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Income Tax Appellate Tribunal - Indore

Ayush Ajay Construction P. Ltd., Indore vs Dcit 5(1), Indore on 15 May, 2017

Ayush Ajay Construction Pvt. Ltd. v. DCIT 5(1) Indore / I.T.A. No. 793 /Ind/2016 /A.Y.:10-11 Page 1 of 6 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ /.सं.अ.I.T.A. No. 793/Ind/2016 नधा रण वष /Assessment Year: 2010-11 M/s. Ayush Ajay Construction DCIT 5(1) Indore Pvt. Ltd. v.

 3/3 South Tukoganj, Indore
             अपीलाथ  /Appellant                                           	यथ  /Respondent
  था.ले.सं./PAN: AACCA 5523 B

अपीलाथ  क  ओर से/Appellant by                             Shri Prakash Jain, C.A.
 	यथ  क  ओर से/Respondent by                              Shri Mohd. Javed, Sr. D.R.

सनु वाई क  तारीख/Date of hearing                                              08-05-2017
उ ोषणा क  तारीख/Date of pronouncement                                         15-05-2017

                                           आदेश /O R D E R
 PER O.P. MEENA, ACCOUTANT MEMBER.

1. This appeal filed by the assessee is directed against the order of Learned Commissioner of Income-tax (Appeals)-I, Indore [in short "the CIT (A)"] dated 04-03-2016 pertaining to Assessment Year 2010-11, which in turn has arisen from the order dated 30-01-2013 passed by the DCIT 5(1) Indore (in short "the AO") under section 143 (3) of Income Tax Act, 1961 (in short 'the Act'). The assessee has taken following grounds of appeal:-

2. Ground no. 1 is general in nature and do not require any specific adjudication.

3. Ground no. 2 regarding confirming the disallowance of Rs. 8,27,363/- being management fees paid to Prudential ICICI towards Portfolio Management Services.

4. The AO disallowed the PMS expenses by holding that these expenses were related to capital gains on mutual fund of which income is exempt under section 10(34)of the Act, hence, expenditure relating to exempt income is not allowable. The Ld. CIT (A) also confirmed the same by observing that PMS paid to Prudential ICICI and mutual fund related to exempt income and the assessee has not proved that these expenses are fees relating to share business, which is subject to tax.

5. Being aggrieved, the assessee preferred this appeal. The Ld. A.R. referring to page No 210 of Paper Book (which contains details of expenses), submitted that the expenditure consists management fees of Rs. 58,904/- Rs. 4,21,794/- paid to ICICI , Rs. 1,25,000/- being fees paid to Franklin Management Fees and other expenses of Rs. 1,91,552/- and Rs. 30,112/- being HDFC PMS expenses. Thus, the total expenditure of Rs. 8,27,363/- are related to exempt income. The learned counsel referring to computation of total income, (PB-4) contended that these expenses are included in the suo-moto disallowance of Rs. 10, 89,633/- made u/s. 14A by the assessee in its computation of total income. As such, the assessee while computing taxable income already disallowed these expenses, which were related to exempt income. Hence, disallowance made and confirmed by the CIT (A) amounts to double disallowance of same expenditure. Hence, disallowance so made may be deleted.

6. We have heard the rival submissions of both the parties and have perused the material available on record. We find that the expenditure relates to exempt income , and same is covered by disallowance of Rs. 10,89,633/- made by the assessee by its own as per provision of section Ayush Ajay Construction Pvt. Ltd. v. DCIT 5(1) Indore / I.T.A. No. 793 /Ind/2016 /A.Y.:10-11 Page 3 of 6 14A of the Act. Thus, these disallowance are already covered and stand added back to total income while computing total taxable income of Rs. 4,08.60,137/-. Hence, no further disallowance of same expenditure is called for. Therefore, the AO is directed to delete such disallowance of expenditure. This ground is allowed.

7. Ground no. 3 relates to confirming disallowance of Rs. 12,21,002/- out of disallowance of mess expenses of Rs. 22,70,000/-.

8. Facts apropos of this ground are that the assessee has claimed expenses relating to food , tea, coffee, and breakfast etc. to the employees working at Toll Booths under the head Mess expenses of Rs. 34,72,029/- in Non-BOT projects and Rs. 3,83,142/- in BOT projects. The AO found that most of expenses are self-made vouchers having no supporting evidence. The expenses in Non-BOT section are 9 times more than of BOT section. As these expenses mainly related to employees working at booths, hence, by taking basis of salary ratio, the AO found that, the assessee has claimed 19% mess expenses of salary in BOT section whereas in Non-BOT section these expenses are 55% of salary. In view of this, the AO restricted the expense of Non-BOT section to 19% which resulted in to disallowance of Rs. 22,70,000/-.

9. In appeal, the Ld. CIT (A) has made some arithmetical calculation and noted that average expenditure per employee in Maharashtra booths comes to Rs. 17,233/- whereas in Gujarat Booth it comes to Rs. 44,773/- . The average salary for Non BOT section comes to Rs. 65,684. In terms of percentage of expenses of mess expenses are 68.14% in Gujarat booths and 26.36% in Maharashtra booth of average salary paid. Thus, expenses in Gujrat Booth are considered as high. Accordingly, the expenses of Gujrat booth were unreasonably considered high , therefore, taking the average rate of salary at 40% , the expenses were restricted to Rs. 17,34,018/- as against the claim of Ayush Ajay Construction Pvt. Ltd. v. DCIT 5(1) Indore / I.T.A. No. 793 /Ind/2016 /A.Y.:10-11 Page 4 of 6 expenses of Rs. 29,55,020/-. Accordingly, disallowance of Rs. 12,21,003[ 29-55020- 17,34,018] was confirmed and balance disallowance of Rs. 10,48,998/- was allowed.

10. Being not satisfied, the assessee preferred this appeal before us. The learned Counsel for the assessee, submitted that expenses in Gujarat booth are more as the booth in Gujarat are located more distance then from the main city. Where employees are to be provided foods in evening and lunch also. The expenditure incurred is not under control of the assessee and it have to be allowed based on self-made vouchers. On the other hand, the learned Sr. D.R. supported the order of the CIT (A).

11. We have heard the rival submissions of both the parties and have perused the material available on record. We find that the Ld. CIT (A) has restricted the expenses by considered @40 of average salary expenses. We find that in terms of percentage the expenses in Maharashtra booth comes to 26.36% whereas in Gujarat booth it comes to 68.14%. Therefore, we are of the opinion that it would be meet the end of justice, if we take average of percentage of mess expenses which worked out to 47.24% [ 26.36%+ 68.14%=94.49/2= 47.24%]. Accordingly, the expenses on account average salary in respect of 66 employees of Gujarat booths which comes to Rs. 43, 35, 144/- hence, it is restricted to 47.24% which comes to Rs. 20,49,223/-. [43, 35,144*47.24%]. The assessee has debited mess expenditure at Rs. 29,55,020/- hence, disallowance is worked out to Rs. 9,05,797/-which is confirmed and balance disallowance of Rs. 12,21, 002- 9,05,797=3,15,205/- is deleted. This ground of appeal is therefore, partly allowed.

12. Ground no. 4 relates to confirming the addition of Rs. 15, 41,065/- being commission paid on change of coins.

13. Briefly stated the facts of this ground are that the assessee has debited expenses of the Rs. 15, 41, 065/-being commission paid to various persons on account of getting coins changed for changing the coins at the time of receipt of the toll tax. However, the AO noted that no such charges in respect of BOT section as such expenses for non-BOT sections are not acceptable. Accordingly, the AO made disallowance of total expenditure claimed on this account.

14. Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). Before the CIT(A) , it was claimed that the assessee filed copy of RBI letter received by E mail by of the assessee , and contended that in spite of approaching the bank with the documents in form of RBI letter, but the coins were not made available. Hence, the assessee has to take coins from market by paying a commission. However, the CIT (A) has noted that out of the total expenses of Rs. 15, 41, 065-/- coin expenses commission of Rs. 13, 67, 440/-is only of one Booth expenses with regard Bamanbore, Gujarat and balance of Rs. 1,70,0 75/- at Bagdogra Gujarat. Thus again there is a wide disparity and no reason for such steep expenditure is filed by the assessee. Whereas RBI letter categorically stated that bank will proved the coins. In view of these facts, the disallowance made by the Assessing Officer came to be confirmed.

15. Being, aggrieved the assessee filed this appeal before the Tribunal. The Ld. A.R. submitted that during the period the bank were not able to provide coin, which are necessary for paying change at tool booth. Therefore, the assessee has to obtain the same from market on which commission was paid. The assessee also written to RBI to write to the bank to provide coins to the assessee for the purpose of its payments for payment of change at the Toll, booths. However, inspite of Ayush Ajay Construction Pvt. Ltd. v. DCIT 5(1) Indore / I.T.A. No. 793 /Ind/2016 /A.Y.:10-11 Page 6 of 6 that bank were not able to provide, hence, it was imperative on the part of the assessee to obtain the same on commission.

16. Per contra, the learned Sr. D.R. relied on the orders of lower authorities.

17. We have heard the rival submissions of both the parties and have perused the material available on record. We find that the expenditure on commission on coin were incurred in respect of only two BOOTH at Gujarat as the toll tax being collected where the toll tax rate was in odd amount of rupees, and not in even amount of currency notes like Rs. 5, 10, 20 denominations. Therefore, the assessee had to keep change for payments to owners of vehicles passing through these tolls. It is also noticed that the assessee had made an attempt by writing letter to RBI for direction to banks to provide coins to the assessee. However, the assessee could not succeed to obtain coins. Considering such circumstances, it cannot be doubted that the assessee was not required to obtain coin from open market and consequently, paying commission to such persons. Therefore, the entire disallowance of expenses in the case of a Private limited company in which no personal elements are involved is not justified. Therefore, considering the circumstances, we are of the considered opinion that it would meet the end of justice, if the disallowance of expenses claimed are restricted to Rs. 5,00,000/- and balance disallowance of Rs. 10,41,065/- is directed to be deleted. Accordingly, this ground of appeal is therefore, partly allowed.

18. In the result, the appeal of the assessee is partly allowed.

19. The order pronounced in the open Court on 15.05.2017 Sd/- Sd/-

                ( C.M. GARG)                                      ( O. P. MEENA)
             JUDICIAL MEMBER                                   ACCOUNTANT MEMBER
       िदनांक /Dated : 15th May,2017
       opm