M/s. V.K. Patel & Co.,, Ahmedabad v. The Jt.CIT,Range-9,, Ahmedabad

ITA 2634/AHD/2008 | 2005-2006
Pronouncement Date: 06-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 263420514 RSA 2008
Assessee PAN AACFV2510N
Bench Ahmedabad
Appeal Number ITA 2634/AHD/2008
Duration Of Justice 2 year(s) 2 month(s) 15 day(s)
Appellant M/s. V.K. Patel & Co.,, Ahmedabad
Respondent The Jt.CIT,Range-9,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 06-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 06-10-2010
Date Of Final Hearing 05-10-2010
Next Hearing Date 05-10-2010
Assessment Year 2005-2006
Appeal Filed On 22-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI A.N.PHAUJA ACCOUNTANT MEMBER ITA NO.2634 & 2712/AHD/2008 ASSESSMENT YEAR:2005-06 DATE OF HEARING:5.10.10 DRAFTED:6.10.10 M/S. V. K. PATEL & CO. V.K. PATEL HOUSE 35-B MUNICIPAL SERVANTS SOICIETY NR. FOOTBALL GROUND KANKARIA AHMEDABAD- 380 022 PAN NO.AACFV2510N DY. CIT(OSD) CIRCLE-9 AHMEDABAD V/S. V/S. JT. COMM. OF INCOME- TAX RANGE-9 AHMEDABAD M/S. V.K. PATEL & CO. V.K. PATEL HOUSE 35-B MUNICIPAL SERVANT COLONY NR. FOOTBALL GROUND KANKARIA AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S.N.SOPARKAR SR-AR REVENUE BY:- SHRI K.M. MAHESH SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE CROSS-APPEALS ONE BY ASSESSEE AND ANOTHER BY REVENUE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX(APPEALS)-XV AHMEDABAD IN APPEAL NO. XV/JCIT./RANGE-9/152/07-08 DATED 27-05-2008. THE ASSESSMENT WAS FRAMED BY THE JCIT RANGE-9 AHM EDABAD U/S 143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO A S THE ACT) VIDE HIS ORDER DATED 27-12-2007 FOR THE ASSESSMENT YEAR 2005-06. ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 2 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IN ITA NO.2634/AHD/2008 IS AS REGARDS TO THE CONFIRMATION OF DISALLOWANCE OF P AYMENT OF TECHNICAL CONSULTANCY FEE U/S40(A)(IA) OF THE ACT. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 ;- 1. UPHOLDING THAT DISALLOWANCE OF RS.3 50 000/- PA ID AS SECURITY DEPOSIT TO VISHAL INFRASTRUCTURE LTD. U/S.40(A)(IA) WHICH HAS BEEN ADJUSTED AGAINST TECHNICAL CONSULTANCY FEES OF RS.6 44 341/- PAYABLE TO VISHAL INFRASTRUCTURE LTD. AS PER THE MEMORANDUM OF UNDERSTANDING AND ON WHICH TAX HAS BEEN DEDUCTED AND PAID IN TIME. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED TH AT THE ASSESSEE HAS DEDUCTED TDS ON TECHNICAL CONSULTANCY FEE PAID TO V ISHAL INFRASTRUCTURE LTD. AMOUNTING TO RS.6 44 341/- AS UNDER:- ON 08-06-2004 OF RS.1 LAC ON 28-02-2005 OF RS.2.50 LAC ON31-03-2005 OF RS.2 94 341/- ACCORDING TO ASSESSING OFFICER ASSESSEE HAS DEDUCTE D TDS ON 31-03-2005 AND PAID TO GOVERNMENT ACCOUNT ON 15-04-2005. ACCOR DING TO ASSESSING OFFICER THE ASSESSEE SHOULD HAVE DEDUCTED THE TDS AT THE TIME OF PAYMENT OR CREDIT OF TECHNICAL CONSULTANCY FEE AND THE SAME SHOULD HAVE BEEN DEPOSITED WITHIN DUE DATES. ACCORDING TO ASSESSING OFFICER DUE DATES FOR DEPOSITING OF TDS OF RS.1 LAKH WAS ON 07-07-2004 AN D FOR RS.2.50 LAKH WAS ON 07-03-2005. SINCE THE ASSESSEE HAS NOT DEPOSITED THE TDS WITHIN DUE DATES AND EVEN WITHIN 31-03-2005 THE AO REQUIRED T HE ASSESSEE TO EXPLAIN WHY THIS TECHNICAL CONSULTANCY FEE PAYMENT OF RS.3. 5 LAKH BE NOT DISALLOWED U/S.40(A)(IA) OF THE ACT. THE ASSESSEE EXPLAINED BE FORE THE AO THAT THE FIRST PAYMENT IS ON ACCOUNT OF SECURITY DEPOSIT AND THE B ALANCE WAS TECHNICAL CONSULTANCY FEE @ 1% OF THE GROSS RECEIPTS. THE AO HAS NOT BELIEVED THE EXPLANATION OF THE ASSESSEE AND MADE DISALLOWANCE O F TECHNICAL CONSULTANCY FEE PAYMENT OF RS.3.50 LAKH BY INVOKING THE PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT BY STATING THAT AS PER MEMORANDUM OF UNDERS TANDING (MOU IN SHORT) BETWEEN THE ASSESSEE AND VISHAL INFRASTRUCTURE LTD. THE ASSESSEE WAS TO PAY ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 3 TECHNICAL CONSULTANCY FEE @ 1% OF THE GROSS RECEIPT IN THAT PROJECT AND THE LETTER PRODUCED BY ASSESSEE FROM VISHAL INFRASTRUCT URE LTD. THE ASSESSEE TRIED TO CAMOUFLAGE THE TECHNICAL CONSULTANCY FEE PAYMENT AS SECURITY DEPOSIT. ACCORDING TO AO THE LETTER TO VISHAL INFRASTRUCTURE LTD. IS A SELF-SERVE DOCUMENT AND DOES NOT HAVE ANY EVIDENTIARY VALUE. F URTHER ACCORDING TO AO IN MOU THERE IS NO MENTION OF ANY SECURITY DEPOSIT AND THERE IS NO MENTION OF ANY SECURITY DEPOSIT IN THE BOOKS OF ACCOUNT. ACCOR DINGLY AO MADE DISALLOWANCE. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF ASSESSING OFFIC ER BY GIVING FOLLOWING FINDING IN PARA-7 OF HIS APPELLATE ORDER:- 7. I HAVE GONE THROUGH RIVAL SUBMISSIONS AND FIND THAT AS PER FINANCE ACT 2008 AN AMENDMENT HAS BEEN BROUGHT IN SECTION 4 0(A)(IA) W.E.R.F. 1.4.2008 ACCORDING TO WHICH WHERE TAX WAS DEDUCTIB LE AND WAS DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR NO ADDITION WOULD BE MADE IF THE TAX HAD BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1). THE CASE OF THE APPELLANT DOES N OT FALL IN THIS CLAUSE. AS PER AMENDMENT VIDE CLAUSE-B NO ADDITION WOULD B E MADE IF TAX HAS BEEN PAID IN ANY OTHER CASE ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR. THE APPELLANT HAS NOT PAID TDS TO GOVERNMENT ACCOUNT BY 31.3.2005 THEREFORE THE ADDITION MADE BY THE AO O F RS.3 50 000 IS UPHELD. AGGRIEVED NOW ASSESSEE CAME IN SECOND APPEAL BEFOR E US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ARGUME NTS OF BOTH THE SIDES THAT ASSESSEE AND VISHAL INFRASTRUCTURE LTD. FORM A JOIN T VENTURE IN THE NAME AND STYLE OF V.K. PATEL VISHAL JOINT VENTURE FOR THE P URPOSES OF EXECUTING THE WORK OF REPAIRS AND REHABILITATION OF SH-17 FROM SURENDR ANAGAR TO VIRAM GAM ROAD. THE ASSESSEE CLAIMED TO HAVE PAID SECURITY DE POST OF RS.3.50 LAKH TO VISHAL INFRASTRUCTURE LTD. AS PER MOU AND CONFIRMAT ION WAS ALSO FILED BY VISHAL INFRASTRUCTURE LTD. THE ASSESSEE CLAIMED THAT SECUR ITY DEPOSIT OF RS.3.50 LAKH WAS ADJUSTED AGAINST TECHNICAL CONSULTANCY FEE OF R S.6 44 341/- PAYABLE TO VISHAL INFRASTRUCTURE LTD. AS PER THE MOU. THE ASSE SSEE CLAIMED TO HAVE DEDUCTED TDS ON THE TECHNICAL CONSULTANCY FEE OF RS .6 44 341/- ON 31/03- 2005 AND PAID TO THE GOVERNMENT ACCOUNT ON 15-04-20 05. ACCORDING TO ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 4 ASSESSEE THE FIRST ARGUMENT WAS THAT THIS WAS SECU RITY DEPOSIT FOR THIS AMOUNT OF RS.3.50 LAKH AND FURTHER WITHOUT PREJUDICE TO TH E ABOVE THIS BEING THE FIRST YEAR WHEN THE PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT HAVE BECOME OPERATIVE. ACCORDING TO ASSESSEE THE PURPOSE OF INT RODUCTION OF THIS PROVISION IS TO AUGMENT COMPLIANCE OF TDS PROVISIONS. WE FIND THAT NOWHERE IN THE MOU THERE IS PROVISION OF SECURITY DEPOSIT AND EVEN THE CONFIRMATION FILED BY ASSESSEE IS NOT CLEAR THAT AS TO HOW THIS SECURITY DEPOSIT WAS ADJUSTED AGAINST TECHNICAL CONSULTANCY FEE WITHOUT COMPLETION OF PRO JECT. BUT IT IS A FACT THAT ASSESSEE HAS PAID TDS ON15-04-2005 ON THE TECHNICAL CONSULTANCY FEE AFTER DEDUCTED TDS ON TECHNICAL CONSULTANCY FEE AS ON 31- 03-2005. THE PROVISIONS OF SECTION 40(A)(IA) HAVE BEEN INTRODUCED BY FINANC E ACT (NO.2) 2004 ( ACT NO.23 OF 2004) W.E.F. ASSESSMENT YEAR 2005-06 AND S AID FINANCE NO.2 2004 HAS RECEIVED ASSENT OF THE PRESIDENT ON 10 TH SEPTEMBER 2004. THIS LAW HAS BECOME APPLICABLE FROM 1 ST OCTOBER 2004. WE ARE OF THE VIEW THAT THIS BEING SUBSTANTIVE LAW IT CANNOT OPERATE RETROSPECTIVELY. WE FIND FROM THE FACTS THAT THE ASSESSING OFFICER COULD NOT HAVE FOUND ANY FAUL T WITH THE PAYMENT OF RS.1 LAKH MADE ON 08-06-2004. AS PER THE PROVISIONS OF T HE ACT ALL SUCH PAYMENTS ON WHICH TAX HAS BEEN DEDUCTED DURING THE YEAR TDS HAS BEEN PAID BY 31 ST MAY OF RESPECTIVE YEAR IS ALLOWABLE U/S.200(1) OF T HE ACT AS THE ASSESSEE HAS DEPOSITED TAX ON THE SAID EXPENSE OF RS.3.50 LAKH A S IS EVIDENT FROM COPY OF FORM NO.26 AND NO DISALLOWANCE ON THIS AMOUNT CAN B E MADE. THE ASSESSEE RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ORACLE SOFTWARE INDIA LTD. 164 TAXMAN 479 (DEL) WHEREIN IT HAS BEEN HELD IN THE CASE OF DISALLOWANCE U/S.40(A)(IA) THAT AS THE TAX DEDUCTED DURING THE RELEVANT PREVIOUS YEAR HAS BEEN PAID DURING SUBSEQUENT YEAR BEFORE DUE DATE OF FILING OF RETURN OF INCOME NO DISALLOWANCE CAN BE MADE BY THE ASSESSING OFFICER AND IN THE PRESENT CASE TDS HAS BEEN PAID ON 15-04 -2005 ON THE AMOUNT OF RS.3.50 LAKH. ACCORDINGLY THIS ISSUE OF THE ASSESS EES APPEAL IS ALLOWED. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IN ITA NO.2634/AHD/2008 IS AS REGARDS TO DISALLOWANCE OF TRANSPORT CHARGES BY INVOKING THE PROVISIONS OF ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 5 SECTION 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF T DS. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2 :- 2. UPHOLDING THAT DISALLOWANCE OF RS.23 839/- PAID FOR TRANSPORT CHARGES TO A-I TRANSPORT U/S.40(A)(IA) ON WHICH TA X HAS NOT BEEN DEDUCTED BY INADVERTENCE AT RELEVANT TIME AND TAX O F RS.487/- ALONG WITH INTEREST OF RS.180/- HAS BEEN PAID ON 23-01-20 08. 6. AT THE OUTSET LD. SR-COUNSEL FOR THE ASSESSEE S .N.SOPARKAR FAIRLY STATED THAT HE HAS INSTRUCTIONS FROM THE ASSESSEE N OT TO PRESS THIS ISSUE. AS THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THIS ISSUE HENCE SAME IS DISMISSED AS NOT PRESSED. 7. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IN ITA NO.2634/AHD/2008 IS AS REGARDS TO THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF UNPAID PROFESSIONAL TAX U/S.43B OF THE ACT. FOR THIS ASSE SSEE HAS RAISED THE FOLLOWING GROUND NO.3 :- 3. UPHOLDING THAT DISALLOWANCE OF RS.29 377/- AS U NPAID PROFESSIONAL TAX U/S.43B THOUGH THERE IS DOUBLE DISALLOWANCE TO THE TUNE OF RS.7 940/- 8. THE BRIEF FACTS ARE THAT THERE IS UNPAID PROFESS IONS TAX OF RS.1 12 306/- AS PER THE GROUPINGS BALANCE-SHEET OF ASSESSEE AS O N 31-03-2005 AND THIS UNPAID PROFESSIONAL TAX RELATES TO ASSESSMENT YEARS 2001-02 TO 2005-06 AS CLAIMED BY ASSESSEE. ACCORDING TO ASSESSEE IT HAS D ISALLOWED AT RS.19 486/- DURING ASSESSMENT YEAR 2003-04 AND RS.180/- DURING ASSESSMENT YEAR 2005- 06. THE ASSESSEE CONTENDED THAT ASSESSING OFFICER H AS ERRED IN MAKING DISALLOWANCE OF UNPAID PROFESSIONAL FEE AT RS.1 19 863/- U/S.43B OF THE ACT ON THE PREMISE THAT THE ASSESSEE HAS NOT DEPOSITED THE PROFESSIONAL TAX OF RS.1 20 043/- WITHIN THE PRESCRIBED TIME-LIMIT. THE AO APART FROM THE DISALLOWANCE MADE BY ASSESSEE AT RS.180/- DISALLOWE D THE BALANCE AMOUNT OF RS.1 19 863/-. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO CONFIRMED THE DISALLOWANCE OF UNPAID PR OFESSIONAL TAX U/S.43B TO ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 6 THE EXTENT OF RS.29 377/- BY GIVING FOLLOWING FINDI NG IN PARA-10 OF HIS APPELLATE ORDER:- 10. THE PLEA OF THE AR THAT RS.90 486 HAD BEEN DISALLOWED IN AY 2003-04 S PER APPELLATE ORDER PASSED BY CIT(A)-II RAJKOT DATED 23.2.06 WAS FOUND TO BE CORRECT. ON QUERY THAT WHY THIS AMOUNT WAS NOT TAKEN CARE OF IN THE AUDIT REPORT OR THE RETURN THE AR INFORMED THAT THE APPELLATE ORDER WAS RECEIVED IN FEBRUARY 2006 WHILE THE AUDIT REPORT WAS COMPLETED ON 29.10.05 AND THE RETURN WAS FILED ON 31.10.05 THAT IS EARLIER THAN THE RECEIPT OF THE APPELLATE O RDER. AFTER GOING THROUGH RIVAL SUBMISSIONS THAT THE AUDIT REPORT POINTS OUT THAT RS.1 20 043 WAS UNPAID PROFESSIONAL TAX THAT CAN BE REDUCED BY RS. 180 ALREADY ADDED BACK IN THE COMPUTATION OF INCOME BY THE APPELLANT AND FURTHER BY RS.90 486 DISALLOWED IN AY 2003-04 BY CIT(A).A THE ADDITION THUS GETS REDUCED TO RS.29 377/- (RS.1 20 043 MINUS RS.180 =R S.1 19 863 MINUS RS.90 486). THE APPELLANT GETS RELIEF OF RS.90 486. AGGRIEVED ASSESSEE CAME IN SECOND APPEAL BEFORE US . 9. WE FIND THAT THIS FACT IS NOT CLEAR THAT HOW MUC H AMOUNT RELATES ON WHICH YEAR OUT OF THE BALANCE DISALLOWANCE OF RS.29 377/-. AS CLAIMED BY ASSESSEE THAT THIS PERTAINS EARLIER ASSESSMENT YEAR S SINCE THE FACTS ARE NOT CLEAR BROUGHT OUT BY THE LOWER AUTHORITIES THIS IS SUE NEEDS RE-VERIFICATION AT THE LEVEL OF ASSESSING OFFICER. ACCORDINGLY THIS I SSUE OF THE ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF ASSESSING OFFICER AND A LLOWED FOR STATISTICAL PURPOSE. 10. THE NEXT COMMON ISSUE IN THESE CROSS APPEALS A SSESSEES APPEAL IN ITA NO.2634/AHD/2008 AND THAT OF REVENUES APPEAL IN ITA NO.2712/AHD/2008 IS AS REGARDS TO THE ORDER OF CIT(A) IN RESTRICTIN G THE DISALLOWANCE AT RS.83 565/- OUT OF WHICH TOTAL DISA LLOWANCE OF RS.6 98 484/- ON ACCOUNT OF EXPENDITURE INCURRED AS CAPITAL IN N ATURE. FOR THIS AGAINST THE CONFIRMATION OF DISALLOWANCE ASSESSEE HAS RAISED T HE FOLLOWING GROUND NO.4 :- ITA NO.2634/AHD/2008 (ASSESSEES APPEAL) 4. UPHOLDING THAT DISALLOWANCE OF RS.83 565/- INCU RRED FOR BOREWELL (RS.61 946) AT THE CONSTRUCTION SITE OF AIRPORT AUT HORITY MUMBAI FOR THE PURPOSE OF EXECUTION OF CONSTRUCTION CONTRACT ON TH E LAND BELONGING TO ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 7 AND WHICH HAS BEEN HANDED OVER TO AIRPORT AUTHORITY MUMBAI AND RS.21 619/- THAT IS 10% OF RS.2 16 190/- BEING B USINESS PROMOTION EXPENSES INCURRED DURING EARLIER PREVIOUS YEAR. FOR DELETION OF ADDITION REVENUE HAS RAISED THE FO LLOWING GROUND NO.1 :- ITA NO.2712/AHD/2008 (REVENUES APPEAL) 1. THE LD. COMMISSIONER OF INCOME-TAX-XV AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.6 40 919/- BY TREATING IT AS REVE NUE EXPENDITURE. HOWEVER THE AUDITOR OF THE ASSESSEE HIMSELF HAS CA TEGORICALLY MENTIONED AT COLUMN NO.17(A) OF HIS AUDIT REPORT IN FORM NO.3CD THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE AS THE SA ME IS INCURRED FOR NEW SITE DEVELOPMENT. 11. THE BRIEF FACTS ARE THAT THE ASSESSEE HAS INCUR RED EXPENSES FOR CONSTRUCTION OF TEMPORARY STRUCTURES AND OTHER ALLI ED FACILITIES FOR THREE NEW WORK SITES AMOUNTING TO RS.10 13 669/- (RS.3 65 250 FOR MUMBAI AIRPORT + RS.3 77 700/- FOR SURAT AIRPORT AND RS.2 70 719/- F OR VIRAMGAM SURENDRANAGAR ROAD PROJECT) AND CLAIMED THAT THESE ARE ALLOWABLE REVENUE EXPENSES. THE ASSESSEE MAINTAINED THAT INSTEAD OF C LAIMING FULL AMOUNT OF RS.10 13 669/- IN THE RETURN OF INCOME THE ASSESSE E UNDER MISTAKEN BELIEF CLAIMED DEDUCTION OF RS.6 76 879/- ONLY AND A STATE MENT OF NEW SITE DEVELOPMENT EXPENSES WHICH HAS BEEN SUBMITTED ALON G WITH ASSESSEES LETTER DATED 20-12-2007. THE ASSESSEE ALSO CLAIMED RS.21 619/- AS 10% OF RS.2 16 190/- WHICH IS INCURRED FOR BUSINESS PROMOT ION OF THE ASSESSEE DURING EARLIER PREVIOUS YEAR. THE AGGREGATE OF DEDUCTION C LAIMED IS RS.6 98 484/- INSTEAD OF PERMISSIBLE DEDUCTION OF RS.10 35 288/-. THE ASSESSING OFFICER MADE THE ADDITION BY GIVING FOLLOWING FINDING:- 9. IT IS SEEN THAT THE AUDITORS IN COLUMN 17(A) OF FORM 3CD HAS MENTIONED THAT THE ASSESSEE HAS DEBITED RS.6 98 484 /- IN THE PROFIT & LOSS ACCOUNT BUT THE SAME WAS EXPENDITURE OF CAPIT AL NATURE AS CERTIFIED BY THE AUDITORS OF THE ASSESSEE. HENCE THIS AMOUNT OF RS.6 98 484/- IS BEING DISALLOWED BEING OF CAPITAL NATURE AND ADDED BACK TO THE TOTAL INCOME. BY CLAIMING THIS EXPENDITURE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULAR OF INC OME LEADING TO CONCEALMENT OF INCOME. THEREFORE PENALTY PROCEEDINGS U/S.271(1)(C) HAS BEEN INITIATED. ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 8 AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO RESTRICTED THE ADDITION THE ADDITION AT RS.83 565/ - AND DELETED THE BALANCE ADDITION OF RS.6 04 919/- BY GIVING FOLLOWING FINDI NG IN AFTER GOING THROUGH RIVAL SUBMISSIONS THE COMMENT S ON THE STRUCTURE FOR WHICH EXPENSES ARE CLAIMED ARE AS UNDER. (ANNEX URE G OF AR'S LETTER DATED 1.4.08 IS REPRODUCED BELOW WITH REMARK S/COMMENTS: MUMBAI SITE TOTAL EXPENSES 2004-05 2005-06 REMARKS DESCRIPTION AMOUNT AMOUNT AMOUNT BOREWELL 1 02 028 61 946 40 082 A BOREWELL CANNOT B E TREATED AS A TEMPORARY STRUCTURE ELIGIBLE FOR 100% DEPRECIATION. THE ADDITION OF RS.61 946 IS UPHELD AS CAPITAL EXPENDITURE OFFICE GODOWN STRUCTURE 1 55 074 94 152 60 922 IT WAS EXPLAINED THAT FOR STORAGE OF CEMENT TEMPORARY STRUCTURES ARE BUILD AS THIS CAN BE TREATED AS TEMPORARY STRUCTURE. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.94 152 PLANT & ERECTION 1 08 148 65 659 42 489 IT WAS EXPLAINED THAT TEMPORARY ELECTRICITY WORK ETC. ARE GOT DONE STORAGE SPACES FOR MATERIALS ARE BUILD AT WORK SITES. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.65 659 TOTAL EXPENSES CLAIMED 3 65 250 2 21 757 1 43 493 SURAT SITE BOREWELL OFFICE GODOWN WATER TANK 3 77 700 2 38 547 1 39 153 IT WAS EXPLAINED DURING THE COURSE OF APPELLANT PROCEEDINGS ON 23.5.08 THAT THERE IS NO BOREWELL AT SURAT SITE BOREWELL HAD BEEN MENTIONED BY ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 9 MISTAKE. IT WAS EXPLAINED THAT THE NEW AIRPORT AT SURAT IS BEING BUILT FAR AWAY FROM THE CITY AND THE WORK GIVEN TO THE APPELLANT WAS A TIME BOUND PROGRAMME THEREFORE THE EXPENDITURE INCURRED ON TEMPORARY STRUCTURES LIKE OFFICE GODOWN AND WATER TANK SHOULD BE ALLOWED. IN THE LIGHT OF THESE ARGUMENTS THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.2 48 947. TOTAL EXPENSES CLAIMED 3 77 700 2 38 547 1 39 153 MADHUPAR SITE GOODWILL 2 16 190 21 619 1 94 571 IT WAS EXPLAINED THAT RS.21 619 WERE SPENT ON BOCHURES DISTRIBUTED BY THE APPELLANT FOR MARKETING. THE AR COULD NOT EXPLAIN WHAT SALES PROMOTION WAS DONE BY A GOVERNMENT CONTRACTOR. FURTHER THIS AMOUNT CANNOT BE TREATED ELIGIBLE FOR DEPRECIATION BY ANY STRETCH OF IMAGINATION. THE ADDITION OF RS.21 619 IS UPHELD. TOTAL EXPENSES CLAIMED 2 16 190 21 619 1 94 571 SURENDRANAGAR SITE OFFICE GODOWN STRUCTURE 2 70 719 2 16 575 54 144 IT WAS ARGUED THAT FOR REPAIR AND REHABILITATION OF HIGHWAY-17 TEMPORARY STRUCTURES WERE BUILT FOR MEN AND MATERIALS. IN THE LIGHT OF THESE ARGUMENTS THE AO IS DIRECTED TO DELETE THE ADDITION AS THE ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 10 EXPENSES HAVE BEEN INCURRED BY THE APPELLANT ON TEMPORARY STRUCTURES TO EXECUTE WORK ORDERS. AGGRIEVED REVENUE AS WELL AS ASSESSEE CAME IN APPE AL BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS A S NOTED ABOVE WHICH ARE NOT IN DISPUTE THAT THE ASSESSEE RAISED THESE TEMP ORARY STRUCTURES AT THE PROJECT SITE FOR THE PURPOSE OF BUSINESS AND WELFAR E OF THE EMPLOYEES. WE FIND FROM THE FACT THAT THE ASSESSEE WAS REQUIRED TO CLE AR THE SITE ON COMPLETION OF THE PROJECT. THE ABOVE FACTS THEREFORE SHOW THAT ALL THE STRUCTURES WERE TEMPORARY IN NATURE AND WERE MEANT FOR THE BUSINESS OF THE ASSESSEE TILL THE PROJECT CONTINUED. IT WAS OBLIGATION OF THE ASSESSE E TO REMOVE THE TEMPORARY STRUCTURE FROM THE SITE ON COMPLETION OF THE PROJEC T. THERE IS NO QUESTION OF GENERATING ANY ASSET IN FAVOUR OF THE ASSESSEE OR G ETTING ANY ENDURING BENEFIT. THE TEMPORARY STRUCTURE THEREFORE WOULD N OT CONSTITUTE ANY ASSET THE SAME ARE EXPENSES WHOLLY AND EXCLUSIVELY INCURRED F OR THE PURPOSE OF FACILITATING THE BUSINESS OF THE ASSESSEE. THE DECI SIONS RELIED UPON BY LD COUNSEL FOR THE ASSESSEE CLEARLY SUPPORT THE CASE O F THE ASSESSEE FOR ALLOWING DEDUCTION ON THE EXPENSES BEING REVENUE IN NATURE B Y THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. TAMILNADU POLICE HOUSING CORPORATION 313 ITR (ST) 28 (SC) DISMISSED THE DEPARTMENTAL APP EAL IN WHICH ASSESSEE DID NOT IN CONSTRUCTION BUILDING ON LEASEHOLD LAND ACQUIRED A CAPITAL ASSET BUT HAD ONLY PUT UP A CONSTRUCTION OF THE BUILDING FOR BUSINESS ADVANTAGE WITH THE RESULT THAT THE ENTIRE CONSTRUCTION COST WAS ADMISS IBLE AS REVENUE EXPENDITURE. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE IN THE LIGHT OF THE ABOVE DECISIONS IT IS CLEAR THAT THE AMOUNTS SPENT BY TH E ASSESSEE ON ERECTION OF THE TEMPORARY STRUCTURE EQUIPMENTS FURNITURE AND FIXT URES ETC. AT THE SITE UNIT ARE REVENUE EXPENDITURE AND THE SAME SHALL HAVE TO BE A LLOWED AS DEDUCTION. WE ACCORDINGLY SET ASIDE THE ORDERS OF AUTHORITIES BEL OW AND DELETE THE ENTIRE ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 11 ADDITION. THE COMMON ISSUE IN THIS APPEAL OF ASSES SEE IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 13. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IN ITA NO.2634/AHD/2008 IS AS REGARDS TO DISALLOWANCE OF TRAVELING EXPENSES T ELEPHONE EXPENSES AND CONVEYANCE EXPENSES TREATING AS PERSONAL IN NATURE AT RS.2 10 945/-. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.5 :- 5. UPHOLDING THAT DISALLOWANCE RS.2 10 945/- OUT O F TRAVELING EXPENSES TELEPHONE EXPENSES AND CONVEYANCE EXPENSES TREATING THE SAME AS PERSONAL EXPENDITURE IN SPITE OF THE FACT THAT THE PARTIES OF THE FIRM HAVE ALSO INCURRED PERSONAL TRAVELLING EXPENSES OF RS.75 875/- VEHICLE EXPENSES OF RS.80 236/- AND TELEPHONE EXPENSES OF R S.80 392/- WHICH HAVE BEEN DEBITED IN THEIR PERSONAL BOOKS OF ACCOUN T.. 14. WE FIND THAT THE ASSESSEE BEFORE THE ASSESSING OFFICER HAS PRODUCED COMPLETE BILLS & VOUCHERS FOR THESE EXPENSES DULY A UDITED BY THE TAX AUDITORS OF THE ASSESSEE. WE FROM THE ORDERS OF THE LOWER AU THORITIES THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC INSTANCE OF PERSONAL U SER INVOLVED AND WITHOUT THAT HAS ESTIMATED 1/5 TH OF SAID EXPENSES AS PERSONAL IN NATURE. EVEN THE A O COULD NOT POINT OUT THE IOTA OF PERSONAL USER OF TR AVELING BY THE ASSESSEE OR HIS FAMILY MEMBERS. IN THE ABSENCE OF ANY FINDING OF SU CH NATURE WE CANNOT CONFIRM THE ADDITION AND ACCORDINGLY DISALLOWANCE I S DELETED. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 15. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06 /10/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 06/10/2010 ITA NO.2634 & 2712/AHD/2008 A.Y.2005-06 M/S. V.K. PATEL & CO. V. JCIT RNG-9 ABD PAGE 12 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XV AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD