Ashphalt Techno Product, Mehsana V. The Income Tax Officer, Ward-1, Mehsana

ITA 207/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9419 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: S N DIVETIA
• Keywords: Business expenditure
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.207/AHD/2015 ASST. YEAR: 2008-09 ASHPHALT TECHNO PRODUCT, SHILPA COMPOUND HIGHWAY, MEHSANA. VS. INCOME-TAX OFFICER, WD-1, MEHSANA. APPELLANT RESPONDENT PAN AANFA 1103H APPELLANT BY SHRI S. N. DIVETIA, AR RESPONDENT BY SHRI VILAS V. SHINDE, DR DATE OF HEARING: 3/12/2015 DATE OF PRONOUNCEMENT: 2/03/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST THE OR DER OF LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 10/10/2014 FOR ASST. YEAR 200809.. ASSESSMENT WAS FRAMED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON 28/1 0/2013 BY ITO, WD-1, MEHSANA. ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL :- 1. THE CIT(A), GANDHINAGAR, WAS NOT JUSTIFIED AND N OT GRANTING RELIEF OF PLANT ERECTION EXPENSES OF RS.76,700/-, D ISALLOWANCE MADE BY AO VIDE ORDER DATED 28/10/2013. ITA NO. 207/AHD/2015 ASST. YEAR 2008-09 2 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORD ARE THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF ROAD/BUILDING CONSTRUCTION MATERIA L. RETURN OF INCOME FOR ASST. YEAR 2008-09 WAS FILED ON 24.09.20 08 DECLARING TOTAL INCOME OF RS.3,30,070/-. CASE WAS REOPENED AND NOTI CE U/S 148 OF THE ACT WAS ISSUED ON 23.07.2012 AND DULY SERVED. T HE ASSESSEE VIDE ITS LETTER DATED 29.07.2012 REQUESTED THAT THE RETURN OF INCOME FILED ON 24.09.2008 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. ACCORDINGLY NOTICE U/S 1 43(2) OF THE ACT WAS ISSUED ON 29.07.2012. ASSESSMENT WAS FRAMED U/S 143 (3) R.W.S. 147 OF THE ACT ON 28.10.2013 AFTER MAKING ADDITION OF R S.76,700/- AND ASSESSING THE INCOME AT RS.4,32,770/-. THE ONLY BAS IS FOR MAKING ADDITION OF RS.76,700/- IN THE ASSESSMENT ORDER RE ADS AS UNDER :- HOWEVER, AS PER THE TERMS AND CONDITIONS, EXCEPT S UPERVISION, ALL OTHER EXPENSES, INCLUDING SKILLED/UNSKILLED (LA BOUR) MANPOWER WILL BE BORNE BY THE BUYER. IN VIEW OF THE ABOVE, AFTER CONSIDERING THE SUBMISSION AS WELL AS TERMS A ND CONDITIONS FOR COMMISSIONING OF THE PRODUCT SOLD, I T IS AMPLE CLEAR THAT THE EXPENSES, RELATING TO SKILLED/UNSKIL LED MAN POWER FOR ERECTION OF THE MACHINERY SHOULD BE ON BUYERS A CCOUNT. THE PLANT FITTING AND LABOUR EXPENSES IS THE LIABILITY OF THE BUYER, THEREFORE, PLANT ERECTION EXPENSES CLAIMED BY THE A SSESSEE IS NOT ALLOWED AND ADDED BACK TO THE TOTAL INCOME OF T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. PENALTY PROCEEDIN GS U/S 271(1)(C) OF THE ACT, 1961 IS INITIATED FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A ) WHO ALSO CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER BY OBSERVING AS UNDER :- ITA NO. 207/AHD/2015 ASST. YEAR 2008-09 3 6. I HAVE CONSIDERED THE FACTS. OF THE CASE, AS SESSMENT ORDER AND STATEMENT OF FACTS RELIED UPON BY THE APPELLANT. THE AO HA OBSERVED THAT APPELLANT HAS CLAIME D PLANT ERECTION EXPENSES OF RS.76,700/- TO VARIOUS PARTIES. THE AO HAS VERIFIED THE TERMS AND- CONDITIONS OF COMMISSIONING OF MACHINERIES WHEREIN IT IS STATED THAT COMMISSIONING WILL BE DONE UNDER SUPERVISION OF APP ELLANT'S ENGINEER ON FREE ON FREE OF CHARGE BUT BUYER HAS TO PROVIDE LODGING, BO ARDING, LOCAL CONVEYANCE TO THE SUPERVISOR. ALL OTHER EXPENSES INCLUDING SKILLE D/UNSKILLED MANPOWER WILL BE BORNE BY THE BUYER. THUS, AO CAME TO THE CONCLUSION THAT THE EXPENDITURE CLAIMED IS REQUIRED TO BE BORNE BY THE CUSTOMER AND NOT THE APPELLANT. HENCE, HE MADE DISALLOWANCE OF RS.76,770/-. THE ABOVE FINDING OF THE AO IS NOT CONTRAVENED BY THE APPELLANT BY PRODUCING EVIDENCES TO SHOW THAT ALL THE ABOVE EXPENDITURE WAS REQUIRED TO BE BORNE BY THE APPELLA NT. THE APPELLANT CLAIMED THAT EXPENSES OF RS.76,700/- ARE AGAINST SALE OF RS .1,33 CRORE, THIS ARGUMENT OF THE APPELLANT CANNOT BE ACCEPTED AS APPELLANT HAS N OT PROVED THAT IT WAS ITS RESPONSIBILITY TO INCUR SUCH .EXPENSES. HENCE, IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKI NG THE DISALLOWANCE OF RS.76,700/- CLAIMED BY THE APPELLANT AS PLANT ERECT ION EXPENSES AND THE DISALLOWANCE MADE IS HEREBY CONFIRMED. THE RELEVANT GROUND OF APPEAL IS REJECTED. 7. IN THE RESULT APPEAL, IS DISMISSED. 4. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. LD. AR SUBMITTED THAT THE EXPENSES TOWARDS LABO UR CHARGES FOR PLANT FITTING HAVE BEEN ACTUALLY INCURRED BY WAY OF PAYMENT TO VARIOUS LABOURERS FOR ERECTION OF PLANT AND MACHINERIES FOR THE BUYERS. THE LD. AR FURTHER SUBMITTED THAT CERTAINLY AS PER THE TERM S AND CONDITIONS OF EXCEPT SUPERVISION OF OTHER EXPENDITURE INCLUDING S KILLED LABOUR/MAN POWER HAD TO BE BORNE BY BUYER FOR COMMISSIONING OF THE MACHINERY, BUT IN THE BUSINESS PRUDENCE CERTAIN EXP ENSES HAVE TO BE INCURRED OVER AND ABOVE WHICH ARE NOT CLAIMED BACK FROM THE BUYER. ITA NO. 207/AHD/2015 ASST. YEAR 2008-09 4 LD. AR FURTHER SUBMITTED THAT EACH AND EVERY DOCUME NT IN RESPECT OF THE EXPENDITURE INCURRED HAVE BEEN PLACED ON RECORD BEFORE BOTH THE LOWER AUTHORITIES AND EVEN BEFORE THE TRIBUNAL AND NO ANOMALY HAS BEEN NOTICED IN THE EXPENSES INCURRED AND THE SAME ARE, THEREFORE, GENUINELY INCURRED FOR BUSINESS PURPOSES AND SHOULD HAVE BEEN ALLOWED BY THE ASSESSING AUTHORITY. HE ALSO RELIED ON THE PAPER BOOK RUNNING IN 217 PAGES COMPRISING OF VARIOUS SUPPORTI NG DOCUMENTS TO PROVE THE GENUINENESS OF THE BUSINESS EXPENDITURE I NCURRED AT RS.76,700/-. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. FROM GOING THROUGH THE RE-ASSESSMENT ORD ER, WE FIND THAT THE ONLY BASIS TAKEN BY THE ASSESSING OFFICER FOR D ENYING THE CLAIM OF EXPENDITURE WAS THAT AS PER THE SALES AGREEMENT ALL THE EXPENSES IN CONNECTION TO ERECTION OF PLANT AND MACHINERY SOLD BY THE ASSESSEE SHOULD HAVE BEEN BORNE BY THE BUYER AND IN VIEW OF THIS AGREEMENT CLAUSES HE DENIED THE BENEFIT OF EXPENDITURE CLAIME D BY THE ASSESSEE. WE FURTHER FIND THAT LD. ASSESSING OFFICE R HAS NOT RAISED ANY DOUBT ON THE GENUINENESS OF THE EXPENDITURE INC URRED. 7. FROM GOING THROUGH THE PAPER BOOK WE FIND THAT A SSESSEE HAS PAID LABOUR CONTRACT CHARGES FOR ERECTION OF PLANT AND MACHINERY AT THE SITE OF THE BUYER. ALL OTHER EXPENSES RELATING TO THE ERECTION OF PLANT AND MACHINERY HAVE BEEN BORNE BY THE BUYER HI MSELF. IT IS A FACT THAT EVERY BUSINESSMAN WANTS TO RUN AND GROW HIS BU SINESS AND IN THIS PROCESS HE WANTS TO KEEP HIS CUSTOMER SATISFIE D AND IN THIS PROCESS HE COMES ACROSS SUCH MOMENTS WHEN IT IS NOT PRUDENT FOR ITA NO. 207/AHD/2015 ASST. YEAR 2008-09 5 HIM TO CLAIM SMALL/PETTY EXPENSES FROM REGULAR BUYE R EVEN IF IT COULD HAVE BEEN CLAIMED FROM THE BUYER AT LATER STAGE. FU RTHER THERE COULD HAVE BEEN A SITUATION THAT THE BUYER MAY HAVE FELT UNPLEASANT TO PAY SUCH MINOR EXPENDITURE WHICH HAVE BEEN INCURRED OVE R AND ABOVE WHAT IS NORMALLY AGREED UPON. CERTAINLY IN SUCH A S ITUATION IT SEEMS THAT ASSESSEE HAS TAKEN A PRUDENT DECISION SO AS TO NOT CLAIM SMALL/MEAGER EXPENSES FROM A CLIENT TO WHOM HE HAS SOLD PLANT AND MACHINERY OF HIGH VALUES AND HE THOUGHT IT PROPER T O INCUR THE SAME FROM HIS SIDE AND WHICH HE DID WITH THE MOTIVE OF R UNNING GOOD BUSINESS AND TO KEEP HIS CLIENT HAPPY. 8. FURTHER IT IS A FACT THAT BOOKS OF ACCOUNTS OF T HE ASSESSEE ARE AUDITED U/S 44AB OF THE ACT. AND TOTAL TURNOVER OF THE ASSESSEE IS RS.1.44 CRORES. IN THESE CIRCUMSTANCES, WE ARE OF T HE VIEW THAT LD. CIT(A) HAS ERRED IN NOT DELETING THE ADDITION OF RS .76,700/- WHICH OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE. WE SET ASIDE THE ORDER OF LD. CIT(A) AND ALLOW THE CLAIM OF ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 02/03/2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 2/03 /2016 MAHATA/- ITA NO. 207/AHD/2015 ASST. YEAR 2008-09 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 15/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 24/02/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 2/3/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: