M/s MG Mohanty, Bhubaneswar V. ACIT, Bhubaneswar

ITA 349/CTK/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6342 (ITAT-CUTTACK)
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: B K MAHAPATRA
• Keywords: Capital expenditure
• Section: 80G

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BE NCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL, AM & SHRI D.T.GARASIA, JM ./ ITA NO.344/CTK/2013 ( / ASSESSMENT YEAR :2009-10) DCIT, CIRCLE 1(1), BHUBANESWAR VS. M/S M.G.MOHANTY, 2-A, FOREST PARK, BHUBANESWAR-751 009 ! ./ '# ./ PAN/GIR NO. : AAFFM 2127 H ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) AND %&' ./CO NO.50/CTK/2013 (ARISING OUT OF ITA NO.344/CTK/2013) ( / ASSESSMENT YEAR :2009-10) M/S M.G.MOHANTY, 2-A, FOREST PARK, BHUBANESWAR-751 009 VS. DCIT, CIRCLE 1(1), BHUBANESWAR ! ./ '# ./ PAN/GIR NO. : AAFFM 2127 H ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) AND ./ ITA NO.349/CTK/2013 ( / ASSESSMENT YEAR :2009-10) M/S M.G.MOHANTY, 2-A, FOREST PARK, BHUBANESWAR-751 009 VS. DCIT, CIRCLE 1(1), BHUBANESWAR ! ./ '# ./ PAN/GIR NO. : AAFFM 2127 H ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ' ( ) /REVENUE BY : SHRI N.K.NEB *+ ( ) /ASSESSEE BY : SHRI B.K.MAHAPATRA ,- ( + / DATE OF HEARING : 29 TH APRIL, 2014 ./ ( + / DATE OF PRONOUNCEMENT : 01/05/2014 0 / O R D E R PER BENCH : BOTH THE CROSS APPEALS AS WELL AS CROSS OBJECTION H AVE BEEN FILED AGAINST THE ORDER THE CIT(A) DATED 22-3-2013. THE R EVENUE IN ITS APPEAL HAS TAKEN FOLLOWING EFFECTIVE GROUND :- 2 ITA NOS.344 & 349/CTK/13 & CO NO.50/CTK/2013 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING RS.17,82,416/- TO THE ASSESSEE ON ACCOUNT OF PERIPHERAL DEVELOPMENT EXPEN SES WHEN THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF ITS BUSINESS. WHILE THE GROUNDS TAKEN BY THE ASSESSEE IN CROSS OB JECTION IS SUPPORTIVE TO THE ORDER OF THE CIT(A). IN ADDITION TO THIS, IN APPEAL FILED BY THE ASSESSEE, THE ASSESSEE HAS CLAIMED DEDUCTION FOR A SUM OF RS.10,02,618/-, WHICH WAS DISALLOWED BY THE CIT(A) OUT OF THE PERIPHERAL DEVELOPMENT EXPENSES. IN THE CROSS APPEA L THE ASSESSEE HAS ALSO TAKEN ONE MORE GROUND RELATING TO THE DISA LLOWANCE UNDER CHARITY AND DONATION AMOUNTING TO RS.1,32,012/-. 2 . THUS, THE ONLY GROUND TAKEN BY THE REVENUE AND ON LY GROUND TAKEN BY THE ASSESSEE IN THE CROSS OBJECTION AS WEL L AS GROUND NO.1 TAKEN BY THE ASSESSEE IN ITS APPEAL RELATES TO THE CLAIM OF THE ASSESSEE UNDER THE PERIPHERAL DEVELOPMENT EXPENSES. 3. BRIEF FACTS TO THIS GROUND ARE THAT THE AO NOTED T HAT THE ASSESSEE HAS INCURRED A SUM OF RS.27,85,034/- AS THE PERIPH ERAL DEVELOPMENT EXPENSES WHICH WAS DEBITED TO THE PROFIT AND LOSS A CCOUNT. THE ASSESSEE CLAIMED BEFORE THE AO THAT THESE EXPENSES HAVE BEEN INCURRED UNDER THE HEADS ROAD REPAIRS, PAYMENT OF S ALARY TO SCHOOL TEACHERS, CONTRIBUTION TO GOVTS CONTROLLED PERIPHE RY DEVELOPMENT SOCIETY, COMMUNITY LIGHTING, ASSISTING THE ADMINIST RATION TOWARDS PROVIDING POLLUTION FREE ENVIRONMENT TO THE SOCIETY , ASSISTING THE LOCAL PEOPLE FOR THEIR SOCIAL CULTURAL ACTIVITIES. THE AO TOOK THE VIEW THAT 3 ITA NOS.344 & 349/CTK/13 & CO NO.50/CTK/2013 THESE EXPENSES HAVE NOT BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS, THEREFORE, HE DISALLOWED A SUM OF RS.27,85,034/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) REDUCED THE DISALLOWANCE BY RS.17,82,416/- B Y HOLDING AS UNDER:- 3.2 I HAVE CAREFULLY CONSIDERED THE MATTER. THERE IS NO DISPUTE THAT EXPENDITURE INCURRED ON THE DEVELOPMENT OF THE PERIPHERY OF THE INDUSTRY IS WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS, SINCE A BUSINESS CANNOT FUNCTION IN ISOLA TION FROM THE SOCIAL ENVIRONMENT. HOWEVER, IT IS FOR THE APPELLAN T TO ESTABLISH THAT SUCH EXPENDITURE IS RELATED TO THE ADVANCEMENT OF THE PURPOSE OF BUSINESS. AN AMOUNT OF RS.16,35,000/- HAS BEEN SPENT THROUGH CORPORATE OFFICE/BHUBANESWAR OFFICE AS CONTRIBUTION TO SUNDARGARH DISTRICT PERIPHERY DEVELOPMENT EXPENSES. THE SAID AMOUNT HAS BEEN PAID BY DEMAND DRAFT AND IN ACCORDA NCE WITH THE POLICY OF GOVERNMENT OF ODISHA. THE DEPUTY DIRE CTOR OF MINES IS THE CONVENER OF THE SAID SOCIETY AND THE E XPENDITURE HAS BEEN REVIEWED BY THE COLLECTOR OF THE DISTRICT . AN AMOUNT OF RS.1,47,416/- HAS BEEN PAID BY CHEQUE AS A CONTRIBU TION FOR REPAIR OF NH-215 AND OTHER ROADS AND THE EXPENDITUR E IS INCURRED BY THE EASTERN ZONE MINING ASSOCIATION FOR THE SAID PURPOSE. HOWEVER, THE OTHER PAYMENTS WHICH ARE MOSTLY IN CAS H DO NOT APPEAR TO BE FOR THE PURPOSE OF PERIPHERY DEVELOPME NT. SUBSTANTIAL PAYMENTS HAVE BEEN MADE TO BHUBANESWAR MUNICIPAL CORPORATION FOR BEAUTIFICATION OF BHUBANE SWAR INCLUDING FOR GARDENING WORK WHICH CANNOT BE CALLED AS PERIPHERY DEVELOPMENT EXPENSES SINCE NO INDUSTRIAL ACTIVITY I S BEING UNDERTAKEN IN OR AROUND BHUBANESWAR BY THE APPELLAN T. MOST OF OTHER EXPENSES ARE IN CASH AND IT IS NOT ASCERTAINA BLE WHETHER THE SAME IS FOR THE PURPOSE OF PERIPHERAL DEVELOPME NT. IN VIEW OF THE SAME, OUT OF THE TOTAL CLAIMS MADE, AN AMOUNT O F RS.16,35,000/- AND RS.1,47,416/- TOTALING TO RS.17, 82,416/- IS ALLOWABLE AS CORRECTLY INCURRED FOR THE PERIPHERY D EVELOPMENT. ACCORDINGLY, THE ADDITION ON ACCOUNT OF PERIPHERY D EVELOPMENT EXPENSE IS REDUCED BY RS.17,82,416/-. THE APPELLANT GETS RELIEF OF RS.17,82,416/-. 4. WE HEARD RIVAL SUBMISSIONS AND CAREFULLY CONSIDE RED THE SAME ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A). THE CIT(A) HAS 4 ITA NOS.344 & 349/CTK/13 & CO NO.50/CTK/2013 RIGHTLY ALLOWED THE DEDUCTION TO THE ASSESSEE TO TH E EXTENT OF RS.17,82,416/- TOWARDS PERIPHERAL DEVELOPMENT EXPEN SES. THE FINDING GIVEN BY THE CIT(A), IN OUR OPINION, DOES NOT REQUI RE ANY INTERFERENCE. OUT OF THE AFORESAID SUM, A SUM OF RS.16,35,000/- H AS BEEN CONTRIBUTED BY THE ASSESSEE TO SUNDARGARH DISTRICT PERIPHERY DEVELOPMENT SOCIETY TOWARDS PERIPHERY DEVELOPMENT E XPENSES AND A SUM OF RS.1,47,416/- PAID THROUGH CHEQUE AS CONTRIB UTION FOR REPAIR OF NH-215 AND OTHER ROADS AND THIS EXPENDITURE HAS BEE N INCURRED BY EASTERN ZONE MINING ASSOCIATION FOR THE SAID PURPO SE. THIS EXPENDITURE IS NOT A CAPITAL EXPENDITURE. THE ROAD HAS TO BE USED NOT ONLY BY THIS ASSESSEE, THE OWNERSHIP OF THE ROAD A ND THE PERIPHERAL DEVELOPMENT DOES NOT BELONG TO THE ASSESSEE. OUR AF ORESAID VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE MADRAS HIG H COURT IN THE CASE OF CIT VS. MADRAS REFINERIES LTD., 266 ITR 170 . WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. THUS , THE ONLY GROUND TAKEN BY THE REVENUE STANDS DISMISSED AND THE GROUN D NO.1 TAKEN BY THE ASSESSEE IN ITS APPEAL ALSO STANDS DISMISSED, W HILE THE ONLY GROUND TAKEN BY THE ASSESSEE IN ITS CROSS OBJECTION HAS BE COME INFRUCTUOUS AS WE HAVE ALREADY DISMISSED THE GROUND TAKEN BY THE R EVENUE. 5. GROUND NO.2 IN ASSESSEES APPEAL RELATES TO DISALL OWANCE OF SUM OF RS.1,32,012/- ON ACCOUNT OF CHARITY AND DONA TION. THE ASSESSEE CLAIMED THAT THE SAID EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF CHARITY AND DONATION. IT CONSISTS OF RS. 15,000/- PAID TO 5 ITA NOS.344 & 349/CTK/13 & CO NO.50/CTK/2013 INDIAN RED CROSS SOCIETY, SUNDERGARH. NO CLAIM HAS BEEN MADE BY THE ASSESSEE U/S.80G. THE AO TOOK THE VIEW THAT THE SE EXPENSES HAVE NOT BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PU RPOSE OF THE BUSINESS, HENCE, HE DISALLOWED. THE MATTER WENT BEF ORE THE CIT(A), WHEREIN ALSO THE ASSESSEE DID NOT SUBMIT HOW THESE CHARITY AND DONATION GIVEN BY HIM ARE ALLOWABLE U/S.37(1) EXCEP T THE REITERATION OF THE SUBMISSION MADE BEFORE THE AO. 6. WE HEARD RIVAL SUBMISSION AND CAREFULLY CONSIDERED THE SAME. BEFORE US, LEARNED AR EVEN THOUGH VEHEMENTLY CONTEN DED THAT THESE EXPENSES SHOULD HAVE BEEN ALLOWED U/S.37(1) BUT DID NOT POINT OUT THE FACT OF ANY PAYMENT MADE FOR DONATION TO THE INSTIT UTION ARE APPEARED FOR DEDUCTION U/S.80G. DONATION MADE BY THE ASSESSE E IS DEDUCTIBLE ONLY U/S.80G. THE DONATION IS ALLOWABLE U/S.80G CAN NOT BE OVERRIDDEN BY SECTION 37(1). FROM THE DETAILS FILED BY THE ASS ESSEE, WE NOTED THAT THE ASSESSEE HAS DONATED A SUM OF RS.15,000/- TO CH AIBASA GOUSALA COMMITTEE ON 1-11-2008, THE SAID COMMITTEE IS RECOG NIZED U/S.80G VIDE LETTER NO.80G/37/2007-08/1476-82, DATED 26-6-2 007 BY THE CIT, JAMSHEDPUR. THE ASSESSEE HAS ALSO FILED THE CERTIFI CATE ISSUED U/S.80G. WE, THEREFORE, DIRECT THE AO TO ALLOW THE DEDUCTION ONLY IN RESPECT OF A SUM OF RS.15000/- IN ACCORDANCE WITH T HE PROVISION OF SECTION 80G AND SUSTAIN THE REST OF THE DISALLOWANC E. THUS, THIS GROUND IS PARTLY ALLOWED. 6 ITA NOS.344 & 349/CTK/13 & CO NO.50/CTK/2013 7 . IN THE RESULT, ITA NO.344/2013 FILED BY THE REVENUE AND CO NO.50/2013, FILED BY THE ASSESSEE ARE DISMISSED WHE REAS APPEAL FILED BY THE ASSESSEE (ITA NO.349/2013) IS PARTLY A LLOWED. * 1+2 ' ( ( ITA NO.344/2013 ) *+ ( %&' ( CO NO.50/2013) *' ( '+ 45 +! *+ ( ( ITA NO.349/2013 ) 0 6+ ( '+ 45 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/05 /2014. 0 ( ./ , 17 82 01/05/2014 / ( - SD/- SD/- ( . . ) (D.T.GARASIA) ( . . ) (P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; 8 DATED 01/05/2014 % . , . 1 /PKM , . / PS 0 0 0 0 ( (( ( %+9 %+9 %+9 %+9 :9 + :9 + :9 + :9 + / COPY OF THE ORDER FORWARDED TO : 0, 0, 0, 0, / BY ORDER, ; ;; ; / 4 4 4 4 ' ' ' ' ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. ,< ( ) / THE CIT(A), CUTTACK 4. ,< / CIT , CUTTACK 5. 9= %+ , , 1,- / DR, ITAT,CUTTACK 6. >- / GUARD FILE. &9+ %+ //TRUE COPY//