ACIT, JODHPUR V. Shri Naveen Kapoor, JODHPUR

ITA 231/JODH/2013

• Counselvise Citation: 23123314 RSA 2013
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: ARUN DADHICH
• Section: 37(1)

Judgement Text

1 `IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 231/JODH/2013 (A.Y. 2009-10) ACIT, CIRCLE-1, VS SHRI NAVEEN KAPOOR JODHPUR. PROP. M/S. MAYANK EQUIPMENTS 98, ABHAYGARH SCHEME, JODHPUR. PAN NO. AETPK0089E (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ARUN DADHICH. DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 12/09/2013. DATE OF PRONOUNCEMENT : 20/09/2013. O R D E R PER HARI OM MARATHA, J.M . : THIS APPEAL OF THE REVENUE, FOR A.Y. 2009-10, IS D IRECTED AGAINST THE ORDER OF LD. CIT(A), JODHPUR DATED 12/02/2013. 2 2. BRIEFLY STATED, THE FACTS OF THE SOLE ISSUE, RAI SED BY TAKING IN AS MUCH AS FIVE EFFECTIVE GROUNDS, ARE THAT THE ASSESS EE IS THE PROPRIETOR OF M/S. MAYANK EQUIPMENT, JODHPUR, AND TRADES IN MA CHINERY AND THEIR SPARE PARTS. FOR A.Y. 2009-10 HE E-FILED HIS RETURN OF INCOME [ROI]) ON 29/09/2009DECLARING TOTAL INCOME OF RS. 82,21,310/- . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED FRO M THE SCRUTINY OF THE TRADING ACCOUNT THAT SUM OF RS. 23,42,450/- HAS BEEN DEBITED ON ACCOUNT OF SERVICE CHARGES PROVISION AS PER ITS SCH EDULE PURCHASES AND DIRECT EXPENSES. THE ASSESSEE WAS REQUIRED TO EXPLA IN AS TO HOW A PROVISION IS ALLOWABLE AS EXPENSES INCURRED DURING THE YEAR. THE ASSESSEE FURNISHED A WRITTEN SUBMISSIONS (WS) DATED 26/12/2011, WHICH IS EXTRACTED BELOW. THE ASSESSEE HAS DEBITED IN THE PROFIT & LOSS ACC OUNT FOR THE RELEVANT YEAR THE SERVICE CHARGES EXPENDITURE OF R S. 23,42,450/- IN RESPECT OF 110 NO. OF MACHINES SOLD DURING THE PREVIOUS YEAR AT THE RATE OF 21,295/-. DURING THE YEAR UNDER CO NSIDERATION, THE ASSESSEE HAS SOLD TOTAL 240 NO. OF MACHINES. H OWEVER, THE SERVICE CHARGE EXPENDITURE HAS BEEN DEBITED ONLY I N RESPECT OF THOSE MACHINES IN RESPECT OF WHICH EXPANSES HAVE B EEN DETERMINED BY THE SERVICE ENGINEERS. THE REPAIRS A ND SERVICING IS CARRIED BY THE SERVICE ENGINEER OF THE ASSESSEE. T HE SERVICE CHARGE EXPENDITURE IS DEBITED IN THE PROFIT & LOSS ACCOUNT ON THE BASIS OF SERVICE ENGINEERS. THE EXPENDITURE IS DEBITED ON THE BASIS OF NUMBER OF MACHINES WHICH HAVE BEEN SUBJEC T TO THE SERVICE AND REPAIR. THUS THE AMOUNT OF SERVICE CHA RGES EXPENDITURE HAS BEEN ARRIVED ON THE SCIENTIFIC MET HOD. HENCE, 3 THE GENUINENESS OF THE EXPENDITURE IS DULY PROVED. THE NAME AND OTHER DETAILS OF THE CUSTOMERS HAVE ALREADY BE EN FURNISHED ALONG WITH EARLIER SUBMISSION. IT MAY ALSO BE NOTE D THAT THE RELEVANT INCOME IN RESPECT OF ANNUAL SERVICE CHARG ES AMOUNTING TO RS. 8,86,310.20/- AND MACHINE SERVICE CHARGES A MOUNTING TO RS. 12,87,551.12/- HAS ALREADY BEEN CREDITED IN TR ADING AND P&L ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS DEBITED SERVICE CHARGES AT A FLAT RATE OF RS. 21,295/- FOR EACH MACHINE SOLD AND FOR 110 MACHINES. THE A.O . HAS INFERRED FROM THE ABOVE THAT THIS PROVISION LIABILITY IS NO ASCERTAINED AND THAT THERE IS A POSSIBILITY THAT SOME OF THE CUSTOMERS M AY NOT REQUIRE FREE SERVICE AND MAY NOT TURN UP AT ALL. HE HAS FURTHER OBSERVED THAT NO PAYMENT HAS BEEN MADE IN THIS RESPECT AND THIS IS O NLY AN UNILATERAL ACTION OF THE ASSESSEE. THEREFORE, HE HAS NOT ACCEP TED THIS LIABILITY AND HAS MADE AN ADDITION OF RS. 23,42,450/-. 2.1 IN FIRST APPEAL, THE ASSESSEE WAS SUCCESSFUL IN GETTING THE RELIEF AS LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION BY OBS ERVING THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF AC COUNTING AND THAT AS PER THE TERM AND CONDITIONS THE ASSESSEE IS REQU IRED TO PROVIDE SERVICE TO HIS CUSTOMERS AND NOT TO SERVICE PROVIDE RS. HE HAS ALSO FOUND THAT THE EXPENSES ARE QUANTIFIED AND ASCERTAINED AN D IS BASED ON A SCIENTIFIC METHOD AND THE ASSESSEE HAS BEEN CLAIMIN G SIMILAR EXPENSES IN THE PAST. THE REVENUE, BEING AGGRIEVED, HAS FILE D APPEAL BEFORE THE APPELLATE TRIBUNAL. 4 2.3 WE HAVE HEARD RIVAL SUBMISSIONS IN THE LIGHT OF THE OBTAINING FACTS OF THIS CASE. BOTH PARTIES HAVE REITERATED TH EIR EARLIER STAND. WE HAVE FOUND THAT THE ASSESSEE IS A DISTRIBUTOR OF JC B MACHINES. AFTER SALES THE ASSESSEE IS REQUIRED TO PROVIDE FREE SERV ICES TO THE CUSTOMERS. THE SUBMISSION OF LD. D.R. IS THAT IN TH E PECULIAR FACTS OF THIS CASE MERE PROVISION FOR SERVICE CHARGES QUA 11 0 MACHINES CANNOT BE AN ASCERTAINED LIABILITY. HE HAS ALSO DISPUTED T HE ASSERTION OF THE ASSESSEE AND THE FINDING OF LD. CIT(A) THAT A SCI ENTIFIC METHOD HAS BEEN APPLIED BY THE ASSESSEE TO ASCERTAIN THIS LIAB ILITY. AS PER LD. DR THE SERVICES ARE PROVIDED THROUGH THE SALARIED ENGI NEERS TO WHOM HUGE SALARY IS BEING PAID AND THUS, THERE IS NO NEED TO MAKE A PROVISION FOR FUTURE SERVICES. HE HAS ALSO REPEATED THE REASONS G IVEN BY THE A.O. TO DENY THIS CLAIM OF THE ASSESSEE. THE LD. AR HAS REL IED ON HIS W.S. APART FROM MAKING ORAL SUBMISSIONS. THE ASSESSEE HAS INCU RRED EXPENSES AT THE RATE OF RS. 21,295/- PER MACHINE TOWARDS MAINTE NANCE AND REPAIRS CARRIED ON THE MACHINES. THE AMOUNT OF EXPENSES INC URRED TOWARDS THE MAINTENANCE AND REPAIRS CARRIED OUT IN RESPECT OF S UCH MACHINES. THE ASSESSEE POSSESSES A COMPLETE DETAILS LIKE THE NAME S / ADDRESSES TO WHOM SERVICE CHARGE ARE TO BE PAID AND THE AMOUNT P AYABLE TOWARDS SUCH EXPENSES TO EACH CUSTOMERS. SO, THESE EXPENSES CANNOT BE SAID TO BE A MERE PROVISION. WE ARE ALSO IN AGREEMENT WITH LD. AR THAT THERE ARE SPECIFIC EXPENDITURES OF THE PARTICULAR YEAR DE BITED IN THE P&L ACCOUNT. THE ASSESSEE HAS FURNISHED REQUISITE COMPL ETE DETAILS OF HIS CUSTOMERS. WE HAVE FOUND THAT THE ASSESSEE HAS INCU RRED THIS EXPENDITURE WHOLLY AND EXCLUSIVELY FOR HIS BUSINESS . SECTION 37(1) SAYS THAT EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINE SS OR PROFESSION IS ALLOWABLE. THE DECISION OF HONBLE APEX COURT IN TH E CASE OF BHARAT EARTH MOVERS VS CIT (2000) 245 ITR 428 (SC) AND THE FOLLOWING OTHER 5 JUDGMENTS / ORDERS ALSO SUPPORT OUR CONCLUSION THAT THE ACTION OF LD. CIT(A) IN DELETING THE IMPUGNED ADDITION IS JUSTIFI ED. I. HADEN INTERNATIONAL GROUP INDIA (P) LTD. VS. AC IT (2008) 20 SOT 305 (MUM-TRIB). II. JCIT VS. MODI OLIVETTI LTD. (2005) 2 (II) ITCL 18 (DEL.-TRIB) (2004) 85 TTJ 1038 (DEL.TRIB) III. CIT VS. S.K.G. SUGAL LTD. (1974) 96 ITR 194 ( PAT). IV. CALCUTTA CO. LTD. VS. CIT (1959) 37 ITR 1 (SC) . V. MARUTI UDYOG LTD. VS. DCIT (2005) 3 (II) ITCL 9 8 (DEL.TRIB) (2005) 92 ITD 119 (DEL.TRIB) : (2005) 92 TTJ (DEL .TRIB) 987. VI. IBM INDIA LTD. VS. CIT (2007) 290 ITR 183 (BAN G.TRIB) : (2007) 105 ITD 1 (BANG.TRIB) (2007) 108 TTJ (BANG . TRIB) 531. VII CIT VS. MAJESTIC AUTO LTD. (2006) 156 TAXMAN 4 60 (P&H). VIII. INFOSYS TECHNOLOGIES LTD. VS. JCIT (2007) 10 9 TTJ (BANG.TRIB) 631. 3. IN VIEW OF THE ABOVE DECISION WE APPROVE AND UPH OLD THE FINDING OF LD. CIT(A) AND, THEREFORE, CANNOT ALLOW REVENUE S APPEAL. 6 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20 TH SEPTEMBER, 2013. SD/- SD/- (N.K.SAINI) [HARI OM MAR ATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH SEPTEMBER, 2013. VL/ COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT, JODHPUR