M/s. Trumboo Cements Industries Pvt. Ltd, Srinagar (J&K) V. The Dy. Commissioner of Income-tax., Srinagar

ITA 489/ASR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80636 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BIREN DRA KUMAR SINGH
• Assessee Lawyers: P K MISHRA
• Keywords: Depreciation
• Section: 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. A.D. JAIN, HONBLE JUDICIAL MEMBER, AND SH. B.P. JAIN, HONBLE ACCOUNTANT MEMBER I.T.A. NO.489/ASR/2013 (ASSESSMENT YEA R: 2009-10) M/S TRUMBOO CEMENT INDUSTRIES PVT. LTD., JAVIDAN BUILDING, 156-C, NEAR POST OFICE RAJBAGH, SRINAGAR PAN:AABCT3414F(APPELLANT) VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, SRINAGAR. (RESPONDENT) APPELLANT BY: SH. P.K. MISHRA, CA. RESPONDENT BY: SH. BIREN DRA KUMAR SINGH, DR. DATE OF HEARIN G: 26.11.2014 DATE OF PRONOUN CEMENT: 30.12.2014 ORDER PER: B.P. JAIN (AM): THIS APPEAL OF THE ASSESSEE IS ARISING FROM THE OR DER OF LEARNED CIT(A), JAMMU DATED 17.05.2013 FOR THE ASSESSMENT Y EAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL. 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) IS BAD IN LAW AND ON FACTS OF THE CASE . 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.8,07,060 /- OUT OF DEPRECIATION ON ACCOUNT OF ADJUSTMENT OF CAPITAL IN VESTMENT SUBSIDY. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 1,10,700/- ON ACC OUNT OF PRIOR PERIOD EXPENSES IGNORING THE EVIDENCES ON RECORD AN D EXPLANATION OFFERED BY THE APPELLANT. - 2 - ITA NO.489/ASR/2013 4. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN SUSTAINING THE ADDITION OF RS.1,50,000/- INVOKIN G THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TAX ACT,1961. 5. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 36,00,660/- I NVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT,196 1. 6. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN SUSTAINING THE ADHOC DISALLOWANCE OF RS.1,08,910/-( @ 5%) OUT OF TRAVELLING & CONVEYANCE, CAR RUNNING & MAINTENANCE EXPENSES. 7. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN NOT CONSIDERING VARIOUS DISALLOWANCE/ADDITIONS SUST AINED BY HIM AS MENTIONED IN GROUND NO.2 TO 6 ABOVE AS INCOME ELIGI BLE FOR DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961. 8. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO EACH OTHER. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL. 3. GROUND NOS.1, 8 AND 9 ARE GENERAL IN NATURE, THEREF ORE, DO NOT REQUIRE ANY ADJUDICATION. 4. GROUND NOS.2 AND 3 ARE NOT PRESSED BY THE LEARNED A R AND ACCORDINGLY SAME ARE DISMISSED AS NOT PRESSED. 5. AS REGARDS GROUND NO.4:- THE BRIEF FACTS OF THE CAS E ARE THAT THE AO HAS MADE AND ADDITION OF RS.3,60,000/- AND RS.2, 70,000/- TOTALING TO RS.6,50,000/- BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE LEARNED CIT(A) ALLOWED A RELIEF OF RS.4,80,000/ - CONFIRMING THE ADDITION OF RS.1,50,000/- BY CONSIDERING THE EXPLAN ATION OF THE ASSESSEE AND HAVING RECORDED THE QUALIFICATION OF THE EMPLO YEES. - 3 - ITA NO.489/ASR/2013 6. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT NO COMPARABLE HAVE BEEN BROUGHT ON RECORD BY THE AO OR THE LEARNE D CIT(A) AND THE SALARY HAS BEEN PAID VERY REASONABLY AT MARKET RATE . 7. THE LEARNED DR, ON THE OTHER HAND SUPPORTED THE ORD ER OF THE LEARNED CIT(A). 8. WE HAVE HEARD THE COUNSEL AND HAVE PERUSED THE FACT S OF THE CASE. THE EXPLANATION GIVEN BY THE ASSESSEE WITH REGARD T O THE PAYMENTS U/S. 40A(2)(B) THAT THE SAID PAYMENTS ARE NOT EXCESSIVE OR UNREASONABLE, IN VIEW OF THE SERVICE PROVIDED BY THE SAID EMPLOYEE W HO LOOK AFTER THE SALES, PLANT AND ADMINISTRATION OF THE ASSESSEE COM PANY, THE AO HAS OBSERVED WITH REGARD TO THE QUALIFICATION OF MS. S HAZIA TRAMBOO AND MR OMER TRAMBOO, THE SAID PERSONS ARE UNDER GRADUATE A ND TAHIR AHMED TURBOO IS L.L.B. THE PAYMENT MADE TO SHRI TAHIR AH MED TURBOO WAS ALLOWED AS REASONABLE BEING L.L.B WHERE AS PAYMENTS MADE TO OMER SAFI AND SHAZIA TURMBOO WAS TOTALLY DISALLOWED BY THE AO BEING UNDER GRADUATE, IN THE ABSENCE OF ANY EXPERIENCE ON RECOR D OR ANY COMPARABLE PLACED ON RECORD. BUT IN THE CIRCUMSTANCES AND FACT S OF THE PRESENT CASE WE FIND NO INFIRMITY OF THE ORDER OF LEARNED CIT(A) WHO HAS RIGHTLY ALLOWED THE SALARY OF RS.20,000/- PER MONTH FOR BOT H THE EMPLOYEES TOTAL TO RS.4,80,000/- AS REASONABLE ON THE BASIS IN FACT BOTH THE EMPLOYEES ARE GRADUATE AND THE ASSESSEE HAD PRODUCED COPY OF QUAL IFICATION CERTIFICATE OF THESE EMPLOYEES. ACCORDINGLY THE LEARNED CIT(A) HAS RIGHTLY CONFIRMED - 4 - ITA NO.489/ASR/2013 AND THE ADDITION OF RS.1,50,000/-. THUS, GROUND NO. 4 OF THE ASSESSEE IS DISMISSED. 9. AS REGARDS GROUND NO.5:- THE BRIEF FACTS OF THE CAS E ARE THAT THE AO HAS MADE A DISALLOWANCE OF RS.78,21,826/- U/S. 1 4A OF THE ACT WITH REGARD TO THE INVESTMENT MADE BY THE ASSESSEES COM PANY, IN ANOTHER COMPANY M/S. TRUMBOO CEMENT INDUSTRIES PRIVATE LIMI TED OUT OF BORROWED FUNDS OF ASSESSEES COMPANY AND THE INCOME FROM SUCH INVESTMENT IS NOT TAXABLE UNDER THE ACT. THE LEARNE D CIT(A) CONFIRMED THE DISALLOWANCE U/S.14A AT RS.36,00,660/- BY COMPL YING RULE 8D(2)(II) AND ALLOWED THE REST OF THE RELIEF. 10. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE SU BMISSIONS MADE BEFORE THE CIT(A) AND THE LEARNED DR RELIED UPON TH E ORDER OF LEARNED CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE ARGUMENTS MADE BY LEARNED COUN SEL FOR THE ASSESSEE THAT THE INVESTMENT HAS BEEN MADE WITH A VIEW TO HA VE STRATEGIC CONTROL OVER THE COMPANY, AND ACCORDINGLY DISALLOWANCE OF I NTEREST ON BORROWED FUNDS TO THE EXTENT MENTIONED BY LD. CIT(A) IS NOT JUSTIFIED. WE FIND THAT THE COMPUTATION OF THE DISALLOWANCE HAS CORRECTLY B EEN MADE BY THE CIT(A) AS PER RULE 8D OF THE IT RULES, AFTER INSERT ION WHEREOF, FACTORS LIKE STRATEGIC CONTROL, ETC., HAVE NO RELEVANCE. A S REGARDS RULE 8D, THE ARGUMENT OF LEARNED COUNSEL THAT THE CLOSING BALANC E AS ON 31 ST MARCH,2009 HAS BEEN TAKEN BY THE AO INSTEAD OF AVER AGE BALANCES AS - 5 - ITA NO.489/ASR/2013 PRESCRIBED UNDER THE SAID RULE, THE LEARNED CIT(A) HAS ACCEPTED THE ARGUMENTS MADE BY THE LEARNED COUNSEL FOR THE ASSES SEE AND ACCORDINGLY HAS RIGHTLY ALLOWED THE RELIEF OF RS.42,21,166/-. T HE ASSESSEE, AS SUCH, DOES NOT HAVE ANY GRIEVANCE. WE FIND NO INFIRMITY I N HIS ORDER AND ACCORDINGLY THE SAME IS CONFIRMED. THUS, GROUND NO. 5 OF THE ASSESSEES APPEAL IS DISMISSED. 12. AS REGARDS GROUND NO.6:- THE BRIEF FACTS OF THE CAS E ARE THAT THE AO MADE AD HOC ADDITIONS OF RS.2,17,940/- OUT OF TRAVELING & CONVEYANCE EXPENSES, CAR RUNNING & MAINTENANCE EXP ENSES, STAFF WELFARE & TELEPHONE EXPENSES ON ACCOUNT OF UNVERIFIABLE EXP ENSE BEING 10% OF THE CLAIM ON ACCOUNT OF SUCH EXPENSES MADE BY THE A SSESSEE. THE LEARNED CIT(A) RESTRICTED THE SAID AD HOC ADDITIONS TO 5%. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSE D THE FACTS OF THE CASE. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT HAVING REGARD TO THE NATURE OF EXPENSES, NO EXTERNAL VOUCH ERS OR EVIDENCE CAN BE PRODUCED. IN SUCH CIRCUMSTANCES AND FACTS OF THE CA SE, THERE IS EVERY POSSIBILITY OF LEAKAGE OF REVENUE. THE LEARNED CIT( A) HAS RIGHTLY RESTRICTED THE AD HOC ADDITIONS @ 5% IN PLACE OF 10 % MADE BY THE AO. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF T HE LEARNED CIT(A). THUS, GROUND NO.6 OF THE ASSESSEE IS DISMISSED. 14. AS REGARDS GROUND NOS.7:- THE ADDITIONS MADE BY THE AO AND SUSTAINED BY US HEREIN ABOVE INCREASES THE INCOME O F THE ASSESSEE ELIGIBLE - 6 - ITA NO.489/ASR/2013 FOR DEDUCTION U/S. 80IB OF THE ACT. ACCORDINGLY, TH E AO IS DIRECTED TO ALLOW THE DEDUCTION U/S. 80IB WITH REGARD TO THE AD DITIONS SO SUSTAINED HEREIN ABOVE, AS PER LAW. THUS, GROUND NO.7 OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES TO ALLOW THE DEDUC TION U/S. 80IB BY THE AO AS DIRECTED HEREIN ABOVE. GROUND NO.7 OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2014. SD/- SD/- (A.D. JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED: 30.12.2014 PK. PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S TRUMBOO CEMENT INDUSTRIES PVT. LTD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, SR INAGAR. 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.