Swastik Stevedores (P) Ltd, Cuttack V. ACIT, Cuttack

ITA 429/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4345 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 21-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-12-2010
• Court: TRIBUNAL
• Assessee Lawyers: R KARARS; G NAIK
• Section: 37(1)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 429/CTK/2010 (ASSESSMENT YEAR 2007 - 08) SWASTIK STEVEDORES (P) LTD., PARESWAR SAHI,JOBRA,CUTTACK PAN : AACCS 7481 L VERSUS ACIT, CIRCLE 1(1), CUTTACK. (APPELLANT) (RESPONDENT) ITA NO. 440 /CTK/2010 (ASSESSMENT YEAR 2007 - 08) ACIT, CIRCLE 1(1), CUTTACK. VERSUS SWASTIK STEVEDORES (P) LTD., PARESWAR SAHI,JOBRA,CUTTACK PAN : AACCS 7 481 L (APPELLANT) (RESPONDENT) FOR THE ASSESSEE: SHRI G.NAIK AND R.KAR, ARS FOR THE DEPARTMENT: NONE ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE APPEALS BY THE ASSESSEE AS WELL AS THE REVENUE ARISE OUT OF A COMMON ORDER OF THE LEARNED COMMISSI ONER OF INCOME - TAX (APPEALS) DT.20.9.2010. 2. THE ASSESSEE AGITATES THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ESTIMATION OF INCOME ON THE BASIS OF GROSS RECEIPTS WHICH COULD NOT HAVE LED TO DISALLOWANCE OF INTEREST INCOME EARNED SEPARATELY AS AG AINST INTEREST EXPENDITURE BEING HIGHER THAN THE INCOME THAT HAS BEEN EARNED AND HELD THE PART OF THE BUSINESS TRANSACTIONS. 3. THE REVENUE IN ITS APPEAL IS AGITATING THE ACTION OF THE LEARNED CIT(A) IN UPHOLDING THE ESTIMATION ON THE BASIS OF GROSS RECE IPTS AT CERTAIN PERCENTAGE OF DIFFERENT BUSINESS OF THE ASSESSEE BUT ON THE BASIS OF PROCEEDINGS U/S.144 OF THE I.T.ACT. THE REVENUE HOWEVER AGITATES THE ACTION OF THE LEARNED CIT(A) HAVING ERRED IN DELETING THE ADDITION OF RS.14,50,420 ON ACCOUNT OF SPEED MONEY AS PER THE PROVISIONS OF SECTION 37(1) RELYING ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT (232 ITR 776). THE REVENUE AGITATES THAT THE ITA NO.429 AND 440 /CTK/2010 (CROSS APPEALS) 2 RATIO OF THE SAID DECISION IS NOT APPLICABLE TO THE FACT S OF THE ASSESSEES CASE. 4. WE HAVE HEARD THE LEARNED AR OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE, A PRIVATE LIMITED COMPANY, DERIVES INCOME FROM STEVEDORING AND EXECUTION OF CONTRACT WORKS. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DISCLOSING TOTAL INCOME OF RS.24,85,810. THE ASSESSING OFFICER PASSED THE IMPUGNED ORDER U/S.144 BY ESTIMATING INCOME ON THE BASIS OF GROSS RETURNS AT 4% ON STEVEDORING WORK, AT 8% FROM CONTRACT RECEIPTS AND 5% F ROM SUB - CONTRACT RECEIPTS. HE DISALLOWED PAYMENT OF SPEED MONEY AMOUNTING TO RS.14,5 0,420 CLAIMED IN THE CONSOLIDATED PROFIT & LOSS ACCOUNT AND ALSO INTEREST INCOME CREDITED IN THE P & L ACCOUNT AMOUNTING TO RS.8,51,152 OVER AND ABOVE THE ESTIMATED INCOME. THE LEARNED AR OF THE ASSESSEE FURNISHED P & L ACCOUNT INDICATING THAT ONCE THE ASSESSING OFFICER IN HIS ORDER HAS RESORTED TO ESTIMATION ON THE GROSS RECEIPTS, THE EXPENDITURE CLAIMED ARE TO BE CONSIDERED AS ALLOWED WHICH INCLUDED THE PAYMENT OF INTEREST AMOUNTING TO RS.16,55,531. HE POINTED OUT THAT THE EARNING OF INTEREST THEREFORE WAS IN THE SAME ANALOGY WHEN THE TERM LOANS AND CASH CREDITS FROM VARIOUS BANKS AND PRIVATE FINANCIER WERE OBTAINED TO THE TUNE OF RS.1.65 CRORES. HE SUBMITTED THAT THE AMOUN T OF INTEREST SOUGHT TO BE SEPARATELY CONSIDERED BY THE ASSESSING OFFICER A S NOT PERTAINING TO THE CONTRACT BUSINESS THEREFORE WAS UNILATERALLY CONSIDERED AGAINST THE ASSESSEE INSOFAR AS THE EARNING OF INTEREST WAS EARNED ON THE FIXED DEPOSITS LYING AS MAR GIN MONEY AND SECURITY WITH THE BANKS AND CONTRACTEES. THE EARNING OF INTEREST THEREFORE WAS TO BE SET OFF AGAINST THE INTEREST PAID AS PERTAINING TO THE SAME BUSINESS COULD NOT BE ISOLATED FOR THE PURPOSE OF ESTIMATION OF INCOME FROM THE CONTRACT RECEIPTS AND SUB - CONTRACT RECEIPTS AT 8% AND 5% RESPECTIVELY. HE POINTED OUT THAT THE ESTIMATION AS MADE BY THE ASSESSING OFFICER U/S.144 HAS ITA NO.429 AND 440 /CTK/2010 (CROSS APPEALS) 3 BEEN CONFIRMED BY THE LEARNED CIT(A) WHICH GROUND HE DOES NOT WISH TO PRESS ON THE FACTS AND CIRCUMSTANCE AS ON HAVING REN DERED THE INTEREST INCOME SEPARATELY WAS NOT THE CONTENTION OF THE ASSESSING OFFICER AS NOT PERTAINING TO THE BUSINESS. ONCE THE ULTIMATE ESTIMATION IS IN ACCORDANCE WITH THE PROVISIONS OF LAW HAS BEEN BROUGHT TO TAX OTHER INCOME OR EXPENDITURE OF THE SAM E BUSINESS COULD NOT BE DISAL LOWED. CONTINUING HIS ARGUMENT O N THE REVENUES APPEAL, HE SUPPORTED THE ORDER OF THE EARNED CIT(A) ON THE ISSUE OF ALLOWING SPEED MONEY WHICH HE SUBMITTED WAS FOR THE PURPOSE OF GETTING WORK DONE THROUGH THE LABOURERS FOR LOAD ING AND UNLOADING SHIPS WHICH IS BARRED BY LIMITATION INSOFAR AS SHIPS HAVE TO SAIL ON A PRESCRIBED DATE DULY LICENSED BY THE GOVERNMENT AUTHORITIES AND PORT TRUST. PLACING RELIANCE ON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWEL L CONSTRUCTIONS V. CIT (232 ITR 776) THE LEARNED CIT(A) RIGHTLY HELD THAT SUCH EXPENSES WHICH DO NOT BECOME PART OF THE WAGE BOARD HAVE TO BE PAID IN ORDER TO GET THE WORK DONE ON TIME AND THEREFORE MAY NOT HAVE LEGAL SANCTITY IN THE EYES OF LAW WHICH ARE GOVERNED IN ACCORDANCE WITH THE LABOUR COURTS AND WAGE BOARDS OF THE PORT TRUST WHERE THE WORK OF LOADING AND UNLOADING WAS EXECUTED. 5. WE ARE INCLINED TO AGREE WITH THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE INSOFAR AS ONCE THE ASSESSING OFFICER CHOOSE S TO ESTIMATE THE INCOME FROM BUSINESS AND WITHOUT BRINGING ON RECORD AS TO HOW THE INTEREST PAID FOR THE BUSINESS OF THE ASSESSEE AMOUNTING TO APPROX. RS.16 LAKHS IS ALLOWABLE EXPENDITURE OUGHT TO HAVE CONSIDERED THE SUM OF RS.8,51,152 AS PART AND PARCEL OF THE SAME BUSINESS INSOFAR AS THE LEARNED CIT(A) HAS GIVEN NO BASIS TO CONFIRM THE SAME. THE END RESULT OF ESTIMATING THE INCOME IN THE P & L ACCOUNT BEING 8% AND 5% ON THE CONTRACT RECEIPTS AND SUBCONTRACT RECEIPTS RESPECTIVELY WOULD NOT HAVE DIS TURBED THE NET RESULT OF INTEREST ITA NO.429 AND 440 /CTK/2010 (CROSS APPEALS) 4 EARNED MINUS INTEREST PAID WHICH WOULD BE A NEGATIVE FIGURE AND WOULD RATHER REDUCE THE ESTIMATION OF INCOME WHICH AS PER THE LEARNED COUNSEL FOR THE ASSESSEE IS NOT PRESSED FOR. SIMILARLY THE SPEED MONEY DISALLOWED AFTER ESTIMATING THE INCOME HAS BEEN CONSIDERED BY THE LEARNED CIT(A) IN THE SAME IDEOLOGY INSOFAR AS THE HONBLE ANDHRA PRADESH DECISION RELIED UPON BY HIM CLEARLY INDICATES THAT WHEN THE INCOME IS ESTIMATED AFTER REJECTING THE BOOKS IT IS NOT PERMISSIBLE TO RE LY ON THE DISALLOWING THE EXPENDITURE WHICH HAVE BEEN CLAIMED IN THE P & L ACCOUNT. ON THIS ISSUE THEREFORE WE UPHOLD THE ORDER OF THE LEARNED CIT(A). 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THAT FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELL ANT: SWASTIK STEVEDORES (P) LTD., PARESWAR SAHI,JOBRA,CUTTACK 2. THE RESPONDENT: ACIT, CIRCLE 1(1), CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.