M/s. Prithvi Associates, Ahmedabad V. The Jt.CIT.,Range-10, Ahmedabad

ITA 449/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67661 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA SRDR
• Keywords: Capital asset; Gift; Depreciation

Judgement Text

, , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.449/AHD/2013 [ASSTT.YEAR : 2009-2010] M/S.PRITHVI ASSOCIATES 35, SHRIMALI SOCIETY NAVRANGPURA POLICE STATION NAVRANGPURA, AHMEDABAD 380 009. PAN : AABFP 0834 A /VS. JCIT, RANGE-10 AHMEDABAD. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI ROHAN THAKKAR + 2 3 )/ REVENUE BY : SHRI O.P. BATHEJA, SR.DR 5 2 &(*/ DATE OF HEARING : 19 TH AUGUST, 2013 678 2 &(*/ DATE OF PRONOUNCEMENT : 5.9.2013 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-2010, IS DIRE CTED AGAINST THE ORDER OF THE CIT(A)-XVI, AHMEDABAD, DATED 2.1.2 013. 2. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. THE APPELLANT HEREBY SUBMITS THAT THE LD.CIT(A ) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ITA NO.449/AHD/2013 -2- DISALLOWANCE OF SALES PROMOTION EXPENSES AMOUNTING TO RS.3,00,000/- OUT OF DISALLOWANCE MADE BY LD.AO OF RS.4,81,959/- 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE SALES PROMOTIONAL EXPENSES REPRESENT GIFTS TO VARIO US BUSINESS ASSOCIATES AND WERE INCURRED FOR BUSINESS CONSIDERA TION, AND THEREFORE ALLOWABLE. HE SUBMITTED THAT IN THE EARL IER ASSESSMENT YEAR 2008-2009, THE ISSUE WENT UPTO THE TRIBUNAL AN D WAS RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO, AND THE AO AFTER VERIFICATION HAS ALLOWED THE AMOUNT OF SALES PROMOT ION EXPENSES EXCEPT A SUM OF RS.2 LAKHS CLAIMED THEREIN. HE SUB MITTED THAT THE DETAILS OF THESES EXPENSES HAVE BEEN FILED IN T HE COMPILATION BEFORE THE TRIBUNAL. THE LEARNED DR HAS OPPOSED TH E SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . HE SUBMITTED THAT IN THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR 2008-2009, THE ASSESSEE HAS PRODUCED IDENTITY PROOF OF THE RECIPIENTS OF THE GIFTS, THEREFORE, THE EXPENDITURE WAS ALLOWED BY THE AO, WHEREAS IN THIS YEAR, THE ASSESSEE COULD NO T PRODUCE THE ID-PROOF OF THE RECIPIENTS OF THE GIFT ITEMS. HE R ELIED ON THE ORDERS OF THE AO AND THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE HAVE ALSO PERU SED THE DETAILS OF THE EXPENSES FILED BY THE ASSESSEE IN TH E COMPILATION FILED BEFORE US. WE FIND THAT THE EXPENSES WERE IN CURRED IN CASH. THE NAMES OF THE RECIPIENTS OF THESE GIFT I TEMS COULD NOT BE DISCLOSED BY THE ASSESSEE. THE ASSESSEE HAS INC URRED EXPENSES ITA NO.449/AHD/2013 -3- IN SOME HOTELS ETC. ALSO, FOR WHICH DETAILS COULD N OT BE PRODUCED BEFORE US. THE ASSESSEE HAS HIRED 14 COTTAGES ON 1 5/8/2008 AND 12 COTTAGES ON 16/8/2008 AT THE RATE OF RS.2,550/- PER COTTAGE AND HAS HIRED LCD PROJECTOR WITH SCREEN AND CERTAIN EXT RA SERVICES IN DIFFERENT ROOMS, BUT COULD NOT GIVE DETAILS OF THE NAMES OF GUESTS, WHO STAYED IN THESE COTTAGES. LIKEWISE, THERE ARE OTHER VOUCHERS ALSO FOR EXPENSES, FOR WHICH THE DETAILS OF THE REC IPIENTS ARE NOT AVAILABLE. CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE, AND THAT THE EXPENSES WERE INCURRED IN CASH AND THE DET AILS OF THE RECIPIENTS OF THE GIFTS ITEMS OR THE GUESTS ENTERTA INED COULD NOT BE MADE AVAILABLE BY THE ASSESSEE, WE ARE OF THE VIEW THAT ENDS OF JUSTICE SHALL BE MET, IF THE DISALLOWANCE IS RESTRI CTED TO RS.2,00,000/- OUT OF SALES PROMOTION EXPENSES, AS A GAINST RS.3,00,000/- SUSTAINED BY THE CIT(A), AND ACCORDIN GLY, THE GROUND NO.1 OF THE ASSESSEE IS PARTLY ALLOWED. 5. THE GROUND NO.2 OF THE ASSESSEE IS AS UNDER: 2. THE APPELLANT HEREBY SUBMITS THAT THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ADDITION OF RS.1,57,737/- ON ESTIMATE BASIS ON ACCOUNT OF JO B WORK CHARGES INCURRED ON THE FURNITURE. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS PURCHASED TIMBER (WOOD) FOR ITS JOINT OFFICE WITH ITS SISTER CONCERN, AND ENTIRE LABOUR EXPENSES WERE INC URRED BY THE SISTER CONCERN OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS FILED NECESSARY DETAILS OF LEDGER ACCOUNT OF THE SI STER CONCERN, WHEREIN THE LABOUR EXPENSES ON MAKING FURNITURE FOR THE JOINT ITA NO.449/AHD/2013 -4- OFFICE OF THE ASSESSEE-FIRM AS WELL AS THE SISTER C ONCERN WERE DEBITED. HE SUBMITTED THAT THE ADDITION MADE BY ES TIMATING 25% OF THE TIMBER PURCHASE VALUE BY WAY OF ESTIMATE OF LABOUR CHARGES THEREIN IS WHOLLY UNCALLED FOR, SINCE THE A SSESSEE HAS NOT CLAIMED THE DEDUCTION THEREOF, AND THERE IS NO MATE RIAL BROUGHT ON RECORD TO SUGGEST THAT THE SISTER CONCERN, M/S.P URNIMA ADVERTISING AGENCY P. LTD. HAS DEBITED THE LABOUR E XPENSES WITH REGARD TO SOME OTHER TIMBER WORK. THE LEARNED DR R ELIED ON THE ORDERS OF THE AO AND THE CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE HAS FILED COMPLETE DETAILS OF EXPENSES ON ACCOUNT OF LA BOUR FOR CONVERTING THE TIMBER INTO FURNITURE FOR JOINT OFFI CE OF THE ASSESSEE-FIRM AS WELL AS ITS SISTER CONCERN, M/S.PU RNIMA ADVERTISING AGENCY P. LTD. THE ASSESSEE HAS DEBITE D THE COST OF TIMBER IN THE ACCOUNTS OF THE ASSESSEE FIRM AND THE COST OF LABOUR CHARGES HAS BEEN DEBITED TO THE ACCOUNTS OF THE SIS TER CONCERN OF THE ASSESSEE. NO DEDUCTION OF THE LABOUR CHARGES, DEBITED IN THE BOOKS OF SISTER CONCERN, WERE CLAIMED BY THE ASSESS EE. THE ESTIMATE OF LABOUR CHARGES AT 25% OF THE COST OF TI MBER HAS NO BASIS. THERE IS NO MATERIAL BROUGHT ON RECORD ON B EHALF OF THE REVENUE TO SUGGEST THAT THE LABOUR EXPENSES INCURRE D AND DEBITED IN THE BOOKS OF M/S.PURNIMA ADVERTISING AGENCY P. L TD. PERTAINS TO SOME OTHER TIMBER WORK CONVERTED INTO FURNITURE BY THE SISTER CONCERN. THE DEPARTMENT HAS NOT DENIED THE CLAIM OF THE ASSESSEE THAT THE JOINT OFFICE IS MAINTAINED FOR BO TH THE ASSESSEE- ITA NO.449/AHD/2013 -5- FIRM AS WELL AS SISTER CONCERN, M/S.PURNIMA ADVERTI SING AGENCY P. LTD. IN THESE FACTS OF THE CASE, WE ARE UNABLE T O UPHOLD ANY ADDITION MADE BY WAY OF ESTIMATE, AND ACCORDINGLY, THE GROUND NO.2 OF THE ASSESSEE IS ALLOWED. 8. THE GROUND NO.3 IS AS UNDER: 3. THE APPELLANT HEREBY SUBMITS THAT THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE DISALLOWANCE OF DIWALI EXPENSES INCLUDED IN SALES PROMOTION EXPENSES AMOUNTING TO RS.6,00,000/- OUT O F DISALLOWANCE MADE BY THE LD. AO OF RS.6,91,333/- 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE FACTS OF THE CASE AND THE ARGUMENTS OF THE ASSESSEE ARE SAME, AS APPLICABLE TO THE GROUND NO.1 OF THE ASSESSEE IN TH E PRESENT APPEAL. THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE COMPLETE DETAILS OF DIWALI EXPENSES ARE MAINTAINED BY THE ASSESSEE. HOWEVER, MOST OF THE EXPENSES WERE INCUR RED IN CASH AND DETAILS OF THE RECIPIENTS AND NAMES AND ADDRESS ES OF THE RECIPIENTS OF THE DIWALI GIFTS ETC. ARE NOT MAINTAINED BY THE ASSESSEE. IN THESE FACTS, WE HOLD THAT ENDS OF JUS TICE SHALL BE MET IF THE DISALLOWANCE IS RESTRICTED TO RS.4,00,000/- AS AGAINST RS.6,00,000/- SUSTAINED BY THE CIT(A), AND ACCORDIN GLY, THE GROUND NO.3 OF THE ASSESSEE IS PARTLY ALLOWED. 10. THE GROUND NO.4 OF THE ASSESSEES APPEAL IS AS UNDER: 4. THE APPELLANT HEREBY SUBMITS THAT THE LD.CIT(A) HAS ERRED LAW AS WELL AS ON FACTS IN MAKING ADDITION OF ITA NO.449/AHD/2013 -6- RS.3,09,224/- TOWARDS CAPITALIZATION OF PROFESSIONA L FEES PAID TO SARJAN ARCHITECT AND PROJECT CONSULTANTS. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT HAS INCURRED AN EXPENSES OF RS.3,09,224/- ON ACCOUNT OF ARCHITECT FEES WHICH WAS WRONGLY CAPITALIZED BY THE DEPARTMENT, AL THOUGH, THE SAME IS REVENUE IN NATURE. THE LEARNED DR HAS RELI ED ON THE ORDERS OF THE AO AND THE CIT(A). 12. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY AND HAS PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FI ND THAT THE ASSESSEE HAS INCURRED THE ARCHITECT FEES FOR BUS SH ELTERS MADE BY IT AS PART OF ITS ADVERTISING BUSINESS, AND THE ASSESS EE HAS HIMSELF TREATED THE BUS SHELTERS AS CAPITAL ASSETS, AND HAS CLAIMED CORRESPONDING DEPRECIATION THEREON. IN THESE FACTS , THE CIT(A) HAS ALSO HELD THAT ALL THE EXPENDITURE CONNECTED WI TH THE CREATING OF THE SHELTER WOULD BECOME CAPITAL IN NATURE, AND THERE CANNOT BE A CASE OF PART REVENUE, PART CAPITAL. THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ISSUE, AND THE EXPENDIT URE BEING PART OF THE BUS SHELTERS ADMITTED BY THE ASSESSEE AS CAP ITAL ASSETS, WE HOLD THAT THERE IS NO MERIT IN THE GROUND OF THE AP PEAL OF THE ASSESSEE ON THIS ISSUE, WHICH IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT