GKN Sinter Metals Ltd., Pune V. Addl.CIT, Range-9, Pune,

ITA 767/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3031 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANGRAM GAIKWAD D I T
• Assessee Lawyers: ABHIJIT KULKARNI
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 767/PN/2009 (ASSTT. YEAR : 2005-06) GKN SINTER METALS LTD. , 146, MUMBAI-PUNE ROAD, PIMPRI, PUNE 411 018 PAN : NOT AVAILABLE .. APPELLANT V. ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE 9, PUNE . RESPONDENT APPELLANT BY : SHRI ABHIJIT KULKARNI RESPONDENT BY : SHRI SANGRAM GAIKWAD, ADDL.D.I.T ORDER PER SHAILENDRA KUMAR YADAV JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-III, PUNE AND THE GROUNDS RAISED READ AS UND ER : 1.0 THE LEARNED CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS.3,00,000/- PAID TOWARDS CORPORATE MEMBERSHIP OF A CLUB BY HOLDING THAT THE SAID EXPENDITURE WAS OF CAPITAL NA TURE. 2.0 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADHO C DISALLOWANCE OF RS. 75,000/- OUT OF TRAVELLING AND CONVEYANCE EXPENSES INCURRED BY THE APPELLANT. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMIT S THAT THE DISALLOWANCE IS UNWARRANTED AND REQUIRES TO BE DELE TED. WITHOUT PREJUDICE TO THE FOREGOING, THE APPELLANT SUBMITS T HAT THE DISALLOWANCE IS GROSSLY EXCESSIVE AND ARBITRARY AND THE SAME REQUIRES TO BE REDUCED SUBSTANTIALLY. 3.0 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADHO C DISALLOWANCE OF RS. 75,000/- OUT OF MISCELLANEOUS E XPENSES. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE DISALLOWANCE IS UNWARRAN TED AND REQUIRES TO BE DELETED. WITHOUT PREJUDICE TO THE F OREGOING, THE APPELLANT SUBMITS THAT THE DISALLOWANCE IS GROSSLY EXCESSIVE AND ARBITRARY AND THE SAME REQURES TO BE REDUCED SUBSTA NTIALLY. ITA NO 767/PN/2009 GKN SINTER METALS LTD., A.Y.2005-06 PAGE OF 4 2 4.0 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.6,88,911/- TO THE TOTAL INCOME, BEING THE DIFFER ENCE BETWEEN THE INTEREST REFLECTED AS PER THE TDS CERTIFICATE A ND AS REFLECTED IN THE BOOKS OF ACCOUNT. 5.0 THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.10,65,287/- U/S 40(A)(IA) OF THE ACT, THOUGH THE TAX WAS DEDUCTED BY THE APPELLANT BY MARCH 31,2005 AND PAID INTO THE GOVERNMENT TREASURY BEFORE OCTOBER 31,2005. 2. AT THE OUTSET OF HEARING, LD. A.R. SUBMITTED THA T HE IS NOT PRESSING GROUND NOS. 4 & 5. SO, THE SAME ARE DISMISSED AS NO T PRESSED. 3. OUT OF THE REMAINING ISSUES, THE ISSUE ARISING FROM GROUND NO. 1 IS WITH REGARD TO DISALLOWANCE OF RS. 3,00,000/- PAID TOWARDS CORPORATE MEMBERSHIP OF THE CLUB. 3.1. THE A.O FOUND THAT ASSESSEE HAS INCURRED EXPEN SES OF RS. 3,00,000/- ON ACCOUNT OF MEMBERSHIP OF ITS EMPLOYEE S TO ROYAL CONNAUGHT BOAT CLUB AND THE ENTIRE AMOUNT WAS CLAI MED AS REVENUE EXPENDITURE, WHICH WAS DISALLOWED BY A.O BY HOLDING THE SAME AS CAPITAL EXPENDITURE AND ADDED THE SAME TO THE INCOM E OF THE ASSESSEE WHICH WAS CONFIRMED BY CIT(A). THE LD. A.R. POINT ED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF OTIS ELEVATOR CO INDIA LTD VS CIT, 195 ITR 682 (MUM) WHE REIN THE HONBLE BOMBAY HIGH COURT HELD THAT CLUB FEES PAID TO EMLOY EES ARE PERQUISITES PAID TO THE EMPLOYEES U/S. 40(A)(V) OF THE INCOME T AX ACT. IN FACT, THE EXPENDITURE IN QUESTION WAS FOR BETTER CONDUCT AND IMPROVEMENT OF THE BUSINESS, SO IT SHOULD BE TREATED AS REVENUE EXPEND ITURE. RESPECTFULLY, FOLLOWING THE ABOVE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE ITA NO 767/PN/2009 GKN SINTER METALS LTD., A.Y.2005-06 PAGE OF 4 3 OF OTIS ELEVATOR CO. LTD. VS CIT (SUPRA), WE ALLOW THIS GROUND IN FAVOUR OF THE ASSESSEE. 4. THE NEXT ISUE IS WITH REGARD TO DISALLOWANCE OF RS. 75,000/- OUT OF TRAVELLING AND CONVEYANCE EXPENSES. THE A.O FOUND THAT ASSESSEE HAS CLAIMED EXPENDITURE OF RS.1,32,00,521/- UNDER THE H EAD TRAVELING AND CONVEYANCE WHICH COMPRISED OF LOCAL TRAVELING OF R S. 78,68,880/- AND OTHER FOREIGN TRAVELLING EXPENSES. A.O OBSERVED TH AT SUBSTANTIAL PORTION OF THE CASH EXPENSES DEBITED UNDER THIS HEAD WAS O NLY SUPPORTED BY SELF MADE VOUCHERS OF THE EMPLOYEES AND WAS NOT SU PPORTED BY THIRD PARTY BILLS. ACCORDINGLY, HE MADE DISALLOWANCE OF RS.2,00,000/- ON GROUND OF NON-VERIFIABILITY, WHICH WAS REDUCED TO R S. 75,000/-. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. TAKING OVERALL VIEW OF THE SITUATION, THE DISALLOWANCE IS RESTRICTED TO RS. 50,000/-. SIMILARLY, A.O HAS MADE DISALLOWANCE OF RS. 2,00,000/- OUT OF MISCELLANEOUS EXPENSES, WHICH WAS RESTRICTED TO RS . 75,000/- BY THE CIT(A). TAKING OVERALL VIEW OF THE SITUATION AND I N THE INTEREST OF JUSTICE, THE DISALLOWANCE IS RESTRICTED TO RS. 50,000/-. 5. AS A RESULT, APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23RD DECEMBER 2010. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER PUNE, DATED THE 23RD DECEMBER , 2010 US ITA NO 767/PN/2009 GKN SINTER METALS LTD., A.Y.2005-06 PAGE OF 4 4 COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT V NASHIK 4. THE CIT(A)-III, PUNE 4. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE