Adani Retail Ltd, Ahmedabad vs Assessee
- CitationI.T.A. No.491/Ahd/2011
Ratio decidendi
The rule this decision rests on
Ground 1(i): Where the assessee has not paid employees' contributions to Provident Fund and ESI within the due date prescribed under the PF/ESIC Act, the resulting disallowance of such contributions is sustained, the question being governed by the binding decision of the jurisdictional High Court in CIT v. Gujarat State Road Transport Corporation, (2014) 366 ITR 170 (Guj.), which the Tribunal follows. Ground 1(ii): An amount received by the assessee as reimbursement of expenses incurred in rendering services, where the services have already been rendered and the report delivered, is not rendered an allowable business expenditure merely because the assessee later refunds that amount to the payer on the payer's decision not to execute the project; non-execution of the project does not furnish a basis for claiming as deduction the refund of reimbursed expenses already incurred and received.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
आयकर अपील सं./I.T.A. No.491/Ahd/2011 ( नधा रण वष / Assessment Year : 2007-08) Adani Retail Ltd. बनाम/ The DCIT ( Es t wh i l e K no wn a s B2 C I n d i a Lt d .) Vs. Circle-1 Adani House, Shrimali Ahmedabad Society Nr.Mithakhali 6 Roads Navrangpura Ahmedabad थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. :AABCB 5212 H (अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से / Appellant by : Shri S.N. Soparkar, A.R. यथ क ओर से/Respondent by : Shri Dinesh Singh, Sr.DR
ु वाई क तार ख / सन Date of Hearing 21/01/2015 घोषणा क तार ख /Date of Pronounce ment 29/01/2015
आदे श / O R D E R
PER SHAILENDRA KUMAR YADAV, JM :
This appeal filed by the Assessee is directed against the order of CIT(A)-IV, Ahmedabad dated 13/12/2010 passed for the Asst.Year 2007-08. The assessee has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case, the CIT(A) erred in dismissing the assessee's appeal and thereby confirming disallowances made in the assessment order being:
ITA No.491/Ahd/2011 Adani Retail Ltd. vs. The DCIT Asst.Year - 2007-08 -2-
i) For allegedly delayed payment of Employees' contribution to P.F. and ESI Rs.8,83,117/-
ii) For expenditure incurred/reimbursed For expenses for services Rs.33,52,859
2. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.
2. Briefly stated facts of the case are that the return of income was filed by the assessee on 30/10/2007 declaring total loss of Rs.(-) 23,47,88,357/-. The assessee-company is engaged in the business of running a chain of super markets of foods, groceries and apparels.
3. The first issue is regarding disallowance of Employees' contribution amounting to Rs.8,83,117/- to PF and ESI not paid within the due date prescribed in PF/ESIC Act. This issue is covered against the assessee by the decision of Hon'ble Jurisdictional High Court rendered in the case of CIT vs. Gujarat State Road Transport Corporation reported at (2014) 366 ITR 170 (Guj.). Respectfully following the said decision of Hon'ble Jurisdictional High Court, we confirm the disallowance made by CIT(A) because there was a delay in making the payment for employees' contribution to PF/ESI. Accordingly, the order of the CIT(A) is hereby upheld on this issue.
ITA No.491/Ahd/2011 Adani Retail Ltd. vs. The DCIT Asst.Year - 2007-08 -3-
4. Next issue is with regard to disallowance of Rs.33.53 lacs. The AO disallowed the aforesaid amount by holding that the same was no incurred for business purpose. In fact, the AO held as under:-
"It is therefore seen that a certain income which is earned and received by assessee-company during earlier year on account of specific services provided to B2B India P.Ltd. has been reimbursed to the concerned party as the latter decided not to execute the project for which the survey was conducted. However, it is not clear that has to how and under what circumstances the same was claimed as expenditure incurred for the purpose of business. Vide the order sheet nothing dtd. 29/12/2009, the assessee was asked to show cause why the said amount be not disallowed as the same has not been incurred in the normal course of business. In response the assessee merely stated that the expenses were allowable as it was incurred as part of the business activities.
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The reply of the assessee is not acceptable. There is no clear purpose why the said expenditure has been incurred i.e. why the money has been returned back while it was received earlier on account of specific services provided by the assessee. In view of the same, the expenditure of Rs.33,52,859/- is disallowed."
4.1. The matter was carried before the first appellate authority and having considered the submissions on behalf of the assessee, the CIT(A) confirmed the same. Same has been opposed before us on behalf of assessee and stand of assessee has been that the CIT(A) was not justified in confirming the disallowance holding the same was not incurred for business purpose. On the other hand, the ld.DR supported the orders of the authorities below.
ITA No.491/Ahd/2011 Adani Retail Ltd. vs. The DCIT Asst.Year - 2007-08 -4-
4.2. After going through the rival submissions and having gone through the materials available on record, we find that the assessee received income from B2B India Pvt.Ltd. on account of consultation fee and staff salary in earlier year. The stand of assessee has been that considering market strength of assessee, the said company approached assessee to do a complete research of retail and related market. Assessee undertook a survey of market and advised B2B India Pvt.Ltd. For this purpose, Rs.33.53 lacs were recovered towards expenditure incurred on such survey. Such recovery of expense was reduced from expenditure charges to P&LA/c in the said year. The stand of assessee before us has been that during the year under consideration, B2B decided not to execute project for which survey was conducted and they claimed the amount back which was paid by them. The assessee refunded the same amount in its business interest and same was claimed as allowable deduction. We find that the assessee has received the reimbursement of expense incurred by it as discussed above. The assessee has already rendered the services by conducting market survey and submitting report to B2B India Pvt.Ltd. Having completed this transaction, there is no logic or basis for refunding the same. Non-execution of project has nothing to do with claiming expenses already incurred. Once the assessee has rendered the services, reimbursement of expenses made by other company cannot be refunded just because other company did not execute the project. What the assessee received is just re-imbursement of expenses already incurred by it. Market survey was already conducted and report given, therefore there is no justification of refund of such reimbursed expenses. Even he has refunded the same, it cannot be said ITA No.491/Ahd/2011 Adani Retail Ltd. vs. The DCIT Asst.Year - 2007-08 -5-
to be allowable business expenditure. Under these facts and circumstances, the order of the CIT(A) on this issue is upheld.
5. In the result, Assessee's appeal is dismissed.
Order pronounced in the Court on 29.1.2015, the .................... of January, 2015 at Ahmedabad.
Sd/- Sd/- ( N.S. SAINI ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 29/ 01 /2015 ट .सी.नायर, व.(न.स./T.C. NAIR, Sr. PS
आदे श 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)-VI, Ahmedabad
5. /वभागीय (त(न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड5 फाईल / Guard file.
आदे शानुसार/ BY ORDER,
स या/पत (त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 28.1.15 (dictation-pad 9-pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ...29.1.15
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......29.1.15
7. Date on which the file goes to the Bench Clerk.....................30.1.15
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................
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