IT: Claim of freight cannot be disallowed without pointing out defects in it
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[2013] 36 taxmann.com 368 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax -III
v.
Reclamation Welding (P.) Ltd.*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
TAX APPEAL NO. 824 OF 2011†
SEPTEMBER 20, 2012
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Freight and octroi] - As per agreement, freight inward for raw material and freight outward in respect of finished goods were to be borne by principal and appellant had to bear expenditure in respect of movement of casting, weightment of castings, weightment of scrap and alloys - Assessee claimed certain freight expenses and claimed that it did not include any of first two types and this expenditure of freight was with regard to store material and consumable while manufacturing goods - Assessing Officer disallowed same through he had not pointed out specifically that particular claim of appellant had been incurred for bringing raw material into factory and expenses toward finished goods i.e., casting for sending it to principal - Whether on facts, claim made by appellant could not be disallowed - Held, yes [Para 3.2.6] [In favour of assessee]
Ms. Paurami B Sheth for the Appellant.
ORDER
Akil Kureshi, J - The Revenue has challenged the judgment of the Income Tax Appellate Tribunal (hereinafter to be referred to as "the Tribunal") dated 19.11.2010 raising following question for our consideration:—
"Whether the Appellate Tribunal is right in law and on facts in deleting the addition made of Rs. 27,02,925/- on account of disallowance of freight and octroi expenses?"
2. Having perused the judgments on record with the assistance of the learned counsel for the Revenue, we noticed that the Tribunal, in order to decide the above referred question against the Revenue, had relied on its earlier order in case of this very assessee for the earlier assessment years. Counsel for the Revenue candidly pointed out that such issue was carried in appeal by the Revenue in Tax Appeal No.1171 of 2010. This Court had, by its order dated 24.8.2011, rejected the Revenue's appeal on this issue, making following observations:—
'(10) Coming to question B, we may notice that though the Assessing Officer added a sum of Rs. 19,45,000/- treating the claim of the assessee as one for freight and octroi expenses, CIT (Appeals) deleted such disallowance making following observations:-
"3.2.1 It is seen that the A.O. has relied upon the agreement entered between the appellant and AIAE which is the principals party. As per the agreement, the freight inward for raw material and freight outward in respect of finished castings was to be borned by the principals. Therefore, the A.O. has disallowed freight inward and Octroi of Rs. 12,46,681/-, Freight Outward Rs. 1,49,066/-and Cartage Outward Rs. 5,49,500/- totalling to Rs. 19,45,247/-.
3.2.2 As it is seen from the written submission reproduced as above, the pleading of the appellant is that the appellant has neither claimed any freight on raw materials brought into the factory nor on finished cartings for sending outward. The expenditure involved is with regard to stores materials and consumables while manufacturing cartings. It appears for the assessment year under consideration the appellant had purchased stores and consumables at Rs. 59,46,629/-which includes certain materials like refectories, ramming mass etc., which involved higher freight is incidence thereon. The appellant is also required to pay octroi on such purchases.
3.2.3 Further it is seen that the appellant also has to bear the expenditure in respect of movements of castings weighment of castings, weighment of scrap and alloys before changing them to furnace.
3.2.4 It is also seen that the freight outward is towards moving the used moulding send and other scrap materials out of factory premises which are to be taken to remote places for disposal. The principal would not be bearing these expenses.
3.2.5 It is also noticed from the submissions of the A.R. that cartage outward expenses is incurred for moving castings outside the premises as the appellant sometimes gets certain works done from outside, therefore, these expenses are claimed.
3.2.6 After verifying the submissions filed by the appellant and after verifying the details furnished by the A.R. which are also stated to have been filed before the A.O. I find that the A.O. was not pointed out specifically that the particular claim of the appellant has been incurred for bringing raw materials into the factory and expenses towards finished castings for sending to the principal. Therefore, it appears to me that claim made by the appellant cannot be disallowed without pointing out a specific incidence of expenses allegedly said to have been incurred towards bringing raw materials and sending finished castings."
(11) This review of the CIT (Appeals) was confirmed by the Tribunal. The CIT (Appeals) had given sufficient reasons which were in the nature of appreciation of evidence. Such conclusions were approved by the Tribunal. Such concurrent findings, in our opinion, do not give rise to any question of law.'
3. In the result, tax appeal is dismissed.
SBRegards
Prarthana Jalan
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