ACIT , LTU, New Delhi V. Mawana Sugar Ltd., New Delhi

ITA 5724/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3396 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 05-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: E NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.5724/DEL/2018 ASSESSMENT YEAR: 2013-14 ACIT, LTU, NEW DELHI VS. M/S. MAWANA SUGAR LTD., 5 TH FLOOR, KIRTI MAHAL, 19, RAJENDRA PLACE, NEW DELHI PAN :AAACS4902Q (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDE R DATED 29/06/2018 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-22, NEW DELHI [IN SHORT THE LEARNED CIT( A)] FOR ASSESSMENT YEAR 2013-14, RAISING FOLLOWING GROUNDS: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,9 3,03,014/- MADE BY THE AO U/S 14A OF THE I.T. ACT READ WITH RU LE 8D OF THE INCOME TAX RULES, 1962. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) HAS ERRED IN DELETING 30% DISALLOWANCE AMOUN TING TO RS.1,52,75,060/- ON ACCOUNT OF STAFF WELFARE EXPENS ES MADE BY THE AO. APPELLANT BY SH. GAURAV PUNDIR, SR.DR RESPONDENT BY SH. TARANDEEP SINGH, ADV. DATE OF HEARING 05.10.2021 DATE OF PRONOUNCEMENT 14.10.2021 2 ITA NO.5724/DEL/2018 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AME ND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME O F HEARING. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SUGAR, INDUSTRIAL CHEMICALS, DISTILLERY PRODUCTION AND POWER. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RE TURN OF INCOME ON 30/11/2013 DECLARING TOTAL LOSS OF 129,61,25,190/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES UNDER INCOME-TAX A CT, 1961 (IN SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. IN THE ASSESSMENT COMPLETED ON 10/03/2016 UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWAN CES AND ASSESSED TOTAL LOSS OF 124,47,85,235/-. ON FURTHER APPEAL, THE LD. CIT(A) ALLOWED PART RELIEF TO THE ASSESSEE. AGG RIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING TH E GROUNDS AS REPRODUCED ABOVE. 3. BEFORE US, THE PARTIES APPEARED THROUGH VIDEOCONFE RENCING FACILITY. WE HAVE HEARD RIVAL SUBMISSION OF THE PAR TIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON RECORD. 4. THE GROUND NO. 1 OF THE APPEAL RELATES TO DISALLOW ANCE OF 1,93,03,014/- UNDER SECTION 14A OF THE ACT READ WIT H RULE 8D OF INCOME-TAX RULES, 1962, WHICH WAS MADE BY THE ASSES SING OFFICER, HOWEVER, DELETED BY THE LEARNED CIT(A). DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DID NOT EARN EXEM PT INCOME AND, THEREFORE, THE LEARNED CIT(A) DELETED THE DISA LLOWANCE FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CHEMINVEST LTD., REPORTED IN 378 ITR 33. WE DO N OT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) IN FOLLOWING T HE BINDING 3 ITA NO.5724/DEL/2018 PRECEDENT OF HONBLE JURISDICTIONAL HIGH COURT. ACC ORDINGLY, THE GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 5. THE GROUND NO. 2 RAISED BY THE REVENUE RELATES TO DISALLOWANCE MADE BY THE ASSESSING OFFICER OF 1,52,75,060/- BEING 30% OF THE STAFF WELFARE EXPENSES, WHICH HAS BEEN DELETED BY THE LEARNED CIT(A). ACCORDING TO ASSESSING OFFIC ER, CHILDREN BUS EXPENSES ( RS.16,72,949/-); EXPENSES FOR SCHOOL WELFARE (RS.1,13,74,151/- ); INTERDEPARTMENTAL EMPLOYEES SO CIALIZATION (RS.3,31,010/-); INTER UNIT SPORTS EXPENSES; NSC OF FICERS LADIES CLUB EXPENSES ETC. WERE NOT IN THE NATURE FOR EARNI NG OF BUSINESS PROFIT. THE ASSESSEE SUBMITTED THAT STAFF WELFARE EXPENSES WERE INCURRED FOR PROVIDING FACILITIES TO THE EMPLOYEES, PRIMARILY IN THE NATURE OF CANTEEN EXPENSES, DISPENSARY EXPENSES, EX PENSES ON THE REFRESHMENT TO EMPLOYEES IN THE OFFICE, EXPENSE S INCURRED IN RESIDENTIAL COLONY OF THE EMPLOYEES. AS REGARD TO S CHOOL EXPENSES, THE ASSESSEE SUBMITTED THAT THE SCHOOL IS BEING RUN BY THE COMPANY IN EMPLOYEES COLONY FOR PROVIDING EDUCATION TO THE CHILDREN OF EMPLOYEES AS THE FACTORY AND RESIDENTIA L COLONY ARE LOCATED OUTSIDE THE CITY. THE SCHOOL IS BEING RUN B Y THE COMPANY SINCE 1957 AND THE EXPENSES HAVE ALWAYS BEEN ALLOWE D IN PAST AS BUSINESS EXPENDITURE. THE OTHER EXPENSES INCURRED F OR EMPLOYEES LIKE CLUB EXPENSES ETC. HAVE ALSO BEEN ALLOWED IN P AST. THE LEARNED ASSESSING OFFICER DISALLOWED THE 30% OF THE STAFF WELFARE EXPENSES HOLDING THAT THE EXPENSES WERE NOT INCURRE D FOR THE PURPOSE OF THE BUSINESS OF EARNING PROFIT. THE LEAR NED CIT(A) DELETED THE DISALLOWANCE OBSERVING THAT ASSESSING O FFICER HAS NOT MADE DEFINITE OBSERVATION WITH REGARD TO PARTICULAR EXPENSE THAT SAME IS NOT BUSINESS EXPENDITURE. WE ARE OF THE OPI NION THAT NO 4 ITA NO.5724/DEL/2018 DISALLOWANCE IS PERMITTED IN LAW WITHOUT BRINGING O N RECORD SPECIFIC EXPENSE AS NOT INCURRED WHOLLY AND EXCLUSI VLY FOR THE PURPOSE OF THE BUSINESS. WE DO NOT FIND ANY ERROR I N THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE AND, ACC ORDINGLY, WE UPHOLD THE SAME, THE GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2021 SD/- SD/- (KUL BHARAT) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH OCTOBER, 2021. RK/- (DTDC) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI