Business Communication (Guj.) Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 404/AHD/2009

• Counselvise Citation: 40420514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 14A

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI G C GUPTA VICE-PRESIDENT AND SHRI A K GARODIA ACCOUNTANT MEMBER ITA NO.404/AHD/2009 (ASSESSMENT YEAR:-2005-06) BUSINESS COMMUNICATION (GUJ) PVT. LTD., 6 TH FLOOR, ADITYA, NR. URVASHI FLATS, MITHAKHALI SIX ROADS, AHMEDABAD V/S THE INCOME-TAX OFFICER, WARD-1(2), AHMEDABAD PAN: [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR, WITH SMT. URVASHI SHODHAN REVENUE BY:- SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING:- 16-11-2011 DATE OF PRONOUNCEMENT:- 02-12-2011 O R D E R PER G C GUPTA (VICE-PRESIDENT) :- THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 IS DIRECTE D AGAINST THE ORDER OF THE CIT(A). GROUND NO.1 OF APPEAL OF THE A SSESSEE BEING GENERAL IN NATURE IS NOT ADJUDICATED. 2 GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS AS U NDER:- 2. THE CIT(A) HAS ERRED IN CONFIRMING THE MUNICIPAL TAXES OF RS.31,677/- PAID BY THE COMPANY. 3 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE ASSESSEE HAS TAKEN THE ADJOINING PREMISES TO ITS EX ISTING BUSINESS 2 PREMISES BELONGING TO ONE OF THE DIRECTORS OF THE A SSESSEE COMPANY WITHOUT ANY LIABILITY OF RENT FOR BUSINESS PURPOSE. HOWEVER, MUNICIPAL TAXES AMOUNTING TO RS.31,677/- W ERE PAID BY THE ASSESSEE WHICH IS AN ALLOWABLE EXPENDITURE. HE REFERRED TO THE CONFIRMATION FROM THE LANDLORD OF THE ADJOINING PREMISES IN WHICH HE HAS CONFIRMED THAT THE PREMISES WERE USED BY THE ASSESSEE COMPANY FOR THEIR BUSINESS PURPOSE DURING THE RELEVANT PERIOD AND THE MUNICIPAL TAXES WERE PAID BY THE ASS ESSEE COMPANY, A COPY OF WHICH WAS FILED IN THE COMPILATI ON BEFORE US. THE LEARNED DR SUBMITTED THAT WHEN THE OWNER OF THE ADJOINING PREMISES, WHO HAPPENS TO BE A DIRECTOR OF THE ASSES SEE COMPANY, HAS GIVEN HIS PREMISES TO THE ASSESSEE FIRM WITHOUT RENT, THERE IS NO REASON FOR NOT MAKING PAYMENT OF THE MUNICIPAL T AXES BY THE LANDLORD. HE SUBMITTED THAT THERE WAS NO AGREEMENT BETWEEN THE LANDLORD OF THE PREMISES AND THE ASSESSEE COMPANY F OR PAYMENT OF MUNICIPAL TAXES. 4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN REPLY TO A SPECIFIC QUERY BY THE BENCH REGARDING TH E EVIDENCE THAT WHETHER THE PREMISES IN QUESTION WERE IN FACT USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE COMPANY, NO EVIDEN CE TO THIS EFFECT COULD BE SHOWN ON BEHALF OF THE ASSESSEE AND IN THE ABSENCE THEREOF, WE HOLD THAT THE CLAIM OF DEDUCTIO N OF MUNICIPAL TAXES WAS NOT ALLOWABLE AND THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 5 GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS AS U NDER:- 3 3 THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION O F RS.5,95,000/- ON ACCOUNT OF REPAIRING CHARGES. 6 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THIS IS A VERY PECULIAR ADDITION MADE BY THE AO AS THE ASSESS EE HAS SHOWN INCOME FROM REPAIRING CHARGES RECEIVED FROM ITS ASS OCIATE CONCERN AT RS.4,25,000/- AND BY MISTAKE THE TDS WAS MADE ON RS.10,20,000/- ON ACCOUNT OF REPAIRING CHARGES AND THE ASSESSEE HAS PASSED THE NECESSARY ENTRIES IN ITS LEDGER ACCO UNT IN THE ACCOUNT OF M/S SILICON COMPUTECH PVT. LTD. [M/S SCP L] CREDITING THEIR ACCOUNT BY THE DIFFERENTIAL AMOUNT OF RS.5,95,000/- ON 31-08-2004. THE LEARNED COUNSEL FO R THE ASSESSEE REFERRED TO THE COPY OF ACCOUNT OF THE ASS ESSEE COMPANY IN THE BOOKS OF M/S SCPL WHEREIN SIMILAR ENTRIES AP PEAR AND THEY HAVE PASSED THE DEBIT ENTRIES OF RS.5,95,000/- TO THE ACCOUNT OF THE ASSESSEE ON 28-01-2005. A COPY OF THE ACCOUN T OF THE ASSESSEE COMPANY AS WELL AS M/S SCPL HAVE BEEN FILE D IN THE COMPILATION OF THE ASSESSEE. 7 THE LEARNED DR REFERRED TO PAGE 4 OF THE COMPILAT ION FILED BY THE ASSESSEE WHICH IS THE ACCOUNT COPY OF M/S SC PL IN THE BOOKS OF THE ASSESSEE WHEREIN AN AMOUNT OF RS.85,00 0/- HAS BEEN RECEIVED ON ACCOUNT OF SERVICE CHARGES IN THE MONTH OF APRIL, 2004 ONWARDS ON MONTHLY BASIS TILL AUGUST, 2004. HE SUBMITTED THAT IF THE AMOUNT OF RS.85,000/- REPRESENTING MONT HLY REPAIRING SERVICE CHARGES IS MULTIPLIED BY 12 CALENDAR MONTHS , AN AGGREGATE COMES TO RS.10,20,000/- ON WHICH THE TDS WAS RIGHTLY DEDUCTED AND DEPOSITED TO THE CREDIT OF CENTRAL GOV ERNMENT. HE SUBMITTED THAT THE ASSESSEE COMPANY AS WELL AS M/S SCPL ARE 4 RELATED PARTIES AND IT SHOULD BE VERIFIED THAT WHAT AMOUNT HAS BEEN CLAIMED BY M/S SCPL IN THEIR ASSESSMENT AND IF THEY HAVE CLAIMED ONLY RS.4,25,000/-, THEN THE CLAIM OF THE A SSESSEE MAY BE CONSIDERED. 8 THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJOI NDER SUBMITTED THAT THE P&L ACCOUNT OF M/S SCPL, A COPY OF WHICH IS FILED IN THE COMPILATION BY THE ASSESSEE, CLEARLY S HOWS THE CORRECT AMOUNT OF REPAIRING SERVICE CHARGES AND THEREFORE N O FURTHER VERIFICATION IS REQUIRED IN THIS CASE. 9 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAS CHARGED THE SUM OF RS.85,000/- PER MON TH FOR SERVICE CHARGES FROM M/S SCPL ON MONTHLY BASIS FROM APRIL, 2004 TO AUGUST, 2004 MAKING A TOTAL OF RS.4,25,000/ - AND THE NECESSARY ENTRIES WERE PASSED IN THE ACCOUNT OF M/S SCPL IN THE BOOKS OF THE ASSESSEE, A COPY OF WHICH IS FILED IN THE COMPILATION BEFORE US. THE ASSESSEE HAS PASSED DEBIT ENTRY IN T HE ACCOUNT OF M/S SCPL OF RS.10,20,000/- ON ACCOUNT OF ESTIMATED INCOME FROM REPAIRING CHARGES FROM M/S SCPL ON 1 ST DAY OF THE ACCOUNTING YEAR I.E. 01-04-2004 ON ESTIMATE BASIS F OR THE WHOLE RELEVANT ACCOUNTING YEAR. HOWEVER, AFTER 31-08-2004 REPAIRING CHARGES FROM M/S SCPL WERE DISCONTINUED AND THEREFO RE THE NECESSARY ENTRIES OF CANCELLATION OF THE CONTRACT W ERE PASSED ON 31-08-2004 IN THE BOOKS OF THE ASSESSEE COMPANY IN THE ACCOUNT OF M/S SCPL AND THE DIFFERENTIAL SUM OF RS.5,95,000 /- WAS CREDITED TO THEIR ACCOUNT. THE ASSESSEE HAS ALSO FI LED THE LEDGER ACCOUNT COPY OF THE ASSESSEE COMPANY IN THE BOOKS O F M/S SCPL WHEREIN SIMILAR ENTRIES WERE PASSED BY M/S SCPL AND THE 5 DIFFERENTIAL AMOUNT OF RS.5,95,000/- WAS DEBITED TO THE ACCOUNT OF ASSESSEE COMPANY ON 28-01-2005 AND, THEREFORE, T HERE REMAINS NO DISCREPANCY BETWEEN THE ACCOUNT OF THE ASSESSEE COMPANY AND M/S SCPL. MERELY BECAUSE THE TDS WAS DEDUCTED AT A HIGHER AMOUNT AND PAID TO THE CREDIT OF THE CENTRAL GOVERN MENT IS NOT A GROUND TO MAKE THE IMPUGNED ADDITION IN THE HANDS O F THE ASSESSEE COMPANY WITHOUT ANY BASIS. THE ONLY REASON ADVANCED BY THE AO WHILE MAKING THE ADDITION WAS THAT IN THE PRESENT CASE TDS HAS BEEN DEDUCTED AND HAS ALSO BEEN PAID TO THE GOVERNMENT ACCOUNT, THUS, INCOME ON ACCOUNT OF REPAIRING OF RS .10,20,000/- HAS ARISEN TO THE COMPANY WHICH HAS NOT BEEN SHOWN CORRECTLY. THIS REASONING OF THE AO IS NOT SUSTAINABLE IN LAW. THE MISTAKE IN THE ACCOUNT BOOKS OF THE ASSESSEE COMMITTED BONA FIDE BY THE ASSESSEE IS RECTIFIABLE AT ANY POINT OF TIME. WE FI ND THAT THE ASSESSEE COMPANY AS WELL AS ITS GROUP CONCERN M/S S CPL HAS RECTIFIED THE SAME AND HAS PASSED THE NECESSARY ENT RIES IN THEIR BOOKS OF ACCOUNTS AND, THEREFORE, THERE WAS NO JUST IFICATION FOR MAKING ANY ADDITION ON THIS COUNT. THE PLEA THAT IT SHOULD BE VERIFIED THAT WHAT AMOUNT HAS BEEN CLAIMED BY M/S S CPL IN THEIR ASSESSMENT IS NOT ACCEPTED FOR THE SIMPLE REASON TH AT THE ASSESSEE HAS FILED THE COPY OF P&L ACCOUNT OF M/S SCPL IN IT S COMPILATION BEFORE US WHICH SHOWS THAT M/S SCPL HAS CLAIMED THE CORRECT AMOUNT OF REPAIRING CHARGES PAID. IN TH ESE FACTS OF THE CASE, WE HOLD THAT THERE IS NO JUSTIFICATION FOR MA KING ANY ADDITION ON THIS ACCOUNT. ACCORDINGLY, THIS ISSUE I S DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUND NO.3 OF THE A PPEAL OF THE ASSESSEE IS ALLOWED. 6 10 GROUND NO.4 OF THE APPEAL OF THE ASSESSEE IS AS UNDER:- 4 THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION O F RS.19,518/- U/S 14A OF THE IT ACT. THE CASE LAW CITED BY CIT(A) OF AY 1977-78 IS NOT APPLICABLE IN THE CASE OF THE APPELL ANT. 11 THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CA SE OF CIT VS. CATHOLIC SYRIAN BANK LTD. & ORS. (2011) 237 CTR (KE R) 164 AND THE DECISION OF THE ITAT AHMEDABAD BENCH-C IN THE C ASE OF SAGAR DRUGS & PHARMACEUTICALS (P) LTD. [ITA NO.3179/AHD/2009, ORDER DATED 03-06-2011] AND SUBMI TTED THAT NO EXPENDITURE WERE INCURRED BY THE ASSESSEE COMPAN Y ON THE DIVIDEND INCOME. THE LEARNED DR SUBMITTED THAT THE DISALLOWANCE U/S 14A IS CALLED FOR IN THE FACTS OF THE CASE AND RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF GODREJ BOYCE MFG. CO. VS. DCIT (2010) 328 I TR 81 (BOM). 12 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. DUE TO NON- AVAILABILITY OF DETAILS, WE RESTORE THE ISSUE TO TH E FILE OF THE AO WITH THE DIRECTION TO RE-DECIDE THE SAME IN ACCORDA NCE WITH LAW IN THE LIGHT OF THE DECISIONS OF THE HONBLE COURTS RELIED UPON BY THE PARTIES AND AFTER RECORDING A FINDING OF EXPENS ES, IF ANY, INCURRED ON EARNING OF DIVIDEND INCOME BY THE ASSES SEE AND AFTER ALLOWING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE . WE DIRECT ACCORDINGLY. 7 13 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 02-12-2011 SD/- SD/- (A K GARODIA) ACCOUNTANT MEMBER (G C GUPTA) VICE-PRESIDENT DATE : 02-12-2011 COPY OF THE ORDER FORWARDED TO: 1. BUSINESS COMMUNICATION (GUJ) PVT. LTD., 6 TH FLOOR, ADITYA, NR. URVASHI FLATS, MITHAKHALI SIX ROADS, AHMEDABAD 2. THE INCOME-TAX OFFICER, WARD-1(2), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VI, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD