Sri. Ganesh Shipping Agency, Mangalore V. Asst.C.I.T., Mangalore

ITA 545/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5463 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 40A(3); 143(3); 37(1); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH AT MANGALORE BEFORE SHRI INTURI RAMA RAO, ACCOUNTA N T MEMBER AND SHRI SUDHANS H U SRIVASTAVA, JUDIC I AL MEMBER ITA NO S . 545 & 546 /BANG/2016 (ASS ESSMENT Y EAR S : 2011 - 12 & 2012 - 13) SRI GANESH SHIPPING AGENCY, 05 - 152, SRI RAM BUILDING, KOTTARA C HOWKI, DEREBAIL, MANGALORE. PAN: AAFFS 2694 K VS. ... APPELLANT ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), MANGALORE. ... RESPONDENT APPELLANT BY : SHRI V.SRINIVASAN, ADVOCATE. RESPONDENT : SHRI K.A.CHANDRASHEKAR, JCIT(DR) DATE OF HEARING : 31/01/2017 DATE OF PRONOUNCEMENT : 02 /0 5 /2017 O R D E R PER INTURI RAMA RAO, AM : THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDERS OF THE CIT(A), MANGALORE, DATED 20/01/2016 FOR THE ASSESSMENT YEAR 2011 - 12 AND 20 12 - 13. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO S.545 & 546 /BANG/201 6 PAGE 2 OF 5 3. THE FACTS RELEVANT TO ASSESSMENT YEAR 2011 - 12 ARE STATED HEREUNDER: THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGEN T, STEAMER AGENT AND BUS OPERATOR. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12 WAS FILED ON 30/09/2011 DECLARING TOTAL INCOME OF RS.1 , 86 , 30 , 222/ - . AFTER PROCES SING THE SAID RETURN OF INCOME U/S 143(1), THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 31/01/2014 PASSED U/S 143(3) OF THE INCOME - TAX ACT,1961 [ THE ACT FOR SHORT] AT A TOTAL INCOME OF RS.2,03,36,959/ - . WHILE DOING SO, THE ASSESSING OFFICER (AO) DISALLOWED 20% OF THE SPEED MONEY EXPENDITURE OF RS.8535685 HOLDING THAT HAVING REGARD TO INCREASE IN EXPENDITURE AND THE ITA NO S.545 & 546 /BANG/201 6 PAGE 3 OF 5 NATURE OF EXPENDITURE, 20% OF THE EXPENDITURE IS TREATED AS NON - GENUINE. 4. ON APPEA L BEFORE THE CIT(A), THE CIT(A), FOLLOWING THE HON BLE ITAT DECISION IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2005 - 06 DATED 14/06/2013 IN ITA NO.833/2011 RESTRICTED THE DISALLOWANCE TO 10% OF THE SPEED MONEY. 5. BEING AGGRIEVED, THE ASSESSEE IS BEFORE US IN THE PRESENT APPEAL. 5.1 LEARNED AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE NATURE OF SPEED MONEY WAS CONSIDERED HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KONKAN MARINE AGENCIES (313 ITR 308) WHEREIN THE HON BLE HIG H COURT OPINED THAT THIS EXPENDITURE DOES NOT INVOLVE ANY BREACH OF ANY STATUTE OR LAW AND THEREFORE THE ENTIRE EXPENDITURE IS ALLOWABLE. HE FURTHER SUBMITTED THAT THIS DECISION WAS FOLLOWED BY THE HON BLE CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.1209/ BANG/2009 DATED 30/06/2010. THEREFORE, ACCORDING TO THE LEARNED AR OF THE ASSESSEE , LATTER DECISION OF THIS TRIBUNAL IS TO BE PREFERRED TO THE DECISION IN THE CASE OF THE APPELLANT. 5.2 ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF THE CO - ORDINATE BENCH OF TRIBUNAL IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO.299/BANG/2014 AND ITA NO.1677/BANG/2013 DATED 23/03/2015. ITA NO S.545 & 546 /BANG/201 6 PAGE 4 OF 5 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE OF ALLOWABILITY OF SPEED MON EY HAD COME FOR CONSIDERATION BEFORE THE HON BLE HIGH COURT IN THE CASE OF CIT VS. KONKAN MARINE AGENCIES ( 313 ITR 308 ) WHEREIN THE HON BLE HIGH COURT HELD THAT SAID EXPENDITURE WAS INCURRED ONLY IN THE COURSE OF BUSINESS AND IS NEITHER PROHIBITED BY LAW AND IS WHOLLY ALLOWABLE. THE RELEVANT PARA IS AS UNDER: 7. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW AND TAKING INTO CONSIDERATION THE ASSESSEE'S BUSINESS AND THE PREVAILING PRACTICE IN THE TRADE, WHEREBY PAYMENTS HAVE TO BE MADE BY THE FIRMS SUCH AS THE ASSESSEE IN ORDER TO ENSURE THAT WORK OF HANDLING GOODS ARE DONE WITHIN A REASONABLE TIME AND TO HAND LE EMERGENCY OPERATIONS OF CARGO HANDLING BEYOND THE WORKING HOURS, SUCH PAYMENTS ARE MADE EITHER THROUGH LABOUR OR WORKERS' UNION, CANNOT BE CONSIDERED TO BE EITHER PROHIBITED BY LAW AND FURTHER THE ASSESSEE CANNOT BE EXPECTED TO TAKE THE RECEIPT FROM IND IVIDUAL WORKERS OR MAKE PAYMENT BY WAY OF CHEQUES. IN OUR OPINION, THE PAYMENT IS CLEARLY FOR BUSINESS CONSIDERATION AND CANNOT BE CONSIDERED TO BE ILLEGAL IN NATURE AND HAVE BEEN INCURRED IN THE ORDINARY COURSE OF BUSINESS AND, THEREFORE, THE SAID AMOUNT OUGHT TO BE ALLOWED AS DEDUCTION BY WAY OF BUSINESS EXPENDITURE. THUS, THE HON'BLE HIGH COURT, AFTER EXAMINING THE NATURE OF EXPENDITURE HAD COME TO THE CONCLUSION THAT THIS EXPENDITURE IS ALLOWABLE AS BUSINESS EXPENDITURE AS IT IS NOT PROHIBITED BY ANY PROVISIONS OF LAW. FURTHER, WE HOLD THAT NO EXPENDITURE CAN BE DISALLOWED MERELY ON THE PREMISE THAT THE EXPENDITURE IS EXCESSIVE WHEN ALL OTHER CONDITIONS FOR ALLOWABILITY OF EXPENDITURE U/S 37(1) ARE FULFILLED. THE AO HAD NOT INVOKED THE PROVISIONS OF SECTIONS OF 40A(3) TO DISALLOW THE PAYMENTS, IF ANY, MADE IN CASH ITA NO S.545 & 546 /BANG/201 6 PAGE 5 OF 5 EXCEEDING RS.20,000/ - . MERELY BECAUSE EXPENDITURE WAS INCURRED IN CASH, IT CANNOT BE PRESUMED THAT THE EXPENDITURE IS NOT GENUINE. NO DISALLOWANCE CAN BE MADE MERELY BASED ON SURMISES AND CONJECTURES. 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 2 N D M A Y , 201 7 S D / - S D / - (SUDHANSHU SRIVASTAVA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BENGALURU. DATE: 0 2 /0 5 /2017 SRINIVASULU, SR. PS COPY TO: 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT, 5) DR ITAT, BANGALORE, 6) GUARD FILE ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE