Dy.CIT, Circle-1(3), Hyderabad V. M/s Bagga Distilleries Hyderabad Private Limited, R.R.Dist

ITA 989/HYD/2013

• Counselvise Citation: 98922514 RSA 2013
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE THE HONBLE VICE PRESIDENT, SHRI D.MANMOHAN AND SHRI B.RAMAKOTAIAH, HONBLE ACCOUNTANT MEMBER ITA NO.989/HYD/2013 : ASST. YEAR 2005 - 06 DY. COMMISSIONER OF INCOME - TAX CIRCLE 1(3), HYDERABAD. V/S. M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD., HYDERABAD ( PAN - AACCB 3837 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. K.HARITHA DR RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 3 . 2 .201 4 DATE OF PRONOUNCEMENT 3.2.2014 O R D E R PER D.MANMOHAN, VICE PRESIDENT: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX( APPEALS) V, HYDERABAD, DATED 28.2.2013 FOR THE ASSESSMENT YEAR 2005 - 06. 2. THE ONLY EFFECTIVE GROUND URGED BY THE REVENUE READS AS UNDER - 1 . 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE OF RS.25 LAKHS DISREGARDING THE FACTS BROUGHT OUT IN THE REMAND REPORT SUBMITTED BY THE ADDL. CIT AND REQUESTING FOR ENHANCEMENT OF THE ADDITION TO RS.1,15,02,543/ - . 3. . 3. FACTS IN BRIEF ARE THAT THE ASSESSEE, A MANU F A C TURER OF IMFL HAS FIVE B RANCHES WHICH ARE ENGAGED IN THE MARKETING OF IMFL . T HE ASSESSEE CLAIM ED RS.54.47 CRORES UNDER THE HEAD ADMINISTRATIVE AND SELLING EXPENSES . DURIN G THE COU R SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT PART OF THE EXPENSES UNDER VARIOUS HEADS IS BO O K E D BY WAY OF SELF - MADE VOUCHERS, WHICH ITA NO. 989/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD., HYDERABAD 2 ARE NO T SUSC E PT I BLE FOR VERIFICATION. HE THER E FORE, PROCEEDED TO MAKE AN AD - HOC DISALLOWANCE OF RS.25 LAKH S ON THE G R OUN D THAT TH E EXPENDITURE CLAIMED BY THE ASSESSEE IS EXCESSIVE. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT( A) THAT THE ENTIRE EXPENDITURE CLAIMED AS DEDUCTION IS SUPPORTED BY VOUCHERS AND IT IS REASONABLE HAVING R EGARD TO THE TURNOVER ETC. IT WAS ALSO SUBMI T TED TH A T 86.54% WAS PAID TO GOVERNMENT OF ANDHRA PRADESH, 1.17% WAS PAID TO BAN K S TH R OUGH WORKING CAPITAL INTER E ST AND BANK CHARGES, 6.45% WAS PAID AS ROYALTY TO BRAND HOL D ER, 2.98% IS TOWARDS FREIGHT AND 2.11% WAS SPENT TOWARDS SERVICE CHARGES. THE ASSESSEE FURNISHED VARIOUS BILL S AND VOUCH E RS IN SUPPORT OF HI S CON TEN TIONS 5. HAVING RE G ARD TO TH E MATE RIAL PLACED B E FORE THE LEARNED CIT(A), A REMAND REPO R T WAS CALLED FOR. VIDE REMAND REPORT DATED 17.9.2012, THE ASSESSING OFFICER POINTED OUT THAT THER E WAS INFLATION OF EXPENDITURE IN RESPECT OF SERVI C ES CHAR G ES PAID TO M/S. INDRA M ARKETING AG ENCIES , M/S . SRI M ARKETING & FIN A N C E, ETC. IN THE OPINION OF THE ASSESSING OFFICER, IT IS A FIT CA S E FOR ENHANCING THE DISALLOWANCE, SINCE THE EXPENDITURE SHOWN TO HAVE BE E N INCURRED BY THE ASSESSEE I S EXCESSIVE AND IT IS NO T ALLO W ABL E UNDER S.37 OF THE ACT. 6. T HE REMAND REPORT WAS FORWARDED TO THE ASSESSEE FOR ITS COMMENTS. IN R E SPON S E TH E RETO, THE ASSESSEE SUBMITTED THAT THE AMOUNTS PAID TO M/S. INDRA MARKETING AG ENCIES, ETC. WAS REFLECTED IN THEIR INCOME - TAX RETURNS, AND THEY W ERE ACCORDINGLY ASSESS E D TO TAX IN THE SCRUTI N Y PROCEEDINGS. IN SUPPORT THE R EOF, THE ASSESSEE PRODUCED COPIES OF THE I N COM E - TAX RETURNS AND ASSESSMENTS THEREON. HA V ING RE G ARD TO THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ARRIVED AT THE CON C LU S ION THAT IT IS NO T A FIT CASE FOR M AKING ANY ADDITION, SINCE THE EXPENDITURE INCURRED BY TH E ASSESSEE AND CLAIMED AS DE D U CT ION UNDER S.37 OF THE ACT IS REASONABLE. BRIEF REASONS OF THE LEARNED CIT(A) ARE EXTRACTED HEREUNDER FOR READY REFERENCE - ITA NO. 989/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD., HYDERABAD 3 5.3 I HAVE GONE THROUGH THE FINANCIAL ST A TE M E NTS AND OTHER DOCUMENTARY EVIDENC E S FIL E D IN RESPECT OF THESE TWO PARTIES. IT IS SEEN TH A T THE EXPENDITURE BOOKED IN THE H A NDS O F THE APPELLANT AS OFFERED TO TAX BY TH E SE TWO PARTIES AND SCRUTINY ASSESSMENTS W E RE COMPLETED, BY MAKING SOME EXPENDITURE DIS A LLOWANCES. THER E FORE, I SEE NO GROUND TO D O UBT THE EXPENDITURE BOOK E D IN THE HANDS O F THE APP E LL A NT IN RESPECT OF TH E SE TWO PARTIES. AS NO ADVERSE FIN D IN G S W E RE BROUGHT OUT AGAINST THE OTHER CLAIMS OF EXPENSES AND IN SUPPORT OF THE ROUND SUM ADDITION MADE BY THE ASSESSING OFFICER, I AM NO T IN C LINED TO CONFIRM THE ROUND SUM ADDIT I ON MADE. ACCOR D INGLY, I DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE O F R S .25,00,000/ - MADE IN THE ASSESSMENT. 7. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 8. T HE LEARNED DEPARTMENTAL REPRESENTATIVE PL A CED BEFORE US A COPY O F THE REMAND REPORT TO SUPPORT THE STAND O F THE ASSESSING OFFICER THAT TH E EXPENDITURE CLAIMED AS DEDUCTION IS EXCESSIVE. 9. ON THE OTHER HAND, THE LEARNED COUNSEL APPEARING ON BEHALF O F THE ASSESSEE SUBMITTED THAT THE ADDITION MADE ON AD - HOC BASIS IS MERELY BASED ON ASSUMPTIONS, SIN C E THE ASSESSEE FURNISHED FULL DETAILS ALON G WITH SUPPORTING VOUCHERS AND IN FACT, THE RECIPIENTS HAVE OFFERED THE SAME TO TAX AND ALSO ASSESSED AS SUCH IN TH E SCRUTINY PROCEEDINGS. 10. W E HAVE HEARD THE RIVAL SUBMI S SION S AND PERUSED THE MATERIAL ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS UN AB LE TO PLACE ANY M A TERIAL ON R ECORD TO CONTRADICT THE FINDIN G S OF THE CIT( A). IT IS NOT IN DISPUTE THAT THE RECIPIENTS HAVE RENDERED SERVI C ES AND PAYM E N T S ARE MADE TO THEM, WHICH WERE REFLECTED IN THEIR INCOM E - TAX RETURNS. THE ASSESSING OFFICER HAS NO T POINTE D OUT ANY SPECIFIC DEFECTS IN THE BOOK S OF ACCOUNT, EXCEPT MAKING GEN E RAL REM A RKS THAT THE EXPENDITURE IS EXCESSIVE AND THIS POINT WAS DISPROVED BY THE ASSESSEE BY PLACING THE PERCENTAGE OF EXPENDITURE INCURRED IN TH E FORM OF PAYMENTS TO GOVERNMENT DEPARTMENTS ETC. , T O HIGHLIGHT THAT THE COMPO SITION O F PAY M EN T S MADE TO THE S ISTER CONCERN S WAS A MEAGER PERCENTAGE O F THE TOTAL OUTGO. HAVING RE G ARD TO THE OVERALL CIR C UMSTANCES OF THE CASE, WE ARE O F THE FIRM VIEW THAT THE TAX AUTHORITIES HAVE NO T MADE OUT A STRONG CASE TO MAKE THE ITA NO. 989/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD., HYDERABAD 4 IMPU G N E D ADDITION. WE TH E R E FORE, CONFI R M THE ORD ER OF THE LEARNED CIT(A) AND REJECT THE GROUNDS O F THE REVENUE. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 3.2.2014 SD/ - SD/ - (B.RAMAKOTAIAH ) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT DT/ - 3 RD FEBRUARY 201 4 COPY FORWARDED TO: 1. M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD., NO.43B, SATAMRAI VILLAGE, GAGAN PAHAD MANDAL, RANGA REDDY DISTRICT. 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 1(3) , HYDERABAD 3 . 4 . COMMISSIONER OF INCOME - TAX(APPEALS) V , HYDERABAD COMMISSIONER OF INCOME - TAX I V HYDERABAD 5 . DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S