Dep Agro Machineries Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-1(4), Ahmedabad

ITA 1619/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9705 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S N DIVETIA
• Keywords: Depreciation; Cost of acquisition
• Section: 37(1)

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE-PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO. 1619/AHD/2011 / ASSESSMENT YEAR: 2007-2008 DEP AGRO MACHINERIES P. LTD. NH NO.8, NR.KASHIRAM TEXTILES NAROL, AHMEDABAD 382 405. PAN : AAACD 5233 D VS ITO, WARD - 1(4) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI S.N. DIVETIA REVENUE BY : SMT.SONIA KUMAR, SR.DR / DATE OF HEARING : 23/06/2015 / DATE OF PRONOUNCEMENT: 17/07/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(A)-VI DATED 6 TH APRIL,2011 PASSED FOR THE ASSTT.YEAR 2007-08. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NA TURE. IN BRIEF, THE GRIEVANCE OF THE ASSESSEE REVOLVES AROUND TWO ISSUE S, NAMELY, (A) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.1,06,134/- OUT OF FOREIGN TOUR EXPENSES, AND (B) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,18 ,352/- OUT OF DEPRECIATION ON MOTOR CAR. 3. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORDS. AS THE FACTS EMERGE FROM THE RECORD, THE ASSESSEE HAS FILED RETURN OF INCOME ON 14.10.2007 DECLARING TOTAL INCOME AT ITA NO.1619/AHD/2011 2 RS.NIL. THE ASSESSEE, AT THE RELEVANT TIME, WAS EN GAGED IN THE BUSINESS OF EXPORT OF AGRICULTURAL MACHINERY AND EQ UIPMENT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 16.9.2008. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED THAT A SUM OF RS.2,12,268/- W AS INCURRED BY DAMIL PATEL AND RAJVI PATEL ON FOREIGN TOUR. THE EXPENSE S OF RS.1,06,134/- ATTRIBUTABLE TO MS.RAJVI PATEL WAS, ACCORDING TO TH E AO, NOT ALLOWABLE BECAUSE SHE WAS NEITHER A DIRECTOR OF THE COMPANY N OR EMPLOYEE. THE LEARNED AO HAD ISSUED SHOW CAUSE NOTICE INVITING EX PLANATION OF THE ASSESSEE AS TO WHY THIS EXPENSES BE DISALLOWED. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS CONTENDED THAT SHRI DAMIL PATEL IS A MARKETING CONSULTANT OF ASSESSEE COMPANY. HE DID H IS MBA FROM GUJARAT UNIVERSITY. HIS WIFE ACCOMPANIED HIM ON FO REIGN TOUR. IT WAS CUSTOMARY FOR MEETING CERTAIN BUSINESS DIGNITARIES ALONG WITH WIFE. THE LEARNED AO DID NOT ACCEPT THE CONTENTION OF THE ASS ESSEE, AND DISALLOWED THE CLAIM. 4. ON APPEAL, THE LEARNED FIRST APPELLATE AUTHORITY HAS CONCURRED WITH THE AO. THE BRIEF FINDING RECORDED BY THE FIR ST APPELLATE AUTHORITY IS WORTH TO NOTE, WHICH READS AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANT'S SUBMISSION. APPELLANT CLAIMED FOREI GN TOUR EXPENSES OF WIFE OF THE CONSULTANT. IT IS NOT IN DI SPUTE THAT THE LADY IS NOT AN EMPLOYEE NOR SHE IS ASSOCIATED WITH APPELLANT'S BUSINESS IN ANY MANNER. SHE JUST ACCOMPANIED HER HU SBAND WHO IS CONSULTANT OF THE COMPANY. BUSINESS PURPOSE OF H ER TRIP IS NOT AT ALL ESTABLISHED. THE APPELLANT'S EXPLANATION THA T IT IS CUSTOMARY AND REQUIRED FOR PROTOCOL IN MARKETING MEETING IS N OT AT ALL CONVINCING. WHEN SHE IS NOT AT ALL FAMILIAR OR ASSO CIATED WITH APPELLANT'S BUSINESS WHERE IS THE QUESTION OF CLAIM ING EXPENSES RELATING TO HER TRIP. CONSIDERING THE FACTS OF THE CASE, THE EXPENSE IS HELD TO BE INCURRED NOT FOR BUSINESS PURPOSE AND HENCE NOT ALLOWABLE, UNDER SECTION 37(1) OF THE IT ACT. ADDI TION MADE BY THE ASSESSING OFFICER IS THEREFORE CONFIRMED. ITA NO.1619/AHD/2011 3 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS, AS WERE RAISED BEFORE THE LEARNED REVE NUE AUTHORITIES BELOW. HE RELIED ON THE DECISIONS REPORTED IN J.K. INDUSTRIES LTD. VS. CIT, 335 ITR 170 (CAL.) AND BOMBAY MINERAL SUPPLY C O. P. LTD. VS. CIT, 153 ITR 437 (GUJ). ON DUE CONSIDERATION OF FACTS OF THE CASE, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE ASSESSEE CAN CLAIM THE ALLOWANCE OF EXPENDITURE IF THAT EXPENDITURE IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE COULD NOT POINT OUT SERVICE S RENDERED BY MS.RAJVI PATEL TOWARDS THE BUSINESS OF THE ASSESSEE . SHE SIMPLY ACCOMPANIED HER HUSBAND ON HIS FOREIGN TOUR. THE L EARNED FIRST APPELLATE AUTHORITY HAS APPRECIATED ALL THESE CONTE NTIONS IN THE FINDINGS EXTRACTED SUPRA. THEREFORE, AFTER TAKING INTO CONS IDERATION THE FINDINGS OF THE CIT(A), WE DO NOT FIND ANY REASON TO INTERFE RE IN IT. AS FAR AS CASE LAWS RELIED BY THE LEARNED COUNSEL FOR THE ASS ESSEE ARE CONCERNED, THESE ARE NOT APPLICABLE ON THE FACTS OF THE PRESEN T CASE, BECAUSE, THE ASSESSEE FAILED TO POINT OUT AS TO HOW THE PRESENCE OF MS.RAJVI PATEL WAS NECESSARY ALONGWITH HER HUSBAND. THUS, THIS IS SUE RAISED IN THE GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 6. IN THE NEXT GROUND OF APPEAL, THE ASSESSEE HAS P LEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,18,352/- OUT OF DEPRECIATION ON MOTOR CAR. 7. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY HAD PURCHASED A CAR, NAMELY, TOYOTA INNOVA IN THE NAME OF ITS DIRECTOR. IT CLAIMED DEPRECIATION ON THE CAR, WHICH WAS DISALLOW ED BY THE AO ON THE GROUND THAT THE ASSESSEE IS NOT REGISTERED OWNER OF THE CAR. THE LEARNED AO FURTHER OBSERVED THAT THE ASSESSEE FAILE D TO SHOW THE USER OF THE CAR FOR THE PURPOSE OF BUSINESS. ACCORDING TO THE AO, NO LOG BOOK WAS PRODUCED. THE ASSESSEE CONTENDED BEFORE T HE LEARNED FIRST APPELLATE AUTHORITY THAT THE CAR IS REGISTERED IN T HE NAME OF THE ITA NO.1619/AHD/2011 4 DIRECTOR, WHICH WAS USED BY THE DIRECTOR FOR THE PU RPOSE OF BUSINESS ONLY. SMT. PRATIMABEN PATEL IS A GRADUATE IN ECONO MICS AND ALSO MEMBER OF WOMENS COMMITTEE OF GUJARAT CHAMBER OF C OMMERCE. SHE HAS VISITED ABROAD IN THE BUSINESS TOUR ORGANIZ ED BY GCCI. PURCHASE COST OF THE CAR HAS BEEN BORNE BY THE COMP ANY. ITS DAY-TODAY RUNNING EXPENDITURES WERE ALSO BORNE BY THE COMPANY . THEREFORE, AS FAR AS USER OF THE CAR FOR THE PURPOSE OF BUSINESS IS CONCERNED, THERE IS NO DISPUTE. THE LEARNED AO COULD NOT POINT OUT AN Y SPECIFIC CIRCUMSTANCES INDICATING THAT THE CAR WAS NOT USED FOR THE PURPOSE OF BUSINESS. THE LEARNED FIRST APPELLATE AUTHORITY HA S REJECTED THE CONTENTIONS OF THE ASSESSEE. THE LD.CIT(A) HAS REC ORDED THAT THE ASSESSEE HAS FAILED TO PROVE THE USER OF THE CAR FO R THE PURPOSE OF BUSINESS. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE IMPU GNING THE ORDERS OF THE REVENUE AUTHORITIES CONTENDED THAT FOR THE G RANT OF DEPRECIATION, IT IS NOT NECESSARY THAT THE VEHICLE SHOULD BE REGI STERED IN THE NAME OF THE COMPANY. IF THE COMPANY HAS BORNE THE COST, AN D ALSO BEARS THE EXPENDITURE ON ITS DAY-TO-DAY RUNNING, THEN THE VEH ICLE REGISTERED IN THE NAME OF DIRECTOR WILL ALSO BE ELIGIBLE FOR CLAI MING THE DEPRECIATION. FOR BUTTRESSING THIS CONTENTION, THE LEARNED COUNSE L FOR THE ASSESSEE RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF AF LON ALPLAST PVT.LTD. VS. ITO IN ITA NO.1186/AHD/2012 ORDER DATED 30.1.2015. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDER OF THE C IT(A). 9. ON DUE CONSIDERATION OF THE RECORD, WE FIND THAT BEFORE THE LEARNED AO THE ASSESSEE PUT RELIANCE ON THE DECISIO NS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MM FISHERIES PVT. L TD. VS. CIT, 277 ITR 204. IN THIS CASE DEPRECIATION WAS GRANTED TO THE FIRM ON THE CAR, WHICH WAS NOT REGISTERED IN THE NAME OF FIRM. IN THE ORD ER OF THE ITAT RENDERED IN THE CASE OF AFLON APLAST PVT. LTD. (SUP RA), THE ITAT CONSIDERED LARGE NUMBER OF DECISIONS INCLUDING THE DECISIONS OF THE ITA NO.1619/AHD/2011 5 HONBLE GUJARAT HIGH COURT IN THE CASE OF ARAVALI F INLEASE LTD., 341 ITR 280(GUJ). ON THE STRENGTH OF THESE DECISIONS, WE A RE OF THE VIEW THAT IF THE VEHICLE IS FINANCED BY THE COMPANY, AND IT IS B EING USED BY THE DIRECTOR, THEN EVEN IF THE CAR IS NOT REGISTERED IN THE NAME OF THE COMPANY, DEPRECIATION WILL BE GRANTED. BUT IN THE PRESENT CASE BOTH THE REVENUE AUTHORITIES HAVE NOT DENIED THE DEPRECIATIO N SIMPLY FOR THE REASONS THAT VEHICLE WAS NOT OWNED BY THE COMPANY - THEY HAVE DENIED IT FOR THE REASON THAT THERE IS NO EVIDENCE THAT VE HICLE WAS USED FOR THE BUSINESS PURPOSE OF THE COMPANY. FACED WITH THIS S ITUATION, WE DEEM IT PROPER TO SET ASIDE THIS ISSUE TO THE FILE OF THE A O FOR RE-ADJUDICATION. THE ASSESSEE IS DIRECTED TO FURNISH EVIDENCE DEMONS TRATING THE FACT THAT VEHICLE WAS EXCLUSIVELY USED FOR THE BUSINESS PURPO SE OF THE ASSESSEE COMPANY. IF THAT EVIDENCE IS SUBMITTED, THEN THE D EPRECIATION WILL BE GRANTED TO THE ASSESSEE. IT WILL NOT BE DENIED ON THE GROUND THAT THE VEHICLE WAS NOT REGISTERED IN THE NAME OF THE ASSES SEE-COMPANY. IF THE ASSESSEE FAILS TO PRODUCE THE EVIDENCE, DEMONSTRATI NG ITS USER, FOR THE PURPOSE OF BUSINESS, THEN THE LEARNED AO WILL BE AT LIBERTY TO TAKE VIEW IN ACCORDANCE WITH LAW. THIS GROUND OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 17 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (G.D. AGRAWAL) VICE-PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 17/07/2015