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15-02-2019, Tilaknagar Industries, Section 133A, 131, Tribunal Mumbai

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3 months 23 hours ago #8698 by amit
Section - 133A, 131, 133(6), 14A, 154, 194J, 37
Order Date - 15-02-2019
Favouring - Partly allowed for statistical purpose
Court - Tribunal Mumbai
Appellant - Tilaknagar Industries Ltd
Respondent - DCIT
Justice - Mahavir Singh JM & G Manjunatha AM
Citation - 219Taxpundit213
Appeal No. - ITA No. 5818 & 5819/Mum/2016
Asstt. Year - 2010-11 & 2011-12


PER : Mahavir Singh

This appeal filed by the assessee in ITA No.5818/Mum/2016 is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals) – 47, Mumbai {hereinafter called as CIT(A)} dated 08.08.2016, for the assessment years 2010-11 & 2011-12. Similarly, the assessee as well as the Revenue have filed cross appeals for Asst Year 2011-12 against the order passed by the Ld. Commissioner of Income Tax (Appeals) – 47, Mumbai dated 08.08.2016. Since, appeal for Asst Year 2010-11 & cross appeals for 2011-12 are having common issues, all the appeals are heard together and are disposed off under this common order.

2. In this case, assessee has raised the following grounds of appeal in its appeal for the Asst Year 2010-11:-

The Ld. CIT(A) erred in upholding the action of the Id Assessing Officer in making additions on the basis of statements of various persons recorded during the course of survey under Section 133A of the Act on 13.03 2013 without appreciating the fact that such recorded statement does not have any legal sanctity and cannot be relied upon.

The Ld. CIT(A) erred in upholding the reopening of the assessment despite the fact that all the details were before the Id Assessing Officer during the original scrutiny assessment proceedings for which order u/s 143(3) of the Act was passed on 31.01.2013.

The Ld. CIT(A) erred in upholding the disallowance of depreciation on astrological fees (Architectural Fees) amounting to Rs. 1,04,67,3177- despite the fact that:

• The payments were made for the services provided;
• The recipient had offered the same to tax;
• The work was evidenced by various e-mails / maps;
• The Hon'ble Settlement Commission in the appellant's own case had vide order dated 30.09.2015 held the same to be allowable;
• TDS @ 10% have been deducted;
• Service tax was paid;
• There is no evidence that services were not provided.

4.The Ld. CIT(A) erred in upholding the disallowance of rental charges amounting to Rs.26,96,640/- on the alleged ground that the expenses were not for purpose of business. The Id CIT(A) failed to appreciate that such sums were incurred for genuine business expediencies.”

5. The Ld. CIT(A) erred in upholding the disallowance of housekeeping charges amounting to Rs.26,96,640/- on the alleged ground that the expenses were not for purpose of business. The Id CIT(A) failed to appreciate that such sums were incurred for genuine business expediencies.”

3. Ground No 1 is not pressed and hence the same is dismissed.

4. Ground No 2 is also not pressed, hence, dismissed.

5. Ground No 3 challenges the disallowance of depreciation on astrology fees of Rs 1,04,67,317/-. During the year, the assessee has made payment of architectural and management consultancy fees to Mr. Anand Nair of Rs 9,96,50,798/-. Such payments were capitalized in the books of the assessee under “Fixed Assets”. The assessee claimed depreciation of Rs. 1,04,67,317/- on such capitalization.

5.2 The ld Assessing Officer asked the assessee to explain the nature of such payment. The assessee submitted that the fees were architectural management and consultancy fees. The AO observed that the stand taken by the assessee was patently wrong since Mr Nair had disclosed the fees as Astrological Fees in his return of income. Mr. Anand Nair raised invoice / debit note as “Astrology Fees”. The ld Assessing Officer was of the view that there is no record of services rendered by Shri Anand Nair to justify such a high fees not only in current year, but also, in subsequent years. Accordingly, the AO disallowed the entire payment made during the year of Rs 9,96,50,798/-.

5.3 Subsequently on being pointed out that out of total payment of Rs. 9,96,50,798/-; deduction has been claimed only of Rs. 1,04,67,317/- being depreciation on Rs. 9,96,50,798/-; the ld Assessing Officer passed a rectification order u/s 154 of the Act on 10.09.2015 restricting the disallowance of Astrology Fees to the amount claimed in the P&L account amounting to Rs 1,04,67,317/-. Thus, the amount of dispute before us is the disallowance of Rs. 1,04,67,317/-.

5.4 The assessee challenged the Assessment Order before the ld. CIT(A). Before CIT(A), the assessee submitted that Mr Anand Nair was a qualified architect who had been entrusted with the assignment of successfully implementing various Projects of the company. Shri Anand P Nair was the President of the applicant company during 2006-07. The assessee gave details of services done by Mr Nair sample emails, maps and drawings done by him. The assessee submitted all payments were by cheque after deducting TDS. Mr Nair had offered the same to tax. The assessee submitted confirmation. The assessee submitted that in its own case, the Hon’ble Settlement Commission had held the payments to Shri Anand Nair were genuine. The assessee submitted that Mr Nair had paid service tax in Amnesty Scheme under category “Management Service”.

5.5 The ld. CIT(A) did not accept the submission of the assessee. The CIT(A) observed that the assessee had capitalized the fees paid to Mr Nair as part of the 100 klpd block of assets which was part of Plant & Machinery. However, the assessee could not establish which part of the 100 klpd plant the payment

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