The Poona Stud Farm Pvt. Ltd., Pune V. Income-tax Officer,

ITA 395/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1465 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO . 395 /PN/201 6 / ASSESSME NT YEAR : 20 0 6 - 07 THE POONA STUD FARM PVT. LTD., 16/B - 1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 4110 01 . / APPELLANT PAN: A AACT6849F VS. THE INCOME TAX OFFICER (TECH & JUD) - IV , PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI ANIL CHAWARE / DATE OF HEARING : 2 6 . 0 7 .201 6 / DATE OF PRONOUNCEMENT: 29 . 0 7 .201 6 / ORDER PER SUSHMA CHOWLA, J M : THI S APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) , PUNE - 5 , PUNE, DATED 28 . 0 1 .20 1 6 RELATING TO ASSESSMENT YEAR 20 0 6 - 07 AGAINST ORDER PASSED UNDER SECTION S 14 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LD. CIT(A) ERRED IN HOLDING AD - HOC DISALLOWANCE OF RS.3,00,000/ - FROM ANIMAL FEED EXPENSES INCURRED BY THE APPELLANT. ITA NO. 395 /PN/20 1 6 THE POONA STUD FARM PVT. LTD. 2 2. WHILE AFFIRMING THE DISALLOWANCE ON AD - HOC BASIS, THE LD. CIT(A) IGNORED FACTS, MERITS OF THE CASE AND A LSO THE DECISION OF JURISDICTIONAL BENCH OF ITAT DECIDING WHETHER AD - HOC DISALLOWANCES ARE JUSTIFIED. 3. THE APPELLANT BE AWARDED COST FOR COMPELLING IT IN FURTHER LITIGATION FOR IGNORING JUDICIAL DISCIPLINE AS PER THE RATIO OF HONBLE SUPREME COURT IN TH E CASE OF UOI VS. KAMALAKSHI FINANCE CORPORATION. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE OF RS.3 LAKHS OUT OF ANIMAL FEED EXPENSES. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN BREEDING, REARING AND SALE OF RACE HORSES. THE TOTAL TURNOVER OF THE ASSESSEE COMPANY FOR THE YEAR WAS RS. 1,71,42,254/ - , WHICH WAS INCLUSIVE OF HORSE BREEDING, SALE OF LIVE STOCK, LEASE OF LIVE STOCK AND OTHER CHARGES OF LIVRY CHARGES, ETC. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.23,82,826/ - . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.55,99,810/ - UNDER THE HEAD CONSUMPTION OF ANIMAL FEED AND DRUGS & MEDICINES, COMPRISING OF ANIMAL FEED OF RS. 48,87,2 41/ - AND DRUGS AND MEDICINES OF RS.7,08,969/ - . THE ASSESSEE EXPLAINED THAT ONE OF THE SISTER CONCERNS OF THE COMPANY I.E. POONAWALLA ESTATE STUD & AGRI FARM WAS ALSO ENGAGED IN LIVE STOCK BREEDING AND AS THERE WERE CERTAIN COMMON ACTIVITIES OF BOTH THE CO NCERNS AND IN ORDER TO TAKE ADVANTAGE OF CENTRALIZED PURCHASING, IN ORDER TO AVAIL THE DISCOUNT, THE PURCHASES WERE MADE AND EXPENSES WERE ALLOCATED ON COST BASIS AMONG THE BENEFICIARIES. THE ASSESSEE FURTHER POINTED OUT THAT IT DID NOT MAINTAIN DAY - TO - DA Y RECEIPTS OF ANIMAL FEED AND DRUGS AND MEDICINES OR CONSUMPTION OF ANIMAL FEED OR DRUGS AND MEDICINES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAIM OF ASSESSEE WAS NOT VERIFIABLE AND SUM OF RS.3 LAKHS WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. ITA NO. 395 /PN/20 1 6 THE POONA STUD FARM PVT. LTD. 3 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ENTITY WHICH PROCURED THE ANIMAL FEED AND DRUGS , DISTRIBUTED THE SAM E TO THE LOCATIONS, WHERE THE HORSES WERE REARED AND THE TOTAL EXPENSES ON FEED AND DRUGS WERE AVERAGE D ON TOTAL HORSES HELD BY VARIOUS GROUP COMPANIES. ACCORDINGLY, THE COST WAS CHARGED PER ANIMAL TO THE RESPECTIVE ENTITY OWNING THE HORSES. THE ASSESSEE IN THE STATEMENT OF FACTS FILED BEFORE THE CIT(A) FURTHER POINTED OUT THAT THE ENTITY WHO WAS PURCHASING ANIMAL FEED AND DRUGS WAS MAINTAINING PROPER ACCOUNTS AND CENTRALIZED SYSTEM OF PROCUREMENT AND DISTRIBUTION OF THE SAME , WAS BEING FOLLOWED BY THE AS SESSEE FROM YEAR TO YEAR AND WAS ACCEPTED BY THE REVENUE DEPARTMENT IN EACH OF THE YEAR. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. ON PERUSAL OF RECORD AND SUBMI SSIONS FILED BY THE ASSESSEE, THE LIMITED ISSUE RAISED FOR ADJUDICATION IN THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE OF RS.3 LAKHS OUT OF ANIMAL FEED EXPENSES. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT FROM PAST YEARS, THE ASSESSEE WAS FOLLOWING A PRACTI S E WHEREIN THE PURCHASE OF ANIMAL FEED AND DRUGS WERE MADE BY ITS SISTER CONCERN, WHO IN TURN, WAS DISTRIBUTING THE SAME FOR CONSUMPTION OF HORSES IN THE RATIO OF HORSES OWNED BY EACH OF THE ENTITIES. THE ASSESSEE HAD PROCURED THE ANIMAL FEED FROM THE SAID ENTITY IN THE PAST AND ALSO IN THE FUTURE. THE COST OF ANIMAL FEED AND DRUGS WAS AVERAGE D ON THE BASIS OF TOTAL HORSES HELD BY EACH OF THE ENTITIES AND LOOKING AT THE LINE OF BUSINESS BEING CARRIED ON BY THE ITA NO. 395 /PN/20 1 6 THE POONA STUD FARM PVT. LTD. 4 ASSESSEE, IT WAS NOT POSSIB LE TO MAINTAIN THE RECORDS PER ENTITY PER ANIMAL - WISE. IN THE PECULIARITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS MERIT IN THE CLAIM OF ASSESSEE. THE ASSESSEE HAS FOLLOWED A PARTICULAR METHOD OF ACCOUNTING FOR THE ABOVE SAID EXPENSES AND IN THE ABSENCE OF ANYTHING FOUND CONTRARY , THERE IS NO MERIT IN THE ADHOC DISALLOWANCE OF RS.3 LAKHS OUT OF SUCH EXPENSES. ACCORDINGLY, THE SAME IS DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 9 . IN THE RESULT, APPEAL OF THE ASS ESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF JU LY , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 29 TH JU LY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , PUNE - 5, PUNE ; 4. / THE PR. CIT , PUNE - 4, PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE