M/S RED PEPPERS LTD., ALLEPPEY V. THE COMMR.OF INCOMTAX,KOTTAYAM-686001

ITA/59/2011

AI Insights

The case involves M/s. Red Peppers Ltd., a subsidiary of Vallabhadas Kanji Ltd., which appealed against the disallowances made on certain expenditures claimed in their tax returns. The disallowances were initially made by the Assessing Officer and were upheld by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. The expenditures in question included travel expenses for employees of the parent company, laboratory fees paid to the parent company, and freight charges, all of which were disallowed due to the appellant's failure to deduct tax at source as required under Section 194J of the Income Tax Act. The High Court found no substantial question of law arising from the Tribunal's decision and dismissed the appeal.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 693493 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 30-11-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: P BALAKRISHNAN; K S MENON
• Keywords: Disallowance; Expenditure; Freight; Tax deduction at source; Technical Service; Laboratory fees
• Section: 40(a)(ia); 194J

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 30TH DAY OF NOVEMBER 2011/9TH AGRAHAYANA 1933 ITA.No. 59 of 2011 ( ) ====================== ITA.345/COCH/2010 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT ============ 1 M/S. RED PEPPERS LTD., ALLEPPEY. BY ADV.SRI.P.BALAKRISHNAN (E) SRI.K.S.MENON (K) RESPONDENT ============= 1 THE COMMISSIONER OF INCOME TAX, KOTTAYAM-686 001. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 30-11-2011 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX ANNEXURE A: TRUE COPY OF ASSESSMENT ORDER DT.30.10.2009 OF THE ASSESSING OFFICER. ANNEXURE B: TRUE COPY OF APPEAL ORDER DT.5.4.2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOCHI. ANNEXURE C: CERTIFIED COPY OF THE APPELLATE ORDER DT.23.11.2010 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. TRUE COPY P.S. TO JUDGE C.N.RAMACHANDRAN NAIR, & K.VINOD CHANDRAN, JJ. .................................................................... I.T. Appeal No.59 of 2011 .................................................................... Dated this the 30th day of November, 2011. JUDGMENT Ramachandran Nair, J. Heard counsel for the appellant. The questions raised pertain to disallowances made of three items of expenditure in the assessment which are confirmed by the first appellate authority as well as by the Tribunal. 2. The appellant is a subsidiary of another company by name Vallabhadas Kanji Ltd. In fact the appellant's company shares the office with the parent company. The first item of disallowance is Rs.3 lakhs from out of traveling expense of Rs.16 lakhs claimed by the assessee. On facts it is revealed that the travel was by the employees of the parent company and appellant claimed expenses for the reason that the employees of the parent company went abroad to canvas business for the appellant. However, it is the finding of the officer and the two appellate authorities that the appellant did not furnish even the names and addresses of the officers who went and even their destination and ITA 59/2011 2 purpose of visit. Inspite of want of any details the Assessing Officer was very generous in as much as he allowed Rs.13 lakhs out of Rs.16 lakhs and disallowance is limited to an estimated amount of Rs.3 lakhs. Both the appellate authorities confirmed the disallowance as the appellant could not establish with evidence the nature and purpose of visit in respect of which expenditure was claimed. We do not find any substantial question of law arising from the order of the Tribunal on this issue decided against the appellant. 3. The next question pertains to disallowance of expenditure towards laboratory fees paid by the appellant to the parent company for the reason that the appellant has not deducted tax at source on the payments made. It is the clear finding of the three authorities that the service rendered by the parent company under the head “Lab service” is a technical service falling under Section 194J on which tax ought to have been deducted at source by the appellant. The appellant having failed to deduct tax at source attract disallowance under Section 40(a) (ia) of the Income Tax Act. We do not find any ground to interfere with the concurrent findings by the three lower authorities sustaining ITA 59/2011 3 the disallowance. Consequently appeal on this issue is also turned down. 4. The next question raised is also disallowance of expenditure incurred by way of freight paid to the parent company which also attracts provision for recovery of tax at source. Appellant having failed to recover the tax at source suffered disallowance under Section 40(a) (ia) of the Act. The principle stated above squarely applies to the item of this disallowance also. We do not find any ground to interfere with the concurrent findings of all the three authorities including the Tribunal. Consequently I.T. Appeal is dismissed. C.N.RAMACHANDRAN NAIR Judge K.VINOD CHANDRAN Judge pms "