Empee Sugars & Chemicals Ltd., CHENNAI V. ACIT, CHENNAI

ITA 499/CHNY/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2969 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-05-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Business expenditure; Set aside
• Section: 40(a)(ia)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.499/CHNY/2015 ' (' / ASSESSMENT YEAR : 2010-11 M/S EMPEE SUGARS & CHEMICALS LTD., EMPEE TOWERS, 59, HARRIS ROAD, PUDUPET, CHENNAI - 600 002. PAN : AABCE 5658 G V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ,-*+ . / / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 0 . 1$ / DATE OF HEARING : 29.01.2019 2!( . 1$ / DATE OF PRONOUNCEMENT : 04.03.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -18, CHENN AI, DATED 08.01.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF GUEST HOUSE EXPENDITURE TO THE EXTENT OF 1,15,913/-. 2 I.T.A. NO.499/CHNY/15 3. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE WAS MAINTAINING A SMALL GUEST HOU SE, WHICH IS KNOWN AS TRANSIT ACCOMMODATI8ON FOR THE EMPLOYEES. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THIS IS NOT FOR BUSINESS PURPOSE. ACCO RDING TO THE LD. COUNSEL, THIS IS TEMPORARY ACCOMMODATION FOR EMPLOY EES WITHIN THE FACTORY PREMISES, THEREFORE, IT IS A BUSINESS EXPEN DITURE WHICH NEEDS TO BE ALLOWED. 4. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. DEPARTM ENTAL REPRESENTATIVE ALSO. THE ASSESSEE CLAIMS THAT A TR ANSIT ACCOMMODATION WAS AVAILABLE WITHIN THE FACTORY PREM ISES WHICH WAS USED BY THE EMPLOYEES ON TRANSFER. BUT, THE AS SESSING OFFICER HAS NOT BROUGHT THE FACT ON RECORD WHETHER THE SO-C ALLED GUEST HOUSE EXPENDITURE INCURRED WAS ONLY ON TRANSIT ACCO MMODATION WITHIN THE FACTORY PREMISES OR EXPENDITURE INCURRED FOR ENTERTAINING THE GUESTS OUTSIDE THE FACTORY PREMISES, WHICH NEED S TO BE RE- EXAMINED AND BROUGHT ON RECORD. THEREFORE, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE IS RE MITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL RE- EXAMINE THE MATTER AND BRING ON RECORD THE NATURE O F GUEST HOUSE / 3 I.T.A. NO.499/CHNY/15 TRANSIT ACCOMMODATION AND THEREAFTER DECIDE THE ISS UE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPO RTUNITY TO THE ASSESSEE. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF POOJA EXPENSES. 6. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT A TEMPLE WAS CONSTRUCTED WITHIN THE FACTORY PR EMISES AND THE ASSESSEE CLAIMED POOJA EXPENDITURE. ACCORDING TO T HE LD. COUNSEL, POOJA IS PERFORMED FOR WELLBEING OF THE EMPLOYEES A ND ALSO WELLBEING OF THE ORGANIZATION ITSELF. THEREFORE, A CCORDING TO THE LD. COUNSEL, IT IS A BUSINESS EXPENDITURE WHICH NEEDS T O BE ALLOWED. 7. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE CLAIMS POOJA EXPENDITURE OF 16,89,533/-. ACCORDING TO THE LD. D.R., IT IS NOT KNOWN WHAT KIND OF POOJA WAS PERFORMED FOR 16,89,533/-. IF IT IS TEMPLE, THERE MAY BE SOME REVENUE RECEIPT BY WAY OF HUNDI. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE SO-CALLED EXPENDITURE OF 16,89,533/- IS NOT FOR BUSINESS PURPOSE. 4 I.T.A. NO.499/CHNY/15 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS A HUGE EXPENDITURE OF 16,89,533/- AS POOJA EXPENDITURE. NO DOUBT, POOJA IS PERFORMED FOR WELL BEING OF THE ORGANIZATION ITSELF AND WELLBEING OF THE EMPLOYEES. BUT, IT IS NOT KNO WN WHAT KIND OF POOJA WAS PERFORMED FOR THE SAID EXPENDITURE OF 16,89,533/-, WHETHER THERE WAS A FESTIVAL ORGANIZED BY THE COMPA NY IN THE TEMPLE PREMISES OR SOME OTHER FUNCTION WAS CARRIED ON. AS RIGHTLY SUBMITTED BY THE LD. D.R., WHEN THE ASSESSEE WAS MA INTAINING A TEMPLE WITHIN THE PREMISES AND INCURRED AN EXPENDIT URE OF 16,89,533/-, DEFINITELY THERE WOULD BE REVENUE RECE IPT BY WAY OF HUNDI. THEREFORE, THESE FACTS NEED TO BE EXAMINED BY THE ASSESSING OFFICER. IT IS NOT KNOWN WHETHER THE TEM PLE BELONGS TO THE ASSESSEE OR BELONGS TO GENERAL PUBLIC. AND IT IS ALSO NOT KNOWN WHO IS MANAGING THE AFFAIRS OF THE TEMPLE. IN OTHE R WORDS, IS IT MANAGED BY THE ASSESSEE OR BY THE HINDU RELIGIOUS C HARITABLE ENDOWMENT, GOVERNMENT OF TAMIL NADU. IN THOSE CIRC UMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED 5 I.T.A. NO.499/CHNY/15 BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASS ESSING OFFICER SHALL RE-EXAMINE THE ISSUE IN THE LIGHT OF THE OBSE RVATION MADE ABOVE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACC ORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 9. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF 2,94,000/- TOWARDS COMMISSION EXPENDITURE. 10. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSE E, SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED THE COMMISSION PA YMENT AS EXPENDITURE IN THE RETURN OF INCOME. HENCE, ACCORD ING TO THE LD. COUNSEL, THERE CANNOT BE ANY DISALLOWANCE. 11. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD . D.R. SUBMITTED THAT SINCE THE ASSESSEE CLAIMS THAT IT IS NOT CLAIMED AS EXPENDITURE, THE MATTER MAY BE REMITTED BACK TO THE ASSESSING OFFICER FOR RECONSIDERATION. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SINCE THE ASSESSEE CLAIMS THAT 2,94,000/- WAS NOT CLAIMED AS EXPENDITURE, THE MATTER MAY BE VERIFIED BY THE ASSESSING OFFICER TO ASCERTAIN THE CORRECT FIGURE. ACCORDINGLY, ORDERS OF BOTH THE AU THORITIES BELOW ARE 6 I.T.A. NO.499/CHNY/15 SET ASIDE AND THE ISSUE OF COMMISSION PAYMENT IS RE MITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL RE- EXAMINE THE MATTER AND FIND OUT WHETHER THE ASSESSE E CLAIMED EXPENDITURE OF 2,94,000/- WHILE COMPUTING TAXABLE INCOME AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 13. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF 2,00,000/- TOWARDS DIRECTOR SITTING FEES. 14. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSE E, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED DIRECTOR SITT ING FEES TO THE EXTENT OF 2,00,000/- ON THE GROUND THAT TAX WAS NOT DEDUCTED AT SOURCE. ACCORDING TO THE LD. COUNSEL, THE DIRECTOR , WHO RECEIVED THE AMOUNT, ALREADY FILED RETURN OF INCOME AND PAID TAXES. THEREFORE, ACCORDING TO THE LD. COUNSEL, THERE CANN OT BE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). 15. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. D.R. A LSO. THE ASSESSEE-COMPANY CLAIMS BEFORE THIS TRIBUNAL THAT T HE RECIPIENT, THE DIRECTOR WHO RECEIVED THE SITTING FEES HAS ALREADY PAID TAXES, 7 I.T.A. NO.499/CHNY/15 THEREFORE, THESE FACTS NEEDS TO BE VERIFIED. ACCOR DINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE EN TIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND THEREAFTER BRING ON RECORD WHETHER THE DIRECTOR, WHO RECEIVED THE SITTING FEES , HAS PAID TAXES IN RESPECT OF THE FEES RECEIVED FROM COMPANY AND TH EREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVI NG A REASONABLE OPPORTUNITY TO THE ASSESSEE. 16. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO CLAIM OF PROVIDENT FUND OF 83,115/-. 17. DURING THE COURSE OF HEARING, THE LD.COUNSEL FO R THE ASSESSEE VERY FAIRLY SUBMITTED THAT HE IS NOT PRESS ING THIS ISSUE. THE LD.COUNSEL HAS ALSO MADE AN ENDORSEMENT TO THIS EFFECT IN THE APPEAL FOLDER. THEREFORE, THE DISALLOWANCE OF PROV IDENT FUND TO THE EXTENT OF 83,115/- IS DISMISSED AS NOT PRESSED. 18. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF CANE DEVELOPMENT COUNCIL FUND CONTRIBUTION TO THE E XTENT OF 2,28,668/-. 8 I.T.A. NO.499/CHNY/15 19. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSE E, SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED CANE DEVELOPMENT COUNCIL FUND CONTRIBUTION AS EXPENDITURE WHILE COMPUTING TOTAL I NCOME, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE. 20. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. D.R. A LSO. SINCE THE ASSESSEE CLAIMS BEFORE THIS TRIBUNAL THAT THE D ISALLOWANCE OF 2,28,668/- TOWARDS CANE DEVELOPMENT COUNCIL FUND CO NTRIBUTION WAS NOT CLAIMED AS EXPENDITURE WHILE COMPUTING TAXA BLE INCOME, THIS FACT NEEDS TO BE VERIFIED BY THE ASSESSING OFF ICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND B RING ON RECORD WHETHER THE ASSESSEE CLAIMED CANE DEVELOPMENT COUNC IL FUND CONTRIBUTION AS EXPENDITURE OR NOT AND THEREAFTER D ECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 21. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF EXPENDITURE TO THE EXTENT OF 6,64,526/-. 9 I.T.A. NO.499/CHNY/15 22. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSE E, SUBMITTED THAT THE ASSESSEE INCURRED EXPENDITURE DURING THE C OURSE OF BUSINESS. HOWEVER, ACCORDING TO THE LD. COUNSEL, T HE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE WAS NO SUPPORTING DOCUMENT. THE LD.COUNSEL S UBMITTED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 23. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. D.R. A LSO. THE ASSESSEE CLAIMED EXPENDITURE UNDER THE HEAD OTHER EXPENSES TO THE EXTENT OF 6,64,526/-. THE ASSESSING OFFICER FOUND THAT THESE EXPENDITURES ARE MAINLY SUNDRY AND PERSONAL NATURE. THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL EVIDENCE BEFORE THE ASSESSING OFFICER TO ESTABLISH THAT THESE ARE ALL BUSINESS EX PENDITURE. NOW THE ASSESSEE CLAIMS THAT THE MATTER MAY BE REMITTED BAC K TO THE FILE OF THE ASSESSING OFFICER. SINCE THE MAIN ISSUES ARISE FOR CONSIDERATION IN THIS APPEAL ARE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER, FOR THE SAKE OF CONSISTENCY, THIS ISSUE OF DISALLOW ANCE OF 6,64,526/- IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AND TH EREAFTER DECIDE 10 I.T.A. NO.499/CHNY/15 THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVI NG A REASONABLE OPPORTUNITY TO THE ASSESSEE. 24. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO EXCESS CLAIM OF DEPRECIATION TO THE EXTENT OF 42,464/-. 25. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSE E, SUBMITTED THAT HE IS PLACING HIS RELIANCE ON THE GROUNDS OF A PPEAL. 26. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. D.R. A LSO. ON PERUSAL OF THE ORDER OF THE ASSESSING OFFICER, IT A PPEARS THAT THE ASSESSEE CLAIMED DEPRECIATION OF 3,53,87,599/-. THIS INCLUDES DEPRECIATION OF 8,25,795/- ON THE VEHICLES PURCHASED DURING THE YEAR UNDER CONSIDERATION. AFTER PERUSING PURCHASE BILLS OF THE VEHICLES, THE ASSESSING OFFICER FOUND THAT THERE IS A DIFFERENCE IN THE COST PRICE TO THE EXTENT OF 2,83,098/-. THEREFORE, THE ASSESSING OFFICER FOUND THAT THERE WAS EXCESS CLAIM OF 42,464/-. THE DIFFERENCE IN THE COST PRICE ON VEHICLES WAS NOT EX PLAINED. THEREFORE, THERE WAS EXCESS CLAIM OF DEPRECIATION T O THE EXTENT OF 42,464/- THEREFORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 11 I.T.A. NO.499/CHNY/15 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 4 TH MARCH, 2019 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESA N) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 4 TH MARCH, 2019. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-18, CHENNAI 4. 0 81 /CIT, CENTRAL-I, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.