Paramount Ltd., Baroda V. The ACIT., Baroda Circle-4, Baroda

ITA 1302/AHD/2006

• Counselvise Citation: 130220514 RSA 2006
• Duration Of Justice: 5 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-12-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 22-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Capital asset; Depreciation; Earning of tax free income; Source of fund; Capital expenditure
• Section: 143(3); 37(1); 147

Judgement Text

, , . .. . . .. . , , , , ! !! ! . .. .'# !'# '# !'# '# !'# '# !'# , $ $ $ $ % % % % IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD BEFORE HONBLE SHRI D.K.TYAGI, J.M. & HONBLE SHRI A.MOHAN ALANKAMONY, A.M.) ! !! ! . ITA NO. 1302/AHD./2006 : # &' - 2000-2001 PARAMOUNT LTD., BARODA VS- I.T.O ., WARD-4(1), BARODA (PAN : AABCP 6509P) ( () /APPELLANT) ( *() /RESPONDENT ) () + , / APPELLANT BY : SHRI M. K. PATEL, A.R. *() + , / RESPONDENT BY : SHRI VINOD TANWANI, SR.D.R. -#. + /$ / DATE OF HEARING : 22/12/2011 0'& + /$ / DATE OF PRONOUNCEMENT : 29/12/2011 1 1 1 1 / ORDER PER SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III, BA RODA IN APPEAL NO.CAB/III/44/05-06 DATED 12.04.2006 FOR THE ASSESS MENT YEAR 2000- 2001 PASSED UNDER SECTION 250 R.W.S. 143(3)/147 OF THE I.T. ACT, 1961. 2. THOUGH THE ASSESSEE HAS RAISED EIGHT GROUNDS IN ITS APPEAL, THE GROUND NOS. 7 AND 8 ARE GENERAL IN NATURE AND THERE FORE DO NOT SURVIVE FOR ADJUDICATION. IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED REOPENING UNDER SECTION 147 OF THE ACT. SINCE THIS GROUND IS NOT PRESSED, THE SAME IS DISMISSED AS NOT PRESSED. THE OTHER GROUNDS ARE LISTED HEREIN-BELOW IN A CONCISE FORM FOR ADJUDICATION. I) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION MADE BY THE AO FOR RS.24,98,000/- ON ACCOUNT OF DISALLOWANCE OU T OF INTEREST PAYMENT HOLDING THAT THE APPELLANT HAD DIVERTED AND UTILIZED BORROWED FUNDS FOR NON-BUSINESS PURPOSE. ITA NO. 1302-AHD-06 2 II) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE R EPAIRS AND MAINTENANCE EXPENSES INCURRED OF RS.42,805/- FOR SH ED AND RS.47,456/- FOR DRAINAGE LINE REPAIRING ARE CAPITAL EXPENSES IN NATURE AGGREGATING TO RS.81,235/-. III) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE EXPENSES OF RS.1,08,554/- BEING REPAIRING AND MAINTENANCE EXPEN SES FOR BUILDING, IS CAPITAL EXPENDITURE IN NATURE AND FURT HER ERRED IN CONFIRMING THE DISALLOWANCE OF RS.97,698/- MADE OUT OF THE SAID EXPENSES. IV) THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITI ON MADE ON ACCOUNT OF THE DISALLOWANCE OF FOLLOWING EXPENSES A) OUT OF VEHICLE EXPENSES RS.70,902/- B) OUT OF TELEPHONE EXPENSES RS.50,000/- 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF CONSULTANCY AND ENVIRONMENTAL ENGINEERING FILED ITS RETURN OF INCOME ON 30.11.2000 FOR THE RELEVANT ASSESSMENT YEAR. INITIA LLY THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, SUBSEQUE NTLY THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT AND THE A SSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 14 7 OF THE ACT ON 22.03.2005. 4. GROUND NO.1 DISALLOWANCE OF INTEREST OF RS.24,98, 000/- DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE LD. AO OBSERVED THAT THE ASSESSEE HAS CLAIMED INTEREST OF RS.38,04,918/-. IT WAS ALSO NOTED THAT THE INVESTMENTS MADE BY THE ASS ESSEE HAD INCREASED TO RS.7,01,31,449/- AS AGAINST RS.1,10,36 ,204/- BEING THE OPENING BALANCE. THUS, IT WAS ESTABLISHED THAT THE ASSESSEE HAD MADE AN INVESTMENT OF RS.5,90,95,245/- DURING THE PREVIO US YEAR. THE ASSESSEE ALSO FILED THE DETAILS OF INVESTMENT MADE UP TO THE PREVIOUS YEAR, WHICH ARE LISTED HEREIN BELOW: ITA NO. 1302-AHD-06 3 1. UNQUOTED 15.10.% BOND OF RS. 31,36,914/- RAJASTHAN ELECTRICITY BOARD 2. UNITS OF PRU ICICI TECHNOLOGY(G) FUND RS.1,25, 00,000/- 3. 13% SARDAR SAROVAR NARMADA NIGAM RS.2,00,00,00 0/- BONDS 4. EQUITY SHARES OF VARIOUS LISTED RS.4,34,68 ,331/- COMPANIES RS.7,90,95,245/- 4.1 FROM THE ABOVE LIST, THE LD. AO CAME TO A CONCL USION THAT THE INVESTMENTS MADE IN BONDS, UNITS AND QUOTED SHARES BY THE ASSESSEE DURING THE PREVIOUS YEAR HAS BEEN MADE OUT OF THE B ORROWED FUNDS OF THE ASSESSEE ON WHICH INTEREST HAS BEEN CLAIMED AS EXPE NDITURE, WHEREAS THESE INVESTMENTS EARNED ONLY EXEMPT INCOME. 4.2 THE ASSESSEE FURNISHED THE FOLLOWING SUBMISSION S BEFORE THE LD. AO IN ORDER TO DEFEND ITS STAND THAT IT HAS NOT DIV ERTED ITS INTEREST BEARING FUNDS BY INVESTING IN BONDS, UNITS, EQUITY SHARES( LISTED) EARNING EXEMPT INCOME; (I) THE NET PROFIT EARNED BY THE COMPANY AFTER TAX AMOUNTING TO RS.2.19 CRORES AND CONSIDERING THE DEPRECIATION OF RS.18. 79 LACS THE TOTAL CASH ACCRUALS ARE TO THE TUNE OF RS.3.8 CRORES FOR THE YEAR UNDER REFERENCE. (II) THE ASSESSEE COMPANY HAS SUBSTANTIAL PAID UP CAPITAL AND FREE RESERVES AMOUNTING TO RS.1.5 CRORES AND RS.12. 05 CRORES RESPECTIVELY AGGREGATING TO RS.13.55 CRORES AT THE BEGINNING OF THE FINANCIAL YEAR. (III) INVESTMENT IN SHARES AND OTHER ADVANCES GIVEN BY THE COMPANY ARE ONLY TO THE TUNE OF RS.6.95 CRORES APP ROXIMATELY WHICH IS SUBSTANTIALLY LOWER THAN THE TOTAL P AID UP CAPITAL AND RESERVES AND SURPLUS APPEARING IN THE BOOKS. (IV) INTEREST EXPENDITURE INCURRED BY THE COMPANY WAS IN RELATION TO ITS INDIVISIBLE ACTIVITIES COMPRISING OF CONTRACT R ECEIPTS, OTHER ITA NO. 1302-AHD-06 4 INCOME, DEALING IN SHARES AND SECURITIES ETC. AND T HEREFORE, APPORTIONMENT FOR INTEREST EXPENDITURE FOR BUSINESS AND NON BUSINESS CANNOT BE MADE IN A SUCH A SITUATION. (V) IN MAJORITY OF INVESTMENT MADE DURING THE YEA R COMPANY HAS NOT BORROWED FUNDS BUT UTILIZED THE BALANCE AVAILABLE IN THE BANK ACCOUNTS FOR THE PURPOSE OF' INVESTMENTS. (VI) THE ENTIRE INTEREST EXPENDITURE ARE FULLY ALLO WABLE U/S 36(1)(III) AND ALSO U/S 37(1) OF THE ACT AND ANY DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT DOES NOT ARISE. (VII) WE PLACE OUR RELIANCE STRONGLY ON THE DECISION GIVE N BY HONOURABLE SUPREME COURT IN THE CASE OF RAJASTHAN S TATE WARE HOUSING CORPORATION VS. CIT - 242 ITR 450. 4.3 HOWEVER, THE LD. AO, COMPARING THE BALANCE-SHEE T OF THE ASSESSEE AS ON 31.03.2000 WITH 31.03.1999, ANALYSED THE FUND FLOW AS FOLLOWS: SOURCE OF FUNDS (RS.IN LACS) INCREASE IN SHARE CAPITAL --- INCREASE IN RESERVE & SURPLUS 174.57 INCREASE IN DEPRECIATION 79.98 INCREASE IN BORROVRING 695.27 ( SECURED & UNSECURED) ------------ TOTAL 949.82 TOTAL UTILIZATION OR FUNDS INCREASE IN INVESTMENTS 590.95 INCREASE IN FIXED ASSETS 29.70 INCREASE IN CURRENT ASSETS 142.60 REDUCTION IN CURRENT LIABILITIES 186.57 TOTAL 949.82 4.4 FROM THE FUND FLOW STATEMENT THE LD. AO ARRIVED AT A CONCLUSION THAT INVESTMENT TO THE EXTENT OF RS.416.78 LACS [IN CREASE IN INVESTMENTS- RS. 590.95 LACKS (-) INCREASE IN RESERVES & SURPLUS -RS. 174LACKS] MUST HAVE BEEN MADE FROM THE BORROWED FUNDS OF THE ASSES SEE, AND HELD AS FOLLOWS:- ITA NO. 1302-AHD-06 5 3.5 IT IS CLEAR FROM THE ABOVE DISCUSSION, THAT INTEREST ATTRIBUTABLE ON BORROWED FUNDS NOT UTILIZED FOR BUSINESS IS NOT BE ALLOWED AS BUSINESS DEDUCTION. AS DISCUSSED IN THE EARLIER PAR A, BORROWED FUNDS, ATLEAST TO THE EXTENT OF RS.416.78 LACS HAVE BEEN DIVERTED FOR INVESTMENT NOT MADE FOR BUSINESS PURPOSES. THE AVERAGE COST OF BORROWING (INTEREST/ AVERAGE BORROWING FOR THE Y EAR) I.E. RS.3804918/ RS.63899906 COMES TO 6%. THUS, INTEREST ATTRIBUTABLE ON BORROWINGS DIVERTED FOR NON-BUSINESS PURPOSES CO MES TO RS.24.98 LACS. THE SAME IS ACCORDINGLY, DISALLOWED OUT OF INTEREST EXPENSES FOR NOT BEING INCURRED FOR BUSINESS PURPOS ES. 3.6 THEREFORE, AN ADDITION OF RS.24,98,000/- IS M ADE TO THE INCOME COMPUTED BY THE ASSESSEE COMPANY. 5. AGGRIEVED BY THE ORDER OF THE LD. AO, THE ASSESS EE CARRIED THE MATTER BEFORE THE LD. CIT(A). HOWEVER, THE LD. CIT( A) CONFIRMED THE FINDINGS OF THE LD. AO ON THE SAME PREMISES. 6. THE LD. A.R. SUBMITTED BEFORE US THAT THE ASSESS EE HAD SUFFICIENT RESERVES & SURPLUS FOR MAKING INVESTMENTS AS IT DES IRES OR FOR DISTRIBUTION OF DIVIDEND. THEREFORE NO INTEREST BEA RING FUND OF THE ASSESSEE WAS DIVERTED FOR PURCHASE OF ASSETS EARNIN G EXEMPT INCOME. THE LD. A.R. REFERRED TO THE BALANCE SHEET OF THE A SSESSEE FURNISHED IN PAGE 7 OF THE PAPER BOOK FILED BY THE ASSESSEE. CIT ING THE BALANCE-SHEET OF THE ASSESSEE DRAWN AS ON 31.03.2000 AND 31.03.19 99, THE LD. A.R. SUBMITTED THAT THE RESERVES AND SURPLUS OF THE ASSE SSEE WAS RS.12,04,77,925/- AND RS.13,79,35,105/- RESPECTIVEL Y. THE LD. AR FURTHER SUBMITTED THAT AS PER THE FINANCIAL STATEMENTS OF T HE ASSESSEE IT IS APPARENT THAT THE ASSESSEE HAD SURPLUS RESERVES AT LEAST TO THE EXTENT OF RS.12,04,77,925/- WHICH DO NOT ARISE OUT OF THE INTEREST BEARING FUNDS WHEN THE INVESTMENTS WERE MADE. AS PER THE CLAIM OF THE LD. AO, THE AMOUNT INVESTED FROM INTEREST-BEARING FUNDS IN AGGR EGATE WORKS OUT TO ITA NO. 1302-AHD-06 6 RS.416.78 LACS, WHICH IS FAR BELOW RS. 12,04,77,925 /- DISCLOSED IN THE BALANCE-SHEET OF THE ASSESSEE. THE LD. A.R. THUS ES TABLISHED THAT THE ASSESSEE HAS NOT DIVERTED ANY INTEREST BEARING FUND S BY PURCHASING BONDS, UNITS, EQUITY SHARES ETC., EARNING EXEMPT IN COME, NOT ASSESSABLE TO TAX. 7. THE LD. D.R. STRONGLY OPPOSED TO THE CONTENTIONS OF THE LD. A.R. AND RELIED ON THE ORDERS OF THE LD. AO AND THE LD. CIT( A) AND PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE SUSTAINED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD AND THE PAPER BOOK FILED BY THE ASSESSEE CON TAINING 1 TO 93 PAGES. ON PERUSING THE BALANCE-SHEET OF THE ASSESSE E FOR THE YEAR ENDING 31.03.2000 AND 31.03.1999, IT IS APPARENT AS CLAIMED BY THE LD. A.R. THAT THE ASSESSEE HAD RESERVES AND SURPLUS AS ON 31.03.1999 - RS.12,04,77,925/- AND AS ON 31.03.2000- RS.13,79,35 ,105/-. GENERAL RESERVES OF THE COMPANY ARE FREE RESERVES AVAILABLE TO IT FOR DISTRIBUTION OF DIVIDEND OR FOR ANY OTHER PURPOSE IT DEEMS FIT. THESE RESERVES ARE GENERATED OUT OF THE REVENUE INCOME OF THE COMPANY AND IS NOT INTEREST BEARING FUNDS. FURTHER, IT IS EVIDENT FROM THE BALA NCE-SHEET, THAT THE COMPANY IS HAVING SUNDRY DEBTORS OF RS.16,15,65,304 /- AND CURRENT LIABILITIES INCLUDING SUNDRY CREDITORS OF RS.8,70,6 3,274/- WHICH SHOWS THAT RS.7,45,02,030/- [RS.16,15,65,304/-( MINUS) RS.8,70 ,63,274/-] IS THE NET UNREALISED CASH OUT OF THE PROFITS/RESERVES OF THE COMPANY. THUS THE OWN FUNDS OF THE COMPANY ARISING FROM THE PROFITS/R ESERVES & SURPLUS OF THE COMPANY IN THE WORST SCENARIO WILL BE RS.12,04 ,77,925/- [RESERVES & SURPLUS AS ON 31.03.199] (-) RS.7,45,02,030/- [ BEING THE NET UNREALISED CASH FROM OF THE PROFITS OF THE COMPANY] , WHICH WORKS OUT TO RS. 4,59,75,895/-. THUS THE ASSESSEE IS IN POSSESSI ON OF OWN FUNDS ITA NO. 1302-AHD-06 7 BEING NON-INTEREST BEARING FUNDS AT LEAST TO THE EX TENT OF RS. 4,59,75,895/- AT THE TIME OF INVESTING IN THE ASSET S EARNING EXEMPT INCOME. IN THIS CASE BEFORE US, THE GRIEVANCE OF T HE LD. AO IS THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS TO THE EXTENT OF RS.416.18 LAKHS WHICH IS LESS THAN RS.4,59,75,895/- BEING TH E REALISED FUNDS AVAILABLE WITH THE ASSESSEE OUT OF THE RESERVES & S URPLUS. THIS CLEARLY ESTABLISHES THAT THE ASSESSEE HAS MADE INVESTMENTS ON BONDS AND SHARES GENERATING EXEMPT INCOME FROM NON-INTEREST B EARING FUNDS OF THE COMPANY. FURTHER, RELYING ON THE DECISION OF THE HO NBLE KARNATAKA HIGH COURT, IN THE CASE OF CIT-VS- RAGHUVIR SYNTHETICS L TD. IN TAX APPEAL NO.829 OF 2007, WE ARE OF THE CONSIDERED VIEW THAT THE LD. AO IS NOT JUSTIFIED IN MAKING THE ADDITION ON THE PREMISES THAT THE ASSESSEE HAD DIVERTED ITS INTEREST BEARING FUND FOR INVESTMENTS EARNING EXEMPT INCOME. THEREFORE, WE HEREBY DELETE THE ADDITION OF RS.24,9 8,000/- MADE BY THE LD. AO WHICH WAS FURTHER CONFIRMED BY THE LD. CIT(A ). 9. GROUND NO.2 DISALLOWANCE OF RS.81,235/- HOLDING I T TO BE CAPITAL EXPENDITURE( SHED CONSTRUCTION EXPENSE & DR AINAGE EXPENSE):- THE LD. AO DISALLOWED RS.42,805/- AND RS.47,456/- BEING SHED CONSTRUCTION EXPENSES AND DRAINAGE LINE WORK EXPENS ES HOLDING IT TO BE IN THE NATURE OF CAPITAL EXPENDITURE. HOWEVER, HE A LLOWED 10% DEPRECIATION ON THE SAME AND THUS AN ADDITION OF RS .81,235/- WAS MADE. 9.1 THE LD. CIT(A) UPHELD THE ORDER OF THE LD. AO W ITH THE FOLLOWING OBSERVATIONS: 6.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT. FROM THE PERUSAL OF DETAILS OF 'REPAIRS AND MAINTENANCE (OTHE RS)', IT APPEARS THAT DURING THE YEAR, THE ASSESSEE CONSTRUCTED GIDC SHED-IV. PART OF THE EXPENSES ON CONSTRUCTION OF THE SHED WERE DEBITED UNDER THE HEAD 'REPAIRS AND MAINTENANCE (OTHERS)' AND PART OF THE ITA NO. 1302-AHD-06 8 EXPENSES WERE DEBITED UNDER THE HEAD 'REPAIRS-BUILDI NG'. AS BY CONSTRUCTING THE SHED, THE ASSESSEE HAS ACQUIRED A CAPITAL ASSET AND AN ADVANTAGE OF ENDURING NATURE, THE EXPENDITURE WAS RIGHTLY TREATED AS CAPITAL. 6.2.1 AS REGARDS EXPENDITURE ON DRAINAGE-LINE WORK , IT APPEARS THAT THIS DRAINAGE-LINE WORK WAS DONE IN SHED -IV O NLY. THE BILL DATED 28-2-2000 OF SHRI ASHTAVINAYAK CONSTRUCTION, FOR RS.23,118/- CLEARLY REFERS TO DRAINAGE WORK IN SHED-IV, GIDC ES TATE. THUS, THIS EXPENDITURE IS ALSO IN RELATION TO CONSTRUCTION OF NEW SHED AND WAS RIGHTLY TREATED AS CAPITAL, IN NATURE. 9.2 THE LD. AR SUBMITTED THAT THESE EXPENSES ARE RE VENUE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE COURSE OF ITS B USINESS AND THEREFORE IT MAY BE ALLOWED AS DEDUCTION. 9.3 THE LD. D.R. STOUTLY OPPOSED TO THE CONTENTION OF THE LD. A.R. AND ARGUED STATING THAT THE LD. AO AND LD. CIT(A) HAVE RIGHTLY COME TO A CONCLUSION SINCE THESE ARE EXPENSES INCURRED FOR CR EATION OF ASSETS. 9.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD CAREFULLY. ON EXAMINING THE NATURE OF EXPEND ITURE, IT IS APPARENT THAT THE AMOUNT OF RS.42,805/- WAS SPENT FOR THE CO NSTRUCTION OF A SHED. FURTHER IT IS EVIDENT FROM RECORDS THAT THE EXPENSE INCURRED ON DRAINAGE LINE WORK BY THE ASSESSEE FOR RS.47,456/- WAS FOR T HE CONSTRUCTION OF DRAINAGE OF A NEW LINE. THEREFORE, FROM THE FACTS A VAILABLE BEFORE US, IT IS CLEAR THAT THESE EXPENSES RELATES TO THE CREATION O F ASSETS BRINGING ENDURING BENEFIT. THEREFORE, WE DO NOT HAVE ANY HES ITATION TO HOLD THIS ISSUE IN FAVOUR OF THE REVENUE. IT IS ORDERED ACCOR DINGLY. 10. GROUND NO.3 DISALLOWANCE OF RS.97,698/- HOLDING I T TO BE CAPITAL EXPENDITURE( REPAIRS AND MAINTENANCE EXPEND ITURE):- ITA NO. 1302-AHD-06 9 THE LD. AO OBSERVED THAT THE REPAIRS AND MAINTENANC E OF BUILDING SHOWED A SUM OF RS.1,08,554/- WHICH HAS BEEN INCURR ED FOR CIVIL WORK OF GIDC SHED. SINCE THIS AMOUNT HAS BEEN SPENT FOR THE CONSTRUCTION OF SHED BEING CIVIL WORK, LD. AO HELD IT TO BE EXPENDI TURE IN THE NATURE OF CAPITAL. HE THEREFORE DISALLOWED THE SAME AS REVENU E EXPENDITURE IN THE COMPUTATION OF INCOME. HOWEVER, THE LD. AO GRANTED DEPRECIATION ALLOWANCE OF 10% AS PROVIDED UNDER THE ACT. THUS, T HE NET DISALLOWANCE WORKED OUT TO RS.97,698/-. THE LD. CIT(A) CONFIRMED THE ORDER OF THE LD. AO. 10.1 BOTH THE LD. A.R. AND THE LD. D.R. REITERATED THE SAME ARGUMENTS BEFORE US WHICH WERE PLACED BEFORE THE FIRST APPELL ATE AUTHORITY. 10.2 HAVING HEARD BOTH THE SIDES, WE ARE ALSO OF TH E OPINION THAT THIS AMOUNT WAS SPENT ON THE CONSTRUCTION OF THE SHED WH ICH IS IN THE NATURE OF CAPITAL EXPENDITURE, SINCE NO EVIDENCE TO PROVE OTHERWISE IS BROUGHT BEFORE US BY THE APPELLANT. THEREFORE, WE HEREBY CO NFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 11. GROUND NO.4 DISALLOWANCE OF VEHICLE EXPENSES RS .70,902/- AND TELEPHONE EXPENSES RS.50,000/- THE LD. A.O. DISALLOWED RS.70,902/- OUT OF AN AMOU NT OF RS.9,12,361/- CLAIMED AS REPAIRS AND MAINTENANCE OF THE VEHICLES. THE LD. AO ARRIVED AT THIS CONCLUSION BECAUSE PROPER LO G BOOK FOR THE VEHICLE WAS NOT MAINTAINED AND THERE WAS EVERY POSSIBILITY FOR THE VEHICLES TO BE USED FOR PERSONAL PURPOSE OF THE DIRECTORS, ETC. HE NCE, THE LD. AO DISALLOWED 5% OF RS.9,12,361/- WHICH WORKED OUT TO RS.45,618/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. SIMILAR T REATMENT WAS GIVEN TO THE DEPRECIATION CLAIMED ON THE VEHICLES AMOUNTI NG TO RS.5,05,684/- AND THUS AN ADDITION OF RS.25,284/- WAS MADE. BOTH THESE DISALLOWANCES ITA NO. 1302-AHD-06 10 AGGREGATES TO RS. 70,902/- (RS.45,618/- PLUS RS.25, 284/-). SIMILARLY, THE LD. AO DISALLOWED RS.50,000/- OUT OF THE TOTAL TELE PHONE EXPENSES OF RS.19,58,020/-. THE LD. CIT(A) CONFIRMED THE ORDER OF THE LD. AO UPHOLDING HIS VIEW. 11.1 BOTH THE PARTIES MADE THE SAME SUBMISSIONS BEF ORE US THAT WERE MADE BEFORE THE FIRST APPELLATE PROCEEDINGS. HOWEVE R, NO SUBSTANTIAL MATERIALS WERE PRODUCED BEFORE US BY THE ASSESSEE T O CONTROVERT THE CLAIM OF THE REVENUE. LOOKING INTO THE FACTS AND CI RCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE REVENUE. THEREFORE, WE HEREBY CONFIRM THE ORDER OF THE LD. AO AND THE LD. CIT(A) ON THIS ISSUE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 2 1 + 0'& 3#!' 29 / 12 /2011 ' 4 + . 5 SD/- SD/- (D.K.TYAGI) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED : 29/12/2011 1 1 1 1 + ++ + */6 */6 */6 */6 76&/' 76&/' 76&/' 76&/' - 1. () 2. *() 3. !! / -8 4. -8 - - 5. 69 */# , , 5 6. :2 1 , ; / !< , 5 TALUKDAR/ SR. P.S . ITA NO. 1302-AHD-06 11