ACIT, Ranchi V. M/s. C.M.P.D.I. Limited, Ranchi

MA 18/RAN/2012

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2577 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 26-06-2012
• Court: TRIBUNAL
• Department Lawyers: DEEPAK ROSHAN SR S C LD
• Assessee Lawyers: APPLICANT DR JUNUL BHENGRAJ
• Keywords: Business expenditure

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, RANCHI BEFORE HON'BLE SHRI H.L. KARWA, PRESIDENT , AND HON'BLE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER M.A. NO. 1 8 /RAN/ 12 [ ARISING OUT OF IT A NO. 154 / RAN / 10 A.Y 2007 - 08 ] & ITA NO.154/RAN/1 0 A.Y 2007 - 08 A.C.I.T, CIRCLE - 1, RANCHI I VS. M/S CENTRAL MINE PLANNING & DESIGN INSTITUTE LTD , RACHI PAN: AAACC7475N ( APPLICANT ) ( RESPONDENT ) FOR THE DEPARTMENT : SHRI DEEPAK ROSHAN, SR.S.C/LD.DR FOR THE APPLICANT/ASSESSEE : DR. JUNUL BHENGRAJ, ASSESSEE DATE OF HEARING : 28 - 11 - 2014 DATE OF PRONOUNCEMENT: 28 - 11 - 2014 O R D E R B.R. BASKARAN, ACCOUNTANT MEMBER : TH E REVENUE HAS FILED THIS MISCELLANEOUS APPLICATION SEEKING RECALL OF THE ORDER DATED 24 - 11 - 2010 PASSED IN ITA NO. 154/RAN/2010 FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE LD.DR SUBMITTED THAT THE TRIBUNAL VIDE ITS SAID ORDER DISMISSED THE APPEAL FILED BY THE REVENUE FOR WANT OF COD PERMISSION IN VIEW OF THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF ONGC VS. COLLECTOR OF CENTRAL EXCISE REPORTED IN 104 CTR 31 (SC) . SUBSEQUENTLY, THE HON'BLE SUPREME COURT IN THE CASE OF ELECTRONICS CORPORATION OF INDIA VS. UNION OF INDIA & ORS REPORTED IN 332 ITR 58 (SC) HAS REC ALLED ITS EARLIER ORDER RENDER IN THE CASE OF ONGC VS. COLLECTOR OF CENTRAL EXCISE (SUPRA) . ACCORDINGLY, HE PRAYED BEFORE US THAT THE ORDER DATED 24 - 11 - 2010 PASSED BY THE TRIBUNAL IN ITA NO. 154/RAN/2010 FOR THE ASSESSMENT YEAR 2007 - 08 FILED BY THE REVENU E BE RECALLED. PAGE NO. 2 MA NO.18 RAN 12 & ITA NO.154 RAN 10 M/S CENTRAL MINE PLANNING & DESIGN INSTT. LTD 3. WE HAVE HEARD THE LD.AR. HE DID NOT OBJECT TO THE PETITION U/S. 254(2) OF THE ACT FILED BY THE REVENUE . ACCORDINGLY, THE ORDER DATED 24 - 11 - 2010 IS HEREBY RECALLED. 4. IN THE RESULT, THE MISC. APPLICATION FILED U/S. 254(2) OF THE ACT B Y THE REVENUE IS ALLOWED AND THE APPEAL (ITA NO.154/RAN/10 FOR A.Y 2007 - 08 ) IS ADMITTED FOR HEARING. ITA NO. 154/RAN/10 A.Y 2007 - 08 9 (BY THE REVENUE) 5 . DURING THE COURSE OF HEARING B OTH THE PARTIES REQUESTED BEFORE US THAT THE IMPUGNED APPEAL MAY ALS O BE TAKEN FOR HEARING . ACCORDINGLY, THE ABOVE SAID APPEAL IS TAKEN UP FOR HEARING. IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE ORDER OF THE LD.CIT(A) IN RESPECT OF THE FOLLOWING ISSUES: - A . DISALLOWANCE OF RS. 1 LAKH GIVEN AS G RANT S TO SCHOOL B . DISA LLOWANCE OF RS. 8,58,000/ - SPENT ON S PORTS AND RE CREATION 6. THE ASSESSEE HAD GIVEN RS. 1 LAKH TO A SCHOOL NAMED DAV SCHOOL , GANDHINAGAR , RANCHI IN WHICH CHILDREN OF THE EMPLOYEES OF ASSESSEE COMPANY WERE STUDYING ALONGWITH OTHER STUDENTS . IT WAS SUBM ITTED THAT SCHOOL GAVE CONCESSION IN FEES TO THE CHILDREN OF THE ASSESSEE S EMPLOYEES . FURTHER, THE ASSESSEE HAD INCURRED A SUM OF RS. 8.58 LAKH FOR PROMOTION OF SPORTS AND RECREATION ACTIVITIES FOR ITS EMPLOYEES CHILDREN STUDYING IN THE SAID SCHOOL OF THE ASSESSEE COMPANY . THE ASSESSING OFFICER DISALLOWED BOTH THE ABOVE SAID ADDITIONS BY STATING THAT THEY WERE PURELY ALTRUISTIC AND PHILANTHROPIC IN NATURE AND NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE. 7. HOWEVER, THE LD. CIT(A) DELETED BOTH THE DISALLOWANCES AS MADE BY THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: - PAGE 9 AT PARA 3.11 OF THE LD. CIT(A) S ORDER: 3.II IT MAY BE OBSERVED THAT AN AMOUNT OF RS.1,00,000/ - HAS BEEN PAID TO A SCHOOL IN WHICH THE CHILDREN OF THE EMPLOYE ES OF THE APPELLANT COMPANY STUDY . THOUGH OTHER STUDENTS ALSO STUDY IN THIS PAGE NO. 3 MA NO.18 RAN 12 & ITA NO.154 RAN 10 M/S CENTRAL MINE PLANNING & DESIGN INSTT. LTD S CHOOL, THE CH ILDREN OF APPELLANT S EMPLOYEES ARE CHARGED AT LOWER FEE BY THE SCHOOL . THE EXPENSE IS, THEREFORE, INCURRED FOR THE BENEFIT OF THE EMPLOYEES AND CAN BE LEGI TIMATE LY TERMED AS EMPLOYEE WELFARE EXPENSE. THE EXPENDITURE INCURRED ON SPORTS AND RECREATIONS IS ALSO FOR THE PURPOSE OF WELFARE OF THE EMPLOYEES . THE COMPANY IS ABLE TO PROMOTE GOOD HEALTH AND ENTERTAINMENT AMONG THE EMPLOYEES . THEREFORE, THIS EXPENSE ALSO IS FOR THE EMPLOYEES WELFARE. IT CANNOT BE SAID TO BE OF ALTRUISTIC OR PHILANTHROPIC IN NATURE. 3.III IT MAY NOT BE OUR OF PLACE TO MENTION HERE THAT THE COURTS HAVE HELD THAT THE CONCEPT OF BUSINESS IS NOT STATIC AND IT INCLUDES THE CARE AND CONCERN F OR A SOCIETY AT LARGE AND T HE PEOPLE OF THE LOCALITY IN WHICH THE BUSINESS IS LOCATED. THE EXPENDITURE INCURRED ON WELFARE ACTIVITIES BRINGS GOODWILL TO THE COMPANY AND IS A DEDUCTIBLE BUSINESS EXPENDITURE . THE MADRAS HIGH COURT IN CIT VS. MADRAS REFINERI ES LTD [2004] 266 170 HAS OBSERVE AT PAGE 171: - THE CONCEPT OF BUSINESS IS NOT STATIC. IT HAS EVOLVED OVER A PERIOD OF TIME TO INCLUDE WITHIN ITS FOLD THE CONCRETE EXPRESSION OF CARE AND CONCERN FOR THE SOCIETY AT LARGE AN D THE PEOPLE OF THE LOCALI TY IN WHICH THE BUSINESS IS LOCATED IN PARTICULAR. BEING KNOWN AS A GOOD CORPORATE CITIZENS BRINGS GOODWILL OF THE LOCAL COMMUNITY, AS ALSO WITH THE REGULATORY AGENCIES AND THE SOCIETY AT LARGE, THEREBY CREATING AN ATMOSPHERE IN WHICH THE BUSINESS CAN SUC CEED IN A GREATER MEASURE WITH THE AID OF SUCH GOODWILL. MONIES SPENT FOR BRINGING DRINKING WATER AS ALSO FOR ESTABLISHING OR IMPROVING THE SCHOOL MEANT FOR THE RESIDENTS OF THE LOCALITY IN WHICH THE BUSINESS IS SITUATED CANNOT BE REGARDED AS BEING WHOLLY OUTSIDE THE AMBIT OF THE BUSINESS CONCERNS OF THE ASSESSEE . : THUS THE EXPENDITURE INCURRED FOR THE BENEFIT OF THE EMPLOYEES FOR THEIR CHILDREN S EDUCATION AND THE PHYSICAL WELL BEING OF THE EMPLOYEES AMOUNTS TO STAFF WELFARE EXPENSE AND IS LEGITIM ATELY DEDUCTIBLE WHILE COMPUTING PROFITS OF BUSINESS. THE DISALLOWANCE OF RS.1,00,000/ - AND RS.8,58,000/ - ARE NOT FOUND SUSTAINABLE AND ARE HEREBY DELETED. 8 . WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE LD. CIT(A) HAS FOLLOWE D THE SAID DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF MADRAS REFINERIES LTD (SUPRA) , WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT CONCEPT OF BUSINESS IS NOT STATIC . FURTHER THE FACT THAT THE ASSESSEE HAS SPENT THE ABOVE SAID AMOUNT IN CO NNECTION WITH WELFARE OF ITS EMPLOYEES CHILDREN STUDYING IN THE SAID SCHOOL IS NOT DISPUTED. UNDER THE SET OF FACTS , WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE SAID ADDITIONS . ACCORDINGLY, W E UPHOLD THE SAME. PAGE NO. 4 MA NO.18 RAN 12 & ITA NO.154 RAN 10 M/S CENTRAL MINE PLANNING & DESIGN INSTT. LTD 9. IN THE RESULT, TH E APPEAL FILED BY THE REVENUE IS TREATED AS DISMISSED. PRONOUNCED ACCORDINGLY ON 28 - 11 - 2014 SD/ - SD/ - [ H.L. KARWA ] [ B.R. BASKARAN ] PRESIDENT ACCOUNTANT MEMBER DT. 2 7 - 11 - 2014 PLACE : RANCHI PP, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT/ APPELLANT : THE ACIT, CIR - 1, RANCHI . 2 THE RESPONDENT: M/S. CENTRAL MINING PLANNING & DESIGN INSTITUTE LTD, RANCH 3. .THE CIT, 4.THE CIT(A), 5.DR, ITAT CIRCUIT BENCH, RANCHI 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT. REGISTRAR PAGE NO. 5 MA NO.18 RAN 12 & ITA NO.154 RAN 10 M/S CENTRAL MINE PLANNING & DESIGN INSTT. LTD 1. DATE OF DICTATION ............. 2 8 - 11 - 2014 ....................... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ........................OTHER MEMBER ...... - 11 - 2014 ...... .................. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. ..................... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.................................. 2 7 - 11 - 2014 ..................... .............................. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S ................ 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK ....................................... 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ...... ................................... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................................................................................................. 9. DATE OF DESPATCH OF THE ORDER ..............................................................