ACIT, CHENNAI V. Shri A.V.Ravikumar, CHENNAI

ITA 956/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1329 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-12-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 14-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B, CHENNAI BEFORE SHRI U.B.S. BEDI, J.M. & SHRI ABRAHAM P. GEO RGE, A.M. I.TA. NO. 956/MDS/2010 ASSESSMENT YEAR: 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE IV, CHENNAI. VS. SHRI A.V. RAVIKUMAR, NO.556, 14 TH STREET, 4 TH SECTOR, K.K. NAGAR, CHENNAI 600 078. [PAN:ABHPR6412M] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL ASSESSEE BY : SHRI V.S. JAYAKUMAR O R D E R PER U.B.S. BEDI, J.M. THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) VIII, CHENNAI DATED 31.03.2010 RELEVANT TO THE ASSESSMENT YEAR 2007- 08, WHEREBY THE DEPARTMENT HAS CHALLENGED CANCELLAT ION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS EXPENSES CLAIMED B Y THE ASSESSEE. 2. FACTS INDICATE THAT THE ASSESSEE FILED RETURN O F INCOME ON 24.10.2007 ADMITTING TOTAL INCOME OF ` .1,76,29,210/- FORM TOTAL GROSS RECEIPT OF ` .2,11,64,972/-. SUBSEQUENTLY, IT WAS TAKEN UP FOR S CRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 13.11. 2009 DETERMINING TOTAL INCOME AT ` .2,03,72,992/- AND RAISING A DEMAND OF ` .14,955/-. THE ASSESSEE FILED APPEAL AGAINST SUCH ORDER AND IT WAS CONTENDED THAT THE ASSESSEE WAS A CONSULTING PROFESSIONAL, WHO DERIVED HIS INCOME SOL ELY FROM PROFESSIONAL CONSULTANCY PROVIDED TO M/S. FLY JAC LOGISTICS, A F IRM THAT CHANGED ITS NAME FROM FLY JAC FORWARDERS WITH EFFECT FROM 01.12.2002. M/S . FLY JAC LOGISTICS, A FIRM ITA NO. ITA NO. ITA NO. ITA NO. 956 956956 956/MDS/10 /MDS/10 /MDS/10 /MDS/10 2 REGISTERED IN BOMBAY HAVING ITS MADRAS BRANCH AT NO .3, DAVIDSON ST, CHENNAI 600 001. AS PER AGREEMENT DATED 01.01.1992, THE ASS ESSEE WAS ENTITLED TO RECEIVE REMUNERATION FROM THE FIRM WHICH IS EQUAL T O A SUM 1/3 RD OF THE NET YEARLY PROFIT OF MADRAS, TIRUPUR, BANGALORE AND TUTICORIN BRANCHES OF THE FIRM. THE TOTAL DIRECT INCOME OR RECEIPT FROM FLY JAC LOGISTICS D URING THE RELEVANT YEAR WAS ` .2,11,64,972/-. AGAINST THIS DIRECT INCOME, ` .42,266/- WAS DEDUCTED AS EXPENSE ON REPAIR TO OFFICE. THE ASSESSEE ALSO OFFERED INTE REST INCOME AND MISCELLANEOUS INCOME AMOUNTING TO ` .1,26,379/- FOR TAX. AGAINST THIS OTHER SOURCES I NCOME, EXPENSES AMOUNT TO ` .43,23,379/- WERE CLAIMED FOR DEDUCTION. 2.1 THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE EXPENDITURE OF ` .42,97,777/- ON THE GROUND THAT INDIRECT EXPENSES A RE NOT JUSTIFIED BY THE ASSESSEE TO DERIVE INCOME OF ` .2,11,22,705/- AS PROFESSIONAL CONSULTANCY INCOME RECEIVED FROM M/S. FLY JACK FORWARDERS. THE ONLY EX PENDITURE ALLOWED IS ` .26,092/- BEING ACCOUNTING CHARGES, AUDIT FEES, BAN K CHARGES AND PROPERTY TAXES ONLY AND THE REMAINING AMOUNT OF ` .42,97,777/- HAS BEEN DISALLOWED. 3. AGGRIEVED BY THIS ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND THE LD. COUNSEL FOR THE ASSESSEE FILED P ROFIT AND LOSS ACCOUNT COPY, WHEREIN THE LD. AR HAS GIVEN THE FOLLOWING EXPLANAT ION FURNISHED IN THE P & L ACCOUNT: PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.20 07 PARTICULARS SCH CURRENT YEAR TOTAL ` . PARTICULARS SCH CURRENT YEAR TOTAL RS. TO SALARY & WAGES 12 9,97 ,925.00 BY GROSS PROFIT 2,11,22,705.70 TO INDIRECT EXPENSES 13 33,25, 944.93 BY INDIRECT INCOME 11 1, 26,379.33 TO NET PROFIT 1 ,69,25,215.10 TOTAL 2,12,49,085.03 TOTAL 2,12,49,085.03 ITA NO. ITA NO. ITA NO. ITA NO. 956 956956 956/MDS/10 /MDS/10 /MDS/10 /MDS/10 3 INDIRECT EXPENSES SCHEDULE 13 PARTICULARS AMOUNT ` . ACCOUNTING CHARGES 8,000.00 AUDIT FEES 13, 468.00 BOOKS & PERIODICALS 100.00 CAR HIRE CHARGES PAID 2,70,000.00 CLUB EXPENSES 5,092.29 COMMISSION 1,10,880.00 CONSULTANCY CHARGES PAID 20,612.00 CONVEYANCE 76,800.00 DEPRECIATION ACCOUNT 1,67,783.64 DONATION 15,00,000.00 INTEREST-BANK CHARGES 1,100.00 MEDICAL EXPENSES 1,15,200.00 MISC. EXPENSES 7,800.00 PRINTING & STATIONARY 1,514.00 PROMOTIONAL EXPENSES 6,000.00 PROPERTY TAX 3,524.00 TRAVELLING EXPENSES (FOREIGN) 2,14,000.00 TRAVELLING EXPENSES 7,54,408.00 WORKMEN & STAFF WELFARE EXPENSES 49,663.00 TOTAL 33,25,944.93 4. THE LD. CIT(A), WHILE CONSIDERING AND ACCEPTING THE PLEA OF THE ASSESSEE HAS CONCLUDED TO ACCEPT THE APPEAL OF THE ASSESSEE AS PER PARA 3.3 OF HIS ORDER AS UNDER: 3.3 AFTER EXAMINING THE TRADING ACCOUNT, P&L ACCOU NT, BALANCE SHEET AND ALSO THE DETAILS OF INDIRECT EXPENSES CLA IMED BY THE APPELLANT FOR SHOWING ` .2,11,64,972/-, THE EXPENDITURE CLAIMED OF ` .42,97,777/- IS FOUND TO BE IN ORDER. IT IS SEEN TH AT, THE APPELLANT HAS DECLARED INCOME OF ` .1,76,29,210/- FOR TOTAL GROSS RECEIPT OF ` .2,11,64,972/- WHICH IS FOUND TO BE IN ORDER AND TH E PROFIT RATE WORKS OUT TO ` .83%. THEREFORE, THE ADDITION IS NOT WARRANTED. THE AO IS DIRECTED ACCORDINGLY. 5. AGGRIEVED BY THIS ORDER OF THE LD. CIT(A), THE DEPARTMENT HAS COME UP IN APPEAL AND WHILE RELYING THE ORDER OF THE ASSESSING OFFICER, IT WAS PLEADED FOR SETTING ASIDE THE ORDER OF THE LD. CIT(A) AND RESTO RING THAT OF THE ASSESSING ITA NO. ITA NO. ITA NO. ITA NO. 956 956956 956/MDS/10 /MDS/10 /MDS/10 /MDS/10 4 OFFICER AND THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE LD. CIT(A) HAS PASSED WELL REASONED ORDER AFTER CONSIDERING EACH A ND EVERY ASPECT OF THE MATTER AND THE LD. DR HAS NOT BEEN ABLE TO POINT OU T ANY FLAW OR INFIRMITY IN THE SAID ORDER. THEREFORE, THE APPEAL OF THE REVENUE SH OULD BE DISMISSED. 6. WE HAVE HEARD RIVAL SUBMISSIONS, MATERIAL ON RE CORD AND HAVE ALSO GONE THROUGH THE ORDERS OF THE ASSESSING OFFICER AND LD. CIT(A) AND FIND THAT IN VIEW OF THE FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD, TH E LD. CIT(A) HAS PASSED VERY JUST AND APPROPRIATE ORDER GIVING PROPER REASONING AND IN OUR CONSIDERED VIEW, IT DOES NOT CALL FOR ANY INTERFERENCE AT THIS LEVEL, A S SUCH WHILE CONCURRING WITH THE FINDINGS OF THE LD. CIT(A), WE UPHOLD HIS ORDER AND DISMISS THE APPEAL OF THE DEPARTMENT BEING DEVOID OF ANY MERITS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 03.01.2011. . SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 03.01.2011 VM/- COPY TO : APPELLANT/RESPONDENT/CIT(A)- /CIT, /DR