Income Tax Department, V. Gujarat Ambuja Proteins Ltd., Ahmedabad

ITA 4119/AHD/1995

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57139 (ITAT-AHMEDABAD)
• Duration Of Justice: 16 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-01-2012
• Assessment Year: 1992-1993
• Appeal Filed On: 29-09-1995
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Assessee Lawyers: S N SOPARKAR

Judgement Text

ITA NO.4119/AHD/1995 ASSESSMENT YEAR 1`992-93 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, A HMEDABAD (BEFORE SHRI G.C. GUPTA,VICE PRESIDENT AND SHRI B. R. BASKARAN,AM) I.T.A. NO. 4 119/AHD/1995 (ASSESSMENT YEAR: 1992-93-) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2) 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (APPELLANT) VS. GUJARAT AMBUJA PROTEINS LTD., C/O. AMBUJA TOWERS, OPP. MEMNAGAR FIRE STATION, NARANPURA, AHMEDABAD. (RESPONDENT) APPELLANT BY : SHRI KARTARSINGH CIT (DR) RESPONDENT BY : SHRI S.N. SOPARKAR, SR. ADV. ( )/ ORDER DATE OF HEARING : 19-1-2012. DATE OF PRONOUNCEMENT : 25-1-2012 PER: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER. THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.7.1995 PASSED BY LD CIT(A)-XII, AHMEDABAD AND IT RELATES T O THE ASSESSMENT YEAR 1992- 93. THIS APPEAL WAS INITIALLY DISPOSED OF BY THE TRIBUNAL ON 28-02-2007. HOWEVER, THE GROUND NO.3 RELATING TO THE DISALLOWAN CE OF GODOWN RENT WAS OMITTED TO BE DISPOSED OF BY THE TRIBUNAL. HENCE, THE DEPARTMENT MOVED A MISCELLANEOUS APPLICATION AND ACCORDINGLY THE TRIBU NAL, VIDE ITS ORDER DATED 02- 11-2007, RECALLED ITS ORDER FOR THE LIMITED PURPOSE OF DISPOSING THE GROUND NO.3 CITED ABOVE. ITA NO.4119/AHD/1995 ASSESSMENT YEAR 1`992-93 2 2. THE FACTS RELATING TO THE SAID ISSUE ARE STA TED IN BRIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAS CLAIMED A SUM OF RS.72.54 LAKHS TOWARDS GODOWN RENT EXPENSES, OUT OF WHICH A SUM OF RS.72.48 LAKHS WAS CLAIMED TO BE PAYABLE TO M/S COASTAL ROAD WAYS LTD. THE AO CONDUCTED DETAILED ENQUIRIES AND CAME TO THE CONCLUSION THAT THE GODOWN RENT PAYMENT OF RS.72.48 LAKHS IS NOT GENUINE. IN PAGE 20 OF THE A SSESSMENT ORDER, THE AO HAS LISTED OUT VARIOUS REASONS IN SUPPORT OF HIS CONCLU SIONS, OUT OF WHICH WE CONSIDER THE FOLLOWING TWO OBSERVATIONS VERY PERTINENT:- (A) COASTAL ROADWAYS LTD WAS NEITHER THE OWNER NOR IN POSSESSION OF THESE GODOWNS, WHEN THE AGREEMENT WAS MADE OR AT ANY TIME THERE AFTER. (B) THE ASSESSEE HAS NEITHER SEEN NOR TAKEN POSSES SION OF THESE GODOWNS AT ANY POINT OF TIME. ACCORDINGLY, THE AO DISALLOWED THE SAID EXPENDITURE , BUT THE SAME WAS DELETED BY THE LD CIT(A). HENCE THE REVENUE IS IN APPEAL BEFO RE US. 3. IT WAS STATED THAT THE ASSESSEE COMPANY OBTA INED CONTRACTS FOR EXPORT OF INDIAN TOASTED SOYABEAN EXTRACTION FAQ YELLOW FL AKES FROM TWO COMPANIES LOCATED ABROAD. THE EXPORTS WERE REQUIRED TO BE M ADE FOR A COMPANY IN THE MONTH OF JANUARY/FEBRUARY 1992. THE TOTAL VOLUME OF CONTR ACTS WERE SAID TO BE 7500 MT. IT WAS SUBMITTED THAT THE SAID EXPORT CONTRACTS COM PELLED THE ASSESSEE TO CREATE HUGE GODOWN SPACE AND M/S COASTAL ROADWAYS LTD (M/S CRL) OFFERED GODOWN SPACES IN VARIOUS PLACES, VIZ., AHMEDABAD, DWARKA, PORBANDAR AND KANDLA. ACCORDINGLY, THE AGREEMENTS WERE ENTERED BETWEEN TH E ASSESSEE AND M/S CRL, ACCORDING TO WHICH THE ASSESSEE COMPANY IS REQUIRED TO PAY THE MONTHLY RENT WHETHER THE GODOWN WAS OCCUPIED OR NOT. ULTIMATELY , THE EXPORTS COULD NOT MATERIALIZE. HOWEVER, SINCE THE ASSESSEE COMPANY I S REQUIRED TO PAY RENT TO M/S ITA NO.4119/AHD/1995 ASSESSMENT YEAR 1`992-93 3 COASTAL ROADWAYS LTD, IT ACCOUNTED FOR THE RENT AMO UNT OF RS.72.48 LAKHS AND CLAIMED THE SAME AS EXPENDITURE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE LD. A.R CARRIED US THROUGH THE AGREEMENTS AND VARIOUS DOCUMENTS IN SUP PORT OF THE SAID CLAIM. HE SUBMITTED THAT, AS PER THE AGREEMENT ENTERED WITH M /S CRL, THE SAID COMPANY IS REQUIRED TO PROVIDE THE GODOWN SPACE AS AND WHEN RE QUIRED. HENCE, THE ASSESSEE DID NOT BOTHER ABOUT VERIFYING THE AVAILABILITY OF THE GODOWN SPACE WITH THE SAID COMPANY. HE SUBMITTED THAT THE REQUIREMENT OF GODO WN SPACE IS PROVED BY THE EXPORT ORDERS RECEIVED BY THE ASSESSEE. SINCE THE EXPORTS COULD NOT MATERIALIZE, THE ASSESSEE WAS NOT ABLE TO USE THE GODOWN SPACE THAT WAS AGREED TO BE PROVIDED BY M/S COASTAL ROADWAYS LTD. HE FURTHER SUBMITTED THAT THE NECESSITY OF INCURRING EXPENDITURE CANNOT BE QUESTIONED BY THE INCOME TAX AUTHORITIES AS THEY ARE REQUIRED TO SEE ONLY WHETHER AN EXPENDITURE IS INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THIS REGARD, HE RE LIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.A BUILDERS (288 ITR 1) AND ANOTHER DECISION REPORTED IN 233 ITR 101. HE FURTHER SUBMITTED THAT THE LD C IT(A) HAS RELIED UPON THE DECISION RENDERED IN THE CASE OF UNITED AGENCY OF I NDIA (P) LTD VS. CIT REPORTED IN 108 CTR 390 TO GRANT RELIEF AND THE SAID DECISIO N SQUARELY APPLIES TO THE FACTS OF THE INSTANT CASE. ON THE OTHER HAND THE LD D.R STR ONGLY RELIED UPON THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS FILED BY THE DEPA RTMENT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. ON A CAREFUL CONSIDERATION OF THE ARGUMENTS OF THE COUNS EL AND THE RECORD, WE ARE OF THE VIEW THAT THE DISPUTE IS WITH REGARD TO THE GENUINE NESS OF THE IMPUGNED EXPENDITURE CLAIM AND NOT ABOUT THE NECESSITY OF INCURRING THE IMPUGNED EXPENDITURE. AS PER THE MAIN FINDING OF THE AO ON THE IMPUGNED ISSUE, WHICH ARE ITA NO.4119/AHD/1995 ASSESSMENT YEAR 1`992-93 4 EXTRACTED IN PARA 2 SUPRA, M/S COASTAL ROADWAYS LTD WAS NEITHER THE OWNER NOR IN POSSESSION OF THE GODOWNS, WHICH HE HAS OFFERED TO PROVIDE TO THE ASSESSEE. WE ARE UNABLE TO UNDERSTAND HOW A PERSON COULD OFFER A NY THING, WHICH HE DOES NOT POSSESS AT ALL. WE ARE ALSO DOUBTFUL, WHETHER A PR UDENT BUSINESSMAN WOULD ENTER INTO AN AGREEMENT FOR A NON-EXISTENT GODOWN AND ALS O AGREE TO MAKE PAYMENT OF RS.72.48 LAKHS AS GODOWN RENT TO A PERSON, WHO DOES NOT HAVE THE REQUIRED INFRASTRUCTURE FACILITY. THE LD A.R HAS RELIED UPO N VARIOUS DOCUMENTS IN SUPPORT OF THE SAID CLAIM OF EXPENDITURE. IN OUR VIEW, THO SE DOCUMENTS ARE SELF SERVING AND MUCH RELIANCE COULD NOT BE PLACED UPON THEM. THE AS SESSEE PLACED RELIANCE ON THE COPIES OF EXPORT ORDERS TO SUBSTANTIATE THE REQUIRE MENT OF GODOWN SPACE. HOWEVER, ON A CAREFUL PERUSAL OF THE COPIES OF EXPO RT ORDERS, WE NOTICE THAT THE EXPORTS ARE REQUIRED TO BE COMPLETED BETWEEN 15 TH JANUARY AND 15 TH FEBRUARY. HOWEVER, THE ASSESSEE HAS ACCOUNTED FOR RENT FOR TH E PERIOD FROM SEPTEMBER, 1991 TO MARCH 1992. UNDER THESE FACTS, THE QUESTION THA T WOULD ARISE IS WHETHER ANY BUSINESS MAN WOULD PAY THE RENT FOR THE MONTH OF MA RCH, WHEN THERE IS NO REQUIREMENT OF GODOWN SPACE AT ALL. THE NECESSITY OF GODOWN SPACE ARISES ONLY WHEN THE PRODUCT IS PROCURED. THE ASSESSEE HAS NOT BROUGHT IN ANY MATERIAL TO SHOW THE PROCUREMENT PLANS, THE PLACES FROM WHERE T HE PRODUCTS SHALL BE PROCURED, THE STORAGE PERIOD, VOLUME TO BE PROCURED AT A TIME , THE QUANTITY TO BE SHIPPED AT A TIME ETC. IN OUR VIEW, A PRUDENT BUSINESS MAN WOUL D HAVE ANALYSED THESE KIND OF DETAILS BEFORE DETERMINING THE REQUIREMENT OF GODOW N SPACE. UNFORTUNATELY, THE ASSESSEE HAS FAILED TO BRING THESE DOCUMENTS ON REC ORD TO SUBSTANTIATE THE GENUINENESS OF THE CLAIM. MORE PARTICULARLY, THE O BSERVATION OF THE AO THAT M/S COASTAL ROADWAYS LTD DID NOT HAVE GODOWN SPACE HAS NOT BEEN DISPUTED AND THE SAID FACT PLACES DOUBT OF SHADOW ON THE IMPUGNED EX PENDITURE CLAIM. THE LD A.R PLACED HEAVY RELIANCE ON THE DECISION IN THE CASE O F UNITED AGENCY OF INDIA (P) LTD, SUPRA. HOWEVER, IN OUR VIEW, THE SAID DECISIO N IS NOT APPLICABLE TO FACTS OF THE ITA NO.4119/AHD/1995 ASSESSMENT YEAR 1`992-93 5 INSTANT CASE FOR THE REASON THAT, IN THE CASE OF UN ITED AGENCY OF INDIA (P) LTD, THE ASSESSEE THEREIN TOOK ON HIRE TWO MOTOR VESSELS AND ALSO TOOK POSSESSION THERE OF, WHERE AS IN THE INSTANT CASE, THE ASSESSEE HAS NOT TAKEN POSSESSION OF ANY GODOWN AND FURTHER THE HIRER DID NOT HAVE POSSESSION OF AN Y SUCH GODOWN. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW THAT THE ASSE SSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE IMPUGNED EXPENDITURE AND WE ARE IN AGREEMENT WITH THE VIEW OF THE ASSESSING OFFICER IN THIS REGARD. ACCORDING LY, WE SET ASIDE THE ORDER OF LD CIT (A) ON THIS ISSUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOW ED IN RESPECT OF GROUND NO.3 RAISED BY THEM. ORDER PRONOUNCED IN OPEN COURT ON 25-1-2012 SD/- SD/- (G.C.GUPTA) (B.R.BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) XII, AHMEDABAD.. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.4119/AHD/1995 ASSESSMENT YEAR 1`992-93 6 1.DATE OF DICTATION 20- 01 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 20 /01 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 23 - 01 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 01 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25- 01 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25 - 01 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..