M/S.atofina Peroxides India Ltd., Now Known As M/S.arkema Peroxides India Private Ltd., 1St Floor, Balmer Lawrie House, 628, Anna Salai, Teynampet, Chennai 600 v. The Deputy Commissioner Of Income Tax, Special Range-Ix

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 29.1.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case (Appeal) Nos.670 & 671 of 2010 M/s.Atofina Peroxides India Ltd.,now known as M/s.Arkema Peroxides India Private Ltd.,1st Floor, Balmer Lawrie House,628, Anna Salai, Teynampet,Chennai 600 018. ..Appellant/AppellantVs. The Deputy Commissioner of Income Tax,Special Range-IX, 121, Nungambakkam High Road,Chennai 600 034. ..Respondent/Respondent(Cause title accepted vide order dated 28/04/2010 made in MP.No.1 of 2010in TC(A)SR.Nos.79606 & 79608 of 2006 ) Prayer : Tax Case (Appeals) filed under Section 260A of theIncome Tax Act, 1961 against the order of the Income TaxAppellate Tribunal, 'A' Bench, Chennai, dated 2.4.2006 made inITA Nos.1851 & 1852/Mds/2002 and against the order of theCommissioner of Income Tax(Appeals) III, Chennai -34, dated17.09.2002,madeinITA.No.Tr.208/1998-99/A-III&ITR.No.Tr.258/98-99/A-III, dated 17.09.2002 for the assessmentyear 1993-1994 and 1994-1995 respectively and against the orderof the Deputy Commissioner of Income Tax, Special Range -IX,Chennai -34, dated 08.03.1996 and 25.02.1997 made inPAN/GIR.No.47/095-CZ-0592 for the assessment year 1993-94 &1994-1995. For Appellant : Mr.Venkatnarayanan for M/s.Subbaraya Aiyar Padmanabhan For Respondent : Mr.T.Ravikumar Senior Standing Counsel COMMON JUDGMENT (Delivered by DR.VINEET KOTHARI,J) The Assessee has filed the Appeals agreed by the commonorder passed by the learned Tribunal for the Assessment Years1993-94 and 1994-95 whereby the Tribunal upheld thedisallowances of foreign travel expenses, addition made onestimated variation in consumption of raw material andcontribution of Rs.3,00,000/- made to one Lady Ampthill Hospital. 2. The relevant finding of the order passed by the Tribunalis quoted below for ready reference:-"3. We have heard both the counsels. We findthat orders of the lower authorities arereasonable on this issue. The assessee cannotthe expected to claim allowance of foreigntravel expenses by merely claiming to be thesameforbusinesspurposeswithoutsubstantiating the same with necessary billsand vouchers. As such, the orders of a lowerauthorities on this issue are affirmed and theassessee's appeal is dismissed. ..........5. The next common issue raised pertainsto the excess consumption of raw materials. Theassessee is a manufacturer polymerizationinitiatorsandcrosslinkingagentformulations. The assessee was requested bythe assessing officer to furnish detailsregarding the manufacturing processes of theseproducts. The assessing officer wanted to findout the quantity of finished products, quantumof wastage and shortage occurred during themanufacturing process as well as the quantum ofany other kind of losses such as evaporationloss and handling loss. The assessee filed avery brief note which did not satisfy theassessing officer. In order to verify thepercentage of yield of finished products fromthe major raw materials, the assessing officerreferred to the quantitative information inrespect of each class of raw materials consumedand goods manufactured. The assessing officercompared the ratio of total production of rawmaterials consumed in the previous year withthe current assessment year and held thatconsumption was more to the extent of Rs.13,02,479/- as excess consumption of rawmaterials. Upon assessee's appeal, the learnedCIT(A) did not find the assessee's explanationsufficient and upheld the order of theAssessing Officer.6. We have heard both the counsels andperused the records. The learned D.R. averredthat the assessee has neither maintained norprovided the necessary details as required inthis case. He particularly adverted the A.O.'sobservation that the explanation given by theassesseewassilentabouttheshortages/wastages/losses. He also averredthat there is a specific column in the auditreport under Section 44AB where the assessee isrequired to give several information on thequantity and percentage of production, wastage,yield and shortage, etc. This information wasnot given by the assessee in the said report.The information, as required by the lowerauthorities from the assessee did not elicitappropriate information to arrive at thecomparative variation in the consumption of theraw materials with reference to the production...........8. Upon considering the entire spectrum ofthe case, we find that expenses have to bejustified not only with regard to thesubstantive/documentary evidence but also bythe verificatory evidence that the amount spentwas actually for the purpose of the business.To put it in other words, it needs to beestablished in this case that raw material saidto have been consumed for production wasactually so consumed. This can be establishedonly by reference to this necessary data ofconsumption, production, wastage & losses andthe correlation between the same. The assesseefor obvious reasons has not furnished thenecessary details in this regard in reportunder Section 44AB and not fully complied withinformation required by the A.O. Hence, theassessee has not established that the increasein consumption which in other words meansabnormal shortage/wastage/loss is actuallyjustified. As such the uphold the order of thelower authorities and decide the issue againstthe assessee. ...........14. One issue raised in ITA 1852 isregarding disallowance of contributions made tothe Lady Amphthill Hospital. On this issue, itis to be noted that the assessee has madecontribution of Rs.3,00,000/- towards thehospital and claimed the sum as the admissibleexpenses on account of staff welfare. Theassessee has claimed that the contributionwould enable the employees to have medicalfacilities at a confessional rate. However, ithas been noted by the A.O. and the learned CIT(A) that the assessee has not given any prooffor his assertion that the employees actuallygot any benefit out of the contribution. Sincethe assessee has not brought anything tosupport the assertion that his contribution tothehospitalactuallyprovidedanybenefit/succour to the employees of theassessee and office. Thereafter he madecomparison with production figures andestimated excess consumption. In our opinion,this basis of segregation of electricityexpenses is not cogent enough to warrant anaddition on comparative analysis. As such, wereverse the orders of the learned CIT(A) inthis case and decide the issue in favour of theassessee." 3. These two Appeals were admitted by a co-ordinate Benchof this Court on 10.8.2010 by separate orders and the questionsof law framed are quoted below for ready reference:- "T.C.A.No.670 of 2010 3. These two Appeals were admitted by a co-ordinate Benchof this Court on 10.8.2010 by separate orders and the questionsof law framed are quoted below for ready reference:- "T.C.A.No.670 of 2010 i) Whether, on the facts and in thecircumstances of the case, the Tribunal wasjustified in law in upholding the addition ofthe estimated variation in consumption of rawmaterials? andii) Whether, on the facts and in thecircumstances of the case, the Tribunal wasjustified in holding that the appellant had notestablished the increase in consumption of rawmaterials in spite of the break-up of rawmaterials and production details furnished bythe appellant?T.C.A.No.671 of 2010i) Whether, on the facts and in thecircumstances of the case, the Tribunal was justified in law in upholding the addition ofthe estimated variation in consumption of rawmaterials? ii) Whether, on the facts and in thecircumstances of the case, the Tribunal wasjustified in holding that the appellant had notestablished the increase in consumption of rawmaterials, in spite of the break-up of rawmaterials and production details furnished bythe appellant? and iii) Whether, on the facts and in theterms of the case, the Tribunal was justified inlaw in holding that the contribution made toLady Ampthill Hospital by which the employeeswere entitled to concessional facilities, is notan allowable deduction?" 4. The learned counsel Mr.Venkat Narayanan appearing forthe Assessee sought to urge that the learned Tribunal was notjustified in upholding the disallowances of the expenses made bythe lower Appellate Authority. 5. The learned Senior Standing Counsel Mr.T.Ravikumarappearing for the Revenue contended before us that in the absenceof any evidence produced by the Assessee during the course ofassessment proceedings and even the appeal proceedings, theAuthorities below were justified in answering the questionsagainst the Assessee, particularly on the issue of contributionmade to the tune of Rs.3,00,000/- to Lady Ampthill Hospital. 6. The learned counsel appearing for the Assessee sought tourge that the contribution was made for the benefit of theemployees of the Assessee and therefore, it ought to have beenallowed as a business expenditure under section 37 of the Act. 7. The learned Senior Standing Counsel appearing for theRevenue urged that for want of evidence that the employees of theAssessee are benefited by the contribution made by the Assessee,it was not admissible as a business expenditure. 8. Having heard the learned counsel appearing for theparties, we are of the opinion that the findings of facts arerendered by the learned Tribunal upholding the findings of thetwo Authorities below and thus, all the three Authorities haveconcurrently held against the Assessee that only for want ofproduction of relevant evidence by the Assessee, the Authoritiesbelow came to the conclusion that the expenses incurred by theAssessee on various items as well as the contribution made to https://hcservices.ecourts.gov.in/hcservices/ Lady Ampthil Hospital were not allowable expenses and theadditions made on variation in the raw materials and productionwas also justified and unless such findings rendered by theTribunal are found to be perverse by this court, the Appealsunder Section 260A of the Act are not maintainable. 9. Even though these Appeals were admitted on the questionsof law quoted above, we do not find them to be really questionsof law arising from the order of the learned Tribunal. 10. Therefore, we are satisfied that there is no merit inthe present Appeals filed by the Assessee and in the absence ofany relevant evidence produced by the Assessee, the Authoritieshad no other option, but, to draw an adverse inference againstthe Assessee. Therefore, the Appeals of the Assessee aredismissed and questions, as framed, are answered against theAssessee and in favour of the Revenue. 9. Even though these Appeals were admitted on the questionsof law quoted above, we do not find them to be really questionsof law arising from the order of the learned Tribunal. 10. Therefore, we are satisfied that there is no merit inthe present Appeals filed by the Assessee and in the absence ofany relevant evidence produced by the Assessee, the Authoritieshad no other option, but, to draw an adverse inference againstthe Assessee. Therefore, the Appeals of the Assessee aredismissed and questions, as framed, are answered against theAssessee and in favour of the Revenue. Sd/-Assistant Registrar(C.S.VI) /True copy/ Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, “A” Bench, Chennai. 2. The Commissioner of Income Tax(Appeals -III), 121, Mahatma Gandhi Road, Chennai -34. 3. The Deputy Commissioner of Income Tax, Special Range-IX, 121, Nungambakkam High Road, Chennai 600 034. +1cc to Mr.M.Swaminathan, Advocate Sr.No.6263+1cc to Mr.T.Ravi Kumar, Advocate Sr.No.6992AKM/05.03.2020 /6P-6C/