9911796707
TMI Blog2015 (6) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has erred in sustaining the disallowance of management support expenses of Rs. 43,32,025/- on the alternative ground that such expenses have not been justified to have been made wholly and exclusively for business purposes. 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that in computing the book profit under section 115JB of the Act, the claim of additional depreciation of Rs. 12,84,985/-, arisen as a result of change in the method of depreciation from Straight Line method to Written Down Value, is not justified." 2. At the outset of hearing, the Ld. AR submitted that an application dated 23.03.2012 under Rule 29 of the Income Tax Appellate Tribunal, Rule 1963 for admission of additional evidence has been moved by the assessee with request to place on record certain emails made available at Page 199 to 408 of the paper book filed by the assessee, which demonstrate the nature of service. He submitted that these documents could not be furnished before the authorities below on account of technical problem in retrieving the same. 3. The Ld. AR submitted that vide impugned order the Ld. CIT(A) has upheld the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before disallowing the payments made by the assessee to ALAP u/s 40(a)(i) of the Act. The authorities below on several occasions required the assessee to furnish the details to which the assessee failed to without assigning any reason particularly the reason of non retrieval of the emails, which the assessee has now raised. In support the Ld. DR referred Page no.149 of the paper book i.e. copy of the submission filed by the assessee before the Assessing Officer vide letter dated 27.12.2007 wherein under the heading details of services along with documentary evidence, the assessee is talking about few officials of ALAP visits to assessee to support the Management Support Services and the assessee has not talked about any email which was non retrieval. In this regard, he also referred contents of Page No.3 of the assessment order and Pages 128 to 132 of the paper book, which is copy of the submissions of the assessee filed before the Ld. CIT(A). 7. The Ld. AR rejoined with the submission that payment of Rs. 43,32,025/- was made by the assessee to ALAP on account of services received. He submitted that the authorities below have denied the claim on the basis that the assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of law are answered in favour of the assessee and against the Revenue resulting into dismissal of these appeals. No costs." 9. In para no. 5 the Hon'ble High Court has observed further that as per Rule 29 parties are not entitled to produce additional evidence. It is only when the Tribunal requires such additional evidence in the form of any documents or affidavit or examination of witness or through a witness it would call for the same or direct any evidence to be filed that too in the circumstances (a) when the Tribunal feels that it is necessary to enable it to pass orders; or (b) for any substantial cause; or (c) where the income tax authorities did not provide sufficient opportunity to the assessee to adduce evidence. 10. In the present case before us, it has not been seriously disputed that the additional evidence for which the assessee seeking permission for consideration are relevant to decide the issue raised in Grounds No. 2 and 3 to ascertain the nature of the services rendered for which payment was made and there is no reason to disbelieve the explanation of the assessee that these documents could not be filed before the authorities below due to technical problem i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support. He placed reliance on the following decisions: 1. Recon Machine Tools (P)Ltd. vs. CIT - 286 ITR 637 (Mad.); 2. CIT vs. Girnar Construction Co. - 261 ITR 463 (Raj.); 3. Abbas Wazir (P) Ltd. vs. CIT - 265 ITR 77 (All.); 4. DCIT vs. Spark Hotels (P) Ltd. - 52 SOT 395 (Del.); 5. Jagdamba Roller Floor Mills Ltd. vs. ACIT - 121 TTJ 761 (Nagpur); 14. The learned CIT(DR) on the other hand tried to justify the orders of the authorities below on the issue. She submitted that the onus is not upon the Assessing Officer to justify to enhancement of payment of salary and perks to the Managing Director during the year. Despite opportunities afforded by the Assessing Officer, the assessee did not furnish any explanation for the said enhancement. The enhancement was excessive and unreasonable. 15. Considering the above submission, we find that in the appointment letter of the employee, there is provision of bearing of school fee of the two children of primary and secondary schooling by the assessee company to the limit of 36,000 US $ per year. The dispute however is regarding justifiability of payment of higher salary and school fee of the children during the year at Rs. 19,80,495 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned CIT(Appeals) did not agree and has upheld the addition with this finding that the Assessing Officer had relied upon the observations of the statutory auditor who had clearly stated that profit had been under valued to the extent of Rs. 12,84,985 due to change in the method of depreciation. 17. In support of the ground, the Learned AR submitted that as per the provisions of sec. 211 of the Companies Act, the account is to be prepared as per accounting standard (AS6). In support, he placed reliance on the following decisions: i) Apollo Tyres vs. CIT - 255 ITR 273 (S.C); ii) CIT vs. Tidel Park Ltd. - 334 ITR 126 (Mad.)- (SLP filed by the Revenue dismissed by the Hon'ble Supreme Court in CC 2936/2010 vide order dated 8.3.2010. iii) Garden Silk Mills Ltd. vs. ACIT - ITA No. 220/Ahd/2008 & 651/Ahd/2009. Iv ) CIT vs. Hindustan Pipe Udyog Ltd. (2014) - 360 ITR 437 (All.). v ) DCIT vs. Farmson Pharmaceuticals Guj.Ltd. - 347 ITR 394 (Gujarat) 18. The Learned CIT(DR) on the other hand tried to justify the orders of the authorities below. She placed reliance on the decision of Hon'ble Madhya Pradesh High Court in the case of Gilt Pack Ltd. vs. CIT ( copy supplied ), whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loss. In case the change in the method results in surplus, the surplus is credited to the statement of profit and loss. Such a change is treated as a change in accounting policy and its effect is quantified and disclosed." 21. The Learned CIT(DR) has cited the decision of Hon'ble Madhya Pradesh High Court on the issue in the case of Gilt Pack Ltd. vs. CIT (supra). The Hon'ble High Court has recorded its deviation from the ratios laid down by the Hon'ble Bombay High Court in the case of Kinetic Motors Co. Ltd. vs. DCIT - (2003) 262 ITR 330 (Bom.) , only to the extent that, the change from one method to another has to be prospective. The Hon'ble Madhya Pradesh High Court thus has been pleased to hold that the depreciation, upon change of method, can be claimed prospectively only from the date the change has been effected. On the issue as to whether in view of specific definition of expression "book profit" given in Explanation to section 115J (1) of the Income-tax Act, 1961, it is permissible for the Assessing Officer to make adjustment to the book profit beyond those authorized by the definition and to recast the profit and loss account?, both the Hon'ble Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee were certified by the auditors. The Hon'ble High Court thus held that the books adjustment made by the Assessing Officer being contrary to the decision of Hon'ble Supreme Court, the issue was decided in favour of the assessee. The Hon'ble High Court held further that it is not in dispute that under the Companies Act, 1956, both straight line method and written down method are recognized, therefore, once the amount of depreciation actually debited to the profit and loss account is certified by the auditors, then, the issue has to be answered in favour of the assessee. 23.1 Similar view has been expressed by the Hon'ble Gujarat High Court in the case of DCIT vs. Farmson Pharmaceuticals Guj. Ltd. (supra). 24. Since the ratios laid down on the issue by the Hon'ble Bombay High Court Hon'ble Allahabad High Court and Hon'ble Gujarat High Court in the above cited cases are favourable to the assessee, we set aside the matter to the file of the Assessing Officer to decide the issue afresh following these decisions after affording proper opportunity of being heard to the assessee. The ground No. 4 is accordingly allowed for statistical purposes. 25. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
