ACIT, Lucknow V. M/S India Polyfibers Ltd., Barabanki

ITA 471/LKW/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87721 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-11-2014
• Assessment Year: misc
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P SINGH
• Section: 37(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.471/LKW/2011 ASSESSMENT YEAR:2004 - 05 M/S INDIA POLYFIBERS LTD., DEVA ROAD, BARABANKI. PAN:AAACI3765K VS A.C.I.T., RANGE - V, LUCKNOW. (RESPONDENT) (APPELLANT) SHRI R. K. RAM, D. R. APPELLANT BY SHRI H. P. SINGH, ADVOCATE RESPONDENT BY 20/11/2014 DATE OF HEARING 07 /01/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, LUCKNOW DATED 20 TH MAY, 2011 FOR THE ASSESSMENT YEAR 2004 - 2005. 2. IN THIS APPEAL , THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. C.I.T(A) HAS ERRED ON FACTS IN DELETING THE ADDITION OF RS . 6,48,171/ - MADE BY THE A.O ON ACCOUNT OF GUEST HOUSE EXPENSES ALTHOUGH THE ASSE S SEE COULD NOT FURNISH ANY DETAILS TO PROVE THAT GUEST HOUSE WAS USED FOR BUSINESS PURP OSES. 2. LD. CIT(A) FAILED TO APPRECIATE THAT 'TRANSFER AGENT FEE' AMOUNTING TO RS . 9,00,000/ - WAS NOT INCIDENTAL TO BUSINESS ACTIVITIES OF THE COMPANY AS THE EXPENSES WERE INCURRED TOWARDS MANAGEMENT OF 'SHARES' ONLY AND ARE CAPITAL IN NATURE. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 2 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE INVOLVED IN GROUND NO. 1 IS REGARDING DELETION OF ADDITION OF RS.6,48,171/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF GUEST HOUSE EXPENSES. THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO SHOW THAT THE PERSONS WHO STAYED IN THE GUEST HOUSE CAME FOR BUSINESS PURPOSE AND HELPED IN ANY MANNER TO INCREASE THE TURNOVER AND BUSINESS OF THE ASSESSEE COMPANY. HE HAS REPRODUCED THE COLUMN OF THE MANUAL REGISTER PRODUCED BEFORE HIM WHICH CONTAINS SIX COLUMNS I.E. S.NO., DATE, NAME, LUNCH, DINNE R AND TOTAL. AS AGAINST THIS, IT IS HELD BY CIT(A) IN PARA 4.3 OF HIS ORDER THAT THE ASSESSEE SUBMITTED COMPLETE DETAILS OF EXPENSES CONNECTED WITH THE MAINTENANCE OF GUEST HOUSE, WHICH HAS BEEN REPRODUCED ON PAGE 2 OF THE ASSESSMENT ORDER. THEREAFTER, I T IS NOTED BY THE CIT(A) THAT THE GUEST HOUSE OF THE ASSESSEE COMPANY EXISTS AT THE FACTORY PREMISES OF THE ASSESSEE COMPANY, WHICH IS ABOUT 25 KMS. FROM LUCKNOW. HE HAS FURTHER NOTED THAT IT IS APPARENT THAT THE PERSON WHO WOULD BE STAYING IN THE GUEST H OUSE AT THE FACTORY PREMISES OF THE COMPANY WOULD IN SOME WAY BE CONNECTED WITH THE COMPANY. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE BECAUSE IT CANNOT BE SAID THAT AT A PLACE I.E. FACTORY PREMISES OF THE ASSESSEE COMPANY, AT A DI STANCE OF 25 KMS. FROM LUCKNOW, SOME PERSON, NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE COMPANY, WILL GO AND STAY THERE. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). GROUND NO. 1 IS REJECTED. 5. REGARDING GROUND NO. 2, WE FIND THAT THIS I SSUE WAS DECIDED BY LEARNED CIT(A) AS PER PARA 5(3) OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 5(3) I HAVE EXAMINED THE ISSUE BEFORE ME AND CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE AO HAS NOT FULLY APPRECIATED THE NATURE OF EXPENSES. THE PAYMENT OF RS.9,00,000/ - HAS BEEN MADE TO M/S KARVY CONSULTANTS AS 3 REGISTRAR AND SHARE TRANS FER AGENTS OF THE COMPANY. THE SHARES OF THE COMPANY ARE LISTED ON THE STOCK EXCHANGES IN INDIA. BY VIRTUE OF THIS LISTING, THE SHARES OF THE COMPANY ARE TRADED ON THE STOCK EXCHANGES. THE REGISTRAR AND SHARE TRANSFER AGENT IS A PARTY AUTHORIZED BY THE COM PANY TO FACILITATE THE TRANSFER OF SHARES FROM ONE SHARE HOLDER TO ANOTHER ON BEHALF OF THE COMPANY AND OTHER RELATED WORKS. IT IS A SORT OF OUTSOURCING OF THE WORK RELATED TO TRANSFER OF SHARES. THE EXPENSES ARE NOT RELATED TO ANY ISSUE OF SHARES OF THE C OMPANY. IT IS RELATED TO THE SHARES ALREADY ISSUED BY THE COMPANY. I FIND THAT THE EXPENDITURE IS ALLOWABLE UNDER SECTION 37(1) OF THE ACT ALSO IN VIEW OF DEPARTMENT CIRCULAR NUMBER 10/25/63 - IT(A) DATED 18.06.1964. ACCORDINGLY, I DELETE THE ADDITION MADE B Y THE AO GIVING RELIEF OF RS.9,00,000/ - TO THE APPELLANT. THIS GROUND OF APPEAL IS ALLOWED. 6. FROM THE ABOVE PARA FROM THE ORDER OF LEARNED CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY HIM THAT THE AMOUNT OF RS.9,00,000/ - WAS PAID TO M/S KARVY CONSULTANTS AS REGISTRAR AND SHARE TRANSFER AGENT OF THE COMPANY. HE HAS ALSO NOTED THAT THE SHARES OF THE ASSESSEE COMPANY ARE LISTED ON THE STOCK EXCHANGE IN INDIA AND THESE SHARES ARE TRADED ON THE STOCK EXCHANGES. IN OUR CONSIDERED OPINION, SUCH AN E XPENSE IS ALLOWABLE U/S 37(1) OF THE ACT AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07 /01/2015. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR