Zevrat, Yamunanagar V. DCIT, Yamunanagar

ITA 1173/CHANDI/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95654 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: ASHWANI KUMAR
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 69; 28; 143(3); 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.1173/CHD/2009 ( ASSESSMENT YEAR : 2006-07) M/S ZEVRAT, VS. THE D.C.I.T., GOBINDPURI ROAD, YAMUNA NAGAR. YAMUNA NAGAR. PAN: AAAFZ2863N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 29.09.2015 DATE OF PRONOUNCEMENT : 28.10.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KARNAL DATED 1.10.2009. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS IN THE BUSINESS OF MANUFACTURING AND SALE OF GOLD AND DIAMOND JEWELLERY AND SILVER WARES. SURVEY UNDER SECTION 133A(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS C ONDUCTED IN THE CASE OF THE ASSESSEE ON 18.10.2005 IN WHICH THE ASSESSEE SURRENDERED AN INCOME AMOUNTING TO RS.15 LACS ON AC COUNT OF 2 EXCESS CASH AND RS.25 LACS ON ACCOUNT OF EXCESS STO CK, TOTALING RS.40 LACS. DURING THE SURVEY, THE STAT EMENT OF SHRI RAKESH NARANG, PARTNER WAS RECORDED. IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2006-07, THE ASSES SEE INCLUDED THIS INCOME OF RS.40 LACS BY WAY OF CREDIT ING THE SAME TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD MISCELLANEOUS INCOME. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER FORMED THE VIEW THAT THE AMOUNT SURRENDERED BY THE ASSESSEE DURING THE COURS E OF SURVEY IS TO BE ASSESSED UNDER SECTIONS 69 AND 69A OF THE ACT AS DEEMED INCOME, WHEREAS THE ASSESSEE HAD CLAIME D THE SAME AS INCOME UNDER THE HEAD PROFITS AND GAINS FR OM THE BUSINESS AND PROFESSION. IN THIS WAY, THE ASSESSI NG OFFICER CHANGED THE HEAD OF INCOME OF THIS AMOUNT OF RS.40 LACS. IN CONSEQUENCE TO THIS ACTION OF THE ASSESSING OFFICER , A DISALLOWANCE OF RS.11,50,000/- ON ACCOUNT OF SALARY PAID TO THE PARTNERS OF THE FIRM OUT OF THE TOTAL CLAIM OF RS.12 LACS WAS MADE UNDER THE PROVISIONS OF SECTION 40(B) OF THE ACT. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT (APPEALS) AND SUBMITTED THAT THE SURRENDER WAS MADE DURING THE COURSE OF SURVEY FOR ASSESSMENT YEARS 2005-06 AND 2006-07. THE ASSESSMENT FOR ASSESSMENT YEAR 2005-0 6 WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND THE S AID SURRENDERED INCOME WAS ASSESSED AS BUSINESS INCOME IN THAT YEAR. IT WAS ALSO SUBMITTED THAT IF THE ASSESSING OFFICER WANTS TO CHARGE THE SURRENDERED INCOME AS INCOME FR OM OTHER SOURCES HE MUST POINT OUT THE MATERIAL HE HAS IN HI S 3 POSSESSION FOR COMING TO THIS CONCLUSION. RELIANC E WAS PLACED ON AN ORDER OF RAJKOT BENCH OF THE I.T.A.T. IN THE CASE OF ITO VS. JAMNA DASS MULJI BHAI REPORTED IN 99 TT J 97, WHEREBY IT HAS BEEN HELD THAT THE EXCESS STOCK FOUN D DURING THE COURSE OF SURVEY SURRENDERED BY THE ASSESSEE AN D SHOWN IN THE PROFIT & LOSS ACCOUNT, THE REMUNERATION OF P ARTNERS UNDER SECTION 40(B) OF THE ACT HAS TO BE COMPUTED O N THE TOTAL INCOME INCLUDING THE SURRENDERED INCOME. IT WAS AL SO SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE STO CK AND CASH HAS BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOUNT AND SHOWN THE SURRENDERED INCOME IN THE PROFIT & LOSS ACCOUNT MEANING THEREBY THAT THE SOURCE OF STOCK AND CASH WAS BUSIN ESS INCOME. RELIANCE WAS PLACED ON A NUMBER OF OTHER JUDGMENTS FROM VARIOUS BENCHES OF THE TRIBUNALS. 4. THE SUBMISSIONS OF THE ASSESSEE WERE SENT TO TH E ASSESSING OFFICER BY THE LEARNED CIT (APPEALS) FOR COMMENTS, WHICH THE ASSESSING OFFICER DULY OFFERED VIDE HIS L ETTER DATED 11.9.2009. THE ASSESSING OFFICER REITERATED THE C ONTENTIONS RAISED BY HIM IN THE ASSESSMENT ORDER AND MAINLY RE LYING ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF FAKIR MOHMED HAJI HASAN VS. CIT, 247 ITR 290 STATED THAT THE SURRENDERED INCOME HAS TO BE TAXED AS DEEMED IN COME AND CANNOT FORM PART OF COMPUTATION MADE FOR THE PURPOS E OF SECTION 40(B) OF THE ACT. FURTHER, HE DISTINGUISH ED THE CASES RELIED UPON BY THE ASSESSEE. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE, REMAND REPORT OF THE ASSESSING OFFICER AND COUNTER 4 SUBMISSION BY THE ASSESSEE, THE LEARNED CIT (APPEAL S) DID NOT FIND HIMSELF IN AGREEMENT WITH THE ARGUMENTS OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO EST ABLISH ANY RELATION OR CO-RELATION OF THE SURRENDERED INCOME W ITH ITS BUSINESS ACTIVITIES. IT HAS NOT AT ALL EXPLAINED W HAT TO SAY PROVED THE MANNER AND METHOD BY WHICH SUCH UNEXPLAI NED INCOME WAS EARNED. THEREFORE, HE HELD THAT THE SU RRENDERED INCOME HAS BEEN RIGHTLY ASSESSED UNDER SECTIONS 69 AND 69A OF THE ACT BY THE ASSESSING OFFICER. HE FURTHER S TATED THAT SINCE NO BUSINESS RELATION OF THE SURRENDERED INCOM E HAS BEEN PROVED, THEREFORE, IT IS NOT ASSESSABLE AS INCOME F ROM BUSINESS AND PROFESSION. THE ASSESSEE HAS CLAIMED SALARY TO PARTNERS OUT OF THE SURRENDERED INCOME, BUT SALARY IS ALLOWABLE OUT OF BOOK PROFITS AND BUSINESS INCOME, WHEREAS UNACCOUNTED STOCK AND CASH WAS NOT FOUND RECORDED I N THE BOOKS OF ACCOUNT AND THE SURRENDERED INCOME IS NOT A BUSINESS INCOME. IN THIS WAY, THE LEARNED CIT (AP PEALS) DISMISSED THE GROUNDS OF APPEAL RAISED BY THE ASSES SEE. 6. AGGRIEVED BY THIS ACTION OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS COME UP IN APPEAL BEFOR E US. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES AND THE SUM AND SUBSTANCE OF THE ARGUMENTS WAS THAT THE ASSESSEE HAS MADE SURRENDERED DURING THE COURSE OF SURVEY ON ACCOUNT OF CASH AND STOCK, WHICH IS ONLY A PART OF THE ASSESSEES BUSINESS INCOME AS THERE IS NO OTHER INC OME TO THE ASSESSEE FIRM. IN THIS WAY, IT WAS SUBMITTED THAT THE 5 SURRENDERED INCOME IS A PART OF BUSINESS INCOME OF THE ASSESSEE AND HENCE, FOR COMPUTING PARTNERS REMUNERA TION UNDER SECTION 40(B) OF THE ACT, ALL INCOMES OF THE ASSESSEE FIRM WAS INCLUDED IN THE SURRENDERED INCOME. TO S TRENGTHEN HIS CASE, THE LEARNED COUNSEL FOR THE ASSESSEE RELI ED UPON THE FOLLOWING JUDGMENTS : I) MD SERAJUDDIN & BOTHERS VS. CIT, (2012) 80 DTR 46 (CAL) II) SHRI VENKATESH TEXTILE MILLS VS. JCIT ITA NO.2268/PN/2012, DATED 28.11.2014 (PUNE) III) M/S VIJAY JEWELLERS VS. DCIT ITA NO.3/CHANDI/2007,DATED 10.10.2007 (CHD.) IV) ACIT VS. SETH BROTHERS (2006) 99 TTJ (RAJKOT) 189 V) ROYALE SUNRISE VS. ITO (2006) 99 TTJ (BANG) 1305 8. ON THE BASIS OF THESE SUBMISSIONS, IT WAS PRA YED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(B) OF THE ACT SHOULD BE DELETED. 9. THE LEARNED D.R. WHILE ARGUING RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT (APPEALS). HE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE SALARY IN RESPECT OF INCOME DECLARED BY THE ASSESSEE AT RS .40 LACS DURING THE COURSE OF SURVEY UNDER SECTION 133A OF T HE ACT. THE LEARNED CIT (APPEALS) UPHELD THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER. THE SALARY CLAIMED IN THE INCOME SURRENDERED BY THE ASSESSEE IS NOT ADMISSIBLE IN VI EW OF VARIOUS JUDGMENTS AND HE RELIED UPON THE FOLLOWING JUDGMENTS: 6 I) HOME TEX VS. CIT, 243 CTR 81 (P&H) II) MANSAROVAR FORGINGS PVT. LTD., LUDHIANA ITA NO.873/CHANDI/2012, DATED 6.12.2012 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THIS IS A FACT ON RECORD THAT THE ASSESSEE SURRENDERED AN AMOUNT OF R S.40 LACS AS ADDITIONAL INCOME DURING THE COURSE OF SURVEY ON ACCOUNT OF FOLLOWING HEADS : I) ON ACCOUNT OF EXCESS CASH RS.15 LACS II) ON ACCOUNT OF EXCESS STOCK RS.25 LAS 11. THESE FACTS HAVE NOT BEEN DISPUTED BY ANY OF T HE LOWER AUTHORITIES. THE ISSUE TO BE DECIDED BY US IS WHETHER THE INCOME OF RS.40 LACS CAN BE CONSIDERED TO BE PA RT OF THE INCOME FOR THE PURPOSE OF COMPUTING THE REMUNERATIO N TO PARTNERS UNDER SECTION 40(B) OF THE ACT. SECTION 40(B) OF THE ACT READS AS UNDER : 40. AMOUNTS NOT DEDUCTIBLE.NOTWITHSTANDING ANYTHIN G TO THE' CONTRARY IN SS. 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON,' (B) IN THE CASE OF ANY FIRM ASSESSABLE AS SUCH, (V) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WHO IS A WORKING PARTNER, WHICH IS AUTHORISED BY, AND IS IN ACCORDANCE WITH, THE TERM; , OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER THE DATE OF SUCH PARTNERSH IP DEED INSOFAR AS THE AMOUNT OF SUCH PAYMENT TO ALL THE PARTNERS DURING THE PREVIOUS YEA R EXCEEDS THE AGGREGATE AMOUNT COMPUTED AS HEREUNDER : (1) IN THE CASE OF A FIRM CARRYING ON A PROFESSION REFERRED TO IN S. 44AA OR WHICH IS NOTIFIED FOR THE PURPOSE OF THAT SECTION (A) ON THE FIRST RS. 1,00,000 OF RS. 50,000 OR AT THE RATE OF 90 THE BOOK PROFIT OR IN CASE OF A LOSS PER CENT OF THE BOOK PROFIT, WHICHEVER IS MORE; 7 (B) ON THE NEXT RS. 1,00,000 OF AT THE RATE O F 60 PER CENT; THE BOOK PROFIT C) ON THE BALANCE OF THE BOOK AT THE RATE OF 40 PER CENT; PROFIT (2) IN THE CASE OF ANY OTHER FIRM (A) ON THE FIRST RS. 75,000 OF THE RS. 50,000 OR AT THE RATE OF 90 BOOK PROFIT, OR IN CASE OF A LOSS PER CENT OF THE BOOK PROFIT, WHICHEVER IS MORE; B) ON THE NEXT RS. 75,000 OF THE AT THE RATE OF 60 PER CENT; BOOK PROFIT (C) ON THE BALANCE OF THE BOOK AT TH E RATE OF 40 PER CENT; PROFIT PROVIDED THAT IN RELATION TO ANY PAYMENT UNDER THIS CLAUSE TO THE PARTNER DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1993, THE TERMS OF THE PARTNERSHIP DEED MAY, AT ANY TIME DURING THE SA ID PREVIOUS YEAR, PROVIDE FOR SUCH PAYMENT,' THE TERM 'BOOK PROFIT' HAS BEEN DEFINED IN EXPLN. 3 BELOW S. 40(B)(V) AS UNDER ; 'EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, ' BOOK PROFIT' MEANS THE NET PROFIT, AS SHOWN IN THE P&L A/C FOR THE RELEVANT PREVIOUS YEAR, COMPUTE D IN THE MANNER LAID DOWN IN CHAPTER IV- D AS INCREASED BY THE AGGREGATE AMOUNT OF THE REMUN ERATION PAID OR PAYABLE TO ALL THE PARTNERS OF THE FIRM IF SUCH AMOUNT HAS BEEN DEDUCT ED WHILE COMPUTING THE NET PROFIT.' 12. THE REFERENCE TO THE BOOK PROFITS MADE UNDER SECTION 40(B) OF THE ACT HAS BEEN EXPLAINED TO MEAN THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCOUNT COMPUT ED IN THE MANNER LAID DOWN IN CHAPTER IV-D OF THE ACT. CHAP TER IV-D OF THE ACT IS RELATED TO THE PROFITS AND GAINS OF BUSINESS AND PROFESSION. THIS CHAPTER STARTS WITH SECTION 28 AND ENDS WITH SECTION 44DB OF THE ACT. SECTION 28 OF THE AC T DEFINES THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROVISION. SECTION 29 OF THE ACT STA TES THAT THE INCOMES REFERRED IN SECTION 28 OF THE ACT ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECT IONS 30 TO 43D OF THE ACT. ALL OTHER SECTIONS OF THIS CHAPTE R RELATE TO THE COMPUTATION OF INCOME UNDER THE HEAD B USINESS OR 8 PROFESSION. THEREFORE, THE BOOK PROFITS AS DEFINE D IN EXPLANATION TO SECTION 40(B) OF THE ACT IS BASICALL Y THE INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION FOR THE PURPOSE OF THIS SECTION. 13. IN VIEW OF THIS, THE FIRST QUESTION TO BE DECI DED BY US IS THE HEAD UNDER WHICH THIS SURRENDERED INCOME IS TO BE CHARGED TO TAX. A NUMBER OF JUDICIAL PRONOUNCEME NTS HAVE BEEN CITED DURING THE COURSE OF HEARING. HOWEVER, WE FIND THERE IS A JUDGMENT OF HON'BLE JURISDICTIONAL PUNJA B & HARYANA HIGH COURT IN THE CASE OF KIM PHARMA (P) L TD. VS. CIT IN ITA NO.106 OF 2011 (O&M) DATED 27.4.2011, WH ICH IS QUITE RELEVANT TO DECIDE THE ISSUE IN QUESTION. O N PERUSAL OF THE SAID JUDGMENT, WE FIND THAT THE ISSUE IN THAT C ASE WAS OF TAXABILITY OF CASH SURRENDERED DURING THE COURSE OF SURVEY AS THE ASSESSEE HAD ALSO SURRENDERED INCOME OF RS.10 L ACS ON ACCOUNT OF SUNDRY CREDITS, REPAIR TO BUILDING AND A DVANCES TO STAFF, WHICH BEING RELATABLE TO BUSINESS CARRIED ON BY THE ASSESSEE WERE ALREADY INCLUDED AS INCOME FROM BUSIN ESS. IN THE PRESENT CASE, AS WE HAVE ALREADY STATED THAT TH E SURRENDER WAS MADE ON ACCOUNT OF CASH FOUND DURING THE COURSE OF SURVEY AND ON ACCOUNT OF EXCESS STOCK. BY NO STRE TCH OF IMAGINATION, EXCESS STOCK FOUND CAN BE CONSIDERED A S INCOME NOT FROM THE BUSINESS OF THE ASSESSEE. THE ASSESS ING OFFICER IN HIS ORDER HAS NOT BEEN ABLE TO BRING ON RECORD A NY MATERIAL TO THE EFFECT THAT THE INCOME SURRENDERED DURING TH E COURSE OF 9 SURVEY ON ACCOUNT OF EXCESS STOCK WAS NOT OUT OF TH E BUSINESS OF THE ASSESSEE. NOW, FOLLOWING THE JUDGMENT OF T HE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KIM PHARM A (P) LTD. (SUPRA), ON THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE, WE CAN SAFELY INFER THAT THE OTHER COMPONENTS OF TH E SURRENDERED INCOME I.E. EXCESS STOCK CAN BE BROUGHT TO TAX UNDER THE HEAD BUSINESS INCOME. THIS VIEW HAS A LSO BEEN HELD IN A RECENT ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF GAURISH STEELS PVT. LTD. VS. ACIT, ITA NO.1080/CHD/2014 DATED 17.9.2015, WHERE THE ISSUE W AS THAT OF SET OFF OF UNABSORBED LOSSES, BUT IT WAS HELD TH AT APART FROM CASH SURRENDERED DURING THE COURSE OF SURVEY, ALL OTHER SURRENDERED INCOMES TO BE CHARGED UNDER THE HEAD B USINESS INCOME. IN VIEW OF THIS, WE HOLD THAT THE SURREND ER ON ACCOUNT OF STOCK AMOUNTING TO RS.25 LACS BE TREATED AS INCOME UNDER THE HEAD BUSINESS WHILE THE SURRENDER ON AC COUNT OF CASH BE TREATED AS DEEMED INCOME. 14. NOW, COMING TO THE ISSUE OF COMPUTATION OF REMUNERATION TO PARTNERS UNDER SECTION 40(B) OF THE ACT. FROM THE ABOVE FINDINGS, IT IS VERY CLEAR THAT THE SURRENDERED INCOME ON ACCOUNT OF STOCK BE TAKEN INTO CONSIDERAT ION WHILE COMPUTING THE SAID REMUNERATION. THE ASSESSING OF FICER IS HEREBY DIRECTED TO COMPUTE THE REMUNERATION TO PART NERS UNDER SECTION 40(B) OF THE ACT INCLUDING THE EXCESS STOCK AMOUNTING TO RS.25 LACS TO THE INCOME OF THE ASSESS EE. 10 15. BEFORE PARTING, WE WOULD LIKE TO DEAL WITH VAR IOUS JUDGMENTS RELIED UPON BY BOTH THE PARTIES. FIRST CASE, ON WHICH HEAVY RELIANCE WAS PLACED BY THE LEARNED COUN SEL FOR THE ASSESSEE, IS THAT OF HON'BLE CALCUTTA HIGH COUR T IN THE CASE OF MD SERAJUDDIN & BROTHERS (SUPRA). IN THI S CASE, THE ISSUE WAS NOT THAT OF ANY INCOME SURRENDERED DURING THE COURSE OF SEARCH BUT THERE WAS CERTAIN CONSULTANCY FEE AND INTEREST OF BANK DEPOSITS WHICH WERE UNEXPLAINED, F OR THE PURPOSE OF SECTION 40(B) OF THE ACT. IN THE ORDE R OF THE PUNE BENCH OF THE I.T.A.T. IN THE CASE OF SHRI VENKATES H TEXTILE MILLS (SUPRA), THE ONLY ISSUE WAS TO INCLUDE THE EX CESS STOCK AND UNRECORDED SALES AND DEBTORS SURRENDERED DURING THE COURSE OF SURVEY FOR THE PURPOSE OF COMPUTATION UND ER SECTION 40(B) OF THE ACT. SINCE IN THIS CASE, NO AMOUNT O F CASH WAS SURRENDERED, WE HAVE ALREADY FOLLOWED THE SAID ORDE R OF COORDINATE BENCH AND ALLOWED TO CONSIDER EXCESS STO CK AS PART OF INCOME FOR THE PURPOSE OF COMPUTATION UNDER SECTION 40(B) OF THE ACT. IN THIS CASE, THE JUDGMENT OF T HE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KIM PHA RMA (P) LTD. (SUPRA) HAS ALSO BEEN DISCUSSED AND THE COORDI NATE BENCH ALSO FOUND THAT IN THE CASE OF KIM PHARMA (P ) LTD. (SUPRA) THE ONLY ISSUE WAS SURRENDER OF CASH. IN THE CASE OF M/S VIJAY JEWELLERS (SUPRA) BEFORE THE CHANDIGARH B ENCH OF THE I.T.A.T., THE ISSUE WAS STOCK SURRENDERED TO BE CONSIDERED FOR THE PURPOSE OF SECTION 40(B) OF THE ACT. IN T HIS CASE ALSO, THERE WAS NO CASH ELEMENT. FURTHER THE BENCH DID NOT HAVE 11 THE OCCASION TO HAVE GUIDANCE OF THE CASE OF KIM PH ARMA (P) LTD. (SUPRA) AS IT CAME ONLY AFTER THIS ORDER WAS P ASSED. IN THE ORDER OF RAJKOT BENCH OF THE I.T.A.T. IN THE CA SE OF SHETH BROTHERS (SUPRA), THERE WAS NO SURRENDER AND THE ON LY ISSUE WAS WHETHER THE INTEREST ON FDRS CAN BE TAKEN AS PA RT OF BUSINESS INCOME FOR THE PURPOSE OF COMPUTATION UNDE R SECTION 40(B) OF THE ACT. IN THE CASE OF ROYALE SUNRISE (SUPRA), THE ISSUE BEFORE THE BANGALORE BENCH OF THE I.T.A.T. WA S EXCESS VALUE OF STOCK AND EXCESS CASH DISCLOSED DURING THE COURSE OF SURVEY TO BE INCLUDED FOR THE PURPOSE OF COMPUTATIO N UNDER SECTION 40(B) OF THE ACT. THE FACTS OF THIS CASE ARE QUITE SIMILAR TO THE PRESENT CASE. HOWEVER, WE OBSERVE T HAT THIS ORDER IS DATED 6.1.2006 AND THE BANGALORE BENCH DID NOT HAVE THE BENEFIT OF THE JUDGMENT OF HON'BLE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF KIM PHARMA (P) LTD. (SUP RA). IN ANY CASE, THE JUDGMENT IN THE CASE OF KIM PHARMA ( P) LTD. (SUPRA) IS FROM THE JURISDICTIONAL HIGH COURT, THER EFORE, WE ARE BOUND TO FOLLOW THE SAME. 16. THE LEARNED D.R. RELIED UPON THE JUDGMENT OF P UNJAB & HARYANA HIGH COURT IN THE CASE OF HOME TEX (SUPR A). THE ISSUE IN THIS CASE WAS ALLOWABILITY OF DEDUCTION UN DER SECTION 80IB OF THE ACT IN RESPECT OF EXCESS STOCK SURRENDE RED DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT. THEREFORE, THE FACTS OF THE CASE ARE NOT APPLICABLE TO THE PRESENT CASE. THE OTHER CASE RELIED UPON BY THE LE ARNED D.R. IS MANSAROVAR FORGINGS PVT. LTD. (SUPRA). THE ISSU E WAS PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND NOT THE SAME AS 12 IN THE PRESENT CASE. THEREFORE, BOTH THESE CASES A RE DISTINGUISHABLE ON FACTS AND CANNOT BE RELIED UPON. 17. ANOTHER GROUND RAISED BY THE ASSESSEE IS AGAIN ST THE ACTION OF THE CIT (APPEALS) TO UPHOLD THE ADDITION OF RS.40,837/-, BEING 1/5 TH SHARE OUT OF CAR EXPENSES AND RS.12,054/- AS 1/5 TH SHARE OF TELEPHONE EXPENSES. FROM THE PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE SEE THAT AN ADHOC DISALLOWANCE @ 1/5 OF TELEPHONE AND CAR EXPENSES HAVE BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PE RSONAL USE. THE LEARNED CIT (APPEALS) HAS CONFIRMED THE SAME HOLDING THAT THE FRINGE BENEFIT TAX PAID BY THE ASS ESSEE ONLY TAKES CARE OF THE PERSONAL USE BY EMPLOYEES AND NOT BY THE ASSESSEE HIMSELF. WE DO NOT FIND OURSELVES IN AGR EEMENT WITH THIS LOGIC OF THE LEARNED CIT (APPEALS), THE FRINGE BENEFIT TAX PAID BY THE ASSESSEE FIRM TAKES CARE OF ANY KIND OF PERSONAL USE OF THESE FACILITIES, BE IT BY EMPLOYEES OR BY P ARTNERS OF THE FIRM. FURTHER, THE DISALLOWANCE @ 1/5 IS MADE WI THOUT THERE BEING ANY BASIS FOR THE SAME. WE DIRECT THE ASSES SING OFFICER TO DELETE THE DISALLOWANCE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF OCTOBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 28 TH OCTOBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 13