M/S Model Tanners (India) Pvt. Ltd., ... vs Department Of Income Tax

A.C.I.T., Vs M/s Model Tanners (India) Pvt. Ltd., Central Circle-II, C/o M/s Sultan Tanners, Jajmau, Kanpur. Kanpur. PAN:AAACM9391D (Appellant) (Respondent)

Appellant by Shri Amit Nigam, D. R. Respondent by Shri Rakesh Garg, Advocate Date of hearing 19/03/2015 Date of pronouncement 15/06/2015

ORDER

PER A. K. GARODIA, A.M.

This is Revenue's appeal directed against the order passed by learned CIT(A)-II, Kanpur dated 28/03/2013 for the assessment year 2007-2008.

2. Ground No. 1 is as under:

"1. That Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs.1,28,817/- being amount of annual lease rent and maintenance charges paid for Industrial Plot allotted by UPSIDC without verifying the facts and ignoring that the said expenses are not for any business purposes but for the maintenance of a piece of land."

3. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

2 4. We have considered the rival submissions and have gone through the orders of the authorities below. We find that a disallowance of Rs.1,28,817/- was made by the Assessing Officer on the basis that the amount paid by the assessee to UPSIDC on account of plot maintenance charges in respect of Unit-1 and Rs.75,600/- on account of plot maintenance charges in Unit-2, total Rs.1,28,817/- is not allowable because these expenses are not for any business purpose but for the maintenance of piece of land, which is capital asset. This disallowance was deleted by learned CIT(A) by observing that lease rent cannot be capital expenditure but there is no finding given by CIT(A) that the land in question for which the impugned amount was paid by the assessee was used for business purpose. It is noted by the Assessing Officer in the assessment order that these are plot maintenance charges for Unit-1 & Unit-2 with a clear finding that these expenses are not for any business purpose but for maintenance of piece of land. To delete this disallowance, what is required to be seen is that the land in question for which impugned amount was paid by the assessee was used by the assessee for business purpose. In the absence of any finding by CIT(A) that the land in question was in fact used for business purpose in the present year, the order of CIT(A) is not sustainable and therefore, we reverse the same and restore that of the Assessing Officer. Ground No. 1 is allowed.

5. Ground No. 2 is as under:

"2. That Ld. CIT (A) has erred in law and on facts in restricting the addition to 7% from 15% thus providing relief of Rs.11,06,355/- and deleting the addition of Rs.12,64,406/- on account of disallowance in various expenses under different heads of expenditure without any basis ignoring the facts brought on the records by the A.O."

3 6. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that similar issue was there in earlier years i.e. assessment year 2003-04 to 2007-08 also and as per Tribunal order in I.T.A. No.557 to 560/Lkw/2013 dated 28/02/2014, the issue in dispute was decided by the Tribunal in favour of the assessee. He submitted copy of the Tribunal order and drawn our attention to Para 19 and 20 of the Tribunal order.

7. We have considered the rival submissions. We find that in the appeal of the assessee for assessment year 2007-08 in I.T.A. No.560/Lkw/2012, the assessee has disputed the part disallowance confirmed by CIT(A) on similar basis to the extent of 7% of the expenses as against 15% disallowed by the Assessing Officer. In that year, the Tribunal held that even the part disallowance confirmed by CIT(A) is not justified because it was noted by the Tribunal that the CIT(A) has not given any basis for confirming the part disallowance and he has also not pointed out any specific defect in the details filed by the assessee. The Tribunal deleted the entire disallowance in that year. In the present year before us is the Revenue in appeal in respect of part relief allowed by CIT(A) by reducing the disallowance to 7% from 15% disallowed by the Assessing Officer. In the present year also, the basis of the decision of the CIT(A) is that the Assessing Officer should have pointed out defect, if any in the details filed by the assessee but still he held that to cover the possible leakage and to meet the ends of justice, the disallowance is restricted to 7% instead of 15% in view of this Tribunal decision and in the similar facts. Learned D.R. of the Revenue could not point out any difference in facts and therefore, we are of the considered opinion that there is no infirmity in the order of CIT(A) in the relief allowed by him and since before us is the Revenue's appeal only, we can only confirm the relief allowed by CIT(A) and cannot go into the disallowance 4

partly confirmed by him. We, therefore, hold that no interference is called for in the order of CIT(A) in respect of part relief allowed by him. Ground No. 2 is rejected.

8. Ground No. 3 is as under:

"3. That Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs.23,477/- disallowed on account of medical expenses without assigning any logical reason and ignoring the fact that no payment of FBT had been made."

9. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

10. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that in Para 19 of the assessment order, it is observed by the Assessing Officer that the assessee has debited a sum of Rs.95,107/- under the head 'Medical Expenses' for which the details were not furnished. He has also observed that the assessee has also not paid FBT on this amount. Thereafter he has held that in absence of any justification of these expenses, 25% of these expenses should be disallowed which would result in an addition of Rs.23,477/-. This disallowance was deleted by CIT(A) on the basis that there is no dispute that these expenses have been incurred and they constitute First Aid Expenses to be provided by the industrial unit. In the backdrop of this finding of the Assessing Officer in the assessment order that the assessee has not provided any details regarding the expenses of Rs.95,107/- debited by the assessee under the head 'Medical Expenses', it is not understandable as to what is the basis of this finding of CIT(A) that there is no dispute that these expenses have been incurred. He has not given any finding that the details, which were not furnished before us or 5

before the A.O. were furnished before him and he has examined these details to give a finding that there is no dispute that these expenses have been incurred and these expenses constitute First Aid Expenses to be provided by the industrial unit. We notice that CIT(A) has merely noted down the contentions raised before him and has given a finding on the basis of these contentions raised before him without verifying the details regarding these expenses. Even if some details were filed before him, he should have obtained remand report from the Assessing Officer because a clear finding has been given in the assessment order that the assessee has not given any details. Under these facts, we are of the considered opinion that the order of CIT(A) is not sustainable. We, therefore, reverse the same and restore that of the Assessing Officer. Ground No. 3 of the Revenue is allowed.

11. Ground No. 4 is as under:

"4. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.89,212/- on account of disallowance u/s 43B without verifying the facts brought on record by the AO."

12. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

13. We have considered the rival submissions. We find that the disallowance was made by the Assessing Officer u/s 43B of the Act and the same was deleted by CIT(A) by following the judgment of Hon'ble Apex Court rendered in the case of CIT vs. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) and in the case of CIT vs. Vinay Cement Ltd. [2007] 213 CTR 268 (SC). He has also given a finding that payments have been made before the date of filing of return of income. This finding of CIT(A) could not be 6

controverted by Learned D.R. of the Revenue. Under these facts and in view of various judgments of Hon'ble Apex Court, followed by learned CIT(A), we do not find any reason to interfere in the order of CIT(A). Ground No. 4 is rejected.

14. In the result, the appeal of the Revenue stands partly allowed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:15/06/2015 *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar