ACIT - 5(2), MUMBAI V. M/s. PERFECT CIRCLE VICTOR LTD., MUMBAI

ITA 2067/MUM/2007

• Counselvise Citation: 206719914 RSA 2007
• Duration Of Justice: 4 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANTOSH PARAB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.V. EASWAR (PRESIDENT) AND SHRI B. R AMAKOTAIAH (AM) I.T.A. NO. 2067/MUM/2007 ASSESSMENT YEAR : 2003-04 ASST. COMMISSIONER OF INCOME-TAX- 5(2), ROOM NO. 571, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S. PERFECT CIRCLE VICTOR LTD., 10, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI 400 004. PAN: AAACP 0482 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABANI KANTA NAYAK, SR. DR. RESPONDENT BY : SHRI SANTOSH PARAB O R D E R PER B. RAMAKOTAIAH, AM: THIS APPEAL BY THE REVENUE IS DIRE CTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-V, MUMBAI DATE D 21T DECEMBER, 2006. THE REVENUE HAS RAISED FIVE GROUNDS OF APPEAL WHICH ARE DEALT WITH A UNDER: 2. GROUND NO. 1 PERTAINS TO DELETION OF DISALLOWANC E ON ACCOUNT OF REPAIRS AMOUNTING TO ` 5,24,341/-. THE ASSESSING OFFICER DISALLOWED AN AMO UNT OF ` 5,24,341/- BEING PROVISION FOR REPAIRS CLAIMED UND ER THE HEAD REPAIRS AND MAINTENANCE OF CLAIMED UNDER THE HEAD REPAIRS AND MAINTENANCE OF FACTORY BUILDING TOTALING TO ` 16,82,836/-. IT WAS HIS CONTENTION THAT ON EXAMINAT ION OF VOUCHERS IT WAS NOTICED THAT THEY WERE BILLED IN NE XT ACCOUNTING YEAR, SO THE AMOUNTS WERE TO BE ALLOWED IN THE NEXT YEAR AND CAN NOT BE IN THE YEAR UNDER CONSIDERATION. IT WAS THE SUBMISSION OF THE ASSESS EE THAT THEY HAVE UNTAKEN REGULAR MAINTENANCE WORK THROUGHOUT THE YEAR AND TH E WORK FOR WHICH THE PROVISION WAS MADE WAS COMPLETED BEFORE MARCH 2003, BUT THE BILLS WERE RECEIVED SUBSEQUENTLY. THEREFORE, A PROVISION OF SIMILAR AM OUNT WAS MADE AT THE YEAR ENDING MARCH 2003. ITA NO. 2067/M/2007 PERFECT CIRCLE VICTOR LTD. 2 3. THE LEARNED CIT(A) HAVING CONSIDERED THE FACTS O F THE CASE ALLOWED THE AMOUNTS AS ALLOWABLE DURING THE YEAR. THE REVENUE I S AGGRIEVED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS OBJE CTED TO THE ORDER OF THE CIT(A) STATING THAT THE BURDEN OF PROVING THAT THE WORK WAS COMPLETED IN THE YEAR ENDING MARCH 2003WAS ON THE ASSESSEE BUT THE ASSESS EE COULD NOT FURNISH ANY EVIDENCE BEFORE THE AO OR BEFORE THE LEARNED CIT(A) THAT WORK WAS COMPLETED BY MARCH 2003 AND THIS ASPECT REMAINED UNVERIFIABLE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE WORKS WERE COMPLETED BY THE END OF THE YEAR AND ADVANCE WAS PA ID AND BILLS WERE SUBSEQUENTLY FURNISHED WHICH WERE ADJUSTED AND THE REFORE FOR THE YEAR ENDING MARCH 2003 THE PROVISION WAS MADE AND THE LIABILITY WAS AN ASCERTAINED LIABILITY WHICH WAS ALLOWED BY THE LEARNED CIT(A). 6. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE PART IES, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). EVE N THOUGH THE BILLS WERE DATED SUBSEQUENT TO THE ACCOUNTING YEAR, THE WORK WAS COM PLETED AS SUBMITTED BY THE ASSESSEE BEFORE MARCH 2003 AND PROVISION WAS MADE T O THAT EXTENT. CONSIDERING THE FACTS OF THE CASE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). GROUND N O. 1 IS ACCORDINGLY REJECTED. 7. GROUND NO.2 IS IN RESPECT OF DELETION OF ADDITIO N OF ` 37,57,835/- BEING 50% OF THE STAFF WELFARE EXPENSES OF ` 75,15,671/-. IN MAKING THE DISALLOWANCE THE AO HAS OBSERVED THAT THE ASSESSEE HAS NOT FURNI SHED THE DETAILS AS TO HOW THE CALCULATION OF AMOUNTS INCURRED IN EXCESS OF AMOUNT S SPECIFIED IN IT RULES AND INCLUDED IN THE HANDS OF THE EMPLOYEES AS PERQUISIT ES. WHILE REFERRING TO THE PAST HISTORY OF THE COMPANY, THE AO DISALLOWED THE SAME. ON APPEAL, THE CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS DELETED THE ADD ITION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PER USED THE ORDERS OF THE LOWER AUTHORITIES. THE CIT(A) ALSO GAVE A FINDING T HAT EXPENDITURE IS FOR BUSINESS ITA NO. 2067/M/2007 PERFECT CIRCLE VICTOR LTD. 3 PURPOSES. WE FIND THAT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2001- 02 THE TRIBUNAL VIDE ITS ORDER DATED 17.3.2008 IN I TA NO.335/M/2005 REJECTED THE APPEAL FILED BY THE REVENUE BY CONFIRMING THE ORDE R OF THE CIT(A). FOLLOWING THE ABOVE FINDINGS, SINCE FACTS ARE SAME IN THIS YEAR W E CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND NO.2. 9. GROUND NO.3 IS IN RESPECT OF DELETION OF DISALLO WANCE OF ` 16,28,850 MADE BY THE AO ON ACCOUNT OF MISCELLANEOUS EXPENSES. ON APPEAL THE CIT(A) DELETED THE DISALLOWANCE BY HOLDING THAT MERELY PLACING REL IANCE UPON EARLIER YEARS CONFIRMATION BY THE APPELLATE COMMISSIONER IS NOT S UFFICIENT FOR MAKING THE DISALLOWANCE. HE ALSO GAVE A FINDING THAT ALL THE E XPENSES WERE RELATED TO THE BUSINESS OF THE ASSESSEE. 10. WE HAVE HEARD BOTH THE PARTIES. CONSIDERING THE FACTS AND THE ADHOC DISALLOWANCE MADE BY THE AO, WE UPHOLD THE ORDER OF CIT(A). THERE IS NO SCOPE TO MADE ADHOC DISALLOWANCE. THE GROUND IS ACCORDINGLY DISMISSED. 11. GROUND NO. 4 IS IN RESPECT OF DELETION OF DISAL LOWANCE OF ` 3,54,954/- ON FOREIGN TRAVEL EXPENSES AT 10% OF THE CLAIM. THE AO MADE THE DISALLOWANCE BY HOLDING THAT SPECIFIC INFORMATION REGARDING PERSON, PURPOSE AND PLACE OF VISIT HAS NOT BEEN FURNISHED. THE LEARNED CIT(A) ON APPEAL DE LETED THE ADDITION. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE ISSUE WAS ALLOWED BY TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 IN ITA NO. 335/MUM/2005 VIDE ORDER DATED 17.3.2008. RESPECTFULLY FOLLOWING THE SAME, SINCE THE FACTS AND REASONS FOR DISALLOWANCE ARE SAME, WE DISMISS THE G ROUND RAISED BY THE REVENUE. 12. GROUND NO. 5 PERTAINS TO THE ISSUE OF EXCLUSION OF EXCISE DUTY FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. THE AO INCLUDED THE EXCISE DUTY AS PART OF TOTAL TURNOVER AND FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SUDARSHAN CHEMICAL INDUSTRIES LTD. 245 ITR 769(BOM.) THE CIT(A) DELETED THE ADDITION. THE ISSU E IS SQUARELY COVERED BY THE ITA NO. 2067/M/2007 PERFECT CIRCLE VICTOR LTD. 4 DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LAXMI MACHINE WORKS LTD. (290 ITR 67). THEREFORE, THERE IS NO NEED TO INTERF ERE WITH THE ORDER OF THE LEARNED CIT(A). THE LEARNED DR DURING THE COURSE OF ARGUMEN T RAISED AN ISSUE THAT EXCISE DUTY HAS TO BE EXCLUDED FROM EXPORT TURNOVER AS WEL L WHICH WAS NOT CONSIDERED BY THE AO OR THE CIT(A). THE LEARNED COUNSEL FOR THE A SSESSEE, HOWEVER, SUBMITTED THAT EXCISE DUTY WAS NOT PART OF EXPORT TURNOVER AN D THEREFORE, THE QUESTION OF INCLUDING THE SAME DOES NOT ARISE. SINCE THE FACTS OF INCLUSION OR EXCLUSION OF EXCISE DUTY IN THE EXPORT TURNOVER WAS NOT BEFORE U S NOR THE AO MADE OUT A CASE BUT ONLY CONSIDERED INCLUSION OF EXCISE DUTY IN THE TOTAL TURNOVER, THE ARGUMENT OF THE LEARNED DR CANNOT BE CONSIDERED AT THIS STAGE. THE AO IS DIRECTED TO FOLLOW THE PRINCIPLES ESTABLISHED BY THE HONBLE SUPREME C OURT IN THE CASE CITED SUPRA WHILE GIVING EFFECT TO THE ORDER. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE, 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED THE 30 TH JUNE, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT,MC-V, MUMBAI 4. THE CIT(A)-V, MUMBAI 5. THE DR C BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI