Zen Exim Pvt.Ltd.,, Ahmedabad v. The Income tax Officer,Ward-8(4),, Ahmedabad

ITA 721/AHD/2008 | 2005-2006
Pronouncement Date: 09-07-2010 | Result: Allowed

Appeal Details

RSA Number 72120514 RSA 2008
Assessee PAN AAACZ1599C
Bench Ahmedabad
Appeal Number ITA 721/AHD/2008
Duration Of Justice 2 year(s) 4 month(s) 12 day(s)
Appellant Zen Exim Pvt.Ltd.,, Ahmedabad
Respondent The Income tax Officer,Ward-8(4),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 09-07-2010
Date Of Final Hearing 30-06-2010
Next Hearing Date 30-06-2010
Assessment Year 2005-2006
Appeal Filed On 26-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI A.N.PHAUJA ACCOUNTANT MEMBER ITA NO.721/AHD/2008 ASSESSMENT YEAR:2005-06 DATE OF HEARING:2..7.10 DRAFTED:5.7.10 ZEN EXIM PVT. LTD. 8 TH FLOOR THE CHAMBERS OPP. GURUDWARA S.G.HIGHWAY AHMEDABAD PAN NO.AAACZ1599C V/S. INCOME TAX OFFICER WARD-8(4) AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.SOPARKAR SR-AR & SHRI BANDISH SOPARKAR RESPONDENT BY:- SHRI K. MUDHUSUDHAN SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-XIV AHMEDABAD IN APPEAL NO. CI T(A) XIV /WD.8 (4) / 207/2007-08 DATED 04-02-2008. THE ASSESSMENT WAS FR AMED BY THE ITO WARD-8(4) AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 08-10-2007 FOR THE ASSES SMENT YEAR 2005-06. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE MADE BY ASSESSING OFFIC ER ON ACCOUNT OF CLAIM OF THE ASSESSEE OF COURSE FEE REFUNDED TO THE STUDENT. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING TWO EFFECTIVE GROUND :- (1) THE LEARNED THE COMMISSIONER OF INCOME TAX (AP PEALS) XIV AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN F RAMING AN APPELLATE ORDER FOR A.Y. 2005-06 ON 04.01.1008 FOR THE APPEAL FILED AGAINST THE ORDER PASSED U/S. 143(3) OF THE I.T. ACT. ITA NO.721/AHD/2008 A. Y.2005-06 ZEN EXIM PVT. LTD. V. ITO WD-8(4) ABD PAGE 2 (2) THE LEARNED THE COMMISSIONER OF INCOME TAX (APP EALS) XIV AHMEDABAD HAS ERRED IN UPHOLDING THE DISALLOWANCE OF COURSE F EE REFUNDED OF RS.9 19 049/-. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE-COMPANY IS ENGAGED IN CONSULTANCY SERVICES RELATING TO INFORMA TION & TECHNOLOGY AND DEVELOPMENT OF SOFTWARE. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIM ED AN AMOUNT OF RS.9 19 049/- ON ACCOUNT OF COURSE FEE REFUNDED. HOWEVER NO TUIT ION ACTIVITY HAS BEEN FOUND UNDERTAKEN BY THE ASSESSEE. ON QUERY THE ASSESSEE REPLIED THAT THE FIRM M/S. ZEN SOLUTION WAS CONVERTED INTO A PVT. COMPANY WITH EFF ECT FROM 22-05-2002 AND COURSE FEES WERE COLLECTED FROM THE STUDENTS BY M/S.ZEN SO LUTION AND THE SAME WERE SHOWN AS INCOME IN EARLIER YEARS WHEN COLLECTED. H OWEVER WHEN TUITION ACTIVITY WAS NOT CARRIED OUT DURING THE PREVIOUS YEAR THE FEES COLLECTED BY M/S. ZEN SOLUTIONS WERE REFUNDED AND THE DETAILS WERE CALLED FOR AND T HE ASSESSEE GAVE THE ADDRESSES AND OTHER DETAILS IN RESPECT OF ONLY NINE STUDENTS. THE ASSESSING OFFICER ISSUED LETTERS U/S.133(6) AND SIX OF THEM HAVE NOT COMPLIE D WITH AND THE THREE STUDENTS REPLIED THAT ALTHOUGH THEY RECEIVED THE REFUND AND NO FURTHER DETAILS CAN BE GIVEN BY THEM AT PRESENT. THE AO HAS DISALLOWED THE CLAIM OF THIS EXPENDITURE ON THE GROUND THAT THESE REFUNDS HAVE NOT BEEN PROVED IN THE ABSE NCE OF ANY CONFIRMATION FROM THE STUDENTS. FURTHER IT WAS OBSERVED THAT ALTHOUGH TH E FEES WERE RECEIVED IN THE YEAR 2003 THE SAME WAS NOT REFUNDED EARLIER. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. THE CIT(A) ALSO CONFIRMED THE DISALLOWANCE BY GI VING FOLLOWING FINDING IN PARA-2.2 OF HIS APPELLATE ORDER:- 2.2 THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS HAS SUBMITTED THAT IT HAD GIVEN THE DETAILS CALLED FOR AS FAR AS POSSIBLE. ALL THE RECEIPTS WERE SHOWN AS INCOME BY M/S.ZEN SOLUTION AND WHEN IT IS REFUNDED NOW IT IS TO BE ALLOWED. I HAVE CONSIDERED THE FACTS OF THE CASE AN D I DO NOT AGREE WITH THE VIEWS OF THE APPELLANT. THE APPELLANT DID NOT GIVE THE DETAILS OF 6 STUDENTS AND NO VERIFICATION IS POSSIBLE IN RESPECT OF THESE STU DENTS. FOR THE REMAINING THREE STUDENTS THE AO HAS DISCUSSED THE ISSUE IN DETAIL IN THE ASST. ORDER THAT SIX OF THEM HAVE NOT COMPLIED WITH THE LETTER ISSUED BY TH E AO AND THE THREE COMPLIED WITH BUT THEY HAVE NOT PRODUCED ANY EVIDEN CE AND FURTHER DETAILS. HENCE THE CLAIM IS NOT INDEPENDENTLY VERIFIABLE. F URTHER IT IS SEEN THAT WHEN THE FIRM IS CONVERTED INTO COMPANY IN A.Y. 2003-04 THERE IS NO CORRESPONDING LIABILITY TAKEN OVER BY THAT COMPANY IN RESPECT OF THIS AMOUNT TAKEN AS THERE WAS NO MENTION OF IT IN THE LIABILITY SIDE OF BALAN CE SHEET APPEARING RELEVANT TO THAT ASST.YEAR NOR ISN THE BALANCE SHEET FOR A.Y. 2003-04 & 2004-05. THE ITA NO.721/AHD/2008 A. Y.2005-06 ZEN EXIM PVT. LTD. V. ITO WD-8(4) ABD PAGE 3 REFUND NOW GIVEN CANNOT BE ALLOWED AS IT WAS NOT A LIABILITY OF THE PRESENT APPELLATE COMPANY. HENCE THE CLAIM IS NOT ALLOWABL E IN ADDITION TO THE GROUND OF NON VERIFIABILITY AS OBSERVED BY THE AO. THE ACTION OF AO IS THEREFORE UPHELD AND THIS GROUND IS REJECTED. AGGRIEVED ASSESSEE CAME IN SECOND APPEAL BEFORE US . 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO GONE THROU GH THE CASE RECORDS INCLUDING ASSESSMENT ORDER ORDER OF CIT(A) AS WELL AS ASSESS EES PAPER BOOK CONSISTING OF PAGES 1 TO 39. THE LD. COUNSEL FOR ASSESSEE BEFORE US MADE SUBMISSION THAT THE COURSE FEE RECEIVED HAD BEEN DULY SHOWN AS INCOME I N RELEVANT ASSESSMENT YEAR BUT THE SAID TUITION ACTIVITY COULD NOT CONTINUE AN D AMOUNT COLLECTED HAD BEEN REFUNDED TO THOSE STUDENTS BY AN ACCOUNT PAYEE CHEQ UE AS CAN BE SEEN FROM THE DETAILS OF STUDENTS FILED BEFORE THE LOWER AUTHORIT IES SUCH AS THEIR NAMES ADDRESSES COPIES OF ACCOUNT MODE AND PARTICULARS OF PAYMENT ETC. THE LD. COUNSEL FURTHER MADE ARGUMENT AND THE GIST OF THE ARGUMENT IS AS UNDER:- (I) THE AMOUNT OF FEES RECEIVED WERE DULY SHOWN AS INCOME IN THE YEAR WHEN IT HAD BEEN RECEIVED. (II) AMOUNT WAS REFUNDED BY ASSESSEE TO THE REAL CL AIMANT THROUGH PROPER BANKING CHANNEL I.E. BY ISSUING A/C. PAYEE CHEQUES WHICH CAN NOT BE ENCASHED BY A PERSON OTHER THAN RECIPIENT. (III) PARTICULARS SUCH AS COPIES OF A/C NAME AND A DDRESSES OF THE STUDENT CHEQUE NUMBER ACCOUNT NAME OF THE BANK ETC. WERE DULY PROVIDED AND THUS FULL COMPLIANCE IS MADE FOR THE CLAIM. (IV) THE FEES HAS BEEN REFUNDED FOR THE PERIOD FOR WHICH NO SERVICES HAVE BEEN PROVIDED I.E. THE SAID RECEIPT HAS NEVER EVER BEEN AN INCOME. AS REGARDS TO THE LIABILITY WHETHER THIS IS OF THE ASSESSEE-COMPANY THE LD. COUNSEL FOR ASSESSEE STATED THAT THIS IS A COMPANY REGISTER ED UNDER PART-9 OF THE COMPANYS ACT 1956 AND HE REFERRED TO SECTION 575 AND 576 OF THE COMPANYS ACT AND FURTHER STATED THAT THE EFFECT OF THE SECTION 575 IS THAT T HERE IS AN AUTOMATIC VESTING AND DIVESTING. THE OLD COMPANY IS DIVESTED OF THE PROPE RTIES AND THE NEW COMPANY IS VESTED WITH THE PROPERTIES. THE VESTING BEING STAT UTORY NO REGISTERED INSTRUMENT OF TRANSFER IS NECESSARY. SIMILARLY HE REFERRED TO SEC TION 576 OF THE COMPANYS ACT 1956 SECTION 576 SAVING FOR EXISTING LIABILITIES:- THE REGISTRATION OF A COMPANY IN PURSUANCE OF THIS PART SHALL NOT AFFECT ITS RIGHTS OR LIABILITIES IN RESPECT OF ANY DEBT OR OBLIGATION INCURRED OR ANY CONTRACT ENTERED INTO BY TO WITH OR ON BEHALF OF THE COMPANY BEFORE REGISTRAT ION. LD. COUNSEL STATED THAT THIS SECTION IS COROLLARY T O THE PREVIOUS SECTION 575 AND PROVIDES THAT THE REGISTRATION OF A COMPANY UNDER T HIS PART SHALL NO AFFECT THE PRIOR ITA NO.721/AHD/2008 A. Y.2005-06 ZEN EXIM PVT. LTD. V. ITO WD-8(4) ABD PAGE 4 RIGHTS AND LIABILITIES OF THE COMPANY. THUS FOR IN STANCE IF AN UNLIMITED COMPANY HAS BEEN REGISTERED WITH LIMITED LIABILITY THEN IN THE EVENT OF A WINDING UP NO CONTRIBUTORY WILL BE LIABLE TO CONTRIBUTE BEYOND THE AMOUNT OF T HE SHARES. 6. IN VIEW OF THESE ARGUMENTS WE FURTHER FIND THAT BONA FIDE ACTION OF THE ASSESSEE IN CONVERTING THE FIRM M/S. ZEN SOLUTION I NTO A PRIVATE COMPANY WITH EFFECT FROM 22-05-2002 THE FEES COLLECTED WAS DECLARED BY THAT FIRM IN THE ACCOUNTS AND RETURN OF INCOME. SINCE THE CLASSES COULD NOT BE C ONDUCTED AND CONSEQUENTLY THE COURSE WAS CRASHED THE COURSE FEES WAS REFUNDED TO THE STUDENTS AS THERE WAS NO SERVICES WERE PROVIDED TO THE STUDENTS THE RECEIPT S HAVE NEVER BEEN AN INCOME. ACCORDINGLY WE ARE OF THE VIEW THE AMOUNT OF FEE R ECEIVED DULY SHOWN AS INCOME IN THAT YEAR WHICH HAD BEEN RECEIVED BY THE FIRM M/S. ZEN SOLUTIONS WAS REFUNDED BY THE ASSESSEE TO THE REAL CLAIMANTS. THE REFUND WAS THROUGH BANKING CHANNELS I.E. BY ISSUING ACCOUNT PAYEE CHEQUES AND THE ASSESSEE ALSO FILED COMPLETE DETAILS BEFORE THE REVENUE SUCH AS THEIR NAMES ADDRESSES COPIES OF ACCOUNT MODE AND PARTICULARS OF PAYMENT ETC. THE COURSE FEE REFUNDED BY THE ASSESSEE IS A BONA FIDE CLAIM AND WE ALLOW THE SAME. 7. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09/07/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 09/07/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XIV AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD