Asstt. Commissioner of Income Tax-4, Kanpur V. M/s Standard Surfactants Ltd., Kanpur

ITA 121/LKW/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83367 (ITAT-LUCKNOW)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-09-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 27-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: A K GUPTA
• Keywords: Unexplained investment; Depreciation; Proportionate interest; Bad and doubtful debts

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.121 & 122/LKW/2014 ASSESSMENT YEARS:2003 - 04 & 2004 - 05 A.C.I.T. - 4, KANPUR. VS. M/S STANDARD SURFACTANTS LTD., 8/15, ARYA NAGAR, KANPUR. PAN:AABCS9608N (APPELLANT) (RESPONDENT) C.O. NOS.8 & 9/LKW/2014 (IN ITA NOS.121 & 122/LKW/2014 ASSESSMENT YEARS:2003 - 04 & 2004 - 05 M/S STANDARD SURFACTANTS LTD., 8/15, ARYA NAGAR, KANPUR. PAN:AABCS9608N VS. A.C.I.T. - 4, KANPUR. (OBJECTOR) (RESPONDENT) REVENUE BY SHRI ALOK MITRA, D. R. ASSESSEE BY SHRI A. K. GUPTA, FCA DATE OF HEARING 0 3 /0 9 /2014 DATE OF PRONOUNCEMENT 2 1 / 1 0/2014 O R D E R PER A. K. GARODIA, A.M. THESE APPEALS ARE FILED BY THE REVENUE AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST THE SEPARATE ORDERS OF CIT(A) - I, KANPUR BOTH DATED 29/11/2013. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2003 - 04 I.E. I.T.A. NO .121/LKW/2014. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF PROPORTIONATE INTEREST OF RS.10,21,908/ - WHICH WAS PAID ON LOANS/ADVANCES TAKEN AND NOT CHARGED 2 ON LOANS/ADVANCES GIVEN BY THE ASSESSEE RELYING UPON THE DECISION OF JURISDI C TIONAL HIGH COURT FOR THE A.Y. 2002 - 03 IN ASSESSEE'S CASE WITHOUT APPRECIATING THE FACT THAT THE CIRCUMSTANCES TO GIVE INTEREST FREE LOAN ARE NOT WHOLLY IDENTICAL. 2. THE CIT(A) HAS ERRED IN LAW A ND ON FACTS IN DELETING THE DISALLOWANCE OF RS.8,87 ,530/ - IN RESPECT OF BAD DEBTS WRITTEN OFF BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ORDER OF THE CIT (A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACAT ED AND THE ORDER OF THE AO BE RESTORED. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). WITH REGARD TO GROUND NO. 1, IT WAS ALSO SUBMITTED BY LEARNED D.R. OF THE REVENUE THAT LEARNED CIT(A) HAS DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002 - 03 BUT THE FACTS IN THE PRESENT YEAR ARE DIFFERENT AND THEREFORE, THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE. LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THERE IS NO DIFFERENCE IN FACTS AS IN ASSESSMENT YEAR 2002 - 03. HE ALSO SUBMITTED THAT OTHERWISE ALSO, NO SUCH DISALLOWANCE IS JUSTIFIED BECAUSE THE ASSESSEE WAS HAVING OWN SUFFICIENT INTEREST FREE FUNDS OF RS.1, 145.03 LAC S AS AGAINST AVERAGE OUTSTANDING BALANCE OF THESE TWO PARTIES I.E. M/S STANDARD SULPHONATORS PVT. LTD. AND M/S UNIFLEX INDUSTRIES LTD. OF RS.85,15,898/ - . 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND FORCE IN THE SUBMISSIONS OF LEARNED A .R. OF THE ASSESSEE THAT THE ASSESSEE COMPANY IS HAVING SUFFICIENT OWN FUNDS IN THE FORM OF SHARE CAPITAL OF RS.1,145.03 LAC S AND AS PER THE ASSESSING OFFICER, AVERAGE OUTSTANDING IN THE NAME OF THESE PARTIES IS ONLY RS.85,15,898/ - . THIS IS BY NOW A SETTL ED POSITION OF LAW AS PER 3 THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS RADICO KHAITAN LTD. [2005] 274 ITR 354 (ALL) AND ALSO AS PER THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LIMITED 313 ITR 340 (BOM.) THAT IF INTEREST FREE ADVANCE ARE GIVEN OUT OF COMPOSITE FUNDS AND IF THE OWN INTEREST FREE FUNDS ARE MORE THAN SUCH INTEREST FREE ADVANCES, THEN PRESUMPTION HAS TO BE DRAWN THAT SUCH INTEREST F REE ADVANCES WERE GIVEN OUT OF INTEREST FREE FUNDS AND HENCE, NO DISALLOWANCE OUT OF INTEREST EXPENDITURE IS JUSTIFIED. IN THE PRESENT CASE, OWN INTEREST FREE FUND WAS MANY TIMES MORE THAN THE INTEREST FREE ADVANCE AND THEREFORE, THESE JUDGMENTS ARE SQUAR ELY APPLICABLE AND RESPECTFULLY FOLLOWING THE SE JUDGMENTS, WE HOLD THAT NO DISALLOWANCE IS JUSTIFIED OUT OF INTEREST EXPENDITURE AS HAS BEEN DONE BY THE ASSESSING OFFICER. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND N O. 1 IS REJECTED. 5. REGARDING GROUND NO. 2 OF THE REVENUES APPEAL, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002 - 03 IN I.T.A. NO.186/LKW/2011 DATED 04/07/2011 AND THE COPY OF THE TRIBUNAL DECISION IS AVAILABLE ON PAGE 28 TO 37 OF THE PAPER BOOK. IN PARTICULAR , OUR ATTENTION WAS DRAWN TO PARA NO. 8 OF THIS TRIBUNAL ORDER. HE ALSO SUBMITTED COPY OF LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE COMPANY AND POINTED OUT THAT ALL THE DEBITS IN THIS ACCOUNT ARE ON ACCOUNT OF SALES AND OUT OF THAT, AN AMOUNT OF RS.5 LAC WAS WRITTEN O FF AND THEREFORE, THIS AMOUNT IS ALLOWABLE AS BAD DEBTS WRITTEN OFF. REGARDING THE OTHER AMOUNTS WRITTEN OFF, HE SUBMITTED THAT IF ALL THESE AMOUNTS ARE NOT ALLOWABLE AS BAD DEBT WRITTEN OFF, THE SAME ARE ALLOWABLE AS BUSINESS LOSS BECAUSE THESE ADVANCES WERE GIVEN IN THE COURSE OF BUSINESS AND WERE WRITTEN OFF BEING NOT RECOVERABLE. 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT OUT OF THIS AMOUNT OF RS.8,87,530/ - , THERE IS AN AMOUNT OF RS.5 LAC WRITTEN OFF IN RELATION TO DEBIT BALANCE IN THE NAME OF M/S INDIA GLYCOL LTD. AND THE REMAINING AMOUNTS ARE SMALL AMOUNTS IN DIFFERENT 21 NAMES AS HAS BEEN NOTED BY THE ASSESSING OFFICER IN PARA 5 OF THE ASSESSMENT ORDER. REGARDING THIS AMOUNT OF RS.5 LAC IN THE NAME OF M/S INDIA GLYCOL LTD., WE FIND THAT THE SAME WAS IN RESPECT OF SALES TO THAT PARTY AND IT WAS ACTUALLY WRITTEN OFF BY THE ASSESSEE IN THE PRESENT YEAR AND THEREFORE, THE SAME IS DEFINITELY ALLOWABLE AS BAD DEBT WRITTEN OFF. REGARDING THE BALANCE SMALL AMOUNTS IN RESPECT OF VARIOUS OTH ER PARTIES, WE FIND THAT ALL THESE AMOUNTS ARE IN THE NATURE OF PETTY ADVANCES IN COURSE OF BUSINESS SUCH AS ADVANCE TO SHRI PRAMOD KUMAR SINGH FOR TRAVELLING RS.5,480/ - AND SHRI PANKAJ MISRA ALSO FOR TRAVELLING RS.1,500/ - . SIMILARLY, A SUM OF RS.1,248/ - WAS ADVANCED TO SHRI RAJIV MOHAN SAXENA FOR TOUR AND SALARY AND SIMILARLY IN THE NAME OF VARIOUS OTHER EMPLOYEES SUCH AS SHRI RAJU, SHRI RAKESH TIWARI, SRI RAM GARG, SHRI SHAILENDRA MAHESHWARI, SHRI SHAKEEL AHMED, SHRI VINOD SING, SHRI YOGESH ETC. , VARIOUS AMOUNTS WERE PAID CONSISTING OF RS.350/ - , RS.70/ - , RS.2,580/ - , RS.1,634/ - , RS.1,171/ - AND RS.5,500/ - AND THESE ARE STATED TO BE ADVANCE FOR TOUR AND SALARY AND WERE WRITTEN OFF. A SUM OF RS.31,762/ - WAS GIVEN AS ADVANCE TO SHRI SUSHIL KUMAR PAND EY FOR THE TOUR AND RELEASE OF GOODS ETC., WHICH WAS WRITTEN OFF. AN AMOUNT OF RS.34,125/ - WAS GIVEN TO SHRI BIRJU DRIVER AND WAS WRITTEN OFF. FROM THE DETAILS NOTED BY THE ASSESSING OFFICER, IT IS SEEN THAT ALL THESE SMALL ADVANCES WERE GIVEN TO EMPLOYE ES FOR CARRYING OUT SOME WORK AND THE SAME WERE WRITTEN OFF IN REGULAR COURSE IN THE ABSENCE OF PROPER DETAILS ABOUT ACTUAL EXPENSES AND HENCE, THESE ADVANCE HAVE TO BE ALLOWED AS BUSINESS LOSS. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT(A) O N THIS ISSUE. ACCORDINGLY, GROUND NO. 2 IS ALSO REJECTED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 5 8. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2004 - 05 I.E. I.T.A. NO.122/LKW/2014. IN THIS APPEAL, THE REVENU E HAS RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.17,43,788/ - MADE IN RESPECT OF EXCESS STOCK FOUND BY THE EXCISE DEPARTMENT RELYING UPON THE ORDER OF CIT(A), CENTRAL EXCISE WITHOUT APPRECIATING THE FACT THAT HIS ORDER WAS PRIMARILY RELATED TO CONFISCATION OF EXCESS STOCK WHEREAS THE ADDITION MADE BY THE AO WAS IN RESPECT OF UNDISCLOSED INVESTMENT IN SUCH EXCESS STOCK. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.2,79,006/ - ON ACCOUNT OF EXCISE DUTY ON EXCESS STOCK, AS MENTIONED IN 1 ABOVE, WITHOUT APPRECIATING THE FACT THAT SUCH DUTY WAS INCLUDIBLE M EXCESS STOCK US PER PROVISIONS OF SECTION 145A OF THE ACT. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE DISALLOWANCE OF PROPORTIONATE INTEREST OF RS.1,85,498/ - WHICH WAS PAID ON LOANS/ADVANCES TAKEN AND NOT CHARGED ON LOANS/ADVANCES GIVEN BY THE ASSESSEE RELYING UPON THE DECISION OF JURISDICTIONAL HIGH COURT FOR THE A.Y. 2002 - 03 IN ASSESSEE'S CASE WITHOUT APPRECIATING THE FACT THAT THE CIRCUMSTANCES TO GIVE INTEREST FREE LOAN ARE NOT WHOLLY IDENTICAL IN BOTH THE YEARS. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.7,47,749/ - IN RESPECT OF BAD DEBTS WRITTEN OFF BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE ORDER OF THE CIT (A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 9. REGARDING GROUND NO.1, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 6 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF SURPRISE VISIT TO THE FA CTORY PREMISES OF THE ASSESSEE COMPANY BY THE OFFICERS OF THE CENTRAL EXCISE ON 17/12/2003 DURING WHICH , THEY CONDUCTED PHYSICAL VERIFICATION OF FINISHED GOODS AND PREPARED STOCK VERIFICATION REPORT AND FOUND 5,367 CARTONS OF DETERGENT CAKES OF DIFFERENT B RANDS AND ALSO FOUND THAT STOCK WAS FOUND SHORT ALSO TO THE EXTENT OF VALUE OF RS.20,38,200/ - AS COMPARED WITH DAILY STOCK REGISTER. THEREAFTER, THE EXCISE DEPARTMENT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ON 14/06/2004 IN THIS REGARD AND ULTIMATELY AN ORDER WAS PASSED BY ASSISTANT COMMISSIONER, CENTRAL EXCISE ON 23/02/2006 FOR CONFISCATION OF THESE 5,367 CARTONS OF DETERGENT CAKES BEARING THE NAME OF OTHER MANUFACTURERS AND 69 CARTONS MANUFACTURED BY THE ASSESSEE COMPANY. BASED ON THIS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS MADE INVESTMENT TO THIS EXTENT IN THE STOCK AND MADE ADDITION U/S 69 OF THE ACT. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A) WHO HAS DELETED THE ADDITION ON THE BASIS THAT THE ASSESSEE HAS DU LY ACCOUNTED STOCK IN BOOKS OF ACCOUNT AND PAID EXCISE DUTY ON THE SAME AND THE EXCISE AUTHORITIES HAVE FOUND NO DEFECT EXCEPT PENALTY OF RS.5,000/ - . LEARNED CIT(A) HAS REPRODUCED THE RELEVANT PORTION OF THE ORDER OF CIT(A), CENTRAL EXCISE WHEREIN HE HAS GIVEN A FINDING THAT THERE IS NOTHING ON RECORD TO SHOW THAT THERE WAS SOME PREPARATION FOR REMOVAL OF EXCESS FINISHED GOODS ON THE PART OF THE ASSESSEE. THE CIT(A) OF THE EXCISE DEPARTMENT HAS IMPOSED A PENALTY OF RS.5,000/ - ONLY AS PER HI S ORDER. CONSI DERING ALL THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) BECAUSE WHEN THE GOODS ARE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY, THERE IS NO QUESTION OF UNACCOUNTED INVESTMENT IN SUCH STOCK. ACCORDINGLY, GROUND NO. 1 IS REJECTED. 11. REGARDING GROUND NO. 2, BOTH THE PARTIES AGREED THAT THIS GROUND IS CONSEQUENTIAL TO GROUND NO. 1 BECAUSE THIS IS THE AMOUNT O F EXCISE DUTY ON 7 SUCH STOCK OF RS. 17,43,788/ - , WHICH WAS CONFISCATED BY CENTRAL EXCISE. SINCE GRO UND NO. 1 HAS BEEN REJECTED, GROUND NO. 2 OF THE REVENUE DOES NOT SURVIVE BECAUSE WHEN THERE IS NO EXCESS STOCK, THERE CANNOT BE ANY EXCISE DUTY TO BE INCLUDED IN SUCH EXCESS STOCK. ACCORDINGLY, GROUND NO. 2 IS ALSO REJECTED. 12. REGARDING GROUND NO. 3, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS SIMILAR TO THE ISSUE INVOLVED IN GROUND NO. 1 OF THE REVENUE S APPEAL FOR ASSESSMEN T YEAR 2003 - 2004 AND HENCE, THIS ISSUE CAN BE DECIDED ON SIMILAR LINE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THIS YEAR ALSO, THE INTEREST FREE FUND S OF SHARE HOLDER S WAS TO THE TUNE OF RS.1,151.46 LAC WHEREAS THE OUTSTANDING BALANCE OF INTEREST FREE ADVANCE WAS RS.15,85,146/ - AS PER THE ASSESSING OFFICER. SINCE THE FACTS ARE IDENTICAL IN THIS YEAR ALSO, WE DECIDE THIS ISSUE ON SIMILAR LINE AS PER OUR DECISION IN ASSE SSMENT YEAR 2003 - 04 IN RESPECT OF GROUND NO. 1 OF REVENUES APPEAL IN THAT YEAR. GROUND NO. 3 IS ALSO REJECTED. 14. REGARDING GROUND NO. 4, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDE R OF LEARNED CIT(A). HE ALSO SUBMITTED THAT THIS AMOUNT OF RS. 7,47,749/ - INCLUDES THE AMOUNT OF RS.1,76,658/ - , RS.1,25,776/ - AND RS.44,485/ - OUTSTANDING IN THE NAME OF M/S COLTAGE PALMOLIVE LTD., M/S KHANDELWAL MINERAL INDUSTRIES AND M/S GOEAL ENTERPRISES , CUSTOMERS OF THE ASSESSEE. HE SUBMITTED THAT AT LEAST THESE AMOUNTS ARE ALLOWABLE AS BAD DEBTS WRITTEN OFF AS PER THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF T. R. F. LTD. VS COMMISSIONER OF INCOME - TAX [2010] 323 ITR 397 (SC) . REGARDING THE REMAINING AMOUNTS, IT WAS SUBMITTED THAT THESE ARE SMALL BUSINESS 8 ADVANCES TO 12 PERSONS AS NOTED BY THE ASSESSING OFFICER ON PAGE NO. 5 OF THE ASSESSMENT ORDER AND HENCE, THE SAME IS ALLOWABLE AS BUSINESS LOSS IF NOT AS BAD DEB T. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARDING THESE THREE AMOUNTS IN THE NAME OF CUSTOMERS I.E. M/S COLGATE PALMOLIVE LTD. RS.1,76,658/ - , M/S KHANDELWAL MINERAL INDUSTRIES RS.1,25,476/ - AND M/S GOEL ENTERPRISES RS.44,485/ - , DEDUCTION IS ALLOWABLE AS BAD DEB T U/S 36(1)(VII) OF THE ACT. REGARDING THE BALANCE AMOUNT OF ADVANCE S , WE HOLD THAT THE SAME IS NOT ALLOWABLE AS BAD DEBT. SINCE THIS ASPECT WAS NOT EXAMINED BY AUTHORITIES BELOW, WE RESTORE THE MATTER TO ASSESSING OFFICER REGARDING THIS ISSUE. IF THE ASSESSEE IS ABLE TO ESTABLISH THAT THE SAME IS ALLOWABLE AS BUSINESS LOSS IN THE PRESENT YEAR, NO DISALLOWANCE SHOULD BE MADE. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN FAVOUR OF THE REVENUE. 16. IN THE RESULT, THE APPEAL OF THE REVENUE S TANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 17. NOW WE TAKE UP CROSS OBJECTION OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 I.E. C.O. NO.08/LKW/2014. IN THIS CROSS OBJECTION , THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) HAS ER RED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS.1,86,788/ - OUT OF CONVEYANCE EXPENSES, RS.1,36,787/ - OUT OF DEPRECIATION ON CAR, RS.1,00,000/ - OUT OF TELEPHONE EXPENSES AND RS.50,000/ - OUT OF VARIOUS EXPENSES. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS.74,342/ - OUT OF BUSINESS DEVELOPMENT EXPENSES. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS.73,961/ - AND RS.31,076/ - OUT OF SHIFTING EXPENSES. 9 18. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT NO SUCH DISALLOWANCE IS JUSTIFIED AS PER THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS COMMISSIONER OF INCOME - TAX [2002] 253 ITR 749 (GUJ) . 19. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE IS A LIMITED COMPANY AND THE ASSESSING OFFICER HAS MADE DISALLOWANCE OUT OF CONVEYANCE, TELEPHONE ETC. ON THE BASIS THAT T HERE MAY BE PERSONAL USE BY THE DIRECTORS. AS PER THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS COMMISSIONER OF INCOME - TAX (SUPRA), NO SUCH DISALLOWANCE IS JUSTIFIED IN CASE OF A LIMITED COMPANY ALTHOUGH S UITABLE AMOUNT MAY BE ADDED IN THE HANDS OF THE DIRECTORS AS PERQUISITES. RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS COMMISSIONER OF INCOME - TAX (SUPRA), WE DELETE THESE D ISALLOWANCES. 21. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLOWED. 22. NOW WE TAKE UP CROSS OBJECTION OF THE ASSESSEE FOR ASSESSMENT YEAR 2004 - 05 I.E. C.O. NO.09/LKW/2014. IN THIS CROSS OBJECTION THE ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS: 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS.2,94,707/ - OUT OF DIWALI AND MISC. EXPENSES, RS.60,000/ - OUT OF SALES PROMOTION EXPENSES, RS.63,207/ - OUT OF BUSINESS DEVELOPMENT EXPENSES AND RS.1,79,250/ - OU T OF ENTERTAINMENT EXPENSES. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS.1,26,434/ - OUT OF TELEPHONE EXPENSES, RS.1,91,274/ - OUT OF TRAVELLING EXPENSES AND RS.4,53,935/ - OUT OF CAR RUNNING EXPENSES. 10 3. THE LEA RNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS.1,50,000/ - AND RS.3,01,680/ - OUT OF REPAIRS AND MAINTENANCE EXPENSES. 23. REGARDING THE CROSS OBJECTION OF THE ASSESSEE FOR THIS YEAR ALSO, LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT IN THIS YEAR ALSO, NO DISALLOWANCE IS JUSTIFIED AS PER THE SAME JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON AND ENG G. CO. VS COMMISSIONER OF INCOME - TAX (SUPRA). 24. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THIS YEAR ALSO, THE ASSESSING OFFICER HAS MADE PART DISALLOWANCE OUT OF VAR IOUS EXPENSES SUCH AS TELEPHONE EXPENSES, TRAVELLING EXPENSES, REPAIR & MAINTENANCE EXPENSES ETC. ON THE BASIS THAT THERE MAY BE SOME PERSONAL USE. AS PER OUR DECISION IN CROSS OBJECTION FOR ASSESSMENT YEAR 2003 - 04, IN THIS YEAR ALSO, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 26. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLOWED. 27. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2003 - 04 IS DISMISSED AND APPEAL FOR ASSESSMENT YEAR 2004 - 05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 1 0/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR