IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2991/AHD/2008 ASSESSMENT YEARS :2005-06 & ITA NOS. 284 & 285/AHD/2010 ASSESSMENT YEARS :2003-04 & 04-05 CONDOR FOOTWEAR (INDIA) LTD. SHED NO.A-1, 3503/04, ROAD NO.3, SUB ROAD NO. 35 BH. DEV REKHA, SACHIN G.I.D.C., SURAT V/S . THE JOINT COMMISSIONER OF INCOME TAX, RANGE-1, SURAT (APPELLANT) .. (RESPONDENT) PAN NO. AAACC9504N BY APPELLANT SHRI M.G. PATEL, A.R. /BY RESPONDENT MRS. R. ILAVANASI, SR.D.R. /DATE OF HEARING 20.09.2012 /DATE OF PRONOUNCEMENT 02.11.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THESE THREE APPEALS ARE FILED BY THE ASSESSEE IN IT A NO. 2991/AHD/2008 FOR A.Y. 2005-06 AND IN ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 WHICH HAVE BEEN EMANATED FROM THE ORD ER OF CIT(A)-I, SURAT, DATED 20-06-2008 AND 10.12.2009. THE ISSUES AND A RGUMENTS OF THESE APPEALS ARE SAME. SO, ALL APPEALS WERE HEARD TOGET HER AND ARE BEING ITA NO. 2991/AHD/2008 FOR A.Y. 05-06 & ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 PAGE 2 DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. THE IDENTICAL GROUND OF APPEAL IN ALL THREE YEARS ARE A GAINST UPHOLDING THE ADDITION ON ACCOUNT OF BONUS PAID TO THE CONTRACTORS LABOUR ERS. 2. ITA NOS. 284 & 285/AHD/2010 WERE ORIGINALLY DIS MISSED BY CO-ORDINATE D BENCH, AHMADABAD, BY APPLYING CIT VS. MULTIPLAN INDIA (PVT.) LTD., 38 ITD 320 (DEL), VIDE ORDER DATED 05.01.2011 IN ALL THREE YEARS. BUT THE CO-ORDINATE D BENCH, AHMADABAD VIDE ORDER DATED 03.02.2012 HA S ALLOWED THE MISCELLANEOUS APPLICATIONS FILED BY THE APPELLANT F OR RECALLING THE ORDER FOR DECIDING ON MERIT. 3. NOW THE ASSESSEES APPEALS IN ALL THREE YEARS AR E ENTERTAINED ON MERIT. 4. THE FACTUAL MATRIX OF THE CASE IS THAT THE APPEL LANT HAD CLAIMED BONUS PAID TO THE LABOURERS OF THE CONTRACTOR AT RS.10,25 ,000/- IN A.Y. 03-04, RS.4,82,000/- FOR A.Y. 04-05 & RS.2,97,500 FOR A.Y. 05-06 WAS DISALLOWED BY THE A.O. ON THE GROUND THAT THE APPELLANT DID NOT F URNISH ANY DOCUMENTARY EVIDENCE TO PROVE THAT THE BONUS HAD BEEN PAID FALL S UNDER THE CUSTOM PREVALENT. THE APPELLANTS OWN CASE IN ITA NO.276/ AHD/2007 FOR A.Y. 03-04, ORDER DATED 26.10.2007 & ITA NO. 4064/AHD/2007 FOR A.Y. 04-05, DATED 05.09.2008 THE HONBLE ITAT HAD SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED BACK THE MATTER TO FILE OF THE ASSESSING O FFICER WITH DIRECTION TO VERIFY THE BONUS, PAID BY THE ASSESSEE TO THE LABOURERS OF THE CONTRACTOR, FALLS UNDER CUSTOM PREVAIL OR NOT AND DECIDE THE ISSUE ACCORDIN GLY AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN APPEA L EFFECT ORDER. THE A.O. GAVE REASONABLE OPPORTUNITY AND APPEAL EFFECT VIDE ORDER DATED 31.07.2009 ITA NO. 2991/AHD/2008 FOR A.Y. 05-06 & ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 PAGE 3 FOR A.Y. 03-04 AND 04-05 AND IN SCRUTINY ASSESSMENT FOR A.Y. 05-06. THE APPELLANT HAD NOT PROVED THE CUSTOMARY BONUS PAID T O HE LABOURERS OF THE CONTRACTOR WAS A CUSTOMARY BONUS UNDER THE CUSTOM P REVALENT IN THE LOCALITY AND ALSO IN THE SAME LINE OF BUSINESS IN BOTH THE Y EARS I.E. A.Y. 03-04 & 05- 06. IN SCRUTINY ASSESSMENT FOR A.Y. 05-06, THE SIM ILAR ADDITION OF RS.2,97,500/- WERE MADE BY HOLDING THAT THE EXPENDI TURE IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 5. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD DISMISSED THE ASSE SSEES APPEAL FOR A.Y. 03-04 & 04-05 VIDE ORDER DATED 10.12.2009 AND HELD AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. THE ONLY ISSUE TO BE VERIFIED DURING THE CURRENT PROCEEDINGS, IN VIEW OF THE DIRECTION OF TH E HONBLE ITAT, IS WHETHER THE PAYMENT OF BONUS WAS CUSTOMARY AS PER T HE TRADE AND AS PER THE PREVALENT CUSTOM OR EXAMPLES TO SHOW THA T IT IS CUSTOMARY TO PAY BONUS TO THE EMPLOYEES OF THE CONT RACTOR. ADMITTEDLY AS STATED BY THE CIT(A) AND NOTED BY THE HONBLE ITAT, THE LABOURERS DID NOT BELONG TO THE ASSESSEE AND SI NCE THEY BELONG ONLY TO THE CONTRACTOR THE ASSESSEE WAS NEIT HER UNDER LEGAL OBLIGATION NOR UNDER CONTRACTUAL OBLIGATION TO PAY THE BONUS TO THE LABOURERS. DURING THIS PROCEEDING ALSO THE APPELLA NT HAS FAILED TO SHOW HOW THE ASSESSEE WAS UNDER OBLIGATION AS PER T HE CUSTOM PREVAILING. THE APPELLANT HAS FAILED TO FILE ANY E VIDENCE OR DOCUMENT TO SHOW THAT SUCH PAYMENT WAS CUSTOMARY. THE APPELLANT HAS FAILED TO GIVE ANY EXAMPLE OR CITE AN Y INSTANCE TO SHOW THAT SUCH PAYMENT TO NON-EMPLOYEES IS CUSTOMAR Y. HENCE THIS DISALLOWANCE MADE BY THE A.O. IS CORRECT. IN VIEW OF THE ABOVE, THE ITA NO. 2991/AHD/2008 FOR A.Y. 05-06 & ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 PAGE 4 DISALLOWANCE MADE BY THE A.O. IS CONFIRMED AND BOTH APPEALS ARE DISMISSED. FOR A.Y. 05-06, THE LD. CIT(A) HAS ALSO DISMISSED T HE ASSESSEES CLAIM BY FOLLOWING THE ORDER OF A.Y. 03-04 AS THE APPELLANT HAD NOT BROUGHT ANY MATERIAL ON RECORD IN ITS SUBMISSION DATED 25.05.2008 TO SHO W THAT THE PAYMENT IS AS PER CUSTOM. 6. NOW THE ASSESSEE, FOR ALL THREE YEARS, IS BEFORE US. FOR A.Y. 03-04 & 04-05, LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE LABOURS OF THE CONTRACTOR WERE WORKING IN THE FACTORY UNDER THEIR CONTROL BUT UNDER THE PAROLE OF THE CONTRACTOR. THE BILLS OF THE BONUS WERE SUB MITTED TO THE A.O. WHO HAS NOT DOUBTED THE GENUINENESS OF THE BONUS PAYMENT. IT IS TRUE THAT THERE IS NO DIRECT RELATION AS EMPLOYER AND EMPLOYEE BETWEEN TH E ASSESSEE AND THE LABOURERS BUT TO IMPROVE THE PRODUCTIVITY OF THE CO MPANY, THEY HAVE TO MAINTAIN CORDIAL RELATION WITH THEM AND ACCORDINGLY , THE APPELLANT HAD PAID BONUS TO THE LABOURERS OF THE CONTRACTOR TO IMPROVE THE EFFICIENCY OF THE APPELLANT. THE LD. A.R. ALSO FILED THE SALE FIGURE S FROM A.Y. 02-03 TO 07-08 AND EXPLAINED THAT SALE HAD GROWN UP RS.16.82 CRORE IN A.Y. 02-03 TO RS.37.63 CRORE IN A.Y. 07-08. THE APPELLANT HAD BEEN PAYING BONUS REGULARLY FROM A.Y. 02-03 TO 07-08 AS CUSTOMARY. HE ALSO RELIED UPON T HE CIRCULAR F. NO.8/2/68-IT (AI), DATED 18.10.1968, WHERE IT HAS BEEN CLARIFIED BY THE CBDT THAT EXPENSE INCURRED ON THE OCCASION OF DEEWALI AND MUHURAT ARE IN THE NATURE OF BUSINESS EXPENDITURE. IT HAS BEEN DECIDED NOT TO LAY DOWN A NY MONETARY LIMITS FOR THE PURPOSE OF THEIR ALLOWANCE OF THE INCOME ASSESSMENT S SUBJECT TO THE INCOME TAX OFFICER HAVING SATISFIED THAT THE EXPENSES ARE ADMISSIBLE AS DEDUCTION ITA NO. 2991/AHD/2008 FOR A.Y. 05-06 & ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 PAGE 5 UNDER THE LAW AND RATHER NO EXPENSES OF PERSONAL, S OCIAL OR RELIGIOUS NATURE. HE HAS ALSO DRAWN OUR ATTENTION THAT BONUS OF CONTR ACT LABOURS UNDER THE BONUS ACT AS HELD BY HONBLE SUPREME COURT IN UNION OF INDIA VS. R.C. JAIN, THAT THE LIABILITY TO PAY BONUS IS NOT A QUESTION O F MERE LEGAL LIABILITY BUT IT MUST BE CONSIDERED AS IN THE CONTEXT OF MAINTENANCE OF S OUND INDUSTRIAL RELATIONS. AS PER BONUS ACT, THE CONTRACTOR IS THE CONTRACTOR TO THE PRINCIPAL EMPLOYER FOR WHICH PAYMENT ON BONUS ACT IS ALSO APPLICABLE. HE FURTHER RELIED ON CIT VS. SAMARTH SAKHAR KARKHANAN LTD. (2007) 294 ITR 540 (B OM.) ON BAXIS PAID TO THE LABOURERS EMPLOYED BY THE CONTRACTOR IS ALLOWAB LE EXPENDITURE U/S.37. SIMILAR RELIANCE ALSO HELD IN FAVOUR OF THE APPELLA NT IN CASE OF KEYSTONE VALVES (I) LTD. VS. ACIT (59 TTJ 688) BY THE CO-ORDINATE A BENCH. FROM THE SIDE OF THE REVENUE, HE FAIRLY CONCEDED THAT MATTER IS REQU IRED TO BE EXAMINED AT THE LEVEL OF THE A.O. SIMILAR ARGUMENTS WERE PUT FORTH BEFORE US FOR A.Y. 05-06. 7. WE HAVE PERUSED THE ORDER OF THE AUTHORITIES BEL OW AS WELL AS CO- ORDINATE BENCH DECISION FOR A.Y. 03-04 & 04-05 AND RIVAL SUBMISSION SUBMITTED BY THE APPELLANT AND GONE THROUGH THE CAS E LAWS CITED BY THE APPELLANT. IT IS FACT THAT THE ASSESSEE HAS PAID T HE BONUS TO THE LABOURERS OF THE CONTRACTOR WHICH HAS NOT BEEN DOUBTED BY THE A. O. THE APPELLANT HAD NOT PROVED THE CUSTOM PREVAILING IN THE LINE OF BUSINES S OF SAME LOCALITY BEFORE THE A.O. THEREFORE, WE HAVE CONSIDERED VIEW IN THE INT EREST OF JUSTICE THAT ONE MORE OPPORTUNITY IS TO BE GIVEN FOR ALL THREE YEARS TO THE APPELLANT TO PROVE THAT THE BONUS PAID BY THE APPELLANT TO THE LABOURERS OF THE CONTRACTOR FALLS UNDER CUSTOM PREVAILING OR NOT AND DECIDE THE ISSUES, ACC ORDINGLY, AFTER GIVING ITA NO. 2991/AHD/2008 FOR A.Y. 05-06 & ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 PAGE 6 ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLAN T. ACCORDINGLY, ON THIS ISSUE, WE SET ASIDE THE ORDER OF THE CIT(A) TO THE A.O. FOR DE NOVO IN ALL THREE YEARS. 8. THE REMAINING ONE GROUND IN A.Y. 05-06 IS AGAINS T CONFIRMING THE ADDITION ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES AT RS. 1,35,750/- BY THE CIT(A). THE A.O. OBSERVED THAT FOREIGN TRAVELLING EXPENSES WERE INCURRED OF RS.1,35,750/- ON SHRI MURLI ADNANI WHO WAS NEITHER THE DIRECTOR NOR AN EMPLOYEE OF THE COMPANY. THE REASONABLE OPPORTUNIT Y OF BEING HEARD WAS GIVEN. THE REPLY OF THE APPELLANT WAS NOT FOUND CO NVINCING TO HIM. AS THE RESOLUTION REGARDING EXPENSES TO BE BORNE BY THE CO MPANY WAS FOUND AFTER THOUGHT. ACCORDINGLY, HE MADE ADDITION OF RS.1,35, 750/- ON ACCOUNT OF UNEXPLAINED EXPENSES. 9. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) WHO HAS ALSO CONFIRMED THE ADDITION ON THE GROUND THAT NO PURPOS E OF BUSINESS FOR INCURRING THE FOREIGN TRAVELLING EXPENSES HAS BEEN SHOWN AND ALSO NO SALE AND PURCHASE HAD BEEN CO-RELATED WITH THE EXPENSES. 10. NOW THE MATTER IS BEFORE US. LD. A.R. FAIRLY A CCEPTED THAT THESE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES BUT TH EY DID NOT HAVE ANY SUFFICIENT EVIDENCE TO PROVE THAT THESE EXPENSES WE RE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. THEREFORE, THE SAME HAS NOT BEEN PRESSED. ACCORDINGLY, THE ADDITION CONFIRMED BY TH E CIT(A) IS HELD VALID. ACCORDINGLY, THE ASSESSEES APPEAL ON THIS GROUND I S DISMISSED. ITA NO. 2991/AHD/2008 FOR A.Y. 05-06 & ITA NOS. 284 & 285/AHD/2010 FOR A.Y. 03-04 & 04-05 PAGE 7 11. IN THE RESULT, THE ASSESSEES APPEALS IN ALL AS SESSMENT YEARS ARE PARTLY ALLOWED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 02.11.2012 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 30.10.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 31.10.2012 4) DATE OF CORRECTION 01.11.2012 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 02.11.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 02.11.2012