M/s. R.B. Polymers Ltd., , Kolkata V. DCIT, Circle - 4, Kolkata , Kolkata

ITA 456/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0517 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHRUBAJYOTI RAY
• Keywords: Business expenditure; Earning of tax free income; Proportionate interest; Bad and doubtful debts; Revenue expenditure; Capital expenditure; TDS
• Section: 143(3); 14A; 48; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH KOLKATA BEFORE SHRI P.M. JAGTAP, V.P & SHRI S. S. GODARA, JM ./I.T.A NO.456/KOL/2018 ( [ [ / ASSESSMENT YEAR: 2010-11) M/S RB POLYMERS LTD. 25, R.N. MUKHERJEE ROAD, 4 TH FLOOR, SUITE-F, KOLKATA-1. VS. DCIT, CIRCLE-4, KOLKATA ./ ./PAN/GIR NO.: AABCR3117R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SIDDHARTH AGARWAL, ADVOCATE RESPONDENT BY : SHRI DHRUBAJYOTI RAY, SR. DR / DATE OF HEARING : 21/02/2020 /DATE OF PRONOUNCEMENT : 12/06/2020 / O R D E R PER SHRI S. S. GODARA: THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (A) - 2, KOLKATA DATED 20.02.2018 PASSED IN CASE NO.1220/CIT(A)-2/14-15 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES FIRST AND FORMER SUBSTANTIVE GROUND CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION INVOKING SECTION 14A R.W.R 8D(2)(II) DISALLOWANCE OF PROPORTIONATE INTEREST AMOUNTING TO RS.75614/- PERTAINING TO ITS EXEMPT INCOME. SUFFICE TO SAY, WE NOTICE AT THE OUTSET THAT THE ASSESSEES INVESTMENTS AS ON 31.03.2009 AND 31.03.2010 READ FIGURES OF RS.1,71,25,754/- AND 1,93,49,912/- (DIFFERENCE OF RS.22,24,158/-) AS AGAINST ITS NON-INTEREST BEARING FUNDS IN THE NATURE OF SHARE CAPITAL ALONG WITH RESERVES AND SURPLUS OF I.T.A NO.456/KOL/2018 M/S RB POLYMERS LTD. PAGE | 2 RS.5,82,97,141/- AND RS.7,56,59,552/- I.E POSITIVE INCREASE OF RS.1,73,62,411/-; RESPECTIVELY. THE SAME SUFFICIENTLY LEADS US TO THE IRRESISTIBLE CONCLUSION THAT THE ASSESSEES NON-INTEREST FUNDS TURN OUT TO BE MUCH MORE THAN CORRESPONDING INVESTMENTS. THERE IS HARDLY ANY JUSTIFICATION THEREFORE TO SUSTAIN THE IMPUGNED DISALLOWANCE GOING BY CIT VS. RELIANCE UTILITY & POWER LTD. 313 ITR 340(BOM), CIT VS. TIN BOX CO. 260 ITR 637 (DEL) AND MUNJAL SALES CORPORATION VS. CIT 298 ITR 298(SC), CIT VS. HDFC BANK LTD. 366 ITR 505 (BOM) AND PCIT VS RASOI LTD. GA NO. 633/2016(HONBLE JURISDICTIONAL HIGH COURT). WE THEREFORE ADOPT THE VERY ANALOGY HEREIN AS WELL AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 3. THE ASSESSEES SECOND SUBSTANTIVE GRIEVANCE CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING BAD DEBTS CLAIM OF RS.64,088/- IN THE LOWER PROCEEDINGS. ITS FURTHER CASE IS THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE HAD CHANGED HIS STAND BY CLAIMING THE BAD DEBTS AS BUSINESS LOSS AS WELL WHICH CREATED DOUBTS ON GENUINENESS THEREOF. CASE FILE SUGGESTS THAT THE ASSESSEE HAD SOLD GOODS AMOUNTING TO RS.2,64,088/- TO M/S SUPER HARDWARE & GENERAL STORES WHICH WAS ALSO RECORDED AS INCOME IN THE PROFIT AND LOSS A/C AND RECEIVED RS.2,00,000/- ONLY. THE ASSESSING OFFICER HELD THAT THE FOREGOING DIFFERENCE COULD NOT BE TREATED AS BAD DEBTS U/S 36(2)(I) OF THE ACT. 4. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT THE OTHER PARTY HAD SUBMITTED A COMPLAINT REGARDING DEFECTIVE/DELAMINATION OF GOODS SUPPLIED FORMING SUBJECT MATTER OF THE AMOUNT IN ISSUE. THIS MADE THE ASSESSEE TO WRITE OFF THE IMPUGNED SUM AS LOSSES. WE ARE OF THE VIEW IN THIS FACTUAL BACKDROP THAT THE ASSESSEE HAS INDEED MADE OUT A CASE OF BUSINESS LOSS INCURRED IN RUNNING OF DAY TO DAY BUSINESS ACTIVITIES U/S 28 R.W.S 37 OF THE ACT. WE THUS DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 5. NEXT COMES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING CLUB EXPENDITURE, SUBSCRIPTION, ALLEGED CAPITAL EXPENSES, CST INTEREST AND I.T.A NO.456/KOL/2018 M/S RB POLYMERS LTD. PAGE | 3 LIQUIDATED DAMAGE INVOLVING SUMS OF RS.43,474/-, RS.31,354/-, 1,16,713/-, 904/- AND RS.48,591/-; RESPECTIVELY. 6. BOTH THE LEARNED LOWER AUTHORITIES HELD THAT THE IMPUGNED CLUB EXPENSES COULD NOT BE HELD TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. 7. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT THE IMPUGNED EXPENDITURE ALSO FORMED PART OF ASSESSEES DIRECTORS REMUNERATION INCLUDED IN THEIR PERQUISITES FOLLOWED BY TDS DEDUCTION AS WELL. THE ASSESSEE HAD FURTHER DISCLOSED THE SUM AT NO.2(H) OF SCHEDULE S OF NOTES ON ACCOUNTS IN THE FINANCIAL STATEMENT. THIS CLINCHING ASPECT HAS GONE UNREBUTTED FROM THE REVENUE SIDE. WE ALSO TAKE NOTE OF VARIOUS JUDICIAL PRECEDENTS I.E. CIT VS. SUNDARAM INDUSTRIES LTD. 240 ITR 335(MAD.), GUJARAT STATE EXPORT CORPN 209 ITR 649(GUJ) THAT CLUB EXPENSES INCLUDING ENTRY FEES ARE REVENUE ITEM ALLOWABLE AS BUSINESS EXPENDITURE U/S 37 OF THE ACT. WE THUS DELETE THE IMPUGNED DISALLOWANCE. 8. NEXT COMES SUBSCRIPTION EXPENDITURE DISALLOWANCE OF RS.31,354/- MADE ON THE GROUND THAT THE SAME IS NOT RELATED TO ASSESSEES BUSINESS. WE NOTICE HEREIN AS WELL THAT THE IMPUGNED SUBSCRIPTION PERTAINS TO VARIOUS ASSOCIATIONS I.E. LAMINATE MANUFACTURING ASSOCIATION, PLASTICS EXPORT PROMOTION COUNCIL AND SIMILAR OTHER ASSOCIATIONS AS PER BILLS AND VOUCHERS FORMING PART OF THE RECORDS AT PAGES 48 TO 56. THE ASSESSEE COMPANY ADMITTEDLY MANUFACTURES AND TRADES IN LAMINATED PLASTIC SHEETS & CHEMICALS. IT HAS INCURRED THE IMPUGNED SUBSCRIPTION FOR ITS WIDER REPRESENTATION IN VARIOUS ASSOCIATIONS AND BODIES OPERATING IN THE VERY FIELD. IT IS THUS SAFELY CONCLUDED THAT THE EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE IMPUGNED DISALLOWANCE IS DIRECTED TO BE DELETED THEREFORE. 9. NEXT COMES DISALLOWANCE OF ALLEGED CAPITAL EXPENDITURE OF RS.1,16,713/- ON ACCOUNT OF PAYMENT MADE TOWARD ISO-9001. BOTH THE LEARNED LOWER AUTHORITIES HAVE TREATED THE SAME AS CAPITAL IN NATURE GIVING ENDURING BENEFITS SINCE PERTAINING I.T.A NO.456/KOL/2018 M/S RB POLYMERS LTD. PAGE | 4 TO CERTIFICATION OF ASSESSEES BUSINESS AND MANUFACTURED ITEMS. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT THE IMPUGNED EXPENSES ARE YEARLY PAYMENTS ONLY. HONBLE APEX COURTS DECISION IN TAPARIA TOOLS LTD. VS. JCIT (2015) 55 TAXMANN.COM 361 (SC) HAS MADE IT CLEAR THAT THE MERE FACT THAT SOME ENDURING ADVANTAGE IS DERIVED FROM A PARTICULAR EXPENDITURE CLAIM DOES NOT RESULT IN A REVENUE EXPENDITURE ITEM BEING TREATED UNDER CAPITAL HEAD. WE ACCORDINGLY DELETE THE IMPUGNED DISALLOWANCE AS WELL. 10. LEARNED COUNSEL IS FAIR ENOUGH IN NOT PRESSING FOR THE NEXT ISSUE OF DISALLOWANCE OF CST INTEREST TO THE TUNE OF RS.904/-. THE SAME IS DECLINED AS NOT PRESSED KEEPING IN MIND SMALLNESS OF THE AMOUNT. 11. NEXT COMES LIQUIDATED DAMAGE DISALLOWANCE OF RS.48,591/- MADE IN BOTH THE LOWER PROCEEDINGS ON ACCOUNT OF ASSESSEES ALLEGED FAILURE IN PRODUCING NECESSARY DETAILS. CASE FILE SUGGESTS THAT THE IMPUGNED DAMAGES HAD BEEN DEDUCTED BY M/S BEML FROM THE AMOUNT DUE TO THE ASSESSEE WHICH HAD EARLIER BEEN SHOWN AS INCOME IN THE P&L A/C. THE ASSESSEE HAS ALSO PLACED ON RECORD THE REMITTANCE INVOICES REFLECTING THE IMPUGNED LIQUIDATED DAMAGES IN PAPER BOOK AT PAGE NO.41 TO 45 WHICH WAS DULY MADE AVAILABLE IN THE LOWER PROCEEDINGS AS WELL. THE SAME SUFFICIENTLY SUGGESTS THAT THE IMPUGNED LIQUIDATED DAMAGES EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ONLY. THE ASSESSING OFFICERS REMAND REPORT SUBMITTED BEFORE THE CIT(A) ALSO DID NOT DISPUTE GENUINENESS THEREOF. WE ACCORDINGLY DELETE THE IMPUGNED ADDITION. 12. LASTLY COMES MAT CREDIT ISSUE INVOLVING SUM OF RS.2,07,054/-. BOTH THE LEARNED REPRESENTATIVES ARE FAIR ENOUGH IN EXPRESSING AGREEMENT THAT THE SAME REQUIRES FACTUAL VERIFICATION AT THE ASSESSING OFFICERS END. WE THUS RESTORE THE INSTANT ISSUE BACK TO THE ASSESSING OFFICER TO FINALIZE NECESSARY FACTUAL VERIFICATION AS PER LAW. 13. BEFORE PARTING, IT IS NOTED THAT THE ORDER IS BEING PRONOUNCED AFTER NINETY (90) DAYS OF HEARING. HOWEVER, TAKING NOTE OF THE EXTRAORDINARY SITUATION IN THE I.T.A NO.456/KOL/2018 M/S RB POLYMERS LTD. PAGE | 5 LIGHT OF THE COVID-19 PANDEMIC AND LOCKDOWN, THE PERIOD OF LOCKDOWN DAYS NEED TO BE EXCLUDED. FOR COMING TO SUCH A CONCLUSION, WE RELY UPON THE DECISION OF THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. JSW LIMITED IN ITA NO. 6264/MUM/2018 & 6103/MUM/2018, ASSESSMENT YEAR 2013-14, ORDER DT. 14 TH MAY, 2020. 14. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12.06.2020. SD/- ( P. M. JAGTAP ) SD/- (S. S. GODARA) VICE-PRESIDENT JUDICIAL MEMBER /KOLKATA; / DATE: 12/06/2020 RS / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. THE APPELLANT- M/S RB POLYMERS LTD. 2. THE RESPONDENT- DCIT, CIRCLE-4, KOLKATA 3. ( ) / THE CIT(A), KOLKATA [SENT THROUGH EMAIL] 4. / CIT 5. , , / DR, ITAT, KOLKATA [SENT THROUGH EMAIL] 6. [ / GUARD FILE.