ACIT, Pune V. Tata Ficosa Automotive Systems Ltd., Pune

ITA 1279/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7453 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J D ONKAR
• Assessee Lawyers: ABHAY DAMLE
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI SHAILENDRA KUMAR, JM AND SHRI G.S. PANN U, AM ITA NO. 1279/PN/2009 ASSTT. YEAR 2006-07 ASSTT. CIT CIR. 7, PUNE APPELLANT V. TATA FICOSA AUTOMOTIVE SYSTEMS LTD., S.NO. 235,245 HINJEWADI, MULSHI PUNE-411 057. PAN AAACT 5755 A . RESPONDENT APPELLANT BY : SHRI ABHAY DAMLE DEPARTMENT BY : SHRI J.D. ONKAR ORDER PER SHAILENDRA KUMAR YADAV, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-III PUNE DATED 11-8-2009 FOR THE A.Y. 2006-0 7. 2. THE FIRST ISSUE IS WITH REGARDS TO REDUCTION OF DISALLOWANCE TO 5% IN RESPECT OF TRAVELING, MISCELLANEOUS AND CE LL PHONE EXPENSES. THE ASSESSING OFFICER HAS MADE THE DISALL OWANCES OF RS. 7,69,946/-, RS. 30,000/- AND RS. 90,000/- OUT O F TRAVELING EXPENSES, MISCELLANEOUS EXPENSES AND CELLULAR PHON E EXPENSES AFTER OBSERVING THAT THEY ARE NOT RELATED TO BUSINE SS AND CERTAIN PERSONAL ELEMENT IS ALSO INVOLVED IN THE SAID EXPEN SES. ON APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANCE TO 5 % OF THE EXPENSES WHICH HAS BEEN CHALLENGED BEFORE US BY THE REVENUE. 3. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THIS BENCH OF THE TRIBUNAL HAD AN OCCASION TO DEAL WITH SIMILAR ISSUE IN THE APPEAL FILED BY T HIS VERY ASSESSEE ITA NO 1279/PN/2009 TATA FICOSA AUTOMOTIVE A.Y. 2006-07 2 IN ITA NO. 1422/PN/2009 DATED 12-7-2010 FOR SAME AS SESSMENT YEAR I.E. 2006-07 WHEREIN THE TRIBUNAL HAS CONFIRME D THE DECISION OF THE CIT(A) IN RESTRICTING THE CLAIM TO 5% OF THE EXPENSES. FOR THE SAKE OF COMPLETENESS THE OBSERV ATIONS AND FINDINGS OF THE TRIBUNAL ARE REPRODUCED AS UNDER: RELEVANT FACTS AND THE DECISION OF THE REVENUE ARE NARRATED IN PARA 4 OF THE IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE SAME ARE PRODUCED AS UNDER. 4. THE SECOND, THIRD AND FOURTH GROUNDS OF APPEAL ARE AGAINST DISALLOWANCES OF RS.7,69,946, RS.30,000 AN D RS.90,000 OUT OF TRAVELING EXPENSES, MISCELLANEOUS EXPENSES AND CELLULAR PHONE EXPENSES. 4.1. THE AFORESAID DISALLOWANCES HAVE BEEN MADE BY THE ASSESSING OFFICER AFTER OBSERVING THAT EXPENDITURE NOT RELATED TO BUSINESS INCLUDING SOME SITE SEEING EXPE NSES WERE ALSO INCLUDED IN THE TRAVELING EXPENSES AND CE RTAIN PERSONAL EXPENSES ARE INCLUDED IN MISCELLANEOUS EXP ENSES AS WELL AS CELLULAR PHONE EXPENSES. 4.2 AGITATING AGAINST THE ACTION OF THE ASSESSING O FFICER, THE APPELLANT SUBMITTED THAT THE EXPENSES ARE INCUR RED ON TRAVELING BY THE EMPLOYEES OF THE APPELLANT COMPANY PURELY OUT OF BUSINESS EXPEDIENCY AND WHOLLY AND EXCLUSIVE LY FOR THE PURPOSES OF ITS BUSINESS. SIMILARLY, THE EXPEN SES INCURRED ON COMMUNICATION ARE WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSES OF ITS BUSINESS TO FACILITATE THE EMPL OYEES TO WORK IN DIFFERENT TIME ZONES AND FACILITATE ITS JOI NT VENTURE COMPANY, VENDORS AND CUSTOMERS TO STAY IN TOUCH CONSTANTLY AND AS AN EFFECTIVE EXPENSE CONTROL MEAS URES. THE APPELLANT SUBMITTED THAT SAME ISSUES CAME UP FO R CONSIDERATION IN THE CASE OF THE APPELLANT COMPANY FOR A.Y. 2003-04 BEFORE THE CIT(A) WHEREIN FULL RELIEF WAS A LLOWED TO THE APPELLANT COMPANY. 4.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUB MISSION AND I AM NOT INCLINED TO ACCEPT IT. IT IS SEEN FRO M THE ASSESSMENT ORDER THAT CERTAIN VOUCHERS RELATING TO EXPENSES DEBITED UNDER THESE HEADS WERE NOT PRODUCED BY THE ASSESSEE COMPANY AND THEREFORE, THE EXPENSES COULD NOT BE PROPERLY VERIFIED BY THE ASSESSING OFFICER. THE AP PELLANT COMPANY HAS ALSO NOT REFUTED THE OBSERVATION MADE B Y THE ASSESSING OFFICER ON THE BASIS OF VOUCHER NO.T50031 5 DATED 29.6.2005 THAT THE EXPENDITURE DEBITED THROUGH THIS ITA NO 1279/PN/2009 TATA FICOSA AUTOMOTIVE A.Y. 2006-07 3 VOUCHER HAD AN ELEMENT OF NON-BUSINESS EXPENDITURE. AS THE ASSESSING OFFICER COULD NOT PROPERLY VERIFY THE EXPENSES ON ACCOUNT OF ASSESSEES FAILURE TO PRODUCE THE VOU CHERS, IN MY OPINION, THE ASSESSING OFFICER IS JUSTIFIED IN M AKING PART DISALLOWANCES OUT OF THESE EXPENSES. HOWEVER, THE DISALLOWANCE MADE @ 10% OF THE EXPENSES DEBITED UND ER THIS HEAD APPEARS TO BE ON HIGHER SIDE AND THE SAME IS REDUCED TO 5% ONLY. TO THIS EXTENT RELIEF IS ALLOW ED TO THE APPELLANT. 3. FROM THE ABOVE, THE DISALLOWANCE OF AN ADHOC SUM S OF EXPENDITURE OUT OF THE TRAVELING, MISCELLANEOUS EXP ENSES AND COMMUNICATION TO THE EXTENT OF RS. 3,84,973/-, RS.15,000/- AND RS. 45,000/- RESPECTIVELY, HAS BEEN THE BONE OF CONTENTION. WHILE THE AO MADE THE SAID DISALLOWANCE APPLYING THE SWEEPING RATE OF 10% OF T HE CLAIMS MADE BY THE ASSESSEE IN THE ACCOUNTS, THE C IT(A) RESTRICTED THE SAME TO 5 % OF THE CLAIMS. IN THIS REGARD, LD COUNSEL ARGUED STATING THAT THIS BEING THE COMPANY, WHERE THERE IS INTERNAL AUDIT SYSTEM, THERE CANNOT BE PER SONAL ELEMENT AND RELIED ON THE GUJRAT HIGH COURTS JUDGM ENT IN THE CASE OF M/S SAYALI . ON THE OTHER HAND, THE L D DR MENTIONED THAT THE SAID JUDGMENT IS TOTALLY DISTING UISHABLE. FURTHER, HE STATED THAT IN THE PRESENT CASE, THE AS SESSEE FAILED TO PROVIDE THE BASIC DATA IE NAME AND ADDRE SSES OF THE PERSONS INVOLVED AND THE THIRD PARTY EVIDENCES FOR SUBSTANTIATING THE CLAIMS. WE FIND THAT THE ASSESS EE HAS NOT REFUTED THE OBSERVATION MADE BY THE ASSESSING O FFICER WITH EVIDENCES AT LEAST BEFORE IN CONNECTION WITH T HE DISCREPANCY RELATING TO THE VOUCHER NO.T500315 DATE D 29.6.2005 THAT THE EXPENDITURE DEBITED THROUGH THIS VOUCHER HAD AN ELEMENT OF NON-BUSINESS EXPENDITURE. WE HAVE ALSO ANALYZED THE FACTUAL MATRIX RELEVANT FOR THE CITED GUJRAT HIGH COURT JUDGMENT AND FIND THAT THE SAME I S DISTINGUISHABLE. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AS WELL AS THE CITATIONS RELIED UPON B Y THE PARTIES. FROM THE FACTS OF THE INSTANT CASE, IT IS EVIDENT THE SELF MADE VOUCHERS ARE THE ONLY EVIDENCES TO SUPPOR T THE CLAIMS OF THE ASSESSEE AND THERE IS LACK OF THIRD P ARTY EVIDENCES IN RESPECT OF EXPENDITURE ON ACCOUNTS OF TRAVELING VEHICLE, GUEST ENTERTAINMENT, POSTAGE, TELEPHONE. I T IS ALSO NOT THE CASE OF THE ASSESSEE THE VEHICLES AND TELEP HONES ARE AVAILABLE FOR USE BY THE DIRECTORS FOR PERSONAL USE AND THERE EXISTS WRITTEN TERMS AND CONDITIONS IN THIS REGARD AUTHORIZING FOR SUCH PERSONAL USE. IN ANY CASE, THE CASE LAW ITA NO 1279/PN/2009 TATA FICOSA AUTOMOTIVE A.Y. 2006-07 4 IN THE CASE OF SAYAJI IRON AND ENGINEERING CO (253 ITR 749) IS KNOWN FOR THE FOLLOWING CONCLUSION AND THE SAME READ AS UNDER. ONCE THE DIRECTORS OF THE ASSESSEE COMPANY WERE ENTITLED TO USE THE VEHICLE OF THE COMPANY FOR THEI R PERSONAL USE AS PER THE TERMS AND CONDITIONS OF THE IR APPOINTMENT IT CANNOT BE SAID THAT THE ASSESSEE COMPANY INCURRED EXPENDITURE FOR THE PERSONAL USE B Y THE DIRECTORS AND THEREFORE, DISALLOWANCE OF PART O F THE EXPENDITURE INCURRED BY THE COMPANY FOR THE MAINTENANCE OF THE VEHICLES WAS NOT JUSTIFIED. 5. THUS, CONSIDERING THE ABOVE, WE FIND THE ABOVE C ITATION HAS NO RELEVANCE TO THE FACTS OF THE CASE. IN THESE CIRCUMSTANCES OF NO THIRD PARTY EVIDENCES, NO LOG B OOKS AND NON DISCHARGE OF ONUS BY THE ASSESSEE IN DEMONSTRAT ING THE GENUINENESS OF THE EXPENDITURE, WE ARE OF THE OPINI ON THAT THE GUJARAT HIGH COURT JUDGMENT HAS NO APPLICATION AND AO DECISION TO RESORT TO ADHOC ESTIMATIONS IS IN OR DER. FURTHER, WE FIND THE CIT(A) IS REASONABLE IN REDUCI NG THE ADDITION TO RS 30,000/-. THEREFORE, WE FIND THERE IS NO NEED FOR INTERFERENCE IN THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND 2 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 4. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE TO 5% OF THE EXPENSES. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2011. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV JUDICIAL MEMBER PUNE, DATED THE 30 TH MARCH 2011 ANKAM ITA NO 1279/PN/2009 TATA FICOSA AUTOMOTIVE A.Y. 2006-07 5 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CITIV PUNE 4. THE CIT(A)- III PUNE 4. THE D.R. A BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE