LIEBHERR INDIA P LTD, NAVI MUMBAI V. ADDL CIT 10(3), MUMBAI

ITA 3496/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0309 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Assessee Lawyers: K K VED
• Keywords: Business expenditure; Additional evidence; Corroborative evidences
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO. 3496 /MUM/201 7 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. LIEBHERR INDIA PRIVATE LIMITED 25 TH & 26 TH FLOOR, KESAR SOLITAIRE PLOT NO.5, SECT OR - 19 SANPADA, NAVI MUMBAI 400 705 VS. ADDITIONAL COMMISSIONER OF INCOME TAX 10(3) AAYAKAR BHAVAN NEW MARINE LINES MUMBAI 400 020 PAN/GIR NO. AABCL2049J (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI K.K.VED REVENUE BY MS. SAMATHA MULLAMUDI DATE OF HEARING 26 / 09 /2019 DATE OF PRONOUNCEMENT 24/12 /2019 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 3496/MUM/2017 FOR A.Y. 2009 - 10 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 24, MU MBAI IN APPEAL NO. CIT(A) - 22/ADDL. CIT - 10(3)/IT - 266/2012 - 13 DATED 27/02/2017 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 13/12/2012 BY THE LD. ADDL. COMMISSIONER OF INCOME TAX 10(3), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). ITA NO. 3496/MUM/2017 M/S. LIEBHERR INDIA PVT. LTD., 2 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF IFRS AUDIT FEES OF RS.3,17,300/ - ON THE GROUND IT PERTAINS TO THE PERIOD PRIOR TO THE YEAR UNDER CONSIDERATION. 2.1 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE FEE OF RS.3,17,300/ - WAS PAID BY THE ASSESSEE IN RESPECT OF IFRS AUDIT COMPLETED FOR THE Y EAR ENDED 31/12/2007. WE FIND THAT THE SAME HAS BEEN DISALLOWED BY THE LOWER AUTHORITIES ON THE GROUND THAT IT IS PRIOR PERIOD EXPENSES AND SINCE , THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE SAME CANNOT BE ALLOWED AS DEDUCTION FOR THE Y EAR UNDER CONSIDERATION. WE FIND THAT THE GENUINENESS OF THE INCURRENCE OF THIS EXPENDITURE AND ITS BUSINESS PURPOSE IS NOT DOUBTED BY THE REVENUE. WE FIND THAT THOUGH THE AUDIT PERTAINS FOR THE YEAR ENDED 31/12/2007, THE INVOICE WAS RAISED BY THE CONCERNE D AUDITOR ONLY ON 28/11/2008 AS THE SERVICE WAS RENDERED THEREON DURING THE YEAR UNDER CONSIDERATION. WE FIND THAT THE SERVICES HAVE BEEN CRYSTALISED DURING THE YEAR UNDER CONSI DERATION AND ACCORDINGLY BECOME AN EXPENDITURE ALLOWABLE AS DEDUCTION FOR THE Y EAR UNDER CONSIDERATION. IT IS NOT THE CASE OF THE REVENUE THAT ASSESSEE HAD INDEED CLAIMED DEDUCTION FOR THE VERY SAME SUM IN THE EARLIER YEAR ON MERCANTILE BASIS. IN VIEW OF THE AFORESAID OBSERVATIONS, WE HOLD THAT THE ASSESSEE IS INDEED ENTITLED FOR DED UCTION OF RS.3,17,300/ - TOWARDS IFRS AUDIT FEES. THE LD. AO IS DIRECTED ACCORDINGLY TO GRANT DEDUCTION FOR THE SAME. THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 3. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUS TIFIED IN NOT ALLOWING DEDUCTION OF RS.5,23,277/ - TOWARDS SERVICE TAX CREDIT WRITTEN OFF ON THE BASIS THAT IT PERTAINS TO EARLIER PERIOD. ITA NO. 3496/MUM/2017 M/S. LIEBHERR INDIA PVT. LTD., 3 3.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE BASIC FACT THAT THIS SUM OF RS.5,23,277/ - WAS APPEARING AS SERVICE TAX RECEIVABLE IN THE OPENING BALANCE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT SERVICE TAX RECEIVABLE IS REFLECTED UNDER THE HEAD CURRENT AS SETS LOANS AND ADVANCES IN THE BALANCE SHEET OF THE ASSESSEE COMPANY. IT IS NOT IN DISPUTE THAT THIS SERVICE TAX RECEIVABLE EMANATES OUT OF THE INPUT SERVICES USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ONCE, THE SERVICE TAX INPUT CREDIT IS NOT ELIG IBLE TO BE UTILISED AGAINST THE OUTPUT TAX, THE SAME REQUIRES TO BE WRITTEN OFF AS BUSINESS EXPENDITURE, WHICH IS WHAT IS DONE BY THE ASSESSEE IN THE INSTANT CASE. THERE IS NO DISPUTE THAT THE SERVICE TAX INPUT CREDIT OF RS.5,23,277 WAS NOT ELIGIBLE TO BE UT ILISED TOWARDS OUTPUT SERVICE TAX BY THE ASSESSEE. IN THESE CIRCUMSTANCES, THE ACTION OF THE ASSESSEE IN WRITING OFF THE INPUT SERVICE TAX CREDIT LYING IN CURRENT ASSETS LOANS AND ADVANCES AS ON 01/04/2009 AND CONSEQUENTIALLY CLAIMING THE SAME AS DEDUCTI ON , IS IN ACCORDANCE WITH LAW. WE DIRECT THE LD. AO ACCORDINGLY. THE GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 4. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADHOC DISALLOWANCE OF 30% OF TOTAL TRAVELLING AND CONVEYANCE EXPENSES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD INCURRED TOTAL TRAVELLING AND CONVEYANCE EXPENSES OF RS .1,80,49,723/ - DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED BY THE LD. AO TO PRODUCE SUPPORTING EVIDENCES IN RESPECT OF TRAVELL ING AND CONVEYANCE EXPENSES ABOVE RS.1,00,000/ - . THE LD. AO OBSERVED THAT DESPITE SEVERAL ITA NO. 3496/MUM/2017 M/S. LIEBHERR INDIA PVT. LTD., 4 OPPORTUNITIES PROVIDED T O THE ASSESSEE, THE ASSESSEE FAILED TO PRODUCE SUPPORTING EVIDENCES AND ACCORDINGLY PROCEEDED TO DISALLOW 40% OF THE TOTAL TRAVELLING AND CONVEYANCE EXPENDITURE ON AN ADHOC BASIS AMOUNTING TO RS.72,19,889/ - IN THE ASSESSMENT. WE FIND THAT THE LD. CIT(A) HA D OBSERVED THAT ASSESSEE HAD SUBMITTED THE COPIES OF VOUCHERS AND INVOICES OF TRAVELLING AND CONVEYANCE EXPENSES BEFORE HIM AND THE SAME WERE DULY SUBJECTED TO REMAND PROCEEDINGS AND DULY VERIFIED BY THE LD. AO . B EFORE THE LD. AO ALSO , FURTHER DETAILS WERE SUBMITTED BY THE ASSESSEE. THESE FACTS ARE RECORDED BY THE LD. CIT(A) IN PAGE 18 PARA 2.4.15 OF HIS ORDER. WE FIND THAT ASSESSEE HAD INCURRED THESE TRAVELLING AND CONVEYANCE EXPENSES IN RESPECT OF SITE VISITS OF ITS PERSONNEL , TRAININGS , MEETINGS AND OTHE R OFFICIAL VISITS FOR WHICH DETAILED BREAK - UP WERE FILED ALONGWITH WRITTEN SUBMISSIONS. WE FIND THAT THE LD. AO IN THE REMAND REPORT HAD OBSERVED THAT CERTAIN DETAILS FURNISHED BY THE ASSESSEE CONTAIN THE PROVISION FOR EXPENSES WHICH ARE CONTINGENT IN NATU RE AND HENCE, NOT ALLOWABLE AS DEDUCTION; CERTAIN EXPENSES ARE REFLECTED AS RECEIVABLE AND LATER TRA NSFERRED TO EXPENSES BY THE ASSESSEE BY WAY OF JOURNAL ENTRY IN THE BOOKS OF ACCOUNTS. IN THE OPINION OF THE LD. AO, T HESE EXPENSES ARE NOT FULLY VERIFIABLE AND ASSESSEE COULD NOT SUBSTANTIATE THE VERACITY OF THE SAME. ACCORDINGLY, THE LD. CIT(A) OBSERVED THAT THE ENTIRE TRAVELLING AND CONVEYANCE EXPENSES COULD NOT BE FULLY VERIFIABLE AT THE END OF THE LD. AO AND RESTRICTED THE DISALLOWANCE TO 30% OF TOTAL TR AVELLING AND CONVEYANCE EXPENSES AND REDUCE D THE DISALLOWANCE TO RS.54,14,917/ - AS AGAINST RS.72,19,889/ - MADE BY THE LD. AO. WE FIND THAT THE ASSESSEE HAD FILED DETAILED BILLS AND VOUCHERS IN THE FORM OF ADDITIONAL EVIDENCES BEFORE THE LD. CIT(A) COMPRISI NG OF PAGES 3 - 739 OF THE PAPER BOOK WHICH WERE ALSO FILED BEFORE US. THESE DETAILS WERE SUBJECT TO VERIFICATION BY THE LD. AO IN THE REMAND PROCEEDINGS AND IN THE REMAND REPORT, THE LD. AO HAD HELD THAT SOME OF THE EXPENSES ARE NOT FULLY VERIFIABLE. WE FIN D IN THESE CIRCUMSTANCES , SOME ADHOC DISALLOWANCE ITA NO. 3496/MUM/2017 M/S. LIEBHERR INDIA PVT. LTD., 5 OF EXPENSES NEED TO BE MADE. HOWEVER, THE DISALLOWANCE @30% WOULD BE ON THE HIGHER SIDE GIVEN THE STATUS OF THE COMPANY AND THE BEHAVIOUR OF THE ASSESSEE. HENCE, WE HOLD THAT DISALLOWANCE ON AN ADHOC BASIS AT 10% OF TOTAL TRAVELLING AND CONVEYANCE EXPENSES WOULD MEET THE ENDS OF JUSTICE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. ACCORDINGLY, THE GROUND NO.3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 5. GROUND NO.4 RAISED BY THE REVENUE IS G ENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 12 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - ( M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 12 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//