The ITO, Ward-8(3),, Ahmedabad v. Shore Products Ltd, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA.NO.4053/AHD/2007 WITH CO NO.03/AHD/2008 ASSTT.YEAR : 2004-2005 ITO WARD-8(3) AHMEDABAD. VS. SHORE PRODUCTS LTD. OPP: AIRPORT CROSS ROAD HANSOL AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M.G.PANDIT ASSESSEE BY : SHRI VIJAY RANJAN O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THESE ARE REVENUES APPEAL AND THE ASSESSEES CO AGAINST THE ORDER OF THE CIT( A) DATED 25-9-2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UN DER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. THOUGH IN THIS APPEAL THE REVENUE HAS RAISED FO UR GROUNDS HOWEVER THEY ARE ALL AGAINST THE DELETION OF THE DISALLOWAN CE OF RS.29 29 538/- IN RESPECT OF REBATE/DISCOUNT. 3. THE FACTS ARE THAT THE ASSESSEE DERIVES INCOME F ROM DEALING IN TOBACCO AND INDIAN MADE FOREIGN LIQUOR (IMFL). THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN REBATE ON LIQ UOR AMOUNTING TO RS.29 29 538/-. THE AO DISALLOWED THE SAME WITH TH E FOLLOWING FINDING: 4. ON VERIFICATION OF THE SUBMISSIONS IT IS SEEN THAT THE ASSESSEE COMPANY HAS SHOWN REBATE ON LIQUOR AMOUNTING TO RS. 29 29 538/-. COPIES OF THE SALE BILLS PROVIDED BY THE ASSESSEE C OMPANY WERE VERIFIED DURING THE ASSESSMENT PROCEEDINGS. IT IS SEEN THAT THE ASSESSEE HAS GIVEN REBATE OF RS.50 PER CASE TO SOME PURCHASERS A ND NOT REBATE HAS BEEN GIVEN TO OTHERS. THE AR WAS UNABLE TO EXPLAIN THE REASONS. THE ASSESSEE HAS NOT GIVEN ANY SPECIFIC REASON FOR ALLO WING REBATE IN THIS ASSESSMENT YEARS WHEREAS THERE WAS NO SUCH CLAIM I N THE EARLIER ITA.NO.4053/AHD/2007 WITH CO NO.03/AHD/2008 -2- ASSESSMENT YEAR. THE ASSESSEES BUSINESS REMAINING UNCHANGED I.E. OF TRADING IN TOBACCO AND IMFL IN THIS YEAR ALSO. THE ASSESSEE ALSO COULD NOT SUBSTANTIATE ITS CLAIM OF DEDUCTION OF REBATE. THE SAME IS THEREFORE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PE NALTY PROCEEDINGS U/S.271(1)(C) ARE INITIATED FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. ON APPEAL THE CIT(A) DELETED THE SAME. THE REVENU E AGGRIEVED WITH THE ORDER OF THE CIT(A) IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATER IAL PLACED BEFORE US. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND HE STATED THAT THE ASSESSEE CLAIMED TO HAVE GIVEN REBATE OF RS.50 PER CASE ON T HE SALE OF LIQUOR WHILE NO SUCH REBATE WAS ALLOWED IN THE PRECEDING YEAR. THE ASSESSEE HAS NOT GIVEN ANY SPECIFIC REASON FOR ALLOWING REBATE IN THIS YEAR. HE ALSO POINTED OUT THAT THE GROSS PROFIT OF THE ASSESSEE HAS ALSO REDUCED. HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE AO SHOULD BE SUSTAINED BY REVE RSING THE ORDER OF THE CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE ON TH E OTHER HAND POINTED OUT THAT THE COMPETITION IN THE TRADING BUSINESS OF IMF L HAS SUBSTANTIALLY INCREASED. THE GOVERNMENT HAS REDUCED CUSTOM DUTY ON THE IMPORT OF LIQUOR. IN THE ABOVE CIRCUMSTANCES COMPETITION NOT ONLY FRO M THE IMFL MANUFACTURED IN INDIA BUT ALSO THE LIQUOR IMPORTED FROM OTHER C OUNTRIES HAS INCREASED. IN THE ABOVE CIRCUMSTANCES TO MAINTAIN AND INCREASE THE A SSESSEES BUSINESS THE ASSESSEE HAS ALLOWED REBATE OF RS.50 PER CASE ON TH E SALE OF LIQUOR. THE DISCOUNT IS ALLOWED IN THE SALE BILLS ITSELF WHICH WERE PRODUCED BEFORE THE AO. THE REVENUE HAS NOT DOUBTED THE GENUINENESS OF THE DISCOUNT ALLOWED BY THE ASSESSEE BUT HAS DISALLOWED THE SAME MERELY ON THE GROUND THAT NO SUCH DISCOUNT WAS GIVEN IN THE EARLIER YEAR. HE HAS STA TED THAT GENUINENESS OF THE DISCOUNT ALLOWED IS NOT DOUBTED. IT IS ALSO NOT DI SPUTED THAT THE DISCOUNT WAS GIVEN FOR THE PURPOSE OF BUSINESS. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. FROM THE ORDER OF THE AO IT IS EVIDENT ITA.NO.4053/AHD/2007 WITH CO NO.03/AHD/2008 -3- THAT HE DISALLOWED THE CLAIM OF REBATE GIVEN BY THE ASSESSEE ON THE GROUND THAT (I) NO SUCH CLAIM WAS MADE IN EARLIER YEAR AND (II) THERE WAS NO SPECIFIC REASON FOR ALLOWING REBATE IN THE YEAR UNDER CONSIDERATION . IN OUR OPINION THE CRITERION FOR ALLOWING THE EXPENDITURE IS WHETHER I T WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OR NOT. IN THIS CASE THE AO HAS NEITHER DOUBTED THE GENUINENESS OF THE DISCOUNT ALLOWED BY THE ASSESSEE NOR THE FACT THAT IT WAS INCURRED FOR THE PURPOSE OF BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS EXPLAINED THE REASONS AS TO WHY THE ASSESSEE WAS CO MPELLED TO ALLOW THE DISCOUNT FOR THE YEAR UNDER CONSIDERATION. IN ANY CASE HOW THE BUSINESS IS TO BE RUN HAS TO BE DECIDED BY THE BUSINESSMAN AND NO T THE AO. IF GENUINENESS OF THE DISCOUNT ALLOWED IS NOT IN DOUBT AND IT WAS INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS IN OUR OPINION THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE AO. THE ORDER OF THE CIT( A) IS SUSTAINED AND THE REVENUES APPEAL IS DISMISSED. CO NO.03/AHD/2008 6. AT THE TIME OF HEARING BEFORE US THE LEARNED CO UNSEL FOR THE ASSESSEE SOUGHT PERMISSION TO WITHDRAW THE CO. THE LEARNED DR HAS NO OBJECTION TO DO SO. WE ACCORDINGLY PERMIT THE ASSESSEE TO WITHDRAW THE CO. THE SAME IS ACCORDINGLY DISMISSED AS WITHDRAWN. 7. IN THE RESULT THE REVENUES APPEAL AS WELL AS A SSESSEES CO ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14 TH MAY 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 14-05-2010 ITA.NO.4053/AHD/2007 WITH CO NO.03/AHD/2008 -4- VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD