M/s. Rithwik Swathi Jt. Venture, Hyd, Hyderabad V. ACIT,Circle-3(1), Hyderabad

ITA 451/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66517 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: M V JOSHI
• Keywords: Business expenditure; Corroborative evidences; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO .451/HYD/12 ASST. YEAR 2008-09 M/S RITHWIK SWATHI JOINT VENTURE, HYDERABAD. PAN:AAAAR2384K V/S. ACIT, CIR-3(1), HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.V. JOSHI. RESPONDENT BY : SMT. VIDISHA KALRA DATE OF HEARING 04 - 12 - 2012 DATE OF PRONOUNCEMENT 04-12-2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THIS APPEAL BEING AGGRIEVED BY THE ORDER PASSED BY THE CIT (A)-IV, HYDERABAD PASSED IN ITA NO.50 1/AC 3(1)/CIT(A)-IV/2010-11 PERTAINING TO THE ASSESSMENT YE AR 2008-09. 2. IN GROUND NOS. 1 TO 7, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF BANK GUARANTEE COMMISSION. BRIEFLY THE FACTS ARE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IN THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT T HE ASSESSEE HAS DEBITED AN AMOUNT 74,18,621/- TOWARDS BANK GUARAN TEE COMMISSION. IT WAS FURTHER NOTICED BY THE ASSESSING OFFICER THAT THE PRINCIPAL CONTRACTOR PROGRESSIVE CONSTRUCTION LTD. (PCL IN SHORT) THOUGH ITA NO.451 OF 2012 M/S. RITHWIK SWATHI (JV),HYD. 2 HAS ISSUED THE BANK GUARANTEES ON BEHALF OF THE ASSESSEE, W HEREAS THE EXPENSES ARE BEING CHARGED TO THE ASSESSEE. THE ASSESSING O FFICER INFERRING THAT THE SAME WAS NOT AS PER THE TERMS AND TH E CONDITIONS OF THE CONTRACT BETWEEN THE ASSESSEE AND THE PCL AND FURTHE R SINCE THE BALANCE-SHEET DID NOT SHOW ANY BANKING LOAN/DEPOSITS DI SALLOWED THE DEDUCTION CLAIM TOWARDS BANK GUARANTEE COMMISSION. THE CIT (A) ALSO UPHELD THE DISALLOWANCE. BEING AGGRIEVED OF THE DISAL LOWANCE, THE ASSESSEE IS IN APPEAL BEFORE US. 3. AT THE OUTSET, THE LEARNED AR AS WELL AS LEARNED DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSUE IS COVERED BY TH E ORDER OF THE TRIBUNAL PASSED IN THE CASE OF THE SAME ASSESSEE FOR THE PR ECEDING ASSESSMENT YEAR 2007-08 IN ITA NO.797/HYD/2011 DATED 22- 3-2012. A COPY OF THE SAID ORDER WAS ALSO PRODUCED BEFORE US. ON GOING THROUGH THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSEES OWN CA SE (SUPRA) WE FIND THAT THE IDENTICAL DISPUTE ALSO CAME UP BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2007-08 IN THE CASE OF THE SAME ASSESSEE. THE TRIBUNAL REMITTED THE MATTER BACK TO THE ASSESSING OFFICE R FOR VERIFICATION BY OBSERVING IN THE FOLLOWING MANNER:- 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. THE CLAIM OF THE ASSESSEE IS THAT THE BANK GUARANTEE HA S BEEN GIVEN ON BEHALF OF THE ASSESSEE BY ITS PRINCIPAL M/S. PCL IN FAVOUR OF M/S . THDC. ON THIS M/S. PCL INCURRED BANK GUARANTEE COMMISSION AT RS. 58,61,341 AND THE SAME WAS REIMBURSED BY THE ASSESSEE TO M/S. PCL AS THE BANK GUARANTEE IS GIVEN ON BEHALF OF THE ASSESSEE IN FAVOUR OF M/S. THDC. ACC ORDING TO THE ASSESSEE THIS IS A BUSINESS EXPENDITURE. IN OUR OPINION, IF THE BANK GUARANTEE HAS BEEN GIVEN TO M/S. THDC BY M/S. PCL ON BEHALF OF THE ASS ESSEE THEN THE BANK GUARANTEE COMMISSION HAS TO BE TREATED AS BUSINESS EXPENDITURE IN VIEW OF THE ITA NO.451 OF 2012 M/S. RITHWIK SWATHI (JV),HYD. 3 JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. AKKAMBA TEXTILES LTD. (117 ITR 294) WHEREIN IT WAS HELD AS UNDER: 'THE QUESTION WHETHER A PARTICULAR EXPENDITURE IS R EVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINESS MUST BE VI EWED IN THE LARGER CONTEXT OF BUSINESS NECESSITY OR EXPEDIENCY. IF THE OUTGOING EXPENDITURE IS SO RELATED TO THE CARRYING ON OR THE CONDUCT OF BUS INESS, THAT IT MAY BE REGARDED AS AN INTEGRAL PART OF THE PROFIT-EARNING PROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT C HARACTER, THE POSSESSION OF WHICH IS A CONDITION TO THE CARRYING ON OF BUSIN ESS, THE EXPENDITURE MAY BE REGARDED AS REVENUE EXPENDITURE. THE TRANSACTION OF ACQUISITION OF ASSETS CAN BE SAI D TO BE CLOSELY RELATED TO THE COMMENCEMENT AND CARRYING ON OF BUSINESS BY AN ASSESSEE. HENCE, ANY EXPENDITURE INCURRED BY THE ASSESSEE, WHICH IS A RUNNING CONCERN, FOR ENSURING USE OF MONEY FOR A CERTAIN PERIOD OR ENABL ING THE ASSESSEE TO MAKE DEFERRED PAYMENT OF COST OF ASSETS ACQUIRED, C ONSTITUTES REVENUE EXPENDITURE AND, THEREFORE, THE SAME IS ADMISSIBLE AS DEDUCTION FROM REVENUE INCOME. THEREFORE, THE COMMISSION PAID BY T HE ASSESSEE TO THE GUARANTOR FOR ENABLING IT (THE ASSESSEE) TO MAKE DE FERRED PAYMENT OF THE PURCHASE CONSIDERATION, CONSTITUTES REVENUE EXPENDI TURE AND NOT CAPITAL EXPENDITURE AND, THEREFORE, IS ADMISSIBLE AS DEDUCT ION FROM THE INCOME.' 10.FURNISHING OF BANK GUARANTEE ON BEHALF OF THE AS SESSEE BY M/S. PCL HAS TO BE VERIFIED AND DECIDED ACCORDINGLY. AC CORDINGLY, THE ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFF ICER FOR FRESH CONSIDERATION. FOLLOWING THE AFORESAID FINDING OF THE TRIBUNAL, WE ALSO REMIT THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL VER IFY AND DECIDE THE ISSUE ACCORDINGLY. 4. IN THE RESULT, GROUNDS NOS. 1 TO 7 ARE ALLOWED FOR STATISTICAL PURPOSE. 5. IN GROUND NOS. 8 AND 9, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT (A) CONFIRMING THE ADDITION OF RS.20,85,450/- ON ACCOUNT OF ELECTRICAL MATERIALS PURCHASE. BRIEFLY, THE FACTS ARE IN COURSE OF ASSESSMENT PROCEEDINGS, WHILE EXAMINING PROFIT AND LOSS A /C OF THE ITA NO.451 OF 2012 M/S. RITHWIK SWATHI (JV),HYD. 4 ASSESSEE FILED ALONG WITH RETURN OF INCOME, THE ASSESSING O FFICER NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,5 9,94,857/- TOWARDS ELECTRICAL MATERIAL PURCHASES. THE ASSESSING OFFICER CALLED FOR THE SUPPORTING EVIDENCE LIKE BILLS AND VOUCHERS WHICH WER E PRODUCED BEFORE HIM BY THE ASSESSEE. THE ASSESSING OFFICER ON EXAMIN ATION OF BILLS AND VOUCHERS, FOUND THAT PURCHASES TO THE EXTENT OF RS.20,85,450/- WAS NOT SUPPORTED BY ANY BILLS OR VOUCHER S. THE ASSESSING OFFICER THEREFORE MADE ADDITION OF THE SAID A MOUNT TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE BEING AGGRIEVE D OF THE ADDITION FILED AN APPEAL BEFORE THE CIT (A). 5. IN COURSE OF HEARING OF APPEAL, THE ASSESSEE DISPUTING THE ADDITION MADE BY THE ASSESSING OFFICER SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION ON T HE BASIS OF ESTIMATE AS THE ASSESSEE WAS HAVING ALL THE BILLS AND VOUCHERS IN SUPP ORT OF ELECTRICAL MATERIAL PURCHASED DURING THE YEAR. THE CIT (A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER IN HIS REMAND REPORT AGAIN STATED THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRODUCE BI LLS AND VOUCHERS TO THE EXTENT OF RS.20,85,450/- AND THEREFORE SUGGESTED FOR DISALLOWING THE SAME. THE CIT (A) CONSIDERING THE REMA ND REPORT OF THE ASSESSING OFFICER AND ALSO THE FACT THAT THE ASSESSEE COU LD NOT PRODUCE THE NECESSARY BILLS AND VOUCHERS FOR THE DISALLOWE D AMOUNT EVEN AT THE APPEAL STAGE SUSTAINED THE ADDITION. 6. THE LEARNED AR VIRTUALLY REITERATED THE SUBMISSION S AS MADE BEFORE THE CIT (A). ITA NO.451 OF 2012 M/S. RITHWIK SWATHI (JV),HYD. 5 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED BEFORE US THAT IN ABSENCE OF SUPPORTING BILLS AND VOUCHERS, THE ADD ITION MADE IS JUSTIFIED. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATE RIALS ON RECORD. IT IS SEEN FROM THE ORDERS OF THE LOWER AUTHOR ITIES THAT OUT OF THE AMOUNTS OF RS.1,59,94,857/- DEBITED TO THE PROFIT AND LOSS A/C TOWARDS PURCHASE OF ELECTRICAL MATERIAL, THE ASSESSING OFFIC ER ADDED AN AMOUNT OF RS.20,85,450/- AS IT WAS NOT SUPPORTED BY AN Y BILLS OR VOUCHERS. THE CIT (A) ALSO SUSTAINED THE ADDITION FOR THE SAME REASON. IT IS EVIDENT FROM RECORD THAT THE ASSESSEE IN SPITE OF A VAILING OPPORTUNITIES COULD NOT SUBSTANTIATE ITS CLAIM BY PRODUCI NG SUPPORTING BILLS AND VOUCHERS EITHER AT THE TIME OF ASSESSMENT PROCEE DINGS OR BEFORE THE FIRST APPELLATE AUTHORITY. EVEN DURING T HE REMAND PROCEEDINGS ALSO, THE ASSESSEE FAILED TO PRODUCE THE BILLS A ND VOUCHERS. THIS PROVES THE FACT THAT THE ASSESSEE HAS INFLATED THE EX PENDITURE CLAIMED ON ACCOUNT OF PURCHASE OF ELECTRICAL MATERIAL. MER ELY MENTIONING THE PURCHASES IN THE BOOKS OF ACCOUNT DOES NOT PROVE THE AUTHENTICITY OF THE EXPENDITURE CLAIMED IN THE ABSENCE OF SUPPORTING EVIDENCE. IN THE AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE LOWER AU THORITIES. THE ADDITION MADE IS THEREFORE SUSTAINED. HENCE THE GROUN DS RAISED BY THE ASSESSEE ARE DISMISSED. ITA NO.451 OF 2012 M/S. RITHWIK SWATHI (JV),HYD. 6 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS T REATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 4-12-2012. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 4 TH DECEMBER, 2012 COPY FORWARDED TO: 1. M/S. RITHWIK SWASTHIJOINT VENTURE, C/O P. MURALI & CO MPANY, CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. 3. 4. ACIT, CIR-3(1), HYDERABAD. COMMISSIONER OF INCOME-TAX (APPEALS) IV, HYDERABAD. CIT CONCERNED, HYDERABAD. 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. JMR *