Income Tax Appellate Tribunal - Chennai
Soundarya Decorators Pvt. Ltd., ... vs Assessee on 7 February, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI
BEFORE Dr. O.K. NARAYANAN,VICE-PRESIDENT
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011
( In ITA Nos. 385 & 386/Mds/2011)
(Assessment Years: 2004-05 & 2005-06 )
Assistant Commissioner of Income Vs. M/s.Soundarya Decorators Pvt.Ltd.
Tax, Company Circle-VI(3) 26, Survey Nos. 2 & 3
Aayakar Bhavan, New Block, Porur Village, Kolathur,
121, M.G.Road, Chennai-600 048.
Chennai-600 034. PAN:AAFCS8646C
(Appellant) (Respondent/Cross Objector)
Appellant by : Mr. M.Rathinaswamy, IRS, CIT
Respondent by : Mr. V.S.Jayakumar, Advocate
Date of Hearing : 7th February, 2013
Date of Pronouncement : 7th February, 2013
ORDER
Per Vikas Awasthy, JM:
The present set of appeals have been filed by the Revenue impugning orders of the CIT(A) dated 04.12.2010 and 15.12.2010 for the assessment years 2004-05 and 2005- 06 respectively. The assessee has filed Cross Objections for both the assessment years in support of the orders of the CIT(A).
2. The brief facts of the case are that the assessee is a private limited company engaged in the business of interior 2 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 decoration and manufacturing of modular furniture as per the specification of its customers. During the period under consideration, the assessee had entered into contract works with various clients including M/s. Cognizant Technologies & Solutions Pvt. Ltd. The said company had treated the work undertaken by the assessee under the head "Professional charges" whereas, other clients of the assessee treated the work done by the assessee as "Contract Receipts" and deducted tax at source at the rates applicable thereto.
3. The assessee filed its return of income for the assessment year 2004-05 declaring its income as ` 94,11,910/-. The assessment under section 143(3) was completed on 27.12.2006. The assessment was reopened under section 147 and notice under section 148 dated 4.2.2009 was issued to the assessee. The Assessing Officer vide assessment order dated 4.12.2009 passed under section 143(3) read with section 147 of the Act made addition to the tune of `3,11,72,221/- on account of suppression of sales and foreign travel expenses. Penalty proceedings under 3 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 section 271(1)(c) were also separately initiated against the assessee.
Aggrieved against the assessment order, the assessee preferred an appeal before the CIT(A) for the assessment year 2004-05. The CIT(A) allowed the appeal of the assessee holding that there has been no suppression of sales, as also foreign travel undertaken by the Directors of the company had a direct nexus with the import of machineries for the business activity.
4. The Revenue has preferred a second appeal before the Tribunal assailing the order of the CIT(A) on the ground that the CIT(A) has erred in deleting the addition of `3,01,31,800/- on account of suppressed turnover on sale of furniture. The Revenue has also challenged the findings of the CIT(A) on the ground that while deleting disallowance of ` 10,40,421/- on account of foreign travel expenditure the CIT(A) failed to take into consideration the fact that no documentary evidence was furnished by the assessee with regard to nexus of foreign travel with its business. The DR appearing on behalf of the 4 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 Revenue relied on the grounds of appeal and prayed that the appeal of the Revenue be allowed.
5. On the other hand, Shri V.S.Jayakumar appearing on behalf of the assessee stated that the order of the CIT(A) is a well-reasoned and detailed and the same should be upheld. The learned AR submitted that there is no suppression of sale of furniture. The assessee has shown the sale/supply of goods under the head 'Contract Receipts' in the profit and loss account. The amount under the said head includes both; the amount received on account of interior decoration as well as supply of furniture to the same customer according to their specification.
As regards foreign travel expenditure, the learned A.R. submitted that the directors of the assessee company had to visit various countries for the purchase of machinery. The visit to foreign countries was for the purpose of business only.
6. We have heard the submissions of both the sides and have perused the orders passed by the authorities below. The CIT(A) in the impugned order for the assessment year 2004-05 has given a categoric finding that the assessee has 5 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 shown all the receipts in the category of contract and supply of goods under one head viz. 'Contract Receipts' in the profit and loss account which included both the amount received by way of interior decoration as well as supply of furniture to the same customer. The details furnished by the assessee justify that the assessee company had shown all its receipts under one head 'contract receipts'. The assessee has also filed a reconciliation statement. All the receipts have been duly accounted in the books of account of the assessee. The assessee has only changed the method of presentation of its turnover in the profit and loss account but there is no change in the method of accounting. The turnover as appearing in the books of account and as shown as sales in the assessment order confirm that there is no suppression of any receipts by the assessee. The DR could not controvert the findings of the CIT(A). In view of the categoric findings of the CIT(A), we do not find any reason to interfere with the same.
7. As regards disallowance of foreign travel expenditure to the tune of ` 10,40,421/-, the assessee was able to demonstrate before the CIT(A) that the expenditure was 6 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 incurred for importing machineries for the purpose of business. For the purchase of machineries, the Directors had to visit Srilanka, Dubai and Germany. The contract was entered into for purchase of machineries with the German company and machineries were imported during the financial year 2004-05 relevant to the assessment year 2005-06. The assessee had claimed expenditure under foreign travel expenses as revenue expenditure. The CIT(A) held that there is no dispute about the company having incurred expenditure and import of machineries for the business purpose. The Directors of the company had visited foreign countries for the purpose of purchase of machinery and there was direct nexus between the import of machineries for business activity. In view of the categoric findings of the CIT(A), we do not deem it appropriate to interfere with the same. Therefore, both the grounds of appeal of the Revenue are dismissed. The appeal of the Revenue for the assessment year 2004-05 is dismissed being devoid of merit.
7 ITA Nos.385 & 386/Mds/2011 &
C.O.Nos.137 & 138/Mds/2011 ITA No.386/Mds/2011 & C.O.No.138/Mds/2011 (A.Y.2005-06):
8. For the assessment year 2005-06, the assessee had returned its income as ` 4,11,53,370/-. The return of the assessee was processed under section 143(1) and assessment under section 143(3) was completed on 24.8.2007. The case of the assessee was reopened under section 147 and notice under section 148 dated 4.2.2009 was issued to the assessee. The Assessing Officer vide assessment order dated 31.12.2009 passed under section 143(3) read with section 147 of the Act made addition to the tune of ` 9,97,50,412/- on account of : (i) excess claim of depreciation, (ii) professional charges and (iii) Keyman Insurance Premium. For this assessment year also, penalty proceedings under section 271(1)(c) were initiated against the assessee.
Aggrieved against the assessment order, the assessee preferred an appeal before the CIT(A) impugning the additions made by the Assessing Officer. The CIT(A) vide order dated 15.12.2010 allowed the appeal of the assessee by deleting all additions made in the assessment order. 8 ITA Nos.385 & 386/Mds/2011 &
C.O.Nos.137 & 138/Mds/2011
9. The Revenue has assailed the order of the CIT(A) in second appeal before the Tribunal primarily on the following grounds:-
(i) The CIT(A) has erred in deleting the addition to the tune of ` 7,95,44,742/- on account of suppression of professional receipts from M/s. Cognizant Technology Solutions Ltd.
(ii) The CIT(A) allowed the entire sum of premium paid on Keyman Insurance. The assessee was eligible only for a sum assured value of ` 4,62,63,645/- for which premium is ` 46,26,334/- whereas the assessee paid a sum of ` 2,35,34,723/-.
10. The learned DR assailing the order of the CIT(A) relied on the grounds of appeal. On the other hand, the learned A.R. submitted that the order of CIT(A) is a well-reasoned, detailed and speaking order.
11. We have heard the submissions made by both the parties and have perused the orders passed by the authorities below. The CIT(A) in his order, after going through the 9 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 documents on record, has observed that the assessee has obtained confirmation letters from M/s. Cognizant Technology Solutions India Pvt. Ltd., confirming the payment made by them to the assessee company. In the said letter, M/s. Cognizant Technology Solutions India Pvt. Ltd. has specifically stated that they have deducted tax under section 194J and not under section 194C, as they have treated the services rendered by the assessee company in the nature of profession/technical services. In our considered opinion, the amount received by the assessee has been duly accounted for in the books of account of the assessee and there is no suppression of receipts on the part of the assessee. The assessee has shown gross receipts from M/s. Cognizant Technology Solutions India Pvt. Ltd. under the head Operating Income as Contract Receipts. We, therefore, find no reason to interfere with the findings of the CIT(A) on the issue. Accordingly, we uphold the findings of the CIT(A) and dismiss this ground of appeal of the Revenue. 10 ITA Nos.385 & 386/Mds/2011 &
C.O.Nos.137 & 138/Mds/2011
12. As regards the second ground relating to Keyman Insurance Premium, the CIT(A) referring to CBDT Circular No.762 dated 18.2.1998 has held that the aforementioned circular is clear that Keyman Insurance Premium should be treated as business expenditure. In view of the circular, the CIT(A) allowed the sum of `1,89,08,394/-. Moreover, the Delhi Bench of the Tribunal in the case of P.G. Electronics Vs. ITO reported as 15 SOT 79 has held that Keyman Insurance Premium has to be allowed as expenditure in view of Board's Circular No.762 (supra).
13. In view of the categoric issue-wise findings of the CIT(A) in the impugned order, we do not deem it appropriate to interfere with the same and uphold the order of the CIT(A). Therefore, the appeal of the Revenue for the assessment year 2005-06 is also dismissed as it is devoid of merit.
14. Since, the counsel for the assessee has not pressed the Cross Objections filed by the assessee and in view of the fact that appeals of the Revenue have been dismissed, both the 11 ITA Nos.385 & 386/Mds/2011 & C.O.Nos.137 & 138/Mds/2011 Cross Objections of the assessee are dismissed as having become infructuous.
15. In the result, both the appeals of the Revenue as well as the Cross Objections of the assessee are dismissed. Order pronounced in the open court on Thursday, the 7th day of February, 2013 at Chennai.
Sd/- Sd/-
( Dr. O.K.Narayanan ) (Vikas Awasthy)
Vice-President Judicial Member
Chennai,
Dated the 7th February, 2013.
somu
Copy to: (1) Appellant (4) CIT(A)
(2) Respondent (5) D.R.
(3) CIT (6) G.F.