J.Thomas & Company Pvt. Ltd., Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH : KOLKATA

[Before Hon'ble Sri Mahavir Singh, JM & Hon'ble Sri B.P.Jain, AM] I.T.A No. 693/Kol/2012 Assessment Year : 2007-08

J.C.I.T., (OSD),Circle-4, -vs.- M/s.J.Thomas & Company Kolkata Pvt.Ltd.,Kolkata [PAN : AABCJ 2851 Q) (Appellant) (Respondent) I.T.A No. 554/Kol/2012 Assessment Year : 2006-07

A.C.I.T.,Circle-4, -vs.- M/s.J.Thomas & Company Kolkata Pvt.Ltd.,Kolkata [PAN : AABCJ 2851 Q) (Appellant) (Respondent) For the Appellant : Shri K.L.Kanak, JCIT For the Respondent : Shri Anup Sinha, CA

Date of Hearing : 22.04.2015 Date of Pronouncement : 29.04.2015.

ORDER

Per Shri B.P.Jain, AM

These two appeals of the Revenue arise from two different orders of ld.CIT(A)- IV, Kolkata for Assessment Years 2007-08 and 2006-07 each dated 23.12.2011.

2. The revenue has raised the following grounds of appeal in ITA No.693/Kol/2012 for A.Yr.2007-08 :

"1. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition of Rs.73,54,257/- on account of repair & maintenance of building since the assessee company will get enduring benefit of such expenditure over the years.

2. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition of Rs.10,08,114/- on account of repair & maintenance of machinery since the assessee company will get enduring benefit of such expenditure over the years.

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A.Yrs.2007-08 & 2006-07

3. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in restricting the disallowance of Rs.39,691/- u/s 14A since his decision is not made methodically and he did not consider the necessity of Sec.14A properly.

4. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the disallowance of Rs.11,93,352/- u/s 40(a)(ia) without considering the fact that unless the payee submit certificate u/s 197 the assessee company is obliged to deduct tax at source.

5. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing."

2.1. The revenue has raised the following grounds of appeal in ITA NO.554/Kol/2012 for A.Yr.2006-07 :

"1.That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition of Rs.1,13,076/-/- made on difference due to inability of the assessee to reconcile the ITS details without considering the fact that the said difference would not be reconciled before him.

2. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition of Rs.66,60,893/- on account of repair & maintenance of building since the assessee company will get enduring benefit of such expenditure over the years.

3. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition of Rs.10,23,942/- on account of repair & maintenance of machinery since the assessee company will get enduring benefit of such expenditure over the years.

4. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in restricting the disallowance of Rs.5,95,665/- u/s 14A since his decision is not made methodically and he did not consider the necessity of Sec.14 properly.

5. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing."

3. First of all we take up the appeal of the revenue in ITA No.693/Kol/2012 as under :-

3.1. As regards ground no.1 of the revenue the brief facts of the case are that AO made the disallowance at Rs.73,54,257/- out of total expenditure of Rs.79,56,858/-

incurred in connection with repairs and maintenance of owned and lease buildings taken on rent. The allegation of AO was that the repair expenses are about 264% of the opening WDV of the buildings and there is no closing WDV in the block of building as the entire building has been sold off. It was explained that there are buildings which are owned by the assessee even though in Tax Audit Report the entire block has been wiped out. In any case the AO observed that the amount of repairs has been excessive 2 3 ITA Nos.693 & 554/Kol/2012 M/s. J.Thomas & Co.Pvt...Ltd.

A.Yrs.2007-08 & 2006-07 compared to the value of opening WDV of building. In the immediately preceding year the repairs of the building were allowed to the extent of 20%. AO following the same this year as well 20% of the WDV which comes to Rs.6,02,601/- is allowed and the remaining Rs.73,54,258/- was disallowed and added back to the income of assessee treating the same as capital expenditure and depreciation was allowed on the same.

3.2. Before the ld. CIT(A) the assessee made the submissions. The ld. CIT(A) vide para 3.3 to 3.5 allowed the claim of the assessee.

4. We have heard the parties and perused the materials available on record. We concur with the views of the ld. CIT(A) that Rs.79,56,858/- included expenditure on security amounting to Rs.42,32,673/- and on maintenance of garden amounting to Rs.1,36,267/- and such expenditure cannot be treated towards repair. No evidence has been brought on record by the AO by increasing such expenditure which is stated to be repairs. The assesse has not acquired any new asset of enduring nature or there was no expansion or extension of assets. It was mentioned by the ld. CIT(A) that in the preceding year i.e. A.Y.2005-06 such addition was made but the same was deleted by ld. CIT(A) and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly deleted the addition so made by the AO. Thus ground no.1 of the revenue is dismissed.

5. As regards ground no.2 of the revenue the brief facts of the case are that AO made the disallowance of Rs.10,08,114/- out of total expenditure of Rs.15,89,698/- incurred towards repairs and maintenance of plant and machinery. The AO made disallowance since the WDV as on 01.04.2006 was Rs.22,50,354/-, cost of repairs was Rs.14,58,185/- which is about 65% of WDV.

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A.Yrs.2007-08 & 2006-07

6. The ld. Counsel for the assessee made the submissions before ld. CIT(A) and ld. CIT(A) accepted the explanations of the assessee and deleted the disallowance in full.

7. We have heard the rival contentions and perused the facts of the case. On similar issue we have dismiss the appeal of Revenue being the building repair and therefore in the present circumstances and facts of the case the quantum of the repair on the principal asset does not matter and in the absence of any evidence on record brought by the AO that the assessee has incurred expenditure of enduring in nature, no disallowance can be made. In the circumstances and facts of the case we find no infirmity in the order of ld. CIT(A), who has rightly deleted the disallowance made by AO. Thus ground no.2 of the revenue is dismissed.

8. As regards ground no.3 of the revenue the brief facts of the case are that AO made disallowance of Rs.39,691/- u/s 14A in respect of exempt income. Such disallowance has been made on estimate basis at 0.5% of average investment. The ld. CIT(A) deleted the same.

9. We have heard the rival contentions and perused the facts of the case. The present year is A.Yr.07-08 on which rule 8D is not applicable. Therefore in view of the decision of Kokata Bench of ITAT in the case of DCIT vs M/s.Varanasi Commercial Ltd., vide ITA No.1539/Kol/2011 order dated 07.03.2012 for A.yr.2007-08 where the disallowance has been restricted to 1% of the exempted income. Following the same we find no infirmity in the order of ld. CIT(A) who has rightly restricted the disallowance to 1% of the exempted income at Rs.2005/- Thus ground no.5 of the revenue is dismissed.

10. As regards ground no.4 of the revenue the brief facts of the case are that AO made disallowance of Rs.11,93/352/- u/s 40(a)(ia) of the Act on the ground that no tax

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A.Yrs.2007-08 & 2006-07 had been deducted in respect of rent payment of Rs.11,93,352/- and such disallowance has been made by the AO on the basis of Tax Audit Report being Schedule-7 of the tax Audit Report.

10.1. The ld. CIT(A) deleted the disallowance vide para 7.2. to 7.2.2 of his order.

11. We have heard the rival contentions and perused the facts of the case. It has been observed by the ld. CIT(A) that the entire payment of Rs.11,93,352/- in connection with hiring of car cannot be treated as payment of rent u/s 194I of the Act. It was observed that none of the person to whom such car hire charges were paid had any taxable income and hence the question of any deduction of tax does not arise. Copies of the IT returns of the respective persons were also filed before ld. CIT(A). This matter was duly brought to the notice of the AO as is evident from the assessment order. Since the payees did not have taxable income therefore no deduction of tax at source arise from the assessee. Therefore no disallowance u/s 40(a)(ia) can be made. In such circumstances and facts of the case we concur with the findings of ld. CIT(A)vide para 7.2 to 7.2.2. Thus ground no.4 of the revenue is dismissed.

12. Ground no.5 of revenue, being general in nature does not require any adjudication.

13. Now we take up the appeal of revenue in ITA No.554/Kol/2012 for A.Yr.2006-

07. As regards ground no.2 the facts in the said ground are identical to ground no.1 in ITA No.693/Kol/2012 for A.Yr.2007-08. Our order is identically applicable in the present case in ground no.2. Therefore ground no.2 of the revenue is dismissed.

14. As regards ground no.3 of the revenue in the present case the facts are identical to the facts in ground no.2 in ITA NO.693/Kol/2012 for A.Yr.2007-08. Our order is

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A.Yrs.2007-08 & 2006-07 identically applicable in the present case in ground no.3. Thus ground no.3 of the revenue is dismissed.

15. As regards ground no.4 of the revenue in the present case the facts are identical to the facts in ground no.3 in ITA No.693/Kol/2012 for A.yr.2007-08. Our order is identically applicable in the present case in ground no.4. Thus ground no.4 of the revenue is dismissed.

16. Ground no.5, being general in nature does not require any adjudication.

17. As regards ground no.1 the brief facts of the case are that the AO has made addition of Rs.1,13,076/-. While making the addition it was alleged by the AO that the assessee was not able to reconcile the ITS details the difference of Rs.1,13,076/- has been disallowed.

17.1. Before the ld. CIT(A) assessee made the submissions and ld. CIT(A) after accepting the submissions deleted the disallowance so made.

18. We have heard the rival contentions and perused the facts of the case. We concur with the views of the ld. CIT(A) that AO has not made adequate enquiry as to why such difference arose. The contention of the assesee that the amount appearing in ITS details has been subsequently changed by the deductors as sanctity of such ITS cannot be relied upon until and unless complete details were made available to the assessee is found to be reasonable. We concur with the views of the ld. CIT(A) that AO is not justified in making the addition without making adequate enquiry. Thus we find no infirmity in the order of ld. CIT(A), who has rightly deleted the addition so made. Thus ground no.1 of the revenue is dismissed.

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A.Yrs.2007-08 & 2006-07

19. In the result both the appeals of the revenue are dismissed.

Order pronounced in the Court on 29.04.2015.

Sd/- Sd/- [ Mahavir Singh ] [ B.P.Jain ] Judicial Member Accountant Member

Dated : 29.04.2015.

[RG PS]

Copy of the order forwarded to:

1.M/s. J.Thomas & Company Pvt. Ltd., Nilhat House, 11, R.N.Mukherjee Road, Kolkata-700001.

2. JCIT(OSD), and ACIT, Circle-4, Kolkata

3. CIT(A)-IV, Kolkata 4. CIT Kolkata.

5. CIT(DR), Kolkata Benches, Kolkata.

True copy

By Order

Asstt.Registrar, ITAT, Kolkata Benches

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