ACIT, New Delhi v. M/s JCB India Limited, New Delhi

ITA 3625/DEL/2011 | 2005-2006
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 362520114 RSA 2011
Assessee PAN AAACE0078P
Bench Delhi
Appeal Number ITA 3625/DEL/2011
Duration Of Justice 2 month(s) 9 day(s)
Appellant ACIT, New Delhi
Respondent M/s JCB India Limited, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-09-2011
Assessment Year 2005-2006
Appeal Filed On 21-07-2011
Judgment Text
ITA NO. 3625/D/2011 & CO 306/D/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER ITA NO.3625/DEL/2011 ASSTT. YEAR: 2005-06 ASSTT. COMMISSIONER OF INCOME TAX VS JCB INDIA LIMITED CIRCLE-4(1) ROOM NO. 407 B-1/1-1 2 ND FLOOR C.R. BUILDING I.P. ESTATE MOHAN COOPERATIVE INDL. AREA NEW DELHI. MATHURA ROAD NEW DE LHI. C.O. NO.306/DEL/2011 (IN ITA NO. 3625/DEL/2011) ASSTT. YEAR: 2005-06 JCB INDIA LIMITED VS ACI T CIRCLE 4(1) NEW DELHI. NEW DELHI. (PAN NO. AAACE0078P) (APPELLANT) (RESPONDENT) APPELLANT BY: MS Y. KAKKAR DR RESPONDENT BY: S/SHRI TARNDEEP SINGH VINAY SINGH AL MANEESH UPNEJA O R D E R PER SHRI C.L. SETHI J.M. THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 3 1.5.2011 PASSED BY LD. CIT(A) IN THE MATTER OF AN ORDER PASSED U/S 154 OF THE INCOME TAX ACT 1961 FOR ASSTT. YEAR 2005-06. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN R ELATION THERETO. 3. THE ONLY ISSUE RAISED BY THE DEPARTMENT IN THIS APPEAL IS AS UNDER:- ITA NO. 3625/D/2011 & CO 306/D/2011 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.36 87 606/- MADE U/S 36(1)(II) ON ACCOUNT OF BONUS PAID TO THE EMPLOYEES. 2.1 THE LD. CIT(A) IGNORED THE FINDING RECORDED BY THE AO AND THE FACT THAT THE ASSESSEE DID NOT FILE THE NECESSARY EVIDENCE TO SUBSTANTIATE ITS CLAIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS DESPITE HAVING BEE N PROVIDED NUMBER OF OPPORTUNITIES. 4. IN THE CROSS OBJECTION THE ASSESSEE HAS TAKEN A GROUND AS UNDER:- THAT ON THE FACTS OF THE CASE AND IN LAW THE ORD ER OF THE LD. ASSESSING OFFICER (LD. AO) PASSED UNDER SECTION 154/143(3) OF THE ACT IS WITHOUT JURISDICT ION AS THERE IS NO MISTAKE APPARENT FROM THE RECORD NOR SU CH ADDITIONS COULD BE PERMISSIBLE UNDER SECTION 154 OF THE ACT. 5. IN THIS CASE A REGULAR ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED BY THE AO ON 30.12.2008 DETERMINING TOTAL INCOME AT R S.177 48 80 110/-. THEREAFTER IT WAS REVEALED TO THE AO THAT AS PER 3 CD AUDIT REPORT AN AMOUNT OF RS.36 87 606/- WAS PAID TO AN EMPLOYEE A S BONUS WHICH WAS NOT ALLOWABLE AS DEDUCTION AS PER PROVISIONS OF SECTION 36(1)(II) OF THE ACT. THE AO THEREFORE PROPOSED TO DISALLOW THE AFORESAID D EDUCTION OF RS.36 87 606/- AND HE ACCORDINGLY ISSUED A NOTIC E U/S 154/155 OF THE ACT ON 27.7.2010 TO THE ASSESSEE. IN RESPONSE TO THE S AID NOTICE THE ASSESSEE ITA NO. 3625/D/2011 & CO 306/D/2011 3 SUBMITTED ITS REPLY VIDE LETTER DATED 5.8.2010. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE AS UNDER:- SECTION 36(1)(II) OF THE ACT PROVIDES THAT ANY BONUS OR COMMISSION PAID TO AN EMPLOYEE FOR ANY SERVICES RENDERED IS AN ALLOWABLE EXPENDITURE WITH AN EXCEPTION FOR THOSE PAYMENTS WHICH ARE DISTRIBUTED AS PROFITS OR DIVIDEND. THEREFORE IN CASE ANY SHAREH OLDER IS ALSO AN EMPLOYEE OF THE COMPANY ANY BONUS OR COMMISSION PAID TO HIM MIGHT BE COVERED WITHIN THE PROVISIONS OF SECTION 36(1)(II) OF THE ACT RESULTI NG IN AN DISALLOWANCE EXPENSE FOR THE COMPANY. IN THIS REGARD YOUR GOODSELFS KIND ATTENTION IS DRAWN TO SCHEDULE H (POINT NO. 14) OF RETURN OF INC OME WHERE IT IS REPORTED THAT THE ENTIRE SHARE CAPITAL OF THE COMPANY IS HELD BY JC BAMFORD EXCAVATORS LTD. (JCB UK). THEREFORE THE ENTIRE RIGHT TO RECEIVE DIVIDE NDS OR PROFITS OF THE COMPANY VESTS WITH JCB UK. THUS TH IS IS A MATTER ALREADY ON RECORD THAT THERE IS NO POSSIBILI TY OF PAYING ANY DIVIDEND OR DISTRIBUTING ANY PROFITS TO ANY DIRECTOR OR ANY EMPLOYEE OF THE COMPANY. 6. THE REPLY OF THE ASSESSEE WAS EXAMINED AND CONSI DERED BY THE AO BUT FOUND BY HIM TO BE NOT ACCEPTABLE FOR THE REASON TH AT THE TAX AUDITOR IN THEIR REPORT HAVE CLEARLY MENTIONED THAT THE SAID AMOUNT WAS NOT ALLOWABLE AS DEDUCTION UNDER THE PROVISIONS OF SECTION 36(1)(II) OF THE ACT. THE AO THEREFORE ADDED THE AFORESAID AMOUNT OF RS.36 87 6 06/- TO THE TOTAL INCOME BY WAY OF HIS ORDER PASSED U/S 154 OF THE ACT DATE D 31.1.2011. 7. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A). ITA NO. 3625/D/2011 & CO 306/D/2011 4 8. AFTER CONSIDERING THE AOS RECTIFICATION ORDER P ASSED U/S 154 OF THE ACT AND ASSESSEES SUBMISSION THE LD. CIT(A) DELET ED THE ADDITION BY OBSERVING AS UNDER:- 5.2 I HAVE CONSIDERED THE WRITTEN SUBMISSION ON BEHALF OF THE APPELLANT THE FINDINGS OF THE ASSESS ING OFFICER AND THE FACTS ON RECORD. THE ASSESSING OFF ICER HAS BEEN GUIDED ONLY BY THE REMARKS OF THE AUDITORS UNDER CLAUSE 16(A) OF THE TAX AUDIT REPORT WHILE MA KING THE IMPUGNED ADDITION OF RS.36 87 606/- IN TERMS OF SECTION 36(1)(II) OF THE ACT. THE REMARKS UNDER CL AUSE 16(A) OF THE TAX AUDIT REPORT ONLY STATED THAT THE AMOUNT PAID TO AN EMPLOYEE AS BONUS OR COMMISSION FOR SERV ICES RENDERED WHERE SUCH SUM WAS OTHERWISE PAYABLE TO H IM AS PROFITS OR DIVIDEND WAS NIL. HOWEVER THE ASSES SEE COMPANY HAS DEBITED RS.36 87 606/- TO ITS PROFIT AN D LOSS ACCOUNT ON ACCOUNT OF EX-GRATIA AND YEARLY BONUS OF EMPLOYEES UNDER THE PAYMENT OF BONUS ACT 1965 FOR EMPLOYMENT SERVICES RENDERED DURING THE YEAR OUT O F WHICH AN AMOUNT OF RS.6 56 307/- DEBITED TO THE PR OFIT AND LOSS ACCOUNT REMAINED UNPAID BY THE DUE DATE OF FILING RETURN OF INCOME FOR THE ASSESSMENT YEAR 200 5-06. THEREFORE THE AMOUNT OF RS.6 56 307/- WAS ADDED BA CK TO THE TOTAL INCOME WHILE COMPUTING TAXABLE INCOME FOR THE ASSESSMENT YEAR 2005-06 AND THERE WAS NO REASON FOR ANY DISALLOWANCE IN TERMS OF SECTION 36(1)(II) OF T HE ACT EVEN ACCORDING TO THE AUDITORS. THEREFORE CONSIDE RING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTI FIED IN MAKING DISALLOWANCE OF RS.36 87 606/- UNDER SECTION 36(1)(II) OF THE ACT AND THE SAME IS HEREBY DELETED . 9. HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBU NAL. 10. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION RA ISING A GROUND THAT THE ORDER PASSED BY THE AO U/S 154 WAS BEYOND JURISDICT ION INASMUCH AS THERE ITA NO. 3625/D/2011 & CO 306/D/2011 5 WAS NO MISTAKE APPARENT FROM RECORD WHICH COULD BE RECTIFIED U/S 154 OF THE ACT. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 12. ON PERUSAL OF PROVISIONS OF SECTION 36(1)(II) O F THE ACT IT IS CLEAR THAT THE CONDITIONS IMPOSED BY SECTION 36(1)(II) FOR ALL OWABILITY OF AMOUNT PAID TO AN EMPLOYEE AS BONUS OR COMMISSION FOR SERVICES RENDERED IS THAT ANY SUCH SUM PAID TO THE EMPLOYEES SHOULD NOT HAVE BEEN PAYABLE TO HIM AS PROFIT OR DIVIDEND IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION. IN OTHER WORDS UNLESS ANY SUM AS IS PAID TO AN EMPLOYEE BY WAY OF BONUS OR COMMISSION WOULD OTHERWISE HAVE BEEN PAYABLE TO TH E EMPLOYEE AS PROFITS OR DIVIDEND THE ASSESSEE CANNOT BE DEPRIVED OF THE BENEFITS OF THIS CLAUSE. IN THE PRESENT CASE THE ASSESSEE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF JC BAMFORD EXCAVATORS LIMITED UK (JCBE UK). THE ENT IRE SHARE CAPITAL OF THE COMPANY IS HELD BY JCBE UK. THE PAYMENT OF BO NUS OF RS.36 87 606 HAS NOT BEEN MADE TO JCBE UK BUT HAS BEEN PAID TO REGULAR EMPLOYEES OF THE ASSESSEE UNDER THE PAYMENT OF BONUS ACT 1965 F OR SERVICES RENDERED BY THEM DURING THE YEAR UNDER CONSIDERATION. THE EMPL OYEES CONCERNED WHO WERE PAID BONUS WERE NOT ENTITLED TO ANY DIVIDEND OR PROFITS INASMUCH AS THEY WERE NOT THE SHAREHOLDERS OF THE ASSESSEE COMP ANY. THEREFORE THE ITA NO. 3625/D/2011 & CO 306/D/2011 6 PROVISIONS OF SECTION 36(1)(II) ARE NOT APPLICABLE TO THE PAYMENT OF BONUS OF RS.36 87 606 WHICH HAS NOT BEEN PAID TO ANY SHAREH OLDER BUT HAS BEEN PAID TO REGULAR EMPLOYEES UNDER THE PAYMENT OF BONUS ACT . THE REMARK OF THE AUDITOR UNDER CLAUSE 16(A) OF THE AUDIT REPORT READ S AS UNDER:- 16. (A) ANY SUM PAID TO AN EMPLOYEE AS NIL EXCEPT BONUS AS PER PAYMENT OF BONUS OR COMMISSION FOR SERVICES BONUS ACT 1965 (INCLUDING EX- RENDERED WHERE SUCH SUM WAS OTHERWISE GRA TIA OF RS.30 31 299) PAYABLE TO PAYABLE TO HIM AS PROFITS OR DIVIDEND EMPLOYEES AND DEBITED TO PROFIT & {SECTION 36(1)(II)} LOSS ACCOUNT RS.36 87 606. 13. THE AFORESAID REMARK WAS CLARIFIED BY THE AUDIT OR IN HIS CLARIFICATION NOTE SUBMITTED BY THE ASSESSEE DURING THE COURSE OF THE PROCEEDINGS INITIATED U/S 154 OF THE ACT WHERE IT WAS CLARIFIED AS UNDER: - IN THIS REGARD WE WOULD LIKE TO CLARIFY THAT THE AMOUNT STATED AGAINST THE CLAUSE IS NIL. HOWEVER THE COMPANY HAS DEBITED RS.36 87 606 TO ITS PROFIT AND LOSS ACCOUNT ON ACCOUNT OF EX-GRATIA AND YEARLY BONUS OF EMPLOYEES UNDER THE PAYMENT OF BONUS ACT 1965 FOR EMPLOYMENT SERVICES RENDERED DURING THE YEAR. OF T HIS AN AMOUNT OF RS.6 56 307 DEBITED TO THE PROFIT AND LOSS ACCOUNT REMAINED UNPAID BY THE DUE DATE OF FILING R ETURN OF INCOME FOR THE FINANCIAL YEAR 2004-05 AND WAS THEREFORE INCLUDED IN APPENDIX X OF OUR REPORT IN F ORM NO. 3CD DATED OCTOBER 27 2005. 14. IN THE LIGHT OF THE FACTS DISCUSSED ABOVE WE A RE THEREFORE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS RIGHTLY HEL D THAT AO WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF RS.36 87 60 6 U/S 36(1)(II) OF THE ACT. ITA NO. 3625/D/2011 & CO 306/D/2011 7 SINCE THE ADDITION MADE BY THE AO IN HIS ORDER PASS ED U/S 154 OF THE ACT HAS BEEN DELETED BY THE LD. CIT(A) AND WHICH HAS BEEN C ONFIRMED BY US AFTER CONSIDERING THE MERIT OF THE ISSUE WE ARE NOT INCL INED TO DECIDE THE LEGAL POINT RAISED BY THE ASSESSEE IN THE CROSS OBJECTION THAT THE ORDER PASSED BY THE AO U/S 154 OF THE ACT WAS WITHOUT JURISDICTION INASMUCH AS THERE WAS NO MISTAKE APPARENT FROM THE RECORD THAT COULD BE RECT IFIED U/S 154 OF THE ACT AS THE SAME HAS BECOME REDUNDANT AT THIS STAGE. 15. IN THE LIGHT OF THE DISCUSSION MADE ABOVE THE ORDER OF THE CIT(A) IS UPHELD. 16. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS TREATED AS REDUNDANT. PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2011. SD/- SD/- ( A.N. PAHUJA ) ( C.L. SETHI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 30TH SEPTEMBER 2011 GS COPY FORWARDED TO: 1. ACIT CIRCLE 4(1) NEW DELHI. 2. JCB INDIA LTD. NEW DELHI. 3. CIT(A)-VII NEW DELHI. 4. CIT 5. DR BY ORDER DY. REGISTRAR ITA NO. 3625/D/2011 & CO 306/D/2011 8