M/S AYUSH AJAY CONSTRUCTION P. LTD., Indore V. THE DCIT 5(1), Indore

ITA 793/IND/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2218 (ITAT-INDORE)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Earning of tax free income; Corroborative evidences
• Section: 14A

Judgement Text

AYUSH AJAY CONSTRUCTION PVT. LTD. V. DCIT 5(1) IND ORE / I.T.A. NO. 793 /IND/2016 /A.Y.:10-11 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER M/S. AYUSH AJAY CONSTRUCTION PVT. LTD. 3/3 SOUTH TUKOGANJ, INDORE V. DCIT 5(1) INDORE / APPELLANT / RESPONDENT . . ./ PAN: AACCA 5523 B / APPELLANT BY SHRI PRAKASH JAIN, C.A. / RESPONDENT BY SHRI MOHD. JAVED, SR. D.R. / DATE OF HEARING 08-05-2017 / DATE OF PRONOUNCEMENT 15-05-2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMBER. 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, IND ORE [IN SHORT THE CIT (A)] DATED 04-03-2016 PERTAINING TO ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 30-01 -2013 PASSED BY THE DCIT 5(1) INDORE (IN SHORT THE AO) UNDER SECTION 143 (3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE HAS TA KEN FOLLOWING GROUNDS OF APPEAL:- 2. GROUND NO. 1 IS GENERAL IN NATURE AND DO NOT REQ UIRE ANY SPECIFIC ADJUDICATION. . . /. I.T.A. NO. 793/IND/2016 / ASSESSMENT YEAR: 2010-11 AYUSH AJAY CONSTRUCTION PVT. LTD. V. DCIT 5(1) IND ORE / I.T.A. NO. 793 /IND/2016 /A.Y.:10-11 PAGE 2 OF 6 3. GROUND NO. 2 REGARDING CONFIRMING THE DISALLOWAN CE OF RS. 8,27,363/- BEING MANAGEMENT FEES PAID TO PRUDENTIAL ICICI TOWARDS PORTFOLIO MANAGEMENT SERVICES. 4. THE AO DISALLOWED THE PMS EXPENSES BY HOLDING THAT THESE EXPENSES WERE RELATED TO CAPITAL GAINS ON MUTUAL FU ND OF WHICH INCOME IS EXEMPT UNDER SECTION 10(34)OF THE ACT, HENCE, EX PENDITURE RELATING TO EXEMPT INCOME IS NOT ALLOWABLE. THE LD. CIT (A) ALS O CONFIRMED THE SAME BY OBSERVING THAT PMS PAID TO PRUDENTIAL ICICI AND MUTUAL FUND RELATED TO EXEMPT INCOME AND THE ASSESSEE HAS NOT P ROVED THAT THESE EXPENSES ARE FEES RELATING TO SHARE BUSINESS, WHICH IS SUBJECT TO TAX. 5. BEING AGGRIEVED, THE ASSESSEE PREFERRED THIS APPEAL . THE LD. A.R. REFERRING TO PAGE NO 210 OF PAPER BOOK (WHICH CONTA INS DETAILS OF EXPENSES), SUBMITTED THAT THE EXPENDITURE CONSISTS MANAGEMENT FEES OF RS. 58,904/- RS. 4,21,794/- PAID TO ICICI , RS. 1,2 5,000/- BEING FEES PAID TO FRANKLIN MANAGEMENT FEES AND OTHER EXPENSES OF R S. 1,91,552/- AND RS. 30,112/- BEING HDFC PMS EXPENSES. THUS, THE TOT AL EXPENDITURE OF RS. 8,27,363/- ARE RELATED TO EXEMPT INCOME. THE LE ARNED COUNSEL REFERRING TO COMPUTATION OF TOTAL INCOME, (PB-4) CO NTENDED THAT THESE EXPENSES ARE INCLUDED IN THE SUO-MOTO DISALLOWANCE OF RS. 10, 89,633/- MADE U/S. 14A BY THE ASSESSEE IN ITS COMPUTATION OF TOTAL INCOME. AS SUCH, THE ASSESSEE WHILE COMPUTING TAXABLE INCOME A LREADY DISALLOWED THESE EXPENSES, WHICH WERE RELATED TO EXEMPT INCOME . HENCE, DISALLOWANCE MADE AND CONFIRMED BY THE CIT (A) AMOU NTS TO DOUBLE DISALLOWANCE OF SAME EXPENDITURE. HENCE, DISALLOWAN CE SO MADE MAY BE DELETED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE EXPENDITURE RELATES TO EXEMPT INCOME , AND SAME IS COVERED BY D ISALLOWANCE OF RS. 10,89,633/- MADE BY THE ASSESSEE BY ITS OWN AS PER PROVISION OF SECTION AYUSH AJAY CONSTRUCTION PVT. LTD. V. DCIT 5(1) IND ORE / I.T.A. NO. 793 /IND/2016 /A.Y.:10-11 PAGE 3 OF 6 14A OF THE ACT. THUS, THESE DISALLOWANCE ARE ALREA DY COVERED AND STAND ADDED BACK TO TOTAL INCOME WHILE COMPUTING TOTAL TA XABLE INCOME OF RS. 4,08.60,137/-. HENCE, NO FURTHER DISALLOWANCE OF SA ME EXPENDITURE IS CALLED FOR. THEREFORE, THE AO IS DIRECTED TO DELETE SUCH DISALLOWANCE OF EXPENDITURE. THIS GROUND IS ALLOWED. 7. GROUND NO. 3 RELATES TO CONFIRMING DISALLOWANCE OF RS. 12,21,002/- OUT OF DISALLOWANCE OF MESS EXPENSES OF RS. 22,70,000/-. 8. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSEE HAS CLAIMED EXPENSES RELATING TO FOOD , TEA, COFFEE, AND BREAKF AST ETC. TO THE EMPLOYEES WORKING AT TOLL BOOTHS UNDER THE HEAD MES S EXPENSES OF RS. 34,72,029/- IN NON-BOT PROJECTS AND RS. 3,83,142/- IN BOT PROJECTS. THE AO FOUND THAT MOST OF EXPENSES ARE SELF-MADE VO UCHERS HAVING NO SUPPORTING EVIDENCE. THE EXPENSES IN NON-BOT SECTIO N ARE 9 TIMES MORE THAN OF BOT SECTION. AS THESE EXPENSES MAINLY RELATED TO EMPLOYEES WORKING AT BOOTHS, HENCE, BY TAKING BASIS OF SALARY RATIO, THE AO FOUND THAT, THE ASSESSEE HAS CLAIMED 19% MESS EX PENSES OF SALARY IN BOT SECTION WHEREAS IN NON-BOT SECTION THESE EXP ENSES ARE 55% OF SALARY. IN VIEW OF THIS, THE AO RESTRICTED THE EXPE NSE OF NON-BOT SECTION TO 19% WHICH RESULTED IN TO DISALLOWANCE OF RS. 22, 70,000/-. 9. IN APPEAL, THE LD. CIT (A) HAS MADE SOME ARITHMETIC AL CALCULATION AND NOTED THAT AVERAGE EXPENDITURE PER EMPLOYEE IN MAHARASHTRA BOOTHS COMES TO RS. 17,233/- WHEREAS IN GUJARAT BOO TH IT COMES TO RS. 44,773/- . THE AVERAGE SALARY FOR NON BOT SECTION C OMES TO RS. 65,684. IN TERMS OF PERCENTAGE OF EXPENSES OF MESS EXPENSES ARE 68.14% IN GUJARAT BOOTHS AND 26.36% IN MAHARASHTRA BOOTH OF A VERAGE SALARY PAID. THUS, EXPENSES IN GUJRAT BOOTH ARE CONSIDERE D AS HIGH. ACCORDINGLY, THE EXPENSES OF GUJRAT BOOTH WERE UNRE ASONABLY CONSIDERED HIGH , THEREFORE, TAKING THE AVERAGE RA TE OF SALARY AT 40% , THE EXPENSES WERE RESTRICTED TO RS. 17,34,018/- AS AGAINST THE CLAIM OF AYUSH AJAY CONSTRUCTION PVT. LTD. V. DCIT 5(1) IND ORE / I.T.A. NO. 793 /IND/2016 /A.Y.:10-11 PAGE 4 OF 6 EXPENSES OF RS. 29,55,020/-. ACCORDINGLY, DISALLOWA NCE OF RS. 12,21,003[ 29-55020- 17,34,018] WAS CONFIRMED AND B ALANCE DISALLOWANCE OF RS. 10,48,998/- WAS ALLOWED. 10. BEING NOT SATISFIED, THE ASSESSEE PREFERRED THIS AP PEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THA T EXPENSES IN GUJARAT BOOTH ARE MORE AS THE BOOTH IN GUJARAT ARE LOCATED MORE DISTANCE THEN FROM THE MAIN CITY. WHERE EMPLOYEES A RE TO BE PROVIDED FOODS IN EVENING AND LUNCH ALSO. THE EXPENDITURE INCURRED IS NOT UNDER CONTROL OF THE ASSESSEE AND IT HAVE TO BE ALLOWED B ASED ON SELF-MADE VOUCHERS. ON THE OTHER HAND, THE LEARNED SR. D.R. S UPPORTED THE ORDER OF THE CIT (A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT (A) HAS RESTRICTED THE EXPENSES BY CONSIDERED @40 O F AVERAGE SALARY EXPENSES. WE FIND THAT IN TERMS OF PERCENTAGE THE E XPENSES IN MAHARASHTRA BOOTH COMES TO 26.36% WHEREAS IN GUJARA T BOOTH IT COMES TO 68.14%. THEREFORE, WE ARE OF THE OPINION THAT I T WOULD BE MEET THE END OF JUSTICE, IF WE TAKE AVERAGE OF PERCENTAGE OF MESS EXPENSES WHICH WORKED OUT TO 47.24% [ 26.36%+ 68.14%=94.49/2= 47. 24%]. ACCORDINGLY, THE EXPENSES ON ACCOUNT AVERAGE SALARY IN RESPECT OF 66 EMPLOYEES OF GUJARAT BOOTHS WHICH COMES TO RS. 43, 35, 144/- HENCE, IT IS RESTRICTED TO 47.24% WHICH COMES TO RS. 20, 49,223/-. [43, 35,144*47.24%]. THE ASSESSEE HAS DEBITED MESS EXPEN DITURE AT RS. 29,55,020/- HENCE, DISALLOWANCE IS WORKED OUT TO RS . 9,05,797/-WHICH IS CONFIRMED AND BALANCE DISALLOWANCE OF RS. 12,21, 00 2- 9,05,797=3,15,205/- IS DELETED. THIS GROUND OF APPE AL IS THEREFORE, PARTLY ALLOWED. 12. GROUND NO. 4 RELATES TO CONFIRMING THE ADDITION OF RS. 15, 41,065/- BEING COMMISSION PAID ON CHANGE OF COINS. AYUSH AJAY CONSTRUCTION PVT. LTD. V. DCIT 5(1) IND ORE / I.T.A. NO. 793 /IND/2016 /A.Y.:10-11 PAGE 5 OF 6 13. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE HAS DEBITED EXPENSES OF THE RS. 15, 41, 065/-BEING COMM ISSION PAID TO VARIOUS PERSONS ON ACCOUNT OF GETTING COINS CHANGED FOR CHANGING THE COINS AT THE TIME OF RECEIPT OF THE TOLL TAX. HOWEV ER, THE AO NOTED THAT NO SUCH CHARGES IN RESPECT OF BOT SECTION AS SUCH EXPE NSES FOR NON-BOT SECTIONS ARE NOT ACCEPTABLE. ACCORDINGLY, THE AO MA DE DISALLOWANCE OF TOTAL EXPENDITURE CLAIMED ON THIS ACCOUNT. 14. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). BEFORE THE CIT(A) , IT WAS CLAIMED THAT THE AS SESSEE FILED COPY OF RBI LETTER RECEIVED BY E MAIL BY OF THE ASSESSEE , AND CONTENDED THAT IN SPITE OF APPROACHING THE BANK WITH THE DOCUMENTS IN FORM OF RBI LETTER, BUT THE COINS WERE NOT MADE AVAILABLE. HENC E, THE ASSESSEE HAS TO TAKE COINS FROM MARKET BY PAYING A COMMISSION. H OWEVER, THE CIT (A) HAS NOTED THAT OUT OF THE TOTAL EXPENSES OF RS. 15, 41, 065-/- COIN EXPENSES COMMISSION OF RS. 13, 67, 440/-IS ONLY OF ONE BOOTH EXPENSES WITH REGARD BAMANBORE, GUJARAT AND BALANCE OF RS. 1,70,0 75/- AT BAGDOGRA GUJARAT. THUS AGAIN THERE IS A WID E DISPARITY AND NO REASON FOR SUCH STEEP EXPENDITURE IS FILED BY THE A SSESSEE. WHEREAS RBI LETTER CATEGORICALLY STATED THAT BANK WILL PROV ED THE COINS. IN VIEW OF THESE FACTS, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CAME TO BE CONFIRMED. 15. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. THE LD. A.R. SUBMITTED THAT DURING THE P ERIOD THE BANK WERE NOT ABLE TO PROVIDE COIN, WHICH ARE NECESSARY FOR P AYING CHANGE AT TOOL BOOTH. THEREFORE, THE ASSESSEE HAS TO OBTAIN THE SA ME FROM MARKET ON WHICH COMMISSION WAS PAID. THE ASSESSEE ALSO WRITTE N TO RBI TO WRITE TO THE BANK TO PROVIDE COINS TO THE ASSESSEE FOR THE P URPOSE OF ITS PAYMENTS FOR PAYMENT OF CHANGE AT THE TOLL, BOOTHS. HOWEVER, INSPITE OF AYUSH AJAY CONSTRUCTION PVT. LTD. V. DCIT 5(1) IND ORE / I.T.A. NO. 793 /IND/2016 /A.Y.:10-11 PAGE 6 OF 6 THAT BANK WERE NOT ABLE TO PROVIDE, HENCE, IT WAS I MPERATIVE ON THE PART OF THE ASSESSEE TO OBTAIN THE SAME ON COMMISSION. 16. PER CONTRA, THE LEARNED SR. D.R. RELIED ON THE ORDE RS OF LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE EXPENDITURE ON COMMISSION ON COIN WERE INCURRED IN RESPECT OF O NLY TWO BOOTH AT GUJARAT AS THE TOLL TAX BEING COLLECTED WHERE THE T OLL TAX RATE WAS IN ODD AMOUNT OF RUPEES, AND NOT IN EVEN AMOUNT OF CURRENC Y NOTES LIKE RS. 5, 10, 20 DENOMINATIONS. THEREFORE, THE ASSESSEE HAD T O KEEP CHANGE FOR PAYMENTS TO OWNERS OF VEHICLES PASSING THROUGH THES E TOLLS. IT IS ALSO NOTICED THAT THE ASSESSEE HAD MADE AN ATTEMPT BY WR ITING LETTER TO RBI FOR DIRECTION TO BANKS TO PROVIDE COINS TO THE ASSE SSEE. HOWEVER, THE ASSESSEE COULD NOT SUCCEED TO OBTAIN COINS. CONSIDE RING SUCH CIRCUMSTANCES, IT CANNOT BE DOUBTED THAT THE ASSESS EE WAS NOT REQUIRED TO OBTAIN COIN FROM OPEN MARKET AND CONSEQUENTLY, P AYING COMMISSION TO SUCH PERSONS. THEREFORE, THE ENTIRE DISALLOWANCE OF EXPENSES IN THE CASE OF A PRIVATE LIMITED COMPANY IN WHICH NO PERS ONAL ELEMENTS ARE INVOLVED IS NOT JUSTIFIED. THEREFORE, CONSIDERING THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD MEET TH E END OF JUSTICE, IF THE DISALLOWANCE OF EXPENSES CLAIMED ARE RESTRICTED TO RS. 5,00,000/- AND BALANCE DISALLOWANCE OF RS. 10,41,065/- IS DIRECTED TO BE DELETED. ACCORDINGLY, THIS GROUND OF APPEAL IS THEREFORE, PA RTLY ALLOWED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 19. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.05.201 7 SD/- SD/- ( C.M. GARG) JUDICIAL MEMBER ( O. P. MEENA) ACCOUNTANT MEMBER / DATED : 15 TH MAY,2017 OPM