ACIT, Rohtak V. M/s. Micro Truners, Rohtak

ITA 4569/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1234 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NAMITA S PANDEY

Judgement Text

ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHNADRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, VS M/S MICRO TURNERS, ROHTAK CIRCLE, ROHTAK. HISSAR ROAD, ROHTAK. (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. NAMITA S. PANDEY, SR.DR RESPONDENT BY: SHRI GAUTAM JAIN O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF COMMISSIONER OF INCOME TAX(A)- ROHTAK DATED 11.08.2 011 IN APPEAL NO. 285/RTK/2010-11FOR AY 2008-09. 2. THE MAIN GROUND RAISED IN THIS APPEAL READS AS U NDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION MADE BY THE AO WITH RESPEC T TO SALARY TO THE PARTNERS. THE MERE FACT THAT THE AO H AS NOT QUOTED ANY CASE LAW IN SUPPORT OF THE ADDITION MADE ON THIS GROUND CAN NEVER BE A VALID REASON TO DELETE T HE ADDITION IN QUESTION. THE AO HAS RIGHTLY DISALLOWED THE PROPORTIONATE SALARY TO THE PARTNERS AND THAT THE A CTION OF THE CIT(A) IS NOT VALID. 2. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS DELETING THE ADDITION MADE PROPORTIONATELY WITH REG ARD ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 2 2 TO VARIOUS EXPENSES. THOUGH THE ASSESSEE HAD PAID F BT YET THE DISALLOWANCE MADE ON THE SAID GROUND WAS VA LID AND THAT THE ACTION OF THE CIT(A) IS NOT VALID. 3. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSING OFFICER MADE CERTAIN ADDITIONS ON ACCOUNT OF SALARY PAID TO THE PARTNERS AND ALSO MADE CERTAIN ADDITIONS WITH REGARD TO VARIOUS EXPEN SES ON WHICH ASSESSEE HAD PAID FRINGE BENEFIT TAX (FBT). AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A)-ROHTAK WHI CH WAS ALLOWED AND THE DISALLOWANCE AND ADDITIONS MADE BY THE ASSESSIN G OFFICER WERE FINALLY DELETED. NOW, THE REVENUE HAS FILED THIS APPEAL BE FORE THIS TRIBUNAL. GROUND NO.1 4. LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN DELETING THE A DDITION MADE BY THE ASSESSING OFFICER PERTAINING TO THE SALARY PAID TO THE PARTNERS. THE DR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME T AX(A) WRONGLY OBSERVED THAT THE ASSESSING OFFICER HAS NOT QUOTED ANY CASE LAW IN SUPPORT OF THE ADDITION. REPLYING TO THE ABOVE SUBMISSION, THE ASSESSEES REPRESENTATIVE SUBMITTED A COPY OF THE JUDGMENT OF ITAT F BENCH DELHI IN ASSESSEES OWN CASE IN ITA NO. 554/DEL/2009 FOR AY 2005-06 WHEREIN THE DISALLOWANCE OF SALARY PAID TO THE PARTNERS HAS BEE N DELETED. FROM THE IMPUGNED ORDER PARA 2, WE ALSO OBSERVE THAT THE COM MISSIONER OF INCOME ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 3 3 TAX(A) FOLLOWING THE ABOVE JUDGMENT OF ITAT DELHI F BENCH DATED 17.9.2009 HAS DELETED THE DISALLOWANCE OF SALARY PA ID TO THE PARTNERS WITH THE FOLLOWING OBSERVATIONS:- 2. THE APPELLANT DERIVING INCOME FROM MANUFACTURIN G & JOB WORK OF PRECISION TURNED COMPONENTS AND FASTENE RS, RETURNED TOTAL INCOME OF RS.1,42,83,172/-. THE APPE LLANT HAS FIVE UNITS IN WHICH TWO UNITS ARE LOCATED IN EX EMPTED AREA. THE APPELLANT FIRM HAS CLAIMED SALARY TO THE PARTNERS AMOUNTING TO RS. 24.00 LACS. THE AO ALLOCA TED THE SALARY PAID TO PARTNERS TO EXEMPT UNITS AND TAX ABLE UNITS ON THE BASIS OF TURN OVER. THE SALES INCLUDIN G JOB WORK OF TAXABLE UNITS IS RS. 83,45,26,173/- AND THA T OF THE EXEMPTED UNITS IS RS. 54,88,14,641/-. THE AO DISALL OWED THE SALARY ALLOCABLE TO EXEMPT UNITS OF RS.9,52,155 /-, WORKED OUT ON THE BASIS OF TURNOVER. THE ABOVE ACTI ON OF THE AD WAS CONTESTED IN GROUND NO. 3 OF APPEAL. BEF ORE ME, THE AR SUBMITTED THAT THERE WAS NO MATERIAL TO CONCLUDE THAT PART OF SALARY PAID TO PARTNERS PERTA INS TO EXEMPT UNITS AND AS SUCH THE DISALLOWANCE IS BASED ON SURMISES AND CONJECTURES. THE AR SUBMITTED THAT THE AD HAS NO POWER TO ALLOCATE EXPENSES ARBITRARILY AS HE LD IN THE CASE OF DCIT VS DELHI PRESS SAMACHAR PATRA (P) LTD. 296 ITR 210 (DEL.). FURTHER, IN THE CASE OF TH E APPELLANT ITSELF, HON'BLE ITAT DELHI BENCH 'F' IN I TA NO. 554 (DEL.) 2009 FOR THE AY 2005-06 VIDE ORDER DATED 17.09.2009, DELETED THE DISALLOWANCE OF SALARY PAID TO PARTNERS. WITHOUT PREJUDICE TO THE ABOVE, THE PARTN ERS TO WHOM THE SALARY OF RS. 24.00 LACS WAS PAID, ARE ASS ESSED TO TAX AND PAYING TAX AT 30% AND AS SUCH THERE IS N O LOSS TO REVENUE. 5. IN VIEW OF ABOVE FINDINGS OF LD. COMMISSIONER OF INCOME TAX(A), WE ARE INCLINED TO HOLD THAT WE ARE UNABLE TO SEE ANY AMBIGUITY OR PERVERSITY IN THE IMPUGNED ORDER IN THIS REGARD AND GROUND NO. 1 OF THE REVENUE IS DEVOID ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 4 4 OF MERIT. ACCORDINGLY, RESPECTFULLY FOLLOWING THE JUDGMENT OF ITAT DELHI F BENCH (SUPRA) WE HOLD THAT IN THE PRESENT CASE, GROUND NO. 1 IS SQUARELY COVERED BY THE ABOVE JUDGMENT AND THE LD. COMMISSIO NER OF INCOME TAX(A) RIGHTLY FOLLOWED THE SAME AND DELETED THE ADDITION. FINALLY, WE HOLD THAT GROUND NO. 1 OF THE REVENUE DESERVES TO BE DISMISSE D AND WE DISMISS THE SAME. GROUND NO.2 6. LD. DR SUBMITTED THAT THE ASSESSING OFFICER RIGH TLY MADE AN ADDITION PROPORTIONATELY WITH REGARD TO VARIOUS EXPENSES. H E FURTHER SUBMITTED THAT IN SPITE OF THE FACT THAT THE ASSESSEE HAD PAID FBT ON THE CLAIMED EXPENDITURE, YET THE DISALLOWANCE MADE ON THE SAID GROUND WAS VALID AND ON SUBSTANTIAL GROUND. REPLYING TO THE ABOVE, THE ASS ESSEES REPRESENTATIVE SUBMITTED A COPY OF THE JUDGMENT OF ITAT MUMBAI H BENCH DATED 16.09.2011 IN ITA NO.2397/MUM/2010 FOR AY 2006-07 W HEREIN IT HAS BEEN HELD THAT ONCE FBT IS LEVIED ON SUCH EXPENSES, AS H AS BEEN DONE IN THE PRESENT CASE, IT FOLLOWS THAT THE SAME ARE TREATED AS FRINGE BENEFIT PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLOYEES AND TH E SAME HAVE TO BE APPROPRIATELY ALLOWED AS EXPENSES INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS BY THE ASSESSEE. THE RELEV ANT PARA 17 OF ABOVE ITAT READS AS UNDER:- ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 5 5 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS TAKEN US THROU GH THE CBDT CIRCULAR NO. 8/2005 DATED 29-08-2005 GIVING EXPLANATORY NOTES ON THE PROVISIONS RELATING TO FRI NGE BENEFIT TAX AS INTRODUCED BY THE FINANCE ACT, 2005 AND INVITED OUR ATTENTION TO THE RELEVANT PORTION THERE OF TO EXPLAIN THE OBJECT BEHIND LEVYING FRINGE BENEFIT TA X. AS INDICATED IN THE SAID CIRCULAR, THE FRINGE BENEFIT TAX HAS BEEN INTRODUCED AS A SURROGATE TAX ON EMPLOYER WITH THE OBJECTS OF RESOLVING THE PROBLEMS IN TAXING SOME PERQUISITES/FRINGE BENEFITS IN THE HANDS OF THE EMP LOYEES IN TERMS OF SECTION 17. FURTHER, AS EXPLAINED IN PA RA NO. 3.2 OF THE CIRCULAR, THE SCOPE OF THE TERM 'FRINGE BENEFITS PROVIDED' IS DEFINED IN SECTION 115WB(1) TO MEAN AN Y CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF ANY PRIVILEGE, SERVICE FACILITY OR AMENITY, DIRECTLY OR INDIRECTLY, PROVIDED BY AN EMPLOYER, WHETHER BY WAY OF REIMBURSEMENT OR OTHERWISE, TO HIS EMPLOYEES. MOREO VER, AS CLARIFIED IN THE SAID CIRCULAR WHILE ANSWERING FREQUENTLY ASKED QUESTION NO. 15, FRINGE BENEFIT IS DEEMED TO HAVE BEEN PROVIDED IF THE EMPLOYER HAS INCURRED EXPENSES FOR ANY OF THE PURPOSES REFERRED TO IN THE RELEVANT PROVISIONS AND THERE IS NO REQUIREMENT TO SEGREGATE SUCH EXPENSES BETWEEN THOSE INCURRED FOR OFFICIAL PURPOSES AND PERSONAL PURPOSES. IT WAS FUR THER CLARIFIED WHILE ANSWERING QUESTION NO. 81 THAT WHEN EXPENDITURE ON RUNNING AND MAINTENANCE OF MOTOR CAR S IS LIABLE TO FRINGE BENEFIT TAX, THE EMPLOYEES WILL NO T BE LIABLE TO INCOME TAX ON THE PERQUISITE VALUE OF MOT OR CAR PROVIDED BY THE EMPLOYER. AS RIGHTLY CONTENDED BY T HE LEARNED COUNSEL FOR THE ASSESSEE, CIRCULAR NO. 8/20 05 DATED 29-08-2005 ISSUED BY THE BOARD EXPLAINING THE PROVISIONS RELATING TO FRINGE BENEFIT TAX THUS MAKE S IT CLEAR THAT FRINGE BENEFIT TAX IS LEVIED ON THE EXPE NSES INCURRED BY THE EMPLOYER IRRESPECTIVE OF WHETHER TH E SAME ARE INCURRED FOR OFFICIAL OR PERSONAL PURPOSES . IN OUR OPINION, ONCE FRINGE BENEFIT TAX IS LEVIED ON S UCH EXPENSES AS HAS BEEN DONE IN THE PRESENT CASE, IT F OLLOWS THAT THE SAME ARE TREATED AS FRINGE BENEFITS PROVID ED BY ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 6 6 THE ASSESSEE AS EMPLOYER TO ITS EMPLOYEES AND THE S AME HAVE TO BE APPROPRIATELY ALLOWED AS EXPENSES INCURR ED WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IN THAT VIEW OF THE MATTER , WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(A) OUT OF CONVEYANCE AND TELEPHONE EXPENSES AND ALLOW GROUND NO. 4 AND 5 OF THE ASSESSEES APPEAL. 7. IN THE PRESENT CASE, THE DR HAS NOT DISPUTED THE POINT THAT THE ASSESSEE HAS PAID FBT ON THE VARIOUS CLAIMED EXPENSES AND TH E ASSESSING OFFICER HAS MADE DISALLOWANCE MERELY ON THE BASIS THAT IN ABSEN CE OF COMPLETE AND PROPERLY MAINTAINED VOUCHERS, EXPENSES CLAIMED UNDE R THE HEADS CANNOT BE ALLOWED. 8. THE COMMISSIONER OF INCOME TAX(A) HAS DISALLOWED ABOVE ADDITION WITH AN OBSERVATION THAT THE ASSESSING OFFICER HAS FAILED TO NOTE THAT THE FBT WAS PAID ON THE MAJOR PART OF THE EXPENSES HAS BEEN PAID BY THE ASSESSEE AND FOR THE REMAINING EXPENSES, THE ASSESS ING OFFICER COULD NOT MAKE ANY CLAIM FOR DISALLOWANCE. THE COMMISSIONER OF INCOME TAX(A) FURTHER OBSERVED THAT IN A CASE OF A FIRM HAVING A TURNOVER OF MORE THAN RS.166 CRORES AND RETURNING AN INCOME OF RS.1.42 CR ORES, THE ISSUE OF MAKING AD HOC DISALLOWANCE OF SOME EXPENSES WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD IS NOT TENABLE. WE ARE UNABLE T O SEE ANY VALID REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A) IN THE ITA NO. 4569/DEL/2011 ASSTT. YEAR: 2008-09 7 7 IMPUGNED ORDER. RESPECTFULLY FOLLOWING THE DECISIO N OF ITAT H BENCH MUMBAI (SUPRA), WE HOLD THAT THE PRESENT CASE IS SQ UARELY COVERED BY THE JUDGMENT OF ITAT MUMBAI BENCH AND GROUND NO. 2 OF T HE REVENUE HAS NO LEGS TO STAND. ACCORDINGLY, GROUND NO. 2 OF THE RE VENUE BEING DEVOID OF MERITS IS ALSO DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 15.02.2013. SD/- SD/- (SHAMIM YAHYA ) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 15TH FEBRUARY, 2013 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. COMMISSIONER OF INCOME TAX(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR