ACIT 9(2), MUMBAI V. KING PRAWNS LTD, MUMBAI

ITA 6512/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48451 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 21-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K BALODIA
• Assessee Lawyers: V B DALAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.6512/MUM/2009 (ASSESSMENT YEAR: 2003-04) DCIT 9(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... REVENUE VS M/S. KING PRAWNS LTD., 229-230, 2 ND FLOOR, ARUN CHAMBERS, TARDEO ROAD, MUMBAI -400 034 .........ASSESSEE PAN: AAACK 2067 J ASSESSEE BY: SHRI V.B. DALAL REVENUE BY: SHRI N.K. BALODIA O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-X, MUMBAI DATED 20.10.2009 FOR THE A.Y. 2003-04. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF R S 12,91,417/- BEING DISALLOWANCE OF LABOUR CHARGES TO WARDS SALT MANUFACTURING WITHOUT APPRECIATING THE FACT TH AT NO SALT WAS MANUFACTURED DURING THE ACCOUNTING YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE ASSESSE E ONLY SOLD ITS OPENING STOCK OF RS 6,95,000/- DURING THE YEAR UNDER CONSIDERATION. 2. THE ISSUE IN CONTROVERSY IS IN RESPECT OF THE EX PENDITURE OF THE LABOUR CHARGES CLAIMED BY THE ASSESSEE WHICH WAS DI SALLOWED BY THE A.O. THE ASSESSEE-COMPANY FILED THE RETURN OF INCO ME FOR THE A.Y. ITA 65123/M/2009 M/S. KING PRAWNS LTD. 2 2003-04 DECLARING TOTAL LOSS OF ` 15,65,495/-. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE OF ` 12,91,470/- TOWARDS LABOUR CHARGES. AFTER EXAMINING THE PROFIT & LOSS ACCOUNT, THE A.O. CAME TO THE CONCLUSION THAT NO SALT WAS MANUFA CTURED BY THE ASSESSEE DURING THE YEAR AND THE OPENING STOCK OF ` 6,95,000/- SHOWN BY THE ASSESSEE WAS SOLD DURING THE YEAR FOR ` 11,55,000/-. THE A.O. HELD THAT, AS THE ASSESSEE HAS NOT MANUFACTURED/MAD E ANY SALT DURING THE YEAR, NO SUCH EXPENDITURE OF THE LABOUR IS REQU IRED. THE A.O. ALSO NOTED THAT, AS PER THE BANK ACCOUNT, THERE IS NO CA SH WITHDRAWALS TO SUPPORT THE CASE OF THE ASSESSEE THOUGH TO THAT EXT ENT THE LABOUR CHARGES ARE INCURRED. THE A.O. MADE THE ENTIRE DIS ALLOWANCE OF THE LABOUR OF ` 12,91,470/-, THE ASSESSEE CHALLENGED THE DISALLOWA NCE MADE BY THE A.O. BEFORE THE LD. CIT (A) AND LD. CIT (A) DELETED THE ADDITION. THE OPERATIVE PART OF THE FINDINGS OF THE LD. CIT ( A) IS AS UNDER:- 2.3 I HAVE CONSIDERED THE RELEVANT MATERIALS. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE APPELLANT FURNISHED BEFOR E THE AO COPIES OF LEDGER ACCOUNT OF KP POWER P. LTD IN ITS BOOKS AND THAT OF THE APPELLANT IN THE BOOKS OF KP POWER P. L TD. IN SUPPORT OF RECEIPT OF MANAGEMENT CHARGES OF RS 30,0 0,000. THE A.O. HAS ASSESSED THIS SUM AS INCOME OF THE APP ELLANT EVEN THOUGH ON A PROTECTIVE BASIS WITHOUT STATING I N WHOSE HAND THE SAME WAS BEING ASSESSES IN SUBSTANTIVE CAP ACITY. IN VIEW OF THIS THERE IS SUBSTANCE IN THE CLAIM OF THE APPELLANT THAT IT INCURRED THE IMPUGNED EXPENSES NOT ONLY ON ITS BUSINESS OF SALT MANUFACTURING / TRADING BUT ALSO O N THE WIND MILL PROJECT MANAGEMENT OF KP POWER MILL. THE A.O. CANNOT DISALLOW LABOUR CHARGES FOR THE SOLE REASON THAT THE APPELLANT DID NOT MANUFACTURE ANY SALT WHEN ADMITTE DLY THE APPELLANT HAD TRADED IN SALT DURING THE YEAR AND HA D ALSO MANAGED THE PROJECT OF ANOTHER COMPANY. HIS OTHER OBSERVATIONS ON CASH PAYMENT AND NO ENOUGH BANK WITHDRAWAL HAS NO SUBSTANCE WHEN THE AO DOE NOT SAY THAT THE PAYMENT WAS SHAM AND DOES NOT GIVE ANY DETAIL O F ANY CASH PAYMENT WHEN THERE WAS NO ADEQUATE BALANCE IN EITHER ITA 65123/M/2009 M/S. KING PRAWNS LTD. 3 BANK ACCOUNT OR CASH BOOK. THESE OBSERVATIONS ARE MERELY HIS SURMISE. IN THE RESULT I FIND NO JUSTIFICATION IN SUSTAINING THE IMPUGNED DISALLOWANCE. THE ADDITION MADE OF ` 12,91,417/- ON THAT ACCOUNT IS DELETED. THE GROUND IS ALLOWED. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. D.R. RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE IS ENGAGE D IN TRAINING AND MANUFACTURING OF PRAWN, FISH AND SALT. DUE TO THE CRZ REGULATIONS AND RESTRICTIONS WERE IMPOSED BY THE HONBLE SUPREME CO URT AND THE ASSESSEE WAS FORCED TO GO INTO DIVERSIFICATION OF H IS BUSINESS ACTIVITIES AND HE WAS MANAGING WIND MILL OF M/S. K.P. POWER LT D. IT IS ARGUED THAT THE ASSESSEE HAD ` 7,95,000/- AS LABOUR CHARGES ON THE MANAGEMENT OF THE POWER PROJECT AND ` 5,85,500/- ARE ON THE SALT MANUFACTURING. THE LD. COUNSEL TOOK US THROUGH THE PAPER BOOK, MORE PARTICULARLY, PAGE NO.17 AND SUBMITS THAT THE ASSES SEE HAS DONE BUSINESS IN THE SUBSEQUENT YEARS ALSO. THE LD. COU NSEL REFERRED TO THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE A.Y. 2004-05 (ITA NO.60/M/2010) AND SUBMITS THAT THE TRIBUNAL HA S ACCEPTED THE ASSESSEES CONTENTION THAT THE ASSESSEE HAS CLOSED DOWN HIS BUSINESS PERMANENTLY. THE LD. COUNSEL SUPPORTED THE ORDER O F THE LD. CIT (A). 4. WE HAVE PERUSED THE RECORD. WE HAVE ALSO PERUSE D THE TRIBUNAL ORDER IN THE CASE OF M/S. K.P. POWER PROJECT (ITA N O.4870/M/2007). FROM THE ORDER OF THE TRIBUNAL, IT IS SEEN THAT THE ASSESSEE WAS PAID THE MANAGEMENT CHARGES BY THE SAID COMPANY TO THE EXTEN T OF ` 30,00,000/-. FROM THE ORDER OF THE TRIBUNAL, IT IS FURTHER SEEN THAT THE PRESENT ASSESSEE WAS IN THE TRADING AND MANUFACTURI NG OF SALT, PRAWNS AND FISH BUT THE RESERVATION OF THE ASSESSEE WAS IN RESPECT OF THE REASONABLENESS OF THE MANAGEMENT CHARGES PAID BY TH E M/S. K.P. POWER PROJECT. AFTER GIVING OUR ANXIOUS CONSIDERATION, I N OUR OPINION, THE A.O. HAS NOT PROPERLY APPRECIATED THE FACTS OF THE ASSES SEES CASE AND THERE ITA 65123/M/2009 M/S. KING PRAWNS LTD. 4 IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE, WE ACCORDINGLY CONFIRM THE SAME. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 8 TH APRIL 2011. SD/- SD/- ( S.V. MEHROTRA) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 8TH APRIL 2011 COPY TO:- 1) THE APPLICANT. 2) THE RESPONDENT. 3) THE CIT (A) 20, MUMBAI. 4) THE CIT CENTRAL -IX, MUMBAI. 5) THE D.R. A BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED