Deputy Commissioner of Income-tax , Jalgaon V. M/s. Rajmal Lakhichand & Sons,

ITA 1547/PUN/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7622 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-03-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 143(3); 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , . , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM . / ITA NO.1360/PUN/2014 / ASSESSMENT YEAR : 2009-10 M/S. RAJMAL LAKHICHAND & SONS, 169, JOHARI BAZAR, JALGAON-425201 PAN : ABCFR8612D ....... / APPELLANT / V/S. THE JOINT COMMISSIONER OF INCOME TAX, RANGE-1, NASHIK. / RESPONDENT . / ITA NO.1547/PUN/2014 / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRLE-1, JALGAON. ....... / APPELLANT / V/S. M/S. RAJMAL LAKHICHAND & SONS, 169, BALAJI PETH JALGAON-425201 PAN : ABCFR8612D / RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 21.03.2018 / DATE OF PRONOUNCEMENT : 14 .05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THESE ARE THE CROSS APPEALS FILED BY ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEAR 2009-10 ARE DIRECTED AGAINST THE ORDER PASSED BY CIT(APPEALS)-2, NASHIK DATED 08.05.2014. 2. BRIEFLY STATED RELEVANT FACTS INCLUDES THAT THE ASSESSEE IS ENGAG ED IN TRADING OF SILVER AND GOLD ARTICLES, ORNAMENTS AND BULLION. TH E ASSESSEE 2 ITA NOS.1360 & 1547/PUN/2014 FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME AT RS. NIL. IN THE SCRUTINY ASSESSMENT PROCEEDING S U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), THE CLAIMS MADE IN THE RETURN OF INCOME WERE SCRUTINIZED AND THE AS SESSED INCOME IS DETERMINED AGAIN AT RS.NIL AFTER GIVING THE BENEFIT OF SET-OFF TO THE BROUGHT FORWARD LOSS. THE BUSINESS INCOME OF THE ASSESSEE WAS DET ERMINED AT RS.1,17,44,301/- AGAINST RETURN FROM BUSINESS INCOME AT RS. 46,90,306/-. ASSESSING OFFICER MADE A MAJOR ADDITION OF RS.50,96,700/- ON ACCOUNT OF SALE OF STOCK MADE TO ITS SISTER CONCERN. THE ASSESSING OFFICER ALSO DISALLOWED THE EXCESS INTEREST PAID TO SHRI MANISH JAIN AMOU NTING TO RS.4,86,837/-. OTHER ADDITIONS/DISALLOWANCES INCLUDE THE ADDIT ION OF RS.2,39,399/- ON ACCOUNT OF VEHICLE EXPENSES AND ADDITION OF RS.12,31,059/- U/S. 14A OF THE ACT R.W.RULE 8D OF THE I.T. RULES. 3. DURING FIRST APPELLATE PROCEEDINGS, THE ASSESSEE CONTES TED THE ABOVE ADDITIONS/DISALLOWANCES. EVENTUALLY, THE CIT(A) GRANTE D PARTIAL RELIEF TO THE ASSESSEE AND THUS, PARTLY ALLOWED THE AP PEAL OF ASSESSEE. AGGRIEVED WITH THE ADDITIONS CONFIRMED BY THE CIT(A), ASSESS EE IS IN APPEAL WITH THE GROUNDS EXTRACTED BELOW. THE ONLY ISSUE RAISED IN THE GRO UNDS BY THE ASSESSEE RELATES TO DISALLOWANCE MADE U/S. 14A R.W. R ULE 8D OF THE I.T RULES, 1962. WE SHALL TAKE UP ASSESSEES APPEAL FIRST. ITA NO. 1360/PUN/2014 ( BY ASSESSEE) A.Y. 2009-10 4. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED AS UNDER : DISALLOWANCE U/S. 14A - RS.12,31,059/- 5.1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS. 12,31,059/- U/S 14A ON THE GROUND THAT THE APPELLANT HAD INVESTED A MOUNT IN THE SHARES OF THE SISTER CONCERNS, THE INCOME FR OM WHICH WAS NOT TAXABLE. 3 ITA NOS.1360 & 1547/PUN/2014 5.2 THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAIN ING THE ABOVE DISALLOWANCE U/S 14A FOR THE FOLLOWING REASONS A. THERE WAS NO DIVIDEND INCOME RECEIVED FROM THE S ISTER CONCERNS DURING THE YEAR BY THE APPELLANT AND THUS, NO DISALLOWANCE U/S 14A WAS WARRANTED. B. THE APPELLANT WOULD NOT HAVE RECEIVED THE BANK F INANCE ON ITS OWN AND THUS, TO INCREASE THE BUSINESS, THE INVESTM ENT IN THE SHARES OF THE GROUP CONCERNS WAS MADE BY THE APPELLANT AND ACCORDINGLY, IT WAS OUT OF BUSINESS NECESSITY AND HENCE, DISALLOWAN CE U/S. 14A WAS NOT WARRANTED. 5.3 WITHOUT PREJUDICE THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE MADE BY THE A.O . U/S. 1 4A / RULE 8D WAS EXCESSIVE IN AS MUCH AS HE (THE A.O.) HAD TAKEN INTO ACCOUNT ALL TH E INVESTMENTS INCLUDING WHICH WERE MADE FOR SPECIFIC PURPOSES. 5.4 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AB OVE INTEREST IS DISALLOWABLE U/S. 36 AS THE BORROWINGS ARE NOT USED FOR THE PURPOSES OF BUSINESS BUT THEY ARE USED FOR THE INVESTMENT IN TH E SHARES OF THE SISTER CONCERNS . 5.5 WITHOUT PREJUDICE THE LEARNED A.O. FAILED TO AP PRECIATE THAT THE DISALLOWANCE U/S. 14 A R.W.S 8D COULD NOT EXCEED THE EXEMPT INCOME WHICH IN THIS CASE WAS ADMITTEDLY RS. NIL. 5.6 WITHOUT PREJUDICE ASSUMING THAT THE PROVISIONS OF SEC . 14A/ RULE 8D ARE CAPABLE OF MORE THAN ONE INTERPRETATION AS A GOLDEN RULE THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE FOLLOWED. 5.7 THE LEARNED CIT(A) ERRED IN RELYING UPON CBDT C IRCULAR NO. 225/182/2013 DATED 11.02.2014 IGNORING THE DECISION S RELIED UPON BY THE APPELLANT AND THE CORRECT LEGAL POSITION IN THIS BE HALF. 5.8 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTE R OR DELETE ANY ONE OR MORE OF THE GROUNDS OF APPEALS AS MAY BE REQUIRED I N THE NATURE AND CIRCUMSTANCES OF THE CASE. 5.9 THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHE R EVIDENCE TO SUBSTANTIATE ITS CASE AS THE OCCASION MAY DEMAND. 5. BRIEFLY STATED RELEVANT FACTS RELATING TO THE DISALLOWANC E U/S. 14A R.W. RULE 8D INCLUDE THAT THE ASSESSEE INVESTED RS.1,15,00,0 00/- IN THE SHARES OF GROUP COMPANIES AND EARNED NIL DIVIDEND INCOME . THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT R.W . RULE 8D OF THE I.T RULES AND QUANTIFIED THE DISALLOWANCE AT RS.12 ,31,059/-. THE ASSESSEE RELIED ON VARIOUS DECISIONS AGAINST INVOKING THE SAID PROVISIONS. THE ASSESSING OFFICER REJECTED THE SAME AND MA DE THE SAID DISALLOWANCE. DURING THE FIRST APPELLATE PROCEEDINGS, THE AS SESSEE HEAVILY RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT I N THE CASE OF 4 ITA NOS.1360 & 1547/PUN/2014 GODREJ & BOYCE, 328 ITR 81. ACCORDING TO THE ASSESSEE, IN THE ABSENCE OF ANY EXEMPT INCOME WHICH FORMED PART OF THE TOTAL INCOM E, THE PROVISIONS OF SECTION 14A OF THE ACT SHOULD NOT BE INVOKED . THE CIT(A) CONSIDERED THE SAME AND HOWEVER, CONFIRMED THE ADDITION O F ASSESSING OFFICER RELYING ON THE DECISION OF CHEMINVEST LTD. VS. INCOME TAX OFFICER, 378 ITR 33 AS WELL AS CBDT CIRCULAR NO. 225/182/2013 DATED 11.02.2014. 6. BEFORE US, ON THIS ISSUE RELATING TO APPLYING THE PROVIS IONS OF SECTION 14A R.W.R 8D OF THE I.T. RULES, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE INSTANT CASE IS SQUARELY COVERED IN FAVOUR OF THE AS SESSEE. REFERRING TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CHE MINVEST LTD. VS. CIT (SUPRA.), LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT DISALLOWANCE U/S.14A OF THE ACT IS NOT SUSTAINABLE IN THE YEAR IN WHICH NO EXEMPT INCOME FORMED PART OF THE TOTAL INCOME OF THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION. FURTHER, HE RELIED ON THE DECISION OF PUNE BE NCH OF TRIBUNAL IN THE CASE OF SHRI GOYAL ISHWARCHAND KISHORILAL VS . JCIT IN ITA NO. 422/PN/2013 DECIDED ON 26.06.2014 FOR THE SIMILAR PROPO SITION. HE ALSO RELIED ON THE ANOTHER DECISION OF THE SAME TRIBUNAL IN THE CASE OF AVINASH BHOSALE INFRASTRUCTURE PVT. LTD. VS. DCIT IN ITA NO.984/PN/2016 DECIDED 14.10.2016. FURTHER, LD. COUNSEL BROUGHT OUR ATT ENTION TO THE CONTENTS OF PARA-11 OF THE DECISION OF AVINASH BHOSALE INFR ASTRUCTURE PVT. LTD. VS. DCIT (SUPRA) AND THE SAME READS AS UNDER: 11. IN VIEW OF ABOVE SAID JUDICIAL PRECEDENTS, THE RE IS NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN THE ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. NO DISALLOWANCE WAS WARRANTED UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES AND THE SAME IS THUS, DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE ARE ALLOWED. 7. ON THE OTHER HAND, LD. DR HEAVILY PLACED RELIANCE ON T HE ORDERS OF ASSESSING OFFICER AND CIT(A). 5 ITA NOS.1360 & 1547/PUN/2014 8. WE HAVE HEARD BOTH THE PARTIES. WE HAVE ALSO PERUSE D THE CASE RECORD AND CONSIDERED THE DECISIONS REFERRED ABOVE. THE ONLY ISSUE RAISED IN THE GROUND OF APPEAL RELATES INVOKING PROVISIONS OF SECTI ON 14A OF THE ACT WHEN FACTUALLY NO EXEMPT INCOME IS EITHER EARNED OR FORMED PART OF THE TOTAL INCOME OF THE ASSESSEE IN THE YEAR UNDER CON SIDERATION. IN THIS REGARD, WE PERUSED THE JUDGMENT OF HON'BLE DELHI HIGH COU RT IN THE CASE OF CHEMINVEST LTD. VS. CIT (SUPRA.) AND FOUND THAT THE ABOV E QUESTION IS ANSWERED IN FAVOUR OF ASSESSEE. THE RELEVANT PORTION OF TH E SAID JUDGMENT IS EXTRACTED AS UNDER: EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, W HICH WAS NOT INCLUDABLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS Y EAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. FROM THE ABOVE DISCUSSION, IT IS EVIDENT THAT RELEVANT LEG AL PROPOSITION IS WELL SETTLED IN FAVOUR OF THE ASSESSEE BY THE SAID ORDERS OF THE HON'BLE HIGH COURT AND THE PUNE BENCH OF THE TRIBUN AL. ON FACTS, IT IS UNDISPUTED THAT THE ASSESSEE DID NOT EARN ANY EXEMP T INCOME ON THE INVESTMENT MENTIONED ABOVE. THEREFORE, WE ARE OF THE OPIN ION THAT THE ISSUE RAISED BY ASSESSEE IS SQUARELY COVERED BY THE AB OVE REFERRED JUDGMENT IN FAVOUR OF ASSESSEE. ACCORDINGLY, THE CORE IS SUE RAISED IN THE GROUNDS BY THE ASSESSEE IS ALLOWED. FURTHER, THE GROUND S RAISED WITHOUT PREJUDICE ARE DISMISSED AS ACADEMIC. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1547/PUN/2014 ( BY REVENUE) A.Y.2009-10 10. THE REVENUE FILED THIS APPEAL AGAINST THE RELIEF GRANTED BY CIT(A) TO THE ASSESSEE ON THE ISSUE RELATING TO ADDITION OF (I) RS. 5 0,96,700/- ON ACCOUNT OF SALES TO THE SISTER CONCERNS, (II) RS.4,86,837/- O N ACCOUNT OF 6 ITA NOS.1360 & 1547/PUN/2014 EXCESS INTEREST; AND (III) RS.2,39,399/- ON ACCOUNT OF VEHICLE E XPENSES AND DEPRECIATION ON CAR TOWARDS THE PERSONAL USE OF THE SAM E. THE REVENUE RAISED FOLLOWING GROUNDS AND THE SAME ARE EXTRACTED AS UNDER : 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A)-II, NASHIK HAS ERRED IN DELETING THE ADDITIO NS BEING DIVERSION OF PROFITS ON A/C OF SALES MADE TO ASSOCIATE CONCERN A T A LOWER RATE IN THE BULLION A/C. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-II, NASHIK HAS ERRED IN DELETING THE DISALLO WANCE OF EXCESS INTEREST AMOUNTING TO RS.4,86,837/- PAID TO PARTNER SHRI MAN ISH JAIN OVER GOLD DEPOSIT SCHEME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-II, NASHIK HAS ERRED IN DELETING THE ADDITIO NS OF RS.2,39,399/- TOWARDS VEHICLE EXPENSES AND DEPRECIATION FOR PERSO NAL USE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-II, NASHIK BE CANCELLED ON THE ABOVE ISSUES AND THAT OF THE AO BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY , DELETE AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HON'BLE CIT, A S PER THE CIRCUMSTANCES OF THE CASE. 6. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONA L EVIDENCE APPROPRIATE TO THE GROUNDS TAKEN IN APPEAL. 11. BEFORE US, LD. DR MENTIONED THAT GROUNDS NO. 4 TO 6 A RE GENERAL IN NATURE AND THE SAME REQUIRES TO BE DISMISSED. ACCORDINGL Y, GROUND NO. 4 TO 6 ARE DISMISSED AS GENERAL . REST OF THE GROUND NOS. 1 TO 3 ARE ADJUDICATED IN THE FOLLOWING PARAGRAPHS. 12. GROUND NO. 1 RELATES TO ADDITION OF RS.50,96,700/- AND IT PERTAINS TO SALE OF 62 KG OF BULLION. THE RELEVANT FACTS OF THIS ISSUE ARE DISCUSSED IN PARA NO.6 OF THE ASSESSMENT ORDER. IT INCLUDES THAT THE ASSESSEE PURCHASED THE BULLION FROM THE BANKS AND EFFECTED SALES O F THE SAME TO THE SISTER CONCERNS DURING THE YEAR. AO NOTED THE DIS CREPANCY IN THE SALE PRICES OF THE SAME. SOMETIMES, THE SALES PRICE IS LESSER T HAN THE PURCHASE PRICE. WHEN THE DISCREPANCY IS INFORMED TO THE ASSESSEE, THE ASSESSEE, THE ASSESSEE MAINTAINED DAY-TO-DAY STOCK RECORDS, THE REGISTERS FOR SALES, PURCHASES AND EXPENSES MAINTAINED BY HIM. DURING ASSESSM ENT 7 ITA NOS.1360 & 1547/PUN/2014 PROCEEDINGS, IN CONNECTION WITH PURCHASE AND SALE PRICES WITH REGARD TO THE SALES TO SISTER CONCERN, THE ASSESSEE FILED A CHART GIVING DETAILS OF THE PURCHASE PRICES OF THE GOODS AND SUBMITTED THAT THE S ALES RATES OF THE BULLION CHANGE ON DAY TO DAY BASIS AND THEREFORE, THE SAL ES PRICE BEING GUIDED BY THE MARKET PRICE CAN BE LESSER SOME TIMES. T HE ASSESSING OFFICER CONSIDERED THE SAID SUBMISSIONS AND HELD THAT THE A SSESSEE SOLD THE BULLION TO THE SISTER CONCERNS AT LOWER RATE. AO ALLE GED THAT THE ASSESSEE-FIRM DIVERTED ITS PROFIT TO THE SISTER CONCERN B Y MAKING SALE OF GOODS AT LOWER RATES. REJECTING THE ASSESSEES CLAIM, T HE ASSESSING OFFICER IGNORED THE BOOK PROFITS ON THESE SALES TO THE SISTER CO NCERNS AND ESTIMATED A PROFIT MARGIN OF UNIFORM RATE OF 6% OF SUCH SALE S. THUS, THE AO MADE ADDITION OF RS. 50,96,700/-. THE WORKING IS GIVEN IN THE FOLLOWING TABLE (PAGE 9 OF THE ASSESSMENT ORDER) : 3.5.08 11905-11750=155 X 5 KG= 77,500 8.5.08 12377-11665=712 X 24 KG= 17,08,800 14.5.08 12377-11665=805 X 5 KG= 4,02,500 26.5.08 13569-12787=782 X 3 KG= 2,34,600 10.6.08 13321-12385=936 X 8 KG= 7,48,800 17.9.08 12496-12300=196 X 5 KG = 98,000 2.12.08 13684-12525=1159 X 7 KG= 8,11,300 17.3.08 16328-15200=1128 X 9 KG= 10,15,200 66 KG= 50,96,700 13. BEFORE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE SUBMIT TED THAT THE SAID DECISION OF ASSESSING OFFICER CONSTITUTES GUESS WORK AN D THEREFORE, SHOULD NOT BE SUSTAINED. ABSENCE OF PROVISIONS FOR TAXING T HE CASES OF LOWER SALES PRICE, SIMILAR TO THAT OF SECTION 40A(2)(B) OF THE A CT, THE FLUCTUATIONS IN THE PRICES OF BULLION, ABSENCE OF ANY BASIS TO THE AO FOR ADOPTING PROFIT RATE OF 6%, ABSENCE OF ANY EVIDENCE AGAINST THE ASSESSEE, THE BACKGROUND HISTORY OF NON-DISCLOSURE OF SUCH HUGE GP RATE OF 6% BY THE ASSESSEE IN THE PAST AS WELL AS IN SUBSEQUENT ASS ESSMENT YEARS, EXISTENCE OF FINDING OF THE CIT(A) IN CASE OF M/S. RAJMAL LAKH ICHAND IN A.Y. 2009-10, ARE SOME OF THE REASONS FOR THE CIT(A) FOR G RANTING RELIEF TO 8 ITA NOS.1360 & 1547/PUN/2014 THE ASSESSEE. THE CIT(A) CONSIDERED THE SUBMISSIONS OF TH E ASSESSEE AND ALLOWED THE CLAIM OF THE ASSESSEE AS PER DISCUSSION GIVEN IN PARA 6.4 OF TH E ORDER OF CIT(A). THE CIT(A) HELD THAT ESTIMATION MADE BY AS SESSING OFFICER @6% IS BASELESS. FOR THE SAKE OF COMPLETENESS, THE SAID P ARA NO.6.4 IS EXTRACTED BELOW AND THE SUMMARY OF THE SAME INCLUDES THE FOLLOWING : 6.4 I HAVE GONE THROUGH THE APPELLANTS SUBMISSION S AND THE ASSESSMENT ORDER AND THE AOS REMAND REPORT. THE LEARNED AR H AS RIGHTLY CONTENDED THAT SELLING PRICES IS DEPENDENT UPON SEVERAL MARKE T FACTORS AND IT IS PURELY COMMERCIAL DECISION. AGAIN THERE IS NO PROVISION C ORRESPONDING TO SEC.40A(2)(B) TO MAKE ADDITION ON ACCOUNT OF SALE A T A LOWER PRICE ESPECIALLY WHEN ALL THE CONCERNED PARTIES ARE IN THE SAME TAX BRACKET. THE AO HAS, WITHOUT GIVING ANY BASIS OR BRINGING ANY MATERIAL O N RECORD, ASSUMED THE GROSS PROFIT % TO BE STATIC AT 6% IN THE LINE OF BU SINESS WHERE PRICES VARY FREQUENTLY. NO EVIDENCE IS BROUGHT ON RECORD BY TH E AO JUSTIFYING THAT THE SALES WERE EFFECTED AT LESS THAN THE MARKET RATE PR EVAILING ON THAT DAY. IT IS ALSO SEEN THAT THERE WAS/IS NO SUCH G.P. ADDITION I N THE PAST AND IN SUBSEQUENT YEARS, I.E. AYS 2010-11 AND 2011-12 IN T HE APPELLANTS CASE. THE APPELLANTS BOOKS OF ACCOUNT WERE NOT REJECTED IN THE PAST AND IN SUBSEQUENT YEARS ON ACCOUNT OF SALES MADE TO SISTER CONCERNS AT LOWER RATE. IN THE CASE OF M/S. RAJMAL LAKHICHAND FOR A.Y. 2009 -10, A SISTER CONCERN, THE ADDITION OF RS.12,01,63,323/- ON ACCOUNT OF ALL EGED DIVERSION OF PROFIT WAS DELETED BY THE CIT(A)-II, MY PREDECESSOR AS THE RE IS NO SPECIFIC SECTION IN THE ACT IN THIS REGARD. CONSIDERING THE ABOVE F ACTS, I FIND NO JUSTIFICATION IN THE ADDITION MADE. THE APPELLANT GETS A RELIEF OF RS.50,96,700/-. 14. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SALES MADE TO THE SISTER CONCERNS ARE FULLY ACCOUNTED AND SUBMITTE D THAT ALL THE CONCERNS INVOLVED IN THESE SALES ARE ASSESSED TAX. HE ALSO RELIED ON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 20 09-10 AND SUBMITTED THAT THE RATIO OF THE DECISION OF THE TRIBUNAL ON THIS ISSUE OF PROFIT MARGIN MAY BE CONSIDERED FOR THE SAKE OF PARITY AN D DECIDE THE ISSUE. IN THIS REGARD, LD. COUNSEL BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA NOS. 6.8, 8.18 AND 8.32 OF THE ORDER FOR A.Y.2009-10 IN ASSESSEES OWN CASE AND SUBMITTED THAT THIS ISSUE STANDS COVERED. 15. ON THE OTHER HAND, THE LD. DR FOR REVENUE HEAVILY SU PPORTED THE ORDER OF ASSESSING OFFICER AND CIT(A). 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE OR DERS OF REVENUE AUTHORITIES AND SUBMISSIONS OF ASSESSEE. THE CORE ISSUE FO R ADJUDICATION 9 ITA NOS.1360 & 1547/PUN/2014 RELATES TO THE REJECTION OF BOOK PROFIT AND ESTIMATION OF GP @6% OF THE TOTAL SALES MADE TO THE SISTER CONCERN. IN THIS REGARD, THE CASE OF THE REVENUE IS THAT THE ASSESSEE DIVERTED ITS PROFIT BY UNDER PRICING THE SALES MADE TO THE SISTER CONCERNS BY QUOTING A LOWER RATE OF BULLION. WITH OUT GIVING ANY BASIS OR BRINGING ANY MATERIAL ON RECORD, THE ASSESSING OFF ICER ASSUMED THAT THE GROSS PROFIT ON SUCH SALES IS AT 6% AND IGNO RED THE FACT THAT, IN THE LINE OF BUSINESS, THE SALES PRICE VARY FREQUENTLY DUE TO DOMESTIC AS WELL AS INTERNATIONAL REASONS. FURTHER, WE FIND THE ORDE R OF TRIBUNAL IN THE CASE OF M/S. RAJMAL LAKHICHAND VS. JCIT AND VICE-VERS A IN ITA NOS.532, 663/PN/2013 & ITA NO.607/PN/2013 IS LATER TO TH E ORDER OF THE CIT (A) DATED 08.05.2014. WE FIND THAT THE ORDER OF THE TRIBUNAL FOR THE A.Y. 2009-10 WAS NOT AVAILABLE TO THE CIT(A) AT THE TIME WH EN THE CIT(A) DELETED THE ADDITIONS. CONSIDERING THE ABOVE, WE PERUSED THE ORDER OF CIT(A) AND THE CONTENTS OF PARA NO.6.4 AND THE SAME IS ALR EADY EXTRACTED IN THE EARLIER PARAGRAPHS OF THIS ORDER. 17. FURTHER, WE ALSO PERUSED THE ORDER OF THE TRIBUNAL W ITH SPECIAL REFERENCE TO THE GP RATES AND FIND THE CONTENTS OF PARA NO.6.8, 8.18 AND 8.32 ARE RELEVANT. FOR THE SAKE OF COMPLETENESS, THESE P ARAGRAPHS ARE EXTRACTED HERE AS UNDER : 6.8 AS REGARDS THE ALLEGATION OF THE REVENUE THAT THE ASSESSEE HAS TRANSFERRED PROFITS TO THE SISTER CONCERNS BY PAYIN G A HIGHER PRICE FOR PURCHASES AND CHARGING A LOWER PRICE FOR THE SALES EFFECTED TO SISTER CONCERNS HE SUBMITTED THAT THIS FINDING IS ALSO WRONG. REFERRIN G TO PAGE 52 OF PAPER BOOK 1, HE DREW THE ATTENTION OF THE BENCH TO THE CHART GIVING THE DETAILS OF SALES OF BULLION EFFECTED TO SISTER CONCERNS AND SUBMITTED T HAT THESE SALES HAVE FETCHED EXCESS PRICE OF RS.L,13,57,471/- TO THE ASS ESSEE DURING THE YEAR. THUS, THE CONTENTION OF THE A.O IS WRONG. ASSESSEE HAS NOT PASSED PROFITS ON SALE OF BULLION TO THE SISTER CONCERNS AT ALL. 8.18 IN RESPECT OF THE ALLEGED DIVERSION OF THE PRO FIT OF RS.12,01,63,323/- WHICH WAS FOR ALLEGEDLY SELLING THE ORNAMENTS TO IT S SISTER CONCERNS AT AN AVERAGE LOWER PRICE AS COMPARED TO THE AVERAGE PRIC E OF THE ORNAMENTS SOLD TO UNRELATED PARTIES/THIRD PARTIES, THE LD.CIT(A) H AS OBSERVED THAT THE ASSESSEE HAS CHARGED AN AVERAGE PRICE OF RS.13,350/ 10 GMS FROM SISTER CONCERNS AS AGAINST THE AVERAGE PRICE OF RS.13,906/ 10 GMS CHARGED FROM OTHER PARTIES FOR SALE OF GOLD ORNAMENTS. AS NOTED BY THE LD.CIT(A) THE DIFFERENCE IN THE AVERAGE SALE PRICE WORKED OUT TO RS.55.60/GM AS AGAINST RS.40.96/GM TAKEN BY THE AO IN THE ASSESSMENT ORDER . THE LD.CIT(A) HAS 10 ITA NOS.1360 & 1547/PUN/2014 ALSO OBSERVED THAT ALTHOUGH THERE IS NO PROVISION I N THE INCOME TAX UNLIKE SECTION 40A(2)(B) WHICH IS IN RESPECT OF THE EXPEND ITURE BUT THE SAID ASPECT ALSO CANNOT BE IGNORED WHICH HAS AFFECTED THE GROSS PROFIT AND SUGGEST THAT BOOKS OF ACCOUNT DO NOT DEPICT THE CORRECT PICTURE. 8.32 WE ALSO FIND THAT AGAIN WHILE MAKING THE ADDIT ION IN RESPECT OF SALE OF ORNAMENTS TO THE GROUP CONCERNS/SISTER CONCERNS, BOTH THE AUTHORITIES BELOW HAVE ADOPTED THE COMPARISON FORMULA BASED ON THE SALE OF ORNAMENTS TO THE UNRELATED PARTIES AND SALE OF ORNAMENTS TO T HE RELATED PARTIES. IT IS STATED THAT IF THE AVERAGE PRICE IS TAKEN THEN THE ASSESSEE HAS CHARGED RS.10,350/10 GMS ON THE SALE TO THE SISTER CONCERNS AS AGAINST THE AVERAGE PRICE OF RS.13,906/10 GMS CHARGED TO THE THIRD PART IES/UNRELATED PARTIES ON THE SALE OF GOLD ORNAMENTS. THE AO HAS WORKED OUT THE DIFFERENCE OF RS.40.96/GM BUT THE LD.CIT(A) HAS WORKED OUT THE DI FFERENCE AT RS.55.60/GM. THE LD.CIT(A) HAS ALSO OBSERVED THAT UNLIKE SECTION 40A(2)(B) OF THE I.T. ACT, THERE IS NO PROVISION EVEN IF THER E IS A SALE AT LOWER PRICE COMPARING WITH THE PREVAILING MARKET PRICES OF THE COMMODITY OR GOODS. IN OUR OPINION AS FAR AS THE ISSUE OF ORNAMENTS IS CO NCERNED, APPROACH OF BOTH THE AUTHORITIES BELOW ADOPTING THE AVERAGE PRICE FO RMULA IS NOT CORRECT. AS FAR AS THE ORNAMENTS ARE CONCERNED, THE PRICE MAY VARY FROM DESIGN TO DESIGN, FROM ITEM TO ITEM, FROM PURITY OF GOLD ETC. IN CASE OF THE ORNAMENTS NORMALLY THE SALES ARE MADE FROM THE 916 TOUNCH (22 KARAT). THE ORNAMENTS MAY BE OF 18KARAT, 20 KARAT AND 21 KARAT ALSO. WE CANNOT TAKE THE AVERAGE PRICE OF THE ORNAMENTS TO THE ENTI RE SALE OF THE YEAR AS DIFFERENT FACTORS ARE ALSO INVOLVED AS MENT IONED ABOVE WHICH CHANGES THE PRICE OF THE ORNAMENTS. MOREOVER, THER E MAY BE VARIATION IN THE LABOUR CHARGES ALSO. HENCE, WE DO NOT AGREE WITH THE AVERAGE PRICE FORMULA ADOPTED BY BOTH THE AUTHO RITIES BELOW FOR MAKING THE ADDITION OF RS.12,01,63,323/- ON ALLEGED SELLING OF THE ORNAMENTS TO THE SISTER CONCERNS AT LOWER PRICE THA N THE PRICE CHARGED TO THE UNRELATED PARTIES. FROM THE ABOVE, IT IS A SETTLED LEGAL PROPOSITION THAT IN T HE ABSENCE OF ANY INCRIMINATING EVIDENCES, THE ADDITION ADOPTING THE UNI FORM FLAT RATE OF PROFIT OF 6% IS UNSUSTAINABLE. THE TRIBUNAL DECIDED THE ISS UE IN CONNECTION WITH SALE OF ORNAMENTS TO THE SISTER CONCERNS . IN OUR VIEW, THE PRINCIPLES LAID DOWN BY THE TRIBUNAL APPLY TO THE SALE OF BU LLION TO THE SISTER CONCERNS. AS SUCH, THERE ARE NO STATUTORY PROV ISIONS TO MAKE ADDITION, WHEN THERE IS A CASE OF LOWER SALES PRICE OF THE S ALES TO THE SISTER CONCERNS. AS SUCH, THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT COME IN OPERATION ONLY IF THERE IS EXCESSIVE OR UNREASONABLE PAYM ENTS TO SISTER CONCERNS. AS SUCH, IT IS IN THE KNOWLEDGE OF EVERYBODY TH AT THE SALE PRICE OF THE BULLION IS MARKET GUIDED ONE. FURTHER, IT IS NOT THE CASE OF THE REVENUE THAT THE BULLION PRICE VARY ON A PARTICULAR DATE QUA THE SISTER CONCERNS AND THIRD PARTY TRANSACTIONS. CONSIDERING THE ABSENCE OF ANY INCRIMINATING EVIDENCE AGAINST THE ENTRIES IN THE BOOKS OF ACCOUNT, WE FIND 11 ITA NOS.1360 & 1547/PUN/2014 THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUND NO. 1 RAISED IN APPEAL BY REVENUE IS DISMISSED . 18. THE GROUND NO. 2 RAISED IN APPEAL BY REVENUE RELATES TO DISALLOWANCE ON ACCOUNT OF EXCESS INTEREST AMOUNTING TO R S.4,86,837/- PAID TO SHRI MANISH JAIN PARTNER OF THE FIRM. RELEVANT FACTS INCLUDED THAT THE ASSESSEE STARTED A SCHEME CALLED AS GOLD DEPOSIT SC HEME (GDS) SINCE 2006. UNDER THIS SCHEME, PEOPLE DEPOSIT GOLD WITH THE FIRM AS WELL AS WITH THE ASSESSEES PARTNER. INTEREST IS PAYABLE TO THE DE POSITORS OF GOLD. IN THIS CASE, MR. JAIN, THE PARTNER ALSO DEPOSITED THE GOLD. MR . JAIN ALSO COLLECTED GOLD FROM HIS CUSTOMERS. THE SAID GOLD SO DEPOSIT ED WITH THE FIRM AGAINST THE INTEREST RATE OF 6% AS PER THE CLAUSES IN THE PARTNERSHIP DEED. THE FIRM PAID THE SAID INTEREST AMOUNTING TO RS.29 ,61,618/- TO SHRI MANISH LALWANI (JAIN) WHILE THE LATTER WAS PAID INTEREST OF RS. 24,74,781/- TO HIS DEPOSITORS. THE DIFFERENCE OF RS.4,86,837/- HAS BEEN CONSIDERED AS EXCESS PAYMENT BY THE FIRM TO THE INDIVIDUA L AND THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SAME. THE CIT(A) DISCUSS ED THIS ISSUE IN PARA 5.5 OF HIS ORDER AND FINALLY GRANTED RELIEF TO THE AS SESSEE. WE PERUSED THE SAID PARA AND EXTRACTED THE SAME FOR THE SAKE OF COMPLETENESS. 5.5 I HAVE GONE THROUGH THE AO'S ORDER, THE REMAND REPORT AND THE APPELLANT'S SUBMISSIONS. THE AO HAS ALLOWED INTERES T ON THE PARTNERS' CONTRIBUTING CAPITAL IN THE FORM OF GOLD (RECEIVED BY HIM UNDER HIS GOLD DEPOSIT SCHEME ONLY TO THE EXTENT HE HAS PAID TO HI S DEPOSITORS. HE HAS ACCORDINGLY DISALLOWED THE DIFFERENCE OF RS.4,86,83 7/-. WHILE IT IS NOT UNCOMMON OR UNUSUAL IN PARTNER'S CONTRIBUTING CAPIT AL IN THE FIRM BY MAKING PERSONAL BORROWING, HE WOULD BE ENTITLED TO RECEIVE INTEREST FROM FIRM AT THE RATE SPECIFIED IN THE PARTNERSHIP DEED, SUBJECT TO PROVISIONS OF SECTION 40 (B) OF THE ACT AND HE MAY IN TURN CLAIM DEDUCTION IN HI S PERSONAL RETURN FOR THE INTEREST PAID BY HIM TO THE PARTIES FROM WHOM HE HA S BORROWED THE FUNDS AND UTILIZED THEM IN DEPOSITING THE SAME WITH THE F IRM. IN THE PRESENT CASE, THE APPELLANT HAS CLAIMED INTEREST ON CAPITAL CONTR IBUTED BY PARTNER @ 6% WHICH IS AUTHORIZED BY THE PARTNERSHIP DEED AND IS WITHIN THE LIMITS OF SECTION 40(B) OF THE ACT. THE FIRM IS NOT CONCERNED WITH THE RATE AT WHICH THE PARTNER IS PAYING INTEREST ON THE FUNDS BORROWED AN D INVESTED IN THE FIRM. 12 ITA NOS.1360 & 1547/PUN/2014 THEREFORE, THE AO IS NOT JUSTIFIED IN DISALLOWING S OME PORTION OUT OF INTEREST PAID TO THE PARTNER. THE APPELLANT GETS A RELIEF OF RS.4,86,837/-. 19. BEFORE US, ON THIS ISSUE, LD. COUNSEL SUBMITTED THAT A S IMILAR ISSUE CAME UP FOR CONSIDERATION OF THE TRIBUNAL FOR THE A.Y. 2009- 10 (SUPRA) IN CASE OF M/S. RAJMAL LAKHICHAND AND SUCH ADDITION WAS DELET ED GIVING CREDIT TO THE RELEVANT ENABLING CLAUSES IN THE PARTNERSHIP DEED. THE CONTENTS OF THE ORDER OF THE TRIBUNAL IN PARA NOS. 12.6 AN D 12.7 ARE RELEVANT. THE SAME ARE EXTRACTED AS UNDER : 12.6 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN T HE INSTANT CASE THE ASSESSING OFFICER MADE ADDITION OF RS.18,92,421/- B EING THE DIFFERENCE BETWEEN THE INTEREST PAID BY THE FIRM TO THE PARTNE R AT RS.45,31,460/- AND THE INTEREST PAID BY THE PARTNER SHRI ISHWARLAL I. LALWANI TO THE CUSTOMERS ON GDS. ACCORDING TO THE ASSESSING OFFICER, IF THE GOLD WOULD HAVE BEEN DIRECTLY ROUTED THROUGH THE FIRM, THE FIRM WOULD HA VE SAVED RS.18,92,421/-. ALTHOUGH THE FIRM HAS PAID INTEREST @9%, HOWEVER, I NDIRECTLY IT HAS BENEFITTED THE PARTNER AND THEREFORE THIS IS A COLO URABLE DEVICE AND THE FIRM GAVE EXCESS INTEREST OF RS.19,82,421/- TO THE PARTN ER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE FIRM HAD GIVEN INTEREST @9% ON THE GOLD DEPOSIT BY THE PARTNER WHI CH IS BELOW THE PRESCRIBED LIMIT OF 12% AS PER THE PARTNERSHIP DEED , THEREFORE, THERE SHOULD NOT BE ANY DISALLOWANCE U/S.40A(2)(B). FURTHER, AC CORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE FIRM COULD R ECEIVE ADDITIONAL GOLD DEPOSIT THAN WHAT IT COULD HAVE RECEIVED UNDER ITS OWN GOLD DEPOSIT SCHEME ON ACCOUNT OF GOLD DEPOSIT SCHEME STARTED BY ONE OF ITS PARTNER. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FIRM WOULD HAVE PAID HIGHER AMOUNT OF BANK INTEREST BY GETTING THAT MUCH QUANTITY OF GOLD THAN IT PAID TO THE PARTNER ON ACCOUNT OF SUCH QUAN TITY OF GOLD. 12.7 WE FIND MERIT IN THE ABOVE SUBMISSION OF THE L D. COUNSEL FOR THE ASSESSEE. THERE IS NO BAR FOR THE PARTNER TO OBTAI N THE GOLD UNDER THE GOLD DEPOSIT SCHEME WHICH WAS SIMULTANEOUSLY DONE BY THE ASSESSEE FIRM ALSO. AS LONG AS THE INTEREST PAID TO THE PARTNER ON SUCH GOLD UNDER THE GOLD DEPOSIT SCHEME IS WITHIN THE PERMISSIBLE LIMIT, THE RE SHOULD NOT BE ANY DISALLOWANCE. SINCE IN THE INSTANT CASE THE FIRM H AS PAID INTEREST @9% ON THE GOLD DEPOSITED BY THE PARTNER OBTAINED FROM THE CUSTOMERS UNDER THE GOLD DEPOSIT SCHEME ACCOUNT, THEREFORE, IT IS IMMAT ERIAL AS TO AT WHAT RATE OF INTEREST THE PARTNER HAS PAID TO THE CUSTOMERS. IN THIS VIEW OF THE MATTER, WE SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED. FROM THE ABOVE, THE DECISION OF THE TRIBUNAL REVOLVES AROU ND THE DISALLOWANCE OF INTEREST PAID TO THE PARTNER MR. LALWANI IN CONNECTION WITH GOLD DEPOSIT SCHEME. CONSIDERING THE COMMONALITY OF THE FAC TS, WE FIND THE DECISION OF THE CIT(A) IN DELETING THE ADDITION IS FAIR AND R EASONABLE. IT 13 ITA NOS.1360 & 1547/PUN/2014 DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO. 2 RAISED BY REVENUE IN APPEAL IS DISMISSED. 20. THE GROUND NO. 3 RAISED IN APPEAL BY REVENUE RELATES TO ADDITION OF RS. 2,39,399/- TOWARDS VEHICLE EXPENSES AND DEPRECIATION FO R PERSONAL USE. THE ASSESSEE ON ITS OWN HAD DISALLOWED 1/4 TH OF THE TOTAL AMOUNT OF DEPRECIATION ON VEHICLES BEING ATTRIBUTABLE TO THE PERSONA L USE OF THE PARTNERS. THE ASSESSING OFFICER ALLOWED DEPRECIATION OF RS.4,95 ,775/- ONLY BUT DETERMINED CLOSING WRITTEN DOWN VALUE AT RS. 37,45,852 /- IGNORING RS. 1,65,258/- AND MADE ADDITION OF RS.1,65,259/-. THE ASSESSEE ALSO PAID RS. 95,928/- TO ITS DIVER SHRI RAJESH NAIK AS SALARY AND B ONUS FOR THE F.Y.2008-09 AND THE SAID SALARY IS FIXED SUM PAYABLE TO HIM . BUT THE ASSESSING OFFICER WITHOUT TAKING INTO CONSIDERATION DISALLOWED TH OF THE DRIVER SALARY RS.23,982/-. THE ASSESSEE PAID INTEREST ON C AR LOAN OF RS.2,00,633/- AND THE ASSESSING OFFICER DISALLOWED 1/4 TH OF THE INTEREST ON CAR LOAN AMOUNTING TO RS.50,158/-. THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT INTEREST LIABILITY HAS NOTHING TO DO WITH QUA NTUM OF USE OF VEHICLES BY THE PARTNERS. THE CIT(A) DISCUSSED THIS ISSUE V IDE PARA 7.8 AND 7.9 OF THE CIT(A)S ORDER. FOR THE SAKE OF COMPLETENESS, TH E CONTENTS OF PARA 7.8 AND 7.9 ARE EXTRACTED AS UNDER: 7.8 DEPRECIATION ON VEHICLES : THE AO IS IN ERROR WHILE DETERMINING WDV IN TERMS OF SEE.43(6) OF THE ACT. PROVISIONS OF THE LAW ARE VERY CLEAR. ONLY DEPRECIATION ACTUALLY ALLOWED IS TO BE DEDUCTED (AN D NOT ALLOWABLE DEPRECIATION) WHILE DETERMINING THE WDV. THE CASES RELIED UPON BY THE APPELLANT ALSO SUPPORT THE CORRECTNESS OF THE APPEL LANT'S STAND IN THIS RESPECT. THE AO HAS NOT BROUGHT ON RECORD ANY CONTR ARY DECISION. THE APPELLANT'S WORKING BEING IN ACCORDANCE WITH LAW, N O DISALLOWANCE IS CALLED FOR. THE ADDITION OF RS.1,65,259/- IS THEREFORE DEL ETED, WHILE THE CLOSING WDV WOULD BE RS. 39,11,110/- AND NOT RS.37,45,852/- AS WORKED BY THE AO. 7.9 DISALLOWANCE OUT OF SALARY PAID TO DRIVER AND INTER EST ON CAR LOAN. THE AO HAS MADE DISALLOWANCE WITHOUT APPRECIATING T HE PROVISIONS OF SECTION 38(2) OF THE ACT, WHICH READS AS UNDER: 14 ITA NOS.1360 & 1547/PUN/2014 SEC. 38(2) WHERE ANY BUILDING, MACHINERY, PLANT OR FURNITURE I S NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE DED UCTIONS UNDER SUB- CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30, CLAUSES (I) AND (II) OF SECTION 31 AND [ CLAUSE (II) OF SUB- SECTION (1)] O F SECTION 32 SHALL BE RESTRICTED TO A FAIR PROPORTIONATE PART THEREOF WHICH THE [ASS ESSING] OFFICER MAY DETERMINE, HAVING REGARD TO THE USER OF SUCH BUILDI NG, MACHINERY, PLANT OR FURNITURE FOR THE PURPOSES OF THE BUSINESS OR PROFE SSION. IT IS THUS CLEAR THAT ONLY FOLLOWING ITEMS ARE COVE RED FOR SOME DISALLOWANCE ON ACCOUNT OF PARTIAL USE OF ASSETS FOR NON BUSINES S OR PERSONAL PURPOSES. PARTICULARS NATURE OF EXPENDITURE COVERED SUB CLAUSE (II) OF CLAUSE (A) CURRENT REPAIRS TO T HE PREMISES AND (C) OF SEC. 30. AN AMOUNT OF INSURANCE PREMIU M CLAUSE (I) & (II) OF SEC. (3) PAID FOR PREMISES. CURRENT REPAIRS AND INSURANCE PREMIUM FOR FURNITURE, PLANT & MACHINERY WHICH INCLUDES MOTOR CAR. CLAUSE (II) OF SEC. 32(I) DEPRECIATION. THUS DRIVERS SALARY AND INTEREST ON CAR LOAN ARE N OT ITEMS COVERED BY ANY OF THE PROVISIONS OF SECTION 38(2). THE APPELLANT I S RIGHT IN SAYING THAT SALARY TO DRIVER AND INTEREST ON CAR LOAN, BEING FIXED, SU CH EXPENDITURE WOULD REMAIN SAME WHETHER THE VEHICLE IS USED FOR PERSONA L PURPOSES OR NOT. THE DISALLOWANCES OF RS.23,982/- OUT OF DRIVERS SALARY AND OF RS.50,158/- ON ACCOUNT OF INTEREST ON CAR LOAN ARE NOT IN ACCORDAN CE WITH THE LAW AND THEREFORE, THE SAME ARE CANCELLED. 21. BEFORE US, ON THIS ISSUE, LD. COUNSEL SUBMITTED THAT A SIMILAR ISSUES CAME UP FOR ADJUDICATION BY THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR A.Y. 2009-10 AND SUCH ADDITIONS WERE DELETED BY THE CIT(A ) AND CONFIRMED BY THE TRIBUNAL. THE CONTENTS OF THE ORDER OF THE TRIBUN AL IN PARA NOS. 17 AND 18 ALONG WITH THEIR SUB-PARAGRAPHS ARE RELEVANT. 22. AFTER HEARING BOTH THE SIDES ON THESE ISSUES AND O N PERUSING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2009- 10 (SUPRA), WE FIND THE FINDINGS GIVEN BY THE TRIBUNAL ARE RELEVANT AN THER EFORE, THE SAME ARE EXTRACTED HERE FOR THE SAKE OF COMPLETENESS OF THIS ORDER : 17. GROUND OF APPEAL NO.5 BY THE REVENUE READS AS UNDER : 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN ADDITION MADE ON ACCOUNT OF DRIVER' S SALARY OF RS. 32,086/-. 15 ITA NOS.1360 & 1547/PUN/2014 17.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER IN THE ASSESSMENT DISALLOWED 1/3 RD SALARY OF THE DRIVERS AMOUNTING TO RS.32,086/- OUT OF THE SALARY AND BONUS PAID TO ONE SRI RAMDAS KARDILLE AMOUNTING TO RS.96,258/- BEING ATTRIBUTABLE TO PERS ONAL USE. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION HOLDING THAT THE DRI VERS SALARY IS NOT AN ITEM COVERED BY ANY OF THE PROVISIONS OF SECTION 38(2). FURTHER, SALARY TO DRIVER BEING FIXED SUCH EXPENDITURE REMAINS SAME WHETHER THE VEHICLE IS USED FOR PERSONAL PURPOSE OR NOT. THE PROVISIONS OF SECTION 38(2) RELIED UPON BY THE ASSESSING OFFICER ACCORDING TO THE LD.CIT(A) ALSO S UPPORTS THE CONTENTION OF THE ASSESSEE. HE ACCORDINGLY DELETED THE DISALLOWA NCE OF RS.32,086/- OUT OF DRIVERS SALARY ON THE GROUND THAT THE SAME IS N OT IN ACCORDANCE WITH LAW. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MISTAKE IN THE ABOVE FINDING OF THE LD.CIT(A). IN VIEW OF THE ABO VE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, SAME IS U PHELD AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED. 18. GROUND OF APPEAL NO.6 BY THE REVENUE READS AS U NDER : 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE ON AC COUNT OF DEPRECIATION ON VEHICLES OF RS.8,14,855/-. 18.1 FACTS OF THE CASE, IN BRIEF, ARE THAT OUT OF T OTAL DEPRECIATION ON VEHICLES AMOUNTING TO RS.24,44,656/- THE ASSESSEE S UOMOTO DISALLOWED 1/3 RD OF DEPRECIATION AMOUNTING TO RS.8,14,885/- AND CLA IMED DEPRECIATION OF RS.16,29,770/-. THE ASSESSEE ACCORDINGLY DETERM INED THE WDV AS ON 31-03-2009 AT RS.1,46,67,933/-, THE DETAILS OF WHIC H ARE AS UNDER : WDV AS ON 01-04-2008 RS.1,62,97,704 DEPRECIATION ON VEHICLES @15% RS. 24,44,656 LESS : 1/3 RD DISALLOWED RS. 8,14,885 DEPRECIATION ACTUALLY CLAIMED RS. 16,29,770 --------------------- WDV AS ON 31-03-2009 RS.1,46,67,773/- --------------------- 18.2 THE ASSESSING OFFICER HOWEVER WORKED OUT THE W DV AS ON 31-03- 2009 AT RS.1,38,53,048/- BY DEDUCTING THE DEPRECIAT ION @ 15% AMOUNTING TO RS.24,44,656/- OUT OF THE WDV OF RS.1,62,97,704/ -. THE ASSESSING OFFICER THUS MADE ADDITION OF RS.8,14,855/- TO THE TOTAL INCOME OF THE ASSESSEE BEING DIFFERENCE IN THE CLOSING WDV, I.E. RS.1,46,67,933 RS.1,38,53,048/-. 18.3 BEFORE CIT(A) THE ASSESSEE BROUGHT TO HIS NOTI CE THE PROVISIONS OF SECTION 43(6) AND SUBMITTED THAT THE ASSESSING OFFI CER HAS TAKEN AN INCORRECT VIEW IN THE MATTER OF WORKING OF THE WDV. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CHIRANGILAL REPORTED IN 74 ITR 80 AND THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SUMAN TEA AND PLYWOOD INDUSTRIES REPORTED IN 204 ITR 719 WERE RELIED UPON. THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSES SING OFFICER. HOWEVER, NO SPECIFIC COMMENTS WERE GIVEN BY THE ASSESSING OF FICER ON THIS ISSUE BUT THE ASSESSING OFFICER REITERATED THE FINDING OF THE PREDECESSOR ASSESSING OFFICER. AFTER CONSIDERING THE REMAND REPORT THE L D.CIT(A) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER : 35. THE ASSESSING OFFICER IS IN ERROR WHILE DETERM INING WDV IN TERMS OF SEC.43(6) OF THE ACT. PROVISIONS OF THE LAW ARE VE RY CLEAR. ONLY DEPRECIATION ACTUALLY ALLOWED IS TO BE DEDUCTED (AND NOT ALLOWAB LE DEPRECIATION) WHILE DETERMINING THE WDV. CASES RELIED UPON BY THE APPE LLANTS A/R ALSO SUPPORT THE CORRECTNESS OF APPELLANTS STAND IN THI S RESPECT. AO HAS NOT 16 ITA NOS.1360 & 1547/PUN/2014 BROUGHT ON RECORD ANY CONTRARY DECISION. THE APPEL LANTS WORKING BEING IN ACCORDANCE WITH LAW, NO DISALLOWANCE WAS CALLED FOR . THE ADDITION OF RS.8,14,855/- IS THEREFORE, DELETED; WHILE THE CLOS ING WDV WOULD BE RS.1,46,67,933/- AND NOT RS.1,38,53,048/- AS WORKED OUT BY THE AO. 18.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 18.5 AFTER HEARING BOTH THE SIDES, WE FIND NO INFIR MITY IN THE ORDER OF THE CIT(A) WHO DECIDED THE ISSUE ON THE BASIS OF THE PR OVISIONS OF SECTION 43(6) AS WELL AS THE DECISIONS CITED BEFORE HIM. IN ABSEN CE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LD. DEPARTMEN TAL REPRESENTATIVE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THI S ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. CONSIDERING THE COMMONALITY OF THE FACTS, WE FIND THE DECISIO N OF THE CIT(A) IN DELETING THE ADDITION IS FAIR AND REASONABLE. IT DOE S NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO. 3 RAISED BY REVENUE IN APPEAL IS DISMISSED. 23. TO SUM UP, APPEAL OF ASSESSEE IS ALLOWED AND APPEAL OF THE REVEN UE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH DAY OF MAY, 2018. SD/- SD/- ( / SUSHMA CHOWLA ) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 14 TH MAY, 2018. SB ' ' ' ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-2, NASHIK. 4. THE CIT-2, NASHIK. 5. , , ' , / DR, ITAT, A BENCH, PUNE. 6. % / GUARD FILE. // TRUE COPY // / BY ORDER, /SR.PRIVATE SECRETARY , / ITAT, PUNE.