Gujarat Sidhee Cement Ltd., Veraval V. The Joint Commissioner of Income Tax, JUNAGADH

ITA 154/RJT/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3388 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Business expenditure; Corroborative evidences; Revenue expenditure; Capital expenditure; Set aside
• Section: 37(1); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA L RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 154 & 243/RJT/2015 (ASSESSMENT YEAR: 2009-10) M/S. GUJARAT SIDHEE CEMENT LTD., SIDHEEGRAM, VERAVAL-KODINAR ROAD, VERAVAL-362276 THE ACIT, JUNAGADH CIRCLE, JUNAGADH V/S V/S THE JOINT COMM. OF INCOME TAX, JUNAGADH RANGE-1, JUNAGADH M/S. GUJARAT SIDHEE CEMENT LTD., SIDHEEGRAM, VERAVAL-KODINAR ROAD, VERAVAL-362276 (APPELLANT) (RESPONDENT) ITA. NO: 119/RJT/2016 (ASSESSMENT YEAR: 2011-12) M/S. GUJARAT SIDHEE CEMENT LTD., SIDHEEGRAM, VERAVAL-KODINAR ROAD, VERAVAL-362276 V/S V/S THE JOINT COMM. OF INCOME TAX, JUNAGADH RANGE-1, JUNAGADH (APPELLANT) (RESPONDENT) ITA. NO: 408/RJT/2016 (ASSESSMENT YEAR: 2013-14) THE DY. COMM. OF INCOME V/S M/S. GUJARAT SIDHEE ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 2 TAX, JUNAGADH CIRCLE, JUNAGADH V/S CEMENT LTD., SIDHEEGRAM, VERAVAL-KODINAR ROAD, VERAVAL-362276 (APPELLANT) (RESPONDENT) ITA. NO: 470/RJT/2016 (ASSESSMENT YEAR: 2014-15) THE DY. COMM. OF INCOME TAX, JUNAGADH CIRCLE, JUNAGADH V/S V/S M/S. GUJARAT SIDHEE CEMENT LTD., SIDHEEGRAM, VERAVAL-KODINAR ROAD, VERAVAL-362276 (APPELLANT) (RESPONDENT) PAN: AAACG 8057G APPELLANT BY : SHRI JITENDRA KUMAR, CIT/ DR RESPONDENT BY : SHRI VIMAL DESAI ( )/ ORDER DATE OF HEARING : 26-03-2019 DATE OF PRONOUNCEMENT : 25-04-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THESE FIVE CROSS APPEALS HAVE BEEN FILED BY THE ASS ESSEE AND THE REVENUE AGAINST EACH OTHER. FIRST WE WOULD LIKE TO TAKE UP APPEAL IN ITA NO. 154/RAJKOT/2015 FOR ASSESSEES APPEAL. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 3 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS. 14,36,355/- OUT OF GIFT EXPENSE S ON ACCOUNT OF ALLEGED NON BUSINESS PURPOSE AND THE CIT(A) HAS ERRED IN CONFIR MING THE SAME TO THE EXTENT OF RS. 5,02,725/-. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES OF RS. 26,30,000/- ON ACCOUNT OF ALLEGED NON BUSINESS PURPOSE AND THE CIT(A) HAS ERR ED IN CONFIRMING THE SAME. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS. 33,53,416/- OUT OF MACHINERY RE PAIRS BY CONSIDERING IT AS CAPITAL EXPENDITURE AND THE CIT(A) HAS ERRED IN CON FIRMING THE SAME. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS. 71,02,289/- OUT OF SALES PROMOT ION EXPENSES ON ACCOUNT OF ALLEGED NON BUSINESS PURPOSE AND THE CIT(A) HAS ERR ED IN CONFIRMING THE SAME TO THE EXTENT OF RS. 47,87,879/-. 2. FACTS OF THE CASE ARE THAT APPELLANT IS PUBLIC LIMI TED COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CEMENT AND CLINKER . 3. THE APPELLANT COMPANY FILED ITS COMBINED RETURN OF INCOME AND RETURN OF FRINGE BENEFITS ELECTRONICALLY ON 29.09.2009 DECLAR ING TOTAL INCOME AT RS. NIL AFTER ADJUSTMENT OF BROUGHT FORWARD BUSINESS LOSSES . AS THE COMPANY WAS SICK INDUSTRIAL COMPANY AS ON 31.03.2009, NO TAX WAS PAY ABLE AS PER MAT PROVISIONS U/S. 115JB. DISALLOWANCE OUT OF GIFT EXPENSES - RS. 14,36,355/- 4. THE APPELLANT HAS INCURRED AND CLAIMED GIFT EXPENSE S OF RS. 14,36,355/- COMPRISING OF DIWALI GIFT EXPENSES OF RS. 11,64,570 /- AND GIFT ARTICLES OF RS. 2,71,785/- FOR THE YEAR UNDER APPEAL. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. ASKED THE APPELLANT TO FURNISH THE DETAILS OF SUCH GIFT EXPENSES AND ALSO TO JUSTIFY ITS ALLOWABILITY AS BUSINESS EXPENDITURE. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 4 6. IN RESPONSE, THE APPELLANT FURNISHED COMPLETE DETAI LS OF GIFT EXPENSES ALONG WITH SUPPORTING EVIDENCES AND JUSTIFIED ITS ALLOWAB ILITY AS UNDER VIDE SUBMISSION DATED 16.12.2011: 'THE ASSESSEE COMPANY HAS ALREADY FURNISHED DETAILS ALONG WITH SUPPORTING EVIDENCES RELATING TO GIFT EXPENSES OF RS. 14,36,35 5/- VIDE PARA 2 & 3 OF OUR SUBMISSION DATED 18/07/2011. IT IS FURTHER SUBMITTED THAT AFORESAID GIFT EXPENSE S ARE IN THE NATURE OF CUSTOMARY GIFTS WHICH ARE GIVEN TO CUSTOMERS, SUPPLIERS, BANK ERS, STATUTORY AUTHORITIES ETC. AT THE TIME OF THEIR VISIT BY / TO THE COMPANY OFFICIA LS AND AT OTHER OCCASIONS LIKE MARRIAGE / BIRTHDAY OF EMPLOYEE OR THEIR RELATIVES. THE SAID EXPENDITURE HAS BEEN INCURRED BY THE COMPANY WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IN THE NORMAL COURSE OF ITS BUSINESS. IT MAY BE APPRECIATE D THAT THE EXPENDITURE SO INCURRED IS CUSTOMARY IN THE NATURE IN THE CORPORAT E BUSINESS OF THIS MAGNITUDE AND HENCE THE SAME IS ALLOWABLE AS BUSINESS EXPENDI TURE. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THA T THE ASSESSEE COMPANY HAS PAID FBT ON THE AFORESAID GIFT EXPENSES AS EVIDENT FROM THE RETURN OF INCOME IN FORM NO. ITR-1 AND THEREFORE IN CASE ANY DISALLOWANCE IS MADE OUT OF SUCH EXPENSES, THE CORRESPONDING CREDIT THEREOF SHOULD BE GIVEN TO THE ASSESSEE IN THE COMPUTATION OF FBT AS PER THE CBDT CIRCULAR NO. 8/2 005 DATED 29/08/2008. ' 7. WITHOUT APPRECIATING THE ABOVE FACTS, THE A.O. DISA LLOWED GIFT EXPENSES OF RS. 14,36,355/- ON THE CONTENTION THAT THE APPELLANT HA S NOT SUBMITTED THE LIST OF THE ARTICLES GIFTED, THE LIST OF RECIPIENTS AND NOT STATED THE BUSINESS PURPOSE SERVED BY SUCH EXPENDITURE. 8. THE A.O. HAS FAILED TO UNDERSTAND THAT THE GIFTS WE RE CUSTOMARY IN NATURE WHICH WERE DISTRIBUTED ON FESTIVAL AND OTHER OCCASI ONS. THE LEDGER ACCOUNT FURNISHED TO A.O. CLEARLY SHOWED DESCRIPTION OF ITE MS GIFTED. FURTHER, THE RECIPIENTS WERE EMPLOYEES, DEALERS, CUSTOMERS, SUPP LIERS ETC. AND THEREFORE PRACTICALLY IT IS NOT POSSIBLE TO FURNISH THEIR LIS T. THE A.O. HAS MADE THE DISALLOWANCE IN A VERY SUMMARY MANNER AND ON SURMIS ES. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 5 9. IN APPEAL BEFORE THE LD. CIT(A) HE DECIDED MATTER O N THE BASIS OF EARLIER YEAR AND ITAT ORDER IN ASSESSEES OWN CASE AND RESTRICTE D THE DISALLOWANCE TO 35% OF THE TOTAL GIFT ITEM EXPENDITURE. THUS, IN PARITY WITH THE ITAT ORDER, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A). THEREFORE, THIS GROUND OF ASSESSEE IS DISMISSED. DISALLOWANCE OUT OF FOREIGN TRAVELING EXPENSES - RS . 26,30,000/- 10. THE APPELLANT HAS CLAIMED FOREIGN TRAVEL EXPENSES O N THE TOURS BY ITS DIRECTORS AND OTHERS. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE A.O. ASKED TO FURNISH DETAILS AND TO SUBSTANTIATE THE CLAIM THAT THESE EXPENSES HAVE BEEN INCURRED FOR BUSINESS PURPOSE. 11. IN RESPONSE, THE APPELLANT FURNISHED SOME DETAILS O F FOREIGN TRAVELLING EXPENSES ALONG WITH SUPPORTING EVIDENCES AND STATED AS UNDER VIDE SUBMISSION DATED 18.07.2011 12. IN APPEAL, LD. CIT(A) CONFIRMED THE ACTION OF THE L D. A.O. WHEN BENCH ASKED FOR THE JUSTIFICATION OF THE FOREIGN TRAVEL, LD. A. R. COULD NOT SUBSTANTIATE ITS CLAIM IN SUPPORT OF FOREIGN TRAVELLING EXPENSES. TH EREFORE, THIS GROUND OF APPEAL IS ALSO DISMISSED. DISALLOWANCE OF RS. 31,94,820- OUT OF GENERAL REPAI R EXPENSES, RS. 8,22,760/- OUT OF REPAIRS & MAINTENANCE EXPENSE . 13. THE APPELLANT FURNISHED JUSTIFICATION IN RESPECT OF EACH AND EVERY EXPENDITURE ABOVE RS. 1 LAC AND IT WAS EXPLAINED THAT EXPENSES INCURRED ARE ROUTINE REPAIRING EXPENSES WHICH ARE RECURRING IN NATURE AN D NEITHER ANY NEW ASSET HAS COME INTO EXISTENCE NOR ANY ENDURING NATURE BENEFIT HAS ACCRUED BY INCURRING ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 6 SUCH EXPENSES. IT WAS FURTHER SUBMITTED THAT SOME O F THE REPAIRING EXPENSES WERE INCURRED IN RENTED PREMISES AND THEREFORE WERE ALLOWABLE AS REVENUE EXPENDITURE U/S. 30(A)(I). 14. THE A.O. HOWEVER DID NOT COMPLETELY AGREE WITH ALL THE JUSTIFICATIONS / EXPLANATIONS FURNISHED BY THE APPELLANT AND ACCORDI NGLY CONSIDERED CERTAIN EXPENSES OUT OF FOLLOWING HEADS AS CAPITAL EXPENDIT URE AND DISALLOWED THE SAME. SR. PARTICULARS AMOUNT NO. CONSIDERED AS CAPITAL EXPENSES (RS.) (I) GENERAL REPAIRS & MAINTENANCE 31,94,820 (II) REPAIRS & MAINTENANCE - OTHERS 8,22,760 (III) REPAIRS & MAINTENANCE - PLANT & MACHINERY 33,53,416 TOTAL... 73,70,996 15. THE APPELLANT DOES NOT DESIRE TO BURDEN THIS STATEM ENT OF FACTS WITH THE DETAILS OF SUCH INDIVIDUAL ITEMS OF AFORESAID REPAIRS WHICH WOULD BE FURNISHED IN THE COURSE OF THE HEARING OF THE APPEAL. 16. WITHOUT PREJUDICE TO THE FACT THAT THE EXPENSES DIS ALLOWED BY THE A.O. ARE OF REVENUE NATURE, THE A.O. FAILED TO ALLOW CORRESPOND ING DEPRECIATION ON THE EXPENDITURE CONSIDERED BY HIM AS CAPITAL EXPENDITUR E. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 7 17. IN APPEAL, LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 18. IN THIS CASE, IT IS SEEN THAT THESE EXPENSES HAVE B EEN INCURRED IN RESPECT OF PREHEATER BYPASS DUCT WHICH HAD FALLEN DOWN AND DAM AGED. THE PAYMENT HAS BEEN MADE TO PADHIYAR HITECH P. LTD. A PREHEATER B YPASS DUCT IS A CHANNEL FOR PASSING THE PREHEATED AIR AND IS A SPECIFIC STRUCTU RE REQUIRING VERY HIGH LEVEL OF SOPHISTICATION AND EXPERTISE IN ITS CONSTRUCTION. L D. A.O. HELD THIS EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE AND LD. CIT(A) ALSO CONFIRMED THE ACTION OF THE A.O. HOWEVER, ALTERNATE GROUND OF DEPRECIATION FOR ABOVE SAID CAPITAL EXPENDITURE WAS ALLOWED BY THE LD. CIT(A). THEREFOR E, THIS GROUND OF APPEAL IS DISMISSED. DISALLOWANCE OUT OF SALES PROMOTION EXPENSES - RS. 71,02,289/- 19. THE APPELLANT HAS CLAIMED TO INCUR SALES PROMOTION EXPENSES OF RS. 3,44,73,319/-FOR THE YEAR UNDER APPEAL ON THE GROUN D THAT SUCH EXPENSES WERE INCURRED MAINLY ON THE DEALERS FOR PROMOTING SALE O F PRODUCTS OF THE APPELLANT COMPANY. 20. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AP PELLANT FURNISHED ALL THE RELEVANT DETAILS ALONG WITH PROOFS IN JUSTIFICATION OF ITS CLAIM OF SALES PROMOTION EXPENSES VIDE SUBMISSION DATED 28.07.2011. 21. THE APPELLANT VIDE LETTER DATED 16.12.2011 FURTHER SUBMITTED THAT THERE ARE LARGE NUMBER OF PAYEES IN RESPECT OF THESE EXPENSES WHO H APPEN TO BE DEALERS, CUSTOMERS, SUPPLIERS, BANKERS AND MANY OTHER PERSON S WITH WHOM THE ASSESSEE CARRIES ON ITS BUSINESS ACTIVITIES. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 8 22. WITHOUT APPRECIATING TO THE ABOVE, THE A.O. HAS MAD E THE DISALLOWANCE OF RS. 71,02,289/- OUT OF SALES PROMOTION EXPENSES CONTEND ING THAT SUCH EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS. 23. IN APPEAL, LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 24. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. LD. CIT(A0 DISALLOWED THE SALES PROMOTION EXPENSES OF RS. 71,0 2,289/- ON ACCOUNT OF THAT EXPENDITURE WAS INCURRED ON THE FOREIGN TRIPS BY SH RI MEHTA AND MR. SRIVASTAVA. BUT ASSESSEE COULD NOT SUBSTANTIATE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF FOREIGN TRIP THAT HOW THIS TRIP HAS BENEFITTED THE BUSINESS OF THE ASSESSEE. AND APART FROM THAT ASSESSEE HAS ALSO INCURRED EXPENDIT URE OF RS. 1,60,000/- ON PURCHASE OF CRICKET MATCH TICKET. WE JUST FAIL TO U NDERSTAND THAT HOW CRICKET MATCH TICKET HAS BENEFITTED THE BUSINESS OF THE AS SESSEE. IN OUR CONSIDERED OPINION, LD. CIT(A) HAS PASSED REASONED ORDER. THER EFORE, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL IS DISMISSED. 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 26. ITA NO. 243/RAJKOT/2015 FOR REVENUES APPEAL FOR A. Y. 2009-10. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 9,33,632/- OUT OF GIFT EXPENSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWA NCE OF RS. 1,21,743/- OUT OF CLUB EXPENSES BEING PERSONAL IN NATURE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 31,94,820/- OUT OF GENERAL ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 9 REPAIR AND MAINTENANCE EXPENSES AND RS. 8,22,760/- OUT OF REPAIR AND MAINTENANCE-OTHERS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS, 23,14,410/- OUT OF SALES PROMOTION EXPENSES. 27. SO FAR GROUND NO. 1 IS CONCERNED WITH REGARD TO DE LETING THE DISALLOWANCE OF RS.9,33,632/- OUT OF GIFT EXPENSES. 28. IN CONNECTING APPEAL ITA NO. 154/RJT/2015, WE HAVE CONFIRMED THE ACTION OF LD.CIT(A). THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 29. NOW WE COME TO NEXT GROUND RELATING TO DELETING THE DISALLOWANCE OF RS. 1,21,743/- OUT OF CLUB EXPENSES BEING PERSONAL IN N ATURE. DISALLOWANCE OUT OF CLUB EXPENSES - RS. 1,21,743/- 30. THE APPELLANT HAS INCURRED CLUB EXPENSES OF RS. 1,2 1,743/- DURING THE YEAR UNDER APPEAL. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE APPELLANT VIDE LETTER DATED 18.07.2011 FURNISHED DETAILS OF CLUB E XPENSES AND JUSTIFIED ITS ALLOWABILITY BY SUBMITTING AS UNDER: ''AS PER ANNEXURE F OF THE TAX AUDIT REPORT, THE AS SESSEE COMPANY HAS INCURRED FOLLOWING EXPENDITURE AMOUNTING TO RS. 1,21,743/- A T CLUBS: SPORTS & NATURAL CLUB - RS. 7,333/- CLUB26-RS. 1,912/- THE BOMBAY PRESIDENCY RADIO CLUB LTD. - RS. 1,17,49 8/- COPIES OF ABOVE LEDGER ACCOUNTS ARE ENCLOSED. THE ASSESSEE, BEING A BIG CORPORATE HOUSE, IS A MEM BER OF VARIOUS BUSINESS ASSOCIATIONS. THIS EXPENDITURE IS INCURRED AT CLUBS AS MEMBERSHIP AND OTHER CHARGES VIZ. ENTRANCE FEES, SUBSCRIPTION, COST OF CLUB SERVICES AND FACILITIES IN THE NORMAL COURSE OF BUSINESS ON THE COMPANY OFFICIALS AT THE ASSOCIATION OF BUSINESS MEN / INDUSTRIALISTS /PROSPECTIVE CUSTOMERS ETC. ' ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 10 31. THE APPELLANT FURTHER SUBMITTED SAMPLE SUPPORTING V OUCHERS ALONG WITH BILLS IN RESPECT OF EXPENSES INCURRED AT BOMBAY PRESIDENCY R ADIO CLUB VIDE SUBMISSION DATED 28.07.2011. 32. WITHOUT APPRECIATING THE ABOVE SUBMISSION, THE A.O. DISALLOWED CLUB EXPENSES OF RS. 1,21,743/- CONSIDERING IT AS ALLEGED PERSONA L EXPENDITURE ON THE CONTENTION THAT IT IS INCURRED FOR PERSONAL ENTERTA INMENT. THE A.O. HAS FAILED TO CONSIDER THE FACT THAT THE APPELLANT BEING A PUBLIC LIMITED LISTED COMPANY IS INCAPABLE OF INCURRING ANY 'PERSONAL' EXPENDITURE. 33. IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED A JUDG MENT OF MADRAS HIGH COURT IN THE CASE OF SUNDARAM INDUSTRIES LTD. 240 ITR 335 W HEREIN HONBLE HIGH COURT HAS HELD THAT SUBSCRIPTION PAID TO CLUB ON BE HALF OF ITS DIRECTOR IS ALLOWABLE EXPENDITURE AND IN THAT JUDGMENT A DECISI ON OF BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVATOR COMPANY (1992) (1) 195 ITR 682, HELD THAT A PAYMENT TO THE CLUB WAS MADE TO UNABLE THE ASSESSEE TO INCREASE ITS BUSINESS RELATION AND PROSPECTS AND HELD THAT EXPENDITURE IS ALLOWABLE EXPENDITURE. THUS, RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT , WE HOLD THAT LD. CIT(A) HAS PASSED REASONED ORDER AND SAME DOES NOT REQUIRE ANY KIND OF INTERFERENCE AT OUT END. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 34. NOW WE COME TO NEXT GROUND RELATING TO DELETING THE DISALLOWANCE OF RS. 31,94,820/- OUT OF GENERAL REPAIR AND MAINTENANCE E XPENSES AND RS. 8,22,760/- OUT OF REPAIR AND MAINTENANCE AND RS. 33,53,416/- O UT OF MACHINERY REPAIRS. 35. THE APPELLANT FURNISHED JUSTIFICATION IN RESPECT OF EACH AND EVERY EXPENDITURE ABOVE RS. 1 LAC AND IT WAS EXPLAINED THAT EXPENSES INCURRED ARE ROUTINE ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 11 REPAIRING EXPENSES WHICH ARE RECURRING IN NATURE AN D NEITHER ANY NEW ASSET HAS COME INTO EXISTENCE NOR ANY ENDURING NATURE BENEFIT HAS ACCRUED BY INCURRING SUCH EXPENSES. IT WAS FURTHER SUBMITTED THAT SOME O F THE REPAIRING EXPENSES WERE INCURRED IN RENTED PREMISES AND THEREFORE WERE ALLOWABLE AS REVENUE EXPENDITURE U/S. 30(A)(I). 36. THE A.O. HOWEVER DID NOT COMPLETELY AGREE WITH ALL THE JUSTIFICATIONS / EXPLANATIONS FURNISHED BY THE APPELLANT AND ACCORDI NGLY CONSIDERED CERTAIN EXPENSES OUT OF FOLLOWING HEADS AS CAPITAL EXPENDIT URE AND DISALLOWED THE SAME. SR. PARTICULARS AMOUNT NO. CONSIDERED AS CAPITAL EXPENSES (RS.) (I) GENERAL REPAIRS & MAINTENANCE 31,94,820 (II) REPAIRS & MAINTENANCE - OTHERS 8,22,760 (III) REPAIRS & MAINTENANCE - PLANT & MACHINERY 33,53,416 TOTAL... 73,70,996 37. THE APPELLANT DOES NOT DESIRE TO BURDEN THIS STATEM ENT OF FACTS WITH THE DETAILS OF SUCH INDIVIDUAL ITEMS OF AFORESAID REPAIRS WHICH WOULD BE FURNISHED IN THE COURSE OF THE HEARING OF THE APPEAL. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 12 38. WITHOUT PREJUDICE TO THE FACT THAT THE EXPENSES DIS ALLOWED BY THE A.O. ARE OF REVENUE NATURE, THE A.O. FAILED TO ALLOW CORRESPOND ING DEPRECIATION ON THE EXPENDITURE CONSIDERED BY HIM AS CAPITAL EXPENDITUR E. 39. OUT OF GENERAL REPAIR EXPENSES AMOUNTING TO RS. 31, 94,820/- EXPENSES AMOUNTING RS. 12479839/- HAVE BEEN INCURRED ON A RE NTED PREMISES. THEREFORE, SAME CANNOT BE CONSIDERED AS CAPITAL EXP ENDITURE. IN VIEW OF THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. HI LINE PENS (P.) LTD. 306 ITR 182 WHEREIN IT WAS HELD THAT THE SUCH EXPENSES ARE ALLOWABLE AS REVENUE EXPENSES. THEREFORE, RESPECTFULLY CONSIDERING THE S AME, WE HOLD SUCH EXPENSES ARE ALLOWABLE EXPENSES. AND LD. CIT(A) HAS PASSED R EASONED ORDER AND SAME DOES NOT REQUIRE ANY KIND OF INTERFERENCE AT OUR EN D. 40. IN THE RESULT, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 41. NOW WE COME TO NEXT GROUND RELATING TO DELETING THE DISALLOWANCE OF RS. 23,14,410/- OUT OF SALES PROMOTION EXPENSES. 42. SINCE IN CONNECTING APPEAL IN ITA NO. 154/RJT/2015, WE HAVE CONFIRMED THE ACTION OF THE LD. CIT(A). THUS, IN PARITY WITH THE CONNECTING APPEAL, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 43. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. 44. ITA NO. 191/RAJKOT/2016 ASSESSEES APPEAL FOR A.Y. 2011-12. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF GIFT EXPENSES OF RS. 97,14,705/- ON ACCOUNT OF ALLEGED NON ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 13 BUSINESS PURPOSE AND THE CIT(A) HAS ERRED IN CONFIR MING THE SAME TO THE EXTENT OF RS. 34,00,147/-. 2. THE LEARNED ASSESSING OFFICER HAS ERRED I N LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS. 1,44,75,246/- OUT OF FOREIGN TR AVELLING EXPENSES ON ACCOUNT OF ALLEGED NON BUSINESS PURPOSE AND THE CIT(A) HAS ERRED IN CONFIRMING THE SAME. 3. THE. LEARNED ASSESSING OFFICER HAS ERRED I N LAW AS WELL AS ON FACTS IN MAKING DISALLOWANCE OF RS. 7,47,840/- OUT OF BUSINESS PROM OTION EXPENSES ON ACCOUNT OF ALLEGED NON BUSINESS PURPOSE AND THE CIT(A) HAS ERR ED IN CONFIRMING THE SAME. 45. NOW WE COME TO FIRST GROUND RELATING TO DELETING TH E DISALLOWANCE OF GIFT EXPENSES TO THE EXTENT OF RS. 34,00,147/-. 46. IN CONNECTING APPEAL IN ITA NO. 154/RAJKOT/2015 FOR ASSESSMENT YEAR 2009- 10, WE HAVE CONFIRMED THE ACTION OF THE LD. CIT(A). THUS, THIS GROUND OF APPEAL IS DISMISSED. 47. NOW WE COME TO NEXT GROUND RELATING TO DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF RS. 1,44,75,246/- U/S. 37(1) OF THE ACT . 48. IN CONNECTING APPEAL IN ITA NO. 154/RAJKOT/2015 WE HAVE DISMISSED SAME GROUND OF APPEAL. THEREFORE, IN PARITY WITH THE SAI D ORDER, WE DISMISS THIS GROUND OF APPEAL. 49. NOW WE COME TO NEXT GROUND RELATING TO DISALLOWANCE OF BUSINESS PROMOTION EXPENSES TO THE EXTENT OF RS. 7,47,840/-. 50. IN CONNECTING APPEAL OF THE ASSESSEE IN ITA NO. 154 /RJT/2015, WE HAVE DISMISSED SAME GROUND OF THE ASSESSEE FOR ASSESSMEN T YEAR 2009-10. THEREFORE, IN PARITY WITH THE SAID APPEAL, WE DISMISS THIS GRO UND OF APPEAL OF THE REVENUE. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 14 51. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 52. ITA NO. 408/RAJKOT/2016 REVENUES APPEAL FOR A.Y. 2 013-14. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE OF RS.1,03,93,322/- TO RS.36,37,663/- AND DELETING THE BALANCE OF RS.67,55 ,659/-. THE ID. CIT(A) OUGHT TO HAVE UPHELD THE SAME 2.THE LEARNED CIT(A) HAS ERRED ON FACTS IN DELETING THE CLUB EXPENSES OF RS.37,462/- 3. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFO RE OR DURING THE PROCEEDING BEFORE THE HON'BLE I.T.A.T. 4. ON THE FACTS OF THE CASE AND IN LAW, THE LD. C. I.T.(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER OF THE A.O. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C .I.T.(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT . 53. FIRST OF ALL, WE WOULD DEAL WITH GROUND RELATING TO DELETING THE DISALLOWANCE OF RS. 67,55,659 OUT OF GIFT EXPENSES OF RS. 1,03,93,3 22/-. 54. SINCE IN CONNECTING ITA NO. 154/RAJKOT/2015, WE HAV E CONFIRMED THE ACTION OF THE LD. CIT(A). THUS, IN PARITY WITH THE SAME, W E DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 55. NOW WE COME TO NEXT GROUND RELATING TO DISALLOWANCE OF CLUB EXPENSES OF RS. 37,462/-. 56. WE HAVE GIVEN RELIEF TO THE ASSESSEE BY ALLOWING CL UB EXPENSES IN ITA NO. 154/RAJKOT/2015. THEREFORE, IN PARITY WITH THE SAID APPEAL, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 57. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 15 58. ITA NO. 470/RAJKOT/2017 REVENUES APPEAL FOR A.Y. 2 014-15. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE OF RS. 1,46,44,884/- TO RS.51,25,709/- AND DELETING THE BALANCE OF RS.95,91 ,175/-. THE ID. CIT(A) OUGHT TO HAVE UPHELD THE SAME 2. THE LEARNED CIT(A) HAS ERRED ON FACTS IN RESTRIC TING THE DISALLOWANCE OF RS.30,87,396/- TO RS.15,43,698/- I.E. TO 7.5% FROM 15% DISALLOWED BY THE AO IN RESPECT OF EXPENSES INCURRED FOR CONVEYANCE/VEHICLE /HIRED TAX EXPENSES WITHOUT APPRECIATING THE FACTS NARRATED IN THE ASSESSMENT O RDER BY THE A.O. 3. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEF ORE OR DURING THE PROCEEDING BEFORE THE HON'BLE I.T.A.T. 4. ON THE FACTS OF THE CASE AND IN LAW, THE LD. C.I.T.(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER OF THE A.O. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C.I.T.(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 59. FIRST GROUND IS RELATING TO DELETING THE DISALLOWA NCE OF RS. 95,91,175/- OUT OF TOTAL GIFT EXPENSES OF RS. 1,46,44,884/-. 60. SIMILAR EXPENSES WERE ALLOWED BY THE TRIBUNAL IN EA RLIER YEAR AND ON THE BASIS OF THAT WE ALLOWED 65% OF GIFT EXPENSES IN CONNECTI NG APPEAL IN ITA NO. 154/RJT/2015. THUS, IN PARITY WITH THE CONNECTING A PPEAL, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 61. NOW WE COME TO NEXT GROUND RELATING TO DELETING THE DISALLOWANCE OF RS. 15,43,698/- OUT OF CONVEYANCE/VEHICLE/HIRED TAX EXP ENSES IS CONCERNED, LD.A.O. MADE DISALLOWANCE ON THE GROUND THAT APPELL ANT WAS NOT ABLE TO ESTABLISH THAT THE EXPENSES WERE EXCLUSIVELY INCURR ED FOR BUSINESS PURPOSE. THE APPELLANT EXPLAINED THAT SUCH EXPENSES ARE INHERENT TO INCUR IN THEIR BUSINESS FOR THE PURPOSE OF TRAVELLING BY THE EMPLOYEES AND THAT THE A.O. MADE LUMP- SUM DISALLOWANCE IN AD-HOC MANNER WITHOUT THERE BEI NG ANYTHING ADVERSE ON ITA NO. 154 & 243/ RJT/2015 & OTHERS . A.YS. 2009-10, 2011 -12, 2013-14 & 2014-15 16 RECORD. THE APPELLANT ALSO SUBMITTED THAT THERE CAN NOT BE ANY PERSONAL EXPENSES IN THE CASE OF COMPANY WHO IS A CORPORATE ENTITY AND A.O. DISALLOWED 15% OF TOTAL EXPENSES CLAIMED BY THE ASSESSEE. 62. IN APPEAL BEFORE THE LD. CIT(A) GRANTED RELIEF OF 5 0% AND DIRECTED TO A.O. TO RESTRICT THE DISALLOWANCE TO 7.5% OF THE TOTAL EXPE NSES. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A) AND THEREFORE THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 63. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 04- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 25/04/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD