Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM]
Per N.V.Vasudevan, JM and ITA No.1539/Kol/2014 are appeals by the Revenue against two orders both dated 05.02.2014 of CIT(A)-1, Kolkata relating to A.Y.2004-05 and 2005-06 respectively. ITA No.1540/Kol/2014 is an appeal by the Revenue against the order dated 31.03.2014 of CIT(A)-1, Kolkata relating to A.Y.2008-09. The issues that arise for consideration in these three appeals are identical and arise out of the same facts and circumstances. These appeals are heard together. We deem it convenient to pass a common order. ITA No.1538/Kol/2014 (A.Y.2004-05) 2. Ground No.1 raised by the revenue reads as follows :- “1. That on the facts and circumstances of the case, the ld. CIT(A) is not justified in deleting disallowance of Rs. 3,17,638/- on contribution to Staff Welfare Fund. This fund was created without passing the same through the Profit & loss Account. The assessee actually understated service charge income and resultant cash was directly credited to this fund.
to 1540/Kol/2014 West Bengal Tourism Development Corporation Ltd.A.Y.2004- 05,2005-06 & 2008-09 2
There is a delay of 19 days in filing and 1539/Kol/2014 and delay of two days in filing ITA No.1540/Kol/2014. It has been explained in the affidavit of Shri B.Shah, ITO, Ward-2(4), Kolkata that the delay in filing these appeals was due to administrative and procedural delays. The reasons given in the affidavit are accepted and we hold that there was a reasonable and sufficient cause for the delay in filing these appeals. The delay in filing these appeals are accordingly condoned.
The Assessee is a state government undertaking engaged in the business of tourism in the state of West Bengal and also in the interstate tourism development. In the course of assessment proceedings u/s 143 (3) of the Income Tax Act, 1961 (Act) the AO noticed that there was an item, of staff welfare funds of Rs.3,17,638/- which was shown as current liability in the balance sheet. There was also another item of current liability brokerage compensation fund of Rs.2,85,871/-. As we have already seen that the assessee is in the business of tourism therefore runs tourist lodges. It collects service charges from the occupants of various lodges. During the previous year the assessee had collected a sum of Rs.31,76,380/- but in the books of accounts the assessee had shown service charges of only Rs.26,32,569/-. The staff welfare fund and brokerage compensation fun d were 10% and 9% of the service charges earned by the assessee. On the above facts the AO was of the view that the staff welfare fund and brokerage compensation fund should be added to the total income of the assessee for the following reasons :- “3. During the course of investigation of accounts, it was found' that the assessee company created two funds in the names of 'Staff Welfare Fund' and 'Breakage Compensation Fund'. The assessee treated the said funds as current liability. These funds were created without passing the same through the Profit & Loss Account. Amounts credited directly to these funds and kept the under 'Current Liability' were as below ; .
Staff Welfare Fund (10%) Rs.. 3,17,638/- Breakage Compensation Fund (9%) : Rs.2,85,871/- Rs. 6,03,509/-
Point no. IX of notes on accounts states that these two funds were created by respectively crediting into it 10% and 9% of the service charges earned by tile to 1540/Kol/2014 West Bengal Tourism Development Corporation Ltd.A.Y.2004- 05,2005-06 & 2008-09 3 assessee. In Accordance with this statement the service charge should have been Rs.31,76,380/-.. But service charge income is shown at Rs..26,32,569/- in the Schedule 12 of the Balance sheet furnished by the assessee, implying that assessee has understated its service charge income by Rs.5,43,811/-.
It appears from the accounts furnished by the assessee that no amount out of the said funds was utilised during the relevant. financial year. During the course of hearing the matter was discussed and it was found that the assessee actually understated the service charge income and the resultant cash was directly credited to the above mentioned funds. Thus. the income of the assessee amounting to Rs.6,03,509/- which was credited to the above mentioned two accounts directly should be added back to the total income of the assessee.”
On appeal by the assessee the CIT(A) found that in assesee’s own case for A.Y.2004-05 in order dated 19.12.2007 ITAT Kolkata Bench held that contribution to staff welfare fund cannot be added to the income of the assessee. Following the aforesaid order the CIT(A) deleted the addition made towards contribution to staff welfare of Rs.3,17,638/-. The following were the relevant observations of the CIT(A) :- “4.2 The submissions of the Appellant as above have been considered. It has been held by the ITAT in the Appellant's own case for A.Y 2003-04 that the claim of the Appellant is allowable only to the extent of Staff Welfare Fund. The relevant portion of the order of ITAT is re-produced as under :-
"On careful consideration of the materials made available with the Tribunal and analyzing the same in the light of the rival submissions of both the parties, it is found that the assessee maintains staff welfare fund a/c copy of which is made available before the Tribunal which shows that the service charges received by the assessee were accounted to the Staff Welfare Fund and they were accordingly distributed to the staff and this very procedure is followed by the assessee basing on the Minutes of Board of Directors of West Bengal Tourism Development & Corpn. held on 5-12-79 a copy of which is also made available before the tribunal but at the same time, the assessee is not able to justify the claim relating to breakage compensation fund. Therefore, we are of the considered view that the amounts created for the staff welfare fund are to be allowed as it is in accordance with the Minutes of the Board of Directors which is having an overriding title and basing on which the diversion of the fund was made. Accordingly, the AO is directed to delete the addition relating to the staff welfare fund only. Accordingly, the assessee's appeal is partly allowed. " to 1540/Kol/2014 West Bengal Tourism Development Corporation Ltd.A.Y.2004- 05,2005-06 & 2008-09 4
Considering that the above decision of the ITAT Kolkata is on identical issues in the Appellant's case for A.Y 2003-04, therefore respectfully following the order of the jurisdictional ITAT, the addition made towards contribution to Staff Welfare Fund of Rs. 3, 17,638/- is deleted and the addition towards Breakage Compensation Fund of Rs.2,85,871/- is confirmed.”
Aggrieved by the order of CIT(A) the revenue raised ground no.1 before the tribunal.
None appeared on behalf of the assessee. We have heard the submissions of the ld. DR, who relied on the order of AO. We are of the view that there is no merit in ground no.1 raised by the revenue. On identical facts this tribunal has already taken a view in assessee’s own case for A.Y.2003-04 and held that the contribution towards staff welfare fund was based on a resolution of the board of directors of the assessee held on 05.12.1979 and by virtue of that resolution an over riding title on the service charges received and consequently there was a diversion of income by over riding title at source on the service charges received by the assessee. The CIT(A) has followed the order of ITAT on identical facts . In view of the above, we find no grounds to interfere with the order of CIT(A). Ground no.1 raised by the revenue is accordingly dismissed. 8. Ground No.2 raised by the revenue reads as follows :- “2. That on the facts and circumstances of the case, the ld. CIT(A) is not justified in directing the A.O. to verify the claim of the assessee in respect of a carry forward of losses for A.Y. 1995-96 i) unabsorbed depreciation of Rs. 1,70,56,577/-, ii) Business loss of Rs. 1,45,62,730/- and b) Dividend income of Rs. 7,25,760/- as exempt income u/s 10(34) of the I.T.Act, 1961 and to allow the same as per law. The issue has been set aside by the ld. CIT(A), which is not permissible in law.”
The assessee made a claim before the CIT(A) for carry forward of loss for A.Y.1995-06 which was in the form of unabsorbed depreciation and business loss. The assessee also claimed that there was a dividend income which was wrongly included in the total income declared in the return of income. Since the dividend income is exempt u/s 10(34) of the Income Tax Act, 1961 (Act) the same should be to 1540/Kol/2014 West Bengal Tourism Development Corporation Ltd.A.Y.2004- 05,2005-06 & 2008-09 5 excluded from the total income. On the aforesaid claims made by the assessee the CIT(A) directed the AO to verify the relevant assessment records with regard to carry forward of unabsorbed depreciation and business loss and gave the benefit after due verification. With regard to the exclusion of dividend income the CIT(A) directed the AO to verify the claim of the assessee and if found correct allow relief in accordance with law.
It is the plea of the revenue in ground no.2 that the CIT(A) u/s 251 of the Act does not have the power to set aside an issue to the AO and therefore his order is not in accordance with law. We are of the view that the contention raised on behalf of the revenue is correct but nevertheless we are of the view that the issue requires examination by the AI and in the circumstances we direct the AO to verify the claim of the assessee and if found correct give appropriate relief. Thus ground no.2 is treated as allowed. 11. In the result ITA No. 1538/Kol/2014 is partly allowed for statistical purposes. ITA Nos.1539/Kol/2014 and ITA No.1540/Kol/2014 (A.Y.2005-06 & 2008-09) 12. Grounds of appeal
raised by the revenue read as follows : A.Y.2005-06
1. That on the facts and circumstances of the case, the ld. CIT(A) is not justified in deleting disallowance of Rs. 3,39,328/- on contribution to Staff Welfare Fund. These expenses were not actual expenses, only provisions were created.
2. That on the facts and circumstances of the case, the ld. CIT(A) is not justified in directing the A.O. to verify the claim of the assessee in respect of a) carry forward of losses for A.Y. 1995-96 i) unabsorbed depreciation of Rs. 1,70,56,577/-, ii) Business loss of Rs. 1,45,62,730/- and b) Dividend income of Rs. 7,25,760/- as exempt income u/s 10(34) of the I.T.Act, 1961 and to allow the same as per law. The issue has been set aside by the ld. CIT(A), which is not permissible in law.
3. The appellant craves leave to amend, modify or alter any grounds of appeal
during the course of hearing of this case.” A.Y.2008-09
1. That on the facts and circumstances of the case, the Ld. CIT(A) is not justified in deleting disallowance of Rs. 4,47,890/- on staff welfare expenses, considering the fact that the claim is in respect of a liability which has not been ascertained. to 1540/Kol/2014 West Bengal Tourism Development Corporation Ltd.A.Y.2004- 05,2005-06 & 2008-09 6
2. That on the facts and circumstances of the case, the Ld. CIT(A) is not justified in directing the A.D. to verify the claim in respect of carry forward of unabsorbed depreciation of Rs. 2,61,93,483/- and business loss of Rs. 78,67,136/- and to allow the same as per law. The issue has been set aside by the Ld. CIT(A), which is not permissible in law.
3. The appellant craves leave to amend, modify or alter any grounds of appeal during the course of hearing of this case.”
13. These grounds are identical to ground no.1 and 2 raised by the revenue in for A.Y.2004-05. For the reasons stated while deciding these grounds we dismiss ground no.1 in both these appeals and allow ground no.2 for statistical purposes.
In the result ITA Nos. 1539 and 1540/Kol/2014 are partly allowed for statistical purposes. 15. In the result all the appeals are partly allowed for statistical purposes. Order pronounced in the Court on 03.01.2018. Sd/- Sd/- [Dr.A.L.Saini] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 03.01.2018. [RG Sr.PS] Copy of the order forwarded to:
1. 1. M/s. West Bengal Tourism Development Corporation Ltd., Hemanta Bhawan, 4th Floor, 12, B.B.D.Bag (East), Kolkata-700001.
2. I.T.O., Ward-2 (4), Kolkata. 3 C.I.T.(A)-1, Kolkata 4. C.I.T.-1, Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.