Income Tax Appellate Tribunal - Agra
Ginni Filaments Ltd., Mathura vs Department Of Income Tax on 3 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No.399/Agra/ 2011
Assessment Year: 2007-08
M/s Ginni Filaments Ltd., Vs. Addl. Commissioner of Income Tax,
110 K.M. Stone, Ranmge-3, Aaykar Bhawan,
Delhi Mathura Road, Mathura.
Chhata, Mathura.
(PAN No. AABCG 0942 K).
ITA No.402/Agra/ 2011
Assessment Year: 2007-08
Asstt. Commissioner of Income Tax-3, vs. M/s Ginni Filaments Ltd.,
Mathura. 110 K.M. Stone,
Delhi Mathura Road,
Chhata, Mathura.
(PAN No. AABCG 0942 K).
ITA No.398/Agra/ 2012
Assessment Year: 2003-04
M/s Ginni Filaments Ltd., Vs. Asstt. Commissioner of Income Tax,
110 K.M. Stone, Range-3, Aaykar Bhawan,
Delhi Mathura Road, Mathura.
Chhata, Mathura.
(PAN No. -AABCG 0942 K)
(Appellants) (Respondents)
Assessee by : Shri Anurag Sinha, Advocate
Revenue by : Shri Waseem Arshad, Sr. D.R.
Date of hearing : 03.07.2013
Date of pronouncement : 12.07.2013
2 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012
A.Ys. 2007-08 & 2003-04
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
ITA No.399/Agra/2011 by the assessee and ITA No.402/Agra/2011 by the
Revenue are cross appeals filed against the order dated 29.03.2011 passed by the learned CIT(A)-I, Agra for the Assessment Years 2007-08 and ITA No. 398/Agra/2012 is appeal field by the assessee against the order dated 30.01.2012 passed by the CIT(A)-I, Agra for the Assessment Year 2003-04.
2. The grounds raised in these appeals are reproduced as below:- ITA No. 399/Agra/2011 by the assessee
"1. BECAUSE, on due consideration of facts and in the circumstances of the case the authorities below were not justified in directing for revaluation of closing stock ignoring the detailed submission of the 'appellant' in this regard.
2. BECAUSE, on due consideration of facts, circumstances and present the ld 'CIT(A)' after having held that liability of excise duty would arise only after goods are cleared from the factory (page4) ought not to have held that the 'AO' has correctly applied the method of valuation as provided under section 145A of the 'Act'.
3. BECAUSE, on due consideration of facts and in the circumstances of the case the ld. 'CIT(A)' was unjustified in confirming addition of Rs.89,184/- under the head 'Repair & Maintenance' of Plant & Machinery as was made by the 'AO' ignoring the detailed submission of the 'appellant' and the fact that during the course of 'appellant' proceedings appellant furnished evidences in support of the expenses incurred.3 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
4. BECAUSE, on due consideration of facts and in the circumstances of the case the ld. 'CIT(A)' was unjustified in confirming addition of Rs.83,692/- made out of 'Repair & Maintenance Expenses' on building as was made by the 'AO' ignoring the detailed submission of the 'appellant' and the fact that during the course of 'appellant' proceedings appellant furnished evidences in support of the expenses incurred.
5. BECAUSE, on due consideration of facts in the circumstances of the case the ld. 'CIT(A)' was unjustified in confirming addition of Rs.3,33,265/- made out of Repair & Maintenance 'others' as was made by the 'AO' ignoring the detailed submission of the 'appellant' and the fact that during the course of 'appellant' proceedings 'appellant' furnished evidences in support of the expenses incurred.
6. BECAUSE, the 'appellant' denies levy of interest under section 234C, and the ld. CIT(A) in the light of decision in the case of J.S.W. Steels Limited Vs ACIT reported in (2010) 5 ITR 31 (Bang) (Trib.) ought to have held 'appellant' not liable for interest under Section 234C of the 'Act' in the light of precedent cited before him.
7. BECAUSE, the order appealed against is contrary to the facts, law and principles of natural justice.
The 'appellant' reserves his right to add, delete, modify after or substitute any or all the grounds of appeal."ITA No. 402/Agra/2011 by the Revenue
"1. That the learned Commissioner of Income Tax (Appeals)-I, Agra has erred in law and on the facts in deleting the additions of Rs.3,18,519/- made on account of in absence of vouchers of staff welfare expenses without appreciating the facts that the most of the payment made by the assessee in cash and most of the expenditure is not supported with fully bills and vouchers.
2. That the learned Commissioner of Income Tax (Appeals)-I, Agra has erred in law and on the facts in deleting the additions of Rs.3,95,212/- made on account of in absence of any log book of telephone expenses without appreciating the facts that the 4 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 personal use of telephone by the Directors and their family members can not be over ruled.
3. That the learned Commissioner of Income Tax (Appeals)-I, Agra has erred in law and on the facts in deleting the additions of Rs.5,64,367/- made on account of in absence of any log book of vehicles expenses without appreciating the facts that the personal use of vehicles can not be over ruled.
4. That the appellant craves leave to add or delete or alter or modify any one or more ground(s) of appeal during the appellate proceedings.
5. That the order of the CIT(Appeals)-I, Agra being erroneous in law and on the facts be set aside and that the order of the Assessing Officer be restored."ITA No. 398/Agra/2012 by the assessee
"1. BECAUSE, on due consideration of facts and in the circumstances of the case the authorities below were not justified in directing for revaluation of closing stock ignoring the detailed submission of the 'appellant' in this regard.
2. BECAUSE, on due consideration of facts, circumstances and present the ld 'CIT(A)' after having held that liability of excise duty would arise only after goods are cleared from the factory) ought not to have held that the 'AO' has correctly applied the method of valuation as provided under section 145A of the 'Act'.
3. BECAUSE, on due consideration of facts and in the circumstances of the case the authorities below were unjustified in making and confirming addition of Rs.44,644/- under the head 'Interest Payment' holding the same in violation to section 40A(2)(b) of the 'Act'.
4. BECAUSE, on due consideration of facts and in the circumstances of the case the authorities below were unjustified in making and confirming disallowance of Rs.10,14,317/- on the ground of being prior period expenses without considering the facts that the expenses accrued during the current assessment year on the basis of facts and ought to have been allowed as deduction.5 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
5. BECAUSE, on due consideration of facts and in the circumstances of the case the authorities below were unjustified in considering the repairs expenses Rs.5,71,845/- as capital expenses without appreciating the facts and on the basis of erroneous interpretation of law.
6. BECAUSE, on due consideration of facts in the circumstances of the case the ld. Assistant Commissioner erred in wrongly considering Rs.50,000/- as capital expenses without appreciating the facts and on the basis of erroneous interpretation of law.
7. BECAUSE, on due consideration of facts and in the circumstances of the case the authorities below erred in wrongly disallowing the 'Dangal Expenses' Rs.11,000/- as employee's welfare without appreciating the fact and prevailing social customs.
8. BECAUSE, the authorities below has erred in computing B/F forward losses as Rs.20,27,69,714/- instead of Rs.47,24,63,862/- as per Return of Income. In appeal the ld. 'CIT(A)' ought to have recorded a specific finding in this regard in either way.
9 BECAUSE, while making the assessment the 'AO' and while sustaining the addition the 'CIT(A)' made various observations/conclusions which are contrary to facts available on records. The findings recorded in this aspect are wholly perverse and inadmissible in law. While making and sustaining the addition submission made and evidences filed have been rejected arbitrarily.
10. BECAUSE, the 'appellant' denies levy of interest under section 234B.
11. BECAUSE, in relation to the 'grounds of appeal' as have been taken hereinabove, the 'appellant' refer and rely upon the averments made in the statement of fact accompanying the memo of appeal.
12. BECAUSE, the order appealed against is contrary to the facts, law and principles of natural justice.
The 'appellant' reserves his right to add, delete, modify alter or substitute any or all the grounds of appeal."ITA No. 399/Agra/2011 by the assessee: 6 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
3. Ground nos.1 & 2 of assessee's appeal relates to valuation of closing stock in accordance with section 145A of the Income Tax Act, 1961 ('the Act' hereinafter).
4. The brief facts of the issue are that the assessee company is engaged in the business of manufacturing and trading of cotton yarn and cotton knitted fabrics. The Company operates under 100% export oriented unit. During the assessment proceedings, the A.O. noticed from the tax audit report that Central Sales Tax (CST) paid on stock of raw material and stores and submissions were not considered while valuing the closing sock. Similar was the position in respect of Duty Draw Back and Excise Duty. The A.O. further noticed that assessee sells 30% of its production in India and was not paying excise duty also. The assessee submitted that 4.08% excise duty was paid on such finished goods sold in India. The A.O. was of the view that as per provisions of section 145A all expenses incurred including excise duty should be included in the value of closing stock. The A.O. recalculated the value of closing stock giving effect of central sales tax, duty draw back and excise duty and calculated the amount of addition Rs.71,29,001/- and the same was added to the total income of the assessee. The assessee challenged the order of A.O before the CIT(A). The CIT(A) called the 7 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 remand report of the A.O. on submission of the assessee. After considering assessee's submission and remand report of the A.O., the CIT(A) held as under :-
(Page no.27) "I find that there is no dispute in the judicial pronouncements delivered by various courts about inclusion of cess, duty, fee or tax (by whatever named called) which are actually paid or incurred in the valuation of purchase and sale of goods and inventory (closing stock as well as opening stock) and these taxes, cess, duty or fee should be included only when they are paid or incurred. The meaning of incurred has also been interpreted by the courts that the amount of such duty, tax, cess or fee would be incurred only after liability to pay has arisen and in case of Excise duty such liability would arise only after a good is cleared from the factory.) After considering the provisions of section 145A and the various judicial pronouncements cited by the Ld. AR and AO, I find that the AO has correctly applied the method of valuation as provided u/s 145A."
5. The CIT(A) has dealt with each item i.e. central sales tax, duty draw back and excise duty for the purpose of section 145A in detail. In respect of adjustment of central sales tax, the CIT(A) directed the A.O. to do the valuation following an order of I.T.A.T., Mumbai Bench in the case of Cyanamid Agro Limited vs. Addl. CIT, 31 SOT 286 (Mum.).
6. In respect of duty draw back, the CIT(A) held as under :- (Paragraph no. 5.17.3, page 29) 8 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 "5.17.3 With regard to duty draw back also, the net addition is to be determined after giving effect to the amount of duty draw back in the purchase of fuel oil debited to the P & L A/c as I have directed in the case of purchase of raw material in para 5.17.1 because in case of fuel oil also the appellant has claimed that no amount of duty drawback is taken to P & L A/c and same is separately accounted in duty draw back receivable account."
7. In respect of excise duty, the CIT(A) has held as under :- (Paragraph no. 5.17.2, page nos.28 & 29) "5.17.2 With regard to inclusion of Excise duty in the closing stock of finished goods, it has not been brought on record by the AO clearly as to whether goods required for sale in domestic market was brought outside the factory of the appellant or not. Considering the judicial pronouncement as discussed in para 5.13, the AO is directed to find out the amount of goods brought outside the factory after manufacturing for sale in domestic market and accordingly compute the amount of Excise duty incurred by the assessee on such goods. Such details of incurring of excise duty could be collected by the AO from the concerned Excise Authorities who clear the goods from factory of the appellant after manufacturing. After computing the amount of Excise duty incurred by the assessee on manufacturing of goods which were brought outside the factory, the same should be included in valuation of closing stock and after deducting the value of Excise duty taken in the opening stock of the finished goods, the net addition has to be made in the assessment order."
8. However, the CIT(A) has decided the relevant ground by summoning up his conclusion as under:- (Paragraph no. 5.18, page no.29) "5.18. Since while applying the provision of section 145A, the AO has only re-valued the amount of closing stock and opening stock 9 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 by including the CST, Excise duty and duty drawback without modifying the amount of purchase of raw material and fuel oil and sale amount by calculating the CST and duty drawback to be included in the quantities of their purchase amount and reimbursable amount in sale after consumption of raw material and fuel oil. I find that the amount of addition computed by the AO on account of under valuation as per the provision of Section 145A is erroneous and therefore, the direction for recalculation of value of such purchases and sale amount, opening and closing stock has been issued by me in this order to determine the correct amount required to be added in the income of the appellant after following provision of section 145A and therefore, the ground no.1 taken by appellant is partly allowed for statistical purpose confirming the provision of section 145A to be applied for valuing the inventory (closing as well as opening stock) and sale and purchase value of goods and revising the computation following the procedure as ordered by me in para no.5.17.1( Page no.28)."
9. The ld. Authorised Representative submitted that in principle there is no dispute regarding valuation of closing stock in accordance with section 145A of the Act. The dispute is only in respect of inconsistency following by the Department and incorrect calculation while giving effect to section 145A of the Act.
10. The ld. Departmental Representative, on the other hand, relied upon the order of CIT(A).
10 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
11. We have heard the ld. Representatives of the parties and records perused. The ground nos.1 & 2 raised by the assessee in its appeal pertain to giving effect to section 145A of the Act. In principle, there is no dispute regarding valuation of purchase, sale and stock in accordance with section 145A of the Act. The CIT(A) has also held that the effect of section 145A is to be given in respect of central sales Tax, duty draw back and excise duty. The CIT(A) while considering the assessee's submission held that there is no dispute in judicial pronouncement delivered by various courts about the inclusion of cess, duty, fee or tax which are actually paid or incurred in the valuation of purchase and sale of goods and inventory (closing stock as well as opening stock). The CIT(A) while considering the assessee's submission held that excise duty is includible when it was incurred or paid. While deciding this aspect, the CIT(A) noted as under:- "I find that the A.O. has correctly applied the method of valuation as provided under section 145A". The assessee picked up the last line of the observation of the CIT(A) and raised the ground no.2. The assessee has raised the ground no.2 without appreciating the finding of the CIT(A). Observation of the CIT(A) in paragraph nos.5.16 and 5.17.2 both are required to be read together. If we read both the paragraphs together, we notice that the CIT(A) has clearly observed that inclusion of excise duty in the closing stock of finished goods the A.O. did not bring on 11 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 record whether goods required for sale in domestic market was brought outside the factory of the assessee or not. The A.O. was directed to find out the amount of gods brought outside the factory after manufacturing for sale in domestic market and compute the amount of excise duty incurred by the assessee on such goods. It has also been directed by CIT(A) to the A.O. that such details of incurring of excise duty could be collected by the A.O. from the concerned Excise Authorities who clear the goods from factory of the assessee after manufacturing. The CIT(A) further directed that after computing the amount of excise duty incurred by the assessee on manufacturing of goods which were brought outside the factory, the same should be included in valuation of closing stock and after deducting the value of excise duty taken in the opening stock of the finished goods, the net addition has to be a made in the assessment order. The CIT(A) has given such direction to the A.O after accepting assessee's contention. During the course of hearing before us, it was asked the ld. Authorised Representatives to furnish the detailed working of effect of section 145A in respect of excise duty and indicate the effect of section 145A in accordance with the assessee but the ld. Authorised Representatives has failed to furnish any such calculation before us. After considering the totality of the facts of the case, we find that the CIT(A) has given clear guidelines regarding calculation of effect of section 145A in respect of excise duty. Considering the 12 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 assessee's submission, the ld. Authorised Representative has failed to point out out any exact grievance with quantity. In absence of such details, order of CIT(A) cannot be held to be incorrect. In the light of the fact, order of the CIT(A) is confirmed in this regard.
12. It is also relevant to state that the CIT(A) has decided the issue pertaining to section 145A of the Act in respect of central sales tax and duty drawback but in the grounds of appeal the assessee challenged in respect of liability of excise duty only. Therefore, ground nos.1 & 2 of the assessee's appeal are decided accordingly.
13. As regards the contention of the ld. Authorised Representative that the Department has followed inconsistent approach giving effect of section 145A of the Act, there is no dispute about the fact that section 145A of the Act is applicable to the case under consideration. Effect to section 145A is required to be given and under one or other reason if the A.O. has not given effect of that legal provision merely on that basis a wrong thing which have already been committed cannot be allowed to continue. In this regard, we would like to refer a judgment of Apex Court in the case of CIT vs. British Paints India Limited, 188 ITR 44. In the light 13 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 of the law laid down in the above judgement, we find that the CIT(A) has rightly held that the effect of section 145A is required to be given in the year under consideration.
14. As regards incorrect calculation in giving effect of excise duty for the purpose of section 145A, we find that the CIT(A) has also directed the A.O. with certain guidelines. The ld. Authorised Representative has failed to point out any specific incorrectness in that record inspite of opportunity given to the ld. Authorised Representative to furnish calculation in accordance with the assessee in this regard. But no such calculation was furnished by the assessee. Thus, ground nos.1 & 2 raised by the assessee are dismissed.
15. The brief facts of ground no.3 of assessee's appeal pertaining to addition of Rs.89,184/- is that during the assessment proceedings the A.O. noticed that the assessee has claimed Rs.66,86,689/- under the head repair and maintenance Plant & Machinery. The A.O. asked the assessee to furnish details of these expenses. The A.O. after examining the details of expenditure incurred more than Rs.10,000/- noticed that the assessee has failed to furnish supporting bills and vouchers in respect of following expenditures. (A.O. page no.6) 14 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 Sl. No. Date of bills Amount (Rs) 1 31-03-2007 17,486 2 31-03-2007 46,265 3 14-09-2006 25,433 Total 89,184
16. In the absence of details, the A.O. made addition of Rs.89,184/-. The CIT(A) has confirmed the order of the A.O. as under :- (Paragraph no.6.4, page nos.31 & 32) "6.4 On going through the assessment order and the written submission of the appellant as discussed above, I find that after examination of bills of repairs and maintenance, the AO has specifically found that certain expenses are not supported by bills and therefore, after recording all bills of such expenses, he disallowed Rs.89,184/-. In the case law cited by the Ld. AR, one case of Beta Napthol (P) Ltd. Vs. DCIT (supra) is relating to allowability of conveyance expenses in which generally taxi drivers do not generally give vouchers for traveling. Therefore, the Hon'ble Tribunal allowed expenditure as per the general practice even if certain vouchers were not available. In another case of Raj Enterprises Vs. ITO (supra) also, the matter is relating to certain unvouched small amount, here in the present case the matter is relating to repairs and maintenance of plant and machinery for which substantial expenses were claimed by the appellant but during the assessment proceeding supporting bills could be produced by it and therefore, I find that the AO has correctly disallowed the amount of Rs.89,184/- out of repair and maintenance and hence the disallowance of Rs.89,184/-made by the AO out of repair and maintenance of plant and machinery has been confirmed and accordingly groundno.2 is dismissed."
17. We have heard the ld. Representatives of the parties and records perused. The contention of the assessee before the CIT(A) as well as before us was that the 15 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 A.O. made the adhoc addition and such addition is not sustainable in law. We notice that the CIT(A) has clearly held that the A.O. has pointed out the specific expenditure which was not supported by bills and vouchers. The assessee has failed to discharge the burden that the expenses were incurred for the purpose of business. The CIT(A) has distinguished the judgement cited by the assessee. While distinguishing the decision cited by the assessee, the CIT(A) observed that in the present case the matter relating to repairs and maintenance of the Plant & Machinery for which substantial expenses were claimed by the assessee but supporting bills and vouchers could not be produced. When the A.O. has pointed out specific expenditure and the assessee has failed to establish that the expenditures were incurred for the purpose of business, the assessee has failed to discharge its burden in this regard. In the light of the fact, we hold that the CIT(A) has rightly confirmed the addition of Rs.89,184/-. The order of CIT(A) is confirmed on the issue.
18. Ground no.4 pertains to addition of Rs.83,692/-. The assessee has claimed repair and maintenance expenses on building amounting to Rs.3,33,265/-. The A.O. noticed that the following expenses were not supported by bills:- (Page no.38) 16 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 Sl.No. Date of Bills Amount (Rs.)
1. 06.07.2006 11900
2. 06.07.2006 34522
3. 31.07.2006 16800
4. 31.07.2006 10240
5. 15.02.2007 10230 Total 83692
19. The disallowance made by the A.O. has been confirmed by the CIT(A) as under :- (Paragraph no. 9.2, page 38 & 39) "..........I have considered the discussion made by the AO in para no.8 of the assessment order while making disallowance of Rs.83,692/- and the submission of Ld. AR as discussed above and I find that the AO has made disallowance by pointing out the specific bills which were not produced in support of the expenses claimed by the appellant. In my considered opinion, the AO is justified in making disallowance of Rs.83,692/- and therefore, this addition is confirmed and accordingly ground no.6 is dismissed."
20. We have heard the ld. Representatives of the parties and records perused. The admitted facts of the case are that the A.O. has specifically pointed out the expenditure for which the assessee has failed to furnish any supporting evidence and bills. The assessee has failed to discharge the burden that the expenditure were incurred wholly and exclusively for the purpose of business. In the light of detailed discussion made while deciding ground no.3, above, following the said discussion we do no find any infirmity in the order of CIT(A). Order of CI(A) is confirmed on the issue.
17 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
21. Ground no.5 pertains to addition of Rs.3,33,265/-. During the assessment proceedings, the A.O. noticed that the assessee has failed to furnish supporting evidence like bills and vouchers in respect of following expenditure pertaining to repair & maintenance and others, electrical and furniture & fixtures etc., details of which are as under :- (A.O. page no.10) Sl.No. Date of bills Amount (Rs.)
1. 30.09.2006 13,728
2. 01-10-2006 1,36,943
3. 01-01-2007 1,82,594 Total 3,33,265
22. The addition made by the A.O. has been confirmed by the CIT(A) as under:-
(Page no.39) ".............The contention of the Ld. AR against this disallowance is also not accepted because the AO has disallowed Rs.3,33,265/- out of repair and maintenance others, electrical and furniture and fixture because certain bills relating to these expenses were also not produced by him. Therefore, this addition made by the AO is also confirmed and the argument taken by the Ld. AR against this disallowance in the written submission dated 08.03.2011 is also dismissed."
23. We have heard the ld. Representatives of the parties and records perused. The facts of this ground of appeal are similar to the facts of the ground no.3 & 4 decided above. The A.O. has pointed out specific expenditure for which the 18 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 assessee has failed to discharge the burden of furnishing supporting bill etc. In the light of the detailed discussions made while deciding ground nos.3 & 4 above, following the said discussion, order of CIT(A) is confirmed on the issue.
24. Ground no.6 is in respect of levy of interest under section 234C of the Act. The A.O. has charged interest under section 234C amounting to Rs.1,11,771/-. The interest charged by the A.O. has been confirmed by the CIT(A) as under :-
(Page nos. 39, 40 & 41, paragraph no.10 & 12) "10. In ground no.7, the appellant has disputed enhancing the book profit by Rs.2,30,74,228/- towards deferred tax u/s 115JB contending that the decision of the AO is without considering the decision of Hon'ble Calcutta Tribunal in the case of Balrampur Chini's case.
With regard to this addition in the book profit, the AO has discussed inpara no.10 of the assessment order that from the calculation of profit u/s 115JB filed along with the return, it is seen that the assessee (appellant) has reduced the book profit by deferred tax provisions amounting to Rs.2,30,74,228/- . The AO has further pointed out that as per Explanation 1 of section 115JB which has specified the adjustment, it has been provided that while arriving at the adjusted book profit, first the deferred tax and other provision thereto is to be added to the net profit, if the same is debited in P & L A/c. He has also discussed that this amendment is made in the Income-Tax Act from retrospective effect by the Finance Act 2008 w.e.f. 1.4.2001 and hence he made addition of Rs.2,30,74,228/- in the book profit declared by the appellant. In the written submission, the Ld. AR has accepted this addition in view of the amendment brought in the Act with retrospective effect. However, it has been submitted by the Ld. AR that with regard to this addition, at least on the amount by which the book profit got increased, the appellant cannot be held liable for 19 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 interest u/s 234C of the Act in the light of decision by Hon'ble ITAT, Bangalore Bench in the case of JSW Steels Limited Vs. ACIT reported in (2010) 5 ITR 31 (Bang) Trib). I have considered the request of the Ld. AR in this regard but I find that charging of interest u/s 234A, 234B, and 234C is mandatory under the I.T. Act, 1961 as it has been held by the Hon'ble Supreme Court in the case of M.H. Anjum Ghawala, 252 ITR 1 (SC). Assessing authorities have no power either to reduce or waive such interest however, if any of such interest is levied for no fault of the assessee, such interest can be reduced or waved by the Chief Commissioner of Income-tax (CCIT) as authorized by CBDT. Therefore, if the appellant feels aggrieved for levy of interest u/s 234C on account of this retrospective amendment in view of above decision of the Hon'ble ITAT, he can approach to concerned CCIT for waiving/reducing interest u/s 234C which has been charged due to addition of Rs.2,30,74,228/- in its book profit on account of the above retrospective amendment. Accordingly Ground No.7 is dismissed.
12. In ground no.9, the AO has disputed charging of interest u/s 234C amounting to Rs.1,11,771/- without considering the facts that the Income tax liability has arisen on the basis of brook profit calculated u/s 115JB of the I.T. Act. This ground has as been dealt by me in para no.10. and I have already decided that charging of interest u/s 234C is mandatory, no relief can be given to the appellant at appeal level. However, he may approach to the concerned CCIT as per the direction of CBDT for requisite relief after fulfilling the condition as prescribed by the Board. Therefore, this ground no.9 is dismissed."
25. We have heard the ld. Representatives of the parties and records perused. The ld. Authorised Representative reiterated the submissions which were made before the CIT(A). We notice that the CIT(A) has considered the assessee's submission including submission regarding the retrospective effect by the Finance 20 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 Act w.e.f. 01.04.2001 in respect of calculation of book profit under section 115JB of the Act. This contention of the assessee has already been considered by the CIT(A). We notice that the CIT(A) has rightly held that charging of interest under section 234C of the Act is mandatory as per law laid down by the Apex Court in the case of M.H. Anjum Ghaswala, 252 ITR 1 (SC). When the order of CIT(A) is in accordance with law laid down by the Apex Court in the case of M.H. Anjum Ghaswala (supra), we do not find any infirmity in the order of CIT(A). The order of CIT(A) is confirmed in this regard.
26. In the result, appeal filed by the assessee is dismissed. ITA No. 402/Agra/2011 - by the Revenue
27. The first ground raised by the Revenue is in respect of deletion of addition of Rs.3,18,519/-. The A.O. made the addition of Rs.3,18,519/- being 1/12th of total expenditure claimed by the assessee under the head Staff Welfare expenses. The addition made by the A.O. has been deleted by the CIT(A) on the ground that the A.O. has disallowed 1/12th adhoc disallowance without pointing out any specific expenditure.
21 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
28. We have heard the ld. Representatives of the parties and records perused. We notice that the CIT(A) has rightly deleted the addition as the A.O. made adhoc addition without pointing out any specific expenditure which was not incurred for the purpose of business.
29. In this regard, it is relevant to state that the CIT(A) has rightly deleted the addition as the A.O. has failed to point out any specific expenditure which was not supported by evidence like bills and vouchers or the expenditure which were not incurred for the purpose of business. The CIT(A) wherever it has been found that the A.O. has pointed out specific expenditure which were not supported by evidence of vouchers and were not incurred for the purpose of business, those additions have been confirmed by the CIT(A). In the light of detailed discussion made by the CIT(A), we find that the CIT(A) has rightly deleted the addition of Rs.3,18,519/-. In the alight of the fact, order of CIT(A) is confirmed in deleting the addition of Rs.3,18,519/-.
30. The second ground of Revenue's appeal pertains to deletion of addition of Rs.3,95,212/- and the third ground pertains to deletion of addition of Rs.5,64,367/-. The A.O. has disallowed 1/8th of total expenditure of telephone and mobile 22 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 expenses of which calculation comes to Rs.3,95,212/- and Rs.5,64,637/- being 1/10th out of vehicle expenses. The addition made by the A.O. has been deleted by the CIT(A) as under :- (Page nos.37 & 38) "Therefore, I agree with the Ld. AR that in case any expenditure has suffered F.B.T., disallowance on part of such expenditure cannot be made towards possible use of facilities by directors and their family members. In my opining, the F.B.T. so levied would take care of any disallowance which could have been possibly made before imposition of such levy. Considering the facts and circumstances and relying on aforesaid case laws mentioned by Ld. AR as well the decision of Hon'ble ITAT, Agra in the case of Shivangi Metal (P) Ltd. vs. ACIT, Mathura. I hereby delete the addition of Rs.3,95,212/- and Rs.5,64,367./- made by the AO in the assessment order on ad hoc basis out of telephone and vehicle expenses. Therefore, ground nos.4 & 5 are allowed."
31. We have heard the ld. Representatives of the parties and records perused. We notice that before deleting the addition the CIT(A) has considered all the aspects of the issue. The CIT(A) noted that the A.O. made adhoc disallowance out of telephone and vehicle expenses for personal use of the Director. The CIT(A) noticed that the F.B.T. has been paid by the company on vehicle and telephone. Therefore, no separate disallowance is required for personal use of telephone and vehicle etc. The Revenue has failed to point out any contrary material to the finding of the CIT(A). In the light of the fact, order of CIT(A) is confirmed.
32. Ground nos.4 & 5 are general in nature require no finding. 23 ITA Nos.399, 402/Agra/2011 &
.398/Agra/2012 A.Ys. 2007-08 & 2003-04
33. In the result, appeal of the Revenue is dismissed. ITA No. 398/Agra/2012 - by the assessee
34. Ground nos.3 & 5 to 12 have not been pressed by the ld. Authorised Representative, therefore, the same are dismissed.
35. The ld. Authorised Representative submitted that ground nos.1 & 2 are similar to the assessee's appeal for A.Y. 2007-08.
36. We have heard the ld. Representatives of the parties and records perused. The facts of ground nos.1 & 2 raised in the year under consideration pertaining to section 145A of the Act are similar to the facts of the case for A.Y. 2007-08 in the appeal filed by the assessee. These grounds have been decided after detailed discussion in para nos.9 to 14 of this order. Following the said discussion made in this order, both these grounds of he assessee's appeal are dismissed.
37. Ground no.4 pertains to addition of Rs.10,14,317/-. The A.O. has made disallowance of Rs.10,14,317/- on the ground that these expenses pertained to the 24 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 earlier period. The disallowance made by the A.O. has been confirmed by the CIT(A) as under :- (Paragraph no.8.2, page no.35) "8.2 The AO has made the above disallowance only because these expenses have not been accrued during the year under consideration and they are also not allowable on payment basis as no being Excise duty or CST or any other duty or cess payable to Govt. authorities and allowed on payment basis. In the written submission filed on 25.01.2012, no argument has been taken by the Ld. AR against the above disallowance. As per the facts discussed by the AO in the assessment order, which is reproduced above. I find that the A.O. is justified in making this disallowance because the amount of expenses of Rs.10,14,317/- do not pertain to the year under consideration and they cannot be allowed on payment basis. Therefore, I confirm the addition of Rs.10,14,317/- made by the AO in the assessment order. Accordingly Ground no.3 is dismissed."
38. The only contention of the ld. Authorised Representative was that necessary direction may be given for allowing the prior period expenses in respective year including A.Y. 2007-08 which is before the Bench.
39. We have heard the ld. Representatives of the parties and records perused. It is admitted facts that these expenses were not related to the year under consideration. The only request of the ld. Authorised Representative was that the same may be allowed in respective years but we restrain to our powers that the issues which are pertaining to the year under appeal only those issue are to be 25 ITA Nos.399, 402/Agra/2011 & .398/Agra/2012 A.Ys. 2007-08 & 2003-04 decided by us. Since other years are not before us, therefore, direction cannot be given to allow these expenses in the year pertaining to which the expenditures were incurred. The contention of the ld. Authorised Representative is rejected. Thus, this ground of appeal of the assessee is dismissed.
40. In the result, ITA No.399/Agra/2011 and 398/Agra/2012 filed by the assessee and ITA No.402/Agra/2011 filed by the Revenue, all are dismissed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File. By Order
Sr. Private Secretary
Income Tax Appellate Tribunal, Agra
True Copy