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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Shri M.Balaganesh, AM ]
ORDER
PER S.S. GODARA, JM:
This assessee’s appeal for A.Y.2006-07 emanates from the CIT(A)-2, Kolkata’s order dated 08.07.2016, passed in Appeal No.379/CIT(A)-2/14-15, affirming Assessing Officer’s action inter-alia disallowing amounts written off on account of short fall in reimbursements by the Zonal Development Council, contribution to employees’ club, repairs to machineries, as well as road and buildings, prior period expenses to the tune of Rs.53,000, Rs.16,300, Rs.6,00,000/-, Rs.1,30,000/- and Rs.35,107/-; respectively, in proceedings u/s 143(3) of the Income Tax Act, 1961 (hereinafter the Act).
2. We come to the first issue of disallowance of Rs.53,000/- on account of short fall in reimbursement by the Zonal Development Council. There is no dispute that the assessee had actually incurred an amount of Rs.2,10,500/- on renovation of an existing bridge. The concerned Zonal Development Council reimbursed it a sum of Rs.1,57,500/- only thereby causing the short fall in question of Rs.53,000/-. The assessee claimed the same as its business expenditure written off in the relevant previous year. The Assessing Officer observed that there was no evidence on account of any denial of the reimbursement charges which could prove the instant claim under challenge. We have given our thoughtful consideration to rival submissions. We notice that there is no dispute so far as the assessee having actually incurred the M.P.Chini Industries Ltd. A.Y.2006-07 amount in question Rs.2,10,500/- for renovation of existing bridge as well as the consequential short fall are concerned. We observe in these facts that the lower authorities’ failure in not doubting the actual reimbursement from the Zonal Development Council as well as the gross expenditure form sufficient reasons for us to conclude that the assessee has rightly written off the amount in dispute as its business expenditure in the relevant previous year. There is no material till date indicating recovery thereof. We therefore delete the impugned disallowance of Rs.53,000/-.
3. The assessee’s second substantive ground is that both the lower authorities have erred on facts as well as in law in disallowing its contribution paid to the employees’ club to the tune of Rs.16,300/-. We notice that there is no detailed discussion apart from the fact both the lower authorities have rejected the impugned claim without giving any reason. The assessee is a company supposed to promote harmony amongst its staff/workmen so as to realise maximum potential of its work strength. We therefore see no reason to reject this claim since the impugned sum is wholly and exclusively incurred for the purpose of its business allowable u/s 37 of the Act. This second substantive ground in the instant appeal is also accepted.
The assessee’s third and fourth substantive grounds plead that both the lower authorities have erred in law as well as on facts in disallowing repairs of machineries as well as roads and bridges to the tune of Rs.6,00,000/- and Rs.1,30,000/; respectively on adhoc basis. The Assessing Officer quoted assessee’s failure in not furnishing all the relevant evidence in support of the impugned claims. We find that the assessee had placed on record all cogent details that it had incurred the impugned expenditure in the former head and qua sugar godowns, factory building, residential colony in the latter one. The Assessing Officer made the impugned latter disallowance @ 5% on adhoc basis. The CIT(A)’s detailed relevant portion on these two issues reveals that the assessee had reiterated its earlier submission during the course of lower appellate proceedings. Both the lower authorities seem to have not considered the said details apart from comparing the impugned expenditure amounts M.P.Chini Industries Ltd. A.Y.2006-07 vis-a-vis the preceding assessment year in the former head. There is no discussion much less a detailed one in the lower appellate order qua either of the two issues. We therefore conclude in these facts of the case that such an adhoc disallowance without any doubt on genuineness aspect is not warranted in the given facts of the case. We therefore direct the AO to delete both the impugned disallowance of Rs.6,00,000/- and Rs.1,30,000/-; respectively.
5. This leaves us with assessee’s last substantive ground challenging the disallowance in respect of prior period expenditure of Rs.35,107/-. Learned Counsel pleads before us that the assessee had already disallowed the same in its computation which amounts to double addition qua the very issue. We remit the instant issue back to the Assessing Officer to verify the necessary facts. The instant ground is taken as accepted for statistical purposes.
This assessee’s appeal is partly allowed.
Order pronounced in the open Court on 04.05.2018. Sd/- Sd/- [M.Balaganesh] [ S.S. Godara ] Accountant Member Judicial Member Dated : 04.05.2018. [RG Sr.PS] Copy of the order forwarded to: 1.M.P.Chini Industries Ltd., 10, Camac Street, Kolkata-700017.
A.C.I.T., Circle-4(1), Kolkata.
CIT(A)-2, Kolkata 4. C.I.T.-2, Kolkata.
CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches M.P.Chini Industries Ltd. A.Y.2006-07 M.P.Chini Industries Ltd. A.Y.2006-07