOINED THE COMP ANY AND SERVED THE COMPANY THEREFORE THE EXPENDITURE IS FOR THE PURPOSE OF BUSINESS. HENCE, CONSIDERING THE FACTUAL POSITION, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LD. CIT(A) IS A REASONED ORDER AND DOES NOT REQUIRE INTERFERENCE. THEREFORE, WE CONFIRM THE ORDER OF LD . CIT(A). RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH IS TRIBUNAL IN ASSESSEES OWN CASE, WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE ITA NO.1871/KOL/2016 A.Y. 201 2-13 ACIT, CIR-12(2), KOL. VS. M/S SHREE BAIDY ANATH AYURVED BHAWAN, PVT. LTD. PAGE 5 ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY , THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF TH E TRIBUNAL DECLINE TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) O N THIS ACCOUNT AND ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REGR ETTED. HENCE THE GROUND OF REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 20 /04/2018 SD/- SD/- ($ &) ( &) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S (- 20 / 04 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT,CIRCLE-12(2),AAYAKAR BHAWAN,P-7, 6 TH FL,CHOWRINGHEE SQ.KOL-69 2. /RESPONDENT-M/S SHREEBAIDYANATHAYURVED BHAWAN PVT. LTD.1, GUPTA LANE, KOL-06 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 $$3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,