M/s. Gold Line Exports, Karur V. DCIT, Trichy

ITA 900/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64501 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA IRS
• Assessee Lawyers: M NARAYANAN RET D ACIT
• Keywords: Depreciation; Revised return
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.900(MDS)/2011 ASSESSMENT YEAR : 2005-06 M/S.GOLD LINE EXPORTS, 32, KAMARAJAPURAM WEST, KARUR. PAN AAAFG4435H. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, RANGE-II, TIRUCHIRAPALLI. (APPELLANT) (RESPONDENT) AND ITA NO.975(MDS)/2011 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER M/S.GOLD LIN E EXPORTS, OF INCOME-TAX, VS. 32, KAMARAJAPURAM WEST, CIRCLE II, TRICHY. KARUR-639 002. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.NARAYANAN, RET D. ACIT DEPARTMENT BY : DR. S.MOHARANA, IRS, C IT DATE OF HEARING : 18 TH OCTOBER, 2012 DATE OF PRONOUNCEMENT : 30 TH OCTOBER, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THESE TWO APPEALS RELATE TO THE ASSESSMENT YEAR 2005-06. THE APPEALS ARE FILED BY THE ASSESSEE AND THE - - ITA 900 & 975 OF 2011 2 REVENUE. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), TIRUCHIRAP ALLI, DATED 23-3-2011 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. WE HEARD SHRI M.NARAYANAN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND DR.S.MOHARANA, THE L EARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E. 3. FIRST WE WILL CONSIDER THE APPEAL FILED BY THE ASSESSEE IN ITA NO.900(MDS)/2011. 3.1. THE FIRST ISSUE RAISED IN ASSESSEES APPEAL I S THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N SUSTAINING A DISALLOWANCE OF 1% AGAINST WEAVING AND TAILORING CHARGES CLAIMED BY THE ASSESSEE AS DEDUCTION. THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF 2%. THIS HAS BE EN REDUCED TO 1% BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE AMOUNT OF DISALLOWANCE WORKS OUT TO ` 2,64,326/-. THE EXPENSES RELATED TO WEAVING AND TAILORING CHARGES. THE DISA LLOWANCE HAS BEEN MADE BY THE ASSESSING AUTHORITY ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS IN RESP ECT OF THE CLAIM OF EXPENDITURE. - - ITA 900 & 975 OF 2011 3 3.2. WE CONSIDERED THIS ISSUE. THERE IS NO DOUBT THAT WEAVING AND TAILORING CHARGES HAVE NECESSARILY TO B E INCURRED BY THE ASSESSEE IN CARRYING ON ITS BUSINESS. THEREFOR E, THE CLAIM OF EXPENDITURE IS LEGITIMATE. THE ONLY DEFECT POINTED OUT BY THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS NOT MAIN TAINED PROPER VOUCHERS. BUT, IT IS TO BE SEEN THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY INFIRMITY OR DEFECT, SPECIFIC IN NA TURE, IN THE DETAILS FURNISHED BY THE ASSESSEE. THIS POSITION H AS BEEN ACCEPTED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) AS WELL. THE COMMISSIONER OF INCOME-TAX(APPEALS), AFTER EXAM INING THE QUANTUM OF EXPENSES CLAIMED BY THE ASSESSEE, HAS AL SO HELD THAT THE WEAVING AND TAILORING CHARGES CLAIMED BY T HE ASSESSEE ARE REASONABLE, WHEN COMPARED TO THE TOTAL TURNOVER , AND THE CLAIM WAS LESSER THAN THE CLAIMS MADE FOR EARLIER A SSESSMENT YEARS. THESE OBSERVATIONS, IN FACT SUPPORT THE CLA IM MADE BY THE ASSESSEE. CERTAIN DEFICIENCIES IN THE VOUCHERS PRODUCED BY THE ASSESSEE DO NOT MAKE OUT THAT THE ASSESSEE HAS NOT MAINTAINED VOUCHERS. IN THESE TYPES OF CASES WHAT IS REQUIRED IS A PRACTICAL APPROACH. THE ASSESSEE HAS IN FACT INC URRED SUCH EXPENDITURE. THE VOLUME OF EXPENDITURE IS LESSER T HAN SIMILAR - - ITA 900 & 975 OF 2011 4 CLAIMS COMPARED TO EARLIER ASSESSMENT YEARS. THE C LAIM IS COMPARABLE TO THE SALES TURNOVER REPORTED BY THE AS SESSEE. NO FURTHER INVESTIGATIONS HAVE BEEN CARRIED OUT BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE CIRCUMSTANCES, WE FI ND THAT THERE IS NO NEED TO MAKE ANY DISALLOWANCE IN THE EXPENSES OF WEAVING AND TAILORING CHARGES CLAIMED BY THE ASSESSEE. THE REFORE, THE DISALLOWANCE OF 1% AMOUNTING TO ` 2,64,326/-, CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(APPEALS), IS DELETED. T HIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 3.3. THE SECOND ISSUE RAISED IN THE ASSESSEES AP PEAL IS WITH REFERENCE TO THE ADDITION OF ` 50 LAKHS MADE BY THE ASSESSING AUTHORITY. THE COMMISSIONER OF INCOME-TA X(APPEALS) HAS ALLOWED ONLY AN AMOUNT OF ` 19,80,034/- AS AGAINST THE ADDITION OF ` 50 LAKHS MADE BY THE ASSESSING AUTHORITY. 3.4. IN FACT, THE AMOUNT OF ` 50 LAKHS REPRESENTED THE AMOUNTS RECEIVED BY THE ASSESSEE ON CLOSURE OF ITS BANK DEPOSITS. THESE DEPOSITS ARE REFLECTED IN THE BOOK S OF ACCOUNT OF THE ASSESSEE. BUT, WHILE ACCOUNTING THE PROCEED S OF THE DEPOSITS CLOSED BY THE ASSESSEE, THE ASSESSEE MADE A MISTAKE. INSTEAD OF ACCOUNTING IT UNDER BANK DEPOSITS, THE A SSESSEE - - ITA 900 & 975 OF 2011 5 CREDITED THE AMOUNT AS DISCOUNT INCOME. INSPITE OF PROTESTS MADE BY THE ASSESSEE, THE ASSESSING OFFICER MECHANI CALLY ADOPTED THIS AMOUNT AS INCOME, ESPECIALLY ON THE GR OUND THAT THE ASSESSEE HAS NOT FILED ANY REVISED RETURN TO CL ARIFY THE POSITION. IN FACT, THE COMMISSIONER OF INCOME-TAX( APPEALS) HAS REQUISITIONED A REMAND REPORT FROM THE ASSESSING AU THORITY. IT IS WELL STATED IN THE REMAND REPORT THAT THE AMOUNT OF ` 50 LAKHS REPRESENTED THE PROCEEDS OF THE BANK DEPOSITS CLOSE D BY THE ASSESSEE. WHEN THIS IS THE FACT, THE SAID AMOUNT C ANNOT BE TREATED AS ASSESSEES INCOME, BY ANY STRETCH OF IMA GINATION. 3.5. IN THESE CIRCUMSTANCES WE DELETE THE ENTIRE A MOUNT OF ` 50 LAKHS. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 3.6. THE NEXT ISSUE RAISED BY THE ASSESSEE IS AGAI NST THE DISALLOWANCE OF LOAN PROCESSING CHARGES OF ` 55,100/-. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING AUTHORI TY STATING THAT THE LOAN PROCESSING CHARGES WERE CAPITAL IN NA TURE. IT IS SEEN THAT THE MACHINERY PROCURED BY THE ASSESSEE AV AILING THE LOAN AMOUNT WAS PUT TO USE IN THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, THE LOAN PROCESSING CHARGES SHOULD BE ADDED TO THE COST OF THE MACHINER Y ACQUIRED - - ITA 900 & 975 OF 2011 6 BY THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESS ING OFFICER TO GIVE DEPRECIATION ON THIS ADDITIONAL AMOUNT OF ` 55,100/- AS WELL. THIS ISSUE IS DECIDED PARTLY IN FAVOUR OF THE ASSES SEE. 3.7. THE NEXT GROUND IS AGAINST THE ADDITION OF ` 12,52,987/- MADE BY THE ASSESSING OFFICER AGAINST THE ADVANCES RECEIVED BY THE ASSESSEE FROM WEAVERS BY W AY OF SECURITY DEPOSITS. THE ASSESSEE ACCEPTS SECURITY D EPOSITS FROM THE WEAVERS AS AND WHEN YARNS ARE DISTRIBUTED TO TH EM FOR JOB WORK. THE SECURITY DEPOSITS ARE SETTLED WHEN THE W EAVERS BRING BACK THE CLOTH AND SETTLE THEIR ACCOUNTS. 3.8. THE ABOVE POSITION IS REFLECTED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. BY THE END OF THE PREVIOUS YEAR, SUCH SECURITY DEPOSITS HAVE BEEN SETTLED AND THE ACCOUNTS OF THE WEAVERS SQUARED OFF. THE RECEIPT OF SECURIT Y DEPOSITS AND ADJUSTMENT OF THE DEPOSITS AGAINST THE PAYMENTS DUE TO THE WEAVERS ARE ALL PROPERLY ACCOUNTED BY THE ASSESSEE. THERE IS NO DOUBT THAT THIS IS AN ACCEPTED PRACTICE EMPLOYED IN THE BUSINESS CARRIED ON BY THE ASSESSEE. THIS IS AN IN DUSTRY-WISE PRACTICE. WE DO NOT FIND ANY REASON TO SUSTAIN THE ADDITION OF - - ITA 900 & 975 OF 2011 7 ` 12,52,987/-. THIS ADDITION IS DELETED. THIS ISSU E IS DECIDED IN FAVOUR OF THE ASSESSEE. 3.9. THE NEXT GROUND RAISED BY THE ASSESSEE IS AGA INST THE DISALLOWANCE OF TRAVELLING EXPENSES OF ` 89,525/-. THIS GROUND IS DISMISSED AS NOT PRESSED. 3.10. THE LAST GROUND RAISED IN THE ASSESSEES APP EAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ER RED IN SUSTAINING THE DISALLOWANCE MADE FOR NON DEDUCTION OF TAX AT SOURCE ON COURIER CHARGES. THE DISALLOWANCE MADE B Y THE ASSESSING AUTHORITY AMOUNTED TO ` 48,97,668/-. WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS NOT EXAMINE D THIS ISSUE SO AS TO ASCERTAIN WHETHER EVERY SINGLE PAYME NT WAS IN EXCESS OF ` 20,000/- OR ANY PAYMENT MADE TO A PARTICULAR PERSO N EXCEEDED ` 50,000/- OR NOT. IF THE CONDITIONS ARE NOT SATISF IED, THE TDS PROVISIONS WOULD APPLY. THE ASSESSING OFFI CER ALSO DID NOT APPLY HIS MIND ON THIS CRUCIAL POINT. IT IS AL SO NECESSARY TO SEE AS TO HOW MUCH AMOUNT HAS ALREADY BEEN PAID BY THE ASSESSEE BY THE END OF THE PREVIOUS YEAR. THIS IS BECAUSE IF THE PAYMENTS HAVE ALREADY BEEN MADE BY THE END OF THE P REVIOUS YEAR, SECTION 40(A)(IA) WILL NOT APPLY, AS HELD BY THE SPECIAL - - ITA 900 & 975 OF 2011 8 BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL (VIZHAGA PATNAM BENCH) IN THE CASE OF MERILYN SHIPPING AND TRANSPOR TS VS. ADDL. CIT, 16 ITR (TRIB) 01 (SB) (VIZAG). 3.11. IN THE ABOVE CIRCUMSTANCES IT IS NECESSARY F OR THE ASSESSING OFFICER TO RE-EXAMINE THE ISSUE OF DISALL OWANCE MADE UNDER SECTION 40(A)(IA). WHEREVER THE INDIVIDUAL P AYMENTS MADE UPTO 30 TH SEPTEMBER, 2004 DID NOT EXCEED ` 20,000/-, SUCH PAYMENTS WOULD NOT BE COVERED BY THE PROVISIONS OF TDS. ACCORDINGLY, IN RESPECT OF THOSE PAYMENTS, SECTION 40(A)(IA) WILL NOT APPLY. LIKEWISE, IF ANY PAYMENT MADE TO A PART ICULAR PERSON DID NOT EXCEED ` 50,000/- AFTER 1-10-2004, THEN ALSO THE PROVISIONS OF TDS WILL NOT APPLY. ACCORDINGLY, IN RESPECT OF THOSE AMOUNTS ALSO THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 3.12. IN ADDITION TO THE ABOVE STATED TWO CLASSES OF PAYMENTS, IT IS ALSO TO BE SEEN THAT UPTO WHAT EXTE NT THE ASSESSEE HAS ACTUALLY MADE PAYMENTS BY THE END OF T HE PREVIOUS YEAR. SECTION 40(A)(IA) WILL NOT APPLY TO THE AMOUNTS ALREADY PAID BY THE END OF THE YEAR. - - ITA 900 & 975 OF 2011 9 3.13. THEREFORE, THIS ISSUE IS REMITTED BACK TO TH E ASSESSING OFFICER FOR RECONSIDERING AND RECOMPUTING THE DISALLOWANCE, IF ANY, UNDER SECTION 40(A)(IA) OF TH E ACT. 4. THE ASSESSEE IS PARTLY SUCCESSFUL IN ITS APPEAL FILED BEFORE US. 5. NEXT WE WILL CONSIDER THE APPEAL FILED BY THE REVENUE. 5.1. THE FIRST GROUND RAISED BY THE REVENUE IS THA T THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN GR ANTING DEPRECIATION TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS COMMENCED PRODUCTION. WE EXAMINED THIS ISSUE. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS CONSIDERED THE MATERIALS ON RECORD AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAD PRODUCED EVIDENCES TO SUPPORT ITS CLAI M THAT IT HAD GENERATED POWER IN ITS WINDMILL AND TRANSMITTED IT TO TNEB IN THE FORM OF SALE BY THE END OF THE PREVIOUS YEAR. IN T HESE CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IN GRANTING DEP RECIATION TO THE ASSESSEE ON WINDMILL. ACCORDINGLY THIS GROUND IS REJECTED. - - ITA 900 & 975 OF 2011 10 5.2. THE SECOND GROUND RAISED BY THE REVENUE IS TH AT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N ALLOWING THE CLAIM OF EXPENSES TO THE TUNE OF ` 19,80,034/-. IN THE APPEAL FILED BY THE ASSESSEE WE HAVE ALREADY DIRECTED TO D ELETE THE ENTIRE ADDITION OF ` 50 LAKHS. IN VIEW OF THE ABOVE, THIS GROUND RAISED BY THE REVENUE BECOMES INFRUCTUOUS. 6. THE REVENUE FAILS IN THE APPEAL FILED BY IT. 7. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISM ISSED. ORDERS PRONOUNCED ON TUESDAY, THE 30 TH OF OCTOBER, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 30 TH OCTOBER, 2012. V.A.P. COPY TO: 1. ASSESSEE 2. DEPARTMENT 3. CIT 4. CIT(A) 5. DR 6. GF.