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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the department against the order of the Commissioner of Income Tax(Appeals)-VIII, Ahmedabad, dated 09/04/2013 for the Assessment Year (AY) 2010-11, on the following Grounds: i. (a) The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.69,25,915/- made on account of disallowance u/s.40A(2)(b) of the Act, without properly appreciating facts of the case and the material brought on record.
ITA No.2114/Ahd/2014 DCIT vs. Gujarat Gas Financial Service Ltd. Asst.Year – 2010-11 - 2 - (b) The Ld.CIT(A) has erred in law and on facts to delete the disallowance when assessee had failed to substantiate that the rate of service charges paid by it to its holding company was comparable to fair market value. ii. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 2. The relevant facts as culled out from the materials on record are as under:- In this case, the Assessee Company is subsidiary company of Gujarat Gas Company Limited; the Company is primarily engaged in the business of lease finance and hire purchase whereby it is providing gas connections to industrial, commercial and domestic customers.
2.2 During the year under consideration the assessee company has debited a sum of Rs.91,75,915/- towards service charges to Gujarat Gas Company Ltd @3,205/- per connection on 2863 gas connections. The assessee company was asked to justify the payments made to the holding company. The assessee company wide its letter dated 23.01.2013 stated that; "As required by your good self regarding services charges paid to Gujarat Gas Company Limited. We have already provided month wise details for service charges paid to Gujarat Gas Company Limited vide our letter dated 11th Jan 2013 further it is to be submitted that during the year under review, Rs.91.76 lacs has been paid as service charges to Gujarat Gas Company Limited, Please note that the same is paid @Rs.3,205/- per connection. These service charges are paid in respect of connections signed before 31st March, 2009 and installed during the year i.e. the assessee-company has been installing connections directly to the customers. However, due to the regulatory changes, the
ITA No.2114/Ahd/2014 DCIT vs. Gujarat Gas Financial Service Ltd. Asst.Year – 2010-11 - 3 - connections cannot be sold directly to the customer's as all the services of gas are provide by Gujarat Gas Company Limited, it was decided to sell gas connections by assessee company to Gujarat Gas Company Limited. In view of this, the entire execution and management of the connections is with Gujarat Gas Company Limited and therefore, no service charges are paid to the said company. However, in respect of connections signed before 31st March, 2009 and installed during the year, the same were given to customers directly and hence service charges have been charged."
The submission of the assessee company was considered but not found tenable and disallowance u/s.40A(2)(a) r.w.s. 40A(2)(b) of Rs.69,25,915/- was made against the assessee’s company.
Against the said order assessee preferred first statutory appeal before the ld. CIT(A) who allowed the appeal of the assessee.
We have gone through the relevant material and heard both the parties. In all the earlier assessment years’ upto A.Y.2005-06, such expenditure had been fully allowed. It is only during the assessment year 2006-07 and in the subsequent years under appeal that the learned AO had arbitrarily invoked the provisions of Section 40A(2)(b) and made the impugned disallowance. The disallowance u/s.40A(2)(b) came to be made by learned AO for the first time A.Y. 2006-07 and that addition was deleted by the ld.CIT(A). Similar disallowance made by the AO in A.Y.2007-08, A.Y.2008-09 & A.Y.2009-10 had also been deleted by the Learned CIT(A).
ITA No.2114/Ahd/2014 DCIT vs. Gujarat Gas Financial Service Ltd. Asst.Year – 2010-11 - 4 - 4.2 Learned AR has submitted that on principles of consistency, the impugned addition made by the Ld. AO is not maintainable in law.
4.3 Learned AR has cited a judgment of Gujarat High Court in assessee’s own case in Tax Appeal No.428 to 731 of 2015. In this matter, department/appellant has requested to Hon’ble High Court to frame the following question as substantial question of law in the case for determination of this court under section 260A of the Act. “Whether, the Appellate Tribunal has substantially erred in law in deleting the addition of Rs.7.70 crores made on account of disallowance u/s.40A(2)(b) r.w.s 40A(2)(a) of the Act, without properly appreciating the facts of the case and the material brought on record?” 4.4 In this case, Hon’ble High Court held that “we are of the opinion that the appeals are meritless and the same deserve to be dismissed and accordingly dismissed.”
4.5 Learned AR cited an order of the Co-ordinate Bench in ITA No.556/Ahd/2010 which was filed by the assessee company and ITA No.656/Ahd/2010 & 91, 92 & 1561/Ahd/2012 which were filed by the revenue. In this case, certain expenses were disallowed by the Assessing Officer by invoking provision of Section 40A(2)(b) of the Act, same were decided in favour of the Assessee Company and appears from the record that in the several assessment year the revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further.
ITA No.2114/Ahd/2014 DCIT vs. Gujarat Gas Financial Service Ltd. Asst.Year – 2010-11 - 5 - 5. Considering the overall facts of the case, decision of Jurisdictional High Court and order of the ITAT in assessee’s own case, we do not find any merit in the appeal and therefore, we dismiss the appeal of the revenue.
In the result, appeal filed by the revenue is dismissed. This Order pronounced in Open Court on 11/10/2017
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Ahmedabad; Dated 11/10/2017 Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-VIII, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy