DCIT, New Delhi V. M/s Jubliant Oil & Gas Pvt. Ltd., New Delhi

ITA 5580/DEL/2010

• Counselvise Citation: 558020114 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: PA WAN KUMARCA
• Section: 143(3); 6

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I.C. SUDHIR, JUDICIAL MEMBER ITA NO. 5580/DEL/2010 ASSESSMENT YEAR: 2006- 2007 DCIT VS. JUBLIANT OIL & GAS PVT. LTD. CIRCLE 4 (1) 1517, 15 TH FLOOR, NEW DELHI. DEVIKA TOWERS, NEHRU PLACE NEW DELHI 110 019 AAACE0169K (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI R.S. NEGI, SR. DR. RESPONDENT BY : SHRI PA WAN KUMAR,CA DATE OF HEARING : 27-06- 2012 DATE OF PRONOUNCEMENT : 31.8.2 012 ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS IMPUGNED FIRST APPELLATE ORDER ON FOLLOWING GROUNDS :- 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETIN G THE ADDITION OF ` 11,05,805/- MADE BY THE U/S ON ACCOUNT OF FBT CLAIM ED IN P & L ACCOUNT. 2.1 THE LD. CIT(A) IGNORED THE FACT THAT THE ASSESSEE HAS ITSELF MENTIONED THE AMOUNT AS NOT ALLOWABLE UNDER SECTION 40(A) OF THE ITA NO. 5580/DEL/2010 2 ACT IN ITS TAX AUDIT REPORT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELE TING THE ADDITION OF ` 22,56,817/- BEING THE NON-VERIFIABLE EXPENSES. 3.1 THE LD. CIT(A) IGNORED THE FACT THAT THE ASSESSEE DID NOT PRODUCE THE PROPER NECESSARY VOUCHERS FOR VERIF ICATION OF ITS EXPENSES DURING ASSESSMENT PROCEEDINGS DESPITE H AVING BEEN PROVIDED PROPER OPPORTUNITIES. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF THE ORDERS OF THE AUTHORITIES BE LOW AND MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 IS GENERAL IN NATURE HENCE IT DOES NOT NEED INDEPENDENT ADJUDICATION. GROUND NOS. 2 AND 2.1 4. THE RELEVANT FACTS ARE THAT THE ASSESSE E A PRIVATE LIMITED COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT 19 56 IN THE BUSINESS OF OIL EXPLORATION AND PRODUCTION OF OIL AND GAS. DURING THE YEAR IT HAD DECLARED A LOSS OF ` 92,23,059/-. THE RETURN WAS PROCESSED U/S 143(1) O F THE ACT. SUBSEQUENTLY THE ASSESSMENT U/S 143(3) WAS FRAMED AND THE INCOME OF ` 26,39,017/- WAS ASSESSED AFTER MAKING CERTAIN DISAL LOWANCES. THE DISALLOWANCES WERE MADE IN RESPECT OF FRINGE BE NEFIT TAX (FBT) AND 5% OF PERSONNEL AND OPERATIVE AND OTHER EXPENSES. B EFORE THE LD. CIT(A) THE ASSESSEE OBJECTED THE DISALLOWANCE OF ` 11.05,805/- MADE BY THE AO ON ACCOUNT OF FBT ON THE BASIS THAT THE ASSESSEE HAD N OT CLAIMED FBT OF ` 11,05,805/- WHILE COMPUTING ITS RETURNED LOSS FOR T HE YEAR UNDER ITA NO. 5580/DEL/2010 3 CONSIDERATION, SINCE IT HAD CONSIDERED LOSS OF ` 2,57,74,162/- BEFORE REDUCING FBT FOR THE COMPUTATION OF RETURNED LOSS. THUS IT WAS CONTENDED THAT THE QUESTION OF ADDING BACK FBT DOES NOT ARISE . BEING CONVINCED WITH THIS SUBMISSION LD. CIT(A) HAS DELETED THE DISALLOW ANCE OF ` 11,05,805/- MADE ON ACCOUNT OF FBT BY THE AO . 5. IN SUPPORT OF THE GROUNDS ON THE ISSUE, LD. DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE HAS ALSO REFER RED CONTENTS OF PAGE NO. 60 ON THE PAPER BOOK WHEREIN THE DETAILS OF FRINGE BENEFIT TAX INCURRED ON ALL THE FOUR BLOCKS HAS BEEN SHOWN. THE LD. AR ON T HE OTHER HAND TRIED TO JUSTIFY THE FIRST APPELLATE ORDER ON THE ISSUE. HE REFERRED CONTENTS OF PAGE NUMBERS 1 AND 54 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. PAGE NO. 1 TO 49 OF THE PAPER BOOK IS THE COPY OF RETURN OF INCOME ALONGWITH COMPUTATION OF INCOME OF THE ASSESSEE FOR THE ASSES SMENT YEAR UNDER CONSIDERATION. AT PAGE NUMBER 54 HAS BEEN PLACED TH E COPY OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH, 2006 SHOWING THE FRINGE BENEFIT TAX AT ` 9,88,008/-. BEFORE THAT LOSS FOR THE YEAR, THE TAX HAS BEEN SHOWN AT ` 2,57,74,162/-. 6. CONSIDERING THE ABOVE SUBMISSIONS WE F IND FROM THE FIRST APPELLATE ORDER THAT ON THE CONTENTION OF THE ASSESSEE THAT I T HAD NEITHER DEBITED THE FBT OF ` 11,05,805/-DUE TO PROFIT AND LOSS ACCOUNT NOR CLAIM ED IT IN ITS RETURNED LOSS, LD. CIT(A) HAD CALLED FOR REMAND REP ORT FROM THE AO. AFTER CONSIDERING THE REMAND REPORT FURNISHED BY THE AO T HE ABOVE SUBMISSION OF ITA NO. 5580/DEL/2010 4 THE ASSESSEE THAT THE ASSESSEE HAD NEITHER DEBITED THE FBT AT ` 11,05,805/- TO THE PROFIT AND LOSS ACCOUNT NOR HAD CLAIMED IT I N ITS RETURNED LOSS HAS BEEN ACCEPTED. HE HAS ACCORDINGLY HELD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING ` 11,05,805/-. IN THE RESULT HE HAS DELETED THE DISA LLOWANCE OF ` 11,05,805/ - WE FIND THAT THE FIRST APPELLATE ORDER ON THE ISSUE IS REASONED ONE. HENCE NO INTERFERENCE THERETO IS WARRANTED. TH E SAME IS UPHELD. THE GROUND NO. 2 AND 2.1 ARE THUS REJECTED. GROUND NOS. 3 AND 3.1 7. DURING THE YEAR THE ASSESSEE WAS HAVING PARTIC IPATING INTEREST IN THE FOUR PRODUCTION SHARING CONTRACTS (PSC). THE ASSES SEE HAD CLAIMED EXPENSES AMOUNTING TO ` 1,62,71,647/- ON ACCOUNT OF PERSONNEL COSTS AND ` 2,88,64,707/- ON ACCOUNT OF OPERATIVE AND OTHER EXP ENSES. THE AO DISALLOWED ` 8,13,581/- FROM THE CLAIMED PERSONNEL COST AT ` 14,43,235/- OUT OF THE CLAIMED OPERATIVE AND OTHER EXPENSES. TH US THE AO DISALLOWED 5% OF THE CLAIMED EXPENSES. THE LD. CIT(A) HAS DELE TED THESE DISALLOWANCE, ON THE BASIS THAT THE AO HAD NOT BEEN ABLE TO POINT OUT ANY DISCREPANCY IN THE ACCOUNTS OF ASSESSEE AND HE HAD NOT BROUGHT OUT ANY NEW FACTS AND EVIDENCE IN ORDER TO SUBSTANTIATE THE ALLEGATION THAT PERSONNEL EXPENSES OF ` 1,62,71,647/- AND OPERATIVE AND OTHER EXPENSES OF ` 2,38,64,707/- WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS. LD. CIT(A) HAS HELD THAT IN ABSENCE OF ANY ADEQUATE OR RELEVAN T MATERIAL ON THE BASIS OF WHICH THE EXPENSES INCURRED BY THE ASESEE COULD BE DISALLOWED , THE AO ITA NO. 5580/DEL/2010 5 WAS NOT JUSTIFIED IN MAKING AN ADHOC DISALLOWANCE O F 5% OUT OF THE PERSONNEL EXPENSES AND OPERATIVE AND OTHER EXPENSES . THE LD. CIT(A) HAS ACCORDINGLY DIRECTED THE AO TO DELETE THE SAID ADDI TION OF ` 22,67,817/-. 8. BEFORE THE TRIBUNAL THE LD. DR HAS REFERRED A SSESSMENT ORDER IN SUPPORT OF THE GROUNDS. THE LD. AR ON THE OTHER HAN D TRIED TO JUSTIFY THE FIRST APPELLATE ORDER. HE SUBMITTED THAT THE ABOVE STATED EXPENSES INCURRED BY THE ASSESSEE ON THE FOUR PSC WERE APPROVED BY TH E GOVT. OF INDIA AS SPECIFIED IN ARTICLE 6 READ WITH SECTION 3 TO APPEN DIX C OF PSC. HE POINTED OUT THAT PSC IS ALSO PLACED BEFORE BOTH THE HOUSES OF THE PARLIAMENT AND IT IS FURTHER APPROVED BY THE MINISTRY OF OIL. HE REFE RRED THE PROVISIONS LAID DOWN IN SAID ARTICLE 6 AND SECTION 3. THE LD. AR PO INTED OUT FURTHER THAT THE AFORESAID EXPENDITURE HAS NOT BEEN DISALLOWED EITHE R IN EARLIER OR FUTURE YEARS. HE REFERRED ANNEXURE 7 & 8 OF THE PAPER BOOK I.E. COPIES OF THE ASSESSMENT ORDER. HE HAS ALSO CITED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ACIT VS. JAY ENGINEERING WORKS LIMITED REPORTED IN 113 ITR 389 (DELHI) HOLDING THAT THE AUDITORS REPORT C AN BE RELIED UPON BY THE REVENUE AUTHORITIES. 9. CONSIDERING ABOVE SUBMISSIONS WE FIND THAT AS PER ARTICLE 6 .2 OF THE PSC THE MANAGEMENT COMMITTEE WAS FORMED WHEREIN ALL MEMBERS WERE NOMINATED BY THE GOVT AS ITS REPRESENTATIVE. UNDER ARTICLE 6.5 (B) OF THE PSC, THE OPERATOR I.E. THE ASSESSEE WAS REQUIRED TO SUBMIT THE ANNUAL WORK PROGRESS ALONG WITH THE COST INCURRED THEREON, ANNU AL WORK PROGRAMMES ITA NO. 5580/DEL/2010 6 AND BUDGETS IN RELATION TO DEVELOPMENT AND PRODUCTI ON OPERATIONS TO THE MANAGEMENT COMMITTEE FOR ITS REVIEW/APPROVAL. FURTH ER AS PER SECTION 3 OF THE APPENDIX C TO THE PSC, ANY RE-APPROPRIATION IN THE AFORESAID APPROVED COSTS WAS SUBJECT TO THE APPROVAL OF THE MANAGEMENT COMMITTEE. THUS UNDER THESE CIRCUMSTANCES THERE IS NO REASON TO DOU BT THE SUBMISSION OF THE ASSESSEE THAT THE EXPENSES INCURRED BY THE ASSE SSEE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AFTER OBTAINING APPROVAL FORM THE MANAGEMENT COMMITTEE HAVING TWO NOMINATIONS FRO M GOVT. OF INDIA. SINCE THE REVENUE HAS NOT BEEN ABLE TO IMPROVE ITS CASE ON THE ISSUE BEFORE THE TRIBUNAL TO ESTABLISH THAT THE CLAIMED EXPENDIT URE WAS NOT INCURRED FOR THE BUSINESS PURPOSES, WE DO NOT FIND REASON TO INT ERFERE WITH THE FINDING OF THE LD. CIT(A) AS DISCUSSED ABOVE ON THE ISSUE. THE SAME IS UPHELD GROUND NOS. 3 AND 3.1 ARE REJECTED. 10. CONSEQUENTLY APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2012 SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 31/8/2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) ITA NO. 5580/DEL/2010 7 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT