M/s Jindal Poly Films Ltd., Bulandshahr V. ACIT, Bulandshahr

ITA 162/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5643 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: RUPESH J AIN
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3); 92D; 115JB; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 162/DEL/2009 ASSESSMENT YEAR : 2004-05 M/S. JINDAL POLY FILMS LTD. 19 TH K.M. HAPUR, BULANDSHAHR ROAD, GULAOTHI, BULANDSHAHR VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE BULANDSHAHR, (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RUPESH JAI N, ADVOCATE RESPONDENT BY : SHRI B.K. GUPTA, SR. DR O R D E R PER: C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 17.10.2008 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESS MENT MADE BY THE AO U/S. 143 OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE A.Y. 2004-05. 2. THE VARIOUS GROUNDS OF APPEAL RAISED BY THE ASSE SSEE ARE DIRECTED AGAINST THE CIT(A)S ORDER IN UPHOLDING THE FOLLOWI NG AD-HOC DISALLOWANCES MADE BY THE AO:- (I) RS. 4,63,260/- BEING 10% OF THE LODGING EXPENSE S OF RS. 46,32,607/-, WHICH INCLUDED IN FOREIGN TOUR EXPENSES. (II) RS. 4,90,363/- BEING 10% OF THE VEHICLE UPKEEP EXPENSES OF RS. 49,03,634/-. (III) RS. 21,807/- BEING 10% OF DEPRECIATION ALLOWA NCES ON VEHICLE. ITA NO. 162/DEL/2009 PAGE 2 OF 6 3. THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING POLYESTER FILMS, CHIPS OF ALL KINDS AND POLYESTER YARN ETC. THE ASSESSEE HAS FILED ITS RET URN OF INCOME ON 29.10.2004 DECLARING TOTAL INCOME AT RS. 24,41,19,9 61/-. THE ASSESSEE COMPANY ALSO DECLARED BOOK PROFIT OF RS. 77,73,30,5 07/- U/S. 115JB OF THE ACT. THE ASSESSMENT WAS THEN COMPLETED U/S. 143(3) ON 29.12.2006 DETERMINING THE TOTAL INCOME AT RS. 24,50,95,400/-. SINCE THE TAX PAYABLE ON BOOK PROFIT U/S. 115 JB WAS FOUND TO BE LESS THA N THE TAX PAYABLE ON TOTAL INCOME DETERMINED BY THE AO UNDER THE NORMAL PROVISIONS OF THE ACT, THE ASSESSED TOTAL INCOME WAS TAKEN INTO CONSI DERATION FOR DETERMINING THE TAX PAYABLE BY THE ASSESSEE. IN TH E ASSESSMENT, THE AO MADE THE FOLLOWING DISALLOWANCES:- (I) FOREIGN TOUR EXPENSES AMOUNTING TO RS. 4,63,260 /- BEING 10% OF LODGING EXPENSES OF RS. 46,32,607/- INCLUDED UNDER THE HEAD FOREIGN TOUR EXPENSES CLAIMED AT RS. 77,62,408/-. (II) VEHICLE EXPENSES AMOUNTING TO RS. 4,90,363/- B EING 10% OF RS. 49,03,634/- INCURRED UNDER THE SAID HEAD AS LAST YEAR. (III) RS. 21,807/- BEING 10% OF DEPRECIATION OF RS. 2,18,070/- ON VEHICLES ON ALLEGED GROUND OF PERSONA L USE BY THE DIRECTORS. 4. THE AFORESAID THREE DISALLOWANCES HAS BEEN MADE BY THE AO BY OBSERVING AND DISCUSSION THE MATTER AS UNDER:- ITA NO. 162/DEL/2009 PAGE 3 OF 6 3.2 FOREIGN TOUR EXPENSES: ASSESSEE HAS CLAIMED FOREIGN TOUR EXPENSES AT RS. 77,62,408/- WHICH INCLUDES RS. 29,96,898/- A ND RS. 1,32,903/- TOWARDS AIR FAIR AND VISA EXPENSES, REST OF THE EXPENSES PERTAINS TO LODGING EXPENSES WHICH WER E NOT FOUND FULLY VOUCHED. IN ABSENCE OF COMPLETE VOUCHE R 10% OF THE REST OF THE EXPENSES WORKED OUT AT RS. 46,32,607/- I.E. RS. 4,63,260/- ARE DISALLOWED FOR NON- BUSINESS PURPOSES LIKE EARLIER YEARS. (ADDITION RS. 4,63,260/-) 3.3 VEHICLE UPKEEP: IT IS NOTICED THAT AN AMOUNT OF RS. 49,03,634/- HAS BEEN SPENT ON VEHICLE UPKEEP. THE ASSESSEE FAILED TO PROVE THAT ALL THE EXPENDITURE W ERE INCURRED FOR THE BUSINESS PURPOSES. AFTER DISCUSSI ON AN AMOUNT OF RS. 4,90,363/- WORKED OUT @ 10% IS DISALLOWED LIKE LAST YEARS. (ADDITION RS. 4,90,363/-) 3.4 DEPRECIATION: THE COMPANY HAS VARIOUS TYPES OF VEHICLE, SOME ARE GOODS CARRIER AND SOME ARE FOR COMPANYS AUTHORITIES. THE ASSESSEE HAS CLAIMED TOTAL DEPRE CIATION ON VEHICLE PERTAIN TO ITS ALL UNITS AT RS. 2,18,070 /- (26643+86738+71896+32793). DURING THE COURSE OF HEARING PERSONAL USE OF THE VEHICLES BY THE DIRECTO RS NOT DENIED. THEREFORE, AFTER DISCUSSIONS 10% OF THE DEPRECIATION SO CLAIMED, WORKED OUT AT RS. 21,807/- IS DISALLOWED FOR PERSONAL USE OF THE VEHICLES BY THE DIRECTORS. (ADDITION OF RS. 21,807/-) 5. ON AN APPEAL, THE CIT(A) CONFIRMED THE ADDITION FOR THE GROUND THAT THE EXPENSES WERE NOT FOUND FULLY VOUCHED. 6. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 162/DEL/2009 PAGE 4 OF 6 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 8. IN SO FAR DISALLOWANCE OF RS. 4,63,460/- OUT OF FOREIGN TOUR EXPENSES, WE FIND THAT THE AO HAS MADE A GENERAL RE MARK THAT EXCEPT AIR FARE AND VISA EXPENSES, REST OF THE EXPENSES PERTAI NS TO LODGING EXPENSES, WHICH WERE NOT FOUND FULLY VOUCHED. IT IS NOT THE CASE OF THE AO THAT THESE EXPENSES WERE NOT VOUCHED AT ALL. THE AO HAS NOT POINTED OUT ANY SPECIFIC ITEM, WHICH WERE NOT FULLY VOUCHED AND WHI CH COULD NOT BE CONSIDERED TO BE EXPENDITURE OF BUSINESS IN NATURE. THE DISALLOWANCE HAS BEEN MADE BY THE AO PURELY ON ASSUMPTIONS AND PRESU MPTIONS. THE AO SHOULD HAVE AT LEAST POINTED OUT CERTAIN ITEMS OF E XPENSES, WHICH WERE OF DOUBTFUL NATURE, BUT THE AO HAS NOT POINTED OUT ANY THING TO THAT EFFECT IN THE ASSESSMENT ORDER. WE ARE, THEREFORE, NOT INCLI NED TO UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCES. 9. SIMILARLY, THE DISALLOWANCE OUT OF VEHICLE UPKEE P HAS ALSO BEEN MADE BY THE AO ON PRESUMPTIONS AS WOULD BE CLEAR FR OM HIS OWN DISCUSSIONS AND OBSERVATION MADE IN THE ASSESSMENT ORDER. DEPRECIATION HAS ALSO BEEN DISALLOWED ON THE SIMILAR BASIS. WE, THEREFORE, DO NOT FIND ANY REASON TO UPHOLD THE ORDER OF THE CIT(A) IN CON FIRMING THE DISALLOWANCE OF EXPENSES OUT OF VEHICLE UPKEEP EXPE NSES AND DISALLOWANCE ON DEPRECIATION. WE, THEREFORE, DELET E THE DISALLOWANCE MADE BY THE AO. ITA NO. 162/DEL/2009 PAGE 5 OF 6 10. IN THE RESULT, ALL THESE THREE DISALLOWANCES MA DE BY THE AO AND FURTHER CONFIRMED BY THE CIT(A), ARE DELETED. 11. IN THE COURSE OF HEARING, THE ASSESSEE RAISED O NE ADDITIONAL GROUND, WHICH READS AS UNDER:- THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT EXPUNGING THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE APPELLANT HAD DURING THE RELEVANT PREVIOUS YEAR ENTERED INTO INTERNATIONAL TRANSACTIONS HAVING T OTAL VALUE OF RS. 21,82,98,365 AND IT WAS, IN TERMS OF S ECTION 92D OF THE ACT, REQUIRED TO MAINTAIN DOCUMENTATION PRESCRIBED IN RULE 10D(2) OF THE INCOME TAX RULES I N RESPECT OF THE AFORESAID TRANSACTIONS 12. WITH REGARD TO THE AOS OBSERVATION THAT THE AS SESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION HAVING TOTAL VALUE O F RS. 21,82,98,365/-, AND AS SUCH IT WAS, IN TERMS OF SECTION 92 D OF THE ACT , REQUIRED TO MAINTAIN DOCUMENTATION PRESCRIBED IN RULE 10D(2) OF THE INCO ME TAX RULES IN RESPECT OF THE AFORESAID TRANSACTION, THE CIT(A) HA S HELD AS UNDER:- 5.1 I HAVE GONE THROUGH THE VARIOUS SUBMISSIONS OF THE APPELLANT IN THIS REGARD, I FIND IT PREMATURE TO GI VE ANY COMMENTS ON THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT, AS THE APPELLANT SHOULD RAISE THESE POIN TS BEFORE THE AO DURING THE PROCEEDINGS FOR LEVY OF PENALTIES UNDER THOSE SECTIONS. AS SUCH, THESE GRO UNDS OF APPEAL ARE DISMISSED. 13. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH IS ISSUE RAISED BY THE ASSESSEE IS PRE-MATURE, WHICH WOULD BE ONLY CONSIDE RED IN THE COURSE OF PROCEEDINGS FOR LEVY OF PENALTY FOR NOT MAINTAINING DOCUMENTATION PRESCRIBED IN RULE 10D(2) OF INCOME TAX RULES. THE ASSESSEE SHALL BE AT LIBERTY TO RAISE ANY OBJECTION OR CONTENTION AGAINS T THE AFORESAID ITA NO. 162/DEL/2009 PAGE 6 OF 6 OBSERVATION OF THE AO IN THE COURSE OF ANY PROCEEDI NGS FOR LEVY OF PENALTY UNDER THE RELEVANT SECTION, AND THEREFORE, THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IN- THIS APPEAL IS NOT MAINTA INABLE. WE, THEREFORE, REJECT THE ASSESSEES REQUEST FOR ADMITTING THE ADD ITIONAL GROUND WITH THE ABOVE OBSERVATION. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. 15. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 19TH FEBRUARY, 2010. SD/- (SHAMIM YAHYA ) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 19 TH FEBRUARY, 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR