Trinity(I) Ltd., Pune V. Dy.CIT, Cir.7, Pune, Pune

ITA 666/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72107 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 30-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADARSH KUMAR MODI
• Keywords: Depreciation; Proportionate interest; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.666/PN/2012 (ASSESSMENT YEAR : 2008-09) TRINITY INDIA LIMITED PLOT NO. J-5, S BLOCK, M.I.D.C., BHOSARI, PUNE 411 026. PAN : AAACT4156H . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE . RESPONDENT APPELLANT BY : MR. NIKHIL PATHAK RESPONDENT BY : MR. ADARSH KUMAR MODI DATE OF HEARING : 24-07-2013 DATE OF PRONOUNCEMENT : 28-08-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATE D 28.10.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 31.12.2010 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE FIRST GROUND RELATES TO A DI SALLOWANCE OF INTEREST EXPENDITURE OF RS.29,36,965/- MADE BY THE INCOME-TA X AUTHORITIES INVOKING SECTION 36(1)(III) OF THE ACT. IN BRIEF, THE FACTS ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFAC TURING OF AUTOMOTIVE COMPONENTS LIKE HUBS, SPINDLES AND GEAR BLANKS, COU NTER WEIGHT, ETC. WHICH ARE USED BY VEHICLE MANUFACTURERS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED INTEREST EXPENDITURE AMOUNTING TO RS.2,85,38,397/- IN THE PROFIT AND LOS S ACCOUNT AND AT THE SAME ITA NO.666/PN/2012 A.Y. 2008-09 TIME ASSESSEE WAS FOUND TO HAVE GIVEN CERTAIN LOANS AND ADVANCES OF RS.2,44,74,710/- TO ITS SISTER CONCERNS ON WHICH NO INTEREST WAS CHARGED. ON BEING CALLED UPON TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT SHOULD NOT BE MADE, ASSESSEE CONTENDED THAT THE ADVANCES TO ONE SISTER CONCERN NAMELY, TACO WAS GIVEN FOR PROCUREME NT OF FORGINGS, BUT DUE TO INTERNAL PROBLEMS, THE SAID CONCERN COULD NOT PR ODUCE QUALITY FORGINGS AND THE ADVANCES COULD NOT BE REPAID DUE TO ITS PRECARI OUS FINANCIAL CONDITIONS. IN RESPECT OF ADVANCES TO ANOTHER SISTER CONCERN NAMEL Y TRINITY FORGE LTD., IT WAS EXPLAINED THAT THE SAID SUM WAS RECEIVABLE ON ACCOU NT OF SALES MADE TO THE PARTY IN THE EARLIER YEARS AND WAS NOT RECOVERED DU E TO POOR FINANCIAL CONDITION. THE ASSESSING OFFICER WAS OF THE OPINION THAT POOR FINANCIAL CONDITION OF THE SISTER CONCERNS WAS NO REASON TO E XTEND INTEREST-FREE ADVANCES TO THEM WHERE ASSESSEE ITSELF WAS PAYING S UBSTANTIAL INTEREST ON BORROWINGS. THE ASSESSING OFFICER CONCLUDED THAT TH E ASSESSEE HAD DIVERTED INTEREST BEARING FUNDS TOWARDS INTEREST-FREE LOANS TO ITS SISTER CONCERNS AND ACCORDINGLY PROPORTIONATE INTEREST @ 12% ON THE ADV ANCES SO MADE TO THE SISTER CONCERNS WAS WORKED OUT OF RS.29,36,965/-, W HICH WAS DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT. 3. IN APPEAL BEFORE THE CIT(A), ASSESSEE MADE TWO F OLD ARGUMENTS. FIRSTLY, AS PER THE ASSESSEE, THE ADVANCES WERE MAD E FOR BUSINESS PURPOSES AND THEREFORE NO DISALLOWANCE WAS CALLED FOR. WITHO UT PREJUDICE TO THE ABOVE CONTENTION, ASSESSEE CONTENDED THAT EVEN ASSUMING T HAT THE ADVANCES WERE FOR NON-BUSINESS PURPOSES, THE FUNDS ADVANCED TO TH E SISTER CONCERNS OF RS.2,44,74,710/- WERE MUCH LESS THAN THE INTEREST-F REE FUNDS AVAILABLE WITH THE ASSESSEE BY WAY OF SHARE CAPITAL AND FREE RESERVES. THEREFORE, ACCORDING TO THE ASSESSEE, AS PER THE JUDGEMENT OF THE HONBLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (BOM), NO DISALLOWANCE OF INTEREST COULD BE MADE AS THE INTER EST-FREE FUNDS AVAILABLE WITH THE ASSESSEE WERE SUFFICIENT TO COVER THE IMPU GNED ADVANCES. BOTH THE ITA NO.666/PN/2012 A.Y. 2008-09 POINTS HAVE NOT BEEN ACCEPTED BY THE CIT(A) AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE ONLY POINT RAISED BY THE ASSESSEE IS TO THE EFFECT THAT EVEN IF THE IMPUGNED ADVANCES TO THE SISTER CONCERN S ARE TAKEN FOR NON- BUSINESS PURPOSES, THE DISALLOWANCE OF INTEREST IS NOT WARRANTED IN TERMS OF THE PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIG H COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA). IN THIS CO NTEXT, THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 35 OF THE PAPER BOOK WHEREIN IS PLACED THE BALANCE-SHEET AS ON 31.03.2008 AND IT IS SOUGHT TO BE POINTED OUT THAT THE AMOUNT OF SHARE CAPITAL AND FREE RESERVES AVAILABLE WITH THE ASSESSEE IS MORE THAN ENOUGH TO COVER THE IMPUGNED ADVANCES AND THER EFORE IN TERMS OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT THE PRESU MPTION IS THAT THE IMPUGNED ADVANCES ARE OUT OF SUCH INTEREST-FREE FUN DS AND THUS NO DISALLOWANCE OUT OF INTEREST EXPENDITURE WAS CALLED FOR. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE DISCUSSION MA DE BY THE CIT(A) IN PARA 3.3.2 OF THE ORDER WHEREIN THE CIT(A) HAS NOT APPLI ED THE PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT; AND, IT IS SUBMIT TED THAT THE CIT(A) ERRED IN NOT FOLLOWING THE PROPOSITION LAID DOWN BY THE HON BLE HIGH COURT. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS REITERATED THE POINTS RAISED BY THE LOWER AUTHORITI ES IN SUPPORT OF THE DISALLOWANCE, AND AS THE SAME HAVE BEEN NOTED BY US IN EARLIER PARAGRAPHS OF THIS ORDER, THE SAME ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, IN THIS CASE, IT WAS FOUND THAT ASSESSEE HAD ADVANCED INTER EST-FREE FUNDS OF RS.2,44,74,710/- TO TWO SISTER-CONCERNS AS ON 31.03 .2008. THE OPENING BALANCE OF SUCH ADVANCES AS ON 01.04.2007 WAS RS.23 ,09,460/- AND THE BALANCE OF RS.2,21,65,250/- WAS ADVANCED DURING THE YEAR UNDER ITA NO.666/PN/2012 A.Y. 2008-09 CONSIDERATION. ON THE OTHER HAND, ASSESSEE INCURRED INTEREST EXPENDITURE OF RS.2,85,38,397/- ON BORROWINGS. THE REVENUE HAS DIS ALLOWED THE INTEREST PROPORTIONATE TO THE IMPUGNED INTEREST-FREE ADVANCE S BY INVOKING SECTION 36(1)(III) OF THE ACT PROFESSING THAT THE SAME IS F OR NON-BUSINESS PURPOSES. THAT SUCH ADVANCES ARE FOR NON-BUSINESS PURPOSES IS NOT AN ISSUE FOR CONSIDERATION BEFORE US INASMUCH AS THE ASSESSEE HA S NOT DISPUTED THE POSITION ARRIVED AT BY THE CIT(A) THAT SUCH ADVANCE S ARE FOR NON-BUSINESS PURPOSES. HOWEVER, BEFORE US, THE DISALLOWANCE HAS BEEN SOUGHT TO BE RESISTED ON THE BASIS OF THE PROPOSITION EMERGING F ROM THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE U TILITIES & POWER LTD. (SUPRA) WHEREBY IT CAN BE SAID THAT WHERE AN ASSESS EE HAS ADVANCED INTEREST- FREE FUNDS TO THE SISTER CONCERNS AND THE ASSESSEE HAS BOTH INTEREST BEARING AND INTEREST FREE FUNDS, AND IF THE INTEREST FREE F UNDS ARE SUFFICIENT TO COVER THE ADVANCES TO SISTER CONCERNS, A PRESUMPTION CAN BE D RAWN THAT FUNDS ADVANCED TO THE SISTER CONCERNS ARE OUT OF INTEREST -FREE FUNDS AVAILABLE WITH THE ASSESSEE. IN THIS CONNECTION, THE APPELLANT HAS SOUGHT TO POINT OUT THAT THE TOTAL INTEREST-FREE FUNDS AVAILABLE WITH IT, NAMELY , SHARE CAPITAL PLUS FREE RESERVES ARE SUFFICIENT TO COVER THE IMPUGNED INTER EST-FREE ADVANCES MADE TO THE SISTER CONCERNS. IN THIS CONNECTION, BALANCE-SH EET AS ON 31.03.2008 HAS BEEN REFERRED TO, WHICH IS PLACED IN THE PAPER BOOK . FACTUALLY SPEAKING, IT IS SEEN THAT AS ON 01.04.2007 I.E. AT THE BEGINNING OF THE YEAR THE FUNDS AVAILABLE WITH THE ASSESSEE BY WAY OF SHARE CAPITAL AND RESER VES & SURPLUS WAS ENOUGH TO COVER THE SAID IMPUGNED INTEREST-FREE ADV ANCES TO THE SISTER CONCERNS. IN-FACT, AS PER THE PROFIT AND LOSS ACCOU NT FOR YEAR ENDING 31.03.2008 THE PROFIT FOR THE YEAR AFTER DEPRECIATI ON AND TAX IS TO THE EXTENT OF RS.5,14,84002/-, WHICH ALONE IS ENOUGH TO COVER THE IMPUGNED INTEREST-FREE ADVANCES. IN OUR CONSIDERED OPINION, THE PARITY OF REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE U TILITIES & POWER LTD. (SUPRA) IS CLEARLY APPLICABLE IN THE PRESENT CASE I NASMUCH AS THERE ARE FUNDS AVAILABLE WITH THE ASSESSEE BOTH INTEREST-FREE AND INTEREST BEARING, AND THE ITA NO.666/PN/2012 A.Y. 2008-09 INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE SUFFICIENT TO COVER THE IMPUGNED INTEREST-FREE ADVANCES MADE TO THE SISTER CONCERNS, THEN THE PRESUMPTION IS THAT THE IMPUGNED INTEREST-FREE ADVA NCES MADE TO THE SISTER CONCERNS ARE OUT OF INTEREST-FREE FUNDS. IN SUCH A SITUATION, FOLLOWING THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT THE DISA LLOWANCE OF INTEREST EXPENDITURE MADE BY THE ASSESSING OFFICER BECOMES U NTENABLE. 7. IN-FACT, THE FACTUAL ASPECTS OF THE SAID PROPOSI TION HAVE NOT BEEN FAULTED BY THE CIT(A), THOUGH HE HAS NOT FOUND IT FIT TO AP PLY THE SAID PROPOSITION TO THE ASSESSEES CASE. AS PER THE DISCUSSION MADE BY THE CIT(A) IN PARA 5.3.2 IT EMERGES THAT ACCORDING TO THE CIT(A) THE AFORESAID PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IS APPLICABLE ONLY IN A SITUATION WHERE THE ADVANCES/INVESTMENTS ARE MADE FOR BUSINESS PURPOSES ALONE. AS PER THE CIT(A) WHERE ADVANCES TO SISTER CONCERNS ARE FOR NO N-BUSINESS PURPOSES, THE AFORESAID PROPOSITION LAID DOWN BY THE HONBLE BOMB AY HIGH COURT IS NOT APPLICABLE. IN OUR CONSIDERED OPINION, THE INTERPRE TATION PLACED BY THE CIT(A) ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT I S QUITE MISPLACED. IN- FACT, TO SAY THAT THE PROPOSITION THAT WHERE THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND INTEREST BEARING, THEN A PRESUMPT ION WOULD ARISE THAT INVESTMENTS ARE OUT OF INTEREST-FREE ONLY IF INTERE ST-FREE ARE SUFFICIENT TO COVER THE INVESTMENT IS A PROPOSITION WHICH IS AVAILABLE ONLY IN A SITUATION WHERE THE INVESTMENTS ARE FOR BUSINESS PURPOSES, IS WRONG. WE SAY SO FOR THE REASON THAT IF THE INVESTMENTS/ADVANCES TO THE SISTER CONC ERNS WERE FOR BUSINESS PURPOSES THEN THE QUESTION OF DISALLOWANCE UNDER SE CTION 36(1)(III) WOULD NOT ARISE AT ALL, AS SECTION 36(1)(III) EXPLICITLY PERM ITS DEDUCTION FOR THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR TH E PURPOSES OF BUSINESS OR PROFESSION. ONCE INTEREST IS PAID IN RESPECT OF FUN DS USED FOR PURPOSES OF BUSINESS THERE IS NO QUESTION OF ITS DISALLOWANCE U NDER SECTION 36(1)(III) OF THE ACT AND THERE WOULD NOT BE A NECESSITY TO SEE AS TO WHETHER THE FUNDS ADVANCED TO SISTER CONCERN ARE OUT OF INTEREST-BEAR ING BORROWINGS OR NOT. IN OUR ITA NO.666/PN/2012 A.Y. 2008-09 VIEW, THE CIT(A) ERRED IN NOT APPRECIATING THE JUDG EMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA) IN ITS PROPER RESPECTIVE. ACCORDINGLY, ON THIS GROUND THE ORDER OF THE CIT(A) IS SET- ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELE TE THE ADDITION OF RS.29,36,965/- MADE UNDER SECTION 36(1)(III) OF THE ACT. ON THIS GROUND ASSESSEE SUCCEEDS. 8. THE SECOND GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO A DISALLOWANCE OF EXPENDITURE OF RS.3,55,200/- PAID T OWARDS STAMP DUTY ON AND IN RESPECT OF THE MERGER OF TRINITY THERMAL PVT. LT D. WITH TRINITY DIE FORGERS LTD. IN PURSUANCE OF AMALGAMATION APPROVAL BY THE H ONBLE BOMBAY HIGH COURT. THE INCOME-TAX AUTHORITIES HAVE DISALLOWED T HE EXPENDITURE ON THE GROUND THAT IT WAS IN THE NATURE OF CAPITAL EXPENDI TURE. ON THIS ASPECT, WE FIND THAT THERE IS NO MATERIAL TO HOLD THAT THE EXPENDIT URE IS NOT IN THE NATURE OF CAPITAL EXPENDITURE. ADMITTEDLY THE EXPENDITURE WAS INCURRED BY WAY OF STAMP DUTY PAID ON LAND OWNED TRINITY THERMAL PVT. LTD. W HICH HAD SINCE MERGED WITH THE ASSESSEE IN TERMS OF AN AMALGAMATION SCHEM E. THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD ARE AFFIRMED AS AS SESSEE HAS NOT MADE OUT ANY CREDIBLE ARGUMENT AGAINST THE ORDERS OF THE AUT HORITIES BELOW HOLDING THE IMPUGNED EXPENDITURE TO BE CAPITAL IN NATURE. THUS, ASSESSEE FAILS ON THIS GROUND. 9. THE NEXT GROUND RELATES TO ASSESSEES CLAIM FOR DEPRECIATION OF RS.13,57,651/- ON BUILDINGS. THE SAID CLAIM PERTAIN ED TO ADDITION TO FIXED ASSETS BY WAY OF NEW BUILDING, WHICH WAS STATED TO BE OF A VALUE OF RS.2,71,53,020/-. ASSESSEE CLAIMED BEFORE THE ASSES SING OFFICER THAT THE ASSET REPRESENTED NEW BUILDING CONSTRUCTED AT SHIKR APUR UNIT WHICH WAS PUT TO USE ON 31.12.2007 AND ACCORDINGLY DEPRECIATION WAS CLAIMED AT 50% OF THE APPLICABLE RATE SINCE ASSET WAS PUT TO USE FOR LESS THAN 180 DAYS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER, HO WEVER, DENIED THE CLAIM OF ITA NO.666/PN/2012 A.Y. 2008-09 DEPRECIATION OF RS.13,57,651/- ON THE GROUND THAT T HERE WAS NO EVIDENCE TO SHOW THAT THE BUILDING WAS COMPLETE AND PUT TO USE DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) HAS ALSO DENIED THE CLAIM PRIMARILY BASING ON THE CONTENTS OF THE DIRECTORS REPORT OF THE ASSESSEE C OMPANY WHICH INDICATED THAT THE BUILDING WAS STILL UNDER CONSTRUCTION AS ON 31. 03.2008. THE CIT(A) FURTHER NOTICED FROM THE DIRECTORS REPORT AN AVERMENT THAT THE COMPANY WOULD START INSTALLATION OF EQUIPMENTS IN THE BUILDING FROM OCT OBER, 2008. FOR ALL THE ABOVE REASONS, THE CIT(A) UPHELD THE ACTION OF THE ASSESS ING OFFICER IN DISALLOWING THE DEPRECIATION OF RS.13,57,651/- ON THE GROUND T HAT THE BUILDING IN QUESTION WAS INCOMPLETE AND NOT PUT TO USE DURING THE YEAR U NDER CONSIDERATION. 10. IN THE ABOVE BACKGROUND, ASSESSEE IS IN APPEAL BEFORE US. HOWEVER, THERE IS NO MATERIAL BROUGHT ON RECORD TO NEGATE TH E FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE CIT(A) AND FOR THAT REASON W E ARE UNABLE TO INTERFERE WITH THE CONCLUSION DRAWN BY THE LOWER AUTHORITIES. ON THE BASIS OF THE FACTS ON RECORD, AS EMERGING FROM THE ORDERS OF THE AUTHORIT IES BELOW, IT IS QUITE EVIDENT THAT CLAIM OF THE ASSESSEE FOR DEPRECIATION OF RS.1 3,57,651/- WITH RESPECT TO THE NEW BUILDING AT SHIKRAPUR UNIT WAS UNTENABLE AN D HAS BEEN RIGHTLY DENIED BY THE LOWER AUTHORITIES. WE HEREBY AFFIRM THE SAME . THUS, ON THIS GROUND ASSESSEE FAILS. 11. THE NEXT GROUND OF APPEAL IS WITH REGARD TO A D ISALLOWANCE OF RS.1,00,000/- OUT OF TELEPHONE EXPENSES ON THE GROU ND THAT THE SAME WAS FOR PERSONAL USE. THE ASSESSING OFFICER HAD MADE A DISA LLOWANCE OF RS.5,00,000/- FOR PERSONAL ELEMENT OUT OF TOTAL EXP ENDITURE CLAIMED UNDER THE HEAD POSTAGE & TELEPHONE EXPENSES AMOUNTING TO RS .24,78,806/-. THE CIT(A) HAS REDUCED THE DISALLOWANCE BY AN AMOUNT OF RS.4,00,000/-, AND NOT BEING SATISFIED, ASSESSEE IS IN FURTHER APPEAL BEFO RE US. ITA NO.666/PN/2012 A.Y. 2008-09 12. IN THIS CONTEXT, AFTER HEARING THE RIVAL STANDS WE FIND THAT THE CIT(A) HAS RETAINED THE DISALLOWANCE OF RS.1,00,000/- AS PER T HE DISCUSSION IN PARA 12.3 OF HIS ORDER. THE CIT(A) HAS NOTICED THAT IN THE AB SENCE OF THE RELEVANT RECORDS THE ELEMENT OF NON-BUSINESS RELATED EXPENDI TURE COULD NOT BE VERIFIED AND THEREFORE THE DISALLOWANCE HAS BEEN ESTIMATED B Y HIM AT RS.1,00,000/-. FOR THE REASONS ASSIGNED BY THE CIT(A), TO WHICH TH ERE IS NO NEGATION BEFORE US, WE HEREBY AFFIRM THE DISALLOWANCE OF RS.1,00,00 0/-. THUS, ASSESSEE FAILS ON THIS GROUND. 13. THE NEXT GROUND IS WITH REGARD TO A DISALLOWANC E OF RS.3,70,255/- ON THE BASIS OF ITS DATA. IN THIS CONTEXT, THE BRIEF F ACTS ARE THAT THE ITS DATA RECEIVED IN THE CASE OF THE ASSESSEE SHOWED TRANSAC TIONS TO THE EXTENT OF RS.1,45,50,541/- AND AS PER THE ASSESSING OFFICER T HE ASSESSEE COULD NOT SATISFACTORILY RECONCILE THE TRANSACTIONS TO THE EX TENT OF RS.3,70,255/-. HENCE HE MADE THE DISALLOWANCE TO THAT EXTENT. THE CIT(A) HAS UPHELD THE ADDITION, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 14. THE ONLY POINT MADE BY THE ASSESSEE IS TO THE E FFECT THAT THE DETAILS OF ITS DATA WERE HANDED OVER TO THE ASSESSEE ONLY AT T HE FAG-END OF THE ASSESSMENT PROCEEDINGS AND IT REQUIRED CERTAIN AMOU NT OF TIME BY THE ASSESSEE TO RECONCILE THE FIGURES AFTER OBTAINING N ECESSARY DATA FROM THE PARTIES ALSO. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE WOULD BE ABLE TO MAKE OUT A PROPER RECONCILIATION I F AN OPPORTUNITY IS GRANTED AND THE MATTER BE RESTORED TO THE FILE OF THE ASSES SING FOR THE SAID PURPOSE. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT SERIOUSLY OPPOSED THE AFORESAID PLEA OF THE ASSESSEE. 16. IN THE ABOVE CONTEXT, WE RESTORE THE MATTER BAC K TO THE FILE OF THE ASSESSING OFFICER WHO SHALL ALLOW A REASONABLE OPPO RTUNITY TO THE ASSESSEE TO ITA NO.666/PN/2012 A.Y. 2008-09 RECONCILE THE ITS DATA AND THEREAFTER HE SHALL EXAM INE THE IMPUGNED ADDITION AFRESH AS PER LAW. ON THIS GROUND, ASSESSEE SUCCEED S FOR STATISTICAL PURPOSES. 17. THE LAST GROUND IN THIS APPEAL RELATES TO AN AD -HOC DISALLOWANCE OF RS.6,52,530/- OUT OF WELFARE EXPENSES. IN THIS CONT EXT, THE BRIEF FACTS ARE THAT ASSESSEE WAS FOUND TO HAVE INCURRED WELFARE EXPENSE S OF RS.65,25,324/- WHEREAS IN THE IMMEDIATE PRECEDING YEAR IT HAD INCU RRED EXPENDITURE OF RS.34,00,000/- ONLY. THE INCREASE WAS FOUND TO BE A BNORMAL BY THE ASSESSING OFFICER AND THEREFORE HE DISALLOWED 10% OF THE TOTA L EXPENDITURE, WHICH AMOUNTED TO RS.6,52,530/-. THE CIT(A) HAS ALSO SUST AINED THE DISALLOWANCE, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 18. THE STAND OF THE ASSESSEE BEFORE THE CIT(A) AS WELL AS BEFORE US IS TO THE FOLLOWING EFFECT. FIRSTLY, AS PER THE ASSESSEE IN THE EARLIER YEARS CERTAIN EXPENSES WERE INCLUDED UNDER THE HEAD SALARY AND W AGES WHILE IN THE YEAR UNDER CONSIDERATION, SUCH EXPENSES WERE INCLUDED UN DER THE HEAD STAFF WELFARE AND BECAUSE OF REGROUPING OF THE EXPENDITU RE UNDER THE HEAD STAFF WELFARE, THE FIGURE WAS NOT COMPARABLE TO THAT OF THE EARLIER YEAR. SECONDLY, IT WAS EXPLAINED THAT DURING THE YEAR UNDER CONSIDERAT ION EXPENDITURE ON ACCOUNT OF BUS FACILITY FOR SHIKRAPUR PLANT AND TEA EXPENSES AND SAFETY GEAR FOR WORKERS WAS INCREASED INASMUCH AS IN THE EARLIER YE AR SUCH EXPENSES PERTAINED ONLY TO SIX MONTHS. THIRDLY, IT WAS CONTE NDED THAT THE INCREASE IS OTHERWISE ALSO JUSTIFIABLE INASMUCH AS THE TURNOVER HAS ALSO INCREASED IN THE CURRENT YEARS. 19. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS POINTED OUT THE INCREASE IN EXPENDITURE IS ABNORMAL AND THUS THE DISALLOWANCE HAS BEEN RIGHTLY MADE. ITA NO.666/PN/2012 A.Y. 2008-09 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. NOTABLY, BOTH THE AUTHORITIES BELOW HAVE LAUNCHED INTO A STATISTICAL EXERCISE TO ARRIVE AT A DISALLOWANCE OUT OF STAFF WELFARE EXPENSES, WHEN TH ERE IS NO IOTA OF MATERIAL OR EVIDENCE TO SAY OR PINT-POINT ANY EXPENDITURE OF NO N-BUSINESS NATURE. NEVERTHELESS, WE ALSO FIND THAT THE EXPLANATION REN DERED BY THE ASSESSEE WITH REGARD TO THE INCREASE IN THE EXPENDITURE ON ACCOUN T OF REGROUPING OF EXPENSES, INCURRENCE OF EXPENDITURE FOR ENTIRE PERI OD AS COMPARED TO FOR A LESSER PERIOD IN THE PRECEDING YEAR, INCREASE IN TU RNOVER ETC. HAVE NOT BEEN FAULTED AT ALL. CONSIDERING THE EXPLANATION FURNISH ED AS ALSO THE ABSENCE OF ANY MATERIAL TO DOUBT THE GENUINENESS OF THE EXPEND ITURE CLAIMED, WE FIND NO REASONS TO UPHOLD THE IMPUGNED DISALLOWANCE. THE OR DER OF THE CIT(A) IS SET- ASIDE AND ASSESSING OFFICER IS DIRECTED TO DELETE T HE DISALLOWANCE OF RS.6,52,530/-. THUS, ON THIS GROUND ASSESSEE SUCCEE DS. 21. RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 28 TH AUGUST, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE