Income Tax Officer, Pune V. M/s. Ashtekar Brothers, Pune

ITA 904/PUN/2010

• Counselvise Citation: 90424514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: S N DOSHI
• Section: 10(10D); 37(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, J.M. AND SHRI G.S. PANNU, A.M. I.T.A. NO. 904 AND 905/PN/2010 : A.Y. 2005-06 AND 2006-07 I.T.O CENT. II, PUNE .. APPELLANT VS. ASHTEKAR BROTHER 590 SADASHIV PETH, PUNE-411 030 PAN AACFA 0859 P .. RESPONDENT APPELLANT BY: SHRI S.K. SING H RESPONDENT BY: S/SHRI S.N. DOSHI AND SUHAS P. BORA DATE OF HEARING : 17-4-2012 DATE OF PRONOUNCEMENT: 17-4-2012 ORDER PER SHAILENDRA KUMAR YADAV, JM BOTH THESE APPEALS BY THE REVENUE ARE DIRECTED AGA INST THE ORDER OF THE CIT(A)-IV PUNE BOTH DATED 29-1-201 0 FOR A.Y. 2005-06 AND 2006-07. 2. THE ONLY ISSUE FOR A.Y. 2005-06 AND THE FIRST IS SUE FOR A.Y. 2006-07 IS WITH REGARDS TO DEDUCTION OF PREMIU M PAID ON KEY MAN INSURANCE OF PARTNERS OF THE ASSESSEE. THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS. 7,11,353/- FOR THE YEARS UNDER CONSIDERATION ON ACCOUNT OF KEY MAN INSURANCE OF PARTNERS OF THE ASSESSEE FIRM WHICH WAS DELETED BY THE CIT(A). THE SAME HAS BEEN OPPOSED BY THE REVENUE BEFORE US. 2.1. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS H ELD THE EXPENDITURE AS PERSONAL EXPENDITURE. THE ASSESSEE CLAIMED THAT THE EXPENDITURE IS ALLOWABLE U/S 37(1) OF THE ACT AS THE SAME IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PUR POSES OF BUSINESS. THE ASSESSING OFFICER HAS NOT DISPUTED T HE ITA NO. 904 AND 905/PN/2010 ASHTEKAR BROTHERS A.Y. 2005-06 & 2006-07 2 EXPENDITURE OF INSURANCE RELATING TO KEY PARTNERS O F THE FIRM. IT IS ALSO NOT DISPUTED BY THE ASSESSING OFFICER TH AT THE LIFE OF THE PARTNERS, WHICH ARE SOUGHT TO BE COVERED UNDER THE KEYMAN INSURANCE ARE NOT THE KEY PERSONS FOR THE PU RPOSE OF THE BUSINESS OF THE FIRM. THE ASSESSING OFFICER H AS ONLY DISPUTED THE NATURE OF EXPENDITURE AND ALSO THE MEA NING IMPORTED IN RESPECT OF OTHER PERSONS ARISING IN S EC. 10(10D) OF THE ACT. COMPUTATION OF INCOME HAS TO BE DONE U NDER THE HEAD BUSINESS AND PROFESSION AS PROVIDED IN THE A CT FROM SEC. 28 TO 44DB OF THE ACT. SECTION 37(1) IS A RES IDUARY SECTION FOR ALLOWABILITY OF EXPENDITURE AND IF THE SAME IS FOUND WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ARE NOT SPECIALLY PROVIDED IN ANY SECTION AVAILABLE FOR COM PUTATION OF INCOME, UNDER THE HEAD BUSINESS AND PROFESSION. SECTION 10(10D) PROVIDES FOR TAXATION OF RECEIPT OF MATURIT Y IN THE HANDS OF EMPLOYER OR BUSINESS CONCERN IF THE EXPEND ITURE FOR KEYMAN INSURANCE IS MADE BY THEM FOR EMPLOYEES OR S UCH OTHER PERSONS. IN THE CIRCUMSTANCES THEREFORE, THE EXPENDITURE HAS TO BE TREATED AS REVENUE EXPENDITUR E AND IS ALLOWABLE. IN VIEW OF THIS, THE CIT(A) WAS JUSTIFI ED IN ACCEPTING THE CLAIM OF THE ASSESSEE. WE UPHOLD THE SAME. 3. THE NEXT ISSUE RAISED BY THE REVENUE FOR A.Y. 20 06-07 IS WITH REGARDS TO DELETION OF ADDITION OF RS. 68,83,6 50/- BEING THE REDUCTION IN PROFIT ON ACCOUNT OF CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK. IN THIS CASE, THERE WAS A SEARCH/SURVEY OPERATIONS CARRIED OUT AT THE BUSINES S AND RESIDENTIAL PREMISES ON 26-10-2005, DURING THE COUR SE OF WHICH, DISCREPANCY IN THE STOCK, CASH AND INVESTMEN T IN THE SHOP PREMISES WAS FOUND. IN THE RETURN FILED FOR T HE YEAR UNDER CONSIDERATION, THE ASSESSEE OFFERED THE ADDIT IONAL INCOME OF RS. 1,50,00,000/- WHICH WAS DECLARED DURI NG SEARCH/SURVEY OPERATION AND WHICH WAS ACCEPTED BY T HE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER NOTICED FROM THE FACTS THAT THE ASSESSEE HAS CHANGED THE METHOD OF ITA NO. 904 AND 905/PN/2010 ASHTEKAR BROTHERS A.Y. 2005-06 & 2006-07 3 VALUATION OF CLOSING STOCK WHICH RESULTED IN AN ADD ITION OF RS. 68,83,650/-. THE MATTER WAS CARRIED IN APPEAL BEFO RE THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE DETAILE D SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE CIT (A) DELETED THE SAME. THIS HAS BEEN OPPOSED BY THE REV ENUE BEFORE US. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAD REASONABLE AND ACCEPTABLE REASONS FOR MAKING THE SWITCH OVER IN TH E CIRCUMSTANCES DESCRIBED BY IT BEFORE THE AUTHORITIE S BELOW. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSE SSING OFFICER HAS ALSO ACCEPTED THE REASONS TO BE VALID I NCLUDING THE FACT THAT THE OLD METHOD WAS NOT IN AGREEMENT WITH THE ACCOUNTING STANDARD 2 AND THAT THE NEW METHOD ADOPT ED BY THE ASSESSEE IS IN LINE WITH THE SAID ACCOUNTING ST ANDARD 2. FURTHER, THE ASSESSEE HAS SHOWN THE OVERALL GP AT 1 8.87% WITHOUT CONSIDERING THE INCOME DECLARING IN SURVEY, AS AGAINST THE GP OF 14.95% SHOWN IN THE PREVIOUS ASSESSMENT Y EAR 2005-06. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE I MPUGNED ADDITION. WE THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE SAID ADDITION. THE S AME IS UPHELD. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. DECISION IS ALREADY PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTER CONCLUSION OF THE HEARING ON 17 TH APRIL 2012. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 25 TH APRIL 2012 ANKAM ITA NO. 904 AND 905/PN/2010 ASHTEKAR BROTHERS A.Y. 2005-06 & 2006-07 4 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-IV PUNE 4. CIT- (CENTRAL) PUNE 5. THE D.R, PUNE BENCH TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY ITAT, BILASPUR BENCH CAMP RAIPUR