DOLLEX INDUSTRIES LTD, MUMBAI V. ITO 9(1)(3), MUMBAI

ITA 6857/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88015 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Unexplained expenditure; Business income; Depreciation; Additional evidence
• Section: 69C; 69

Judgement Text

1 ITA NO.6857/M/12 DOLLEX INDUS. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM ! I.T.A. NO. 6857/MUM/2012 ( ASSESSMENT YEAR : 2009-10 ) M/S. DOLLEX INDUSTRIES LTD. 201, A WING, KHERNAGAR SARVODAYA CHS BUILDING NO.11, KHERNAGAR, BANDRA (E) MUMBAI-400 051. ! VS. INCO ME TAX OFFICER WARD-9(1)(3) MUMBAI. ' ! # ! PAN/GIR NO. : AAACD 1534 D ( '$ APPELLANT ) .. ( %&'$ ! RESPONDENT ) '$' ! APPELLANT BY : SHRI RAKESH JOSHI (AR) %&'$(' / RESPONDENT BY : SHRI JEETENDRA KUMAR (DR) )*(+ DATE OF HEARING : 26/11/2014 ,-./ ( + / DATE OF PRONOUNCEMENT : 14/01/2015 0! O R D E R PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31/08/2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2009-1 0. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- BEING AGGRIEVED BY THE ORDER OF THE CIT (A) 19, MUMBAI, HEREAFTER REFERRED TO AS THE CIT(A),YOUR APPELLANT SUBMITS THE FOLLOWING GROUNDS OF APPEAL FOR YOUR SYMPATHETIC CO NSIDERATION: 2 ITA NO.6857/M/12 DOLLEX INDUS. LTD. 1) THE LEARNED CIT (A) ERRED IN DISALLOWING CRUSHIN G CHARGES RS 37,20,317/- AND RENT RS 1,00,00,000/- RESPECTIVELY U/S 40(A)(IA ) OF THE I.T.ACT 1961 IN THIS RESPECT SHE OUGHT TO HAVE APPRECIATED THAT THE ARRANGEMENT BETWEEN YOUR APPELLANT AND NANDED DIST CO-OP BANK L TD. WAS NEVER IN THE NATURE OF LANDLORD AND TENANT AND HENC E NO TDS WAS DEDUCTIBLE FROM THE SAME .SHE OUGHT TO HAVE APPRECI ATED THAT ENTIRE PAYMENT TOWARDS THE ABOVE MENTIONED CHARGES WAS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF YOUR A PPELLANT AND HENCE BE ALLOWED AS BUSINESS EXPENSE OF YOUR APPELL ANT IN COMPUTING BUSINESS INCOME OF THE YEAR AY 2009-10. IT IS HUMBLY PRAYED THAT THE SAID DISALLOWANCE U/S 40(A)(IA) OF THE I.T.ACT 1961 BE DELETED. 2) THE LEARNED CIT (A) ERRED IN TREATING THE FIXED ASSETS PURCHASED AT COST OF RS. 4,59,294/- DURING THE YEAR AS UNEXPLAINED EXPENDITU RE WITHIN THE MEANING OF SEC 69 C OF THE I.T.ACT 1961 AND THEREBY MAKING THE ADDITION OF THE SAID AMOUNT TO THE INCO ME OF YOUR APPELLANT. IN THIS RESPECT SHE OUGHT TO HAVE APPRECIATED THAT THE EXPENDITURE IS FULLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND TH E SOURCE OF THE PAYMENTS MADE FOR THE SAID PURCHASES IS ALSO EXPLAI NED AS RECORDED IN THE BOOKS OF ACCOUNTS ON THESE FACTS AND UNDER THE CIRCUMSTANCES THE PROV ISIONS OF SEC 69C OF THE I.T.ACT 1961 ARE NOT APPLICABLE TO SUCH EXPENDITURE. YOUR APPELLANT HUMBLY PRAYS THAT THE SAID ADDITION OF RS. 4,59,294/- UNDER SEC 69C OF THE I.T.ACT 1961 BE DEL ETED. 3) THE LEARNED AO ERRED IN REWORKING THE DEPRECIATI ON AND IN RESTRICTING THE SAME TO RS 27,83,299/- INSTEAD OF RS. 31,53,796 /- AS CLAIMED BY YOUR APPELLANT. SHE OUGHT TO HAVE APPRECIATED THAT YOUR APPELLANT W AS ENTITLED TO AND HAD CORRECTLY WORKED OUT THE CLAIM OF DEPREC IATION AND HENCE THE ENTIRE DEPRECIATION CLAIMED BY YOUR APPEL LANT BE ALLOWED IN COMPUTING BUSINESS INCOME OF THE YEAR AY 2009-10. 4) YOUR APPELLANT CRAVES FOR LEAVE TO ADD, AMEND, A LTER, 3 ITA NO.6857/M/12 DOLLEX INDUS. LTD. MODIFY AND/OR DELETE ALL OR ANY ONE OR MORE OF THE ABOVE SAID GROUNDS OF APPEAL IF NECESSARY. 2. GROUND NO.1 IS REGARDING DISALLOWANCE U/S. 40(A) (IA). WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVAN T MATERIAL ON RECORD. AT THE OUTSET IT WAS SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08 WHILE DECI DING MA NO.93/MUM/2004 VIDE ORDER DATED 10/10/2014 IN PARA 10 AND 11 AS UNDER :- 10. OUT OF THE TOTAL DISALLOWANCE OF RS. 2,39,42,0 30, THE CRUSHING CHARGES OF RS.88,97,590/- AND FACTORY LEAS E RENT DISALLOWED TO THE EXTENT OF RS. 1,30,83,090/- ARE T HE PAYMENTS MADE TO THE GOVERNMENT AS POINTED OUT BY THE ASSESS EE IN THE MISCELLANEOUS APPLICATIONS. THERE IS NO DISPUTE THA T THE ASSESSEE HAS TAKEN OVER THE SUGAR PLANT IN QUESTION ON LEASE FOR A PERIOD OF SIX YEARS FROM THE GOVERNMENT OF MAHARASHTRA. THEREFORE, THERE IS NO REASON TO DISBE LIEVE THE FACT POINTED OUT BY THE ASSESSEE IN THE MISCELLANEO US APPLICATIONS THAT THESE ITEMS OF EXPENDITURE ARE THE PAYMENTS TO THE GOVERNMENT OF MAHARASHTRA. IF THIS FACT IS FOUND TO BE CORRECT THEN THE PROVISIONS OF TDS ARE NOT APPLICABLE ON SUCH PA YMENTS IN VIEW OF SECTION 196 OF THE INCOME TAX ACT AS UNDER:- 196. 2 INTEREST OR DIVIDEND OR OTHER SUMS PAYABLE TO GOVER NMENT, RESERVE OR CERTAIN CORPORATIONS NOTWITHSTANDING AN YTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS CHAPT ER, NO DEDUCTION OF TAX SHALL BE MADE BY ANY PERSON FROM ANY SUMS PA YABLE TO- (I) THE GOVERNMENT, OR (II) THE RESERVE BANK OF INDIA, OR (III) A CORPORATION ESTABLISHED BY OR UNDER A CENTR AL ACT WHICH IS, UNDER ANY LAW FOR THE TIME BEING IN FORCE, EXEM PT FROM INCOME- TAX ON ITS INCOME, OR (IV) A MUTUAL FUND SPECIFIED UNDER CLAUSE (23D) OF SECTION 10, WHERE SUCH SUM IS PAYABLE TO IT BY WAY OF INTEREST OR DIVIDEND IN RESPECT OF ANY SECURITIES OR SHARES OWNED BY IT OR IN WHICH IT HAS FULL BENEFICIAL INTEREST, OR ANY OTHER INCOME ACCRU ING OR ARISING TO IT.]' 11. SINCE, IT IS A CRUCIAL RELEVANT FACT WHICH GOES TO THE ROOT OF THE ISSUE SO FAR AS THESE TWO EXPENDITURES ARE CONC ERNED, THEREFORE, THE NON CONSIDERATION OF THIS FACT TANTA MOUNT A MISTAKE CREPT IN THE IMPUGNED ORDER. THIS FACT WAS ALSO NOT TAKEN INTO ACCOUNT BY THE AUTHORITIES BELOW WHILE DECIDING THE ISSUE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JU STICE, 4 ITA NO.6857/M/12 DOLLEX INDUS. LTD. THE GROUND NO.4 AND 5 OF THE ASSESSEES APPEAL ARE SET ASIDE TO THE RECORD OF CIT(A) FOR CONSIDERATION AND EXAMINATION OF THIS FACT AND THEN DECIDE THE ISSUE OF DISALLOWANCE U/S. 40(A)(IA). IF THE FACTS POINTED O UT IN THE MISCELLANEOUS APPLICATIONS OF THE ASSESSEE ARE FOUN D TO BE CORRECT THEN IN VIEW OF THE PROVISIONS OF SECTIO N 196 OF THE INCOME TAX ACT, NO DISALLOWANCE CAN BE MADE U/S . 40(A)(IA) IN RESPECT OF SUCH EXPENDITURE TO BE PAID TO THE GOVERNMENT. 2.1 AN IDENTICAL ISSUE WAS SET ASIDE TO THE RECORD OF AO FOR THE YEAR 2007- 08 FOR EXAMINATION OF THE FACTS BROUGHT TO THE NOT ICE OF THE TRIBUNAL BY THE ASSESSEE REGARDING PAYMENT IN QUESTION TO THE GOVER NMENT. THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE IN SUPPORT OF THE CLAIM T HAT THE PAYMENT IN QUESTION IS IN PURSUANT TO THE MANUFACTURING AGREEMENT BETWEEN ASSESSEE AND MAHARASHTRA GOVERNMENT. ACCORDINGLY THIS ISSUE IS S ET ASIDE TO THE RECORD OF CIT(A) FOR VERIFICATION OF THE FACT AND APPLICABILI TY OF SEC 196 OF THE INCOME TAX ACT ON SUCH PAYMENT. 3. GROUND NO.2 IS REGARDING ADDITION U/S. 69C. WE H AVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATER IAL ON RECORD. AT THE OUTSET IT WAS SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN C ONSIDERED BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08 WHILE DECIDING MA N O.93/MUM/2004 VIDE ORDER DATED 10/10/2014 IN PARA 7 AS UNDER :- 7. SINCE THE FACT OF EXPENDITURE DULY RECORDED IN THE BOOKS OF ACCOUNTS IS A CRUCIAL AND RELEVANT FACT FO R DECIDING THE ISSUE OF ADDITION U/S. 69C. IT IS PERTINENT TO MENTION THAT IF AN EXPENDITURE IS DULY RECORDED IN THE BOOKS OF ACCOUNTS THEN THE SAME DOES NOT FALL UNDER THE EXPRESSION OF UNEXPLAINED EXPENDITURE IN TERMS OF SECTION 69C OF THE INCOME TAX ACT. THEREFORE, WE ARE OF THE VIEW THAT THERE IS A MISTAKE APPARENT ON RECORD SO FAR AS THE FINDING OF TRIBUNAL IN SUSTAINING THE DISALLOWANCE OF RS, 5,86 ,292 IS CONCERNED, IN PARA 6 TO 9 OF THE IMPUGNED ORDER. ACCORDINGLY, WE MODIFY THE IMPUGNED ORDER AND SET A SIDE THE ISSUE OF ADDITION U/S 69C TO THE EXTENT OF RS. 5,86,292/- TO THE RECORD OF CIT(A) FOR CONSIDERING THE FACT THAT THE EXPENDITURE IS DULY RECORDED IN THE BOOKS OF 5 ITA NO.6857/M/12 DOLLEX INDUS. LTD. ACCOUNTS AND THE SOURCE OF THE PAYMENT AS EXPLAINED AND RECORDED IN THE BOOKS OF ACCOUNTS AND THEN DECIDE T HE ISSUE AS PER LAW. IT IS CLARIFIED THAT IF THE EXPEN DITURE IS FOUND TO BE DULY RECORDED IN THE BOOKS OF ACCOUNTS THEN IT DOES NOT FALL UNDER THE PURVIEW OF SECTION 69C. NEE DLESS TO SAY, THE ASSESSEE BE GIVEN AN OPPORTUNITY OF HEARIN G BEFORE DECIDING THE ISSUE AFRESH. 3.1 ACCORDINGLY THIS ISSUE IS SET ASIDE TO THE RECO RD OF CIT(A) FOR CONSIDERING THE FACT THAT THE EXPENDITURE IS DULY RECORDED IN T HE BOOKS OF ACCOUNT AND SOURCES OF PAYMENT EXPLAINED AND RECORDED IN THE BO OKS OF ACCOUNT AND THUS DECIDED THE ISSUE AS PER LAW. 4. GROUND NO.3 IS REGARDING RESTRICTING THE CLAIM O F DEPRECIATION. AT THE TIME OF HEARING THE LD. AR OF THE ASSESSEE STATED T HAT THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO.3 AND SAME MAY BE DISMISSE D AS NOT PRESSED. THE LD. DR HAS NO OBJECTION IF GROUND NO.3 IS DISMISSED AS NOT PRESSED. ACCORDINGLY GROUND NO.3 IS DISMISSED BEING NOT PRESSED. 5. APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14/01/2015 . . 0(,-./) 12 345!64!7648- (9* SD/- SD/- (N.K. BILLAIYA) (VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ) * MUMBAI; 2 DATED 14/01/2015. . . ./ JV, SR. PS 6 ITA NO.6857/M/12 DOLLEX INDUS. LTD. !'#' !'#' !'#' !'#' ! COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT. 3. ): ; < / THE CIT(A)- 4. ): / CIT 5. =9 %+> > / ) * / DR, ITAT, MUMBAI 6. 9?@* ! GUARD FILE. $ $ $ $ / BY ORDER, &+%+ //TRUE COPY// % %% % $&' $&' $&' $&' (DY./ASSTT. REGISTRAR) ) * / ITAT, MUMBAI