UTILITY POWERTECH LTD, MUMBAI v. ACIT 1(3), MUMBAI

ITA 2561/MUM/2009 | 2005-2006
Pronouncement Date: 19-04-2010 | Result: Allowed

Appeal Details

RSA Number 256119914 RSA 2009
Assessee PAN AAACU3458P
Bench Mumbai
Appeal Number ITA 2561/MUM/2009
Duration Of Justice 11 month(s) 28 day(s)
Appellant UTILITY POWERTECH LTD, MUMBAI
Respondent ACIT 1(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 19-04-2010
Date Of Final Hearing 05-04-2010
Next Hearing Date 05-04-2010
Assessment Year 2005-2006
Appeal Filed On 21-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI VIJAY PAL RAO (JM ) I.T.A.NO.2561/MUM/2009 (A.Y. 2005-06) M/S.UTILITY POWERTECH LTD. 3 RD FLOOR RELIANCE ENERGY CENTRE SANTACRUZ (E) MUMBAI-400 055. AAACU3458P VS. ASST..COMMR. OF INCOME-TAX-1(3) R.NO.529 AAYKAR BHAVAN M.K.ROAD MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHR I JITENDRA SANGHAVI. RESPONDENT BY SHRI S HRAWAN KUMAR. O R D E R PER VIJAY PAL RAO JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16-02- 2009 OF CIT(A)-XXI MUMBAI FOR THE ASSTT. YEAR 200 5-06. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME- TAX (APPEA LS) [HEREINAFTER REFERRED TO AS CIT(A)] ERRED IN CONFIR MING THE DISALLOWANCE UNDER SECTION 40(A)(IA) AMOUNTING TO R S.7 66 246/- ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCES. YOUR APPELLANT SUBMITS THAT THE DISALLOWANCE OF RS. 7 66 246/- IS WRONGLY MADE AND OUGHT TO BE DELETED. 2. THE LEARNED CIT(A) ERRED IN GRANTING ONLY PARTIAL RELIEF TO THE EXTENT OF 50% OF THE TOTAL EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER AND THEREBY CONFIRMING THE DISALLOWANCE OF TRAVELING EXPENSES TO RS.74 400/- IGNORING THE FACT THAT THE SAME HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND CONSTITUTE GENUINE BUSINESS EXPENDITURE. YOUR APPELLANT SUBMITS THAT THE TRAVELING EXPENSES DISALLOWED SHOULD BE ALLOWED IN FULL UNDER THE GIVEN FACTS AND CIRCUMSTANCES. 3. THE LEARNED CIT(A) IN GRANTING ONLY PARTIAL R ELIEF TO THE EXTENT OF 50% OF THE TOTAL EXPENDITURE DISALLOWED BY THE A SSESSING OFFICER AND THEREBY CONFIRMING THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES TO RS.31 900/- IGNORING THE FACT THAT THE SAME HAVE BEEN ITA2561/MUM/09 UTILITY POWERTECH LTD. 2 INCURRED FOR THE PURPOSE OF BUSINESS AND CONSTITUTE GENUINE BUSINESS EXPENDITURE. YOUR APPELLANT SUBMITS THAT THE BUSINESS PROMOTION EXPENSES DISALLOWED SHOULD BE ALLOWED IN FULL UNDER THE GIVE N FACTS AND CIRCUMSTANCES. 4. THE LEARNED CIT(A) ERRED IN GRANTING ONLY PARTI AL RELIEF TO THE EXTENT OF 50% OF THE TOTAL EXPENDITURE DISALLOWED B Y THE ASSESSING OFFICER AND THEREBY CONFIRMING THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES TO RS.1 01 650/- IGNORING THE FA CT THAT THE SAME HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND CONSTITUTE GENUINE BUSINESS EXPENDITURE. YOUR APPELLANT SUBMITS THAT THE VEHICLE EXPENSES DI SALLOWED SHOULD BE ALLOWED IN FULL UNDER THE GIVEN FACTS AND CIRCUM STANCES. 2. GROUND NO. 1 IS REGARDING DISALLOWANCE U/S.40(A) (IA). THE ASSESSEE COMPANY IS A JOINT VENTURE BETWEEN BSES LTD. AND NT PC LTD. WHICH WAS FORMED ON 23-11-1995. THE ASSESSEE COMPANY IS ENGAGED IN T HE BUSINESS OF UNDERTAKING CONSTRUCTION ERECTION RENOVATION MODERNIZATION A ND OTHER PROJECT MANAGEMENT ACTIVITIES IN THE POWER SECTOR. DURING THE ASSESSM ENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS MADE PAYMENT OF RS.12 00 000/ - BEING OFFICE RENT AND RS.7 66 246/- BEING OFFICE UPKEEPING EXPENSES TO RE LIANCE ENERGY LTD. THE ASSESSEE DEDUCTED TDS ON THE PAYMENT MADE TOWARDS OFFICE RENT BUT HAS NOT DEDUCTED TDS APPLICABLE ON THE PAYMENT TOWARDS OFFI CE UPKEEPING. THE AO ASKED FOR EXPLANATION ON WHICH THE ASSESSEE HAS SUBMITTED THAT TDS DEDUCTIBLE FROM THE PAYMENT TOWARDS OFFICE UPKEEPING COULD NOT BE D EDUCTED SINCE THE SAME WAS ADJUSTED DIRECTLY BY THE RELIANCE ENERGY LTD. AGAIN ST THE AMOUNTS PAYABLE BY THEM. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE AMOUNT OF RS.7 66 246/-. ON APPEAL THE CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE MADE BY THE AO. 3. BEFORE US THE LD. A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE IS HAVING TWO SEPARATE AGREEMENTS TOWARDS OFFICE RENT AS WELL AS OTHER COMMON ITA2561/MUM/09 UTILITY POWERTECH LTD. 3 SERVICES REGARDING OFFICE UPKEEPMENT. THE ASSESSEE HAS NOT PAID ANY AMOUNT TO RELIANCE ENERGY LTD. AND THE AMOUNT PAYABLE WAS A DJUSTED BY RELIANCE ENERGY LTD. BY WAY OF ACCOUNT ENTRIES TOWARDS THE AMOUNT P AYABLE BY RELIANCE ENERGY LTD. TO THE ASSESSEE. THUS THE LD. A.R. HAS CONTEN DED THAT THERE IS NO TRANSFER OF MONEY OR PAYMENT THROUGH CHEQUE OR DRAFT AND THERE FORE NO DISALLOWANCE CAN BE MADE U/S.40(A)(AI). HE HAS RELIED UPON THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT DATED 19-11-2008 IN THE CASE OF CIT VS. M/S. SIEMENS AKTIONGESELLSCHAFT IN I.T.REF. NO. 251 OF 1988 AND SUBMITTED THAT WHEN THE AMOUNT WAS BY WAY OF REIMBURSEMENT AND NO PAYMENT W AS MADE THE PROVISIONS OF SEC. 194-I AS WELL AS SEC.40(A)(IA) ARE NOT APPL ICABLE. 4. ON THE OTHER HAND THE LD. D.R. HAS SUBMITTED TH AT THE PAYMENT WAS NOTHING BUT PART AND PARCEL OF RENT BECAUSE IT WAS ONLY FOR USE OF OFFICE PREMISES. THEREFORE THE ASSESSEE WAS LIABLE TO DEDUCT TAX EV EN IF THE PAYMENT WAS MADE THROUGH ACCOUNT ENTRIES. HE HAS RELIED UPON THE ORD ERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE RECORD. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SE IMENS AKTIONGESELLSCHAFT (SUPRA) HAS HELD THAT REIMBURSEMENT OF EXPENSES CANNOT BE R EGARDED AS REVENUE IN THE HANDS OF THE PAYEE. WHILE DECIDING THE ISSUE THE H ONBLE HIGH COURT HAS FOLLOWED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. INDUSTRIAL ENGG. PROJECTS P.LTD. (202 ITR 1014). IT IS A SETTLED PRO POSITION OF LAW FROM THE VARIOUS DECISIONS OF HIGH COURTS AND PARTICULARLY THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT (SUPRA) THAT WHEN THERE IS NO ELEMENT OF INCOME AND THE PAYMENT IS ONLY AS A REIMBURSEMENT OF EXPENSES INCURRED BY THE PAYEE THEN NO DISALLOWANCE CAN BE MADE U/S.40(A)(IA). IN THE CASE IN HAND THE AO HAS NOT GIVEN A FINDING THAT THE EXPENSES WERE FOR OFFICE U PKEEPING AS REVENUE RECEIPT IN THE HANDS OF RELIANCE ENERGY LTD. AND NOT A PURE RE IMBURSEMENT OF EXPENSES. ITA2561/MUM/09 UTILITY POWERTECH LTD. 4 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE. 6. THE NEXT ISSUE IS REGARDING DISALLOWANCE OF TRAV ELING EXPENSES. THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.14 88 000/- AS TRAVELING EXPENSES. THE AO MADE A DISALLOWANCE @ 10% AMOUNTING TO RS.1 48 0 00/- AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOR WANT OF SUPPOR TING EVIDENCE AND VERIFIABLE VOUCHERS. ON APPEAL THE CIT(A) HAS REDUCED THE DIS ALLOWANCE FROM 10% TO 5%. 7. BEFORE US THE LD. A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE IS HAVING 40 SITES AND IN THE COURSE OF CARRYING OUT W ORK AT VARIOUS SITES SOME OF WHICH ARE LOCATED IN REMOTE AREAS THE ASSESSEE HA S INCURRED THE TRAVELING EXPENSES FOR WHICH NO VOUCHERS CAN BE PRODUCED. HE FURTHER CONTENDED THAT THE AMOUNT OF EXPENDITURE IN PROPORTION TO THE TOTAL TU RNOVER AND INCOME IS NOT ABNORMAL BUT IS VERY SMALL AND THE LOWER AUTHORITIE S ARE NOT JUSTIFIED IN MAKING AN AD HOC DISALLOWANCE. HE HAS FURTHER CONTENDED TH AT WHEN THE PURPOSE OF THE EXPENDITURE AND NEXUS OF THE SAME TO THE BUSINESS O F THE ASSESSEE HAVE NOT BEEN DENIED BY THE LOWER AUTHORITIES THEN THE AD H OC DISALLOWANCE IS NOT JUSTIFIED. 8. ON THE OTHER HAND THE LD. D.R. HAS SUBMITTED TH AT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS BY PRODUCING EVIDENCE IN SUPP ORT OF ITS CLAIM. WHEN THE ASSESSEE HAS NOT PRODUCED ANY VOUCHERS IN RESPECT OF THE EXPENSES CLAIMED THE LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE E XPENDITURE PARTLY. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND PERUSED THE RECORD. THE AO HAS DISALLOWED 10% OF THE TRAVELLING EXPENSES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE VERIFIABLE VOUCH ERS AND ADDRESSES. IT IS NOT THE CASE OF THE REVENUE THAT THE CLAIM OF THE ASSES SEE IS BOGUS AND NOT RELATED ITA2561/MUM/09 UTILITY POWERTECH LTD. 5 TO THE NATURE OF THE BUSINESS OF THE ASSESSEE. SINC E THE TRAVELING EXPENSES ARE PETTY IN NATURE AND KEEPING IN VIEW THE NATURE OF T HE BUSINESS OF THE ASSESSEE AT THE SITES LOCATED IN REMOTE AREAS IT NOT ALWAYS P OSSIBLE TO OBTAIN PROPER VOUCHERS FOR THE SAID EXPENDITURE. EVEN OTHERWISE WHEN THE EXPENDITURE HAS NOT BEEN FOUND AS ABNORMAL IN COMPARISON TO THE TOTAL T URNOVER AND INCOME ADMITTED BY THE ASSESSEE THEN IT IS NOT JUSTIFIED ON THE PA RT OF THE LOWER AUTHORITIES TO DISALLOW CERTAIN PERCENTAGE OF THE EXPENSES WHICH I S AD HOC IN NATURE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES AND NATURE OF THE EXPENSES AS WELL AS THE BUSINESS ACTIVITIES OF THE ASSESSEE WE DO NOT FIND ANY REASON TO DISBELIEVE THE EXPLANATION OF THE ASSESSEE. ACCORDINGLY THE ADDIT ION SUSTAINED BY THE CIT(A) IS DELETED. 10. GROUND NOS.3 & 4 RELATE TO DISALLOWANCE OF BUSI NESS PROMOTION EXPENSES. WE HAVE HEARD THE LD. A.R. AS WELL AS THE LD. D.R. AND PERUSED THE RELEVANT RECORD. THE REASONS FOR DISALLOWANCE BY THE AO ARE IDENTICAL AS TO THE DISALLOWANCE MADE FOR THE TRAVELING EXPENSES. THE C ONTENTIONS OF THE PARTIES ARE ALSO THE SAME AS ON THE ISSUE OF DISLLOWANCE OF TRA VELING EXPENSES. SINCE WE HAVE CONSIDERED AND DECIDED THE ISSUE ON TRAVELING EXPENSES IN FAVOUR OF THE ASSESSEE ON THE SAME REASONING THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY THE DISALLOWANCE MADE ON T HIS ACCOUNT IS DELETED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THE 19TH DAY OF APRIL 2010. SD/- SD/- (R.S. SYAL) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:19TH APRIL 2010. ITA2561/MUM/09 UTILITY POWERTECH LTD. 6 COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-XXI MUMBAI. 4 CIT CIT1 MUMBAI. 5.DR F BENCH MUMBAI. 6.GUARD FILE. (TRUE COPY) BY ORDER NG: ASST.REGISTRAR ITAT MUMBAI. ITA2561/MUM/09 UTILITY POWERTECH LTD. 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 13-4-10 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 13-4-10 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER