BHANSALI TRADING CORPORATION, Jaipur V. ITO, Jaipur

ITA 213/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5591 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: H M SINGHVI
• Keywords: Earning of tax free income
• Section: 10B

Judgement Text

ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 213/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 M/S BHANSALI TRADING CORPORATION, 2654, SHAH BHAWAN, GHEEWALON KA RASTA, JOHARI BAZAR, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 2(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABFB 8840 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI H.M. SINGHVI (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.01.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 13/01/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)- I, JAIPUR DATED 14.01.2014 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING TWO GROUNDS OF APPEAL: (1) THAT THE LD. CIT(A) WENT WRONG IN CONFIRMING THE DI SALLOWANCE OF RS. 4,27,463/- RELATED TO FOREIGN PARTICIPATION EXPENSES WHICH IS ARBITRARY AND ILLEGAL SHOULD BE DELETED. ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 2 (2) THAT THE LD. CIT(A) WENT WRONG IN CONFIRMING THE TR ADING ADDITION OF RS.37,768/- OF EOU UNIT-II BY WORKING 2 5% ON UN VERIFIED PURCHASES AMOUNTING TO RS. 1,59,073/- WHIC H SHOULD BE DELETED. 2. REGARDING GROUND NO.1, THE BRIEF FACTS RELEVANT FOR THE MATTER UNDER CONSIDERATION ARE THAT THE ASSESSEE, WHICH IS IN BUSINESS OF MANUFACTURING AND TRADING OF PREVIOUS AND SEMI-PRE CIOUS STONES AND STUDDED DIAMOND JEWELLERY, IS HAVING TWO UNITS, UNI T-I AND UNIT-II. THE UNIT-II IS 100% EXPORT ORIENTED UNIT (EOU) WHICH IS ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 5,36,228/- TO WARDS FOREIGN EXHIBITION PARTICIPATION EXPENSES IN THE PROFIT AND LOSS ACCOUNT OF UNIT-I. AS PER THE AO, NATURE OF BUSINESS OF BOTH THE UNI TS ARE EXACTLY THE SAME AND BOTH THE UNITS ARE EXPORTING 100% OF THEI R SALES AND THERE IS NO LOCAL SALE IN UNIT-I. ACCORDINGLY, THE EXPENSES INCURRED ON ACCOUNT OF FOREIGN EXHIBITION PARTICIPATION SHOULD HAVE BEEN D EBITED IN BOTH THE UNITS IN PROPORTION OF THEIR RESPECTIVE SALES. GI VEN THAT THE ASSESSEE HAS DEBITED THE WHOLE OF THE EXPENSES IN UNIT -I THE SA ME HAS RESULTED IN INCREASING THE EXEMPT INCOME IN UNIT-II AND DEC REASING THE TAXABLE ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 3 INCOME IN UNIT-I. ACCORDINGLY, HE WORKED OUT THE P ROPORTIONATE EXPENSES IN HANDS OF UNIT-I AND UNIT-II WHICH HAS R ESULTED IN DISALLOWANCE OF RS. 4,31,395/- IN HANDS OF UNIT-I AND CORRESPONDING ADDITION OF RS. 4,31,395/- IN HANDS OF UNIT-II. THE ADDITION OF RS. 4,31,395/- IN HANDS OF UNIT-II IS BEING CONTESTED B EFORE US. 2.1 DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE ASSESSEE FIRM PAID A SUM OF RS. 9,45,000/- FOR BOOK ING OF 2 STALLS FOR PARTICIPATION IN EXHIBITION TO BE HELD ON MAY 30 T O JUNE 2008 AT JCK LAS VEGAS. THESE AMOUNTS WERE PAID IN THE EARLIER YEAR I.E. F.Y. 2007-08 AND WAS DEBITED TO THE A/C OF THE GEM & JE WELLERY EXPORT PROMOTION COUNCIL IN THE BOOKS OF UNIT-I. DURING THE YEAR, THE ASSESSEE FIRM CANCELLED THE BOOKING OF BOOTHS VIDE LETTER DA TED 30.04.2008. BUT THE EXPORT PROMOTION COUNCIL VIDE LETTER DATED 26/0 5/2008 INFORMED THAT OUT OF THE TWO BOOTHS NO. 44101 & 44103, IT WAS AB LE TO ALLOT BOOTH NO.44101 TO SOME BODY ELSE AND MONEY WAS REFUNDED. HOWEVER, IT REFUSED TO PAY THE BOOKING AMOUNT OF BOOTH NO. 441 03 AS PER THE CANCELLATION POLICY AND AS SUCH THE AMOUNT OF RS. 5 ,36,228/- REPRESENTED THE CANCELLATION CHARGES OF BOOTH NO. 44103. ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 4 2.2 THE LD. DR IS HEARD. 2.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY IT IS NOTED THAT THE AMOUNT OF RS. 5,36,228/- WHICH HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOU NT OF UNIT-I RELATES TO CANCELLATION OF PARTICIPATION IN THE EXHIBITION BEI NG ORGANIZED BY THE GEM & JEWELLERY EXPORT PROMOTION COUNCIL DUE TO THE BUSINESS EXIGENCIES OF THE ASSESSEE. SECONDLY, IT IS NOTED T HAT THE INITIAL DEPOSIT OF RS. 9,45,000/- WAS PAID OUT OF THE BOOKS OF ACCO UNTS OF UNIT-I AS EVIDENT FROM THE ACCOUNT OF THE GEM & JEWELLERY EX PORT PROMOTION COUNCIL MAINTAINED IN THE UNIT-I WHICH IS AT PAGE O F 7 OF PAPER BOOK. IN GENERAL A PRESUMPTION CAN BE DRAWN THAT THE UNIT WH ICH HAS PAID THE DEPOSIT AND HAS DEBITED THE SAME IN ITS BOOKS OF AC COUNT SHOULD BE ALLOWED TO CLAIM THE LOSS ON A/C OF CANCELLING CHARGES WHERE THE ASSESSEE HAS NOT BEEN ABLE TO PARTICIPATE IN THE E XHIBITION. HOWEVER, WHAT IS TO BE SEEN IS WHEN THE INITIAL DEPOSIT WAS MADE, WHETHER IT WAS CLAIMED AS AN EXPENSE IN THE PROFIT AND LOSS ACCOUN T OR SHOWN AS AN ADVANCE IN THE BALANCE SHEET. IN THE INSTANT CASE AS SUBMITTED BY THE LD. AR, THE INITIAL DEPOSIT WAS SHOWN IN THE BALANCE SH EET AS AN ADVANCE IN ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 5 THE ACCOUNT OF GEM & JEWELLERY EXPORT PROMOTION COU NCIL. THEREFORE IT CANNOT BE SAID CONCLUSIVELY THAT THE SAID ADVANC E PERTAINS TO UNIT-I ONLY. THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY S PECIFIC DOCUMENTATION TO SUBSTANTIATE THAT THE FOREIGN PART ICIPATION RELATES TO THE GOODS BEING MANUFACTURED AT UNIT-I ONLY. MERELY B Y PAYING THE INITIAL DEPOSIT AND SHOWING THE SAME AS AN ADVANCE IN THE B ALANCE SHEET OF UNIT- I, IT CANNOT BE SAID THAT THE EXPENSES PERTAINS TO UNIT-I ONLY, AS PER THE WELL LAID DOWN PRINCIPLE OF THE LAW THAT THE ENTR Y IN THE BOOKS OF ACCOUNTS ARE NOT DETERMINATIVE OF REAL NATURE OF TH E TRANSACTIONS. GIVEN THAT BOTH THE UNITS ARE IN THE SAME BUSINESS AND 1 00% OF ITS PRODUCTION IS EXPORTED AND THERE WAS NO LOCAL SALE IN UNIT-I HELD BY THE AO, AND IN ABSENCE OF ANY CONTRARY FACTS BROUGHT TO OUR NOTIC E BY LD. AR, A MORE LOGICAL VIEW WHICH EMERGES IS THAT THE BOOKING OF STALLS IN THE EXHIBITION WAS DONE FOR BOTH THE UNITS AND THE EXPE NSES SHOULD RELATE TO BOTH UNITS. IN LIGHT OF ABOVE, WE ARE OF THE CONSI DERED VIEW THAT THE AO HAS RIGHTLY APPORTIONED THE FOREIGN PARTICIPATION CANCELLATION EXPENSES IN THE HANDS OF BOTH THE UNITS AND NECESSARY ADDITI ONS/ DISALLOWANCES ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 6 HAVE BEEN MADE IN THE HANDS OF THE RESPECTIVE UNIT S. HENCE THE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS DISMISSED. 2.4 REGARDING GROUND NO.2, THE SAME RELATES TO PRO PORTIONATE ADDITION OF RS. 37,768/- IN HANDS OF UNIT-II WHICH IS 100% EOU @ 25% OF UNVERIFIABLE PURCHASES. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE LD. AR AS WELL AS THE ORDER OF THE LOWER AUTHORITIE S. GIVEN THAT THE SAID DISALLOWANCE RELATES TO UNVERIFIABLE PURCHASES AND THE FACT THAT THE SAID DISALLOWANCE IS IN HANDS OF UNIT-II WHICH IS ENJOYI NG TAX EXEMPTION U/S 10B OF THE ACT. WE DO NOT LIKE TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). HENCE THIS GROUND IS DISMISSED. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/ 2016 SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 13/01/2016 ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 7 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S BHANSALI TRADING CORPORATION, JAIPUR 2. THE RESPONDENT- ITO, WARD 2(1), JAIPUR 3. THE CIT(A)-I, JAIPUR 4. THE CIT-I, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE ITA NO. 213/JP/14 VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 213/JP/14 M/S BHANSHALI TRADING CORPORATION V. ITO, WARD 2(1) , JAIPUR 8 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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 DISPATCH OF THE ORDER