The Dy. CIT, Anand Circle, Anand V. M/s. Anupam Industries Ltd., Anand

ITA 227/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7006 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Gift; Business expenditure; Earning of tax free income; Corroborative evidences
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, ANAND CIRCLE, 204, 3 RD FLOOR S.P. PATEL COMPLEX, NEAR OLD C.K. HALL, MAYFAIR ROAD, ANAND - 388001 (APPELLANT) VS M/S. ANUPAM INDUSTRIES LTD, 138, GIDC ESTATE, VITHAL UDYOGNAGAR, ANAND - 388121 P AN: AABCA9602Q (RESPONDENT) REVENUE BY : S H RI VINOD TANWANI , SR. D . R. ASSESSEE BY: SHRI M.K. PATEL, A.R . DATE OF HEARING : 30 - 11 - 2 018 DATE OF PRONOUNCEMENT : 15 - 01 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY REVENUE FOR A. Y. 2012 - 13 TO 2013 - 14 , ARI SE FROM ORDER OF THE CIT(A) - 4, VADODARA DATED 25 - 08 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. AS THE FACT IN BOTH THE APPEALS FILED BY REVENUE ARE SIMILAR, SO, WE TAKE GROUND NOS. 1 & 3 OF ITA NO. 226/AHD/2017 AS THE LEAD CASE AND ITS FINDING WILL ALSO BE APPLICABLE TO GROUND NOS. 1 & 2 OF ITA NO 227/AHD/2017 FOR THE SAKE OF CONVENIE NCE. 3 . THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO. 226/AHD/2017 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS BY PARTLY ALLOWING THE APPEAL OF THE ASSESSEE ON THE ISSUE OF DISALLOWANCE I T A NO S . 226 & 227 / A HD/20 17 A SS ESSMENT YEAR 2012 - 13 & 2013 - 14 I.T.A NO. 226 & 227 /AHD/ 20 17 A.Y. 2012 - 13 TO 2013 - 14 PAGE NO D CIT VS. M/S. ANUPAM INDUSTRIES LTD. 2 OF RS.6,16,897/ - OUT OF TOTAL DISALLOWANCE OF RS. 12,33,795/ - AGAINST THE CLAIM OF SALES PROMOTION EXPENSES OF RS.25,92,862/ - BY THE ASSESSEE.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APP EALS) HAS ERRED IN LAW AND ON FACTS BY ALLOWING THE APPEAL OF THE ASSESSEE ON THE ISSUE OF DISALLOWANCE OF NON BUSINESS EXPENSES OF RS.2,75,750/ - ON ACCOUNT OF LEGAL & PROFESSIONAL FEES .' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS BY PARTLY ALLOWING THE APPEAL OF THE ASSESSEE ON THE ISSUE OF DISALLOWANCE OF RS.1,04,77,266/ - U/S.14A R.W.R 8D OF THE ACT, WITHOUT APPRECIATING THE FACT THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE.' 4 . THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 16 , 5 1, 99 ,00 0/ - WAS FILED ON 29 TH SEP, 2012. SUBSEQUENTLY , THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S . 143(3) OF THE ACT ON 6 TH AUGUST, 201 3. THE ASSESSING OFFICER HAS COMPLETED ASSESSMENT U/S. 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME AT RS. 17 , 90 , 77 , 64 0 / - . THE ASSESSEE HAS F ILED THREE GROUNDS OF APPEAL IN RESPECT OF ADDITION MADE BY THE ASSESSEE WHICH ARE ADJUDICATED AS UNDER. (I) DISALLOWANCE OUT OF SALE PROMOTION EXPENSES 5 . THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS DEBITED SALE PROMOTION EXPENSES OF RS. 25 , 9 2 , 862/ - IN THE P & L ACCOUNT. FROM THE DETAILS SUBMITTED BY THE ASSESSEE , THE ASSESSING OFFICER OBSERVED THAT OUT OF AFORESAID EXPENSES AN AMOUNT OF RS.12,33,795 WERE INCURRED FOR GIVING DIFFERENT KIND S OF GIFTS BY THE ASSESSEE. THE ASSESSING OFFICER HAS DIS ALLOWED THE WHOLE EXPENSES OF RS. 12 , 33 , 795/ - ON THE GROUND THAT ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM WITH SUPPORTING EVIDENCES THAT THESE EXPENSES WERE INCURRED FOR THE BUSINESS. 6 . AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY RESTRICT ING THE DISALLOWANCE TO THE 50% OF THESE EXPENSES TO THE AMOUNT OF RS. 6 , 16 , 896/ - . 7 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOTICED THAT ASSESSEE CLAIMED EXPENSES OF RS. 25 , 92 , 862/ - TOWARDS SALE PROMOTION EXPENSES OUT OF WHICH IT HAD INCURRED RS. 12 , 33 , 795/ - TOWARDS VARIOUS GIFTS AND PRESENTATIONS MADE TO CLIENTS. THE LD. CIT(A) HAS RESTRICTED I.T.A NO. 226 & 227 /AHD/ 20 17 A.Y. 2012 - 13 TO 2013 - 14 PAGE NO D CIT VS. M/S. ANUPAM INDUSTRIES LTD. 3 THE DISALLOWANCE TO THE 50% OF SUCH EXPENSES CONSI DERING THE TURNOVER AND INCOME OF THE ASSESSEE SHOWN DURING THE YEAR UNDER CONSIDERATION. AFTER CONSIDERING INCOME OF RS. 16,51,99,000/ - DECLARED BY THE ASSESSEE AND THE NATURE OF BUSINESS OF THE ASSESSEE WE ARE INCLINED WITH THE DECISION OF LD. CIT( A) OF RESTRICTING OF DISALLOWANCE OF SALES PROMOTIONS EXPENSES INCURRED IN THE FORM OF GIF TO THE 50% OF SUCH EXPENSES . TH EREFORE, THIS GROUND OF REVENUE IS DISMISSED. DISALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES OF RS. 2 , 75 , 750/ - 8 . DURING ASS ESSMENT ON VERIFICATION OF LEDGER ACCOUNT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PAID AN AMOUNT OF RS. 2 , 75 , 750/ - TO DE L O ITTE HA SKINS AND S ELLS , CA FOR ADVISING ON TAX IM PLICATION RELATED TO GIFT OF LAND TO SUBSIDIARY COMPANY. THE ASSESSING O FFICER HAS DISALLOWED THESE EXPENSES ON THE GROUND THAT SAME WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS. LD. CIT(A) HAS ALLOWE D THE CLAIM OF THE ASSESSEE. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSAL OF MATERIAL ON RECORD , WE ARE INCLINED WITH THE FINDING OF LD. CIT( A) THAT THESE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE FOR THE PURPOSE OF STREAMLIN ING ITS FINANCIAL STRUCTURING, THEREFORE, WE DO FIND ANY DOUBT ON THE GENUINENESS OF THESE EXPENSES, THEREFORE, ON THIS ISSUE, APPEAL OF THE REVENUE IS DISMISSED. DISALLOWANCE U/S. 14A R.W. RULE 8D 9 . DURING THE COURSE OF ASSESSMENT , THE ASSESSING OFFICER OBSERVED THAT SECTION 14A OF THE INCOME TAX ACT, 1961 PROVIDES FOR DISALLOWANCE OF EXPENDITURE IN RELATION TO INCOME NOT INCLUD I BLE IN TOTAL INCO ME. THE ASSESSING OFFICER WAS OF THE VIEW THAT RULE 8D R.W.S. 14A OF TH E ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE THE ASSESSEE IN PARTICULAR YEAR HA D NOT EARNED ANY EXEMPT INCOME. THEREFORE, THE ASSESSING OFFICER HAS COMPUTED DISALLO WANCE AS I.T.A NO. 226 & 227 /AHD/ 20 17 A.Y. 2012 - 13 TO 2013 - 14 PAGE NO D CIT VS. M/S. ANUPAM INDUSTRIES LTD. 4 PER SECTION 14A R.W. RULE 8D TO THE AMOUNT OF RS. 1 , 06 , 77 , 266/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 10 . THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE AMOUNT OF RS. 2 LAC ON T HE GROUND THAT ASSESSEE HAS NOT SHOWN SUFFICIENT INTEREST FREE FUND AVAILABLE WI TH IT AS PER THE BALANCE SHEET ENDING ON 31 ST MARCH, 2012 .THE NET RESERVE S OF T HE ASSESSEE COMPANY WAS OF RS. 139 , 21 , 54 , 435/ - WHEREAS THE VALUE OF INVESTMENT WAS ONLY RS. 40 , 24 , 00000/ - . THE LD. CIT(A) HAS ALSO PLACED ON THE RELIANCE ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS GUJARAT INDUSTRIAL CORPORAT ION (2013) 318 TAXMAN 142 (GUJ) , CIT VS. TORRENT POWER LTD. (2014) 222 TAXMAN 367 (GUJ) AND THE DECIS ION OF CIT VS. HIT TACHI HOME AND LIFE SOLUTIONS (P ) LTD. (2014) 41 TAXMAN 540 (GUJ). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD . IT IS NOTICED THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDER ATION AND THE HON BLE GUJARAT HUGH COURT IN THE CASE OF CIT VS. CORR TECH PVT. LTD. (2014) 45 TAXMAN.COM 16 HELD T HAT WHERE ASSESSEE HAS NOT SHOWN ANY EXEMPT INCOME THERE CANNOT BE ANY EXPENSE S TO BE DISALLOWED. IN T HE LIGHT OF THE ABOVE FACTS AND JUDI CIAL FINDINGS, WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL, THERE FORE, THE SAME IS DISMISSED . 12 . IN THE RESULT, APPEAL ITA 226/AHD/2017 FILED BY REVENUE IS DISMISSED. 13 . IN THE COMBINED RESULT, APPEAL ITAS 226 & 227/AHD/2017 FILED BY REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 15 - 01 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 15 /01/2019 I.T.A NO. 226 & 227 /AHD/ 20 17 A.Y. 2012 - 13 TO 2013 - 14 PAGE NO D CIT VS. M/S. ANUPAM INDUSTRIES LTD. 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,