Ammonia Supply Co., New Delhi V. ACIT, New Delhi

CO 59/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7713 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 02-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB SENIOR
• Keywords: Depreciation; Business expenditure; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5088/DEL./2015 (ASSESSMENT YEAR : 2012-13) DCIT, CIRCLE 63 (1), VS. M/S. AMMONIA SUPPLY CO., NEW DELHI. 18, NEW COLONY, MODAL BASTI, NEW DELHI 110 055. (PAN : AAIFA0098E) CO NO.59/DEL/2018 (IN ITA NO.5088/DEL./2015) (ASSESSMENT YEAR : 2012-13) M/S. AMMONIA SUPPLY CO., VS. DCIT, CIRCLE 63 (1), 18, NEW COLONY, MODAL BASTI, NEW DELHI. NEW DELHI 110 055. (PAN : AAIFA0098E) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS. ASHIMA NEB, SENIOR DR DATE OF HEARING : 11.07.2019 DATE OF ORDER : 22.07.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE AFORESAID APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSION. ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 2 2. THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAS D ELAY OF 829 DAYS AND THE ASSESSEE HAS ALSO FILED APPLICATION FOR CON DONATION OF DELAY (COD) ON THE GROUND THAT THE DELAY OF FILING THE CR OSS OBJECTIONS IS ATTRIBUTABLE TO THE FIRM OF CHARTERED ACCOUNTANTS W ITH WHOM CASE WAS DISCUSSED AND ONLY AFTER THEIR ADVICE, PRESENT CROS S OBJECTIONS WERE FILED. SINCE THE APPLICATION OF COD IS NOT SUPPORTED WITH ANY AFFIDAVIT ATTRIBUTING HUGE DELAY OF 829 DAYS TO THE FIRM OF C HARTERED ACCOUNTANTS, THE SAME IS HEREBY DISMISSED AND CONSEQUENTLY CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED BEING BARRED BY LIMITATI ON. 3. APPELLANT, DCIT, CIRCLE 63 (1), NEW DELHI (HEREI NAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 29.05.2015 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-20, NEW DELHI QUA THE ASSESSME NT YEAR 2012-13 ON THE GROUNDS INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.22 ,38,319/- ON ACCOUNT OF COMMISSION PAID, WHICH WAS NOT MADE EXCLUSIVELY AND WHOLLY FOR THE PURPOSE OF ASSESSEE' S BUSINESS 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6, 32,549/- ON ACCOUNT OF KEY MAN INSURANCE PREMIUM, WHICH WAS TAKEN ON THE NAME OF THE PARTNERS AND NOT FOR A KEY EMPLOYEE OF THE FIRM OF THE COMPANY. PARTNERS ARE C ERTAINLY NOT EMPLOYEE OF THE FIRM AND POLICY TAKEN IN THE NA ME CANNOT BE ALLOWED AS EXPENDITURE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.48 ,72,309/- ON ACCOUNT OF EXCESS DEPRECIATION CLAIMED AT THE BL OCK VALUE DONE ON THE BASIS OF RELIANCE PLACED UPON CIT VS H. B. ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 3 LEASING & FINANCE LTD. & CIT VS GOYAL MG GASES LTD.(2008) 296 ITR 72 (DELHI) WHICH IS NOT APPLICAB LE IN THIS CASE. 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER (AO) NO TICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.23,43,541/- TO WARDS COMMISSION PAYMENT. ON FAILURE OF THE ASSESSEE TO FURNISH THE DETAILS REGARDING THE NEW BUSINESSES AND CLIENTS SECURED THROUGH THESE CO MMISSION AGENTS TO WHOM PAYMENTS WERE MADE, THE AO MADE ADDITION OF RS .23,43,541/- ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAYMENT. AO ALSO DISALLOWED AN AMOUNT OF RS.7,73,347/- DEBITED BY THE ASSESSEE TOWARDS KEYMAN INSURANCE PREMIUM ON THE GROUND THAT SINCE PARTNERS IN WHOSE NAME THE INSURANCE POLICIES WERE PURCHASED, WERE NOT EMPLOYE ES OF THE ASSESSEE FIRM, EXPENDITURE CANNOT BE ALLOWED. AO ALSO DISAL LOWED EXCESS DEPRECIATION CLAIMED AT THE BLOCK VALUE OF RS.1,85, 45,485/- @ 60% ON THE GROUND THAT THE TANKERS ARE REQUIRED FOR TRANSP ORTATION OF GASES AND NOT STORAGE UNLIKE GAS CYLINDERS BY RESTRICTING THE DEPRECIATION @ 30%. 5. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION BY ALLOWING TH E APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF FILING THE PRESENT APPEAL. 6. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE AND CONSEQUENTLY, WE PROCEEDED TO DEC IDE THE PRESENT ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 4 APPEAL WITH THE ASSISTANCE OF THE LD. SENIOR DR AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. 7. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE TO THE APPEAL WHO HAS RELIED UPON THE ORDER PASSED BY THE AO, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS P ASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 8. AO DISALLOWED THE AMOUNT OF RS.23,43,541/- DEBIT ED BY THE ASSESSEE TOWARDS COMMISSION PAYMENT ON THE GROUND T HAT THE ASSESSEE HAS NOT FURNISHED DETAILS REGARDING THE NEW BUSINES SES/CLIENTS SECURED THROUGH THESE COMMISSION AGENTS TO WHOM THE IMPUGNE D COMMISSION AS PAID. HOWEVER, WHEN WE EXAMINE PARA 6.2 OF THE IMP UGNED ORDER, THE LD. CIT (A) HAS DISCUSSED THE ISSUE AT LENGTH WHO H AS DELETED THE ADDITION VIDE THRASHING THE FACTS AND CIRCUMSTANCES OF THE CASE. DURING APPELLATE PROCEEDINGS, ASSESSEE HAS DULY FURNISHED BRANCH-WISE TURNOVER, COMMISSION PAID, NAME AND ADDRESS AND PAN OF THE PERSON TO WHOM COMMISSION PAID ALONG WITH DETAILS OF SALE VAL UE IN RUPEES, SALE QUANTITY IN KGS., THE NAME OF THE PARTY, THE AMOUNT OF COMMISSION AND THE TDS ON THE COMMISSION, WHICH HAS BEEN RECORDED IN PARA 6.3 OF THE IMPUGNED ORDER IN TABULATED FORM. 9. SO, WHEN ASSESSEE HAS DULY PROVED THE DETAILS WH ICH WERE ALSO PLACED BEFORE THE AO, THERE IS NO QUESTION OF DISAL LOWING THE PAYMENT OF ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 5 COMMISSION PAID BY THE ASSESSEE ON THE GROUND THAT THE DETAILS HAVE NOT BEEN FURNISHED. 10. MOREOVER, WHEN IT IS UNDISPUTED FACT THAT SIMIL AR COMMISSION PAYMENT HAS BEEN ALLOWED IN THE EARLIER YEAR BY THE REVENUE AND IN THE YEAR UNDER ASSESSMENT PERCENTAGE OF COMMISSION VIS- -VIS TURNOVER HAS BEEN REDUCED TO 0.56% FROM 0.81% AND AT THE SAME TI ME, TURNOVER OF THE ASSESSEE HAS INCREASED TO RS.41.82 CRORES, IT CANNO T BE SAID THAT COMMISSION HAS NOT BEEN PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ASSESSEES BUSINESS. SO, WHEN BECAUSE OF THE SE RVICES RENDERED BY THE COMMISSION AGENTS, TURNOVER HAS BEEN INCREASED, EVE N BY MAKING PAYMENT OF LESSER PERCENTAGE OF COMMISSION, THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE DELETION OF THE ADDITION BY THE LD. CIT (A), HENCE GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. GROUND NO.2 11. AO DISALLOWED AN AMOUNT OF RS.7,73,347/- DEBITE D BY THE ASSESSEE TO KEYMAN INSURANCE PREMIUM ON THE GROUND THAT KEYMAN INSURANCE PREMIUM DOES NOT INCLUDE PARTNERS OF THE FIRM BUT ONLY EMPLOYEES. UNDISPUTEDLY, WHEN KEYMAN INSURANCE PO LICY WAS MADE AVAILABLE TO THE FIRM BY LIFE INSURANCE CORPORATIO N OF INDIA (LIC) VIDE CIRCULAR NO.ACTL/1729/4 DATED 24.07.2000 UNDER THE TITLE RELAXATION UNDER EXISTING UNDER-WRITING PRACTICE WHICH HAS CA TEGORICALLY EXTENDED ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 6 THE POLICY TO PARTNERSHIP FIRMS W.E.F. 24.07.2000, WE FIND NO SCOPE TO INTERFERE INTO THE FINDINGS RETURNED BY THE LD. CIT (A). 12. WHEN WE EXAMINE PARA 7.1 OF THE IMPUGNED ORDER AGAIN THE LD. CIT (A) HAS THRASHED THE ISSUE AT LENGTH ON FACTS A S WELL AS ON LAW AND DELETED THE ADDITION BY FOLLOWING THE DECISION REND ERED BY HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. B.N. EXPORTS 323 ITR 178 (BOM.) WHEREIN BOARD CIRCULAR NO.762 DATED 18.02.1998 WAS ALSO DISCUSSED. THE RATIO OF THE JUDGMENT (SUPRA) IS EX TRACTED FOR READY PERUSAL AS UNDER :- CIRCULAR NO. 762 DATED FEBRUARY 18, 1998 ([1998J 2 30 ITR (ST.) 12), CLARIFIES THAT THE PREMIUM PAID ON A KEYMAN IN SURANCE POLICY IS ALLOWABLE AS BUSINESS EXPENDITURE. THE OB JECT AND PURPOSE OF A KEYMAN INSURANCE POLICY IS TO PROTECT THE BUSINESS AGAINST A FINANCIAL SETBACK WHICH MAY OCCUR AS A RE SULT OF PREMATURE DEATH, TO THE BUSINESS OR PROFESSIONAL OR GANIZATION. THERE IS NO RATIONAL BASIS TO CONFINE THE ALLOWABIL ITY OF THE EXPENDITURE INCURRED ON THE PREMIUM PAID TOWARDS SU CH A POLICY ONLY TO A SITUATION WHERE THE POLICY IS IN RESPECT OF THE LIFE OF AN EMPLOYEE. A KEYMAN INSURANCE POLICY IS OBTAINED ON THE LIFE OF A PARTNER TO SAFEGUARD THE FIRM AGAINST A DISRUPTION OF THE BUSINESS THAT MAY RESULT DUE TO PREMATURE DEATH OF A PARTNER . THEREFORE, THE EXPENDITURE WHICH IS LAID OUT FOR THE PAYMENT O F PREMIUM ON SUCH A POLICY IS INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSES OF BUSINESS. THE TRIBUNAL HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE, WHICH WAS A FIRM, IN PAYING THE PREMIUM F OR A KEYMAN INSURANCE POLICY OBTAINED BY THE FIRM ON THE LIFE O F ITS PARTNER MUST BE REGARDED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE FIRM. ON APPEAL IT WAS CONT ENDED THAT IN LAW A FIRM HAS NO SEPARATE EXISTENCE FROM ITS PARTN ERS SINCE A FIRM IS NOT A JURISTIC ENTITY AND THAT THERE WAS NO RELATIONSHIP OF EMPLOYER AND EMPLOYEE BETWEEN A FIRM AND ITS PARTNE RS, THERE BEING NO CONTRACT OF SERVICE. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THERE WAS A FINDI NG OF FACT BY THE TRIBUNAL THAT THE FIRM HAD NOT TAKEN IN SURANCE FOR THE PERSONAL BENEFIT OF THE PARTNER, BUT FOR THE BENEFI T OF THE FIRM, IN ORDER TO PROTECT ITSELF AGAINST THE SETBACK THAT MA Y BE CAUSED ON ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 7 ACCOUNT OF THE DEATH OF THE PARTNER. THE INSURANCE PREMIUM WAS DEDUCTIBLE. 13. SO, FOLLOWING THE DECISION OF B.N. EXPORTS (SUPRA) THE LD. CIT (A) HAS RIGHTLY ARRIVED AT THE DECISION THAT KEYMAN INSURANCE POLICY OBTAINED FOR THE PARTNERS WAS JUST TO SAFEGUARD THE PARTNERSHIP FIRM SO AS TO AVOID LOSS TO THE BUSINESS DUE TO UNTIMELY DEATH OF THE PARTNER WHICH WOULD FURTHER CAUSE THE LOSS TO THE EMPLOYEES OF TH E FIRM IN GENERAL BY WAY OF LOSS OF EMPLOYMENT ETC.. SO, WE FIND NO ILL EGALITY OR PERVERSITY IN THE DELETION OF ADDITION OF RS.7,73,347/- UNDER KEYMAN INSURANCE POLICY, HENCE GROUND NO.2 IS DETERMINED AGAINST THE REVENUE. GROUND NO.3 14. AO HAS RESTRICTED THE DEPRECIATION OF RS.97,44, 617/- CLAIMED BY THE ASSESSEE AT THE BLOCK VALUE OF RS.1,85,45,485/- TO 30% AS AGAINST 60% CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE TANKERS USED ONLY FOR TRANSPORTATION OF GASES AND NOT FOR STORAGE UNL IKE GAS CYLINDERS. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE I S INTO THE BUSINESS OF AMMONIA SUPPLY TRANSPORTATION OF GASES IN THE TANKE RS, IT IS EQUALLY NECESSARY AS TO STORE GAS IN GAS CYLINDERS AND BOTH THE FUNCTIONS ARE INEXTRICABLY LINKED TO EACH OTHER AND PART AND PARC EL OF THE BUSINESS OF THE ASSESSEE. 15. LD. CIT (A) HAS DECIDED THE ISSUE IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE LAW L AID DOWN BY HONBLE HIGH COURT IN CASE OF CIT VS. GOYAL MG GASES LTD. (2008) 296 ITR 72 (DELHI) WHEREIN IT IS HELD THAT TANKERS OR GAS CYLINDERS AT TACHED TO THE ITA NO.5088/DEL./2015 CO NO.59/DEL/2018 8 BODY OF A TRUCK CONTINUOUS TO BE A GAS CYLINDER AND IS ACCORDINGLY ENTITLED TO DEPRECIATION AS APPLICABLE TO GAS CYLIN DER IN APPENDIX 1 TO THE INCOME-TAX RULES, 1962. SO, IN THESE CIRCUMSTA NCES, DISALLOWANCE OF EXCESS DEPRECIATION BY THE AO IS NOT SUSTAINABLE IN THE EYES OF LAW. WE ARE OF THE CONSIDERED VIEW THAT LD. CIT (A) HAS FAC TUALLY AND LEGALLY PASSED A VALID ORDER BY DELETING THE ADDITION ON AC COUNT OF EXCESS DEPRECIATION MADE BY THE AO, HENCE WE FIND NO SCOPE TO INTERFERE INTO THE FINDINGS RETURNED BY THE LD. CIT(A). GROUND NO .3 IS DETERMINED AGAINST THE REVENUE. 16. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE A PPEAL FILED BY THE REVENUE IS HEREBY DISMISSED AND IN VIEW OF OUR FIND INGS IN PARA 1, CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALSO DISMISSED BEING BARRED BY LIMITATION. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF JULY, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND DAY OF JULY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-20, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.