Deputy Commissioner of Income-tax, V. M/s. Associated Dairy Fab Pvt. Ltd., Jalgaon

ITA 1914/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5097 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-02-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARISES OUT OF PASSED
• Keywords: Maximum Marginal Rate

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / ITA NO.1914/PUN/16 / ASSESSMENT YEAR : 2011-12 ACIT, CIRCLE-1, JALGAON VS. M/S. ASSOCIATED DAIRY FAB PVT. LTD., B-5/1, MIDC AREA, AJANTA ROAD, JALGAON-425003 PAN : AAECA3963F APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-2, NASHIK ON 17-06-2016 IN RELATION TO THE ASSESSMENT YEAR 2011-12. 2. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.75,000/- ON ACCOUNT OF PROFESSIONAL CH ARGES. THE ASSESSING OFFICER (AO) HAS RECORDED IN PARA NO.4.5 OF THE APPELLANT BY MS. SHABANA PARVEEN RESPONDENT BY SHRI NIKHIL PATHAK DATE OF HEARING 06-02-2019 DATE OF PRONOUNCEMENT 07-02-2019 ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 2 ASSESSMENT ORDER THAT THE ASSESSEE PAID A SUM OF RS.75,0 00/- TO TWO PERSONS VIZ., MR. K. R. ANANTHANARAYAN RS.65,000 /- AND MR. P. V. LELE RS.10,000/- . THE AO DISALLOWED THE SAM E BY OBSERVING THAT THE ASSESSEE COULD NOT ESTABLISH ANY NEXUS OF PAYMENT WITH THE SERVICES. THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING THAT ALL THE DETAILS WERE FURNISHED AND SIMILAR ADDITION WAS DELETED BY HIM FOR THE A.Y. 2009-10. 3. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IT HAS BEEN APTLY RECORDED THA T SIMILAR ADDITION WAS MADE BY THE AO IN HIS ORDER FOR THE A.Y . 2009-10, WHICH STOOD DELETED AT THE HANDS OF THE LD. CIT( A). IT IS NOTICED THAT THE REVENUE APPEALED AGAINST SUCH ORDER PASSED BY THE LD. CIT(A). VIDE ORDER DATED 09-02-2018, THE TRIBUNAL IN ITA NO.177/PUN/2014 ETC. HAS UPHELD THE FIRST APPELLATE AUTHORITYS VIEW IN DELETING THE DISALLOWANCE OF PROFESSIONAL CHARGES. SINCE THE FACTS AND CIRCUMSTANCES OF THE INSTANT GROUND ARE SIMILAR TO THOSE OF THE PRECEDING YEAR, RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE DELETION OF ADDITION. 4. NEXT GROUND IS AGAINST DELETION OF ADDITION ON ACCOUNT OF SERVICES CHARGES AND COMMISSION PAID AT RS.27,84,960/-. ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 3 5. THE AO DISCUSSED THIS ISSUE IN PARA NO.4.2 OF HIS ORDER . HE MADE ADDITION OF RS.27.84 LAKHS TOWARDS SERVICE CHARGE S AND COMMISSION BY OBSERVING THAT, EXCEPT FOR INVOICES, THER E WAS NO OTHER EVIDENCE TO SUBSTANTIATE THE INVOLVEMENT OF THE PERSONS IN FETCHING THE BUSINESS. THE LD. CIT(A) DELETED S UCH ADDITION BY RELYING ON HIS ORDER FOR A.Y. THE 2009-10. 6. WE HAVE GONE THROUGH THE ORDER PASSED BY THE TRIBUN AL IN ASSESSEES OWN CASE FOR THE A.Y. 2009-10 (SUPRA) IN WHICH THIS ISSUE HAS BEEN DISCUSSED AT PARA NO.28 ONWARDS AND EVENTUALLY THE GROUND OF THE REVENUE WAS DISMISSED. SINCE FACTS AND CIRCUMSTANCES OF THE GROUND FOR THE INSTANT YEAR ARE SIMILAR TO THOSE OF THE ASSESSMENT YEAR 2009-10, RESPECTFU LLY FOLLOWING THE PRECEDENT, WE UPHOLD THE DELETION OF ADDITION. 7. THE NEXT GROUND IS AGAINST THE DELETION OF ADDITION OF RS.1,20,93,770/- MADE BY THE AO ON ACCOUNT OF EXCESS REMUNERATION PAID TO DIRECTORS. 8. THE FACTS OF THIS GROUND AS RECORDED IN PARA NO.4.9 OF THE ASSESSMENT ORDER ARE THAT THE ASSESSEE PAID REMUNERATION TO ITS TWO DIRECTORS AT RS.1.56 CRORE. THE AO OBSERVED THAT ALTHOUGH THE TURNOVER OF THE COMPANY FOR THE INSTANT YEAR G OT ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 4 REDUCED BUT THE DIRECTORS REMUNERATION WAS INCREASED BY RS.30.71 LAKH. ALLOWING DEDUCTION FOR A SUM OF RS.36 LAKH , THE AO MADE DISALLOWANCE OF RS.1,20,93,770/- U/S.40A(2)( A) OF THE ACT. THE LD. CIT(A) DELETED THE ADDITION. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE EFFECTED TURNOVER OF RS.14.13 CRORE FOR THE A.Y. 2009- 10 AND REMUNERATED ITS DIRECTORS BY RS.1.36 CRORE. AS AGAINST TH IS, FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE EFFECTED S ALES OF RS.17.40 CRORE AND REMUNERATED ITS DIRECTORS BY RS.1.56 CRORE. THE ADDITION MADE UNDER SIMILAR CIRCUMSTANCES FOR THE A.Y . 2009-10 HAS BEEN DELETED. AS THERE IS AN INCREASE IN THE VOLUME OF TURNOVER VIS--VIS THE AMOUNT OF REMUNERATION TO THE DIRECTORS WITH REFERENCE TO THE A.Y. 2009-10, WE ARE OF TH E CONSIDERED OPINION THAT NO DISALLOWANCE IS CALLED FOR U/S.40A(2)(A) OF THE ACT. IT IS FURTHER A MATTER OF RECORD THAT THE AMOUNT OF REMUNERATION IN THE HANDS OF THE DIRECTORS H AS ALSO BEEN TAXED AT THE MAXIMUM MARGINAL RATE. IN THAT VIEW O F THE MATTER ALSO, THE DISALLOWANCE IS NOT SUSTAINABLE. WE, THEREFORE, UPHOLD THE DELETION OF ADDITION. ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 5 10. GROUND NO.4 IS AGAINST DELETION OF ADDITION ON ACCOUNT OF EXCESS INTEREST PAYMENT OF RS.4,26,767/-. 11. THE AO HAS DISCUSSED THIS ISSUE IN PARA NO.4.10 OF HIS ORDER. HE NOTICED THAT THE ASSESSEE PAID INTEREST TO ITS DEPOSITORS AT RS.21,33,833/- CALCULATED @15% (SIC 18%). ALL THE PERSONS TO WHOM INTEREST WAS PAID WERE COVERED U/S. 40A(2)(B) OF THE ACT. HE RESTRICTED THE INTEREST PAYMENT AT 12% AND MADE DISALLOWANCE FOR THE REMAINING 3%, WHICH CAME TO RS.4,26,767/-. THE LD. CIT(A) DELETED SUCH ADD ITION. 12. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM PAGE 17 OF THE PAPER BOOK, WHICH IS A COPY OF ACCOUNT STATEMENT ISSUED BY STATE BANK OF INDIA. SUCH STATEMENT DEPICTS CHARGING OF INTEREST FROM THE ASSESSEE AT RS.15.75%. SINCE THE ASSESSEE HA S PAID INTEREST TO ITS DEPOSITORS AT THE LOWER RATE OF 15%, IN OUR CONSIDERED OPINION, NO FAULT CAN BE FOUND BY THE LD. CIT(A ) IN DELETING THIS ADDITION. 13. LAST GROUND OF THE REVENUES APPEAL IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 6 14. THE ASSESSEE INCURRED FOREIGN TRAVEL EXPENSES AT RS.11,93,992/-. THE AO DISALLOWED THE ENTIRE SUM BY HOLDIN G THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO PROVE TH AT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A) EXAMINED THE DETAILS AND CAME TO HOLD THAT THE ASSESSEE HAD FURNISHED THE EVIDENCE. HE FURTHER NOTICED THAT THE FOREIGN TRAVEL EXPENSES WERE INCURRED IN RESPECT OF BUSINESS VISITS UNDERTAKEN BY THE DIRECTORS AND OTHER EXECUTIVES OF THE ASSESSEE COMPANY AND NO FAMILY MEMBER OF SUCH EMPLOYEES ACCOMPANIED THEM ON FOREIGN VISITS. HE, ERGO, DELETED THE ADDITION. THIS IS HOW, THE REVENUE HAS C OME UP IN APPEAL BEFORE THE TRIBUNAL. 15. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE MATERIAL ON RECORD, IT IS OBSERVED FROM THE FACTUAL POSITION NARRATED IN THE IMPUGNED ORDER THAT THE FOREIGN VISITS WERE UNDERTAKEN ONLY BY THE EMPLOYEES/DIRECTORS OF THE ASSESSEE COMPANY FOR BUSINESS PURPOSE AND NO FAMILY MEMBER OF S UCH EXECUTIVES ACCOMPANIED THEM. THIS HAS NOT BEEN CONTROVERTE D ON BEHALF OF THE REVENUE. THE TRIBUNAL VIDE ITS AFORESAID ORDER FOR THE PRECEDING YEAR HAS SUSTAINED THE ADDITION IN RESPECT OF FAMILY MEMBERS ACCOMPANYING THE EMPLOYEES/DIRECTORS OF THE COMPANY. IN SO FAR AS THE OTHER EXPENSES TOWARDS F OREIGN ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 7 VISITS OF THE DIRECTORS/EMPLOYEES ARE CONCERNED, THE SAME STOOD ALLOWED. SINCE NO FAMILY MEMBER OF THE DIRECTORS/EMPLOYEES OF THE ASSESSEE COMPANY ACCOMPANIED SUCH VISITING PERSONS, IN OUR CONSIDERED OPINION, NO DISALLOWANCE IS WARRANTED. THE SAME IS HELD TO HAVE BEEN RIGHTLY DELETED. 16. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH FEBRUARY, 2019. SD/- SD/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESID ENT PUNE; DATED : 07 TH FEBRUARY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-2, NASHIK 4. 5. THE PR.CIT-2, NASHIK , , / DR A, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO. 1914/PUN/2016 M/S. ASSOCIATED DAIRY FAB PVT. LTD., 8 DATE 1. DRAFT DICTATED ON 06-02-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06-02-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *