Patnail Minerals Pvt, Ltd, Keonjhar V. DCIT, Sambalpur

ITA 43/CTK/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4279 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2010
• Court: TRIBUNAL
• Department Lawyers: A S MONDAL
• Assessee Lawyers: S C BHADRA
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE HONBLE SHRI D.K.TYAGI, JUDICIAL MEMBER. /AND HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER . / I.TA.NO . 43/CTK/2010 / ASSESSMENT YEAR 2006 - 07 PATNAIK MINERALS PVT., BONEIKALA, JODA, KEONJHAR, ORISSA. PAN AABCP 3278 P - - - VERSUS - . DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), SAMBALPUR. / A PPELLANT RESPONDENT FOR THE APPELLANT : SHRI S.C.BHADRA, AR FOR THE RESPONDENT : SHRI A.S.MONDAL, DR / ORDER SHRI K.K.GUPTA, A CCOUNTANT MEMBER . THE ONLY GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS WITH RESPECT TO CONFIRMING DISALLOWANCE OF EXPENDITURE FOR PERIPHERY DEVELOPMENT SCHEME AMOUNTING TO RS.22,08,641.73 BY THE LEARNED ASSESSING OFFICER , WHEREAS, ON THE FACTS AND C IRCUMSTANCES OF THE CASE, THE EXPENDITURE SHOULD HAVE BEEN ALLOWED AS FOR THE BUSINESS OF THE ASSESSEE AS THE SAME WAS INCURRED IN PURSUANCE TO THE APPROVAL OF COLLECTOR AND DISTRICT MAGISTRATE, KEONJHAR IN THE LINE WITH THE JUDGEMENT IN THE CASE OF SAMAT HA VR. STATE OF ANDHRA PRADESH. 2. THE ASSESSEE DERIVES INCOME FROM MINING AND PROCESSING OF IRON ORE AND FILED RETURN OF INCOME DECLARING INCOME OF RS.91.64 CRORES. ON SCRUTINY OF THE RETURN, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SPENT RS.49,0 8,641 CLAIMING THE SAME IN THE PROFIT & LOSS ON ACCOUNT AS PERIPHERY DEVELOPMENT EXPENSES. HE NOTED THAT A SUM OF RS.27 LAKHS HAD BEEN PAID TO PERIPHERY DEVELOPMENT SOCIETY AS PER THE DIRECTION OF DISTRICT COLLECTOR, KEONJHAR . HOWEVER ON VERIFYING THE REMA INING EXPENSES, THE COMPANY HAD CONTRIBUTED FOR RUNNING AND MAINTENANCE OF SARASWATI SISU MANDIR, CONSTRUCTION OF SCHOOL BUILDING, LADIES HOSTEL, REPAIR OF ROAD AND WATER PROJECT ETC. ON QUERY TO THE ASSESSEE, THE ASSESSEE SUBMITTED THAT AS PER CIRCULAR OF ORISSA GOVERNMENT, THE COMPANY WAS TO SPEND 5% OF NET PROFIT TOWARDS PERIPHERY / I.TA.NO .43/CTK/2010 2 DEVELOPMENT WAS TO BE SUBSTANTIATED BY A CIRCULAR OR ORDER OF THE STATE GOVERNMENT. DISTRICT COLLECTOR BEING THE CHAIRMAN OF THE PERIPHERY DEVELOPMENT SOCIETY, KEONJHAR WAS NOT AVAILABLE BEFORE THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE CLAIM OF RS.22,08,641.73. 3. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO REITERATED THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE REPLY OF THE ASSESSEE BEF ORE HIM TO CONCLUDE THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT IT WAS UNDER ANY OBLIGATION TO SPENT MORE THAN 5% AS SETTLED IN THE GOVERNMENT POLICY OF GRANTING OF LEASE AND TRANSFER OF LAND FOR COMMERCIAL PROJECTS IN SCHEDULED AREAS. HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE EXPENSES OVER AND ABOVE THE LIMIT OF 5% AS JUSTIFIED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT BEING SATISFIED HI MSELF, THE LEARNED CIT(A) OUGHT NOT TO HAVE CONFIRM THE ACTION OF THE ASSESSING OFFICER IN VIEW OF THE FACT THAT THE AMOUNT OF RS.49.08 LAKHS WAS ITSELF ABOUT % OF THE NET PROFIT WHEREAS THE ASSESSING OFFICER HA D ALLOWED APPROXIMATELY 50% THEREOF BUT HAD DISALLOWED THE RESIDUAL AMOUNT OF RS.22.08 LAKHS WITHOUT ANY REASON AND MORE SPECIFICALLY HAVING ACCEPTED THE FACT THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE EXPENSES AS FOR ASSESSEES BUSINESS WERE IN ACCORDANCE WITH THE DIRECTION OF THE DISTRICT DEVELOP MENT OFFICER REQUIRING THE MAXIMUM AMOUNT TO BE SPENT AT RS.5. 49 CRORES. THEREFORE, HE POINTED OUT THAT IT WAS MISMATCHING BY THE ASSESSING AUTHORITIES OF THE AMOUNT TO BE SPENT AND THE OBLIGATION WHICH WAS CAST ON THE ASSESSEE TO SPENT THE AMOUNT IN ACCOR DANCE WITH THE DIRECTION OF PERIPHERY DEVELOPMENT COMMITTEE WHEREIN THE DISTRICT COLLECTOR WAS THE CHAIRMAN AND HAVING ACCEPTED THE SUM OF RS.27 LAKHS IT DIRECTED THE ASSESSEE TO SPENT THE REMAINING AMOUNT OF RS.22.08 LAKHS FOR DEVELOPMENT OF SCHOOLS, HOST ELS ETC. IN SUPPORT OF HIS CONTENTION HE HAS FILED THE COPY OF THE LETTER ADDRESSED TO THE ASSESSEE COMPANY WHICH ACKNOWLEDGES THE AMOUNT RECEIVED AND THE BALANCE TO BE PAID INCLUDING THE MINUTES OF PROCEEDINGS OF THE PERIPHERY DEVELOPMENT COMMITTEE THAT A CKNOWLEDGES THE ASSESSEE TO INCULCATE SUCH EXPENDITURE FOR THE DEVELOPMENT. HE HAS ALSO ENCLOSED THE COPY OF THE PROJE CT REPORT WHICH PROJECTED COST WAS AT RS.5 1.88 LAKHS TO BE BORNE BY THE ASSESSEE FOR THIS / I.TA.NO .43/CTK/2010 3 PROJECT. THEREFORE, HE SUBMITTED THAT THE LEARNE D CIT(A) MISDIRECTED HIMSELF TO HOLD THAT THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE HAD SPENT MORE THAN 5% WHICH OTHERWISE IS GLARING IN ITSELF AS NET PROFIT OF RS.91 CRORES VIS - - VIS AMOUNTS SPENT TOTALLING TO RS.49.08 LAKHS. HE PRAYED THAT THI S AMOUNT MAY BE DIRECTED TO BE ALLOWED AS EXPENSES IN ACCORDANCE WITH LAW. 5. THE LEARNED DR SUBMITTED THAT NO DETAILS WITH RESPECT OF THE AMOUNT SPENT ON THE PURPORTED SCHEME BEING LADIES HOTEL, REPAIR OF ROADS AND WATER PROJECTS, HAD BEEN FURNISHED TO TH E ASSESSING OFFICER, THEREFORE, WAS RIGHTLY CONSIDERED FOR DISALLOWANCE BY THE AUTHORITIES BELOW. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILABLE ON RECO RD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE ARE INCLINED TO HOLD THAT THE AUTHORITIES BELOW MISDIRECTED THEMSELVES TO HOLD THAT EITHER THE ASSESSEE WAS NOT ENTITLED TO A PART OF THE PERIPHERY DEVELOPMENT COMMITTEE FOR BUSINESS EXPENS E WHICH PARTLY WAS CONSIDERED ACCEPTABLE BY THE ASSESSING OFFICER AND ON THE OTHER HAND, THE LEARNED CIT(A) MISDIRECTED HIMSELF TO CONSIDER THAT THE SAID SUM CLAIMED IN THE PROFIT & LOSS ACCOUNT WAS EXCEEDING 5% LIMIT AS ALLOWABLE TO THE ASSESSEE UNDER TH E PROVISIONS OF LAW. 7. ON BOTH THE COUNTS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM THE EXPENDITURES IN SO FAR AS THE ASSESSING OFFICER HAS NOT POINTED OUT ON VERIFICATION OF THE EXPENSES TO THE EFFECT THAT IT DID NOT LEAD TO A FINDING THAT THE EXPENSES HAD NOT BEEN MADE AS CLAIMED. THEREFORE, HAVING SPENT THE AMOUNT IN ACCORDANCE WITH THE DIRECTION OF THE DISTRICT COLLECT OR AND AS PER THE RECOMMENDATION OF THE PERIPHERY DEVELOPMENT COMMITTEE DULY ACKNOWLEDGED ON THE BASIS OF TH E PRINCIPAL SECRETARY, STEEL AND MINES DEPARTMENT ACKNOWLEDGING IN ACCORDANCE WITH THE PROJECT TO BE EXECUTED BY THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THERE WAS NO CA U SE FOR DISALLOWANCE OF THE PART EXPENDITURE AS CONSIDERED BY THE ASSESSING OFF ICER. 7. IN THE LIGHT OF THE LEARNED DR NOT SPECIFYING THE AMOUNTS INVOLVED, WE ARE INCLINED TO HOLD THAT THE AMOUNT SPENT TOGETHER WITH THE AMOUNT DIRECTLY PAID TO THE / I.TA.NO .43/CTK/2010 4 DISTRICT COLLECT OR WAS IN ACCORDANCE WITH PROJECTED AMOUNTS FOR THE BUSINESS OF THE A SSESSEE , THEREFORE, REQUIRES NO FURTHER VERIFICATION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 30.07.2010 S D / - S D / - ( ), D.K .TYAGI JUDICIAL MEMBER (K.K.GUPTA), ACCOUNTANT MEMBER. DATE: 30.07.2010 - COPY OF THE ORDER FO RWARDED TO : / THE APPELLANT : PATNAIK MINERALS PVT., BONEIKALA, JODA, KEONJHAR, ORISSA. / THE RESPONDENT : DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), SAMBALPUR. THE CIT, THE CIT(A), DR, CUTTACK BENCH GUARD FILE TRUE COPY , BY ORDER , [ ] SENIOR PRIVATE SECRETARY ( /) H.K.PADHEE SENIOR.PRIVATE SECRETARY.