DCIT, Circle - 36 Kolkata, Kolkata V. Rajmahal Quartz Sand & Kaolin Co., Kolkata

ITA 1886/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74993 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2010
• Court: TRIBUNAL
• Department Lawyers: A P RAY
• Assessee Lawyers: N O N E
• Keywords: Business expenditure; Reasonable cause
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , . . . . ! ! ! ! /AND ' #!' ' #!' ' #!' ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ !$ !$ !$ / I.T.A NO. 1886/KOL/2010 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. RAJMAHAL Q UARTZ SAND & KAOLIN CO. CIRCLE-36, KOLKATA. (PAN: AAEFR5525R) ()* /APPELLANT ) (+,)*/ RESPONDENT ) & C.O. NO. 26/KOL/2011 IN !$ !$ !$ !$ / I.T.A NO. 1886/KOL/2010 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2007-08 RAJMAHAL QUARTZ SAND & KAOLIN CO. VS. DEPUTY COMM ISSIONER OF INCOME-TAX, CIRCLE-36, KOLKATA. (CROSS OBJECTOR) (+,)*/ RESPONDENT ) DATE OF HEARING: 13.01.2014 DATE OF PRONOUNCEMENT: 31.01.2014 FOR THE APPELLANT: SHRI A. P. RAY, JCIT, SR. DR FOR THE RESPONDENT: N O N E / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A)-XX, KOLKATA IN APPEAL NO.210/CIT(A)XX/DC CIR .36/2009-10/KOL DATED 27.07.2010. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-36, KOLKATA U /S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2007-08 VIDE HIS ORDER DATED 24.11.2009. 2. THIS APPEAL OF REVENUE IS DELAYED BY 2 DAYS AND REVENUE HAS FILED CONDONATION PETITION. AT THE TIME OF HEARING NO ONE WAS PRESENT ON BEHALF OF ASSESSEE. AFTER HEARING LD. SR.DR, WE FIND THAT THERE IS REASONABLE CAUSE FOR THE AFORESA ID DELAY HENCE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF FREIGHT RECOVERAB LE AT RS.7,85,598/-, ON ACCOUNT OF REPACKING CHARGES OF RS.3,21,336/-, EXCESS FREIGHT CHARGES AT RS.12,76,778/-, DEAD FREIGHT OF 2 ITA NO. 1886/K/2010 & CO NO.26 OF 2011 RAJMAHAL QUARTZ SAND & KAOLIN CO. , AY:2007-08 RS.1,80,438/- AND REIMBURSEMENT OF SALARY OF RS.6,0 4,736/-. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THE LD. CIT(A HAS ERRED IN DISALLOWING THE ADDI TION MADE BY THE ASSESSING OFFICER U/S. 143(3) FOR THE ABOVE ASSESSMENT YEAR UNDER THE HEAD OF FREIGHT RECOVERABLE OF RS.7,85,590/-, REPACKING OF RS.3,21,336/-, PENAL FR EIGHT OF RS.12,76,778/- AND DEAD FREIGHT OF RS.1,80,438/- & REIMBURSEMENT OF SALARY OF RS.6,04,736/-. 4. WE HAVE HEARD LD. SR. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTE D THAT THE ASSESSEE HAS EARNED FREIGHT RECOVERABLE AT RS.7,85,598/-, INCOME FROM REPACKING AT RS.3,21,336/-, INCURRED EXPENDITURE ON ACCOUNT OF PENAL FREIGHT OF RS.12,76,778/- AND DEAD FREIGHT AT RS.1,80,438/- AND PAYMENT OF REIMBURSEMENT OF SALARY OF RS.6,04,736/-. ACCORDIN G TO AO, THESE ARE NOT REFLECTED IN THE P&L ACCOUNT. HENCE, THESE WERE ADDED TO THE RETURNED I NCOME OF ASSESSEE. AGGRIEVED ON THIS, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETE D THE ADDITION AS REGARDS TO FREIGHT RECOVERABLE AT RS.7,85,598/-, REPACKING AT RS.3,21, 336/-, PENAL FREIGHT AT RS.12,76,778/- AND DEAD FREIGHT AT RS.1,80,438/- BY OBSERVING AS UNDER : I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDERED THE SUBMISSION OF THE APPELLANT. THE LEDGER COPIES CLEARLY REVEAL THAT THE INCOME FR OM FREIGHT RECOVERABLE AND THAT FROM REPACKING ARE DULY ACCOUNTED FOR IN THE BOOKS OF AC COUNT. THE ADDITIONS OF RS.7,85,590/- AND RS.3,21,336/- ARE DELETED. I FIN D SUBSTANCE IN THE ARGUMENT THAT THE PENAL FREIGHT OF RS.12,76,778/- PAID TO THE RAILWAY S FOR OVER-LOADING OF RAILWAY WAGONS IS NOT PENAL IN NATURE AS THERE IS NO INFRINGEMENT OF STATUTORY LAW. IT WAS ARGUED BEFORE ME THAT THE APPELLANT WAS IGNORANT ABOUT THE RAILWA Y RULES, AND THAT THE WAGONS WERE OVER-LOADED WITH THE APPROVAL OF THE STATION AUTHOR ITY. THE AMOUNT OF RS.12,76,778/- IS ALLOWABLE AS BUSINESS EXPENDITURE. THE DEAD FREIGH T OF RS.1,80,438/-, DEDUCTED BY BOKARO STEEL PLANT DUE TO UNDER-WEIGHMENT OF RAILWA Y WAGONS, IS NOT PENAL IN NATURE, AND, IS ALLOWABLE AS BUSINESS EXPENDITURE. THE ADD ITION OF RS.3,50,290/- ON ACCOUNT OF UNABSORBED PENAL FREIGHT PAID TO THE RAILWAYS FOR O VER-LOADING IS NOT JUSTIFIED. GROUND NO. 1, 2 AND 3 ARE ALLOWED. SIMILARLY, IN RESPECT TO REIMBURSEMENT OF SALARY WA S DISALLOWED BY AO ALLOWED BY CIT(A) BY OBSERVING AT PAGE 5 AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . AS THE AMOUNT OF RS.1,85,393/- ON ACCOUNT OF SELLING EXPENSES RECOVERED IS DULY CREDI TED IN THE BOOKS OF ACCOUNT, THE ADDITION OF THE SAME IS NOT JUSTIFIED. THE AO HAS DISALLOWED THE CLAIM OF RS.6,04,736/- ON THE GROUND THAT REMBURSEMENT OF SALARY, BONUS, E TC. OF THE STAFF EMPLOYED BY AN ASSOCIATE CONCERN CANNOT BE ALLOWED AS BUSINESS EXP ENDITURE. THE REIMBURSEMENT WAS MADE BY THE APPELLANT AS THE SERVICES OF THE STAFF WERE UTILIZED FOR THE PURPOSES OF ITS BUSINESS. IT IS NOT THE CONTENTION OF THE AO THAT SERVICES WERE NOT RENDERED BY THE STAFF. THE AO HAS ALSO BROUGHT NO ADVERSE MATERIAL ON RECO RD. UNDER THE CIRCUMSTANCES, THE DISALLOWANCE OF RS.6,04,736/- IS NOT JUSTIFIED. GR OUND NO. 4 AND 5 ARE ALLOWED. WE FIND THAT THE AMOUNT OF RS.7,85,590/- IN CONNECT ION WITH FREIGHT RECOVERABLE ACCOUNT REPRESENTS EXCESS FREIGHT REALISED FROM THE CUSTOME RS ON THEIR SALE OVER THE EXPENDITURE INCURRED ON FREIGHT FOR DESPATCH OF SOLD PRODUCTS AND THE SA ME WAY CREDITED THE SAME IN THE MISCELLANEOUS RECEIPT I.E. FREIGHT ACCOUNT. THE A SSESSEE ALSO EARNED REPACKING CHARGES FROM ITS 3 ITA NO. 1886/K/2010 & CO NO.26 OF 2011 RAJMAHAL QUARTZ SAND & KAOLIN CO. , AY:2007-08 CUSTOMER M/S. GLOBAL INTERNATIONAL BY RAISING DEBIT NOTE OF RS.3,21,336/-, WHICH WAS ULTIMATELY TRANSFERRED TO MISCELLANEOUS RECEIPT ACCOUNT. THE ASSESSEE ALSO PAID PENAL FREIGHT OF RS.12,76,778/- TO RAILWAYS AND DEAD FREIGHT OF RS.1 ,80,438/- AS DEDUCTED BY BOKARO STEEL PLANT. THE ASSESSEE CONSEQUENTLY CHARGED UNABSORBE D PENAL FREIGHT OF RS.3,50,290/- TO THE P&L ACCOUNT. THE AO WAS UNDER WRONG IMPRESSION AN D HENCE, WRONGLY ADDED INCOME FROM FREIGHT RECOVERABLE ACCOUNT AND REPACKING CHARGES A S NOT DISCLOSED. THE CIT(A) HAS RIGHTLY DELETED THE SAME. THE PENAL FREIGHT CHARGES OF RS. 12,76,778/- WAS ACTUALLY PAID TO THE RAILWAYS FOR OVER-LOADING OF RAILWAY WAGON AND IT W AS IN THE NATURE OF EXCESS FREIGHT FOR COMPENSATION OF OVER-LOADING. ACCORDING TO RAILWAY AURHORITIES, THE LOADING OF GOODS WAS MADE WITH THE PRIOR APPROVAL OF THE RAILWAY AUTHORI TIES WHICH HAD NOT RECEIVED REVISED CIRCULAR NOTIFYING REVISED QUANTITY OF PERMISSIBLE LIMIT FOR LOADING, BUT QUANTITY WAS FOUND AS EXCESSIVE AT THE DESIGNATED STATION AS PER THE REVISED CIRCUL AR. ACCORDING TO US, THE EXCESS FREIGHT IS NOT PENAL IN NATUE AND THERE IS NO VIOLATION OF ANY STA TUTORY PROVISIONS. EVEN THE DEAD FREIGHT OF RS.1,8,438/- WAS DEDUCTED BY BOKARO STEEL PLANT DUE TO UNDER WEIGHMENT OF RAILWAY WAGONS, WHICH MEANS THAT QUANTITY OF GOODS DISPATCHED WAS L OWER THAN THE OPTIMUM PERMISSIBLE LIMIT. IT MEANS THAT CIT(A) HAS RIGHTLY DELETED THE ADDITI ON AND WE CONFIRM THE SAME. 5. AS REGARDS TO THE DISALLOWANCE OF REIMBURSEMENT OF SALARY OF RS.6,04,736/-, THIS WAS REIMBURSEMENT ON ACCOUNT OF SALARY, BONUS ETC. OF T HE STAFF EMPLOYED BY AN ASSOCIATE CONCERN AND FOR THE SERVICES UTILISED FOR THE PURPOSE OF IT S BUSINESS. REVENUE EVEN NOW BEFORE US HAS NOT CONTENTED THAT THERE WAS NO SERVICES RENDERED. IN SUCH CIRCUMSTANCES, WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION. APPEAL OF REVENUE IS DISMISSED. 6. NOW WE ARE COMING TO ASSESSEES CROSS OBJECTION. THE ONLY ISSUE IN THIS CROSS OBJECTION OF ASSESSEE IS AGAINST THE ORDER OF CIT(A ) CONFIRMING THE DISALLOWANCE OF DEDUCTION FOR NON-PAYMENT OF TDS BY INVOKING THE PROVISION OF SECTION 40(A)(IA OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: FOR THAT THE AO AND THE CIT(A) BOTH HAD ERRED IN A DDING TO THE TOTAL INCOME OF THE APPELLANT RS.8,02,899/- (PART OF RS.10,66,873/-) U/ S. 40(A)(IA) OF THE INCOME TAX ACT, 1961, ALTHOUGH THE TDS WAS PAID BY THE ASSESSEE BEF ORE THE DUE DATE OF FILING OF RETURN. 7. WE HAVE HEARD LD. SR. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, IT IS ADMITTED BY LD. SR. DR THAT THE PAYME NTS WERE PAID I.E. TDS WAS PAID BY ASSESSEE BUT AFTER THE END OF FINANCIAL YEAR I.E. AFTER 31.0 3.2007. THE SAME WERE PAID IN THE MONTH OF MAY 2007. THIS TDS WAS DEDUCTED ON ACCOUNT OF FRE IGHT CHARGES CREDITED OR PAID IN THE MONTH OF JULY, AUGUST, DECEMBER, 2006 AND FEBRUARY, 2007 AND TAX THEREON WAS DEDUCTED. THIS WAS PAID IN THE MONTH OF MAY, 2007. IN VIEW O F THE ABOVE FACTS, IT IS CLEAR THAT THIS ISSUE 4 ITA NO. 1886/K/2010 & CO NO.26 OF 2011 RAJMAHAL QUARTZ SAND & KAOLIN CO. , AY:2007-08 IS SQUARELY COVERED BY THE DECISION OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS IN ITAT NO.302 OF 2011, GA NO. 320 0/2011 DATED 23.11.2011, WHEREIN EVEN AMENDMENT MADE BY THE FINANCE ACT 2010 IN SECTION 4 0(A)(IA) OF THE ACT IS HELD TO BE RETROSPECTIVE. HONBLE HIGH COURT HELD AS UNDER: WE HAVE HEARD MR. NIZAMUDDIN AND GONE THROUGH THE I MPUGNED JUDGMENT AND ORDER. WE HAVE ALSO EXAMINED THE POINT FORMULATED FOR WHIC H THE PRESENT APPEAL IS SOUGHT TO BE ADMITTED. IT IS ARGUED BY MR. NIZAMUDDIN THAT THIS COURT NEED S TO TAKE DECISION AS TO WHETHER SECTION 40(A)(IA) IS HAVING RETROSPECTIVE OPERATION OR NOT. THE LEARNED TRIBUNAL ON FACT FOUND THAT THE ASSESSE E HAD DEDUCTED TAX AT SOURCHE FROM THE PAID CHARGES BETWEEN THE PERIOD APRIL 1, 2005 AND A PRIL 28, 2006 AND THE SAME WERE PAID BY THE ASSESSEE IN JULY AND AUGUST 2006, I.E. WELL BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS F ACTUAL POSITION WAS UNDISPUTED. MOREOVER, THE SUPREME COURT, AS HAS BEEN RECORDED B Y THE LEARNED TRIBUNAL, IN THE CASE OF ALLIED MOTORS PVT. LTD. AND ALSO IN THE CASE OF ALOM EXTUSIONS LTD., HAS ALREADY DECIDED THAT THE AFORESAID PROVISION HAS RETROSPECTIVE APPL ICATION. AGAIN, IN THE CASE REPORTED IN 82 ITR 570, THE SUPREME COURT HELD THAT THE PROVISI ON, WHICH HAS INSERTED THE REMEDY TO MAKE THE PROVISION WORKABLE, REQUIRES TO BE TREATED WITH RETROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTION AS WELL. IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE S UPREME COURT, THIS COURT CANNOT DECIDE OTHERWISE. HENCE WE DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS. ONCE THE ISSUE IS DECIDED BY HONBLE JURISDICTIONAL HIGH COURT THAT THE AMENDMENT IN THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BY FINAN CE ACT, 2010 IS REMEDIAL AND CURATIVE IN NATURE AND TDS PAID ON OR BEFORE THE DUE DATE OF FI LING OF RETURN U/S. 139(1) OF THE ACT, DEDUCTION IN RESPECT TO THE AMOUNT ON WHICH TDS IS SO PAID, IS ALLOWABLE. IN THE PRESENT CASE THE ASSESSEE HAS DEDUCTED TDS ON ACCOUNT OF FREIGH T CHARGES CREDITED OR PAID IN THE MONTH OF JULY, AUGUST, DECEMBER, 2006 AND FEBRUARY, 2007 AND TAX THEREON WAS DEDUCTED. THIS WAS PAID IN THE MONTH OF MAY, 2007 AND PERTAINS TO AY 2 007-08, THAT MEANS THE TDS WAS PAID BEFORE DUE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT BY THE ASSESSEE. HENCE, WE ALLOW THE CLAIM OF ASSESSEE. THIS GROUND OF ASSESSEES C.O I S ALLOWED. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED AN D C.O. OF ASSESSEE IS ALLOWED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.01.2 014 SD/- SD/- , . . . . , ' #!' ' #!' ' #!' ' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31ST JANUARY, 2014 PRONOUNCED BY SD/- (A.P.GEORGE) SD/-(M. SINGH) AM JM -. #/0 #1 JD.(SR.P.S.) 5 ITA NO. 1886/K/2010 & CO NO.26 OF 2011 RAJMAHAL QUARTZ SAND & KAOLIN CO. , AY:2007-08 2 +##3 43&5- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT DCIT, CIRCLE-36, KOLKATA. 2 +,)* / RESPONDENT RAJMAHAL QUARTZ SAND & KAOLIN CO., 1 , N. S. ROAD, 1 ST FLOOR, KOLKATA-700 001 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:#; +# / DR, KOLKATA BENCHES, KOLKATA ,3 +#/ TRUE COPY,