Income Tax Appellate Tribunal - Ahmedabad
Jaycol Industries Pvt.Ltd.,, Surat vs Department Of Income Tax
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ ''B", अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, "B" BENCH
सव[ौी ौी जी.
जी.सी.
सी.गुƯा,
ा माननीय उपाÚय¢,
उपाÚय¢, एवं ए.मोहन अलंकामोनी,
ामोनी, लेखा सदःय के सम¢ ।
BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER)
ITA.No.2542/Ahd/2010
With
CO No.300/Ahd/2010
[Asstt. Year : 2007-2008]
ACIT, Cent.Cir.4 बनाम/Vs. M/s.Jaycol Industries Pvt. Ltd.
Surat. Survey No.91
Opp: Navin Fluorine
Udhna Navsari Road
Bhestan, Surat.
PAN : AAACJ 7055 K
(अपीलाथȸ / Appellant) (ू×यथȸ / Respondent)
राजःव कȧ ओर से/ : Shri M. Mathivandan
Revenue by
िनधा[ǐरती कȧ ओर से/ : Shri Ankur A. Shah
Assessee by
सुनवाई कȧ तारȣख/ : 7th August, 2012
Date of Hearing
घोषणा कȧ तारȣख/ : 07-09-2012
Date of Pronouncement
आदे श / O R D E R
PER G.C. GUPTA, VICE-PRESIDENT: This appeal by the Revenue
and the Cross Objection by the assessee are directed against the order of
the CIT(A)-II, Ahmedabad for the assessment year 2007-2008. These are
being disposed of with this consolidated order.
ITA No.2542/Ahd/2010 (Asstt.Year : 2007-2008)
2. The grounds of the Revenue's appeal are as under:
"1. On the facts and circumstances of the case, the Ld CIT(A) has not
justified in deleting the addition of Rs.15,18,771/- made on account of
ITA.No.2542/Ahd/2010 With
CO No.300/Ahd/2010
excess wages and salaries paid ignoring that excess labourers employed
this year has not resulted in to excess production.
2. On the facts and circumstances of the case, the Ld CIT(A) has not
justified in- deleting the addition of Rs.15,18,771/- made on account of
excess wages and salaries paid ignoring that as the assessee did not
give any evidence in respect of increase in production and also because
the assessee as per the terms of the agreement with its sister concern
was obliged to provide only those number of workers which were
existing at the time of agreement.
3. On the facts and circumstances of the case, the Ld CIT(A) has not
justified in deleting the addition of Rs.67,58,643/- made on account of
payment made to contractors ignoring that there is no provisions in the
agreement between the assessee and its sister concerns for employing
contractors to execute its work other than Its own workers and staff at
the premises of the assessee company.
4. On the facts and circumstances of the case, the Ld CIT(A) is not
justified in holding that section 40A(2)(b) is not applicable to the
assessee since the tax rates are uniform for both the assessee and the
sister concerns, and hence there is no loss to the revenue for non-
charging of higher lease from the sister concerns at par with the
increase in wages and salary to its own staff and contract workers
ignoring that section 40A(2)(b) of the Act operates irrespective of the
tax rates applicable to sister concerns, if the assessee gives undue
benefit to its sister concerns by offering/ taking services at a price
higher than fair market value.
5. On the facts and circumstances of the case and In law, it is
prayed that the order of the Ld CIT(A) be sot aside and that of the
Assessing Officer may be restored."
3. The learned DR submitted that the assessee has claimed almost double
wages and salaries expenses, although excess labour employed during the year
has not resulted in excess production. He submitted that the provision of
Section 40A(2)(b) of the Act was applicable to the facts and circumstances of
the case of the assessee, since the assessee has offered its services for the
benefit of its sister concern, to whom undue benefit has been given by the
assessee. He referred to para-9 of the assessment order wherein the AO has
recorded that average wage expenses has gone up from Rs.4,582/- to Rs.7,251/-
-2-
ITA.No.2542/Ahd/2010 With
CO No.300/Ahd/2010
per person. He submitted that in fact the assessee has paid the wages, which
should have been paid by its sister concern, M/s.CIPL. The learned counsel
for the assessee submitted that the assessee has made payment of wages to the
contractors who are not related to the assessee, and therefore the provisions of
section 40A(2)(b) of the Act are not applicable to the case of the assessee. He
submitted that the genuineness of the wage expenses could not be doubted by
the Revenue. He submitted that the assessee as well as its sister concern,
M/s.CIPL are assessed at the maximum marginal rate of tax, and therefore
there could be no question of any tax planning on the part of the assessee. He
relied on the order of the CIT(A).
4. We have considered rival submissions. We find that the genuineness of
the wage expenses paid to various contractors have not been doubted by the
Revenue. The contractors for wage payments are not related to the assessee.
The assessee as well as its sister concern, M/s.CIPL are assessed at the same
rate of tax, and therefore it could not be said that the conduct of the assessee
was not bona fide. The CIT(A) has given a finding that wage and salary
payments were genuine and incurred for business purpose only, and were at the
normal rate prevailing during that time and was not paid at excessive rate. The
CIT(A) has recorded that the assessee as well as its sister concern, M/s.CIPL
are taxed at the maximum marginal rate, and therefore there is no loss to the
Revenue and has cited CBDT Circular No.6-P dated 6th July, 1968 and has held
that the provision of Section 40A(2)(b) of the Act are not applicable to the case
of the assessee. There being no mistake in the order of the CIT(A), as the
genuineness of the wages and salary payments are not in doubt, and none of the
contractor-parties were related to the assessee and there is no device to reduce
the tax liability, as both the assessee as well as its sister concern M/s.CIPL
were assessed at the maximum marginal rate prevailing at the relevant time, we
uphold the order of the CIT(A) and the grounds of the appeal of the Revenue
are dismissed as being without any merit.
-3-
ITA.No.2542/Ahd/2010 With
CO No.300/Ahd/2010
CO No.300/Ahd/2010 (Assessee's CO)
5. The only effective ground of the assessee's CO is as under:
"1. On facts and circumstances of the case, the ld.AO has erred in
preferring an appeal against the order of CIT(A) deleting the addition of
Rs.82,77,414/- without appreciating the fact that the CIT(A) has passed
speaking order considering the complete facts and merits and applying
true spirit of Circular No.6-P dated 6th July, 1968 of the CBDT and
accordingly the order of the CIT(A) needs to be accepted and upheld."
6. The learned counsel for the assessee submitted that the CO of the
assessee is merely supportive of the CIT(A)'s order and may be disposed of
accordingly. The learned DR has relied on the order of the AO.
7. We have considered rival submissions. In view of the submission of the
learned counsel for the assessee and the CO being merely supportive of the
order of the CIT(A), we dismiss the same as infructous.
8. In the result, the appeal of the Revenue and the CO of the assessee
are dismissed.
Order pronounced in Open Court on the date mentioned hereinabove.
Sd/- Sd/-
(ए.मोहन अलंकामोनी /A.MOHAN ALANKAMONY) जी.
जी.सी.
(जी सी.गुƯा/G.C.
ा GUPTA)
लेखा सदःय /ACCOUNTANT MEMBER उपाÚय¢ /VICE-PRESIDENT
Copy of the order forwarded to:
1) : Appellant
2) : Respondent
3) : CIT(A)
4) : CIT concerned
5) : DR, ITAT.
BY ORDER
DR/AR, ITAT, AHMEDABAD -4-