Ralson (India) Ltd., Delhi V. ITO, New Delhi

ITA 6082/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0031 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Business expenditure
• Section: 43B; 143(3); 37(1); 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI I.C. SUDHIR , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 6082 /DEL / 2013 ASSESSMENT YEAR: 2004 - 05 RALSON (INDIA) LTD. VS. INCOME TAX OFFICER, J - 38, UDYOG NAGAR, WARD 15(2), C.R. BUILDING, ROHTAK ROA D, DELHI NEW DELHI (PAN: AAACR0281P ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ANOOP SHARMA, ADV. RESPONDEN T BY: SH. VIKRAM SAHAY, SR. DR DATE OF HEARING: 24.04.2015 DATE OF PRONOUNCEMENT: 06.05.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS IS AN APPEAL FILED BY THE APPELLANT FOR THE ASSESSMENT YEAR 2004 - 05 IMPUGNING THE ORDER OF THE LEARNED CIT(A) - XVIII, NEW DELHI, DATED 29.08.2013 RAISING THE FOLLOWING GROUNDS: I. THAT THE RE - OPENING OF ASSESSMENT U/S 147/148 IS BAD IN LAW AND IN PARTICU LAR BECAUSE THE REASON FOR RE - OPENING THIS ASSESSING INITIALLY IS DIFFERENT FROM THE REASON MENTIONED SUBSEQUENTLY IN THE ORDER DATED 18.10.2011 OF ASSESSING OFFICER PASSED ON THE OBJECTIONS TAKEN BY THE ASSESSEE. II. THAT THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HAS ERRED IN CONFIRMING AN ADDITION OF RS. 7,82,834/ - TREATING THE SAME AS BONUS BY APPLYING SECTION 43B WHEREAS THE SAME WAS AN INAM PAYMENT ALLOWABLE U/S 37 OF THE INCOME TAX ACT, 1961. THE SAID PAYMENTS ARE NOT HIT BY SECTION 43B OF THE INC OME TAX ACT, 1961. 2 ITA NO. 6082/DEL /2013 ASSESSMENT YEAR: 2004 - 05 III. THE ASSESSEE COMPANY CRAVES LEAVE TO ADD/ALTER 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF TYRES, TUBES, HUBS AND ACCESSORIES FOR CYCLE AND RICKSHAW. THE APPELLANT FI LED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004 - 05 ON 31 ST AUGUST, 2004 DECLARING TOTAL INCOME OF RS. 3,43,17,866/ - . THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) ON 25 TH FEBRUARY, 2005. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT AND FINALLY THE ASSESSMENT ORDER CAME TO BE PASSED UNDER SECTION 143(3) VIDE ORDER DATED 29.11.2005 AT A TOTAL INCOME OF RS. 3,44,55,964/ - A FTER MAKING SEVERAL DISALLOWANCES. THEREAFTER, A NOTICE UNDER SECTION 148 DATED 30.03.2011 WAS ISSUED PROPOSING TO REOPEN THE ASSESSMENT AND FINALLY THE REASSESSMENT ORDER WAS PASSED VIDE ORDER DATED 28.12.2011 BRUSHING ASIDE THE OBJECTIONS FILED BY THE AP PELLANT . A FTER MAKING ADDITION, INTER ALIA, OUT OF A SUM OF RS. 29,49,795/ - CLAIMED BY THE ASSESSEE, RS. 21,66,961/ - BEING PRODUCTION INCENTIVE WAS ALLOWED UNDER SECTION 43B F THE ACT. BEING AGGRIEVED BY THIS ORDER, AN APPEAL WAS PREFERRED BY THE APPELLAN T BEFORE THE LEARNED CIT(A) - XVII, NEW DELHI, WHO VIDE IMPUGNED ORDER DATED 29 TH AUGUST, 2013 DISMISSED THE APPEAL. AGGRIEVE, THE APPELLANT FILED THE PRESENT APPEAL. 3 ITA NO. 6082/DEL /2013 ASSESSMENT YEAR: 2004 - 05 3. THE GROUND RELATING TO THE OPENING OF REASSESSMENT I.E. GROUND NO. 1 WAS NOT PRESSED BY LEARNED AUTHORIZED REPRESENTATIVE. HENCE, THE SAME IS DISMISSED AS SUCH . 4. AS REGARD GROUND NO. 2, IT IS SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF DELHI BENCH OF ITAT PASSED IN ITA NO. 9/DEL/2013, A.Y. 2008 - 09, DATED 31.08.2014 IN FAVOU R OF THE APPELLANT . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN APPEAL IS COVERED BY THE DECISION OF DELHI BENCH OF ITAT PASSED IN ITA NO. 9/DEL/2013, A.Y. 2008 - 09, DATED 31.08.2014 , WHEREIN IT WAS HELD AS FOLLOWS: WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHRIRAM PISTONS & RINGS LTD. (CITED SUPRA) HAS HELD AS UNDER : - 35. THE THIRD QUESTION THAT HAS BEEN REFERRED FOR OUR CONSIDERATION RELATES TO GOOD WORK REWARD AND WHETHER IT CONSTITUTES BONUS WITHIN THE MEANING OF THE SECTION 36(1)(II) OF THE ACT. 36. THE TRIBUNAL HAS NOTED THAT THE WORD 'BONUS' HAS NOT BEEN DEFINED ANYWHERE INCLUDING IN THE PAYMENT OF BONUS ACT, 1965. HOWEVER, FOR THE PURPOSE OF INDUSTRIAL LAW, FOUR TYPES OF BONUS HAVE BEEN RECOGNIZED AND THEY ARE AS FOLLOWS : (A) PRODUCTION BONUS. (B) CONTRACTUAL BONUS. (C) CUSTOMARY BONUS USUALLY ASSOCIATED WITH FESTIVALS. (D) PROFIT - SHARING BONUS. THE GOOD WORK REWARD THAT IS GIVEN BY THE ASSESSEE TO SOME EMPLOYEES ON THE RECOMMENDATION OF SENIOR OFFICERS OF THE ASSESSEE DOES NOT FALL IN ANY ONE OF THESE ABOVE CATEGORIES. 37. FOR THE PURPOSE OF SECTION 36(1)(II) OF THE ACT, IT HAS BEEN HELD BY THIS COURT IN CIT V. KELVINATOR INDIA LTD. [IT CASE NO. 266 OF 1983, 4 ITA NO. 6082/DEL /2013 ASSESSMENT YEAR: 2004 - 05 DECIDED ON JULY 23, 1987] THAT BONUS IS RELATED ONLY TO THE PROFIT THAT A COMPANY MAKES AND IS NOT RELATABLE TO PRODUC TION INCENTIVE. 38. THE REVENUE HAD CHALLENGED THE DECISION OF THIS COURT BY FILING A SPECIAL LEAVE PETITION IN THE SUPREME COURT IN [1988] 171 ITR (ST.) 256. THE SPECIAL LEAVE PETITION WAS DISMISSED BY THE SUPREME COURT ON MAY 11, 1988, THEREBY, IN A SENS E AFFIRMING THE VIEW TAKEN BY THIS COURT THAT PRODUCTION INCENTIVE PAID TO AN EMPLOYEE WAS NOT BONUS AND THEREFORE, IS NOT COVERED UNDER THE PROVISIONS OF SECTION 36(1)(II) OF THE ACT. 39. IN SO FAR AS THE PRESENT CASE IS CONCERNED, THERE IS NOTHING TO SUG GEST THAT THE GOOD WORK REWARD GIVEN BY THE ASSESSEE TO ITS EMPLOYEES HAS ANY RELATION TO THE PROFITS THAT THE ASSESSEE MAY OR MAY NOT MAKE. IT APPEARS FROM THE ORDER OF THE TRIBUNAL THAT IT HAS RELATION TO THE GOOD WORK THAT IS DONE BY THE EMPLOYEE DURING THE COURSE OF HIS EMPLOYMENT AND THAT AT THE END OF THE FINANCIAL YEAR ON THE RECOMMENDATION OF A SENIOR OFFICER OF THE ASSESSEE, THE REWARD IS GIVEN TO THE EMPLOYEE. CONSEQUENTLY, THE GOOD WORK REWARD CANNOT FALL WITHIN THE AMBIT OF SECTION 36(1)(II) O F THE ACT AS CONTENDED BY THE REVENUE. 40. IN CIT VS. AUTOPINS (INDIA) [1991] 192 ITR 161, A DIVISION BENCH OF THIS COURT HAD OCCASION TO CONSIDER PAYMENT OF VARIOUS KINDS OF BONUS SUCH AS PRODUCTION BONUS, ATTENDANCE BONUS AND INCENTIVE BONUS AND WHETHER THEY WERE WITHIN THE CONTEMPLATION OF THE PAYMENT OF BONUS ACT, 1965. IT WAS HELD THAT SUCH TYPES OF BONUS AS WELL AS EX GRATIA PAYMENT WOULD NOT FALL WITHIN THE PROVISIONS OF SECTION 36(1)(II) OF THE ACT AND THAT THEY WERE PAYMENTS ALLOWABLE AS REVENUE EX PENDITURE HAVING BEEN INCURRED FOR THE PURPOSE OF BUSINESS EXPEDIENCY. THESE PAYMENTS WERE NOT OF THE TYPE CONTEMPLATED BY THE PAYMENT OF BONUS ACT. IT WAS HELD THAT IT WAS AN EX GRATIA PAYMENT OR SOME SORT OF REWARD GIVEN TO AN EMPLOYEE FOR THE GOOD WORK DONE BY HIM AND WOULD THEREFORE, FALL WITHIN THE CATEGORY OF EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS EXPEDIENCY AND FOR IMPROVING THE WORKING OF THE ASSESSEE. THEREFORE, IT WOULD NOT FALL WITHIN THE MEANING OF SECTION 36(1)(II) OF THE ACT BUT WOUL D FALL WITHIN THE AMBIT OF SECTION 37 OF THE ACT. ACCORDINGLY, THE THIRD QUESTION IS ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND IT IS HELD THAT THE GOOD WORK REWARD IS ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTIO N 37(1) OF THE ACT. AS HELD BY HON'BLE HIGH COURT, SUCH EXPENDITURE PAID FOR GOOD WORK REWARD IS ALLOWABLE AS BUSINESS EXPENDITURE U/S 37 (1) OF THE ACT, THEREFORE, WE ALLOW THE GROUNDS TAKEN BY THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE STA NDS ALLOWED . 5 ITA NO. 6082/DEL /2013 ASSESSMENT YEAR: 2004 - 05 6. RESPECTFULLY FOLLOWING THE DECISION MENTIONED SUPRA, WE ALLOW THE GROUND OF APPEAL FILED BY THE APPELLANT. 7. HENCE , THE APPEAL FILED BY THE APPELLANT IS PARTLY ALLOWED. 8 . IN THE RESULT, THE APPEAL IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 6 TH MAY , 2015. SD/ - SD/ - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6 TH MAY 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI