DCIT, Circle - 3, Kolkata, Kolkata v. M/s. EKO Diagonistic Pvt. Ltd., Kolkata

ITA 476/KOL/2011 | 2004-2005
Pronouncement Date: 26-09-2011

Appeal Details

RSA Number 47623514 RSA 2011
Assessee PAN AAACE6366J
Bench Kolkata
Appeal Number ITA 476/KOL/2011
Duration Of Justice 6 month(s) 5 day(s)
Appellant DCIT, Circle - 3, Kolkata, Kolkata
Respondent M/s. EKO Diagonistic Pvt. Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 26-09-2011
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 26-09-2011
Assessment Year 2004-2005
Appeal Filed On 21-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH C KOLKATA [ () . .. . ! ! ! !. .. . '# ] ]] ] [BEFORE SRI MAHAVIR SINGH JM & SRI C. D. RAO AM] % / I.T.A NOS. 476 & 477/KOL/2011 &' ()/ ASSESSMENT YEARS : 2004-05 & 2006-07 D.C.I.T. CIRCLE-3 - & - M/S.EKO DIAGNOSTIC PVT. LTD. KOLKATA -VERSUS- KOLKATA (PAN:AAACE 6366 J) (+ / APPELLANT ) ( -.+ /RESPONDENT) + / 0 '/ FOR THE APPELLANT: SHRI S.K.ROY -.+ / 0 '/ FOR THE RESPONDENT: SHRI A.K.TULSIYAN 1&2 / !# /DATE OF HEARING : 26.09.2011. 3( / !# /DATE OF PRONOUNCEMENT : 26.09.2011. '4 / ORDER ' 567 ' 567 ' 567 ' 567 PER BENCH THE ABOVE APPEALS ARE FILED BY THE REVENUE AGAINST SEPARATE ORDERS DATED 24.12.2010 OF THE CIT(A)-I KOLKATA PERTAINING TO A .YRS. 2004-05 AND 2006-07 RESPECTIVELY. ITA NO.476/KOL/2011 (A.YR.2004-05): 2. THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS :- 1. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.32 48 916/- UNDER THE HEAD LEASE RENT IGNORING COULOURABLE DEVICE ADOPTED BY T HE ASSESSEE-CO. TO CLAIM HIGH RATE OF EXPENSES UNDER THE GUISE OF LEASE RENT . 2. THAT IN THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2 00 000/- UND ER THE HEAD STAFF WELFARE EXPENSES WITHOUT APPRECIATING THE FAILURE OF THE AS SESSEE-CO. TO FURNISH THE REQUIRED DETAILS. 3. THAT LEAVE MAY BE GRANTED TO ADD ALTER OR MODIF Y ANY GROUND AS MAY ARISE IN THE COURSE OF APPELLATE PROCEEDINGS. 2 ITA NO.477/KOL/2011 (A.YR.2006-07): 1. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.55 20 433/- ON THE BASIS OF WRONG DEFINITION OF THE DEEMED DIVIDEND. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD ALTER AM END OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARI NG. 3. AT THE TIME OF HEARING BEFORE US THE LD. DR APPEARING ON BEHALF OF THE REVENUE HAS RELIED ON THE ORDERS OF AO. ON THE OTHER HAND THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE HAS RELIED ON THE ORDERS OF LD. CIT(A). 4. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF MATERIALS AVAILABLE ON RECORD THE RELEVANT OBSERVATIONS MADE BY LD. CI T(A) IN RESPECT OF GROUND NO.1 WHICH RELATES TO DELETION OF ADDITION OF RS.32 48 9 16/- UNDER THE HEAD LEASE RENT ARE AS UNDER :- 24. I HAVE GONE THROUGH THE RIVALS SUBMISSION AN D I FIND THAT THE ASSESSEE ACCORDING TO THE LEASE AGREEMENT HAD NO OPTION OR ENTITLEMENT TO OWN THE MACHINES. SO THE QUESTION OF ALLOWING DEPRECIATION ON SUCH MACHINES AS MENTIONED BY THE AO IN HIS REMAND REPORT DOES NOT ARISE AT ALL. IT CANNOT BE T HAT THE LEASE RENT PAID SHOULD BE CONSIDERED AS A CAPITAL INVESTMENT AND AT THE SAME TIME DEPRECIATION SHALL NOT BE ALLOWED ON THE GROUND THAT THE TITLE OF OWNERSHIP O F THE MACHINE IS NOT TRANSFERRED WOULD BE A GLARING INJUSTICE. IN THE CIRCUMSTANCES I DECLINE TO AGREE WITH THE SUGGESTION OF THE AO THAT THE DISALLOWANCE SHOULD B E ENHANCED. THE AO IN THE REMAND REPORT HAS NOT DISPUTED THE GENUINENESS OF T HE LEASE RENT PAYMENT TO M/S. NICCO UCO ALLIANCE CREDIT LTD. AMOUNTING TO RS.64 9 7 832/-. THE AO HAS ALSO NOT DISPUTED THE GENUINENESS OF TAKING EQUIPMENTS ON LE ASE AND USE OF THE LEASED EQUIPMENTS BY THE ASSESSEE. THE LEASE RENT PAYMENT IS SUPPORTED BY THE LEASE AGREEMENT WHICH IS ALSO NOT DISPUTED BY THE AO. IN SUCH CIRCUMSTANCES QUESTION OF ANY ADHOC DISALLOWANCE OF LEASE RENT DOES NOT ARISE . I FULLY AGREE WITH THE ASSESSEE AND THE ADDITION OF RS.82 48 976/- IS DELETED. 4.1. REGARDING THE SECOND ISSUE IN RESPECT OF D ELETION OF ADDITION OF RS.2 00 000/- ON ACCOUNT OF STAFF WELFARE EXPENSES LD.CIT(A) HAD MADE THE OBSERVATIONS WHICH READ AS UNDER : 26. THE RIVAL SUBMISSIONS HAVE BEEN CONSIDERED AND I FIND THAT THE AO FAILED TO MAKE ANY LOGICAL APPROACH TO JUSTIFY THE ADDITION A ND ALSO FAILED TO BRING ANY EVIDENCE FOR THE SAME. IN THE SUBMISSION MADE BY THE ASSESSE E IT HAS BEEN CLAIMED THAT PER CAPITAL EXPENSES PER DAY FOR THE EMPLOYEES HAVE IN FACT GONE DOWN FROM RS.58.58 TO RS.51.08. CONSIDERING THE FACTS AND CIRCUMSTANCES I DO NOT FIND ANY LOGICAL GROUND TO SUSTAIN THE ADDITION. HENCE THE AD-HOC ADDITION MA DE BY THE AO OF RS.2 00 000/- IS DELETED. 3 4.2. IN RESPECT OF A.YR.2006-07 THE SOLE ISSUE RELATES TO DELETION OF ADDITION OF RS.55 20 433/- ON THE BASIS OF DEFINITION OF THE D EEMED DIVIDEND. THE RELEVANT OBSERVATIONS MADE BY LD. CIT(A) ARE AS UNDER :- 4. I HAVE GONE THROUGH THE SUBMISSION MADE BY TH E ASSESSEE AS WELL AS THE ARGUMENTS SUPPORTING THE ADDITION FORWARDED BY THE AO IN HIS ORDER. FROM THE FACTS OF THE CASE IT TRANSPIRES THAT THEA SSESSEE WAS MAINTAINING TWO CURRENT A/CS IN THE NAME OF CALCUTTA MEDICAL IMAGING INSTIT UTION LTD. ONE CURRENT ACCOUNT WAS REGARDING ITS INVESTMENT IN THE ASSESSE E COMPANY FOR ALLOTMENT OF SHARES. THE OTHER CURRENT A/C IS COVERING DAY TO DA Y BUSINESS TRANSACTIONS BETWEEN THE TWO PARTIES. I HAVE GONE THROUGH THE DE TAILS IN THE SAID CURRENT A/CS WHICH THE AO TERMED AS A COLOURABLE DEVICE. MAINTENANCE OF TWO CURRENT A/CS APPEARED TO HIM AS AN ARRANGEMENT TO AVOID THE MIS-CHIEF OF SEC.2(22)(E) OF THE I.TAX ACT. UNDER THE SAID CIRC UMSTANCES HE CLUBBED THE CURRENT A/CS CONSIDERING THE TRANSACTIONS BETWEEN T HE TWO PARTIES AS DEVICE TO AVOID TAXING U/S 2(22)(E) AS EVIDENT FROM HIS ARGUI NG THE MATTER AS QUOTED ABOVE. I DONT FIND ANY REASON WHY THE TWO CURRENT A/CS MAINTAINED BY THE ASSESSEE IN ITS BOOKS SHOULD BE CLUBBED TOGETHER AN D A DECISION TO BE ARRIVED ON THE BASIS OF SUCH CLUBBING. EVEN IF IT IS AGREED THAT WHAT THE AO DID WAS CORRECT EVEN THEN IN VIEW OF THE FACT THAT AN ADDITION OF RS.55 02 433/- HAS BEEN MADE OUT OF THE ACCUMULATED RESERVE IN THE HANDS OF THE COMPANY WHI CH HAS GIVEN THE ADVANCES TO THE ASSESSEE COMPANY THE SAID ACCUMULATED RESER VE HAD ALREADY BEEN ABSORBED IN THE OPENING BALANCE OF RS.2 43 51 583/- STANDING RECEIVABLE BY THE CALCUTTA MEDICAL IMAGING INSTITUTION LTD. HENCE TH ERE IS NO OCCASION AS TO HAVE ANY FURTHER RESERVE IN THE CURRENT YEAR IN THE HANDS OF THE COMPANY WHICH HAD ADVANCED MONEY TO THE ASSESSEE. IN THE CIRCUMST ANCES NO ADDITION U/S 2(22)(E ) CAN BE MADE IN THE YEAR UNDER CONSIDERATI ON. AGAIN IT MAY BE THE CASE THAT THE SHAR EHOLDERS OF BOTH THE COMPANIES ARE SAME IT HAS TO BE KEPT IN MIND THAT THE ASSESS EE COMPANY IS NOT A SHAREHOLDER. THE PROVISIONS OF SEC.2(22)(E) REQUIRE S THAT THE ASSESSEE IN WHOSE HANDS DEEMED DIVIDEND HAS TO BE ADDED MUST BE A SHA REHOLDER IN THE COMPANY WHICH MAKES THE ADVANCES TO THE ASSESSEE (SHAREHOLD ER) OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. IN ANY CASE THE ADDITION HA S TO BE DONE IN THE HANDS OF THE SHAREHOLDER OTHERWISE THE PROVISIONS OF SUB-CLAUS E (III) OF SEC.2(22)(E) BECOMES INOPERATIVE. HENCE ADDITIONS IN THE HANDS OF A NON-SHAREHOLDER CANNOT BE SUSTAINED. 4.3. KEEPING IN VIEW OF THE FACT THAT THE LD. D R FOR THE REVENUE COULD NOT CONTRADICT THE OBSERVATIONS MADE BY LD. CIT(A) ON ALL THE ABOV E ISSUES WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) TO BE INTERFERED WITH. WE CONFIRM THE SAME IN RESPECT OF ALL THE ISSUES FOR BOTH THE ASSESSMENT YEARS AND DISMIS S THE APPEALS OF THE REVENUE. 4 5. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.2011. SD/- SD/- MAHAVIR SINGH JUDICIAL MEMBER . .. . ! ! ! !. .. . '# '# '# '# C.D.RAO ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 26.09.2011. '4 / -8 9'8(:- COPY OF THE ORDER FORWARDED TO: 1. M/S.EKO DIAGNOSTIC PVT. LTD. 154 J.L.NEHRU ROAD KOLKATA-71. 2 THE D.C.I.T. CIRCLE-3 KOLKATA. 3. THE CIT 4. THE CIT(A)-I KOLKATA. 5. DR KOLKATA BENCHES KOLKATA .8 -/ TRUE COPY '4&1/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES R.G.(.P.S.)