The ACIT.Central Circle-4, Surat V. M/s. Jaycol Industries Pvt.Ltd., Surat

ITA 2542/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62935 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANDAN
• Assessee Lawyers: ANKUR A SHAH
• Keywords: Maximum Marginal Rate; Fair market value

Judgement Text

, , , , B , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% $% % $% % $% % $%, , , , &' ( &' ( &' ( &' ( & ' & ' & ' & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER) ITA.NO.2542/AHD/2010 WITH CO NO.300/AHD/2010 [ASSTT. YEAR : 2007-2008] ACIT, CENT.CIR.4 SURAT. /VS. M/S.JAYCOL INDUSTRIES PVT. LTD. SURVEY NO.91 OPP: NAVIN FLUORINE UDHNA NAVSARI ROAD BHESTAN, SURAT. PAN : AAACJ 7055 K ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / &/ REVENUE BY : SHRI M. MATHIVANDAN 12 . / &/ ASSESSEE BY : SHRI ANKUR A. SHAH 3 . 24'/ DATE OF HEARING : 7 TH AUGUST, 2012 5%6 . 24'/ DATE OF PRONOUNCEMENT : 07-09-2012 &7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDER OF THE CIT(A)-II, AHMEDABAD FOR THE ASSESSMENT YEAR 20 07-2008. THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.2542/AHD/2010 (ASSTT.YEAR : 2007-2008) 2. THE GROUNDS OF THE REVENUES APPEAL ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.15,18,771/ - MADE ON ACCOUNT OF ITA.NO.2542/AHD/2010 WITH CO NO.300/AHD/2010 -2- EXCESS WAGES AND SALARIES PAID IGNORING THAT EXCESS LABOURERS EMPLOYED THIS YEAR HAS NOT RESULTED IN TO EXCESS PRODUCTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS NOT JUSTIFIED IN- DELETING THE ADDITION OF RS.15,18,771 /- MADE ON ACCOUNT OF EXCESS WAGES AND SALARIES PAID IGNORING THAT AS THE ASSESSEE DID NOT GIVE ANY EVIDENCE IN RESPECT OF INCREASE IN PRODUCT ION AND ALSO BECAUSE THE ASSESSEE AS PER THE TERMS OF THE AGREEMENT WITH ITS SISTER CONCERN WAS OBLIGED TO PROVIDE ONLY THOSE NUMBER OF WORKERS WHICH WERE EXISTING AT THE TIME OF AGREEMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.67,58,643/ - MADE ON ACCOUNT OF PAYMENT MADE TO CONTRACTORS IGNORING THAT THERE IS NO PROVISIONS IN THE AGREEMENT BETWEEN THE ASSESSEE AND ITS SISTER CONCE RNS FOR EMPLOYING CONTRACTORS TO EXECUTE ITS WORK OTHER THAN ITS OWN WORKERS AND STAFF AT THE PREMISES OF THE ASSESSEE COMPANY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS NOT JUSTIFIED IN HOLDING THAT SECTION 40A(2)(B) IS NOT APPLICABLE TO THE ASSESSEE SINCE THE TAX RATES ARE UNIFORM FOR BOTH T HE ASSESSEE AND THE SISTER CONCERNS, AND HENCE THERE IS NO LOSS TO THE REVENUE FOR NON- CHARGING OF HIGHER LEASE FROM THE SISTER CONCERNS A T PAR WITH THE INCREASE IN WAGES AND SALARY TO ITS OWN STAFF AND C ONTRACT WORKERS IGNORING THAT SECTION 40A(2)(B) OF THE ACT OPERATES IRRESPECTIVE OF THE TAX RATES APPLICABLE TO SISTER CONCERNS, IF THE ASS ESSEE GIVES UNDUE BENEFIT TO ITS SISTER CONCERNS BY OFFERING/ TAKING SERVICES AT A PRICE HIGHER THAN FAIR MARKET VALUE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, IT IS PRAYED THAT THE ORDER OF THE LD CIT(A) BE SOT ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS C LAIMED ALMOST DOUBLE WAGES AND SALARIES EXPENSES, ALTHOUGH EXCESS LABOUR EMPLOYED DURING THE YEAR HAS NOT RESULTED IN EXCESS PRODUCTION. HE SUBMITTE D THAT THE PROVISION OF SECTION 40A(2)(B) OF THE ACT WAS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE, SINCE THE ASSESSEE HAS OF FERED ITS SERVICES FOR THE BENEFIT OF ITS SISTER CONCERN, TO WHOM UNDUE BENEFI T HAS BEEN GIVEN BY THE ASSESSEE. HE REFERRED TO PARA-9 OF THE ASSESSMENT ORDER WHEREIN THE AO HAS RECORDED THAT AVERAGE WAGE EXPENSES HAS GONE UP FRO M RS.4,582/- TO RS.7,251/- ITA.NO.2542/AHD/2010 WITH CO NO.300/AHD/2010 -3- PER PERSON. HE SUBMITTED THAT IN FACT THE ASSESSEE HAS PAID THE WAGES, WHICH SHOULD HAVE BEEN PAID BY ITS SISTER CONCERN, M/S.CI PL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS MA DE PAYMENT OF WAGES TO THE CONTRACTORS WHO ARE NOT RELATED TO THE ASSESSEE, AN D THEREFORE THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. HE SUBMITTED THAT THE GENUINENESS OF THE WAGE EXPENSES COULD NOT BE DOUBTED BY THE REVENUE. HE SUBMITTED THAT THE ASSESSEE AS WEL L AS ITS SISTER CONCERN, M/S.CIPL ARE ASSESSED AT THE MAXIMUM MARGINAL RATE OF TAX, AND THEREFORE THERE COULD BE NO QUESTION OF ANY TAX PLANNING ON T HE PART OF THE ASSESSEE. HE RELIED ON THE ORDER OF THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND T HAT THE GENUINENESS OF THE WAGE EXPENSES PAID TO VARIOUS CONTRACTORS HAVE NOT BEEN DOUBTED BY THE REVENUE. THE CONTRACTORS FOR WAGE PAYMENTS ARE NOT RELATED TO THE ASSESSEE. THE ASSESSEE AS WELL AS ITS SISTER CONCERN, M/S.CIP L ARE ASSESSED AT THE SAME RATE OF TAX, AND THEREFORE IT COULD NOT BE SAID THA T THE CONDUCT OF THE ASSESSEE WAS NOT BONA FIDE . THE CIT(A) HAS GIVEN A FINDING THAT WAGE AND SAL ARY PAYMENTS WERE GENUINE AND INCURRED FOR BUSINESS PUR POSE ONLY, AND WERE AT THE NORMAL RATE PREVAILING DURING THAT TIME AND WAS NOT PAID AT EXCESSIVE RATE. THE CIT(A) HAS RECORDED THAT THE ASSESSEE AS WELL AS IT S SISTER CONCERN, M/S.CIPL ARE TAXED AT THE MAXIMUM MARGINAL RATE, AND THEREFO RE THERE IS NO LOSS TO THE REVENUE AND HAS CITED CBDT CIRCULAR NO.6-P DATED 6 TH JULY, 1968 AND HAS HELD THAT THE PROVISION OF SECTION 40A(2)(B) OF THE ACT ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THERE BEING NO MISTAKE IN THE ORD ER OF THE CIT(A), AS THE GENUINENESS OF THE WAGES AND SALARY PAYMENTS ARE NO T IN DOUBT, AND NONE OF THE CONTRACTOR-PARTIES WERE RELATED TO THE ASSESSEE AND THERE IS NO DEVICE TO REDUCE THE TAX LIABILITY, AS BOTH THE ASSESSEE AS WELL AS ITS SISTER CONCERN M/S.CIPL WERE ASSESSED AT THE MAXIMUM MARGINAL RATE PREVAILI NG AT THE RELEVANT TIME, WE UPHOLD THE ORDER OF THE CIT(A) AND THE GROUNDS OF T HE APPEAL OF THE REVENUE ARE DISMISSED AS BEING WITHOUT ANY MERIT. ITA.NO.2542/AHD/2010 WITH CO NO.300/AHD/2010 -4- CO NO.300/AHD/2010 (ASSESSEES CO) 5. THE ONLY EFFECTIVE GROUND OF THE ASSESSEES CO I S AS UNDER: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO HAS ERRED IN PREFERRING AN APPEAL AGAINST THE ORDER OF CIT(A) DE LETING THE ADDITION OF RS.82,77,414/- WITHOUT APPRECIATING THE FACT THAT T HE CIT(A) HAS PASSED SPEAKING ORDER CONSIDERING THE COMPLETE FACTS AND M ERITS AND APPLYING TRUE SPIRIT OF CIRCULAR NO.6-P DATED 6 TH JULY, 1968 OF THE CBDT AND ACCORDINGLY THE ORDER OF THE CIT(A) NEEDS TO BE ACC EPTED AND UPHELD. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE CO OF THE ASSESSEE IS MERELY SUPPORTIVE OF THE CIT(A)S ORDER AND MAY BE DISPOSED OF ACCORDINGLY. THE LEARNED DR HAS RELIED ON THE ORDE R OF THE AO. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW O F THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE AND THE CO BEING M ERELY SUPPORTIVE OF THE ORDER OF THE CIT(A), WE DISMISS THE SAME AS INFRUCTOUS . 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( #.% $% /A.MOHAN ALANKAMONY) &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD