The DCIT, Circle-4, Ahmedabad V. Gujarat Gas Financial Services Ltd., Ahmedabad

ITA 2114/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8339 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Question of law; Fair market value
• Section: 260A

Judgement Text

, *MH *MH*MH *MH* ** * IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.A. NO. 2114/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, AHMEDABAD. VS. GUJARAT GAS FINANCIAL SERVICE LTD., 2, SHANTI SADAN SOCIETY, NEAR PARIMAL GARDEN, ELLISBRIDGE, AHMEDABAD 380 006 ! PAN/GIR NO. : AAACG 5584 E ( ' / APPELLANT ) .. ( #' RESPONDENT ) '$ APPELLANT BY : SHRI V. K. SINGH, SR.D.R. #'%$ / RESPONDENT BY : SHRI S. N. SOPARKAR & PARIN SHAH, A.R. & ' (%) * / DATE OF HEARING 10/08/2017 +,-. %) * / DATE OF PRONOUNCEMENT 11/10/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDABAD , DATED 09/04/2013 FOR THE ASSESSMENT YEAR (AY) 2010-11, ON THE FOLLOWING GROUNDS: I. (A) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.69,25,915/- MADE ON ACCOUNT OF DISAL LOWANCE U/S.40A(2)(B) OF THE ACT, WITHOUT PROPERLY APPRECIA TING FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. ITA NO.2114/AHD /2014 DCIT VS. GUJARAT GAS FINANCIAL SERVICE LTD. ASST.YEAR 2010-11 - 2 - (B) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS TO DELETE THE DISALLOWANCE WHEN ASSESSEE HAD FAILED TO SUBSTANTIA TE THAT THE RATE OF SERVICE CHARGES PAID BY IT TO ITS HOLDING COMPAN Y WAS COMPARABLE TO FAIR MARKET VALUE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, THE ASSESSEE COMPANY IS SUBSIDIARY C OMPANY OF GUJARAT GAS COMPANY LIMITED; THE COMPANY IS PRIMARI LY ENGAGED IN THE BUSINESS OF LEASE FINANCE AND HIRE PURCHASE WHEREBY IT IS PROVIDING GAS CONNECTIONS TO INDUSTRIAL, COMMERCIAL AND DOMESTIC CUSTOMERS. 2.2 DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E COMPANY HAS DEBITED A SUM OF RS.91,75,915/- TOWARDS SERVICE CHA RGES TO GUJARAT GAS COMPANY LTD @3,205/- PER CONNECTION ON 2863 GAS CON NECTIONS. THE ASSESSEE COMPANY WAS ASKED TO JUSTIFY THE PAYMENTS MADE TO THE HOLDING COMPANY. THE ASSESSEE COMPANY WIDE ITS LETTER DATED 23.01.2013 STATED THAT; 'AS REQUIRED BY YOUR GOOD SELF REGARDING SERVICES C HARGES PAID TO GUJARAT GAS COMPANY LIMITED. WE HAVE ALREADY PROVID ED MONTH WISE DETAILS FOR SERVICE CHARGES PAID TO GUJARAT GAS COM PANY LIMITED VIDE OUR LETTER DATED 11 TH JAN 2013 FURTHER IT IS TO BE SUBMITTED THAT DURING THE YEAR UNDER REVIEW, RS.91.76 LACS HAS BEEN PAID AS SERVICE CHARGES TO GUJARAT GAS COMPANY LIMITED, PLEASE NOTE THAT TH E SAME IS PAID @RS.3,205/- PER CONNECTION. THESE SERVICE CHARGES A RE PAID IN RESPECT OF CONNECTIONS SIGNED BEFORE 31 ST MARCH, 2009 AND INSTALLED DURING THE YEAR I.E. THE ASSESSEE-COMPANY HAS BEEN INSTALLING CONNECTIONS DIRECTLY TO THE CUSTOMERS. HOWEVER, DUE TO THE REGULATORY CH ANGES, THE ITA NO.2114/AHD /2014 DCIT VS. GUJARAT GAS FINANCIAL SERVICE LTD. ASST.YEAR 2010-11 - 3 - CONNECTIONS CANNOT BE SOLD DIRECTLY TO THE CUSTOMER'S AS ALL THE SERVICES OF GAS ARE PROVIDE BY GUJARAT GAS COMPANY LIMITED, IT WAS DECIDED TO SELL GAS CONNECTIONS BY ASSESSEE COMPANY TO GUJARAT GAS COMPANY LIMITED. IN VIEW OF THIS, THE ENTIRE EXECUTION AND MANAGEMEN T OF THE CONNECTIONS IS WITH GUJARAT GAS COMPANY LIMITED AND THEREFORE, NO SERVICE CHARGES ARE PAID TO THE SAID COMPANY. HOWEV ER, IN RESPECT OF CONNECTIONS SIGNED BEFORE 31 ST MARCH, 2009 AND INSTALLED DURING THE YEAR, THE SAME WERE GIVEN TO CUSTOMERS DIRECTLY AND HENCE SERVICE CHARGES HAVE BEEN CHARGED.' THE SUBMISSION OF THE ASSESSEE COMPANY WAS CONSIDER ED BUT NOT FOUND TENABLE AND DISALLOWANCE U/S.40A(2)(A) R.W.S. 40A(2 )(B) OF RS.69,25,915/- WAS MADE AGAINST THE ASSESSEES COMP ANY. 3. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 4. WE HAVE GONE THROUGH THE RELEVANT MATERIAL AND H EARD BOTH THE PARTIES. IN ALL THE EARLIER ASSESSMENT YEARS UPTO A.Y.2005-06, SUCH EXPENDITURE HAD BEEN FULLY ALLOWED. IT IS ONLY DURI NG THE ASSESSMENT YEAR 2006-07 AND IN THE SUBSEQUENT YEARS UNDER APPEAL TH AT THE LEARNED AO HAD ARBITRARILY INVOKED THE PROVISIONS OF SECTION 4 0A(2)(B) AND MADE THE IMPUGNED DISALLOWANCE. THE DISALLOWANCE U/S.40A(2)( B) CAME TO BE MADE BY LEARNED AO FOR THE FIRST TIME A.Y. 2006-07 AND THAT ADDITION WAS DELETED BY THE LD.CIT(A). SIMILAR DISALLOWANCE MADE BY THE AO IN A.Y.2007-08, A.Y.2008-09 & A.Y.2009-10 HAD ALSO BEE N DELETED BY THE LEARNED CIT(A). ITA NO.2114/AHD /2014 DCIT VS. GUJARAT GAS FINANCIAL SERVICE LTD. ASST.YEAR 2010-11 - 4 - 4.2 LEARNED AR HAS SUBMITTED THAT ON PRINCIPLES OF CONSISTENCY, THE IMPUGNED ADDITION MADE BY THE LD. AO IS NOT MAINTAI NABLE IN LAW. 4.3 LEARNED AR HAS CITED A JUDGMENT OF GUJARAT HIGH COURT IN ASSESSEES OWN CASE IN TAX APPEAL NO.428 TO 731 OF 2015. IN THIS MATTER, DEPARTMENT/APPELLANT HAS REQUESTED TO HONBLE HIGH COURT TO FRAME THE FOLLOWING QUESTION AS SUBSTANTIAL QUESTION OF LAW I N THE CASE FOR DETERMINATION OF THIS COURT UNDER SECTION 260A OF T HE ACT. WHETHER, THE APPELLATE TRIBUNAL HAS SUBSTANTIALLY ERRED IN LAW IN DELETING THE ADDITION OF RS.7.70 CRORES MADE ON ACC OUNT OF DISALLOWANCE U/S.40A(2)(B) R.W.S 40A(2)(A) OF THE ACT, WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON R ECORD? 4.4 IN THIS CASE, HONBLE HIGH COURT HELD THAT WE ARE OF THE OPINION THAT THE APPEALS ARE MERITLESS AND THE SAME DESERVE TO BE DISMISSED AND ACCORDINGLY DISMISSED. 4.5 LEARNED AR CITED AN ORDER OF THE CO-ORDINATE BE NCH IN ITA NO.556/AHD/2010 WHICH WAS FILED BY THE ASSESSEE COM PANY AND ITA NO.656/AHD/2010 & 91, 92 & 1561/AHD/2012 WHICH WERE FILED BY THE REVENUE. IN THIS CASE, CERTAIN EXPENSES WERE DISALL OWED BY THE ASSESSING OFFICER BY INVOKING PROVISION OF SECTION 40A(2)(B) OF THE ACT, SAME WERE DECIDED IN FAVOUR OF THE ASSESSEE COMPANY AND APPEARS FROM THE RECORD THAT IN THE SEVERAL ASSESSMENT YEAR THE REVE NUE ACCEPTED THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND DID N OT PURSUE THE MATTER ANY FURTHER. ITA NO.2114/AHD /2014 DCIT VS. GUJARAT GAS FINANCIAL SERVICE LTD. ASST.YEAR 2010-11 - 5 - 5. CONSIDERING THE OVERALL FACTS OF THE CASE, DECIS ION OF JURISDICTIONAL HIGH COURT AND ORDER OF THE ITAT IN ASSESSEES OWN CASE, WE DO NOT FIND ANY MERIT IN THE APPEAL AND THEREFORE, WE DISMISS T HE APPEAL OF THE REVENUE. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 11/10/2017 SD/- SD/- IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRAMOD KUMAR) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/10/2017 PRITI YADAV, SR.PS !'# $#! COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) 45 / THE CIT(A)-VIII, AHMEDABAD. 5. 67 8)'12 *12. 0 / DR, ITAT, AHMEDABAD 6. 8 9: ( GUARD FILE. % & / BY ORDER, # 6)) //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY