ACIT, Nashik V. Shri SOHANLAL MOHANLAL BHANDARI, Nashik

ITA 1542/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93770 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation; Non-deduction of tax; Bad and doubtful debts
• Section: 194C; 37; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. 1542 /PN/201 3 ASSESSMENT YEAR : 20 10 - 11 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. VS. SHRI SOHANLAL MOHANLAL BHANDARI, OPP. POLICE STATION, NIPHAD, TAL- NIPHAD, DISTT. NASHIK 422 209. (APPELLANT) (RESPONDENT) PAN NO. ABTPB2116L REVENUE BY: SHRI B. C. MALAKAR ASSESSEE BY: SHRI ABHAY AVCHAT DATE OF HEARI NG : 25-05-2015 DATE OF PRONOUNCEMENT : 29-05-2015 ORDER PER VIKAS AWASTHY, JM:- THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 31.05 .2013 FOR THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, THE REVENUE HAS RAISED AS MANY AS 8 GROUNDS, WHICH ARE AS UNDER :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE ADDI TION OF RS.15,28,921/- MADE ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN HOLDING THAT TDS PROVISION DOES NOT ATTRACT ON THE HAMALI PAYMENT OF RS.10,20,000/- EIT HER IN THE FORM OF COMMISSION OR CONTRACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE DISA LLOWANCE OF EXPENSES 2 CLAIMED U/S 36 OF RS.1,30,255/-, MADE BY THE ASSESS ING OFFICER. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE DISA LLOWANCES OF PRIOR PERIOD EXPENSES OF RS.5,13,637/-, MADE BY THE ASSESSING OF FICER. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE DISA LLOWANCE U/S 40(A)((2)(B) OF RS.60,000/-, MADE BY THE ASSESSING OFFICER. 6. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING O FFICER MAY BE RESTORED. 7. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDE NCE TO SUBSTANTIATE HIS CASE. 8. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY , AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCA SION DEMANDS. THE GROUNDS OF APPEAL NO.6, 7 AND 8 ARE GENERAL IN NATUR E. THUS, THE EFFECTIVE GROUNDS OF APPEAL ARE FROM NO.1 TO 5 WHICH AR E TO BE ADJUDICATED UPON. 3. THE FIRST GROUND RAISED BY THE REVENUE IN ITS APPEAL IS WITH REGARD TO DELETING THE ADDITION OF RS.15,28,921/- WITH RESPECT TO D ISALLOWANCE OF BAD DEBTS. THE ASSESSEE IS A COMMISSION AGENT. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASS ESSEE CLAIMED BAD DEBTS OF RS.15,28,921/-. THE ASSESSING OFFICER REJECTED TH E CLAIM OF ASSESSEE ON THE GROUND, THAT THE ASSESSEE HAS MADE N O EFFORT TO RECOVER THE AMOUNT WRITTEN-OFF AS BAD DEBTS. IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE C ASE OF T.R.F. LTD. VS. CIT REPORTED AS 323 ITR 397 (SC) DELETED THE ADDITION. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) IN DELETING THE ADDITION. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF T.R.F. LTD. VS. CIT (SUPRA) HAS HELD AS UNDER :- 3 THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRES ENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN F ACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCU RS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CR EDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MATTER IS REM ITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVEMENTI ONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. THE HONBLE APEX COURT HAS UNAMBIGUOUSLY HELD THAT IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T HAS BECOME IRRECOVERABLE. THE ONLY REQUIREMENT IS THAT THE BAD DE BT ARE TO BE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESS EE. IN THE PRESENT CASE THE REVENUE HAS NOT DISPUTED THE RECORD ING OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE REVENUE HAS OVE RSTEPPED ITS JURISDICTION IN QUESTIONING THE MANNER OF DECLARING DEBTS AS BAD. IN VIEW OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA , THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 4. THE SECOND GROUND RAISED BY THE REVENUE IN ITS APPEA L IS WITH RESPECT TO NON-DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE TO A GROUP OF PERSONS TOTAL AMOUNTING TO RS.10,20,000/-. THE ASSESSE E HAS MADE PAYMENTS TO A GROUP OF PERSONS THROUGH THEIR GROUP LEA DER TOWARDS REGULAR TRADE EXPENSES SUCH AS RAILWAY WAGON CLEANING C HARGES, RAILWAY WAGON LOADING AND UNLOADING CHARGES, RAILWAY STAT ION SITE CLEANING CHARGES, ETC.. THE ASSESSING OFFICER DISALLOWED THE S AME UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS ON THE SAID PAYMENTS. THE ASSESSING OFFICER HELD THAT THE PAYMENTS A RE IN THE NATURE OF COMMISSION. THE COMMISSIONER OF INCOME TAX (AP PEALS) BY 4 FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR A SSESSMENT YEAR 2008-09 DELETED THE ADDITION. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECOR D THE COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2008-09 IN ITA NO.990/PN/2011 DECIDED ON 15.10.2012, WHER EIN, IDENTICAL ISSUE HAS BEEN DECIDED. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL IN AFORESAID APPEAL IS AS UNDER :- 5. THE NEXT ISSUE IS DISALLOWANCE MADE BY THE A.O OF RS. 10,20,000/- U/S. 40A(IA) OF THE ACT FOR NON-COMPLIANCE OF TDS P ROVISION. THE A.O HAS OBSERVED THAT LEDGER EXTRACT OF COMMISSION SUBMITTE D BY THE ASSESSEE SHOWED THAT THE ASSESSEE HAD PAID COMMISSION OF RS. 51,000/- TO 20 ITA NO. 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHANLAL BHANDARI A.Y.2008-09 PARTIES, WHICH LIST IS GIVEN ON PAGE NO . 3 OF THE ASSESSMENT ORDER. THE A.O ASKED THE ASSESSEE TO JUSTIFY THE PA YMENT OF COMMISSION PAID TO THOSE PARTIES AND ALSO TO JUSTIFY NON-DEDUC TION OF TDS FROM THE PAYMENT MADE TO THOSE PERSONS. THE ASSESSEE CONTEND ED THAT THE AMOUNT IS PAID TO A GROUP OF PERSONS (TOLI) AT THE STATION TOWARDS CLEANING EXPENSES OF RAILWAY WAGONS AND OTHER CHARGES. THE A SSESSEE FURNISHED THE PHOTO COPIES OF THE VOUCHERS FOR THE PAYMENT MA DE TO ONE OF THE RECIPIENT SHRI RAJENDRA AMBADAS SHINGARE, WHO HAS R ECEIVED ALL THE PAYMENTS. THERE WERE 24 VOUCHERS WHICH HAVE BEEN SI GNED BY SHINGARE. THE AMOUNT HAS BEEN ACCOUNTED IN THE BOOKS OF ACCOU NT UNDER THE HEAD 'COMMISSION'. THE A.O MADE THE DISALLOWANCE BY GIVI NG THE REASON THAT THERE WERE CONFLICTING AND DIVERGENT STANDS OF THE ASSESSEE IN RESPECT OF THE SAID PAYMENT AND HENCE, THE SAID PAYMENT CANNOT BE CONSIDERED GENUINE. HE FURTHER HELD THAT EVEN IF IT IS A GENUI NE PAYMENT MADE TO A PERSON ORGANIZING LABOUR FOR CARRYING OUT WORK OF R AILWAY WAGONS, IT IS IN THE NATURE OF A CONTRACTUAL PAYMENT AND ASSESSEE WA S DUTY BOUND TO MAKE THE TDS U/S. 194C OF THE ACT. THE A.O., THEREF ORE, ON THIS REASON ALSO MADE THE DISALLOWANCE AND MADE THE ADDITION TO THE EXTENT OF RS. 10,20,000/- IN HIS TOTAL INCOME. 6. THE LD CIT(A) DELETED THE ADDITION MADE BY THE A .O. THE REASONS GIVEN BY THE LD CIT(A) ARE AS UNDER : '6.4. FROM THE ABOVE OBSERVATIONS OF THE LD. AO, IT IS APPARENT THAT HE HAS MADE THE IMPUGNED DISALLOWANCE ON TWO GROUND S. FIRSTLY, ACCORDING TO HIM, THE ENTIRE COMMISSION PAYMENT OF R S. 10,20,000/- IS NOT GENUINE AS THE APPELLANT HAS TAKEN DIFFERENT STAND WHILE WRITING THE BOOKS OF ACCOUNT AND FILING THE RETURN OF INCOME. SECONDLY, THE PAYMENT MADE FOR ORGANIZING LABOUR WO RK FOR CARRYING OUT THE CLEANING OF RAILWAY WAGON WAS, IN THE AO'S OPINION IN THE NATURE OF CONTRACTUAL PAYMENT ON WHICH TDS W AS REQUIRED TO BE DEDUCTED U/S 194C. SINCE THE APPELLANT HAS NOT D EDUCTED THE TDS, THE IMPUGNED AMOUNT WAS DISALLOWED. THE APPELL ANT'S 5 BUSINESS IS THAT OF COMMISSION AND TRANSPORT AGENT. IN THIS PROCESS, THE APPELLANT IS REQUIRED TO TAKE RAILWAY WAGONS ON HIRE FROM THE RAILWAYS AND BEFORE THE WAGONS ARE PUT TO USE AND A FTERWARDS ALSO, THE APPELLANT IS OBLIGED TO KEEP THEM CLEAN A ND PROPERLY WASHED. THEREFORE, THE APPELLANT WAS REQUIRED TO TA KE THE SERVICES OF GROUP OF PERSONS WHO WERE PAID LABOURERS FOR CLE ANING THE RAILWAY WAGONS. THEREFORE, IT IS FOUND TO BE AN INT EGRAL PART OF THE APPELLANT'S BUSINESS. THE LD. AO HAS NOT INVOKED TH E PROVISIONS OF SECTION 40A(IA), INSTEAD HE HAS PRIMARILY TREATED T HE ENTIRE COMMISSION PAYMENT AS NOT GENUINE. HOWEVER, WHILE G IVING THE FINDING, THE LD. AO HAS NOT PROPERLY APPRECIATED TH E FACTS OF THE CASE AND THE NATURE OF BUSINESS. THE LD. AR HAS CAN VASSED BEFORE ME THAT PROPER UPKEEP AND CLEANLINESS OF THE RAILWA Y WAGON TAKEN BY THE APPELLANT FROM THE RAILWAYS IS THE APPELLANT 'S RESPONSIBILITY. THE WORK AND SERVICES RENDERED BY THE VARIOUS PERSO NS TO WHOM THE IMPUGNED AMOUNT WAS PAID HAS NOT BEEN DISPUTED OR DENIED BY THE ASSESSING OFFICER. WITH REGARD TO THE FACT RECO RDED BY THE AO THAT ALL THESE PAYMENTS WERE RECEIVED BY ONE ITA NO . 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHANLAL BHA NDARI A.Y.2008-09 INDIVIDUAL SHRI RAJENDRA AMBADAS SHINGA RE, THE LD. AR HAS ARGUED THT PAYMENT IN AFFECT WAS MADE TO 20 DIFFERENT PERSONS WHICH ARE REPRODUCED ON PAGE 3 OF THE IMPUG NED ASSESSMENT ORDER, HOWEVER, THE PERSON SHRI RAJENDRA AMBADAS SHINGARE WAS ONLY THE TOLI LEADER WHO HAS BROUGHT A LL THESE WORKERS FOR KEEPING THE JOB OF CLEANING DONE. THE A PPELLANT HAS FURNISHED COPIES OF VOUCHERS FOR PAYMENT BEFORE THE ASSESSING OFFICER AND THE FACT OF PAYMENT HAS NOT BEEN DISPUT ED. ON GOING THROUGH THE FINDINGS OF THE ASSESSING OFFICER, IT I S SEEN THAT HE HAS DISPUTED THE INCREASE IN THE PAYMENT TO THESE WORKE RS FROM RS. 1500 TO RS. 4000/- AND CONCLUDED THAT THE PAYMENTS WERE NOT GENUINE. THE LD. AR HAS SUBMITTED THAT THERE IS NO DIVERSITY IN THE STAND TAKEN BY THE APPELLANT IN THE BOOKS OF ACCOUN T AND IN THE RETURN OF INCOME. WHATEVER HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT, THE SAME HAS BEEN INCORPORATED WHILE FILIN G RETURN OF INCOME. THIS CONTENTION IS FOUND TO BE CORRECT. WIT H REGARD TO THE INCREASE IN THE PAYMENTS UNDER THIS HEAD, IT WAS SU BMITTED BY THE LD. AR THAT THE PAYMENTS HAVE INCREASED PER PERSON FROM RS. 1500 TO RS.4000/- KEEPING IN VIEW THE AMOUNT OF JOB REQU IRED TO BE DONE AND THE AVAILABILITY OF THE WORKERS FOR THE JOB. IN MY CONSIDERED VIEWS, THIS CANNOT BE HELD AGAINST THE APPELLANT. W ITH REGARD TO THE SECOND GROUND TAKEN BY THE ASSESSING OFFICER FOR MA KING THE IMPUGNED DISALLOWANCE, IT IS NOTED THAT THIS IS NOT A CONTRACTUAL PAYMENT WITHIN THE MEANING OF SECTION 194C. THERE W AS NO CONTRACT BETWEEN THE APPELLANT AND THE PERSONS WHO CARRIED OUT THE WAGON CLEANING JOB. INSTEAD THE PAYMENTS HAVE BEEN MADE TO INDIVIDUAL WORKERS THROUGH THEIR TOLI LEADER VIS. R AJENDRA AMBADAS SHINGARE. THE TOLI LEADER BY NO STRETCH OF IMAGINAT ION CAN BE CALLED A LABOUR CONTRACTOR. THEREFORE, THERE IS NO APPLICA TION OF SECTION 194C ON THESE FACTS. AS A NATURAL COROLLARY TO THIS FINDING, SECTION 40A(IA) IS ALSO NOT APPLICABLE, WHICH THE ASSESSING OFFICER HAS OTHERWISE NOT INVOKED WHILE MAKING THE IMPUGNED DIS ALLOWANCE. THE APPELLANT'S CASE IS, THEREFORE, SUPPORTED BY TH E DECISION OF THE HON'BLE TRIBUNAL IN THE CASE OF SAMANWAYA V. ASSTT. CIT (SUPRA) 6 AND THE APEX COURT IN THE CASE OF BIRLA CEMENT WORK S VS. CBDT (SUPRA). IN VIEW OF THESE FINDINGS OF FACT AND THE POSITION OR LAW, THE IMPUGNED DISALLOWANCE OF RS. 10,20,000/- IS UNJUSTI FIED AND THE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APPE AL IS, THEREFORE, ALLOWED.' NOW, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . WE FIND THAT SO FAR AS GENUINENESS OF THE PAYMENT IS CONCERNED, IT IS NOT THE CASE OF THE A.O THAT THE ASSESSEE IS NOT USING RAILWAY WAGONS F OR TRANSPORTATION. THE LD COUNSEL ARGUED THAT IT IS A CUSTOM THAT THE TOLI LEADER ACCEPTS THE PAYMENT AND IN THE GROUP THEY CARRY OUT THE CLEANIN G JOB. HE FURTHER ARGUES THAT INCREASE IN THE PAYMENT WAS DUE TO MARK ET DEMAND I.E. FROM RS. 1500/- TO RS. 4000/-. HE ALSO ARGUED THAT EXCEP T SUSPICION, NOTHING IS THERE TO SUPPORT THE VIEW TAKEN BY THE A.O. 8. PER CONTRA, THE LD. D.R. SUBMITS THAT IT IS CERT AINLY STRANGE THAT THE PAYMENT IS INCREASED FROM RS. 1500/- TO RS. 4000/-. IN OUR OPINION, THE A.O SHOULD HAVE TAKEN SOME PAINS TO BRING ON RECORD SOME MATERIAL TO SHOW THAT THE AMOUNTS PAID BY THE ASSESSEE WHICH WE RE DULY RECORDED IN ITA NO. 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHA NLAL BHANDARI A.Y.2008-09 THE BOOKS OF ACCOUNT WERE INFLATED AS A DMITTEDLY, IT IS NOT DISPUTED BY THE A.O THAT ASSESSEE WAS REQUIRED THE SERVICES FOR CLEANING THE RAILWAY WAGONS. 9. SO FAR AS THE SECOND REASON OF THE A.O IS CONCER NED, IN OUR OPINION, IT IS A CUSTOM IN THAT PARTICULAR TRADE TO MAKE A G ROUP AND UNDERTAKE CLEANING WORK. IN OUR OPINION, IT CANNOT BE SAID AS A SUPPLY OF LABOURERS BUT, THE GROUP OF LABOURERS IS ENGAGED THEMSELVES A ND PROVISIONS OF SEC. 194C ARE NOT APPLICABLE AS RIGHTLY HELD BY THE LD C IT(A). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, RELEVANT GROUND TAKEN BY THE REVENUE IS DISMISSED. WE FIND THAT THERE HAS BEEN NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THIS ASSESSMENT YEAR AS WELL. THE PAYME NTS HAVE BEEN MADE TO SHRI RAJENDRA AMBADAS SHINGARE WHO IS GROUP LEA DER. IT HAS COME ON RECORD THAT IN EARLIER ASSESSMENT YEARS ALSO, TH E PAYMENTS ON BEHALF OF ALL THE LABOUR WERE RECEIVED BY THE SAME GROUP LEADER. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH FOR THE ASSESSMENT YEAR 2008-09 IN THE CASE OF THE ASS ESSEE, WE HOLD THAT THE PROVISIONS OF SECTION 194C ARE NOT ATTRACTED O N THE PAYMENTS MADE TO GROUP LEADER. WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE FOR AFORESAID REASONS. 7 6. THE THIRD GROUND RAISED BY THE REVENUE IN APPEAL IS DE LETING OF DISALLOWANCE OF EXPENSES CLAIMED UNDER SECTION 36 OF THE AC T. THE ASSESSEE HAS CLAIMED FUEL EXPENSES TO THE TUNE OF RS.1,30,2 55/- FOR THE VEHICLES USED FOR BUSINESS. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE ASSESSEE IS NOT ABLE TO SHOW T HE GENUINENESS OF THE EXPENDITURE. THE ASSESSING OFFICER FURTHER HELD THAT THE VEHICLES FOR WHICH FUEL EXPENDITURE HAS BEEN CLAIMED BELONGS TO THE EM PLOYEES AND DOES NOT APPEAR IN THE BALANCE SHEET OF THE ASSESSEE. 7. IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) AFTE R EXAMINING THE ISSUE HELD AS UNDER :- 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE RIVAL CONTENTIONS. THE AO HAS MADE THE IMPUGNED DISALLOW ANCE IN RESPECT OF FUEL EXPENSES USED IN THE VEHICLES BELONGING TO THE EMPLOYEES ON THE GROUND THAT THESE VEHICLES ARE NOT APPEARING IN THE BALANCE SHEET OF THE ASSESSEE. THIS ISSUE HAS BEEN EXAMINED. THE ASSES SEE IS AN INDIVIDUAL AND HAS NUMBER OF EMPLOYEES OUT OF WHICH THREE VEHI CLES I.E. MARUTI AND INDIGO ARE OWNED BY HIS EMPLOYEES WHICH ARE ALSO US ED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS REIMBUR SED THE FUEL EXPENSES. SUCH EXPENDITURE IS, THEREFORE, ALLOWABL E UNDER SECTION 37. IT IS NOT NECESSARY THAT A VEHICLE SHOULD NECESSARILY BE OWNED BY THE BUSINESS OR SHOULD APPEAR IN THE BLOCK OF ASSETS TO ENTITLE A CLAIM OF EXPENSES IN RESPECT OF FUEL OF SUCH VEHICLES. IT IS NOT A CASE OF THE ASSESSEE THAT HE HAS CLAIMED DEPRECIATION ON SUCH VEHICLES. THE ASSESSE E HAS ONLY CLAIMED FUEL EXPENSES AND THERE IS NO DISPUTE THAT THESE WE RE UTILIZED FOR THE PURPOSE OF BUSINESS. ON THESE FACTS AND IN THE CIR CUMSTANCES, THE EXPENSES OF RS.1,30,255/- IS AN ALLOWABLE EXPENDITU RE UNDER SECTION 37 AS THE SAME HAS BEEN UTILIZED FOR THE PURPOSE OF BU SINESS. THE AO IS NOT JUSTIFIED IN MAKING THE IMPUGNED DISALLOWANCE. THE DISALLOWANCE OF RS.1,30,255/- IS THEREFORE, DELETED. THIS GROUND O F APPEAL IS ALLOWED. THE ONLY ARGUMENT RAISED BY THE LD. DEPARTMENTAL REPR ESENTATIVE IS THAT THE FUEL EXPENSES CLAIMED ON THE VEHICLES WERE NOT OWNED BY THE ASSESSEE. WE DO NOT FIND FORCE IN THE SUBMISSIONS OF THE L D. DEPARTMENTAL REPRESENTATIVE. EVEN IF THE VEHICLES WERE OW NED BY THE EMPLOYEES, IT IS NOT DISPUTED THAT THEY WERE USED FOR THE PURPOSE OF ASSESSEES BUSINESS. 8 WE DO NOT FIND ANY INFIRMITY IN THE OBSERVATION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. THE FOURTH GROUND IN APPEAL OF THE REVENUE RELATES TO DELETING OF DISALLOWANCE OF PRIOR PERIOD EXPENSES RS.5,13,637/-. THE ASS ESSEE HAS CLAIMED EXPENDITURE TO THE TUNE OF RS.5,13,637/- IN RESPEC T OF PAYMENTS MADE ON ACCOUNT OF WEIGH BRIDGE MAINTENANCE CHARGES, RAIL COMMISSION, HAMALI CHARGES, RENT NIPHAD KK SANGH, COMPUTER EXPENSES. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE BY TREATING THEM AS PRIOR PERIOD EXPENSES. 9. IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS), THE ASSESSEE AGAIN FURNISHED ALL THE DOCUMENTS RELATING TO TH E EXPENDITURE DISALLOWED. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER EX AMINING THE SAME HELD AS UNDER :- THE ASSESSEE HAS DEMONSTRATED THAT LIABILITY IN RE SPECT OF THESE EXPENSES GOT CRYSTALLIZED IN THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, THESE BECOME PAYABLE DURING THI S ASSESSMENT YEAR. THE CONTENTION OF THE ASSESSEE HAS BEEN EXAMINED AN D FOUND TO BE CORRECT. THE AO'S OBSERVATION WITH REGARD TO NON-D EDUCTION OF TDS IN RESPECT OF COMMISSION OF RS.3,03,33/- PAID TO SHRI SHANKARLAL BHAMKI THAKKAR IS FACTUALLY INCORRECT IN SO FAR AS THE ASS ESSEE HAS SUBMITTED NECESSARY PROOF AS COPY OF ACCOUNT TO DEMONSTRATE T HAT TDS OF RS.78,228/- HAS BEEN DEDUCTED ON THIS PAYMENT. THE REFORE, NO SUCH DISALLOWANCE IS WARRANTED UNDER SECTION 40(A)(IA). THERE IS NO DISPUTE WITH REGARD TO THE NON-PAYMENT OR GENUINENESS OF TH ESE EXPENSES. AS THESE EXPENSES WERE CRYSTALLIZED AND PAID DURING TH E ASSESSMENT YEAR UNDER APPEAL, SUCH EXPENSES ARE ALLOWABLE EXPENDITU RE UNDER SECTION 37. THE IMPUGNED DISALLOWANCE OF RS.5,13,637/- IS UNJUS TIFIED AND IS THEREFORE DELETED. THIS GROUND OF APPEAL IS ALLOWE D. IN VIEW OF THE CATEGORIC FINDINGS OF THE COMMISSIONER OF INC OME TAX (APPEALS) ABOUT THE GENUINENESS OF THE EXPENDITURE, W E DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. THE LD. DEPARTME NTAL 9 REPRESENTATIVE HAS NOT ABLE TO CONTROVERT THE OBSERVA TION OF THE COMMISSION OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGL Y, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. THE LAST GROUND IN APPEAL OF THE REVENUE IS DELETING O F DISALLOWANCE UNDER SECTION 40(A)(2)(B) OF THE ACT. THE ASSESS EE HAS DEBITED SALARY OF RS.1,20,000/- IN THE NAME OF SMT. SAPNA B HANDARI, WIFE OF ASSESSEES NEPHEW. THE ASSESSING OFFICER DISALLOWED 5 0% OF SALARY. THE ASSESSING OFFICER HELD THAT THE SALARY HAS BE EN PAID TO THE RELATIVE OF ASSESSEE. IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION WITH FOLLOWING OBSERVATIONS :- 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE RIVAL CONTENTIONS. THE ASSESSEE HAS PAID SALARY OF RS.1, 20,000/- TO A PERSON VIZ. SAPNA BHANDARI WHO IS THE WIFE OF THE ASSESSEE S NEPHEW SHRI VISHAL BHANDARI. THE ASSESSEE HAS SUBMITTED THAT THIS LAD Y IS A QUALIFIED DATA ENTRY OPERATOR AND THE SERVICES RENDERED ARE VERY U SEFUL TO THE BUSINESS OF THE ASSESSEE. IT WAS ALSO DEMONSTRATED THAT SHE IS NOT A RELATIVE OF A PERSON AS DEFINED UNDER SECTION 40(A)(2)(B) R.W.S . 2(41). THIS HAS BEEN EXAMINED. THERE IS NO DISPUTE THAT SMT. SAPNA BHAN DARI HAS RENDERED SERVICES AS DATA ENTRY OPERATOR TO THE ASSESSEE. A S PER THE DEFINITION OF THE RELATIVE AS PER SECTION 2(41) THE TERM RELATIVE IN RELATION TO AN INDIVIDUAL MEANS THE HUSBAND, WIFE, BROTHER OR SIST ER OR ANY LINEAL ASCENDANT OR DESCENDANT OF THAT INDIVIDUAL. AS MAY BE SEEN, THE PERSON IS THE WIFE OF THE ASSESSEES NEPHEW, THEREFORE, IS NOT COVERED BY THE DEFINITION OF A RELATIVE OF A PERSON UNDER SECTION 40(A)(2)(B). THE LD. AO HAS NOT BROUGHT ANY MATERIAL OF EVIDENCE SUCH AS CO MPARATIVE DATA OR INDEPENDENT MARKET RESEARCH, IF ANY, TO JUSTIFY THE ESTIMATION OF MARKET RATE FOR THE SALARY PAID TO THIS PERSON. AS MAY BE SEEN THE TOTAL SALARY PAYMENT TO THIS PERSON IS RS.1,20,000/- WHICH IS RO UGHLY RS.10,000/- PER MONTH, WHICH ACCORDING TO THE PRESENT ECONOMIC SCEN ARIO DEMAND AND SUPPLY IN THE SERVICE SECTOR IS QUITE REASONABLE. ON BOTH THESE COUNTS, I.E. ON THE APPLICABILITY OF SECTION 40(A)(2)(B) AND THE REASONABLENESS OF THE MARKET RATE THE IMPUGNED ADDITION IS NOT JUSTIFIED AND THE SAME IS, THEREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOW ED. 10 WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CIT(A) ON TH IS ISSUE. THE WIFE OF ASSESSEES NEPHEW DOES NOT FALL WITHIN THE DEFINIT ION OF RELATIVE AS DEFINED IN SECTION 2(41) OF THE ACT, WHICH READS AS UNDER :- 2(41) RELATIVE, IN RELATION TO AN INDIVIDUA L, MEANS THE HUSBAND, WIFE, BROTHER OR SISTER OR ANY LINEAL ASCENDANT OR DESCEN DANT OF THAT INDIVIDUAL. ACCORDINGLY, NO DISALLOWANCE CAN BE MADE IN RESPECT OF S ALARY PAID TO SMT. SAPNA BHANDARI. THIS GROUND OF APPEAL OF THE REVE NUE IS DISMISSED BEING DEVOID OF MERIT. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED B EING DEVOID OF MERIT. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF MAY, 2015 AT PUNE. SD/- SD /- (R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH MAY, 2015 SUJEET COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, NASHIK 4 THE CIT - I , NASHIK 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, PUNE