DEPUTY COMMISSIONER OF INCOME-TAX vs. M/S. ASSOCIATED DAIRY FAB PVT. LTD., JALGAON

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ITA 1914/PUN/2016Status: DisposedITAT Pune07 February 2019AY 2011-128 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the deletion of additions for professional charges, service charges, director's remuneration, and interest payments, finding them similar to prior year's facts where similar additions were deleted. For foreign travel expenses, the Tribunal noted that only employees/directors travelled for business and no family members accompanied them, thus upholding the deletion.

What were the facts?

The Revenue appealed against the deletion of additions made by the Assessing Officer (AO) concerning professional charges, service charges, director's remuneration, interest payments, and foreign travel expenses. The CIT(A) had deleted these additions.

What were the issues?

Whether the disallowances made by the AO for various expenses were justified, particularly in light of previous years' assessments and evidence provided by the assessee.

Which sections of the Income-tax Act were involved?

Section 40A(2)(a),Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

Before: SHRI R.S. SYAL & SHRI VIKAS AWASTHY

For Appellant: Ms. Shabana Parveen
For Respondent: Shri Nikhil Pathak

आदेश / ORDER

PER R.S.SYAL, VP :

This appeal by the Revenue arises out of the order passed by the CIT(A)-2, Nashik on 17-06-2016 in relation to the assessment year 2011-12.

2.

The first issue raised in this appeal is against the deletion of addition of Rs.75,000/- on account of Professional charges. The Assessing Officer (AO) has recorded in Para No.4.5 of the

2 ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

assessment order that the assessee paid a sum of Rs.75,000/- to

two persons viz., Mr. K. R. Ananthanarayan – Rs.65,000/- and

Mr. P. V. Lele – Rs.10,000/- . The AO disallowed the same

by observing that the assessee could not establish any nexus of

payment with the services. The ld. CIT(A) deleted the

addition by observing that all the details were furnished and

similar addition was deleted by him for the A.Y. 2009-10.

3.

We have heard both the sides and gone through the

relevant material on record. It has been aptly recorded that

similar addition was made by the AO in his order for the A.Y.

2009-10, which stood deleted at the hands of the ld. CIT(A). It

is noticed that the Revenue appealed against such order

passed by the ld. CIT(A). Vide order dated 09-02-2018, the

Tribunal in ITA No.177/PUN/2014 etc. has upheld the first

appellate authority’s view in deleting the disallowance of

Professional charges. Since the facts and circumstances of the

instant ground are similar to those of the preceding year,

respectfully following the precedent, we uphold the deletion of

addition.

4.

Next ground is against deletion of addition on account of

Services charges and Commission paid at Rs.27,84,960/-.

3 ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

5.

The AO discussed this issue in Para No.4.2 of his order.

He made addition of Rs.27.84 lakhs towards service charges

and commission by observing that, except for invoices, there

was no other evidence to substantiate the involvement of the

persons in fetching the business. The ld. CIT(A) deleted such

addition by relying on his order for A.Y. the 2009-10.

6.

We have gone through the order passed by the Tribunal

in assessee’s own case for the A.Y. 2009-10 (supra) in which

this issue has been discussed at Para No.28 onwards and

eventually the ground of the Revenue was dismissed. Since

facts and circumstances of the ground for the instant year are

similar to those of the assessment year 2009-10, respectfully

following the precedent, we uphold the deletion of addition.

7.

The next ground is against the deletion of addition of

Rs.1,20,93,770/- made by the AO on account of excess

remuneration paid to Directors.

8.

The facts of this ground as recorded in Para No.4.9 of the

assessment order are that the assessee paid remuneration to its

two Directors at Rs.1.56 crore. The AO observed that

although the turnover of the company for the instant year got

4 ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

reduced but the Directors’ remuneration was increased by

Rs.30.71 lakh. Allowing deduction for a sum of Rs.36 lakh,

the AO made disallowance of Rs.1,20,93,770/- u/s.40A(2)(a)

of the Act. The ld. CIT(A) deleted the addition.

9.

We have heard the rival submissions and gone through

the relevant material on record. It is seen that the assessee

effected turnover of Rs.14.13 crore for the A.Y. 2009-10 and

remunerated its Directors by Rs.1.36 crore. As against this,

for the year under consideration, the assessee effected sales of

Rs.17.40 crore and remunerated its Directors by Rs.1.56 crore.

The addition made under similar circumstances for the A.Y.

2009-10 has been deleted. As there is an increase in the volume of turnover vis-à-vis the amount of remuneration to the

Directors with reference to the A.Y. 2009-10, we are of the

considered opinion that no disallowance is called for

u/s.40A(2)(a) of the Act. It is further a matter of record that

the amount of remuneration in the hands of the Directors has

also been taxed at the maximum marginal rate. In that view of

the matter also, the disallowance is not sustainable. We,

therefore, uphold the deletion of addition.

5 ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

10.

Ground No.4 is against deletion of addition on account

of excess interest payment of Rs.4,26,767/-.

11.

The AO has discussed this issue in Para No.4.10 of his

order. He noticed that the assessee paid interest to its

depositors at Rs.21,33,833/- calculated @15% (sic 18%). All

the persons to whom interest was paid were covered u/s.

40A(2)(b) of the Act. He restricted the interest payment at

12% and made disallowance for the remaining 3%, which

came to Rs.4,26,767/-. The ld. CIT(A) deleted such addition.

12.

After hearing the rival submissions and perusing the

relevant material on record, we find from page 17 of the paper

book, which is a copy of account statement issued by State

Bank of India. Such statement depicts charging of interest

from the assessee at Rs.15.75%. Since the assessee has paid

interest to its depositors at the lower rate of 15%, in our

considered opinion, no fault can be found by the ld. CIT(A) in

deleting this addition.

13.

Last ground of the Revenue’s appeal is against deletion

of addition made on account of Foreign Travel Expenses.

6 ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

14.

The assessee incurred Foreign Travel expenses at

Rs.11,93,992/-. The AO disallowed the entire sum by holding

that the assessee did not furnish any evidence to prove that the

expenditure was incurred for the purpose of business. The ld.

CIT(A) examined the details and came to hold that the

assessee had furnished the evidence. He further noticed that

the foreign travel expenses were incurred in respect of

business visits undertaken by the Directors and other

executives of the assessee company and no family member of

such employees accompanied them on foreign visits. He,

ergo, deleted the addition. This is how, the Revenue has come

up in appeal before the Tribunal.

15.

Having heard both the sides and gone through the

material on record, it is observed from the factual position

narrated in the impugned order that the foreign visits were

undertaken only by the Employees/Directors of the assessee

company for business purpose and no family member of such

executives accompanied them. This has not been controverted

on behalf of the Revenue. The Tribunal vide its aforesaid order

for the preceding year has sustained the addition in respect of

family members accompanying the Employees/Directors of

the company. In so far as the other expenses towards foreign

7 ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

visits of the Directors/Employees are concerned, the same

stood allowed. Since no family member of the

Directors/Employees of the assessee company accompanied

such visiting persons, in our considered opinion, no

disallowance is warranted. The same is held to have been

rightly deleted.

16.

In the result, the appeal is dismissed.

Order pronounced in the Open Court on 07th February, 2019.

Sd/- Sd/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 07th February, 2019 सतीश

आदेश क� आदेश आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / 3. The CIT (Appeals)-2, Nashik 4. The Pr.CIT-2, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR 5. ‘A’, ITAT, Pune; गाड� फाईल / Guard file. // True copy // 6.

आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

ITA No. 1914/PUN/2016 M/s. Associated Dairy Fab Pvt. Ltd.,

Date 1. Draft dictated on 06-02-2019 Sr.PS 2. Draft placed before author 06-02-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *

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