M/s Cube Construction Engineering, Jammu V. The Dy. Commissioner of Income Tax, Jammu

ITA 520/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7783 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: BHAGAT; RAJINDER CHOPRA
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. T.S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.520(ASR)/2016 ASSESSMENT YEAR:2010- 11 M/S. CUBE CONSTRUCTION ENGINEERING, 61D D/C GANDHI NAGAR, JAMMU. PAN:AAFFC-5664B VS. DY. CIT, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. M.R.BHAGAT & SH. RAJINDER CHOPRA RESPONDENT BY: SH. CHARAN DASS (LD. D.R) DATE OF HEARING:27.09.2017 DATE OF PRONOUNCEMENT:27.09.2017 ORDER PER N.K.CHOUDHRY: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 23.12.201 5 PASSED BY THE LD. CIT(A), JAMMU, RELEVANT OF ASST. YEAR:2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THE APPELLANT ORDER IS ILLEGAL, PERVERSE, ARBIT RARY, NOT BASED ON THE FACTS OF THE CASE AND THE LAW. 2. THAT THE LEARNED CIT(A) ERRED TO CONFIRM ADDITIO N OF RS.12,50,642/- MADE BY THE A.O. U/S 40A(IA) OF THE INCOME TAX ACT, 1961 WITHOUT APPEARING THAT INTEREST WAS PAID ON BANK LOAN USED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE BUT WAS ONLY PAID THROUGH M/S GVPR LTD. WHO WERE THE MAIN CONTRACTORS. THE ADDITION IS PRAYED T O BE DELETED. 3. THAT THE LEARNED CIT(A) ERRED TO CONFIRM ESTIMA TED ADDITION OF RS.2,00,000/- MADE BY THE A.O. OUT OF WAGES WHICH W ERE ALLEGED TO HAVE BEEN MADE WITHOUT PROPER VOUCHERS AND IS PRAYED TO BE DELETED. ITA NO.520 (ASR)/2016 ASST. Y EAR:2010-11 2 3. THAT THE LEARNED CIT(A),JAMMU ERRED TO CONFIR M ADDITION OF RS.1,00,000/- OUT OF MACHINERY REPAIR ON ESTIMATE B ASIS WITHOUT ANY SPECIFIC DEFECT. THE ADDITION IS PRAYED TO BE DELET ED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THAT THE APPELLANT IS A PARTNERSHIP FIRM CONSISTING OF TWO PARTNERS, NAMELY SH. ARVIND GUPTA AND SH. ASHWANI SI NGH HAVING EQUAL SHARES. DURING THE PERIOD UNDER CONSIDERATION, ASSE SSEE HAD SHOWN INCOME FROM CONTRACTS MAINLY FROM M/S. CUBE CONSTRUCT ION ENGINEERING LTD. AND M/S. GVPR ENGINEERING LTD. BEIN G A SUB- CONTRACTOR. THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS.10,22,74,072/- AND NET PROFIT AMOUNTING TO RS.34,3 2,204/- HAS BEEN DECLARED @ OF 3.35%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODU CED AND THESE WERE CHECKED BY THE AO ON TEST CHECK BASIS. THE ASSE SSEE HAS MADE ADDITIONS OF RS.12,50,642/- UNDER THE HEAD INT EREST ON GVPR WITHOUT DEDUCTION OF TDS. SOME OF THE EXPENSES INCURRED ON ACCOUNT OF WAGES WERE N OT FULLY VOUCHED AND ALSO WERE NOT PROPERLY MAINTAINED. FURTHER THE VOUCHERS ON ACCOUNT OF MACHINERY REPAIR AND MAINTENANCE EXPENSES IN THE P&L ACCOUNT HAVE NOT PROPERLY VOUCHED AND WERE MAD E IN CASH. ON THE AFORESAID DISCREPANCIES, THE ASSESSING OFFICER ADDED RS.2,00,000/- UNDER THE HEAD DISALLOWANCE OF WAGES AND ADDITION OF RS.1,00,000/- UNDER THE HEAD MACHINERY REPAIR AND MAI NTENANCE. 4. THE ASSESSEE PREFERRED TO FILE THE APPEAL BEFORE THE L D. CIT(A) WHO WHILE DEALING WITH THE APPEAL CONFIRMED THE ORDE R PASSED BY THE ASSESSING OFFICER. 5. THE ASSESSEE FURTHER CARRIED THE MATTER BEFORE US AND IN SUPPORT OF GROUND NO.2 SUBMITTED THAT M/S GVPR LTD. FOR DOING WORKS IN THE ITA NO.520 (ASR)/2016 ASST. Y EAR:2010-11 3 STATE OF J&K FOR CARRYING ON SPECIFIED WORKS OF CONSTRUCTI ON ETC. IN HILLY TERRAIN, THE CONTRACTOR HAD RAISED LOAN FROM BANK TO P URCHASE MACHINERY TO BE USED IN DOING SPECIFIED WORKS. AS THE M ACHINERY WAS USED FOR DOING HIS WORKS, THE APPELLANT AGREED TO PAY INSTALLMENTS PAYABLE TO THE BANK OF PURCHASE PRICE AS WELL AS INTEREST ON THAT LOANS. AS THE MACHINERY WAS PLEDGED WITH THE BANK BY GVPR, T HE PRINCIPAL AMOUNT AND INTEREST WAS DEDUCTED FROM BILLS RAISED BY TH E APPELLANT AND PAID TO THE BANK BY GVPR. THE PRINCIPAL AMOUNT B EING OF CAPITAL NATURE DID NOT APPEAR IN THE PROFIT AND LOSS ACCOUNT AN D INTEREST BEING REVENUE EXPENDITURE WAS RIGHTLY PAID TO THE BANK THR OUGH GVPR. IT APPEARS THAT NARRATION IN THE PROFIT & LOSS ACCOUNT CREAT ED CONFUSION IN THE MINDS OF THE AUTHORITIES BELOW. HAD THE NARRATIO N BEEN INTEREST ON BANK LOAN RAISED BY GVPR, THAT WOULD HAVE CLEARED THE POSITION AND NO ADDITION COULD HAVE BEEN MADE. AS THE MACHINERY WAS USED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE, THEREFORE, INTERE ST WAS ALLOWABLE AND TDS WAS NOT REQUIRED TO BE DEDUCTED AS P ER PROVISIONS OF SECTION 194A(3)(III)(A) OF THE ACT. IT WAS ALSO BR OUGHT TO THE NOTICE OF THE AO THAT MAIN CONTRACTOR I.E. GVPR DEDUCTED THE AMOUNT OF INTEREST FROM THE BILLS PAID BY THEM TO THE APPELLAN T, THEREFORE, TAX COULD NOT BE DEDUCTED AS SECTION APPLIES TO AMOUNTS PAYAB LE. IN THE PRESENT CASE THE AMOUNT WAS REDUCED FROM THE BILLS OF PA YMENTS SUBMITTED TO THE MAIN CONTRACTOR WHO HAD ALLOTTED WOR KS TO THE APPELLANT. THE ASSESSEE WAS RIGHT IN NOT DEDUCTING TAX ON THE AMOUNT OF INTEREST PAID AND EVEN OTHERWISE THE M/S GVPR ENGI NEERS LTD. (PAN: AAACG 7614 P) FILED RETURN OF INCOME FOR AY 2 010-11 ON 15-10- 2010 AT INCOME OF RS.21,57,54,742/-. AS THE GOVERNMENT GOT TAX IN FULL EVEN ON THE AMOUNT PAID TO GVPR ENGINEERS LTD, THEREFORE, TAXING THE SAME AMOUNT IN THE HANDS OF THE APPELLANT WOULD A MOUNT TO DOUBLE TAXATION. ITA NO.520 (ASR)/2016 ASST. Y EAR:2010-11 4 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE O RDER PASSED BY THE AUTHORITY DOES NOT SUFFERS FROM PERVERSITY, ILLE GALITY AND IRREGULARITY AND EVEN THE APPELLANT COUNSEL CONCEDED T HE GROUNDS BEFORE THE LD. CIT(A), THEREFORE, THE ADDITION MADE BY THE A.O WAS UPHELD BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND RELEVANT MATERIAL ON RECORD AS IN THE INSTANT CASE, THE PAYMENT OF RS.12,50,642/- HAS BEEN PAID UNDER THE HEAD INTEREST ON GVPR , IT IS TRITE TO SAY THAT IF AN AMOUNT PAID TO THE CERTAIN COM PANY HAS ALREADY BEEN TAXED THEN IT CANNOT BE SUBJECTED TO THE TAXATIO N AGAIN AND SAME WOULD AMOUNT TO DOUBLE TAXATION. WE ARE IN CONCURRENCE WITH THE SUBMISSIONS OF THE LD. AR T HAT NARRATION IN THE P&L ACCOUNT CREATED CONFUSION IN THE M IND OF THE AUTHORITIES BELOW. HAD THE NARRATION BEING INTEREST L OAN OR ON BANK LOAN RAISED BY GVPR, WOULD HAVE CLEAR THE POSITION AN D NO ADDITION COULD BE MADE. WE FEEL IT APPROPRIATE TO DIRECT THE LD. ASSESSING OFF ICER TO VERIFY THE FACTS WHETHER THE AMOUNT UNDER CONSIDERATION HAS AL READY BEEN SUBJECTED TO TAX BY GVPR ENGINEERS LTD, AND AFTER VERI FYING THE SAME THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH UNDER CON SIDERATION. HENCE, THE ISSUE IS REMANDED TO THE FILE OF THE LD. AO. WITH REGARD TO THE CONTENTION OF THE LD. DR THAT DU RING THE APPELLANT PROCEEDINGS, THE APPELLANT COUNSEL CONCEDED THI S GROUND, IN FACT DOES NOT CLEAR, WHETHER HE HAS ACCEPTED HIS FAULT OR HE HAS NOT PRESSED THE GROUND UNDER CONSIDERATION, HENCE, THE SAID O BSERVATION DOES NOT REQUIRE MUCH CONSIDERATION. ITA NO.520 (ASR)/2016 ASST. Y EAR:2010-11 5 WITH REGARD TO GROUND NO.2 & 3, THE LD. AR ARGUED THAT BOOKS OF ACCOUNTS WERE NOT REJECTED BY THE A.O AND THERE IS NO PR ESCRIBED PROCEDURE TO PREPARE AND MAINTAINING VOUCHERS AS THE AD DITION MADE IS NOT BASED ON EVIDENCE BUT ON PURE IMAGINATION. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ORDER PASSED BY LD. CIT(A) AS IT IS SPECIFICALLY WRITTEN BY THE LD. CIT(A) THAT THE ASSESSEE COUNSEL DID NOT OPPOSE THE PROPOSE DISALLOWANCE OF RS.2,00,000/- AND FURTHER NO OBJECTION WAS MADE BY THE REPRESENTATIVE OF THE ASSESSEE, DURING THE ASSESSMENT PROCEE DINGS AND EVEN OTHERWISE DURING THE APPELLANT PROCEEDING AL SO THE APPELLANT COUNSEL DID NOT OPPOSE THIS ADDITION, THEREFORE, THE LD . CIT(A) CONFIRMED THE SAID ADDITIONS. WE DO NOT FIND ANY SUBSTANCE AND REASON TO INTERFERE WI TH THE ORDER PASSED BY THE LD. CIT(A) ON THESE ASPECTS/GROUNDS UN DER CONSIDERATION AND IN OUR CONSIDERED OPINION THE SAME IS BASED UPON LOGIC AND WELL REASONING. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.09.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:27.09.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER ITA NO.520 (ASR)/2016 ASST. Y EAR:2010-11 6