LORD CHLORO ALKALI LTD., Jaipur V. ACIT, Alwar

ITA 56/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99449 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: P C PARWAL CA A
• Section: 115JB; 11

Judgement Text

ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 56/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. LORDS CHLORO ALKALI LTD. SPA-460, M.I.A. ALWAR CUKE VS. THE ACIT CIRCLE- 1 ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 3981 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA A JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30 /10/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV:- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A),ALWAR DATED 11-11-2013 FOR THE ASSESSMENT Y EAR 2008-09 WHEREIN THE ASSESSEE RAISED FOLLOWING GROUNDS IN ITS APPEAL . 1. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF RS. 8,64,000/- U/S 4 0A(2)(B) IN RESPECT OF PROFESSIONAL FEES. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 36,90,200/- MADE BY THE AO IN COMPUTING THE BOOK PROFIT U/S 115JB BY HOLDIN G THAT NO ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 2 EVIDENCE HAS BEEN PLACED ON RECORD BY THE ASSESSEE TO COUNTER THE FINDING OF AO. 2.1 BRIEF FACTS OF GROUND NO. 1 OF THE ASSESSEE ARE THAT DURING THE YEAR THE ASSESSEE COMPANY HAD PAID PROFESSIONAL FEE OF RS. 9 4.19 LACS TO M/S. DHIR & DHIR ASSOCIATES, A PARTNERSHIP FIRM WHO PARTNERS ARE HAVING SUBSTANTIAL INTEREST IN THE BUSINESS OF THE ASSESSEE COMPANY. I N THE PRECEDING ASSESSMENT YEAR 2007-08, A DISALLOWANCE OF RS. 11.00 LACS WAS MADE ON TOTAL EXPENSES OF RS. 104.66 LACS PAID AS PROFESSIONAL FEE TO M/S. DHIR & DHIR ASSOCIATES. AS FACTS OF THE CASE REMAINED SAME, A DISALLOWANCE OF RS. 11.00 LACS WAS MADE BY THE AO IN THIS YEAR ALSO AND ADDED TO THE T OTAL INCOME OF THE ASSESSEE . 2.2 THE LD. CIT(A) PARTLY ALLOWED THE GROUND OF AP PEAL OF THE ASSESSEE BY OBSERVING AS UNDER:- 4.4 CONSIDERING THE SUBMISSIONS MADE AND IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD BY THE AP PELLANT TO CONTROVERT THE FINDINGS GIVEN BY THE AO, I AGREE WI TH THE CONTENTIONS OF THE AO. HOWEVER, I FIND SOME MERIT I N THE ARGUMENTS OF THE APPELLANT THAT THIS YEAR THE AMOUN T DEBITED IN THE ACCOUNTS UNDER THIS HEAD IS ONLY RS. 82.10 LACS AS AGAINST RS. 104.66 LACS IN THE PRECEDING YEAR. THUS, KEEPIN G IN VIEW, THE SAME RATIO OF DISALLOWANCE TO THE EXPENSE DEBIT ED (10.52% UNDER THIS HEAD, I CONFIRM THE DISALLOWANCE OF RS. 8,64,000/- FOLLOWING THE ORDER OF MY LD. PREDECESSOR IN THIS R EGARD. THE APPELLANT WOULD THEREFORE, GET A RELIEF OF RS. 2,3 6,000/- UNDER THIS HEAD. ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 3 2.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE RELIED ON ITAT, JAIPUR BENCH ORDER DATED 25-05-2012 (ITA NO. 950/JP/2011) IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007-08 AND PRAYED THAT THIS GROUND OF APPEAL SHOULD BE DECIDED BASED ON ITAT OR DER (SUPRA). 2.4 THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO OBSERVED THAT THE AO HAS FOLLOWED HIS OWN ORDER FOR THE ASSESSMENT YEAR 2007-08 IN MAKING A SIMILAR DISALLOWANCE OF PAYMENT TO M/S. DHIR & DHIR ASSOCIATES. THE SAID MATTER HAD SINCE REACHED THE ITAT AND COORDINATE BENCH HAS DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE VIDE ITS ORDER DATED 25-05-2012 BY OBS ERVING AS UNDER:- 10. WE OBSERVE THAT THE CASE OF REVENUE IS DE HORS THE FACTS WHICH ARE REQUIRED FOR THE APPLICATION OF THE PROVISION OF SECTION 40(A)(2)(A) OF THE ACT. RATHER, IT WOULD AP PEAR TO US THAT THE REVENUE, ON WHOM THE ONUS LIES IN THIS REGARD, HAS EVEN NOT SHOW CAUSED THE ASSESSEE IN THE MATTER. MERITS APART, TH E ONUS U/S 40(A)(2) BEING DIRECTLY ON THE REVENUE, WE FIND THAT THE SAM E HAS NOT BEEN DISCHARGED BY IT IN ANY MANNER. FOR, A SATISFACTION OF THE INGREDIENTS OF THE SECTION WOULD REQUIRE AN ANALYSIS OF THE SER VICES PROVIDED, AND (FURTHER) CATEGORIZING THEM INTO VARIOUS COMPONENTS , AS (SAY): RETAINERSHIP, FOREIGN EXCHANGE MATTERS, APPEARANCE FEE, ETC. IT IS ONLY SUCH A COMPREHENSIVE ANALYSIS, THE DETAILS OF THE E XPENDITURE BEING AVAILABLE FROM THE RELEVANT BILLS RAISED, SO THAT T HE DETAILS OF THE CHARGES RAISED QUA VARIOUS SERVICES PERFORMED OR CHARGED FOR IS AVAILABLE, THAT WOULD YIELD THE BASIS FOR A DECISIO N WITH REGARD TO THE REASONABILITY THEREOF, INCLUDING WITH REFERENCE TO THE LEGITIMATE NEEDS OF THE ASSESSEES BUSINESS, COULD IF AT ALL B E TAKEN; IN THE CLEAR ABSENCE OF WHICH, THE REVENUES CASE IS NO MORE THA N AN ALLEGATION OR A SURMISE. THE ASSESSEE HAS RIGHTLY RELIED ON TH E DECISION IN THE CASE OF UPPER INDIA PUBLISHING HOUSE (P.) LTD. V. CIT , 117 ITR 569 ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 4 (SC). WE, ACCORDINGLY, FIND LITTLE MERIT IN THE REV ENUES CASE, AND DIRECT THE DELETION OF THE IMPUGNED DISALLOWANCE. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 (SUPRA), T HIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 3.1 THE GROUND NO. 2 OF THE ASSESSEE IS REGARDING C ONFIRMING THE DISALLOWANCE OF RS. 36,90,200/- U/S 115JB OF THE AC T. THE AO OBSERVED THAT ASSESSEE COMPANY HAD DECLARED BOOK PROFIT OF RS. 2, 13,82,826/- AFTER CLAIM DEDUCTION OF RS. 36,90,200/-. THE AO, ON PERUSAL OF PROFIT AND LOSS ACCOUNT AS PER PRINTED ANNUAL REPORT, NOTED THAT THE AMOUN T WAS CLASSIFIED BELOW THE LINE AND SECONDLY IT WAS NOT AN ASCERTAINED LIABIL ITY. THEREFORE, THE AO OBSERVED THAT THE SAME IS DISALLOWABLE U/S 115JB(2) (C) OF THE ACT. CONSEQUENTLY, RETURNED BOOK PROFIT OF RS. 2,13,82,8 26/- HAD BEEN INCREASED BY RS. 36,90,200/-. 3.2 THE LD. CIT(A) HAD CONFIRMED THE ADDITION OF R S. 36,90,200/- TO BOOK PROFITS MADE BY THE AO BY OBSERVING AT PARA 5.2 AND 5.3 OF HIS ORDER AS UNDER:- 5.2 THE A.R. OF THE APPELLANT HAS CONTENDED AS UNDER:- THE AMOUNT OF RS. 36,90,200/- WAS SHOWN BELOW THE LINE AFTER WORKING OUT THE NET PROFIT AS PER PR OFIT AND ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 5 LOSS ACCOUNT AS IT WAS AN EXCEPTIONAL ITEM. THE DE TAILS OF THE SAME ARE AS UNDER:- MANAGEMENT FEE TO RIICO FOR SETTLEMENT OF LOAN UNDER BIFR SCHEME RS. 8.29 LACS MANAGEMENT FEE TO UTI FOR SETTLEMENT OF LOAN UNDER BIFR SCHEME RS. 26.83 LACS REINSTATEMENT OF AMOUNT W/BACK IN LAST YEAR RS. 1.78 LACS TOTAL RS. 36.90 LACS ONLY BECAUSE THE AMOUNT IS SHOWN BELOW THE LINE WOU LD NOT MEAN THAT SUCH AMOUNT IS NOT TO BE CONSIDERED I N COMPUTING THE BOOK PROFIT. IT IS ALSO NOT AN UNASCERTAINED LI ABILITY INASMUCH AS PAYMENT OF MANAGEMENT FEES HAS BEEN ACT UALLY MADE IN ORDER TO ARRIVE AT THE SETTLEMENT OF SECURE D LOAN AS PER THE SCHEME OF BIFR. THE PAYMENT OF MANAGEMENT FEE I S COVERED WITHIN THE DEFINITION OF INTEREST U/S 2(28A ). THE AMOUNT OF RS. 1.78 LACS IS REINSTATED AS THIS AMOUNT HAS B EEN WRITTEN BACK IN THE LAST YEAR. THUS THE AMOUNT OF RS. 36,90 ,200/- IS NOT A DISALLOWABLE ITEM AS PER EXPLANATION 2 TO SECTION 115JB. IN VIEW OF THIS, THE AO IS DIRECTED TO ALLOW DEDUCT ION OF RS. 36,90,200/- IN COMPUTING THE BOOK PROFIT U/S 11 5JB. 5.3 I HAVE PERUSED THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT NO EVIDENCE HAS BEEN PLACED ON RECORD BY THE APPELLANT TO COUNT ER THE FINDINGS GIVEN BY THE AO. IN THE ABSENCE OF ANY EVI DENCE TO THE CONTRARY, I CONFIRM THE DISALLOWANCE OF RS. 36,90,2 00/- MADE BY THE AO FOR COMPUTATION OF BOOK PROFIT FOR THE PURPO SES OF COMPUTING MAT LIABILITY UNDER THE ACT. ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 6 3.3 DURING THE COURSE OF HEARING, THE LD.. AR RELI ED ON SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND PRAYED FOR DELETION OF ADDITION U/S 115JB OF THE ACT CONFIRMED BY THE LD. CIT(A). 3.4 THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AS PER THE AO, THE AMOUNT OF R S. 36.92 LACS HAS BEEN SHOWN BELOW THE LINE AND SECONDLY, IT IS NOT AN ASC ERTAINED LIABILITY. AS PER LD. AR, IT IS AN ASCERTAINED LIABILITY AS IT REPR ESENTS ACTUAL PAYMENT OF MANAGEMENT FEES TO RIICO IN ORDER TO ARRIVE AT THE SETTLEMENT OF SECURED LOAN AS PER SCHEME OF BIFR . THE SAID CONTENTION OF LD. AR HAS NEITHER BEEN CONTROVERTED BY THE LOWER AUTHORITIES NOR BY LD. DR . IT IS THUS CLEARLY A CASE OF ACTUAL PAYMENT OF MANAGEMENT FEES AND THE SAME C ANNOT BE HELD TO BE A PROVISION TOWARDS AN UNASCERTAINED LIABILITY U/S 11 5JB(2) (C ) OF THE ACT. 3.6 AS REGARDS THE OTHER OBSERVATION OF THE AO THAT THE SAID AMOUNT HAS BEEN SHOWN BELOW THE LINE, IN OUR VIEW, WHETHER THE AMOUNT IS SHOWN ABOVE THE LINE OR BELOW THE LINE, SO LONG AS THE AMOUNT I S CHARGED TO PROFIT AND LOSS ACCOUNT AND PROFIT AND LOSS ACCOUNT HAS BEEN PRE PARED IN ACCORDANCE WITH COMPANIES ACT, THE SAME SHOULD BE ALLOWABLE IN COMP UTING THE BOOK PROFITS SUBJECT TO SPECIFIC ADJUSTMENTS AS SPECIFIED IN SEC TION 115JB. IN THIS REGARD, IN RESPONSE TO THE SPECIFIC QUERY FROM THE BENCH, IT WAS INFORMED BY LD. AR ITA NO. 56/JP/2014 M/ S. LORDS CHLORO ALKALI LTD. VS. ACIT, CIRCLE- 1, AL WAR 7 THAT THE AMOUNT HAS BEEN ACTUALLY CHARGED TO THE PR OFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. HENCE, THE CONTENTION OF THE AO DOES NOT HAVE A LEGAL BASIS AND HENCE DOES NOT FIND FAVOUR WITH U S. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) IS NOT JUSTIFIE D IN CONFIRMING THE ADDITION OF RS. 36.92 LACS. THUS, GROUND NO. 2 OF T HE ASSESSEE IS ALLOWED. 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2 015. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 /10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. LORDS CHLORO ALAKLI LTD., ALWA R 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE- 1, ALWAR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.56/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR