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2022 (6) TMI 633 - AT - Income TaxPeriphery Development Expenses - Disallowance of expenses as only objection raised by the ld. AO is that some of the expenditure debited by the assessee cannot be termed as exclusively for the purpose of the business - CIT-A deleted the addition - HELD THAT:- To our mind, AO failed to appreciate the nature of the assessee's business and the atmosphere where he has been carrying out his business. The expenditures have been incurred under the guidance of District Periphery Development Committee as well as Periphery Development Society. Certain isolated instance of expenditure brought to our notice are not of personal nature rather they were incurred for keeping the harmonious atmosphere at mining site i.e. to give donation on festival or to help local authority in there functioning. These expenditure are to be seen in comparison of return of Rs. 234 crores of income shown by the assessee. Therefore, the ld. 1st Appellate Authority has appreciated the nature of the business, i.e. mining of Iron Ore, vis-à-vis incurrence of these expenditures after considering the well reasoned finding of the ld. CIT(Appeals), we do not find any infirmity and, therefore, respectfully following the order of the Coordinate Bench in earlier years, we do not find any merit in this ground of appeal and it is rejected. Disallowance of Consultancy Charge - addition made as there is a relationship between the managerial staff of both the assessees i.e. assessee and Pushpak Financial Services Pvt. Limited and assessee failed to demonstrate the nature of services rendered by M/s. Pushpak Financial Services Pvt. Limited - CIT-A deleted the addition - HELD THAT:- AO himself has not disputed about the payments made by the assessee to M/s. Pushpak Financial Services Pvt. Limited. In other words, the existence of service providers has not been doubted. Now the issues are raised qua the transactions, the only passing reference made by the ld. AO in a non-speaking assessment order is that evidences depicting the nature of services provided to the assessee were not produced. It is pertinent to observe that the ld. Assessing Officer failed to appreciate the controversy in right perspective. He has not properly investigated the issue, rather in a hurried manner made the addition by making certain vague observation, which is running into few lines only. The assessee has submitted that service provider has suffered the taxes on the payments made by the assessee, both are taxable at the same rate. The invoices produced by the assessee depict the nature of services rendered by the service provider. In other words, the assessee has submitted that Pushpak Financial Services Pvt. Ltd. had provided managerial consultancy including verification of day-to-day business and banking transactions. If the magnitude of the business carried out by the assessee is looked into, vis-à-vis the charges then it is just a normal charges paid by the assessee. We do not find any error in the finding of the CIT(Appeals) on this point and this ground of appeal is rejected. Disallowance u/s 40A(3) - Rates for sale of Iron Ore to different parties, he observed that the assessee had made sales to associate concerns at a lower rate than the sales made to other parties - HELD THAT:- AO has taken the rates of sales made to an independent party and observed that to the extent lower rate charged from associate concerns amounts to suppression of profit. He made addition to such profit to the income of the assessee. The details compiled by him for a comparative study of the rates were annexed at Annexure 'A' & 'B' to the assessment order. Though these Annexures were not filed originally alongwith the appeal but during the course of hearing, ld. CIT(DR) had supplied copies of these Annexures to the Bench as well as to the ld. counsel for the assessee. We had taken them on the record. Suppression of Net Profit - HELD THAT:- In the present case, the ld. Assessing Officer has not applied any domestic transfer pricing concept. It was not available in this year. In the scheme of Income Tax Act, if by incurrence of such expenditure, some undue benefit is being extended to the sister concern, then claim of those expenditure could be disallowed. But nowhere it has been provided that assessee should earn deemed profit according to the calculation of the revenue official. In the present case, the assessee has not shown losses rather in the understanding of the Assessing Officer, he failed to show the profit as calculated by the ld. Assessing Officer. We have confronted the ld. D.R. to show us the provision under which the assessee can be compelled to make the sales to the sister concerns also at the market price or at the same price at which it was made to other concerns. Apart from the above observation, it is to be appreciated the circumstances under which such sales have been made. The assessee has obtained renewal of lease licence understanding that iron ore produced in his mines will be used in a captive plant. In that exercises, he has sold the goods to the plant of the sister concern. The third reasoning assigned by the ld. Commissioner is that independent buyers would buy the material according to their requirement, whereas M/s. Thakur Prasad Sao & Sons Pvt. Limited was bound to purchase the raw material produced by the assessee. Therefore, the assessee was never required to find out the customer for the iron ore produced by him. He was also bound to achieve the targets put by Indian Bureau of Mines, so in case excess material was produced and not able to sell to the independent buyer, in that case his associate concern i.e. M/s. TPSL would procure all the material produced by the assessee. Undisclosed investment - HELD THAT:- A perusal of the above finding would indicate that the ld. CIT(Appeals) has deleted this addition after finding out that a particular amount has been accounted for twice. It is an arithmetical error which has been corrected and there cannot be any addition for such type of mistake under section 69 of the Income Tax Act. After going through the order of the ld. CIT(Appeals), we do not find any error in this finding and this ground of appeal is rejected.
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