Midwest Granite Private Limited, Hyderabad V. Asst. Commissioner of Income Tax, Circle-16(2), Hyderabad

ITA 223/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5918 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHAN RAO
• Section: 143(3); 13; 22

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO.223/HYD/2018 ASSESSMENT YEAR:2013 - 14 MIDWEST GRANITE PRIVATE LIMITED, HYDERABAD. PAN: AAACM 9486 D VS. ACIT, CIRCLE - 16(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI P. MURALI MOHAN RAO REVENUE BY: SHRI SUNIL KUMAR PANDEY, DR DATE OF HEARING: 10/02/2021 DATE OF PRONOUNCEMENT: 22 /04/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A) - 4, HYDERABAD IN APPEAL NO. 0068/2016 - 17/ACIT, CIR - 16(2)/CIT(A) - 4/HYD/17 - 18, DATED 27/11/2017 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE AY 2013 - 14. 2. THE ASSESSEE HAS RAISED SEVEN GROUNDS IN ITS APPEAL HOWEVER, THE CRUX OF THE ISSUE IS THAT: - 2 THE LD. CIT(A) HAS ERRED IN PARTIALLY SUSTAINING THE ADDITION MADE BY THE LD. A.O. TOWARDS OFFICE RENT AND O FFICE MAINTENANCE CHARGES . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF GRANITE / MARBLE BLOCKS ETC., FILED ITS RETURN OF INCOME ON 2911/2013. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 22/3/2016 WHEREIN THE LD. A.O. MADE ADDITION OF RS. 63,25,982/ - BEING THE DISALLOWANCE OF EXPENDITURE INCURRED TOWARDS RENT OF OFFICE PREMISES AND OFFICE MAINTENANCE CHARGES . ON APPEAL, THE LD. CIT(A) PARTIALLY SUSTAINED THE ADDITION BY ESTIMATING THE DISALLOWANCE @ 50% OF THE TOTAL EXPENDITURE INCURRED TOWARDS RENT PAID FOR OFFICE PREMISES AND OFFICE MAINTENANCE EXPENSES . AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. A.O. THAT THE ASSESSEE HAD DEBITED THE AMOUNT OF RS. 68,53,148/ - TOWARDS RENT FOR OFFICE PREMISES AND RS. 9,85,874/ - TOWARDS OFFICE MAINTENANCE CHARGES A GGREGATING TO RS. 78,39,022/ - . THE LD. A.O. FURTHER OBSERVED THAT THE ASSESSEES 13 SISTER COMPANIES WERE ALSO OPERATING FROM THE SAME PREMISES. THEREFORE, THE LD. A.O. WAS OF THE VIEW THAT THE AGGREGATE EXPENDITURE INCURRED TOWARDS OFFICE RENT AND OFFICE MAINTENANCE CHARGES SHOULD BE APPORTIONED AMONGST ALL THE 3 COMPANIES OPERATING FROM THE SAME PREMISES. HOWEVER, THE CONTENTION OF THE ASSESSEE WAS THAT AL L THE ASSESSEES SI S TER CONCERNS WERE NO N - OPERATIO NAL AND EVEN IF THERE W ERE SOME ACTIVITIES CARRIED OUT , THEY WERE MINIMAL . IT WAS THEREFORE CONTENDED BY THE ASSESSEE THAT THE APPORTIONMENT OF THE EXPENSES WOULD NOT BE APPROPRIATE . HOWEVER, THE LD. A.O. REJECTED THE SUBMISSIONS OF THE LD. AR AND COMPUTED THE ASSESSEES SHARE OF EXPENDITURE AT RS. 5,59,930/ - . ACCORDINGLY, HE DISALLOWED THE AMOUNT OF RS. 63,25,982/ - AS ALLOWABLE EXPENDITURE IN THE HANDS OF THE ASSESSEE . ON APPEAL, T HE LD. CIT(A) WAS OF THE VIEW THAT 50% OF THE OFFICE RENT AND OFFICE MAINTENANCE CHARGES HAS TO BE ALLOWED AS DEDUCTION IN THE CASE OF THE ASSESSEE BY OBSERVING AS UNDER: - 6.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELL ANT. IT IS THE FACT THAT THE OFFICE PREMISES WAS SHARED BY 13 OTHER SISTER CONCERNS / GROUP COMPANIES. THEREFORE, THERE IS VALID REASON FOR THE ASSESSING OFFICER TO CONSIDER THAT THE APPELLANT COMPANYS CERTAIN EXPENDITURE TO BE DISALLOWED. BUT CONSIDER ING THE EXPLANATION FILED BY THE APPELLANT COMPANY AND KEEPING IN VIEW THAT THERE IS NO SPECIFIC PROOF TO DISALLOW EXPENSES, THE REASONABLE AMOUNT OF 50% OF RENT AND OFFICE MAINTENANCE TO BE ALLOWED AS GENUINE AND 50% TO BE DISALLOWED AS NOT ALLOWABLE. TH EREFORE, THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 5. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED REVENUE AUTHORITIES AND ARGUED BY STATING THAT ALL THE ASSESSEES SISTER CONCERNS WERE EXISTING ONLY ON PAPER AND THERE WE RE NO REASONABLE ACTIVITIES CONDUCTED BY THOSE COMPANIES DURING THE RELEVANT ASSESSMENT YEAR . LD. AR FURTHER ARGUED BY STATING THAT ONLY THE ASSESSEE COMPANY WAS CONDUCTING ITS ENTIRE BUSINESS FROM THE RENTED PREMISES INCURRING THE RENTAL AND OFFICE MAINTENANCE CHARGES 4 AGGREGATING TO RS. 78,39,022/ - . HENCE, IT WAS PLEADED , THAT THE ADDITIONS MADE AND SUSTAINED IN THE HANDS OF THE ASSESSEE BY THE LEARNED REVENUE AUTHORITIES MAY BE DELETED. THE LD. D R ON THE OTHER HAND VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. ON PERUSING THE ORDERS OF THE LD. A.O. AND THE LD. CIT(A), W E FIND THAT THEY HAVE NOT COM E ACROSS ANY MATERIAL EVIDENCE TO ARRIVE AT THE CONCLUSION THAT THE ASSESSEES SI S TER COMPANIES HAD CONDUCTED ANY SIGNIFICANT ACTIVITIES IN THE RENTED PREMISES OF THE ASSESSEE COMPANY WHERE IT IS CARRYING OUT ITS ACTIVITIES SO AS TO PROPORTIONATELY ABSORB THE RENTAL AND OFFICE MAINTENANCE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY . FURTHER T HE SUBMISSIONS OF THE LD. AR ON THAT REGARD COULD NOT BE SUCCESSFULLY CONTROVERTED BY THE LD. REVENUE AUTHORITIES EITHER WITH ANY MATERIAL EVIDENCE OR FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY OR FROM THE PARTICULARS O F THE ASSESSES SUBSIDIARY COMPANIES. THEREFORE , IT A PPEARS THAT ALL THE SUBSIDIARY COMPA NIES OF THE ASSESSEE ARE ONLY EXISTING ON PAPER AND NOT CONDUCTING ANY SIGNIFICANT ACTIVITIES. THE LD.CIT(A) HAS ALSO NOT BROUGHT OUT ANY CATEGORICAL FINDING TO CONT ROVERT THE SAME IN HIS ORDER . WHEN ALL THE ASSESSES SISTER COMPANIES ARE ONLY PAPER COMPANIES WITH NO ACTIVITIES CONDUCTED DURING THE RELEVANT ASSESSMENT YEAR IT IS OBVIOUS THAT T HE EN TIRE EXPENSES INCURRED TOW A RDS OFFICE RENT AND OFFICE MAINTENANCE CHARGES ARE ATTRIBUTABLE TO THE ASSESSEE COMPANY AND 5 THEREFORE THESE EXPENSES CAN N OT BE APPORTIONE D TO THE ASSESSES SISTER COMPANIES AND IF AT ALL APPORTIONABLE IT WOULD BE NEG LIGIBLE. IN THIS SITUATION, W E DO NOT FIND ANY MERIT IN THE ADDITION MADE AND SUSTAINED BY THE LD. REVENUE AUTHORITIES IN THE HANDS OF THE ASSESSEE COMPANY BY DISALLOWING THE PORTION OF EXPENDITURE INCURRED BY THE ASSESSEE COMPANY TOWARDS RENT OF OFFICE PREMISES A ND OFFICE MAINTENANCE CHARGES . HENCE, W E HEREBY DIRECT THE LD. A.O. TO ALLOW THE ENTIRE AMOUNT OF RS. 78,3 9 ,022/ - AS ALLOWABLE DEDUCTION IN THE HANDS OF THE ASSESSEE COMPANY BEING THE EXPEN DITURE INCURRED BY IT TOW A RDS RENT OF OFFICE PREMISES AND OFFICE MA INTENANCE CHARGES AND ACCORDINGLY DELETE THE ADDITION MADE AND SUSTAINED THEREON. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE 22 ND APRIL, 2021. SD/ - SD/ - (S.S. GODARA) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 22 ND APRIL, 2021. OKK COPY TO: - 6 1. MIDWEST GRANITE PVT LTD., C/O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6 - 3 - 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD - 82. 2. ACIT, CIRCLE - 16(2), HYDERABAD. 3. THE CIT (A) - 4, HYDERABAD. 4. THE PRINCIPAL COMMISSIONER OF INCOME TAX - 4, HYDERABAD.