Mohan Lal Syal, Chandigarh V. Addl. CIT, Chandigarh

ITA 1182/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5458 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Unexplained investment; Capital asset; Depreciation; Business expenditure; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 1182/CHANDI/2010 ASSESSMENT YEAR: 2006-07 MOHAN LAL SYAL V. ADDL C.I.T. RANGE IV, CHANDIGA RH HELIX INSTITUTE SCO 343-345, SECTOR 34-A, CHANDIGARH PAN: AJOPS 6791B APPELLANT BY: SHRI PANKAJ JAIN, ADVOCATE RESPONDENT BY: SMT. SARITA KUMARI, DEPARTMENTAL REP RESENTATIVE ORDER D K SRIVASTAVA: THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF COACHING THE STUDENTS PREPARING FOR MEDICAL/ENGINEERING ENTRANCE TESTS, ETC., ON COMMERCIAL LINES. THE ASSESSEE IS ALSO A FRANCHISEE OF AKASH I NSTITUTE, DELHI. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER APPEA L ON 30.3.2006 RETURNING TOTAL INCOME AT RS.1,84,16,327/-. PERUSAL OF ASSESSMENT O RDER SHOWS THAT A SURVEY U/S 133A WAS CARRIED OUT BY THE DEPARTMENT AT THE BUSIN ESS PREMISES OF THE ASSESSEE ON 3.5.2005 DURING WHICH THE ASSESSEE SURRENDERED A SUM OF RS.25.00 LAKHS ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE/CONST RUCTION OF HOUSE PROPERTY AND FURTHER SUM OF RS.10.00 LAKHS ON ACCOUNT OF UNE XPLAINED CASH. THE ASSESSMENT WAS COMPLETED BY THE AO U/S 143(3) ON 26 .12.2008 ASSESSING THE TOTAL INCOME AT RS.2,05,89,895/- AFTER MAKING CERTA IN ADDITIONS/DISALLOWANCES, WHICH WERE CHALLENGED BY THE ASSESSEE BEFORE THE FI RST APPELLATE AUTHORITY, NAMELY, THE CIT(A). THE ADDITIONS/DISALLOWANCES CON FIRMED, ON APPEAL, BY THE LD. CIT(A), BY HIS APPELLATE ORDER DATED 2.6.2010 ARE N OW SUBJECT MATTER OF APPEAL BEFORE THIS TRIBUNAL. 2. GROUND NO.1 TAKEN BY THE ASSESSEE READS AS UNDER : 1(A) BECAUSE THE ACTION IN UPHOLDING THE ADDITION OF RS.5,52,554/- (TIMBER RS.2,00,554/- + CARPENTER RS.3,5,2,000/-) I S BEING CHALLENGED ON FACTS AND LAW AND ALTERNATIVELY THE QUANTUM THEREOF TOO IS DISPUTED, SINCE EVER OTHERWISE THERE BEING A MISINTERPRETATION AND MISAPPLICATION OF LAW. (B) ALTERNATIVELY FOR A DIRECTION TO GRANT DEPRECI ATION ON THE AMOUNT CAPTALISED. 3. APROPOS GROUND NO.1(A), THE ASSESSEE WAS FOUND T O HAVE PURCHASED TIMBER AMOUNTING TO RS.2,00,554/- AND ALSO INCURRED EXPEND ITURE OF RS.3,52,000/- AS WAGES PAID TO CARPENTER. ON BEING CALLED UPON TO EX PLAIN THE NATURE OF WORK CARRIED OUT BY THE ASSESSEE THROUGH THE AFORESAID E XPENDITURE, THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE EXPENSES WERE INCU RRED TO INCREASE THE SIZE OF CLASS ROOMS SO AS TO ACCOMMODATE MORE STUDENTS IN T HE CLASSES. ON BEING FURTHER ASKED AS TO WHY THE IMPUGNED EXPENDITURE SHOULD NOT BE CAPITALIZED, THE MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 2 2 ASSESSEE EXPLAINED BEFORE THE AO THAT THE EXPENDITU RE WAS INCURRED OUT OF COMMERCIAL EXPEDIENCY AND THEREFORE, IT SHOULD BE A LLOWED AS REVENUE EXPENDITURE. THE AO WAS NOT SATISFIED WITH THE AFOR ESAID EXPLANATION. HE OFFICER THEREFORE DISALLOWED THE IMPUGNED EXPENDITURE. ON A PPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO WITH THE FOLLOWING O BSERVATIONS: 8 AFTER TAKING THE RIVAL CONTENTIONS INTO CONSIDER ATION, I FIND THAT THE APPELLANT HAD MAINLY TAKEN THE PLEA THAT EXPENDITUR E HAD BEEN INCURRED DUE TO COMMERCIAL EXPEDIENCY AND ALSO RELIED UPON T HE DECISION OF NATIONAL DIARY DEVELOPMENT BOARD (SUPRA). I TOTALLY AGREE TH AT COMMERCIAL EXPEDIENCY IS ONE OF IMPORTANT FACTORS FOR CLAIMING ANY EXPENSE U/S 37(C) OF INCOME-TAX ACT BUT ONE THIS TEST IS PASSED, THER E ARE OTHER ISSUES TO BE SORTED OUT IN ORDER TO DECLARED THE NATURE OF THE E XPENSES CLAIMED. THE MOST IMPORTANT TEST TO BE APPLIED IN MY VIEW IS THE NATURE OF BENEFIT BEING DERIVED WHETHER ENDURING OR NOT. THE USE OF WORD REPAIR & MAINTENANCE IS NOT ENOUGH TO TREAT THE EXPENSES AS REVENUE. THE INDICATORS LAID DOWN BY VARIOUS JUDGMENTS ARE TO BE APPLIED WHICH THE AO HAS VERY METICULOUSLY DISCUSSED IN HER ORDER AND AL L OF THESE INDICATORS HAVE BEEN DULY APPLIED TO THE INSTANT CASE. 9 IN THE INSTANT CASE, THE APPELLANT PURCHASE WOODE N PARTITIONS WHICH INCREASED THE LENGTH AND WIDTH OF ROOMS IN ORDER TO ACCOMMODATE MORE STUDENTS RESULTING IN MORE INCOME. THE BENEFIT DERI VED VIDE THIS EXPENDITURE IS DEFINITELY ENDURING. 10 IN VIEW OF THE ABOVE DISCUSSION, I AGREE WITH TH E STAND TAKEN BY THE AO AND CONFIRM THE ADDITION OF RS.5,52,554/- MADE O N ACCOUNT OF CAPITALIZING THE EXPENDITURE OF RS.2,00,554/- (PURC HASE OF TIMBER) + RS.3,52,000/- (PAID TO CARPENTER), DISMISSING ASSES SEES APPEAL ON THIS ISSUED. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT A SUM OF RS.2,00,554/- WAS PAID TO K ASHMIRI LAL & SONS FOR PURCHASE OF TIMBER AND FURTHER SUM OF RS.3,52,000/- WAS PAID TO DINESH, CARPENTER, FOR CREATING STRUCTURES OF TEMPORARY NAT URE TO ACCOMMODATE EVER INCREASING NUMBER OF STUDENTS JOINING THE ASSESSEE S INSTITUTE FOR COACHING. ACCORDING TO HIM, THE CREATION/MODIFICATION OF EXIS TING CLASS ROOMS WOULD NOT LEAD TO ACQUISITION OF ANY NEW CAPITAL ASSET OR BENEFIT OF ENDURING NATURE AND THEREFORE THE AO WAS NOT JUSTIFIED IN TREATING THE IMPUGNED E XPENDITURE AS CAPITAL IN NATURE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON A LARGE NUMBER OF ENGLISH AND INDIAN DECISIONS WHICH ARE AS UNDER: 1 CIT V. PORTIS & SPENCER (A) LTD, 257 ITR 49 (P & H) 2 ADDL CIT V. INDIA UNITED MILLS LTD, 141 ITR 399 (BOM) MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 3 3 3 KANPUR DYEING & PRINTING V. CIT, 75 ITR 686 (ALL ) 4 HANUMAN MOTOR SERVICE V. CIT (MYS) 148 ITR 560 ( KAR) 5 SASSON DAVID AND CO. (P) LTD V. CIT, 118 ITR 261 (S C) 6 SHAHZADA NAND AND SONS V. CIT, 108 ITR 358 (S C) 7 NATIONAL DAIRY DEVELOPMENT BOARD V. ACIT, 310 IT R 325 (AHD) 8 CIT V. SWARASHTRA CEMENT & CHEMICAL INDUSTRIES LT D, 91 ITR 170 (GUJ) 9 SARABHAI MANAGEMENT CORP LTD V. CIT, 102 ITR 25 (GUJ) 10 CIT V. SARABHAI MANAGEMENT CORP LTD., 192 ITR 1 51 (S C) 11 TAJ MAHAL HOTEL V. CIT, 66 ITR 303 (A P) 12 BRITISH INSULATED & HELSBY CABLES LTD. V ATHERT ON (1926) AC 205 (HL) 13 D.P. CHIRANIA V. CIT, 112 ITR 12 (KAR) 14 HINDUSTAN MACHINE TOOLS LTD V. CIT, 175 ITR 220 (KAR) 15 PUNJAB STATE INDUSTRIAL DEVELOPMENT CORP LTD V. CIT, 225 ITR 792 (SC) 16 EMPIRE JUTE CO. LTD V. CIT, 124 ITR 1 (SC) 17 CIT V. ASHOKA LEYLAND LTD, 86 ITR 549 (SC) 18 B.W NOBLE LTD. MITCHALL, 11 TAX CASES 372 (CA) 19 ANGLO PERSIAN OIL CO. LTD V. (1931) 16 TAX CASE S 253 (C.A) 20 G. SCAMMEALL AND NEPHEW LTD. V. ROWLES (1940) I ITR (SUPPL) 41 (C.A) 21 BOMBAY STEAM NAVIGATION CO. (1953) PVT LTD. V C IT, 56 ITR 52 (S C) 22 STATE OF MADRAS V. G.J. COELHO, 53 ITR 186 (SC) 23 ADDL CIT V. AKKAMMBA TEXTILES LTD., 117 ITR 294 (A P) 24 CHALLAPALLI SUGARS LTD V. CIT, 98 ITR 167 (S C) 25 SIVAKKAMI MILLS LTD. V. CIT, 120 ITR 211 (MAD) 26 INDIAN CEMENTS LTD V. CIT, 60 ITR 52 (S C) 27 CIT V. SHAW WALLACE AND COMPANY, AIR 1932 PC 13 8 28 VAN DEN BERGHS LTD V. CLARK, (1935) 19 TAX CASE S 390 5. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS INCURRED THE IMPUGNED EXPENDITURE AMOUNTING TO RS.5,52,554/- FOR CREATING/ENLARGING T HE SIZE OF CLASS ROOMS SO AS TO ACCOMMODATE LARGER NUMBER OF STUDENTS. THE ASSESSEE HAS SHOWN THE IMPUGNED EXPENDITURE AS REPAIR AND MAINTENANCE IN ITS ACCO UNTS AND CLAIMED DEDUCTION IN RESPECT THEREOF AS SUCH BEFORE THE AO. THE SHORT AN D SIMPLE ISSUE IS WHETHER THE IMPUGNED EXPENDITURE INCURRED BY THE ASSESSEE AS R EPAIR AND MAINTENANCE IS ELIGIBLE FOR DEDUCTION U/S 31(1) OF THE INCOME-TAX ACT. 7. IN CIT V. SARAVANA SPINNING MILLS PVT. LTD, 293 ITR 201 (SC), THE HONBLE SUPREME COURT HAS HELD AT PP.208-209 OF THE SAID RE PORTS AS UNDER: AN ALLOWANCE IS GRANTED BY CLAUSE (I) OF SECTION 3 1 IN RESPECT OF AMOUNT EXPENDED ON CURRENT REPAIRS TO MACHINERY, PLANT OR FURNITURE USED FOR THE MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 4 4 PURPOSES OF BUSINESS, IRRESPECTIVE OF WHETHER THE A SSESSEE IS THE OWNER OF THE ASSETS OR HAS ONLY USED THEM. THE EXPRESSION C URRENT REPAIRS DENOTES REPAIRS WHICH ARE ATTENDED TO WHEN THE NEED FOR THE M ARISES FROM THE VIEWPOINT OF A BUSINESSMAN. THE WORD REPAIRS INVO LVES RENEWAL. HOWEVER, THE WORDS USED IN SECTION 31(I) ARE CURRENT REPAIR S. THE OBJECT BEHIND SECTION 31(I) IS TO PRESERVE AND MAINTAIN THE ASSET AND NOT TO BRING IN A NEW ASSET. IN OUR VIEW, SECTION 31(I) LIMITS THE SC OPE OF ALLOWABILITY OF EXPENDITURE AS DEDUCTION IN RESPECT OF REPAIRS MADE TO MACHINERY, PLANT OR FURNITURE BY RESTRICTING IT TO THE CONCEPT OF CURR ENT REPAIRS. ALL REPAIRS ARE NOT OF CAPITAL NATURE. SECTION 37(1) ALLOWS CLAIMS FOR EXPENDITURE WHICH ARE NOT OF CAPITAL NATURE. HOWEVER, EVEN SECTION 37(1) EXCLUDES THOSE ITEMS OF EXPENDITURE WHICH EXPRESSLY FALL IN SECTIONS 30 TO 36. THE EFFECT IS TO DELIMIT THE SCOPE OF ALLOWABILITY OF DEDUCTIONS FOR REPAIRS TO THE EXTENT PROVIDED FOR IN SECTIONS 30 TO 36. TO DECIDE THE APPLICABILITY OF SECTION 31(I) THE TEST IS NOT WHETHER THE EXPENDITURE IS RE VENUE OR CAPITAL IN NATURE, WHICH TEST HAS BEEN WRONGLY APPLIED BY T HE HIGH COURT BUT WHETHER THE EXPENDITURE IS CURRENT REPAIRS. THE BASIC TEST TO FIND OUT AS TO WHAT WOULD CONSTITUTE CURRENT REPAIR S IS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO PRESERVE AN D MAINTAIN AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EX PENDITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OB TAIN A NEW ADVANTAGE. 8. IN THE SAME JUDGMENT, THE HONBLE SUPREME COURT HAS HELD AT P. 213 OF THE SAID REPORTS AS UNDER: BEFORE CONCLUDING, ONE ASPECT NEEDS TO BE DISCUSSE D. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEES, IN THE PRESENT CASE, THAT ALTHOUGH THE ASSESSEES HAD CLAIMED DEDUCTION U/S 31(I) THEY SHOULD BE PERM ITTED TO CLAIM DEDUCTION U/S 37(1) AS ON THE FACTS IT HAS BEEN HEL D BY THE LD. CIT(A), TRIBUNAL AND THE HIGH COURT THAT THE EXPENDITURE WA S REVENUE IN NATURE. WE FIND NO MERIT IN THIS CONTENTION. AS STATED ABOVE, EVEN IF THE EXPENDITURE INCURRED IS REVENUE IN NATURE, STILL IT MAY NOT FALL IN THE CONNOTATION OF THE WORDS CURRENT REPAIRS U/S 31(I) WHICH TEST HAS NOT KEPT IN MIND. AS HELD BY CHAGLA C.J. IN THE CASE OF NEW SHORROCK SPINNING AND MANUFACTURING CO. LTD, 30 ITR 338 (BOM), ALL REPAIRS DO NOT ATTRACT SECTION 31(I) EVEN THOUGH THE EXPEND ITURE IS REVENUE IN NATURE. THEREFORE, THE BASIC TEST, WHICH HAD NOT BE EN APPLIED, IN THE PRESENT CASE, BY THE COMMISSIONER OF INCOME-TAX (AP PEALS), THE TRIBUNAL AND THE HIGH COURT IS WHETHER THE EXPENDITURE CAME WITHIN THE EXPRESSION CURRENT REPAIRS. INSTEAD ALL THE THREE AUTHORITIE S PROCEEDED ON THE FOOTING THAT SINCE THE EXPENDITURE WAS REVENUE IT CONSTITUT ED CURRENT REPAIR. IT IS MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 5 5 FOR THIS REASON THAT WE HAVE INTERFERED WITH THE CO NCURRENT FINDINGS GIVEN BY THE LD. CIT(A), THE TRIBUNAL AND THE HIGH COURT. 9. A HELD IN THE AFORESAID JUDGMENT, EXPENDITURE ON REPAIRS AND MAINTENANCE CAN BE ALLOWED ONLY IF IT IS IN THE NATURE OF CURRE NT REPAIRS AND THAT THE DISTINCTION BETWEEN REVENUE EXPENDITURE AND CAPITAL EXPENDITURE IS IRRELEVANT IN THE CONTEXT OF SECTION 31(1). WHAT IS RELEVANT IS WHETHER THE E XPENDITURE IN RESPECT OF WHICH DEDUCTION IS CLAIMED BY WAY OF REPAIRS AND MAINTENA NCE HAS BEEN INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET. TH E IMPUGNED EXPENDITURE HAS BEEN INCURRED TO CREATE/ENLARGE CLASS-ROOMS TO ACCO MMODATE LARGER NUMBER OF STUDENTS AND NOT TO PRESERVE AND MAINTAIN ALREADY E XISTING CLASS ROOMS. IN THIS VIEW OF THE MATTER, THE IMPUGNED EXPENDITURE CANNOT BE SAID TO BE IN THE NATURE OF CURRENT REPAIRS AND HENCE IS NOT ELIGIBLE FOR DE DUCTION U/S 31 EVEN IF IT IS IN THE NATURE OF REVENUE EXPENDITURE. GROUND NO. 1(A) IS D ISMISSED. 10. APROPOS GROUND NO.1(B), THE IMPUGNED DISALLOWAN CE MADE BY THE AO HAS BEEN CONFIRMED AS THE EXPENDITURE CLAIMED IS NOT IN THE NATURE OF CURRENT REPAIRS WITHOUT GOING INTO THE ISSUE AS TO WHETHER IT IS IN THE NATURE OF REVENUE EXPENDITURE OR CAPITAL EXPENDITURE AS SUCH CLASSIFI CATION IS IRRELEVANT FOR EXAMINING THE CLAIM U/S 31(1) IN TERMS OF THE AFORESAID JUDGM ENT. WE CANNOT THEREFORE ISSUE ANY CONSEQUENTIAL DIRECTION TO THE AO TO ALLOW DEPR ECIATION AS THE ALLOWABILITY OF DEPRECIATION DEPENDS UPON THE FULFILLMENT OF SEVERA L CONDITIONS AS LAID DOWN IN SECTION 32. SECONDLY, NO SUCH GROUND OF APPEAL AS T AKEN BEFORE US WAS TAKEN BEFORE THE LD. CIT(A) AND THEREFORE THE AFORESAID G ROUND DOES NOT ARISE OUT OF THE ORDER OF THE LD. CIT(A). THE ASSESSEE HAS NOT FILED ANY APPLICATION SEEKING ADMISSION OF THE AFORESAID GROUND WHICH IS IN THE N ATURE OF ALTOGETHER NEW GROUND OF APPEAL. IN THIS VIEW OF THE MATTER, GROUND NO. 1 (B) IS DISMISSED IN-LIMINE. 10. GROUND NOS. 2 AND 3 READ AS UNDER: 2(A) BECAUSE THE ACTION IN UPHOLDING THE DISALLOWA NCE FOR BUSINESS EXPENSES RS.1,31,670/- DIWALI EXPENSES RS.30,000/- IS BEING CHALLENGED ON FACTS AND LAW WITHOUT RETURNING THE FINDINGS ON THE BUSINESS EXIGENCY AND COMMERCIAL EXPEDIENCY, IMPORTANTLY AS FOR THE PURP OSE OF BUSINESS OR PROFESSION AS APPEARING U/S 37(1) OF THE ACT. AND EVEN THE ALLOWANCE OF THE CLAIM HAS TO BE FROM THE VIEW POINT, PERCEPTION OF ON ASSESSEE NOT THE REVENUE DEPARTMENT. (B) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABO VE THE QUANTUM OF DISALLOWANCE IS DISPUTED. 3(A) BECAUSE THE ACTION IN UPHOLDING AND RESTRICTI NG THE DISALLOWANCE FOR CAR/VEHICLE EXPENSES RS.1,28,284/- TELEPHONE AND ST AFF WELFARE EXPENSES RS.1,17,540/- TO THE EXTENT OF 1/5 TH IS BEING CHALLENGED ON FACTS AND LAW MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 6 6 WHERE BY THE JURISDICTION TRIBUNAL HAS CONSISTENTLY BEEN RESTRICTING THE SAID DISALLOWANCE TO THE EXTENT OF 1/10 TH . (B) EVEN OTHERWISE THE REVENUE RESPONDENTS PLEADI NG IS THAT EACH YEAR IS SEPARATE YEAR THEREFORE, MECHANICAL RELIANCE ON PREVIOUS YEAR ASSESSMENT SUFFERS FROM SUFFERS FROM FACTUALLY AND LEGAL INFIRMITY WHICH IS EVEN CONTRARY TO THE DECISION OF HON'BLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CHHAT MULL AGGARWAL V. C.I.T, 116 TR 694 (P & H). 11. THE AFORESAID DISALLOWANCE HAS BEEN CONFIRMED B Y THE LD. CIT(A) WITH THE FOLLOWING OBSERVATIONS: 18 I HAVE CONSIDERED THE RIVAL CONTENTIONS. THOUGH PAST HISTORY/CONDUCT CANNOT BECOME THE BASIS FOR AN ADDITION IN THE CURR ENT YEAR, YET IT CANNOT BE TOTALLY IGNORED. COMPLETE BILLS AND VOUCHERS HAV E NOT BEEN PRODUCED EVEN AT THE APPELLATE STAGE. IT WAS IMPORTANT FOR T HE APPELLANT TO PROVIDE NECESSARY EVIDENCE TO SUBSTANTIATE THE CLAIM OF THE SE EXPENSES. IN THE CASE OF ACIT V. NIKO RESOURCES LTD. (2009) 123 TTJ (AHD) 310, THE HON'BLE TRIBUNAL HELD THAT WHEN THE ASSESSEE HAS CLAIMED D EDUCTION THE ONUS HEAVILY LIES ON HIM AS HELD IN THE DECISIONS REFERR ED TO BY HIM/IT TO SUBSTANTIATE ITS CLAIM BY PRODUCING NECESSARY EVIDE NCE IN RESPECT OF SUCH EXPENDITURE. THE VOUCHERS RELATING TO THESE EXPENSE S WERE FOUND TO BE KEPT IN A VERY DISORDERLY MANNER AND IT WAS FOUND E XTREMELY DIFFICULT TO HOLD THAT A PARTICULAR EXPENDITURE AND THE PURPOSE FOR WHICH SUCH EXPENDITURE WAS INCURRED WAS FOR BUSINESS PURPOSES. IN SUCH CIRCUMSTANCES, THE DEDUCTION IN FULL CANNOT BE ALLO WED AND THE AUTHORITIES BELOW ARE JUSTIFIED IN MAKING PARTIAL DISALLOWANCE OUT OF SUCH EXPENSES. 19 IN THE CASE OF GOODYEAR INDIA LTD V. ITO (ITAT D EL) 66 TTJ 164, IT WAS HELD THAT IN THE ABSENCE OF FULL DETAILS OR EVI DENCE EVEN FOR A PART OF THE YEAR, ASSESSEES CLAIM FOR DEDUCTION OF CANTEEN EXPENSES, SALES AND MISC. EXPENSES, SPORTS EXPENSES AND INCIDENTAL EXPE NSES CANNOT BE ACCEPTED AT THE FACE VALUE SIMPLY BECAUSE THERE ARE NO ADVERSE COMMENTS FROM THE AUDITORS OR NO DISALLOWANCE WAS MADE IN TH E PAST. 20 IN THE INSTANT CASE, IN THE ABSENCE OF PROPER BI LLS AND VOUCHERS, COUPLED WITH THE ASSESSEE HAVING AGREED TO THESE EX PENSES IN EARLIER YEARS ON ACCOUNT OF THEE BEING UNVOUCHED AS WELL AS BECAU SE OF PERSONAL ELEMENT, I BELIEVE THAT THE AO DID NOT BEST HE COUL D I.E. REASONABLE DISALLOWANCE FROM ALL THESE EXPENSES. AGREEING WITH THE AOS FINDING, THE PLEA ON THESE GROUNDS IS REJECTED, DISMISSING ASSES SEES GROUNDS OF APPEAL. 12. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) , THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF THE AFOR ESAID GROUNDS, THE LD. COUNSEL MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 7 7 FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS WHICH WERE EARLIER MADE BEFORE THE LD. CIT(A). ACCORDING TO HIM ALL THE EXPENSES ARE V OUCHED AND THEREFORE THE LD. CIT(A) SHOULD NOT HAVE CONFIRMED THE DISALLOWANCE. 13. IN REPLY THE DR SUPPORTED THE ORDER PASSED BY T HE LD. CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR SUBMISSIONS. THE LD. CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWA NCE FOR WANT OF COMPLETE BILLS AND VOUCHERS. IT IS STATED IN PARA 18 OF THE APPELLATE ORDER PASSED BY THE LD. CIT(A) THAT COMPLETE BILLS AND VOUCHERS HAVE NOT B EEN PRODUCED EVEN AT THE APPELLATE STAGE. DURING THE COURSE OF HEARING BEFO RE US, WE CALLED UPON THE ASSESSEE TO SHOW US THE RELEVANT VOUCHERS IN SUPPOR T OF THE IMPUGNED EXPENSES. THOUGH THE ASSESSEE HAS FILED VOLUMINOUS PAPER-BOOK CONTAINING 234 PAGES, THE ASSESSEE COULD NOT INVITE OUR ATTENTION TO ANY OF T HE VOUCHERS TO SUPPORT THE IMPUGNED EXPENSES. BOTH THE DEPARTMENTAL AUTHORITIE S, NAMELY, THE AO AND THE LD. CIT(A), HAVE CONCURRENTLY RECORDED THEIR FINDIN GS THAT THE IMPUGNED EXPENSES ARE NOT SUPPORTED BY PROPER BILLS AND VOUCHERS. NO MATERIAL HAS BEEN PLACED BEFORE US TO REBUT THEIR FINDINGS IN THIS BEHALF. H OWEVER, THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS EXCESSIVE AND ON HIGHER SIDE AS COMPARED TO THE TOTAL AMOUNT OF EXPENDITURE CLAIMED BY THE ASSESSEE AS DEDUCTION AND THE POSSIBILITY OF SOME OF THEM REMAI NING UN-VOUCHED. IN THIS VIEW OF THE MATTER, THE DISALLOWANCE IS RESTRICTED TO 1/ 10 TH OF THE IMPUGNED EXPENDITURE. GROUND NOS. 2 AND 3 ARE PARTLY ALLOWED . 15. GROUND NO. 4 TAKEN BY THE ASSESSEE READS AS UND ER: 4(A) BECAUSE THE ACTION IN UPHOLDING THE DISALLOWA NCE FOR ADVERTISEMENT EXPENSES AMOUNTING TO RS.3,50,000/- IS BEING CHALLE NGED ON FACTS AND LAW AND ALTERNATIVELY THE QUANTUM THEREOF TOO IS DISPUT ED. (B) EVEN OTHERWISE THE REVENUE RESPONDENTS PLEADI NG IS THAT EACH YEAR IS SEPARATE YEAR THEREFORE, MECHANICAL RELIANCE ON PREVIOUS YEAR ASSESSMENT SUFFERS FROM FACTUALLY AND LEGAL INFIRMI TY WHICH IS EVEN CONTRARY TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CHHAT MULL AGGARWAL V. CIT, 116 ITR 694 (P & H). 16. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AO HAS DISALLOWED RS.3,50,000/- OUT OF EXPENDITURE ON ADVERTISEMENT O N THE GROUND THAT THE ASSESSEE HAS NOT REDUCED THE EXPENDITURE ON ADVERTI SEMENT BY THE AMOUNT OF DISCOUNT WHICH IS USUALLY GIVEN BY THE ADVERTISING AGENCIES TO THEIR REGULAR CUSTOMERS. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE AFORESAID FINDING RECORDED BY THE AO. 17. IN SUPPORT OF THE AFORESAID GROUND OF APPEAL, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED EXPENSES ON AD VERTISEMENT ARE DULY SUPPORTED BY BILLS AND VOUCHERS. ACCORDING TO HIM, HE HAS FILED THE COPIES OF BILLS MOHAN LAL SYAL, CHD. V. ADDL. CIT ITA NO.1182/CHANDI/2010 8 8 TOGETHER WITH ADVERTISEMENTS IN THE PRINT MEDIA IN SUPPORT OF HIS CLAIM. HE SUBMITTED THAT THE ASSESSEE DID NOT RECEIVE ANY DIS COUNT FROM THE ADVERTISING AGENCIES AND THEREFORE THE SAME WAS NOT SHOWN BY TH E ASSESSEE. 18. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 19. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR SUBMISSIONS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ES TABLISH THAT THE ADVERTISING AGENCIES HAD ACTUALLY GIVEN DISCOUNT TO THE ASSESSE E WHICH THE ASSESSEE HAS NOT TAKEN INTO ACCOUNT WHILE CLAIMING THE IMPUGNED EXPE NDITURE OR THAT IT IS CUSTOMARY FOR THE ADVERTISING AGENCIES TO GIVE SUCH DISCOUNTS TO ALL THE ADVERTISERS. THE AO HAS BROUGHT NO MATERIAL ON RECO RD TO SUPPORT HIS FINDING IN THIS BEHALF. IN THIS VIEW OF THE MATTER, THE IMPUGN ED DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS DELETED. GROUND NO.4 IS ALLOWED. 20. GROUND NO.5 TAKEN BY THE ASSESSEE READS AS UNDE R: 5 BECAUSE THE ACTION IN UPHOLDING THE DISALLOWANCE FOR RENT PAID AMOUNTING TO RS.8,63,520/- BY INVOKING SECTION 40(A )(IA) IS BEING CHALLENGED ON FACTS AND LAW. 21. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT THE ASSESSEE WAS STATUTORILY OBLIGED TO DEDUCT TAX AT S OURCE OUT OF RENT PAID BY HIM BUT IT WAS NOT DEDUCTED AT SOURCE BY THE ASSESSEE A ND THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) WERE APPLICABLE. IT WAS FURTHER S UBMITTED THAT TAX OUT OF RENT WAS DEDUCTED AT SOURCE IN SUBSEQUENT YEARS THOUGH I T WAS NOT SO DEDUCTED AT SOURCE IN THE YEAR UNDER APPEAL. THUS THE ADMITTED POSITION IS THAT THE TAX REQUIRED TO BE DEDUCTED AT SOURCE OUT OF RENT WAS N OT DO DEDUCTED AT SOURCE IN THE YEAR UNDER APPEAL. THE DEDUCTIBILITY OF THE IMP UGNED EXPENSES IS HIT BY SECTION 40(A)(IA) AND THEREFORE THE AO HAS RIGHTLY DISALLOWED THE IMPUGNED EXPENSES, WHICH, ON APPEAL, HAS BEEN CORRECTLY CONF IRMED BY THE CIT(A). GROUND NO. 5 IS DISMISSED. 22. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 25 APRIL 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMB ER CHANDIGARH: THE 25 APRIL 2011 SURESH COPY TO: 1. THE APPELLANT, MOHAN LAL SYAL, CHANDIGARH 2. THE RESPONDENT, ADDL C.I.T. RANGE IV, CHANDIGARH 3. THE CIT(A), CHANDIGARH 4. THE LD. CIT, CHANDIGARH 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH