M/s Yamuna Oils, Yamunanagar V. DCIT, Yamunanagar

ITA 1435/CHANDI/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2304 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Depreciation; Question of law; Cost of acquisition
• Section: 40A(3); 143(3); 133(6); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1435 /CHD/2010 (ASSESSMENT YEAR : 2007-08) M/S YAMUNA OILS, VS. THE D.C.I.T., NEAR KAMANI CHOWK, CIRCLE YAMUNANAGAR. PAN: AAAFY5459K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GOEL RESPONDENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 19.03.2013 DATE OF PRONOUNCEMENT : 16.04.2013 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DAT ED 28.09.2010 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THE AUTHORITIES BELOW HAS ERRED IN LAW AND FACTS IN MAKING ADDITION OF RS.44,92,123/- U/S 40(A)(IA) BEING FREIGHT PAID ON PURCHASES. 2. THE AUTHORITIES BELOW HAVE ERRED IN LAW AND FACT S IN MAKING AN ADDITION OF RS.21552/- U/S 40A(3) BEING 20% OF RS.107759/- DEBI TED UNDER BUILDING REPAIR EXPENSES. 3. THE AUTHORITIES BELOW HAVE ERRED IN LAW AND FACT S IN MAKING AN ADHOC DISALLOWANCE OF RS.25000/- OUT OF EXPENSES DEBITED UNDER BUILDING REPAIR EXPENSES. 4. THE AUTHORITIES BELOW HAVE ERRED IN LAW AND FACT S IN MAKING AN ADDITION OF RS.300.000/- OUT OF LEGAL EXPENSES. 5. THE AUTHORITIES BELOW HAVE ERRED IN LAW AND FACT S IN MAKING AN ADDITION OF RS.51974/- BEING AN ADHOC 15% DISALLOWANCE OUT OF T ELEPHONE EXPENSES, TEA EXPENSES, VEHICLE RUNNING EXPENSES, DEPRECIATION ON CAR AND INTEREST ON 2 CAR LOAN WHEREAS FRINGE BENEFIT TAX HAS ALREADY BEE N PAID ON THESE HEADS OF EXPENDITURES 6. THE AUTHORITIES BELOW HAVE ERRED IN LAW AND FACT S IN MAKING AN ADDITION OF RS.136450/- BY TREATING LOSS ON ACCOUNT OF SALE OF TRACTOR AS CAPITAL LOSS. 3. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.44,92,123/- UNDER SECTION 40(A)(IA) OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS RUNNING A PETROL PUMP AND WAS DEALING IN PURCHASE AND SALE OF MOTOR SPIRIT, HIGH SPEED DIESEL AND LUBRICANTS OF M/S RELIANCE INDUSTR IES LTD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED T OTAL FREIGHT EXPENSES OF RS.44,92,123/- OUT OF WHICH PAYMENT OF FREIGHT A MOUNTING TO RS.44,59,412/- WAS MADE TO M/S RELIANCE INDUSTRIES LTD. THE ASSESSING OFFICER FOUND THE ASSESSEE NOT TO HAVE DEDUCTED TDS OUT OF THE SAID FREIGHT PAYMENT. THE ASSESSING OFFICER FURTHER OBS ERVED THAT AS PER DETAILS FILED, THE ASSESSEE FIRM, RUNNING RELIANCE PETROL PUMP, HAS MADE ITS PURCHASES FROM M/S RELIANCE INDUSTRIES LTD., MU MBAI AND FOR EVERY PURCHASE SO MADE, THE RELEVANT INVOICE IS ALSO ACCO MPANIED WITH AN INVOICE OF M/S RELIANCE LOGISTICS PVT. LTD., MUMBAI IN RESPECT OF FREIGHT CHARGES PAYABLE BY THE ASSESSEE FIRM. ON SUCH INVO ICES ISSUED BY M/S RELIANCE LOGISTICS PVT. LTD., MUMBAI, A NOTE IS APP ENDED AT THE END OF THE INVOICE OF FREIGHT, AS UNDER:- PLEASE MAKE PAYMENT IN FAVOUR OF M/S RELIANCE IND USTRIES LIMITED A/C PLPL, WHO IS OUR COLLECTING AGENT. 5. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE SAID FREIGHT PAYMENT OF RS.44,92,123/- BE NOT DISALLOWED AS PER THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT AS NO TDS WAS DEDUCTED. THE A SSESSING OFFICER ALSO CALLED FOR INFORMATION UNDER SECTION 133(6) OF THE ACT FROM M/S RELIANCE INDUSTRIES LTD., MUMBAI. IN REPLY DATED 2 7.11.2009 M/S 3 RELIANCE INDUSTRIES LTD. CONFIRMED THE FREIGHT PAYM ENTS BY THE ASSESSEE FIRM WITHOUT DEDUCTION OF ANY TAX AT SOURCE. ANOTH ER SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY INFORMATION/EXPLANATION, THUS THE FREIGHT PAYMENTS AGGREGATING RS.44,92,123/- WERE DISALLOWED UNDER SECTION 40(A)( IA) OF THE ACT. 6. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER REJECTING THE CLAIM OF THE ASSESSEE THAT NO DISALLO WANCE WAS WARRANTED WHERE THE AMOUNT IN QUESTION STOOD PAID AT THE END OF THE YEAR. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THERE IS NO MERIT IN THE SAID DISALLOWANCE OF FREIGHT PAID BY INVOKING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WHICH ARE NO APPLICABL E. THE LEARNED A.R. FOR THE ASSESSEE REFERRED TO THE BILL RAISED BY M/S RELIANCE INDUSTRIES LTD. FOR PURCHASE OF DIESEL WHICH IS PLACED AT PAGE 1 OF THE PAPER BOOK AND FURTHER TO THE BILL OF FREIGHT OF M/S RELIANCE LOGISTICS PVT. LTD. PLACED AT PAGE 2 OF THE PAPER BOOK IN WHICH IT HAD BEEN MENTIONED THAT THE PAYMENT IS TO BE MADE TO M/S RELIANCE INDUSTRIE S LTD. WHO IS THE COLLECTING AGENT. IT WAS FURTHER POINTED OUT BY TH E LEARNED A.R. FOR THE ASSESSEE THAT M/S RELIANCE LOGISTICS PVT. LTD. IN T URN HIRED RITCO LOGISTICS FOR TRANSPORTATION OF DIESEL AND THIS IS A CASE OF REIMBURSEMENT OF EXPENSES. THE LEARNED A.R. FOR THE ASSESSEE PLA CED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN CIT(TDS), CHANDIGARH VS. ASSISTANT MANAGER (ACCOUNT S), FOOD CORPORATION OF INDIA (PAY OFFICE), JAGADHRI IN ITA NO.407 OF 2008 DATE OF DECISION 21.8.2008 AND THE CHANDIGARH BENCH OF T HE TRIBUNAL IN M/S RANA WINES (L-1), HO KLIN AREA, NANGAL VS. ADDL.CIT , R-1, CHANDIGARH IN ITA NO.599/CHD/2011 DATE OF DECISION 17.10.201 1. THE SECOND ASPECT OF THE ARGUMENT OF THE LEARNED A.R. FOR THE ASSESSEE WAS THAT THE 4 CASE OF THE ASSESSEE WAS SALE OF PETROL PRODUCTS AN D ALL THE COSTS WERE PART OF THE PURCHASE COST AS THE ASSESSEE WAS ONLY GETTING MARGIN ON SALE OF DIESEL. THE LEARNED A.R. FOR THE ASSESSEE IN TH IS CONNECTION PLACED RELIANCE ON THE DECISION OF THE HON'BLE PUNJAB & HA RYANA HIGH COURT IN CIT VS. BHAGWATI STEELS [326 ITR 108 (P&H)]. 8. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THOUGH THE CASE BUILT UP BY THE LEARNED A.R. FOR THE ASSESSEE WAS T HAT THE PRESENT CASE WAS REIMBURSEMENT OF EXPENSES BUT THE INVOICE DOES NOT SAY SO. 9. IN REJOINDER THE LEARNED A.R. FOR THE ASSESSEE P OINTED OUT THAT THE BILL WAS RAISED BY M/S RELIANCE LOGISTICS PVT. LTD. AND THE SAME WAS REIMBURSED BY WAY OF PAYMENT TO M/S RELIANCE INDUST RIES LTD. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS RUNNING A PETROL PUMP OF M/S RELIANCE PETRO PRODUCTS. AS PER THE DEALERSHIP AGREEMENT ENTERED INTO BETWEEN M /S RELIANCE INDUSTRIES LTD. AND, THE DEALER I.E. THE ASSESSEE W AS TO SALE, SUPPLY OR DEAL IN THE PRODUCTS SUPPLIED EITHER BY M/S RELIANC E INDUSTRIES LTD. OR BY AUTHORIZED DEALER OF RELIANCE. IN ADDITION TO T HE OTHER CONDITIONS AGREED UPON BETWEEN THE PARTIES IT WAS ALSO AGREED UPON AS PER CLAUSE 22 AT PAGE 13 THAT THE DAY-TO-DAY CONTROL OVER THE SAL E AT THE OUTLET OF THE ASSESSEE AND ALL THE OPERATING EXPENSES HAD TO BE I NCURRED BY THE ASSESSEE EVEN THE HANDLING EXPENSES. FURTHER AS PE R CLAUSE 33 IT WAS AGREED THAT THE DEALER SHALL NOT SELL THE PRODUCTS AT RATES OR PRICES HIGHER THAN THOSE AT WHICH RELIANCE OR ANY AUTHORITY UNDER LAW SHALL FROM TIME TO TIME PRESCRIBE. FROM THE READING OF THE ABOVE S AID CLAUSES OF THE AGREEMENT ENTERED INTO BETWEEN THE PARTIES IT IS AP PARENT THAT M/S RELIANCE INDUSTRIES LTD. WAS TO DELIVER THE PRODUCT S TO THE DEALER AT THE RATES SPECIFIED ON THE DATE OF DELIVERY AND THE ASS ESSEE WAS BOUND TO SELL 5 THE PRODUCTS AT THE PRICES PRESCRIBED BY M/S RELIAN CE INDUSTRIES LTD. THE COST INCURRED BY THE ASSESSEE WAS PART OF THE O PERATING COST OF THE ASSESSEE AND THE ASSESSEE WAS ONLY ENTITLED TO THE MARGIN OF SALE OF DIESEL. 11. THE COPY OF THE BILL OF PURCHASE OF DIESEL IS P LACED AT PAGE 1 OF THE PAPER BOOK WHICH REFLECTS THE AMOUNT DUE TO BE PAID AGAINST THE COST OF DIESEL DELIVERED BY M/S RELIANCE INDUSTRIES LTD. A T PAGE 2 OF THE PAPER BOOK THE ASSESSEE HAS ENCLOSED THE FREIGHT BILL RAI SED BY M/S RELIANCE LOGISTICS PVT. LTD. AND ON THE FACE OF THE SAID BIL L IT IS MENTIONED THAT THE PAYMENT OF THE SAME IS TO BE MADE TO M/S RELIAN CE INDUSTRIES LTD. WHO WAS COLLECTING AGENT FOR M/S RELIANCE LOGISTICS PVT. LTD. THE GOODS WERE DELIVERED TO THE ASSESSEE BY M/S RITCO L OGISTICS PVT. LTD. AS PER THE COPY OF THE BILL ENCLOSED AT PAGE 3 OF T HE PAPER BOOK IN WHICH THE CONSIGNORS NAME IS MENTIONED TO BE M/S RELIANC E INDUSTRIES LTD. AND THE CONSIGNEE IS MENTIONED AS JAMUNA OIL I.E. T HE ASSESSEE BEFORE US. THE ASSESSEE CLAIMED TO HAVE REIMBURSED TRANSPORTAT ION COST INCURRED BY M/S RELIANCE LOGISTICS PVT. LTD. BY ENGAGING SERVIC E OF RITCO LOGISTICS PVT. LTD. AND SUCH REIMBURSEMENT OF EXPENSES WAS MA DE BY THE ASSESSEE WITHOUT DEDUCTION OF TAX AT SOURCE. THE CASE OF TH E REVENUE IS THAT THE SAID PAYMENTS ARE NOT TO BE ALLOWED AS DEDUCTION BE CAUSE OF NON DEDUCTION OF TDS IN VIEW OF THE PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT. WE FIND NO MERIT IN THE ORDERS OF THE AUTHORI TIES BELOW IN VIEW OF THE FACTS OF THE PRESENT CASE WHERE THE AMOUNT PAID BY THE ASSESSEE WAS IN RELATION TO REIMBURSEMENT OF FREIGHT EXPENSES IN CURRED BY M/S RELIANCE LOGISTICS PVT. LTD. WHO WAS NOT A TRANSPOR TER. THE TRANSPORTATION OF THE GOODS HAS BEEN CARRIED OUT BY M/S RITCO LOGISTICS PVT. LTD. WHO WAS ENGAGED BY M/S RELIANCE LOGISTICS PVT. LTD. AND THIS TRANSACTION MAY ATTRACT DEDUCTION OF TAX AT SOURCE. HOWEVER, 6 REIMBURSEMENT OF FREIGHT EXPENSES BY THE ASSESSEE T O M/S RELIANCE LOGISTICS PVT. LTD. BY WAY OF PAYMENT TO M/S RELIAN CE INDUSTRIES LTD. IS OUTSIDE THE PURVIEW OF DEDUCTION OF TAX AT SOURCE. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES OF THE CASE WE F IND NO MERIT IN INVOKING OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWANCE OF FREIGHT EXPENSES IN THE HANDS OF THE ASSESSEE. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN M/S RANA WINES VS. ADDL. CIT (SUPRA). WE ALSO FIND MERIT IN THE ALTERNATE PLEA OF THE ASSESSEE THAT WHERE THE EXPENDITURE INCURRED WA S PART OF PURCHASE COST OF THE GOODS, WHICH ARE TAKEN CARE OF WHILE FI XING THE COST OF PETRO PRODUCTS TO BE SOLD BY THE ASSESSEE IN IT IS PETROL PUMP, THE SAID COST BEING CUMULATED CANNOT BE HELD TO BE PAYMENT FOR TR ANSPORTATION UNDER SEPARATE HEAD OF ACCOUNTING AND HENCE LIABLE FOR DE DUCTION OF TAX AT SOURCE. WE FIND SUPPORT FROM THE RATIO LAID DOWN B Y THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. BHAGWATI STEELS (SU PRA) WHEREIN IT HAS BEEN HELD AS UNDER:\ THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH 'A 1 , CHANDIGARH (FOR SHORT, 'THE TRIBUNAL'), IN I.T.A. N O. 374/CHANDI/2006 DATED 16.10.2007, RAISING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW:- 'WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE HON'BLE ITAT WAS RIGHT IN HOLDING THAT PROVISIONS O F SECTION 194A, 1941 AND 194C WERE NOT APPLICABLE AS NO PAYME NT HAS BEEN MADE SEPARATELY ON ACCOUNT OF INTEREST, RENT E TC. THE TRANSACTION WAS A TRANSACTION OF PURCHASE & SALE AN D NOT PAYMENT OF EXPENSES ?' THE ASSESSEE IN THE PRESENT CASE IS FOOD CORPORATIO N OF INDIA WHICH IS ENGAGED IN PROCUREMENT OF FOOD GRAINS FOR THE CE NTRAL POOL. THE FOOD GRAINS IS PROCURED THROUGH THE STATE AGENCIES AND D IRECTLY AS WELL. THE PROCEEDINGS WERE INITIATED UNDER SECTION 201 OF THE INCOME TAX ACT, 1961, WITH THE ALLEGATIONS THAT THE ASSESSEE HAD FA ILED TO DEDUCT TAX AT SOURCE ON THE INTEREST, RENT AND TRANSPORTATION CHA RGES PAID BY IT TO VARIOUS AGENCIES. THE ORDER CAME TO BE PASSED BY TH E INCOME TAX OFFICER (TDS) ON 25.2.2005 RAISING A DEMAND OF RS.12,34,814 /-. THE ORDER WAS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS). IN FURTHER APPEAL BEFORE THE TRIBUNAL, THE PLEA SET UP BY THE ASSESSE E WAS ACCEPTED. IT WAS NOTICED THAT IN THE INVOICES RAISED BY VARIOUS STAT E AGENCIES WHO PROCURED FOOD GRAINS ON BEHALF OF THE ASSESSEE, COS T OF WHEAT HAS BEEN SHOWN APART FROM THE COST ON ACCOUNT OF OTHER INCID ENTAL EXPENSES INCURRED BY THE PROCUREMENT AGENCIES. VAT HAD ALSO BEEN CHARGED. IT 7 WAS NOT EVIDENT FROM THERE THAT THE EXPENSES SO INC URRED BY THE PROCUREMENT AGENCIES WERE ON BEHALF OF THE ASSESSEE RATHER IT WAS FOUND TO BE PART OF THE COST AT WHICH THE FOOD GRAINS WER E TO BE TRANSFERRED BY THE PROCUREMENT AGENCIES TO THE ASSESSEE. WITH THES E FACTS, IT WAS FOUND THAT AS THE ASSESSEE HAD NOT PAID ANY AMOUNT TO THE PROCUREMENT AGENCIES ON ACCOUNT OF TRANSPORTATION, INTEREST OR STORAGE CHARGES AS SUCH, ACCORDINGLY, THERE WAS NO LIABILITY FOR DEDUC TION OF TAX. THE CONTENTION OF LEARNED COUNSEL FOR THE REVENUE T HAT IN FACT ALL THESE FACTORS HAD BEEN TAKEN CARE OF WHILE FIXING T HE PRICE AT WHICH THE FOOD GRAIN WAS TO BE BILLED TO THE ASSESSEE, CARRIE S NO WEIGHT. IF EXPENSES INCURRED BY A PERSON ON ACCOUNT OF TRANSPO RTATION, INTEREST, STORAGE ETC. ARE ADDED TO THE COST OF THE GOODS, IT CANNOT BE INFERRED THAT THE PERSON WHO IS BILLED HAD PAID CERTAIN AMOUNT ON ACCOUNT OF THOSE SERVICES SEPARATELY AS THE SAME BECOMES PART OF THE COMMODITY SO SOLD. FOR THE REASONS MENTIONED ABOVE, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT APPEAL. THE S AME IS ACCORDINGLY DISMISSED. 12. FOLLOWING THE ABOVE WE DIRECT THE ASSESSING OFF ICER TO DELETE THE ADDITION OF RS.44,92,123/-. THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 13. THE GROUND NO.2 RAISED BY THE ASSESSEE IS NOT P RESSED AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 14. THE GROUND NO.3 RAISED BY THE ASSESSEE IS AGAIN ST THE DISALLOWANCE OF RS.25,000/- OUT OF BUILDING REPAIR EXPENSES. TH E ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE SPENT SUM OF RS.3,51,734 /- UNDER THE HEAD BUILDING REPAIR. THE SAID EXPENDITURE INCLUDED CAS H PAYMENT OF RS.1,07,759/- AND 20% OF THE SAME AMOUNTING TO RS.2 1,552/- WAS DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 40A (3) OF THE ACT. THE ASSESSEE IS NOT IN APPEAL AGAINST THE SAID DISALLOW ANCE. FURTHER THE ASSESSING OFFICER NOTED THAT THE REMAINING PAYMENTS UNDER THE HEAD BUILDING REPAIR WERE MADE IN CASH FOR WHICH THERE W ERE SELF PREPARED VOUCHERS AND FURTHER DISALLOWANCE OF RS.25,000/- WA S MADE BY THE ASSESSING OFFICER, WHICH WAS CONFIRMED BY THE CIT ( APPEALS). 15. WE FIND THAT THE TOTAL EXPENDITURE MADE IN CASH WAS RS.1,07,759/- OUT OF WHICH DISALLOWANCE UNDER SECTION 40A(3) OF T HE ACT WAS MADE 8 AMOUNTING TO RS.21,552/- AND FURTHER DISALLOWANCE W AS MADE OF RS.25,000/- AS THE CASH PAYMENTS WERE AGAINST SELF MADE VOUCHERS. WE FIND NO MERIT IN THE DOUBLE DISALLOWANCE MADE IN TH E HANDS OF THE ASSESSEE WHEREIN THE EXPENDITURE WAS TAKEN TO BE BU SINESS EXPENDITURE BUT BECAUSE OF THE CASH PAYMENTS ABOVE RS.20,000/- DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT WAS MADE. FURTHER DISALL OWANCE OF RS.25,000/- UNDER THE SAME HEAD OUT OF THE CASH EXP ENSES IS THUS NOT WARRANTED. THUS GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 16. THE ISSUE IN GROUND NO.4 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OUT OF LEGAL EXPENSES. THE ASSESSEE D URING THE COURSE OF ASSESSMENT PROCEEDINGS WAS NOT ABLE TO EXPLAIN THE NATURE OF THE SAID EXPENDITURE AND FURTHER NO TDS WAS DEDUCTED OUT OF THE SAID EXPENSES. HENCE DISALLOWANCE WAS MADE IN VIEW OF THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT, WHICH WAS CONFIRMED BY THE CI T (APPEALS). THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE SAID AM OUNT OF RS.3 LACS WAS PAID AS SIGNING FEE TO M/S RELIANCE INDUSTRIES LTD. AS PER THE AGREEMENT, THE COPY OF WHICH IS PLACED AT PAGE 4 ON WARDS OF THE PAPER BOOK, THE SAID AMOUNT OF RS.3 LACS WAS TOWARDS TRAI NING CHARGES OF THE EMPLOYEES OF THE ASSESSEE. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE SAID PAYMENT WAS MAD E BY M/S HKTC OIL DIVISION AS THE ASSESSEE HAD NOT COME INTO EXISTENC E. 17. ON THE PERUSAL OF THE RECORD WE FIND THAT THE D EALERSHIP AGREEMENT WAS ENTERED INTO BY THE PARTNERS ON 21.2.2005 AND S UM OF RS.3 LACS WAS PAID AS SIGNING FEE TOWARDS EXPENSES TO BE INCURRED BY THE RELIANCE TOWARDS TRAINING OF THE DEALER AND ITS STAFF AND SU PERVISION AND COORDINATION OF THE CONSTRUCTION OF THE SAID RETAIL OUTSET BY RELIANCE. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D SHOWN INCOME FROM RUNNING OF PETROL PUMP AND THE PRODUCTS OF RELIANCE . THE SAID AMOUNT 9 OF RS.3 LACS WHICH INITIALLY WAS PAID BY ITS SISTER CONCERN WAS CLAIMED AS AN EXPENDITURE DURING THE YEAR UNDER CONSIDERATION AND THE AMOUNT WAS DEBITED ON 31.3.2007 ON ACCOUNT OF HKTC OIL DIVISIO N. THE NATURE OF EXPENDITURE BEING TRAINING OF THE DEALER AND ITS ST AFF AND ALSO MONITORING OF THE CONSTRUCTION OF THE RETAIL OUTSET OF THE ASS ESSEE BEING RELATABLE TO RUNNING OF THE BUSINESS BY THE ASSESSEE WAS ALLOWAB LE EXPENDITURE. MERELY BECAUSE THE AMOUNT WAS INITIALLY PAID BY THE SISTER CONCERN OF THE ASSESSEE AND WAS ALSO CLAIMED AS EXPENDITURE DURING THE YEAR DOES NOT MERIT THE DISALLOWANCE IN THE HANDS OF THE ASSESSEE . FURTHER UNDER THE PROVISIONS OF THE ACT THERE IS NO REQUIREMENT FOR D EDUCTION OF TAX OUT OF SUCH PAYMENTS AND CONSEQUENTLY NON-DEDUCTION DOES O F THE ACT ATTRACT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. IN VIEW THEREOF, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF R S.3 LACS IN THE HANDS OF THE ASSESSEE. THE GROUND NO.4 RAISED BY THE ASS ESSEE IS THUS ALLOWED. 18. THE ISSUE IN GROUND NO.5 RAISED BY THE ASSESSEE IS IN RELATION TO THE DISALLOWANCE OUT OF TELEPHONE EXPENSES, TEA EXP ENSES, VEHICLE RUNNING EXPENSES, DEPRECIATION ON CAR AND INTEREST ON CAR RUNNING ON WHICH THE ASSESSEE HAD PAID FRINGE BENEFIT TAX. WE FIND NO MERIT IN THE SAID DISALLOWANCE WHEREIN THE FRINGE BENEFIT TAX HA D BEEN PAID BY THE ASSESSEE ON PARTICULAR EXPENDITURE, WHICH WAS INCUR RED IN THE COURSE OF CARRYING ON THE BUSINESS. THERE IS NO MERIT IN DIS ALLOWING ANY PART OF THE SAID EXPENDITURE FOR PERSONAL USE AS HELD BY TH E AUTHORITIES BELOW. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHA NDIGARH BENCH OF THE TRIBUNAL IN M/S ADELTA OPTEC VS. ITO, YAMUNANAGAR I N ITA NO.1265/CHD/2009. IN VIEW THEREOF, WE DIRECT THE A SSESSING OFFICER TO DELETE THE ADDITION OF RS.51,974/-. 10 19. THE GROUND NO.6 RAISED BY THE ASSESSEE IS NOT P RESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF APRIL, 2012. SD/- SD/- (T.R. SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 16 TH APRIL, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH