M/S INDORE DEVELOPMENT AUTHORITY, Indore V. THE ITO 5(1), Indore

ITA 489/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5310 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 10-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER INDORE DEVELOPMENT AUTHORITY, IDA BUILDING, 7, RACE COURSE ROAD, INDORE. .. ./ PAN: AAAJI-0103J VS. ITO, 5(1), INDORE. / APPELLANT / RESPONDENT / APPELLANT BY SHRI ANIL KAMAL GARG, CA / RESPONDENT BY SHRI MOHD. JAVED, SR. DR. DATE OF HEARING 06.12.2016 DATE OF PRONOUNCEMENT 13.12.2016 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, INDORE .. . / I.T.A. NO. 489/IND/2016 %' ' / ASSESSMENT YEAR: 2010-11 I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 2 OF 9 [HEREINAFTER REFERRED TO AS THE CIT (A)] DATED 29.0 1.2016. THIS APPEAL PERTAINS TO ASSESSMENT YEAR 2010-11 AS AGAIN ST APPEAL DECIDED IN RESPECT OF ASSESSMENT ORDER DATED 25.03. 2013 PASSED U/S. 143(3) OF INCOME TAX ACT, 1961(HEREINAF TER REFERRED TO AS 'THE ACT) BY THE ITO, 5(1) INDORE [H EREINAFTER REFERRED TO AS THE AO]. THE ASSESSEE HAS TAKEN AS MANY AS 4 GROUNDS OF APPEAL WHICH ARE BEING DECIDED AS UNDER. 2. GROUND NO. 1 STATES THAT THE LD. CIT (A) GROSSLY ER RED IN CONFIRMING THE DISALLOWANCE OF RS. 39,36,129/- MADE BY THE AO OUT OF LOCAL FUND (GOVERNMENT) AUDIT FEES OF RS. 1,95,31,629/- CLAIMED BY THE ASSESSEE. 3. BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED RS. 1,95,31,629/- AS PAYMENT MADE TO THE LOCAL FUND AUD IT DEPARTMENT OF STATE GOVERNMENT AS ADMINISTRATIVE EXPENSES. DURING THE FINANCIAL YEAR UNDER CONSIDER ATION, THE ASSESSEE AUTHORITY HAD CLAIMED A SUM OF RS. 1,95,31 ,629/- TOWARDS GOVERNMENT AUDIT FEES EXPENSES, WHICH COMPRIS ED OF A SUM OF RS. 39,36,129/- AS BALANCE FEES PAYABLE FO R THE FINANCIAL YEAR 2008-09 AND OF RS. 1,55,95,500/- PER TAINING TO I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 3 OF 9 THE YEAR UNDER CONSIDERATION. IT WAS CLAIMED THAT TH E AUDIT FEES PAYABLE OF F.Y. 08-09 WERE CRYSTALLIZED DURING THE YEAR AS NEITHER THE DEMAND FOR THE SAME WAS RAISED BY THE GOVERNMENT OF MADHYA PRADESH AND BILL OF SAME RAISE D DURING THE YEAR FOR THE UTILIZATION OF SERVICE OF THE AUDI TORS. HOWEVER THE AO WAS OF THE VIEW THAT THE ASSESSEE COMPANY FOLL OWS MERCANTILE SYSTEM OF ACCOUNTING AND SINCE AUDIT FE ES PERTAINS TO F.Y. 08-09, HENCE, BEING PRIOR PERIOD EXPENSES, SAME WAS DISALLOWED. BEING, AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). 4. THE LD. CIT (A) NOTED THAT RATE OF SUCH PROFESSION SERVICES WAS FIXED AT 1% OF INCOME OF THE ASSESSEE AUTHORITY. THE ASSESSEE HAS ADOPTED MERCANTILE SYSTEM OF ACCOU NTING AND AUDIT FEES OF RS. 39,36,129/- PERTAINING TO FIN ANCIAL YEAR 2008-09 IS PRIOR PERIOD EXPENSES. THEREFORE, OUT OF THE AMOUNT DEBITED TOWARDS AUDIT FEES, A SUM OF RS. 39,36,129/ - PERTAINING TO ASSESSMENT YEAR 2009-10 WAS DISALLOWED . ACCORDINGLY, THE FINDING OF THE AO WAS CONFIRMED. I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 4 OF 9 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, TOOK US THRO UGH PB PAGE NOS. 67 TO 70 WHICH ARE COPY OF MEMORANDUM BILLS RAISED AND COPY OF NOTE SHEET TO DEMONSTRATE THAT B ILL OF RS. 1,95,14,500/- WHICH WAS RECEIVED BY THE APPELLANT AU THORITY ONLY DURING THE FINANCIAL YEAR UNDER CONSIDERATION. TILL THE DATE OF FINALIZATION OF THE FINANCIAL STATEMENTS FO R FINANCIAL YEAR 2008-09 I.E. UP TILL 02-12-2009, SUCH MEMORAND UM BILL COULD NOT BE SETTLED BETWEEN THE APPELLANT AUTHORIT Y AND THE LOCAL FUND AUDIT DEPARTMENT AND, THEREFORE, AN ESTI MATION FOR AUDIT FEES LIABILITY WAS MADE AT RS. 1,20,00,000/-. FINALLY, THE BILL FOR GOVERNMENT AUDIT FEES GOT SETTLED AT RS. 1 ,59,36,129/- FOR FINANCIAL YEAR 2008-09. SINCE, THE APPELLANT AU THORITY HAD ALREADY MADE PROVISION FOR THE GOVERNMENT AUDIT FEE S FOR FINANCIAL YEAR 2008-09 AT RS. 1,20,00,000/- IN BOOK S OF ACCOUNTS FOR FINANCIAL YEAR 2008-09 AND HAD ALSO MA DE PAYMENT OF RS. 1,00,00,000/- VIDE CHALLANS DATED 26 .04.2010 AND 23.06.2010, IT MADE THE PAYMENT FOR BALANCE AUD IT FEES OF I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 5 OF 9 RS. 59,36,129/- VIDE CHALLAN DATED 16.07.2010.(P.B. NO. 71 TO 73). THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSES SEE SUBMITTED THAT SINCE OUT OF THE TOTAL AUDIT FEES PA YMENTS OF AUTHORITY IN ITS ACCOUNT BOOKS FOR FINANCIAL YEAR 2 008-09, THE REMAINING SUM OF RS. 39,36,129/- WAS DEBITED BY IT D URING THE FINANCIAL YEAR 2009-10, THE REMAINING SUM OF RS. 39 ,36,129/- WAS DEBITED BY IT DURING THE FINANCIAL YEAR 2009-10 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS SUBMITT ED THAT IT IS SETTLED LAW THAT LIABILITY IS TO BE RECOGNIZED AS AN EXPENDITURE WHEN IT IS SETTLED BETWEEN TWO PARTIES AND AFTER SETTLEMENT, ANY PAYMENT IS MADE. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL, ALSO CITED SOME CASE LAWS AS CI T VS. RAJ MOTORS (2006) 284 ITR 489(ALL), CIT VS. KANORIA CHE MICALS & INDUSTRIES LTD. (1992) 106 CTR 314(CAL) AND OTHERS AS PER HIS WRITTEN SUBMISSIONS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE MATERIAL AVAILABLE ON RECORD AND FIND THAT LIAB ILITY TO PAY GOVERNMENT AUDIT FEES WAS RAISED. WE HAVE GONE THROU GH NOTE SHEET ENTRY PLACED AT PAPER BOOK PAGE NOS. 67 TO 70 WHICH I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 6 OF 9 SHOWS THAT THERE WAS DISPUTE REGARDING PAYMENT OF GOVERNMENT AUDIT FEES IN RESPECT OF IDA BEING NODAL AGENCY. THEREFORE, THE ASSESSEE COULD NOT ENVISAGED THE LIA BILITY IN F.Y. 2008-09, HENCE, THE PROVISIONS OF RS. 1,20,00,000/- WAS ONLY MADE. SINCE THE LIABILITY WAS SETTLED IN THE YEAR U NDER CONSIDERATION AND IT WAS PAID DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE, IT IS ALLOWABLE AS THE L IABILITY WAS CRYSTALLIZED AND SETTLED DURING THE YEAR. ACCORDING LY, THIS GROUND OF APPEAL IS ALLOWED. 8. GROUND NO. 2 RELATES TO ADDITION OF RS. 64,44,245/- MADE BY THE AO IN THE APPELLANTS INCOME ON ACCOUNT OF L IFE TIME LEASE RENT. 9. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL, BEFORE US, HENCE, IT IS TREATED A S WITHDRAWN AND IS DISMISSED. 10. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS. 8,74,210/- MADE BY THE AO OUT OF DEPRECIATION CLAIM ED BY THE ASSESSEE. I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 7 OF 9 11. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRES S THIS GROUND OF APPEAL, BEFORE US, HENCE, IT IS TREATED A S WITHDRAWN AND IS DISMISSED. 12. GROUND NO. 4 RELATES TO CONFIRMATION OF ADDITION OF RS. 28,71,071/- ON ACCOUNT OF SUPERVISION CHARGES TO TH E EXTENT OF 10% AS AGAINST THE ADDITION MADE BY THE AO AT A FLA T RATE OF 12 %. 13. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSEE HAS SHOWN AMOUNT RECEIVED FROM VARIOUS CO-OPERATIVE SOCI ETIES FOR THE DEVELOPMENT WORK DONE ON BEHALF OF THEM. IN THIS REGARD, SOME DOCUMENT WERE PRODUCED WHICH SHOWED THAT THE ASSESSEE AUTHORITY CHARGING 12% AS SERVICE CHARGE S ON THE WORK DONE BY IT ON BEHALF OF THE SOCIETIES. THE ASSE SSEE HAS NOT DECLARED THIS AMOUNT DURING THE YEAR. IT WAS FOU ND THAT THE ASSESSEE HAS DONE THE WORK AS ABOVE OF RS. 2,39 ,25,594/-. THE SERVICE CHARGE ON THIS AMOUNT @ 12% WORKED OUT T O RS. 28,71,071/-. HENCE, THE AO ADDED THE SAME TO THE TO TAL INCOME OF THE ASSESSEE. I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 8 OF 9 14. BEING, AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT (A). THE CIT (A) OBSERVED THAT THE ASSESSEE HAS NOT CONTESTED THE ADDITION BUT CONTESTED THE QUANTUM A S THE AO HAS ADOPTED A UNIFORM RATE OF 12% ON ENTIRE WORK WHE REAS IN MANY CASES EITHER NO INCOME WAS DERIVED OR INCOME M UCH LESSER RATE WAS EARNED. CONSIDERING THIS LD. CIT (A ) UPHELD 10% AS REASONABLE RATE ON ESTIMATED ADDITION. 15. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BE FORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE AO ERRED IN ADOPTING 12% RATE OR SUPERVISION CH ARGES AND LD. CIT (A) ERRED IN REDUCING ESTIMATED ADDITION @1 0% OF SUPERVISION CHARGES WITHOUT CONSIDERING THE MATERIAL FACTS WHEREAS THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCO UNTS AND NO ADDITION CAN BE MADE WITHOUT REJECTING THE BOOKS OF ACCOUNTS. IF INCOME OF THE ASSESSEE IS ASSESSED UND ER THE PROVISIONS OF SECTION 44AD, THE RATE OF PROFIT CANN OT BE MORE THAN 8%. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSE D THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THE ASSESSEE HAS I.T.A.NO.489/IND/2016-A.Y.2010-11 A.Y.2010-11 PAGE 9 OF 9 NOT SHOWN THE INCOME EARNED ON AS SUPERVISION CHARGE S FOR THE WORK DONE ON BEHALF OF CO-OPERATIVE SOCIETIES, WHEREAS THE ASSESSEE HAS CARRIED OUT SUPERVISION WORK FOR THEM. THEREFORE, THE LOWER AUTHORITIES HAVE CORRECTLY WORKED OUT THE INCOME ON THAT BEHALF. THE AO ON THE BASIS OF MATERIAL AVAILA BLE WITH HIM APPLIED THE RATE OF 12% ON RECEIPTS OF RS. 2,39,25, 594/- WHICH WERE REDUCED BY THE LD. CIT (A) TO 10%. WE DID NOT F IND ANY LOGIC IN THE PLEA OF THE LEARNED COUNSEL THAT RATE IS HIGHER, PARTICULARLY; ANY COGENT EVIDENCES HAVE NOT DEMONST RATED IT. THEREFORE, WE UPHOLD THE FINDING OF THE CIT (A), AN D HENCE, THIS GROUND OF APPEAL IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 13 TH DECEMBER, 2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 13 TH DECEMBER, 2016.CPU*