V.K. CONST. WORKS (P) LTD. v. INCOME TAX OFFICER
[Citation -1986-LL-0121-4]

Citation 1986-LL-0121-4
Appellant Name V.K. CONST. WORKS (P) LTD.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 21/01/1986
Assessment Year 1979-80
Judgment View Judgment
Keyword Tags business promotion • promotion expenses • natural justice • guest house
Bot Summary: Counsel for the assessee Mr. R.S. Aulkh submitted that the Guest House was maintained for the directors and employees and it did not fall under the mischief of any disallowance under the statute. Counsel for the assessee on 136 ITR 361 is misplaced because in that case their Lordships specifically mentioned that the prescribed register was duly maintained and kept by the assessee. Regarding the second ground which is in respect of interest under s. 217, the main attack of the ld counsel for the assessee was that the CIT(A) did not g i v e any finding on merit as he only mentioned that the ITO will give consequential relief to the appellant. Departmental representative could not controvert the submissions made by the ld counsel for the assessee. The learned counsel for the assessee, on the other hand, submitted that the Explanation does not help the Revenue in the light of the case of CIT vs. S.L.M. Maneklal Industries Ltd. 107 ITR 133. Counsel for the assessee in the form of chart regarding work done on various sites during the relevant accounting year at Trilok Puri, Dilshad Garden, Morinda, Kotkapura, Chandigarh and Gardaspur etc. Counsel for the assessee which are detailed in the order of the CIT(A) and which are also reiterated before us, we don't find any reasons for interfering in the finding of the CIT(A).


F.C. RUSTAGI, J.M These two cross appeals since pertained to asst. yr. 1979-80, both were heard together and are disposed of by this consolidated order for sake of convenience. For sake of convenience, we first take up assessee's appeal in which first ground pertains to disallowance of Rs. 17,578 on account of guest House expenses. ld. counsel for assessee Mr. R.S. Aulkh submitted that Guest House was maintained for directors and employees and, therefore, it did not fall under mischief of any disallowance under statute. He relied on cases of Kanhaiyalal Agarwal vs. ITO (1984) 18 TTJ (Jab) 39 and ITO vs. Kothari (Mds) Ltd. (1984) 18 TTJ 473 and also Punjab and Haryana High Court decision in case of Saraswati Industrial Syndicate Ltd. vs. CIT (1981) 24 CTR (P&H) 246: (1982) 136 ITR 361 (P&H). ld. departmental representative Mr. M.P. Singh, on other hand, in respect of this issue submitted that there was no evidence on record regarding use of said Guest House by employees and directors and Expln. of s. 37 which has undergone change w.e.f. 1st April 1976. hits assessee's claim. After taking into consideration rival submissions and going through finding of two lower authorities on this issue, we are unable to interfere in finding of CIT(A) because in instant case there was no maintenance of any type of register or record which indicated that said Guest Hose was utilised by employees or directors. Reliance of ld. counsel for assessee on (1982) 136 ITR 361 (P&H) (supra) is misplaced because in that case their Lordships specifically mentioned that prescribed register was duly maintained and kept by assessee. Since there is no proof to effect that Guest House was maintained and utilised by directors or employees, in light of Expln. 2 which is brought on statute w.e.f. 1st April 1976 with which we had occasion to deal with dt 31st Dec., 1985 in case of Hero Cycles (P) Ltd. In I.T.A. No. 219/Chandi/84 and finding it as fact that prescribed register was not duly maintained and kept by assessee, action of CIT(A) in this regard deserves to be confirmed. assessee, therefore, fails on No. 1 of its appeal. Regarding second ground which is in respect of interest under s. 217, main attack of ld counsel for assessee was that CIT(A) did not g i v e any finding on merit as he only mentioned that ITO will give consequential relief to appellant. He submitted that appellant was old assessee. Though there was no estimate or deposit or tax but since it was case of contractor, huge amount was deducted at source. Moreover, he submitted that return was filed on 6th June, 1979, it was revised on 15th Feb., 1982 and assessment was framed on 2nd Aug., 1983 and nowhere delay was attributed to assessee. He, however, was fair enough to say that there was no finding on merit given by ld. CIT(A). ld. departmental representative could not controvert submissions made by ld counsel for assessee. Under circumstances, for sake of natural justice, we restore back this issue to file of CIT(A) with direction to him to read judicate same de novo on merit after granting opportunity to assessee and considering submissions to be made before him in this regard. Coming to Revenue's appeal, first ground is in respect disallowance of Rs. 3,380 mad by ITO and deleted by CIT(A). ld. Departmental representative in this regard submitted that these were presents not given to employees in form of shirts and shoes but to clients and any sort of expenses whatever type it may be of, in light of Expln. 2 disallowance was to be confirmed. learned counsel for assessee, on other hand, submitted that Explanation does not help Revenue in light of case of CIT vs. S.L.M. Maneklal Industries Ltd. (1977) 107 ITR 133 (Guj). expenditure was rightly allowed by CIT(A), submitted ld. counsel of assessee. After taking into consideration rival submissions and perusing details available on record regarding business promotion expenses, we find that it is specifically written under certain items such as on 7th Jan., 1978 shirts given as gifts, etc., but nowhere it is mentioned it is given to any employee or someone who working for assessee. After insertion of Explanation 2 to s. 37, with which we have dealt with in ITA No. 219 (supra), disallowance should not have been deleted. action of CIT(A) is, therefore, reversed. second ground in Revenue's appeal pertains to disallowance of Rs. 12,000 paid as salary to Smt. Rita Garg made by ITO but deleted by CIT(A). ld. departmental representative submitted that undoubtedly Rita Garg is graduate but there was no evidence on record that she did any work. He drew our attention to order-sheet entry as per which it is indicated that ITO demanded justification of said salary from assessee on 22nd Dec., 1982 and no explanation whatsoever was furnished by assessee before lower authorities. ld. departmental representative submitted that CIT(A) h s cast burden on Revenue that ITO has not categorically established that Rita Garg was not getting salary for work done. ld. counsel for assessee, on other hand, submitted that since during year under consideration there was lot of work secured and all other directors and chairman were pre-occupied, this lady was required to look after business locally i.e., at H.O. and, therefore, she was paid said amount. After taking into consideration rival submission and perusing papers placed by ld. counsel for assessee in form of chart regarding work done on various sites during relevant accounting year at Trilok Puri, Dilshad Garden, Morinda, Kotkapura, Chandigarh and Gardaspur etc., and huge work secured during year and submission that daily work was looked after by two directors and chairman was busy looking after other huge works which were undertaking, local work was looked after by Rita Garg. When we peruse order-sheet entry dt. 22nd Dec., 1982, it is mentioned: "Present: Sh. Ravinder Krishan, advocate, on behalf of assessee. Asked to file following details: Work done by Rita Garg and justification of salary, etc. Work done by ........" case was adjourned for 28th Dec., 1982 and on that date in order- sheet entry, it is mentioned: "Present; Sh Ravinder Krishan, Advocate and filed details. Case discussed. As to what were details and how ITO was not satisfied fromt same, and if it was so, he should have summoned Rita Garg for verification of work having been done by her but all that exercise not having been done by ITO, he should not have disallowed same. In light of above discussions and for reasons given by CIT(A) in his order and submissions made by ld. counsel for assessee which are detailed in order of CIT(A) and which are also reiterated before us, we don't find any reasons for interfering in finding of CIT(A). His action is, therefore, hereby confirmed in respect of allowance of Rs. 12,000 paid as salary to Rita Garg. In result, assessee's appeal is treated as partly allowed for statistical purpose and that of Revenue is partly allowed. *** V.K. CONST. WORKS (P) LTD. v. INCOME TAX OFFICER
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