Unitech Paper Mill Pvt. Ltd., Kolkata v. DCIT, CIR-4, KOLKATA, Kolkata

ITA 557/KOL/2014 | 2010-2011
Pronouncement Date: 29-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 55723514 RSA 2014
Assessee PAN AAACU3795M
Bench Kolkata
Appeal Number ITA 557/KOL/2014
Duration Of Justice 3 year(s) 8 month(s) 1 day(s)
Appellant Unitech Paper Mill Pvt. Ltd., Kolkata
Respondent DCIT, CIR-4, KOLKATA, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 29-11-2017
Date Of Final Hearing 06-06-2017
Next Hearing Date 06-06-2017
First Hearing Date 06-06-2017
Assessment Year 2010-2011
Appeal Filed On 28-03-2014
Judgment Text
ITA NO.557/KOL/2014 UNITECH PAPER MILL PVT. LTD. A .Y. 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN JM & SHRI M.BA LAGANESH AM] I.T.A NO.557/KOL/2014 ASSESSMENT YEAR : 2010-11 UNITECH PAPER MILL PVT. LTD. -VS.- D.C.I.T . CIRCLE-4 KOLKATA KOLKATA [PAN : AAACU 3795 M] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGAR WAL ADVOCATE FOR THE RESPONDENT : SHRI DAVID Z.CHAWNG THU ADDL. CIT SR.DR DATE OF HEARING : 21.11.2017. DATE OF PRONOUNCEMENT : 29.11.2017. ORDER PER N.V.VASUDEVAN JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED.01.12.2013 OF C.I.T.(A)-IV KOLKATA RELATING TO A.Y. 2010-11. 2. THERE IS A DELAY OF ABOUT FIVE DAYS IN FILING TH E APPEAL BY THE ASSESSEE. IN THE APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL THE ASSESSEE HAS EXPLAINED THAT ONE OF THE DIRECTOR OF THE ASSESSEE SHRI DAYAN AND GUPTA WAS ILL AT THE RELEVANT POINT OF TIME WHEN THE APPEAL WAS TO BE FILED AND H ENCE COULD NOT SIGN THE APPEAL MEMO AND GROUNDS TO BE FILED BEFORE THE TRIBUNAL. THE OTHER DIRECTOR WAS SHRI SAILESH GUPTA. HE WAS BUSY LOOKING AFTER THE MEDI CAL TREATMENT OF HIS FATHER AND HIS FATHER ULTIMATELY DIED ON 02.05.2016. WE HAVE CON SIDERED THE REASONS GIVEN IN THE APPLICATION FOR CONDONATION OF DELAY AND ARE OF THE VIEW THAT THE DELAY IN FILING THE APPEAL IS NOT INORDINATE. THE REASONS GIVEN FOR CO NDONATION OF DELAY IN OUR VIEW ARE CONSTITUTES REASONABLE AND SUFFICIENT CAUSE FOR THE DELAY IN FILING THE APPEAL BY THE ASSESSEE. THE DELAY IN FILING THE APPEAL IS ACCORDI NGLY CONDONED. ITA NO.557/KOL/2014 UNITECH PAPER MILL PVT. LTD. A .Y. 2010-11 2 3. THE ASSESSEE HAS FILED THE FOLLOWING REVISED GRO UNDS OF APPEAL. THE REVISED GROUNDS OF APPEAL ARE NOTHING BUT A MODIFIED VERSION OF THE ORIGINAL GROUND OF APPEAL RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL FILED ALONG W ITH FORM NO.36. THE REVISED GROUNDS ARE TAKEN UP FOR ADJUDICATION WITH THE CONS ENT OF THE PARTIES. THE REVISED GROUNDS OF APPEAL READ THUS: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING RS 45 64 880/- BEING 1 0% OF THE TOTAL EXPENSES ON ACCOUNT OF ESTIMATED EXPENSES RELATING TO SALARY W AGES BONUS POWER AND FUEL EXPENSES TOWARDS CONSTRUCTION OF UNIT II. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CONFERENCE EXPENS ES OF RS 2 00 000/- PAYABLE TO ASSESSEE'S TRADE ASSOCIATION. 4. AS FAR AS GROUND NO.1 RAISED BY THE ASSESSEE IS CONCERNED THE FACTS ARE THAT THE ASSESSEE WHICH IS A COMPANY IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF MG GRAPH PAPER IN NOTES ON ACCOUNTS POINT NO. 1(D)(II ) OF THE AUDITED ACCOUNTS IT WAS MENTIONED AS FOLLOWS :- II THE COMPANY HAS NOT ALLOCATED SALARIES WAGES POWER AND OTHER INCIDENTAL EXPENSES USED FOR CONSTRUCTION OF UNIT-II AS THE MA NAGEMENT FEELS THAT THE AMOUNT CANNOT BE WORKED OUT ON A REASONABLE BASIS. 5. IT CAN BE SEEN FROM THE AFORESAID NOTES ON ACCOU NTS THAT THE ASSESSEE WAS IN THE PROCESS OF CONSTRUCTION OF UNIT-II AND AS ONE THE L AST DATE OF THE PREVIOUS YEAR THE CONSTRUCTIONS WAS NOT COMPLETED AND UNIT-II HAD NOT BEEN SET UP OR COMMENCED BUSINESS. THEREFORE THE COST OF CONSTRUCTION OF UNI T-II HAD TO BE CAPITALISED AND EVEN REVENUE EXPENSES INCURRED IN CONNECTION WITH UNIT-I I CANNOT BE CLAIMED AS DEDUCTION WHILE DETERMINING THE TOTAL INCOME OF THE EXISTING UNIT (UNIT-I) AND HAD TO BE CAPITALIZED. TAKING A CUE FROM THE NOTES ON ACCOUNT S THE AO WAS OF THE VIEW THAT SALARIES WAGES BONUS POWER AND FUEL EXPENSES WHI CH WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND WHICH WERE CLAIMED AS DEDUCTION WH ILE COMPUTING INCOME FROM BUSINESS CANNOT SAID TO BE WHOLLY INCURRED FOR THE EXISTING UNIT-I AND PART OF IT HAS TO BE CONSIDERED AS ATTRIBUTABLE TO UNIT-II AND THAT P ORTION OF THE REVENUE EXPENSE WHICH ITA NO.557/KOL/2014 UNITECH PAPER MILL PVT. LTD. A .Y. 2010-11 3 ARE ATTRIBUTABLE TO UNIT-II AND SHOULD BE DISALLOWE D AND CAPITALISED AS CAPITAL WORKS- IN-PROGRESS OF UNIT-II. THE AO FOUND THAT A SUM OF RS.4 56 48 806/- WAS THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT O F SALARY WAGES BONUS POWER AND FUEL EXPENSES. THE AO ESTIMATED 10% OF THE AFORESAI D EXPENSES AS ATTRIBUTABLE TO UNIT-II AND A SUM OF RS.45 64 880/- WAS ADDED TO TH E TOTAL INCOME OF THE ASSESSEE AS EXPENSES ATTRIBUTABLE TO UNIT-II. 6. AGGRIEVED BY THE AFORESAID ADDITION THE ASSESSE E PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE FIRSTLY POINTED OUT THAT THE AO HAD NOT CALLED UPON THE ASSESSEE FOR ANY EXPLANATION ON THIS ASPEC T AND HAS MADE AN ADHOC DISALLOWANCE OF 10% OF THE EXPENSES AND THE ACTION OF THE AO IN THIS REGARD IS BAD IN LAW. THE ASSESSEE POINTED OUT THAT SALARY AND WAGES FOR THE PAST FIVE YEARS IS ALMOST IDENTICAL WITH THE SALARY AND WAGES CLAIMED DURING THE PREVIOUS YEAR RELEVANT TO AY 2010-11 WHICH MEANS THAT NO EXTRA SALARY AND WAGES WAS INCURRED FOR UNIT-II WHICH WAS UNDER CONSTRUCTION. AS FAR AS LABOUR AND BONUS ARE CONCERNED THE ASSESEE POINTED OUT THAT THE CONSTRUCTION OF UNIT-II WAS NOT DONE B Y THE ASSESSEE AND WAS DONE BY AN OUTSIDE PARTY AND THEREFORE LABOUR CHARGES OF UNIT- II COULD NOT AND WERE NOT CLAIMED IN THE PROFIT AND LOSS ACCOUNT OF UNIT-I. THE ASSES SEE POINTED OUT THAT THERE WAS A MEMORANDUM OF SETTLEMENT BETWEEN THE ASESSEE AND TH E WORKERS UNION IN WHICH IT WAS SPECIFICALLY AGREED THAT THE EXISTING WORK FORC E WILL NOT INDULGE IN ANY WORK FOR UNIT-II. AS FAR AS POWER AND FUEL CHARGES ARE CONCE RNED THE ASSESEE POINTED OUT THAT ATTRIBUTING 10% OF POWER AND FUEL EXPENSES TO UNIT- II COULD BE UNREASONABLE. THE ASSESSEE POINTED OUT THAT THE MAJOR COMPONENT OF FU EL EXPENSES IS COAL WHICH IS CONSUMED ONLY BY UNIT-I AND COAL IS NOT REQUIRED AT THE CONSTRUCTION STAGE OF UNIT-II. THE ASSESSEE ALSO POINTED OUT THAT FOR CONSTRUCTION OF UNIT-II THE CONTRACTOR WAS OBLIGED TO PROVIDE DG SET. THE ASSESSEE POINTED OUT THAT NOTES ON ACCOUNTS CANNOT BE THE BASIS TO MAKE THE IMPUGNED DISALLOWANCE. 7. ON THE ABOVE SUBMISSIONS A REMAND REPORT WAS CAL LED FROM THE AO. THE AO IN HIS REMAND REPORT AGREED WITH THE SUBMISSIONS OF TH E ASSESSEE BUT POINTED OUT THAT THE ITA NO.557/KOL/2014 UNITECH PAPER MILL PVT. LTD. A .Y. 2010-11 4 ASSESSEE HAS NOT QUANTIFIED THE EXPENSES DISALLOWAB LE AS ATTRIBUTABLE TO UNIT-II. IN A REPLY TO THE REMAND REPORT THE ASSESSEE SUBMITTED T HAT A SUM OF RS.17 19 000/- BEING THE PART SALARY OF DIRECTORS AND HEAD OFFICE ACCOUN TS STAFF CAN BE CONSIDERED AS ATTRIBUTABLE TO UNIT II. 8. DESPITE THE ABOVE FACTS WHICH TRANSPIRED IN THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE CIT(A) THE CIT(A) CONFIRMED THE ORDER OF THE AO WITHOUT TAKING COGNIZANCE OF THE SUBMISSIONS OF THE ASSESSEE BY CO NCLUDING THAT EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT WERE PARTLY ATTRIBUTABL E TO UNIT-II AND SINCE THE ASSESSEE HAD NOT QUANTIFIED THE EXPENSES THE DISALLOWANCE MA DE BY THE AO WAS REASONABLE AND HAD TO BE UPHELD. 9. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HA S RAISED GROUND NO.1 BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS CLEA R FROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE CIT(A) THE REMAND REPORT OF TH E AO AND REPLY OF THE ASSESSEE TO THE REMAND REPORT THAT ONLY A PROPORTIONATE PART OF THE EXPENSES OF RS.17 19 000/- BEING SALARY OF THE DIRECTORS AND HEAD OFFICE ACCOU NTS STAFF SHOULD BE CONSIDERED FOR DISALLOWANCE AS ATTRIBUTABLE TO UNIT-II. 10% OF THE AFORESAID SUM OF RS.1 71 900/- SHOULD BE DISALLOWED AND CAPITALISED AS PRE-OPERATI VE COST OF UNIT-II. 10% OF RS.17 19 000/- SO DISALLOWED SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND NO.1 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 11. AS FAR AS GROUND NO.2 RAISED BY THE ASSESSEE IS CONCERNED THE FACTS ARE THAT THE ASSESSEE CLAIMED AS DEDUCTION WHILE COMPUTING INCOM E FROM BUSINESS A SUM OF RS.2 00 000/- WHICH WAS THE EXPENSES FOR CONDUCTING A CONFERENCE BY M/S EASTERN INDIA CORROGATED BOX MANUFACTURING ASSOCIATION WHIC H WAS FORMED TO TAKE CARE OF THE INTEREST OF PAPER MANUFACTURERS AND TRADERS. T HE ASSESSEE WAS ALSO A MEMBER OF THE AFORESAID ASSOCIATION. THE SUM IN QUESTION WAS PAID BY CHEQUE IN THE SUBSEQUENT FINANCIAL YEAR NAMELY FINANCIAL YEAR 2010-11 RELEVA NT TO A.Y.2011-12. IT IS NOT DISPUTED THAT M/S EASTERN INDIA CORRUGATED BOX MANU FACTURING ASSOCIATION SENT THEIR ITA NO.557/KOL/2014 UNITECH PAPER MILL PVT. LTD. A .Y. 2010-11 5 BILL ON 30.12.2009 WHICH WAS DURING THE PREVIOUS Y EAR RELEVANT TO A.Y.2010-11. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON FOR THE REASON THAT THERE WAS NO VALID PROOF OF INCURRING OF THE EXPENDITURE. THE CI T(A) WAS SATISFIED WITH THE EVIDENCE PRODUCED FOR INCURRING OF THE EXPENDITURE AND THE FACT THAT IT IS A LEGITIMATE BUSINESS EXPENDITURE. HE HOWEVER PROCEEDED ON THE B ASIS THAT SINCE PAYMENT WAS MADE IN THE PREVIOUS YEAR RELEVANT TO A.Y.2011-12 THE EXPENDITURE SHOULD BE CLAIMED ONLY IN A.Y.2011-12. WE ARE OF THE VIEW THAT THE CO NCLUSION OF CIT(A) ARE INCORRECT. THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTIN G AND HAS RECEIVED BILL RAISED BY M/S EASTERN INDIA CORROGATED BOX MANUFACTURING ASSO CIATION ON 30.12.2009. ON THAT DATE THE LIABILITY OF THE ASSESSEE CRYSTALLISED AND DEDUCTION WAS TO BE ALLOWED LEGITIMATELY IN A.Y.2010-11. WE THEREFORE DIRECT TH E AO TO ALLOW THE DEDUCTION OF A SUM OF RS.2 00 000/- AS CLAIMED BY THE ASSESSEE. GR OUND NO.2 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 12. IN THE RESULT THE APPEAL BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 29.11.2017. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29.11.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.UNITECH PAPER MILL PVT. LTD. MR. N.K.GOPYAL 16 N.S.ROAD 2 ND FLOOR KOLKATA- 700001. 2. D.C.I.T. CIRCLE-4 KOLKATA. 3. C.I.T. (A)-IV KOLKATA. 4. C.I.T.-II K OLKATA. 5. CIT(DR) KOLKATA BENCHES KOLKATA. TRUE COPY BY ORDER SR. PRIVA TE SECRETARY HEAD OF OFFICE/DDO ITAT KOLKATA BENCHES