Income Tax Officer, V. M/s United construction & co.,

ITA 70/RAN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85433 (ITAT-RANCHI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 10-02-2014
• Court: TRIBUNAL
• Department Lawyers: DEEPAK ROSHAN SENIOR S CLD
• Keywords: Gift; Depreciation

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, RANCHI BEFORE HON'BLE SHRI H.L. KARWA, PRESIDENT , AND HON'BLE SHRI B.R. BASKARAN, ACCOUNTANT M EMBER ITA NO . 7 0 /RAN/201 4 A.Y 200 5 - 06 I.T.O WARD 3(4), DALTONGANJ VS. M/S. UNITED CONSTRUCTION & CO. PAN: ABBFU0906A ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT :SH RI DEEPAK ROSHAN, SENIOR S.C/LD.DR FOR THE RESPONDENT : NONE DATE OF HEARING : 2 8 - 11 - 2014 DATE OF PRONOUNCEMENT: 2 8 - 11 - 201 4 O R D E R SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THIS APPEAL F ILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 2 9 - 11 - 2013 PASSED BY LD. CIT(A) , RANCHI (JHARKHAND) AND IT RELATES TO T HE ASSESSMENT YEAR 200 5 - 06 . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE . HENCE, WE PROCEED TO DISPOSE OF THE APPEAL EX - PARTE WITHOUT PRESENCE OF THE ASSESSEE. 3. WE HEARD THE LD. D . R AND PERUSED THE RECORD. THE ASSESSEE IS A FIRM . IT IS ENGAGED IN THE BUSINESS OF UNDERTAKING CONTRACT WORK. THE ASSESSSING OFFICER COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS. THE APPEAL FILED BY THE ASSESSEE BEFORE LD CIT(A) WAS PARTLY ALLOWED. AGGRIEVED AGAINST THE RELIEF GRANTED BY THE FIRST APPELLATE AUTHOR ITY, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF INCENTIVE S GIVEN TO THE STAFF S . THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS GIVEN GIFT S TO ITS STAFFS BY 2 ITA NO 7 0 /RAN/1 4 - M/S. UNITED CONSTRUCTION & CO. WAY OF INCENTIVE TO THE TUNE OF RS.29,500 / - . THE ASSESSING OFFICER FELT THAT THE SAID PAYMENT IS UNWARRANTED WHEN THE EMPLOYEES HAVE BEEN PAID SALARY AND BONUS. ACCORDINGLY, HE DISALLOWED THE ENTIRE AMOUNT OF RS.29,500/ - . THE LD.CIT(A) RESTRICTED THE ADDITION TO 10%. I.E AT RS. 2,950/ - . WE HEAR D LD D.R AND AND PERUSED THE RECORD. HOWEVER, IN OUR VIEW, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THIS ADDITION ONLY ON THE REASONING THAT THE ASSESSEE HAS PAID SALARIES TO ITS EMPLOYEES . THE DECISION TO PAY THE INCENTIVE TO THE EMPLOYEES IS THE DECISION TAKEN BY THE ASSESSEE ON COMMERCIAL CONSIDERATIONS AND, IN OUR VIEW, THE ASSESSING OFFICER WAS NOT ENTITLED TO ENTER INTO THE SHO E S OF THE ASSESSEE TO DETERMINE THE CORRECT NESS OR OTHERWISE OF THE SAID DECISION. ACCORDINGLY, THE LD CIT(A) WAS ALSO NOT JUSTIFIED IN PARTIALLY SUSTAINING THE ADDITION. ACCORDINGLY , WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 5. THE NEXT ISSUE RELATES TO THE DISALLOWANCE MADE OUT OF SITE EXPENSES . THE ASSESSEE HAD CLAIM ED A SUM OF RS.1,91,903/ - UNDER THE HEAD SITE EXPENSE . THE ASSESSEE SUBM ITTED THAT THE SAID EXPENSES WERE INCURRED FOR PROVIDING ACCOMMODATION TO THE STAFF S AND WORKERS AND ALSO FOR PROVIDING FOOD AT WORK SITE . IT WAS ADMITTED BY THE ASSESSE E THAT GUEST S OF STAFF AND WORKERS WERE ALSO ACCOMMODATED ON SOME OCCASIONS. HENCE, THE ASSESSING OFFICER DISALLOWED 20% OF THE TOTAL EXPENSES I.E. AT RS. 38,381/ - O N THE REASONING THAT THE SAME IS NOT EMENDABLE FOR VERIFICAT ION. THE LD.CIT(A) RESTRICTED THE SAME TO 5% . WE NOTICE THAT THE RE APPEARS TO BE NO DISPUTE IN ALLOWING THE EXPENSE S INCURRED ON THE EMPLOYEES. BUT THE EXPENSES INCURRED FOR THE GUESTS OF EMPLOYEES ARE LIABLE TO BE DISALLOWED , AS THEY WERE NOT INCURRED FO R THE PURPOSES OF BUSINESS . HOWEVER, THE EXACT AMOUNT OF EXPENSES INCURRED ON GUESTS ARE NOT ASCERTAINABLE AND THE AO HAS ALSO MADE THE DISALLOWANCE ON ESTIMATE BASIS. UNDER THE FACTS PREVAILING IN THE INSTANT CASE, WE ARE OF THE VIEW THAT THE LD.CIT(A) W AS JUSTIFIED IN RESTRICTING THE SAME AT 5%. ACCORDINGLY W E UPHOLD THE SAME. 3 ITA NO 7 0 /RAN/1 4 - M/S. UNITED CONSTRUCTION & CO. 6. THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OUT OF OVERTIME WAGES . THE ASSESSEE CLAIMED DEDUCTION TOWARDS OVERTIME WAGES AT RS. 65,96,184/ - . ON PERUSAL OF LABOUR REGISTER AN D O VERTIME REGISTER , THE ASSESSING OFFICER NOTICED THAT SOME TIMES, SAME WORKERS WERE ENGAGED FOR OVERTIME WORK ALSO FOR FULL SHIFT CONTINUOUSLY AFTER NORMAL WORKING HOURS. THE ASSESSING OFFICER OBSERVED THAT IT WAS NOT PRACTICALLY POSSIBLE TO A WORKER T O WORK IN DOUBLE SHIFT WITHOUT TAKING REST. ACCORDINGLY, HE FELT THAT OVERTIME WAGES CLAIMED BY THE ASSESSEE IS EXCESSIVE. HE DISALLOWED THE SAME AT 10% . THE LD. CIT(A) HAS REDUCED THE SAME TO 1% I.E RS. 65,962/ - . WE NOTICE THAT THE ASSESSING OFFICER HAS POINTED OUT A SPECIFIC DEFECT , I.E. REGISTERS REVEAL THAT SOME OF SAME WORKERS WERE SHOWN AS WORKING IN DOUBLE SHIFT , MEANING THEREBY THERE IS SOME DEFICIENCY IN THE CLAIM OF THE OVERTIME WAGES. WE ALSO NO T ICE THAT THE ASSESSEE HAS FAILED TO CONVINCING LY EXPLAIN THE DEFECTS POINTED OUT BY THE ASSESSING OFFICER. ACCORDINGLY, WE ARE OF THE VIEW THE DISALLOWANCE OF 10% MADE BY THE ASSESSING OFFICER ON THIS ISSUE IS JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND UPHOLD THE A DDITION MADE BY THE AO. 7. THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OUT OF HIRE CHARGES . THE ASSESSEE CLAIMED DEDUCTION OF HIRE CHARGES PAID ON HIRING O F MACHINES/ MACHINERIES. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE WAS HAVING ITS OWN EQU IPMENT S . HENCE, HE FELT THAT HIRE CHARGES CLAIMED BY THE A SSESSEE IS EXCESSIVE AND ACCORDINGLY DISALLOWED 20% OF THE EXPENSES. THE LD. CIT(A) REDUCED THE SAME AT 5% . WE NOTICE THAT THE ASSESSEE HAS SUBMITTED THAT IT WAS CONSTRAINED TO HIRE THE MACHINERIES IN ORDER TO COMPLETE THE WORK EXPEDITIOUSLY . THE ASSESSING OFFICER HAS NOT DOUBTED ABOUT THE HIRING OF MACHINERIES , BUT HE FELT THE HIRING CHARGES CLAIMED BY THE ASSESSEE WAS EXCESSIVE. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE PAYMENT MADE BY THE ASSESSEE WAS EXCESSIVE , I.E IN EXCESS OF THE MARKET RATE S . HENCE, WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS JUSTIFIED IN REDUCING THE DISALLOWANCE TO 5%. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT (A) ON THIS ISSUE. 4 ITA NO 7 0 /RAN/1 4 - M/S. UNITED CONSTRUCTION & CO. 8. THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES AND DEPRECIATION. THE ASSESSING OFFICER DISALLOWED 25% OF THE CLAIM OF THE ASSESSEE TOWARDS PERSONAL USAGE OF VEHICLE S . THE LD.CIT(A) REDUCE D THE SAME TO 5%. WE NOTICE THAT THE ASSESSING OFFICER HAS MADE THE ABOVE SAID DISALLOWANCE ON ESTIMATE BASIS . HOWEVER, CONSIDERING THE FACT THAT THE VEHICLES MIGHT HAVE BEEN USED FOR PERSONAL PURPOSES ALSO , W E FEEL THAT THE ADDITION SUSTAINED BY LD CIT(A ) NEEDS TO BE ENHANCED. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO SUSTAIN THE ADDITION TO 10% OF EXPENSES CLAIMED BY THE ASSESSEE. 9 . THE NEXT ISSUE RELATES TO THE DISALLOWANCE MADE FROM TELEPHONE EXPENSES. THE ASSESSING OFFICER HAS DISALLOWED THE SAME TO 25% TOWARDS PERSONAL USAGE. THE LD. CIT(A) REDUC ED THE DISALLOWANCE TO 5% . WE NOTICE THAT THE ASSESSING OFFICER HAS MADE THE ABOVE SAID DISALLOWANCE ON ESTIMATE BASIS. HOWEVER, CONSIDERING THE F ACT THAT THE VEHICLES MIGHT HAVE BEEN USED FOR PERSONAL PURPOSES ALSO, WE FEEL THAT THE ADDITION SUSTAINED BY LD CIT(A) NEEDS TO BE ENHANCED. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO SUSTAIN THE ADD ITION TO 10% OF EXPENSES CLAIMED BY THE ASSESSEE. 1 0 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED . PRONOUNCED ACCORDINGLY ON 2 8 - 11 - 2014 SD/ - SD/ - [ H.L. KARWA ] [ B.R. BASKARAN ] PRESIDENT ACCOUNTANT MEMBER DT. 2 8 - 11 - 2014 PLACE : RANCHI 5 ITA NO 7 0 /RAN/1 4 - M/S. UNITED CONSTRUCTION & CO. PP, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT : I T O W 3 (4) DALTONGANJ 2 THE RESPONDENT: M/S. UNITED CONSTRUCTION & CO. 3. .THE CIT, 4.THE CIT(A), 5.DR, ITAT CIRCUIT BENCH, RANCHI 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT. REGISTRAR 6 ITA NO 7 0 /RAN/1 4 - M/S. UNITED CONSTRUCTION & CO. 1. DATE OF DICTATION ............. 2 8 - 11 - 2014 ....................... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ........................OTHER MEMBER ...... - 11 - 2014 ........................ 3. DATE ON WHICH THE APPROVED DRA FT COMES TO THE SR. P.S./P.S. ..................... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.................................. 2 7 - 11 - 20 14 ................................................... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S ................ 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK ....................................... 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ......................................... 8. THE DATE ON W HICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................................................................................................. 9. DATE OF DESPATCH OF THE ORDER .................................................... ..........