ACIT, Circle - 10, Kolkata, Kolkata V. Phillips Carbon Black Ltd., Kolkata

ITA 235/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70396 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A P ROY SRDR
• Assessee Lawyers: D S DAMLE
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI, R.S. SYAL, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 235 / KOL / 2012 ASSESSMENT YEAR :2005-06 ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-10, P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA 700 069 V/S . PHILLIPS CARBON BLACK LTD. DUNCUN HOUSE, 31, N.S.ROAD, KOLKATA 700 001 [ PAN NO.AABCP 5762 E ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI A.P. ROY, SR-DR /BY RESPONDENT SHRI D.S. DAMLE, AR /DATE OF HEARING 11-11-2013 /DATE OF PRONOUNCEMENT 13-11-2013 / // / O R D E R PER R.S. SYAL, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE EMANATES FROM THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-XXIV, KOLKATA ( CIT(A) FOR SHORT) ON 30-11-2011 IN RELATION TO THE ASSESSMENT YEAR (AY) 2005-06. 2. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION ON ACCOUNT OF EXPENDITURE INCURRED TOWARDS RETAINER-SHIP FEE PAID TO M/S.SREEBALA (P) LTD. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS NOTICED THAT THE AUTHORITIES BELOW HA VE RELIED ON THEIR RESPECTIVE DECISIONS TAKEN IN THE EARLIER YEARS ON THE SAME GR OUND FOR THE PURPOSE OF NOT ALLOWING AND ALLOWING THE DEDUCTION. THE APPEAL OF THE ASSESSEE FOR THE ITA NO.235/KOL/2012 A.Y. 200 5-06 ACIT, CIR-10, KOL V. PHILLIPS CARBON BLACK LTD. PAGE 2 IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E., 2004-05 CAME UP FOR DECISION BEFORE THE TRIBUNAL. VIDE ORDER IN ITA NO. 566/KOL/2009 , THE TRIBUNAL HAS ACCEPTED THE ASSESSEES CLAIM ON THIS ISSUE BY FOLL OWING THE EARLIER ORDER OF THE TRIBUNAL. RELEVANT DISCUSSION IS MADE IN PARA-3 OF THE TRIBUNAL ORDER (A COPY OF WHICH IS AVAILABLE ON RECORD). RESPECTFUL LY FOLLOWING THE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER IN GRANTING THE DEDUCT ION IN RESPECT OF RETAINER- SHIP FEE PAID TO M/S SREEBALA (P) LTD. THIS GROUND IS NOT ALLOWED. 4. THE SECOND GROUND IS AGAINST THE ALLOWING OF DED UCTION IN RESPECT OF GUEST HOUSE EXPENSES. HERE ALSO, THE POSITION IS MUTATIS MUTANDIS SIMILAR TO THAT OF GROUND NO.1 ABOVE. THE TRIBUNAL WAS PLEASED TO GRANT DEDUCTION IN RESPECT OF GUEST HOUSE EXPENSES VIDE ITS AFORESTATE D ORDER FOR THE AY 2004- 05. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE HA VING BEEN BROUGHT TO OUR NOTICE BY THE LD.DR, WE UPHOLD THE IMPUGNED ORDER I N ALLOWING DEDUCTION OF THE GUEST HOUSE EXPENSES. THIS GROUND FAILS. 5. GROUND NO.3 OF THE APPEAL IS AGAINST THE DELETIO N OF ADDITION ON ACCOUNT OF VIOLATE PAYMENT OF PF, ESI, SALES TAX AND OTHER STATUTORY LIABILITIES. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT ASSESSEE M ADE BELATED PAYMENTS OF THESE STATUTORY LIABILITIES AS UNDER:- AMOUNT (RS) DUE DATE PAYMENT DATE NATURE 84,153 15.04.05 19.04.05 EMPLOYEES CONTRIBUTION TO PF 82,552 15.09.04 16.09.04 EMPLOYEES CONTRIBUTION TO PF 1,25,941 15.09.04 08.12.04 EMPLOYEES CONTRIBUTION TO PF 5,480 15.09.04 18.11.04 EMPLOYERS CONTRIBUTIO N TO PF 1,890 15.09.04 18.11.04 EMPLOYERS CONTRIBUTIO N TO PF 52 15.09.04 18.11.04 PF ADMINISTRATIVE CHARGES 21,032 15.09.04 16.09.04 EMPLOYERS CONTRIBUTION TO PF 1,567 15.09.04 - - - UNPAID SALES TAX ITA NO.235/KOL/2012 A.Y. 200 5-06 ACIT, CIR-10, KOL V. PHILLIPS CARBON BLACK LTD. PAGE 3 6. THE ASSESSING OFFICER DID NOT ALLOW THE D EDUCTION IN RESPECT OF THESE AMOUNTS AS THERE WAS DELAY IN MAKING PAYMENTS OF SU CH STATUTORY LIABILITIES BEYOND THE PERIOD PRESCRIBED UNDER THE RESPECTIVE A CT OR THERE WAS NO PAYMENT. THE LD. CIT(A) GOT CONVINCED WITH THE ASSE SSEES SUBMISSIONS AND ALLOWED THE RELIEF BY NOTICING THAT ALL, EXCEPT THE AMOUNT OF SALES TAX OF RS.1,567, WERE PAID BEFORE THE DUE DATE AS PRESCRI BED U/S. 139(1) OF THE ACT. THE REVENUE HAS CHALLENGED THE DECISION OF THE LD. CIT(A) ON THE POINT. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIALS ON RECORD, WE FIND THAT THE HONBLE SUPRE ME COURT IN THE CASE OF CIT V. ALOM EXTRUSION LTD., (2009) 319 ITR 306 (SC) HAS HELD THE AMENDMENT TO THE FIRST PROVISO AND THE OMISSION OF THE SECOND PROVISO TO SECTION 43B BY THE FINANCE ACT, 2003 TO BE RETROSPECTIVE. IT HAS B EEN HELD BY THE HONBLE APEX COURT IN THE CASE OF CIT V. VINAY CEMENT LTD. (2007) 213 CTR 268 (SC) THAT THE AMOUNT OF EPF DEPOSITED BEFORE THE DUE DAT E CANNOT BE DISALLOWED U/S. 43B OF THE ACT. THE HONBLE DELHI HIGH COURT I N CIT V. AIMIL LTD. (2010) 321 ITR 508 (DEL) CONSIDERED U/S.2(24)(X) ALONG WIT H SECTION 36(1) AND ALLOWED DEDUCTION IN RESPECT OF THE EMPLOYEES SHAR E WHICH WAS PAID BEFORE THE DUE DATE AS PER SEC. 139(1) OF THE ACT. IN VIEW OF THE AFORESTATED PRECEDENTS, WE ARE OF THE CONSIDERED OPINION THAT T HE VIEW TAKEN BY THE LD. CIT(A) REQUIRES NO MODIFICATION AND THIS GROUND IS NOT ALLOWED. 8. THE LAST GROUND IS AGAINST THE DELETION OF ADDIT ION UNDER THE HEAD AIRCRAFT FLYING RIGHTS CHARGES. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.3.40 CRORES IN RES PECT OF AIRCRAFT FLYING RIGHTS CHARGES. ON BEING CALLED UPON TO JUSTIFY TH E DEDUCTION, THE ASSESSEE STATED THAT IT ENTERED INTO AN AGREEMENT DATED 17-1 1-2003 WITH M/S. SPENCER TRAVEL SERVICES LTD. (STSL FOR SHORT), WHEREBY THE ASSESSEE AGREED TO OBTAIN THE EXCLUSIVE FLYING RIGHTS OF AN AIRCRAFT. IN CONS IDERATION OF THE SAME, THE ASSESSEE AGREED TO PAY A SUM OF RS.3.40 CRORES PER ANNUM TO STSL TOWARDS FLYING RIGHTS CHARGES. IT WAS EXPLAINED THAT ASSESS EE WAS LARGEST CARBON BLACK ITA NO.235/KOL/2012 A.Y. 200 5-06 ACIT, CIR-10, KOL V. PHILLIPS CARBON BLACK LTD. PAGE 4 MANUFACTURER IN THE COUNTRY HAVING MANUFACTURING F ACILITIES AT SEVERAL PLACES AND ALSO HAVING OFFICES AND WAREHOUSES AT DIFFERENT LOCATIONS IN THE COUNTRY TO CATER TO BUSINESS NEEDS. FOR THIS PURPOSE, THE ASSE SSEE STATED TO HAVE OBTAINED THE EXCLUSIVE FLYING RIGHTS OF AN AIRCRAF T FOR WHICH THE ABOVE REFERRED PAYMENT WAS MADE. IT WAS ALSO EXPLAINED THAT STSL W AS TO INCUR ALL COSTS AND EXPENSES ASSOCIATED WITH THE OPERATION OF THE AIRC RAFT. THE ASSESSING OFFICER OPINED THAT THE ASSESSEE FAILED TO EXPLAIN THE BUSI NESS EXPEDIENCY OF INCURRING SUCH EXPENDITURE. IN THE ABSENCE OF ANY E XPLANATION FROM THE ASSESSEE ABOUT THE LOG BOOK EXPLAINING THE BUSINESS PURPOSE, THE AO HELD THAT A PART OF SUCH EXPENDITURE MUST BE HELD TO HAV E BEEN INCURRED OR THE PERSONAL PURPOSE OF THE DIRECTORS AND SENIOR MANAGE MENT PERSONNEL. IN THIS BACKDROP OF THE FACTS, HE HELD 25% OF SUCH EXPENDIT URE TOWARDS NON-BUSINESS PURPOSE AND RESULTANTLY MADE ADDITION OF RS.85 LAKH S. THE LD. CIT(A) DELETED THE ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE ADDUC ED NECESSARY MATERIAL TO INDICATE THAT THE AIRCRAFT WAS TAKEN ON HIRE FOR IT S BUSINESS PURPOSES. THE ASSESSING OFFICER IS NOT COMPETENT TO DECIDE THE BU SINESS EXPEDIENCY OF INCURRING ANY EXPENDITURE. BE THAT AS IT MAY, IT IS OBSERVED THAT THE ASSESSING OFFICER DID NOT DENY THAT LOG BOOK OF THE AIRCRAFT WAS NOT FURNISHED BUT ONLY THAT THE PURPOSE FOR WHICH THE JOURNEYS WERE UNDERTAKEN OR THE NAMES OF THE PERSONS WHO UNDERTOOK THE TRAVEL WAS NOT SPECIFIED IN THE LOG BOOK. IT IS IN SUCH CIRCUMSTANCES, THAT HE HELD 25% OF THE EXPENDI TURE FOR NON-BUSINESS PURPOSE. IT IS RELEVANT TO NOTE THAT WE ARE DEALING WITH A CASE OF A LIMITED COMPANY. IT IS A SETTLED LEGAL POSITION THAT THERE CAN BE NO DISALLOWANCE OF ANY EXPENDITURE ON ACCOUNT OF PERSONAL USE BY THE DIREC TORS OF THE COMPANY. THERE IS NO DEARTH OF THE JUDGMENTS AND THE TRIBUNA L ORDERS ON THIS ASPECT OF THE MATTER. THE HONBLE GUJARAT HIGH COURT IN SEVE RAL CASES INCLUDING SAYAJI IRON & ENGG.CO. LTD. V. CIT (2002) 253 ITR 749(GUJ) AND DINESH MILLS LTD. V. CIT (2004) 268 ITR 504 (GUJ) AND (2002) 254 ITR 673 (GUJ) HAS HELD THAT ITA NO.235/KOL/2012 A.Y. 200 5-06 ACIT, CIR-10, KOL V. PHILLIPS CARBON BLACK LTD. PAGE 5 THERE CAN BE NO DISALLOWANCE OF EXPENSES BY CONSIDE RING THE PERSONAL USE OF THE ASSETS BY THE DIRECTORS. IT HAS FURTHER BEEN HE LD THAT THIS DISALLOWANCE CANNOT BE SUSTAINED BY TREATING THE EXPENDITURE AS FOR NON-BUSINESS PURPOSE. THE DELHI BENCH OF THE TRIBUNAL IN DY CIT VS. HARYA NA OXYGEN LTD. (2001) 76 ITD 32 (DEL) HAS ALSO TAKEN SIMILAR VIEW. UNDER TH ESE CIRCUMSTANCES, WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THE LD., C IT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. THE IMPUGNED ORDER IS ACCORDINGLY UP HELD ON THIS ISSUE. 10. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (GEORGE MATHAN) (R.S. SYAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, DKP !-13/11/2013 + + + + ,+ ,+ ,+ ,+ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. 0 / CONCERNED CIT 4. 0- / CIT (A) 5. + , , / DR, ITAT, KOLKATA 6. 8 / GUARD FILE. BY ORDER/ , / , STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 11/11 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 12/11 4) DATE OF CORRECTION 12/11 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 12/11 7) ORDER UPLOADED ON 12/11 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES ITA NO.235/KOL/2012 A.Y. 200 5-06 ACIT, CIR-10, KOL V. PHILLIPS CARBON BLACK LTD. PAGE 6 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 10) ORDER SEND TO HEAD CLERK *