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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri JOGINDER SINGH, & Shri G. MANJUNATHA
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The Revenue as well as assessee is in cross appeal against the impugned order dated 02/08/2016 of the Ld. First Appellate Authority, Mumbai. In the appeal of the assessee ( ), the first and second ground raised by the assessee pertains to confirming the assessment order disallowing a sum of Rs.11,12,458/- on adhoc basis, being 1% of total packaging expenses of Rs.11,12,45,790/- and further disallowing a sum of Rs.25,127/- on ad-hoc basis, being 1% of the total miscellaneous expenses of Rs.25,12,775/- without considering the facts and circumstances.
2. During hearing, the ld. counsel for the assessee, invited our attention to the case of the assessee for Assessment Year 2011-12 (ITA No.4073/Mum/2016) order dated 04/01/2017, wherein, such addition-hoc disallowance claim of the assessee to the effect that the Tribunal has already take a view.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, the aforesaid order of the Tribunal dated 04/01/2017, in the case of the assessee, for Assessment Year 2011-12 is reproduced hereunder for ready reference and analysis:-
“This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner (Appeals) – 2, Mumbai and arises out of order u/s 143(3) of the Income Tax Act, 1961 (the “Act’’).
The grounds of appeal filed by the assessee read as under:-
i. On the fact and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs. 8,90,553/- on adhoc basis being 1% out of the total Packing Expenses of Rs. 8,90,55,258/- without appreciating the facts and circumstances of the case. ii. On the facts and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs. 2,11,355/- on adhoc basis being 1% out of the total Packing Expenses of Rs. 2,11,35,583/- without appreciating the facts and circumstances of the case.
4 & 7535/Mum/2016 Beekaylon Synthetics Pvt. Ltd.
3. Briefly stated, the facts are that the Assessing Officer (AO) found during the course of assessment proceeding that most of the expenses in respect of packing materials of Rs. 8,90,55,258/- and miscellaneous expenses of Rs. 2,11,35,583/- have been incurred by raising self-made vouchers not supported by specific bills. The AO referred to the disallowance @1% made in respect of similar expenses from A.Y. 2006-07 to 2010-11 and then disallowed 1% of packing material and miscellaneous expenses which comes to Rs. 8,90,553/- and Rs. 2,11,355/- respectively.
4. The assessee preferred an appeal before the learned CIT(A). We find that the learned CIT(A) agreed with the reasons given by the AO that the expenses are supported by self-made vouchers which are not verifiable in nature. The learned CIT(A) also noted that the assessee gave the same submission which was given before the AO at the time of assessment proceedings and no fresh evidences could be filed before him during the appellate proceedings. As the vouchers are self-made ones, possibility of inflation of expenditure cannot be ruled out, therefore, the learned CIT(A) confirmed the disallowance of Rs. 8,90,553/- and Rs. 2,11,355/- made by the AO.
Before us, the learned counsel of the assessee referred to the order of the learned CIT(A) for the A.Y. 2010-11, wherein the disallowance of 1% of packing material expenses and miscellaneous expenses made by t he AO were deleted following the order of the learned CIT(A) for A.Y. 2008-09 and 2009-10.
The learned DR supported the order of the learned CIT(A) for the impugned assessment year confirming the disallowance of the above expenses made by the AO.
We have heard the rival submissions and perused the relevant material on record. We find that a similar issue arose
5 & 7535/Mum/2016 Beekaylon Synthetics Pvt. Ltd. before the Coordinate Bench in the case of the assessee for the A.Y. 2005-06 [ITA No. 6506/Mum/2008]. The Tribunal on similar facts reduced the disallowance to Rs. 50,000/- from the disallowance of Rs. 1,20,040/- made by the AO. Considering the entire facts and circumstances of the case as well as the fact that the assessee failed to file before the learned CIT(A) any fresh evidence, we are of the considered view that it would be just and fair if an estimated addition is made towards such expenses at Rs. 6,00,000/-. The AO is directed to restrict the disallowance to Rs. 6,00,000/- .
In the result, the appeal is partly allowed.”
2.2. We find that on identical issue an ad-hoc disallowance was made by the Ld. Assessing Officer and finally before this Tribunal for Assessment Year 2011-12, considering the facts and the decision of the Coordinate Bench for Assessment Year 2005-06 (ITA No.6506/Mum/2008) , the ad- hoc disallowance was reduced. Following the aforesaid decision, the disallowance so sustained by the Ld. Commissioner of Income Tax (Appeal) is reduced to 50%, thus, this ground of the assessee is partly allowed.
The next ground pertains to disallowance of expenses of Rs.11,37,585/-, being 1% on adhoc basis out of the total packing expenses and miscellaneous expenses, while computing the book profit u/s 115 JB of the Act has been for which reliance was placed upon the decision in the case of Apollo Tyres (255 ITR 273)
3.1. If the special provision u/s 115JB of the Act for payment of tax by certain companies is analyzed, it says that where in the case of the assessee being a company, the income tax payable on the total income as computed under this Act in respect of any previous year, relevant to Assessment Year commencing on or after, the 1st day of April 2012 as substituted for 2011 by the Finance Act, 2011 w.e.f 01/04/2012 is less than eighteen and one half percent of its books profit. Such books profit shall deem to the total income of the assessee and the tax payable by the assessee on such income shall be the amount of income tax. Our view find support from the decision in the case of Apollo Tyres 255 ITR 273 (Supreme Court). Thus, no further disallowance was required to be made. This ground of the assessee is allowed.
Thus, the appeal of the assessee is partly allowed.
Now, we shall take up the cross appeal of the Revenue (ITA NO.7535/Mum/2016), wherein, deleting the 8D of the Rules has been challenged merely on the basis of the decision of the Tribunal in CIT vs Graviss Hospitality Ltd. (ITA No.3542/Mum/2013) order dated 31/11/2014.
4.1. During hearing, the Ld. DR, defended the addition made by the Ld. Assessing Officer, whereas, the Ld. counsel for the assessee, defended the order of the Ld. Commissioner of Income Tax (Appeal).
4.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee made suo-moto disallowance of Rs.11,17,815/- u/s 14A. The Ld. Assessing Officer made further disallowance of Rs.59,39,938/-. The Ld. Assessing Officer while making the disallowance applied the formula under Rule-8D of the Act. Without going into much deliberation, we find that this issue was deliberated upon by Hon'ble Bombay High Court in the Godrej & Boyce Mfg. Ltd. (328 ITR 81) and also made discussion on Rule-8D of the Rules. As per which the amount of expenditure by way of interest that will be taken (as A in the formula) will exclude attributable to any particular income or receipt. The case of the assessee is further fortified by the decision of the Tribunal in the case of CIT vs Graviss Hospitality Ltd. (ITA No.3542/Mum/2013) order dated 21/11/2014, wherein, the Tribunal deleted the disallowance made u/s 14A r.w.s. 8D and restricted the disallowance to the extent of suo-moto made by the assessee. In the present appeal, the assessee has also made suo-moto disallowance of Rs.11,17,815/- u/s 14A as
per the calculation filed with the computation. We affirm the stand drawn by the Ld. Commissioner of Income Tax (Appeal), resulting into, dismissal of appeal of the Revenue.
Finally, the appeal of the assessee is partly allowed and that of the Revenue is dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 24/04/2018.