Rolcon Engineering Com.Ltd., Anand V. The Addl.CIT.,Anand Range, Anand

ITA 2196/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73042 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: MK PATELAR
• Keywords: Business expenditure; Opportunity of being heard; Commercial expediency; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD , , , , BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ' ! ' ! ' ! ' ITA NO. 2196/AHD/2010 ASSESSMENT YEAR : 2007-08 ROLCON ENGINEERING COMPANY LIMITED P.B. NO. 20, VALLABH VIDYANAGAR 388120 V/S . ADDL. COMMISSIONER OF INCOME TAX, ANAND RANGE, ANAND-388120 PAN NO. A A A C R8759 G (APPELLANT) .. (RESPONDENT) #$ % & / BY APPELLANT SHRI M. K. PATEL, A.R. '(#$ % & /BY RESPONDENT SHRI K. C. MATHEWS, SR. D.R. )* % /DATE OF HEARING 26.02.2014 +,- % /DATE OF PRONOUNCEMENT 07.03.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF ASSESSEE WHICH H AS EMANATED FROM THE ORDER OF CIT(A)-IV, BARODA, DATED 12.05.2010 FO R ASSESSMENT YEAR 2007- 08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,00,000/- MADE BY AD DITIONAL COMMISSIONER OF INCOME TAX FOR GARDEN EXPENSES CLAI MED AS DISCUSSED IN PARA NO.4 OF THE ASSESSMENT ORDER DATE D 21.12.2009. (PLEASE REFER TO STATEMENT OF FACTS ENCLOSED) 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ALSO ERRED IN CONFIRMING THE ADDITION OF RS.1,27,824/- ( RS. 87,000/- AND ITA NO. 2196/AHD/2010, ROLCON ENGINEERING CO. LTD. VS. ACIT A.Y. 07-08 PAGE 2 RS.55,027/-) MADE BY ADDITIONAL COMMISSIONER OF INC OME TAX OUT OF REPAIRS EXPENDITURE CLAIMED AS DISCUSSED IN PARA NO.5 OF THE ASSESSMENT ORDER DATED 21.12.2009. (PLEASE REFER TO STATEMENT OF FACTS ENCLOSED) 2. THE FIRST GROUND OF THE ASSESSEE IS AGAINST CONF IRMING THE ADDITION OF RS.3 LACS MADE BY THE ADDL. CIT FOR GARDEN EXPENSES . THE A.O. OBSERVED THAT ASSESSEE IS MANUFACTURING INDUSTRIAL CHAIN & S PROCKET, WHICH ARE PARTS USED IN CEMENT, STEEL, SUGAR, PAPER AND CHEMICAL IN DUSTRIES. ON VERIFICATION OF THE P&L ACCOUNT, IT WAS FOUND THAT ASSESSEE HAS DEBITED RS.3 LACS ON ACCOUNT OF GARDEN EXPENSES. THE A.O. GAVE REASONAB LE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. IT WAS SUBMITTED BEFORE HIM T HAT THE SAID ACTIVITY OF SPONSORING A PUBLIC GARDEN WAS APPROVED BY THE VALL ABH VIDYANAGAR MUNICIPAL BUREAU. THE NAGARPALIKA ALSO APPROVED LI GHT BILL, WATER BILL AND FOUNTAIN ELECTRIC LIGHT BILL AND WAS BORNE BY IT. RS.3 LACS WAS INCURRED AS COST ON DEVELOPMENT OF THE SAID GARDEN. THE ASSESSEE CO MPANY ALSO BORE THE MAINTENANCE EXPENSES OF GARDEN THOUGH THE OWNERSHIP OF THE LAND REMAINED WITH THE CHAROTTAR GRAMODHAR SHAKARI MANDAL. THE G ARDEN EXPENSES WERE INCURRED FOR COMMERCIAL EXPEDIENCY AND FOR BRAND NA ME ALSO AS ADVERTISED EXPENSES. THE SUBMISSION OF THE ASSESSEE WAS NOT F OUND CONVINCING TO THE A.O. AFTER RELYING UPON VARIOUS DECISIONS, HE HELD THAT EXPENDITURE WAS NOT AN ALLOWABLE BUSINESS EXPENDITURE. THUS, HE MADE A DDITION OF RS.3 LACS IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO ALSO CONFIRME D THE ADDITION BY OBSERVING ITA NO. 2196/AHD/2010, ROLCON ENGINEERING CO. LTD. VS. ACIT A.Y. 07-08 PAGE 3 AS UNDER: 2..2 I HAVE CAREFULLY CONSIDERED THE MATTER. THE E XPENDITURE IN QUESTION IS PURELY A SOCIAL WELFARE EXPENDITURE WITH NO DIRE CT NEXUS WITH APPELLANT'S BUSINESS. THE GARDEN IN QUESTION WAS DEVELOPED FOR PUBLIC AT LARGE AND NOT SPECIFICALLY FOR EMPLOYEES OF THE APPELLANT COM PANY OR THEIR FAMILIES. AS HELD IN THE CASES OF STANDARD MILLS CO. LTD. (19 94) 122 CTR (BOM.) 272 RELIED UPON BY THE ASSESSING OFFICER AND VOLTAS LTD. (1993) 114 CTR (BOM.) 274, EXPENSES ON SOCIAL WELFARE ARE NOT ALLO WABLE AS REVENUE EXPENDITURE. EVEN THOUGH THE DECISION IN CASE OF VA ZIR SULTAN TOBACCO CO. LTD. IS IN FAVOUR OF ASSESSEE, ASSESSING OFFICE R HAS REFERRED TO THE PRINCIPLE LAID DOWN THEREIN, I.E. FOR CLAIMING EXPE NDITURE TO BE FOR THE PURPOSE OF BUSINESS, CONNECTION BETWEEN EXPENDITURE AND THE OBJECT SHOULD BE REAL AND NOT REMOTE OR ILLUSORY. THE CASE S RELIED UPON BY THE APPELLANT ARE THOSE WHERE THERE WAS DIRECT BENEFIT TO THE EMPLOYEES OF ASSESSEE DUE TO THE EXPENDITURE INCURRED. FOR INSTA NCE, IN CASE OF PALANI ANDAWARE MILLS LTD. (177) 110 ITR 742, THE SCHOOL B UILDING WAS EXCLUSIVELY USED FOR THE CHILDREN OF EMPLOYEES OF A SSESSEE COMPANY, DUE TO WHICH EXPENDITURE WAS CONSIDERED TO BE FOR ASSES SEE'S BUSINESS. IN APPELLANT'S CASE, THE EXPENDITURE IS PURELY FOR SOC IAL WELFARE WITHOUT ANY DIRECT NEXUS WITH APPELLANT'S BUSINESS. ASSESSING O FFICER HAS RIGHTLY DISALLOWED THE SAME BY RELYING ON MUMBAI HIGH COURT DECISION IN CASE OF STANDARD MILLS CO. LTD. ADDITION OF RS.3,00,000/- I S CONFIRMED. 4. NOW, THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IT IS TRUE THAT COMPANY DOES NOT OWN LAND OF THE GARDEN BUT IN THE INTEREST OF BUSINESS OF THE COMPANY, IT HAD INC URRED THE EXPENDITURE FOR MAINTENANCE OF THE GARDEN AND WAS INCURRED FOR BUSI NESS PURPOSES. HE FURTHER ARGUED THAT IN A.Y. 07-08, THE LD. CIT IN A SSESSEES OWN CASE U/S. 264 OF THE IT ACT HAS ALLOWED THE EXPENDITURE AS BUSINE SS PURPOSES. THUS, IT SHOULD BE ALLOWED. AT THE OUTSET, LD. SR. D.R. REL IED UPON THE ORDER OF THE CIT(A). ITA NO. 2196/AHD/2010, ROLCON ENGINEERING CO. LTD. VS. ACIT A.Y. 07-08 PAGE 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE EXPENDITURE INCURRED TO BE FOUND FOR BUSINESS PURPOSES ON THE BASIS OF SUBMISSION MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES, WHICH WERE INCURRED FOR MAINTAINING THE BRAND NAME OF THE COMPANY AS WELL AS FOR ADVERTISEMENT. THE LD. CIT HAD ALLOWED THE IDENTIC AL EXPENDITURE IN A.Y. 09- 10. THUS, WE HAVE CONSIDERED VIEW THAT THIS EXPEND ITURE IS INCURRED FOR BUSINESS PURPOSES. ACCORDINGLY, WE ALLOW THE APPEA L OF THE ASSESSEE ON THIS GROUND. 6. THE SECOND GROUND IS NOT PRESSED BY THE ASSESSEE . SO, THIS GROUND IS DISMISSED AS NOT PRESSED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 07/03/2014 SD/- SD/- ( MUKUL KR. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA . . . . % %% % '/ '/ '/ '/ 0/- 0/- 0/- 0/- / COPY OF ORDER FORWARDED TO:- 1. #$ / APPELLANT 2. '(#$ / RESPONDENT 3. 44 5 / CONCERNED CIT 4. 5- / CIT (A) 5. /9: ') , , / DR, ITAT, AHMEDABAD 6. :< => / GUARD FILE. BY ORDER/ . , ?/ 4A , '