Income Tax Appellate Tribunal - Chandigarh
Sh. Madan Lal Bassi, Ludhiana vs Dcit, Ludhiana on 4 September, 2018
I N T H E I N CO ME T A X A P PE L L AT E T RI B UN A L
D I VI S I O N B E NC H , ' B ' , C H AND I G AR H
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 886/CHD/2017
Assessment Year: 2011-12
Sh. Modan Lal Bassi, Vs. The DCIT, Central Circle-2,
C-106, Phase-V, Ludhiana
Focal Point,
Ludhiana
PAN No. ABFPB7839N
(Appellant) (Respondent)
Appellant by : Sh. S.C. Jain, CA
Respondent by : Sh. Manjit Singh, Sr.DR
Date of Hearing : 12.07.2018
Date of Pronouncement : 04.09. 2018
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 09.03.2017 of the Commissioner of Income Tax(A)-5, Ludhiana [hereinafter referred to as 'CIT(A)']
2. In this appeal the assessee has taken the following grounds o f a p p e a l: -
1. T h a t t h e L d . C I T(A ) h a s p a r t l y d i s a l l o w e d t h e i n t e r e s t u / s 3 6 (i ) (i i i ) w i t h o u t c o n s i d e r i n g t h i s f a c t t h a t t h e a s s es s e e h a s s u f f i c i e nt i n t e r e s t f r e e o w n e d c a p i t a l a n d i n t e r e s t f r e e l o a ns a n d h a s n o t c o n s i d e r e d t h e j u dg m e n t s o n t h i s i s su e , h e n c e , t h e d i s a l l o w a n c e m a d e u / s 3 6 (i ) (i i i ) o f t h e I n c o m e - t a x Act, 1961.ITA No. 886/Chd/2017-
Sh. Madan Lal Bassi, Ludhiana 2
2. T h a t C I T (A ) h a s n o t d e l e t e d t h e a d d i t i o n / d i s a l l o w a n c e o f Rs . 1 9 , 8 9 , 3 4 2 / - g i ve n t o S u n m a c Bike Pvt Ltd and such addition / disallowance may please be deleted.
3. That the C I T (A ) has not allowed the e x p e n d i t u r e o f R s. 2 1 , 0 6 , 0 0 0 / - p a i d t o w o r k e r s o n the 25th annual anniversary out of total expenditure o f Rs . 2 1 , 2 8 , 0 0 0 / - i n cu r r e d b y t h e assessee under the wrong notion of law. The expenses of Rs. 21,06,000/-paid to workers as a w a r d o n s i l v e r j u b i l e e m a y p l e a s e be a l l o w e d .
3. Ground Nos. 1 & 2 : The assessee through these grounds of a p p e a l h a s a g i t a t e d t h e c o n f i r ma t i o n o f d i s a l l o w a nc e o f R s . 1 9 , 8 9 , 3 4 2 / - u / s 3 6 ( i ) ( i i i ) o f t h e I nc o me - t a x A c t , 1 9 6 1 ( i n s h o r t 't h e A c t ') i n r e s p e c t o f i nt e r e s t f re e a d v a n c e s g i ve n t o M / s S u n ma c B i k e P v t . L t d . T h e L d . C I T ( A ) h a s c o nf i r me d t h e a f o r e s a i d d i s a l l ow a n c e o b s e r v i n g t h a t t h e a s s e s se e h a d u s e d i n t e r e s t b e a r i n g f u n d s t o a d v a n c e t h e a f o r e s a i d l o an s t o M / s S u n ma c B i k e P v t L t d . H e o b s e r v e d th a t t h e a s s e s s ee ha d f a i l e d to p r o v e t h a t i t h a d i t s o w n r e s e r v e s a n d s u r p l u s e s / in t e r e s t f r ee f u n d s a v a i la b l e a t t h e t i me o f a d v a n ce me n t o f af o r e s a i d l o a n s .
4. B e f o r e u s , t h e L d. C o u n s e l f o r t h e a s s e s s e e h a s s u bmi t t e d that the assessee is an undertaking who is running proprietorship c o n c e r n n a me l y ' S u r a j U d yo g ' . T h e a s s e s s e e i s a l s o d i r e c t o r of M / s S u n ma c B i k e P v t . L t d . T h e a s s e s s e e i s i n v o l v e d i n t h e b u s i n e s s of ma n u f a c t u r i n g of s p a r e p a r t s of t w o w h ee l e r s - f o u r wheelers and that there was inter se dependency between the ITA No. 886/Chd/2017- Sh. Madan Lal Bassi, Ludhiana 3 a s s e s s e e ' s p r o p r i e t o r s h i p c o n c e r n a n d t h a t o f M / s S u n ma c B i k e P v t L t d . H e , t h e r ef o r e , h a s s t r e s s e d t h a t t h e a d v a n c e s w e r e ma d e t o M / s S u n ma c B i k e P v t L t d o u t of b u s i n e s s e x p e d i e nc y. T h e L d . c o u n s e l h a s a l s o f u r t h e r r e l i e d u p o n t h e c a s h f l o w s t at e me n t f o r t h e ye a r u n d e r c o n s i d e r a t i o n s u b mi t t i n g t h a t t h e a s s e s s e e h a d t h e a v a i l a b i l i t y o f e n o u g h i n t e r e s t f r e e f u n d s t o c o v e r th e a f o r e s a id a d v a n c e s ma d e t o M / S S u n ma c B i k e P v t L t d . T h e L d . c o u n s e l i n t h e a l t e r n a t i v e h a s f u r t h er s u b mi t t e d t h a t e v e n o t h e r w is e s o me o f t h e a d v a n c e s w e r e ma d e o u t o f t h e O . D . l i mi t a g a i n s t t h e s e c u r i t y deposit of the FDRs of the assessee with the bank and that the d i f f e r e nc e b e t w e en i n t e r e s t e a r n e d o n F D R s a n d i n t e r e s t p a i d o n t h e l o a n a mo u n t a t t h e r a t e o f @ 1% o n l y. T h a t a t t h e mo s t t h e d i s a l l o w a n c e o f in t e r e s t e x p e n d i t u r e u / s 3 6 ( 1 ) ( i i i ) o f t h e A c t c a n b e o n l y @ 1 % o f t h e i n t e r e s t a n d n o t @ 1 2 % , a s h a s b ee n ma d e b y t h e A s s e s s i n g o f f ic e r .
5. B o t h t h e L d . r ep r e s e n t a t i v e s of t h e p a r t i e s ha v e f a i r l y s u b mi t t e d t h a t t h e a b o v e p o i n t s r a i s e d b y t h e L d . C o u n s e l f o r t h e a s s e s s e e h a v e n o t b e e n l o o k e d i n t o by t h e l o w e r a u t h o r i t i e s w h i le ma k i n g / c o n f i r mi n g t h e a f o r e s a i d d i s a l l o w a n c e u / s 3 6 ( i ) ( i i i ) o f t h e Act.
I n v i e w o f t h i s, th e i mp u g n e d o r d e r o f t h e C I T ( A ) is s e t a s i d e t o t h e e x t e nt o f c o nf i r ma t i o n o f t h i s d i s a l l o w a nc e a n d t h e ma t t e r i s r e s t o r e d t o t h e f il e of t h e A s s e s s i n g o f f i ce r t o e x a mi n e t h e af o r e s a i d c o nte n t i o n r a i s e d b y t h e a s s e s s e e a n d de c i d e t h i s l i mi t e d i s s u e a f r e sh i n a c c o r d a n c e w it h l a w . ITA No. 886/Chd/2017-
Sh. Madan Lal Bassi, Ludhiana 4
6. Ground No.3: In this ground the assessee has agitated the c o n f i r ma t i o n o f di s a l l o w a n c e o f Rs . 2 1 , 0 6 , 0 0 0 / - ma d e b y t h e Assessing officer on account of amount paid to workers on 25th a n n u a l a n n i v e r s a r y o f t h e c o n c e r n of t h e a s s e s s e e .
T h e f a c t s a s b ro u g h t o u t b e f o r e u s a r e t h a t a s s e s s e e celebrated the 25th anniversary of its concern on 12.3.2011. A f u n c t i o n w a s or g an i z e d a n d c e r t a i n a mo u n t s a s i n c e n t i v e s t o t h e o u t s t a n d i n g w o r k er s w h o h a v e c o mp l e t e d 5 ye a r s o f se r v i c e w i t h the assessee's concern were paid totalling to Rs. 21,06,000/-. The l o w e r a u t h o r i t i e s h a v e d i s a l l o w e d / c o n f i r me d t h e d i s a l l o w a n c e o n this issue observing that the assessee could not establish that the said expenditure was related to the business activity of the a s s e s s e e . F u r t h e r , t h a t t h e a s s e s s e e h a d s h o w n p a yme n t o f a mo u n t t h r o u g h c h e q u e s , w h e r e a s n o n e o f th e c h e q u e s w a s e n c a s h e d b y t h e w o r k e r s , r a t h er , t h e a mo u n t w a s a l l e g e d l y d i s b u r s e d i n c a s h a f t e r t h e e n d of t he f i n a n c i a l ye a r . T h e L d . C I T ( A ) i n t h i s r e s p e c t observed that the disbursing of c heq u e s o n t h e d a y o f f u n c t i o n s e e me d t o b e a n a f t e r t h o u g h t of t h e a s s e s s e e to b o o k t h e e x p e n d i t u r e d u r i n g t h i s ye a r a g a i n s t t h e i n c o me e a r n e d t o a v o i d t a x l i a b i l i t y. H e f u r t h e r o b s e r v e d t ha t e v e n o t h e r w i s e a s p e r t he p r o v i s i o n s of s e c t io n 4 3 B , e x p e n d i t ur e w a s r e q u i r e d t o b e a l l o w e d i n t h e ye a r i n w h i c h i t w a s a c t u a l l y p a i d . H e n c e , h e c o n f i r me d t h e a f o r e s a i d d i s a l l ow a n c e o f e x p e n di t u r e f o r t h e ye a r u n d e r consideration.
ITA No. 886/Chd/2017-
Sh. Madan Lal Bassi, Ludhiana 5
7. We h a v e c o n s i d e r e d t h e r i v a l s u bmi s s i o n s a n d h a v e a l s o g o n e t h r o u g h t h e r e c o r d . A d mi t t e d l y, a f u n c t i o n w a s organized o n 1 2 . 0 3 . 2 0 1 1 i . e . a f e w d a ys e a r l i e r t o t h e c l o s e of th e f i n a nc i a l ye a r . T h e a s s e s s e e h a s p l a c e d o n r e c o r d a f f i d a vi t s o f a l l t he workers wherein they have deposed that they have actually r e c e i v e d t h e c h e qu e s o n t h e d a t e o f f u n ct i o n . H o we v e r , t h e y i n s i s t e d f o r t h e p a ym e n t o f a mo u n t i n c a s h w h i c h w a s d i s p e r s e d t o t h e m a f t e r s o me p e r i o d a n d b y t h e t i me , t h e f i n a n c ia l ye a r w a s c l o s e d . I t i s a l s o no t d i s p u t e d t h a t s uc h t yp e o f a n n u a l a n n i v e r s a r y f u n c t i o n w a s o r ga n i z e d b y t h e assessee e v e r y ye a r , h e n c e , o r g a n i z i n g of t h e a b o v e a n n u a l a n n iv e r s a r y f u n c t i o n o n t h e s a id d a t e i s n o t b e d o ub t e d . E v e n t h e r e is n o d o u b t r a i s e d b y t h e l o w e r a u t h o r i t i e s t h a t i t w a s t h e 2 5 t h / s i l v e r j u b i l e e a n n i v e r sa r y o f t h e a s s e s s e e ' s c o n c e r n. F u r t h e r , t h e p h ot o g r a p h s o f t h e f un c t i o n a n d t h e af f i d a v i t s of th e e mp l o ye e s p r o v e o n t h e f i l e t h a t th e c h e q u e s were actually dispersed on the date of function. It is also not d o u b t e d o n t h e f i le t h a t t h e a mo u n t h a s b e e n a c t u a l l y p a i d b y t h e assessee to the workers. Further, it is not the case of the Revenue a u t h o r i t i e s t h a t t h e f u n d s w e r e n o t av a i l a b l e i n t h e a c c o u n t s o f t h e a s s e s s e e t o me e t t h e c h e q u e a mo u n t . M e r e l y b e c a u s e t h e w o r k e r s d i d n o t e n c a s h t h e c h e q u e s b u t i n s i s te d t h a t t h e a mo u n t b e p a i d in c a s h a n d b y t h e t i me , t h e f i n a n c i a l ye a r was closed, that in our v i e w , i s n o t s u f f ic i e n t t o h o l d t h a t t h e a s s e s s e e had wrongly s h o w n t h e d i s b u r s a l o f p a yme n t i n t h e ye a r u n d e r c o n s i d e r a t i o n . ITA No. 886/Chd/2017-
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8. C o n s i d e r i n g t h e o v e r a l l f a c t s a n d c ir c u ms t a n c e s o f t h e c a s e , w e f i n d t h at t h e af o r e s a i d di s a l l o w an c e 1 o f e x pe n d i t ur e ma d e b y t h e l o w e r a u t h o r i t ie s i s n o t j u s t if i e d .
In view of the above discussion, this issue is decided in f a v o u r of t h e a s se s s e e a n d t h e d i sa l l o w a n c e ma d e b y t h e l o w e r authorities on this issue is ordered to be deleted.
I n t h e r e s u l t , t h e ap p e a l of t h e a s se s se e i s t r e a t e d a s a l lo w e d f o r s t a ti s t i c a l p u r po s e s .
Order pronounced in the Open Court on 04.09.2018 Sd/- Sd/-
(ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 04.09.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR