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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh, & Shri Rajesh Kumar
आदेश / O R D E R
Per Joginder Singh (Judicial Member) These are cross appeals filed by the Revenue as well as the assessee against the order dated 08.10.2013 of Ld. Commissioner of Income Tax. In the appeal of the assessee the disallowance has been confirmed amounting to Rs.87,493/- out of various expenses on adhoc basis which has been challenged through ground No. 1 & 2. In ground No. 3 & 4 the disallowance of Rs.3,95,850/- has been confirmed which is out of coolie and cartage charges, labour charges and packing expenses. In ground No. 5 & 6 the disallowance of Rs.52,096/- out of repair and maintenance charges has been challenged. 2.2 During hearing Dr. K. Shivaram, learned counsel for the assessee contended that since the assessee is a company no adhoc disallowance is to be made. On the other hand, the learned D.R. Shri H.M. Wanare contended that some of the expenses were claimed on self made vouchers, therefore, their genuineness was not established by the assessee. Consequently the addition made by the Assessing Officer was defended. In reply the learned 3 &6774/Mum/2013 M/s. Kalpesh Synthetics P. Ltd. counsel for the assessee contended that firstly the disallowance is not permitted, the assessee being a company, and secondly the disallowance is based on surmises and conjecture and also highly excessive. 2.3 We have considered the rival submissions and perused the material available on record. It is noted that the major reason for making the disallowance by the learned Assessing Officer is that the genuineness of the expenses is not established by the assessee and also some of the expenses are claimed on self made vouchers. It is also noted that the learned CIT(A) granted part relief to the assessee. Considering the totality of facts and the material available on record to put an end to the litigation the disallowance under the respective head is reduced to 50% of the disallowance confirmed by the learned CIT(A). Thus these three grounds, raised by the assessee, are partly allowed. It is made clear that since we have granted part relief to the assessee to the peculiar facts of the present appeal, therefore, our decision may not be quoted for future reference as a precedent. Resultantly the appeal of the assessee is partly allowed.
In the appeal of the Revenue, the first ground pertains to deleting the disallowance made under section 36(1)(ii) amounting to Rs.4 lakhs, being bonus paid to Directors by the assessee company apart from payment made as remuneration. The learned D.R. defended the addition made by the Assessing Officer whereas the 4 &6774/Mum/2013 M/s. Kalpesh Synthetics P. Ltd. assessee has defended the conclusion arrived at in the impugned order. 3.1 We have considered the rival submissions and perused the material available on record. It is noted that Shri Jitender C. Shah and Shri Bhavesh Kumar V. Shah are working as employees of the assessee. Both these persons received remuneration from the assessee company as salary income. An amount of Rs.4 lakhs was paid as bonus to these persons. The assessee company, during the relevant time, was having profit around Rs.78,48,492/-. Both the aforementioned persons are Directors of the assessee company. The learned Assessing Officer disallowed the commission invoking section 36(1)(ii). On appeal before the learned CIT(A) the addition made on this count was deleted. Now the Revenue is aggrieved and is in appeal before the Tribunal. 3.2 We find that, under the facts discussed herein above and also available on record, the learned CIT(A) while granting relief to the assessee considered various decision including from Hon'ble jurisdictional High Court in Loyal Motor Service Company P. Ltd. vs. CIT 14 ITR 647, M/s. Dalal and Brocha Stock Broking P. Ltd. The percentage of shareholdings was considered alongwith decisions like CIT vs. Carrier Launcher India Ltd. (2012) 71 DTR (Del); 131 ITD 414. It is also noted that for Assessment year 2009-10 identical disallowance was made by the Assessing Officer under section 36(1)(ii) which was deleted by the CIT(A). No contrary decision was brought to our notice by the 5 &6774/Mum/2013 M/s. Kalpesh Synthetics P. Ltd. Revenue. Even otherwise on the principle of consistency also the assessee is having a case in its favour. Considering the totally of facts and the judicial pronouncements discussed hereinabove we affirm the stand of the CIT(A).
The next ground pertains to part relief granted to the assessee with respect to foreign travel expenses. The learned D.R. defended the addition whereas the learned counsel for the assessee defended the conclusion arrived at in the impugned order. 4.1 We have considered the rival submissions and perused the material available on record. It is noted that the whole issue has been tabulated at page 7 onwards by the learned CIT(A) as was explained by the assessee vide letter dated 20.12.2012 with respect to details of foreign travel expenses. The learned CIT(A) duly considered the factual matrix along with the decisions in Cooper Engineering Ltd. vs. CIT 135 ITR 597 (Bom), Sheshasayee Brothers vs. CIT 42 ITR 568 (Mad) and Sabal Gar Industries Ltd. vs. CIT 46 ITR 978 (All). It is also noted that the learned Assessing Officer disallowed the entire amount of foreign travel expenses amounting to Rs.5,78,484/- claimed under section 37 of the Act. The comparative figures of assessment year 2008-09 to 2010- 11 were also considered and found that proper explanation with respect to business expenditure in respect of foreign travel expenses was adduced by the assessee. The purpose of travel was also explained. Even 6 &6774/Mum/2013 M/s. Kalpesh Synthetics P. Ltd. otherwise the addition to the extent of Rs.60,707/- was upheld which was found to be not genuine. Thus the stand of the CIT(A) is affirmed.
The next ground pertains to restricting the disallowance to 5% as against 10% made on account of coolie and cartage charges, labour charges and packaging charges. We find that the addition/disallowance was made by the learned Assessing Officer that such claim was not fully supported with proper bills and vouchers and certain expenses were claimed on self made vouchers. Considering the totality of facts we find no justification to interfere with the reasoning/conclusion contained in the impugned order. Thus this ground of the Revenue having no merits, therefore, dismissed.
The last ground, raised by the Revenue, pertains to deleting the disallowance made on account of unsecured loans under section 68 of the Act amounting to Rs.33,50,000/-. The crux of argument on behalf of the Revenue is that the assessee did not prove the identity, creditworthiness and genuineness of the transaction. On the other hand the learned counsel for the assessee defended the conclusion drawn in the impugned order. 6.1 We have gone through the factual matrix and found that the assessee received loans from Gajaraben C. Shah (Rs.20,00,000/-), Pooja K. Vora (Rs.5,00,000/-), Mehender C. Shah (Rs.4,50,000/-) and Aparna D. Shah (Rs.4,00,000/-) totaling Rs.33,50,000/-. During assessment proceedings the assessee was asked to prove 7 &6774/Mum/2013 M/s. Kalpesh Synthetics P. Ltd. the identity, creditworthiness of the parties and genuineness of the transaction. We find that the submission of the assessee were duly considered by the CIT(A) as is evident from para 7.1 of the impugned order and the submission of the assessee were forwarded to the Assessing Officer for his comments. The comments vide letter dated 30.08.2013 were also considered by the CIT(A). The counter comments of the assessee were also considered and each of the party has been separately dealt with. Uncontroverted findings have been recorded by the learned CIT(A) that the Assessing Officer duly verified the loans to the extent of Rs.31,00,000/- and thus the addition was deleted. So far as the amount of Rs.2,50,000/- is concerned this amount was found as opening balance and the loan transactions were continuing from these parties from earlier years. The source of the amount was also explained along with creditworthiness as well genuineness. It is also noted that the conclusion of the learned CIT(A) is based upon the submission of the assessee, report from the Assessing Officer and counter reply from the assessee. It is noted that the assessee has established the identity and creditworthiness of the parties along with the genuineness of the transaction, thus the conditions mentioned in section 68 are duly established, therefore, we find no infirmity in the conclusion drawn by the learned CIT(A) more specifically when the primary onus cast upon the assessee has been duly discharged. Thus we are convinced 8 ITA Nos. 76 &6774/Mum/2013 M/s. Kalpesh Synthetics P. Ltd. that the addition made under section 68 by the learned Assessing Officer is not justified. Thus the stand of the learned CIT(A) is affirmed. Resultantly the appeal of the Revenue is dismissed. 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. Representative from both sides at the conclusion of the hearing on 19/07/2016. Sd/- Sd/- (Rajesh Kumar) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 20/07/2016 ÇAÑA P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT-4, Mumbai. 4. आयकर आयु�त / CIT(A)-8, Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.