The DCIT, Circle-1(2), Baroda V. Kamdhenu Motors Pvt.Ltd., Baroda

ITA 1671/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89463 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-04-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 18-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 43B

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO. 1671/AHD/2010 / ASSESSMENT YEAR: 2001-02 THE DCIT, CIRCLE 1 (2), BARODA . APPELLANT VS. M/S. KAMDHENU MOTORS PVT LTD, KAMDHENU ESTATE, RACE COURSE CIRCLE, BARODA . RESPONDENT PAN : AAACK 7750 N REVENUE BY : SMT SONIA KUMAR, SR. DR AS SESSEE(S) BY : SHRI MUKUND BAKSHI, AR !' / DATE OF HEARING : 24/04/2015 #$ !' /DATE OF PRONOUNCEMENT: 15/05/2015 %& %& %& %&/ // / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BARO DA DATED 15.03.2010 FOR ASSESSMENT YEAR 2001-02. 2. THE REVENUE HAS FILED REVISED GROUNDS OF APPEAL, WHICH READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.2,18,165/- ON ACCOUNT OF DISALLOWANCE OF EXPENSE S OF SALES TAX PAYMENT. THE CIT(APPEALS) ERRED IN NOT ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 2 - APPRECIATING THE FACT THAT THE ASSESSEE WAS MAINTAI NING SEPARATE ACCOUNT FOR THE PURPOSE OF SALES TAX AND T HE ASSESSED HAD DEBITED SALES TAX AT RS.2,18,165/- UND ER THE HEAD SALES TAX' TO THE P & L A/C. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.18,26,868/- MADE ON ACCOUNT OF DISALLOWANCE OF DISCOUNT CHARGES. THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT/THE ASSESSEE HAD FAILED TO PRODUCE EVIDENCE TO SHOW THAT IT HAD ACTUALLY OFFER ED DISCOUNT AS CLAIMED BY THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.4,79,443/- MADE ON ACCOUNT OF DISALLOWANCE OF SE LLING COMMISSION. THE CIT(APPEALS) ERRED IN NOT APPRECIAT ING THE FACT THAT THE ASSESSEE HAD FAILED TO FURNISH EV EN THE NAMES OF THE PARTIES TO WHOM THE COMMISSION WAS PAI D. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.3,84,801/- MADE ON ACCOUNT OF DISALLOWANCE OF CA R REPAIRING EXPENSES. THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS/VOUCHERS AND OTHER DETAILS AND BUSINE SS NEED TO THE EXTENT OF EXPENSES OF RS.1,99,364/- AND THE EXPENSE OF RS.2,06,041/- INCURRED WAS FOR THE REPLA CEMENT OF COMPONENTS OF CAR WHICH IMPROVED THE, EFFICIENCY AND WORKING OF THE CAR, HENCE, IT IS TO BE TREATED AS C APITAL EXPENDITURE AND NOT ALLOWABLE AS REVENUE EXPENDITUR E. BUT DEPRECIATION HAS BEEN ALLOWED ON THE EXPENSE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.32,740/- MADE ON ACCOUNT OF DISALLOWANCE OF ADVERTISEMENT EXPENSES. THE CIT(APPEALS) ERRED IN N OT APPRECIATING FACT THAT THE AMOUNT OF RS.20,000/- PA ID FOR THE ADVERTISEMENT OF POLITICAL PARTIES IS NOT AN AL LOWABLE EXPENDITURE AND WITH REGARD TO THE BALANCE EXPENSES OF RS.8,240/- AND RS.4,500/-, THE ASSESSEE HAD FAILED TO ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 3 - EXPLAIN AS TO WHAT ADVERTISEMENT PURPOSE IT HAS SER VED TO THE ASSESSEE AND HENCE NOT AN ALLOWABLE EXPENDITURE . 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.1,00,121/- MADE ON ACCOUNT OF DISALLOWANCE OF ADVANCE FROM CUSTOMER. THE CIT(APPEALS) ERRED IN NO T APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO FURNISH ANY DETAILS AND EXPLANATION ABOUT THESE DEB IT ENTRIES. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.4,06,644/- MADE U/S.40A(2)(B) OF THE ACT ON ACCO UNT OF DISALLOWANCE OF LEASE RENT AS THE ASSESSEE HAD FAIL ED TO FURNISH THE COMPLETE DETAILS EITHER DURING THE COUR SE OF ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.68,768/- MADE ON ACCOUNT OF DISALLOWANCE OF STAF F WELFARE EXPENSES AS THE ASSESSEE HAD FAILED TO FURN ISH THE COMPLETE DETAILS SUCH AS BILLS EITHER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE D.CIT(APPEALS) ERRED IN RESTRICTING THE AD DITION OF RS.10,07,636/- MADE ON ACCOUNT OF DISALLOWANCE OF R EPAIR AND MAINTENANCE EXPENSES FOR FURNITURE AND MACHINER Y. THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE MAJOR PORTION OF THE EXPENDITURE WAS CAPITAL EXPEND ITURE AND FOR THE OTHER EXPENSES, THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM WITH SUPPORTING EVIDENCE. 10.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDI TION OF RS.1,20,371/- FOR MARRIAGE AND RS.4,49,863/- TOWARD S OTHER TRAVELLING EXPENSE CLAIMED AS BUSINESS EXPEND ITURE, ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 4 - AS THE ASSESSEE HAD FAILED TO EXPLAIN THE BUSINESS NEEDS OF THE ASSESSEE. 11.THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR AL TER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. 3. THE ASSESSEE IS A DEALER IN HONDA MOTOR CARS AND ALSO ENGAGED IN THE BUSINESS OF TRADING OF HONDA CARS AN D ITS PARTS. THE FIRST ISSUE IS WITH REGARD TO THE ADDITION OF R S.2,18,165/- MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF SALE S TAX PAYMENT. THIS AMOUNT WAS FOUND TO BE PAID IN EXCESS OF THE SALES TAX COLLECTED AND WAS EXPLAINED TO REPRESENT LIABILITY TOWARDS TAXES ON PURCHASES FROM UNREGISTERED DEALER S. THE ASSESSING OFFICER HELD THAT THE ASSESSEE FAILED TO ESTABLISH ITS CLAIM. 3.1 THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRS T APPELLATE AUTHORITY INTER ALIA SUBMITTED THAT PARTICULARS OF SUCH PAYMENT WERE FURNISHED IN THE TAX AUDIT REPORT AND COPY OF THE SAME WAS FILED DURING THE APPELLATE PROCEEDINGS. IN THIS BACKGROUND, IT WAS CONTENDED THAT THE EXCESS AMOUNT OF SALES TA X PAID WAS TO BE ALLOWED IN TERMS OF THE PROVISIONS OF SECTION S 43B, AS THE PAYMENT OF TAX WAS MADE BEFORE THE DUE DATE OF RETU RN AS PER THE CERTIFICATE OF THE TAX AUDITORS. THE CIT(A), HA VING CONSIDERED THE SUBMISSIONS BY THE ASSESSEE, HAS GRA NTED RELIEF TO THE ASSESSEE BY DELETING THE DISALLOWANCE OF RS. 2,18,165/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLO WANCE OF EXPENSES OF SALES TAX PAYMENT AND THE SAME HAS BEEN OPPOSED BEFORE US BY THE REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN FACT AND LAW WHILE DELETING TH E ADDITION OF ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 5 - RS.2,18,165/- MADE BY THE ASSESSING OFFICER. ACCORD INGLY, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING O FFICER ON THIS ISSUE BE RESTORED. ON THE OTHER HAND, LD AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 3.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT THE DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH TH AT THE PAYMENT OF ADDITIONAL SALES TAX WAS A LIABILITY FAS TENED ON IT AND WAS NOT TO BE RECOVERED FROM ITS CUSTOMERS. AC CORDING TO THE ASSESSEE, WHERE PURCHASES WERE MADE FROM REGIST ERED DEALERS FOR RESALE BY THE ASSESSEE, IN SUCH CASES T HE ASSESSEE WAS ENTITLED TO SET OFF THE SALES TAX PAID ON ITS P URCHASES AGAINST THE SALES TAX PAYABLE ON ITS SALES. ONLY TH E DIFFERENCE WAS TO BE PAID TO GOVERNMENT, SINCE IN THE CHAIN, T HE ASSESSEES SUPPLIER HAD ALREADY RECOVERED AND PAID THE BULK OF THE TAX ON THE GOODS. HOWEVER, IN THE CASE OF PURC HASES FROM UNREGISTERED DEALER, SINCE NO TAX HAD BEEN PAID, TH E ASSESSEE WAS NOT ABLE TO CLAIM ANY SET OFF AND THE LIABILITY OF PAYING TAX ON ITS PURCHASES WAS FASTENED ON THE ASSESSEE U/S 1 5A OF THE GUJARAT SALES TAX ACT. IN SUCH SITUATION, IT ONLY NEEDED TO BE VERIFIED WHETHER THE QUANTUM OF TAX HAS BEEN ACTUAL LY PAID BEFORE THE DUE DATE OF FILING THE RETURN FOR CLAIMI NG SUCH PAYMENT U/S 43B OF THE ACT. IT WAS FOUND FROM ANNEX URE-5 TO THE TAX AUDIT REPORT THAT THE AMOUNT OF SUCH TAX LI ABILITY INCURRED DURING THE PREVIOUS YEAR BUT REMAINING OUT STANDING ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 6 - WAS RS.25,68,401/- WHICH WAS PAID BEFORE THE DUE D ATE OF FILING THE RETURN. IN VIEW OF THIS, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION U/S 43B. THUS, THE FINDING OF CIT(A) IN THIS REGARD S NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 4. THE SECOND ISSUE IS WITH REGARD TO THE ADDITION OF RS.18,26,868/- MADE ON ACCOUNT OF DISALLOWANCE OF D ISCOUNT CHARGES. ACCORDING TO THE ASSESSING OFFICER, THE PA RTICULARS OF DISCOUNT DISCLOSED THAT THE ASSESSEE HAS ALLOWED DI SCOUNT TO ITS CUSTOMERS IN THE FOLLOWING MANNER:- 1) DISCOUNT ABOVE RS.5,000/- PER CUSTOMER RS.13,63,2 80/- 2) DISCOUNT BELOW RS.5,000/- PER CUSTOMER RS. 4,63, 588/- TOTAL RS.18,26,868/- THE ASSESSING OFFICER FOUND THAT THE DISCOUNT EXPE NSES WERE NOT ALLOWABLE FOR THE FOLLOWING REASONS:- (I) NO JUSTIFICATION FOR INCREASE IN DISCOUNT EXPENSES, DESPITE THE REDUCTION IN TURNOVER (II) REDUCTION IN NET PROFIT RATIO AS COMPARED TO EARLI ER YEAR (III) THE INCREASE IN DISCOUNT CHARGES FROM RS.5,64,826/- TO RS.18,26,868/-, AS COMPARED TO THE EARLIER YEAR. (IV) HUGE VARIATION IN THE DISCOUNT OFFERED, RANGING FRO M RS.5,000/- TO RS.40,118/- IN RESPECT OF SAME MODEL OF CAR. ACCORDINGLY, THE SAME WAS DISALLOWED ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 7 - 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELI EF TO THE ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF REVENU E INTER ALIA SUBMITTED THAT THE DELETION OF ADDITION OF RS.18,2 6,868/- MADE ON ACCOUNT OF DISALLOWANCE OF DISCOUNT CHARGES WAS NOT JUSTIFIED AND ACCORDINGLY, ORDER OF CIT(A) BE SET A SIDE AND THAT OF ASSESSING OFFICER ON THIS ISSUE BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORD ER OF CIT(A). 4.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD WE FIND THAT THE STAND OF THE ASSESSEE HAS B EEN THAT IN A HIGHLY COMPETITIVE BUSINESS ENVIRONMENT IT IS QUITE NORMAL FOR DEALERS TO OFFER DISCOUNT TO ITS CUSTOMERS. AS STA TED ABOVE, THE ASSESSEE IS A DEALER IN HONDA MOTOR CARS. THESE AR E PREMIUM SEGMENT CARS. THE ASSESSEE HAS ALLOWED DISCOUNT RAN GING FROM RS.15,000/- TO RS.25,000/- IN MOST OF THE CASES, EX CEPT ONE. THE DISCOUNT WORKED OUT ONLY TO 1 TO 2% OF THE SA LES VALUE. WHERE A DISCOUNT OF RS.15,000/- IS OFFERED ON A CAR COSTING RS.10 LACS, THE SAME CANNOT BE SAID TO BE UNREASONA BLE, EXCESSIVE OR UNJUSTIFIED. AS A PAST HISTORY, UPTO F .Y. 2000-01, THE ASSESSEE WAS THE SOLE DEALER OF HONDA CARS IN G UJARAT; THEREAFTER OTHER DEALERS WERE APPOINTED AND COMPETI TIVE PRESSURE INCREASED. IT WAS ALSO NOTICED THAT THE EN TIRE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. O N SIMILAR ISSUE, IN AY 2004-05, DETAILED ENQUIRY WAS MADE BY THE ASSESSING OFFICER AND DUE VERIFICATION, ONLY SMALL DISALLOWANCE ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 8 - WAS MADE, THAT TOO ON THE GROUND THAT SOME OF THE P URCHASERS OF THE CARS DID NOT RESPOND TO THE ENQUIRY U/S 133( 6). THE ASSESSEE HAS DISCHARGED ITS ONUS BY FURNISHING THE NAMES AND ADDRESS OF ALL THE PURCHASERS. AS AN ACCOUNTING MEA SURE, THE ASSESSEE HAS RECORDED THE AMOUNTS UNDER THE HEAD D ISCOUNT. LOOKING TO THE PAST PRACTICE OF THE ASSESSEE AND FA CTS & CIRCUMSTANCES OF THE CASE, THE CIT (A) WAS JUSTIFIE D IN DELETING THE DISALLOWANCE IN QUESTION. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. THE THIRD ISSUE IS WITH REGARD TO DISALLOWANCE OF SELLING COMMISSION OF RS.4,79,443/-. THE ASSESSEE CLAIMED SALES COMMISSION PAID TO VARIOUS PERSONS, THE DETAILS OF THE SAME WERE FILED BEFORE THE AUTHORITIES BELOW. THESE DET AILS INCLUDED DISCOUNT GIVEN TO CUSTOMERS AS ALSO TO CAR DEALERS OR FINANCE COMPANIES FOR REFERRING CUSTOMERS TO THE ASSESSEE. THE COMMISSION WAS PAID TO CAR DEALERS / FINANCE COMPAN IES BY CHEQUES ONLY. AS FAR AS CUSTOMERS ARE CONCERNED, TH E PARTICULARS AND NATURE OF COMMISSION WAS SIMILAR TO THE DISCOUNT ALLOWED. THIS WAS WRONGLY DEBITED TO COMMI SSION ACCOUNT. AS PER ASSESSEE, IT IS A VERY COMMON PRACT ICE IN THE TRADE WHERE THE LOCAL AGENTS WHO ARE NOT AUTHORIZED DEALERS PROMOTE THE SALES OF AUTHORIZED DEALERS. IT IS SUBM ITTED THAT WHERE COMMISSION IS GIVEN TO SUCH DEALER, THE DISCO UNT IS GIVEN TO THE CUSTOMERS IS LESS THAN THE CUSTOMERS WHO DIR ECTLY NEGOTIATE AND FINALIZE THE PURCHASE OF THE CAR WITH THE ASSESSEE. IN THE ASSESSMENT PROCEEDINGS, SOME CONFI RMATIONS FROM THE PERSON TO WHOM COMMISSION WAS GIVEN COULD NOT BE ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 9 - OBTAINED AND SUBMITTED. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER DISALLOWED RS.4,79,443/- ON THE GROUND THAT THESE TRANSACTIONS ARE HELD AS NON-GENUINE AS THE ASSESSE E FAILED TO SUBSTANTIATE THE CLAIM OF COMMISSION ON SALES. 5.1 ON APPEAL, THE CIT(A) GRANTED RELIEF TO THE ASS ESSEE AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 10% OF THE SALES COMMISSION AND DISCOUNT EXPENSES I.E. RS.2,30,630/- . THE SAME HAS BEEN OPPOSED ON BEHALF OF THE REVENUE INTER ALIA SUBMITTING THAT CIT(A) ERRED IN RESTRICTING THE ADD ITION MADE BY THE ASSESSING OFFICER. IT APPEARS THAT AMOUNT HAS WRONGLY MENTIONED IN THE GROUNDS OF APPEAL. THE LD. DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE CIT( A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 5.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT IN THE REMAND REPORT DATED 28. 09.2007, THE ASSESSING OFFICER STATED THAT ALTHOUGH THE ASSE SSEE HAS FURNISHED CONFIRMATIONS FROM THE TWO COMMISSION AGE NTS NAMELY KRISHNA MOTORS (RS.61,096/-) AND SHETH MOTOR S (RS.1,21,240/-), CONFIRMATIONS FROM THE CUSTOMERS W ERE NOT FURNISHED IN ANY CASE. HENCE, THE GENUINENESS OF T HE TRANSACTION SHOULD NOT BE ACCEPTED. THE CIT(A), ON A DETAILED VERIFICATION AND INVESTIGATION DONE BY THE ASSESSIN G OFFICER FOR ASSESSMENT YEARS 2002-03 AND 2004-05 IN THE CASE OF ASSESSEE, OBSERVED THAT MOST OF THE PARTIES WERE FO UND TO BE GENUINE AND DISALLOWANCE HAVE BEEN MADE AS UNDER:- ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 10 - AY COMMISSION EXP. CLAIMED DISALLOWED AFTER VERIFICATION % OF DISALLOWANCE 2002 - 03 RS.28.31 LAKHS NIL 0% 2004 - 05 RS.25.63 LAKHS RS.1,22,250 4.77% 5.3 THUS, THE AMOUNT OF COMMISSION EXPENSES DISALLO WED COMES TO LESS THAN 5% OF THE EXPENSES. IN THIS BAC KGROUND, THE CIT(A) SUSTAINED THE DISALLOWANCE FOR THE YEAR UNDER CONSIDERATION TO THE EXTENT OF 10% OF THE SALES COM MISSION AND DISCOUNT EXPENSES (I.E. 10% OF RS.23,06,301/-) AND DISALLOWANCE OF RS.2,30,630/- WAS CONFIRMED AND BAL ANCE OF RS.20,75,671/- WAS DELETED. THIS REASONED FINDING O F CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6. THE FORTH ISSUE IS WITH REGARD TO ADDITION OF RS .3,84,801/- MADE ON ACCOUNT OF DISALLOWANCE CAR REPAIRING EXPEN SES. THE ASSESSING OFFICER FOUND THAT AN EXPENDITURE OF RS.6 ,03,835/- WAS INCURRED ON REPAIRS AND REPLACEMENT OF COMPONEN TS AND MAINTENANCE OF CAR. OUT OF THESE EXPENSES, THE EXP ENDITURE OF RS.3,84,801/- WAS FOUND TO BE CAPITAL IN NATURE AND THEREFORE, THE SAME WAS DISALLOWED. 6.1 IN APPEAL PROCEEDINGS, THE DETAILS OF EXPENSES INCURRED WERE FURNISHED. IT WAS POINTED OUT THAT THE EXPENSE S WERE TOWARDS PURCHASE OF CAR TYRES, SPARE PARTS AND REPA IRING CHARGES AND NO NEW ASSET HAS COME INTO EXISTENCE ON SUCH PURCHASE. HAVING CONSIDERING THE CONTENTIONS RAISE D ON BEHALF OF THE ASSESSEE, THE CIT(A) GRANTED RELIEF TO THE A SSESSEE AND ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 11 - THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF TH E REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,84,801/- MADE ON ACCOUNT OF THE DI SALLOWANCE OF CAR REPAIRING EXPENSES. THE LD. DEPARTMENTAL RE PRESENTATIVE FURTHER SUBMITTED THAT THE CIT(A) ERRED IN NOT APPR ECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS/ VOUCHERS AND OTHER DETAILS AND BUSINESS NEED TO THE EXTENT OF EX PENSES OF RS.1,99,364/- AND THE EXPENSES OF RS.2,06,041/- INC URRED WAS FOR THE REPLACEMENT OF COMPONENTS OF CAR WHICH IMPR OVED THE EFFICIENCY AND WORKING OF THE CAR, HENCE, IT IS TO BE TREATED AS CAPITAL EXPENDITURE AND NOT ALLOWABLE AS REVENUE EX PENDITURE; BUT DEPRECIATION HAS BEEN ALLOWED ON THE EXPENSE. T HEREFORE, TTE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. ON THE OTHER HAND, THE LD. AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 6.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT, AS A GENERAL PRINCIPLE, THE E XPENDITURE WHICH PROVIDES BENEFIT FOR LESS THAN ONE YEAR INVOL VES MERE REPLACEMENT OF A PART OF THE MACHINE AND NOT THE EN TIRE MACHINE OR DOES NOT RESULT IN THE CREATION OF ANY N EW ASSET CANNOT BE TERMED AS CAPITAL EXPENDITURE. IT WOULD A MOUNT TO A REVENUE EXPENSE, AND WOULD QUALIFY FOR DEDUCTION AS REPAIRS AND MAINTENANCE EXPENDITURE. THE IMPUGNED EXPENDITU RE LAY IN THE REVENUE FIELD AND NOT IN THE CAPITAL FIELD. IN THIS CASE, EXPENDITURE HAS BEEN INCURRED ON REPLACEMENT OF TYR ES, BATTERIES AND OTHER SPARE PARTS AND NO NEW ASSETS H AVE BEEN ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 12 - CREATED. THE ITEMS ON WHICH EXPENDITURE HAD BEEN IN CURRED HAVE NO USEFUL EXISTENCE EXCEPT WHEN ATTACHED TO A VEHICLE. HENCE, IT WAS HELD BY THE CIT(A) THAT THE REPLACEME NT OF SUCH PARTS WOULD AMOUNT TO REVENUE AND NOT CAPITAL EXPEN DITURE. ACCORDINGLY, THE CIT(A) WAS JUSTIFIED IN DELETING T HE DISALLOWANCE OF RS.3,84,801/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE DISALLOWANCE OF CAR REPAIRING EXP ENSES. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FR OM OUR SIDE. WE UPHOLD THE SAME. 7. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.32,7 40/- MADE ON ACCOUNT OF DISALLOWANCE OF ADVERTISEMENT EXPENSE S. THE ASSESSING OFFICER WHILE VERIFYING THE TOTAL EXPENDI TURE OF RS.2,90,216/- FOUND THAT EXPENSE OF RS.32,740/- WAS NOT SHOWN TO BE FOR BUSINESS NEEDS. ACCORDINGLY, THE S AME WAS ADDED TO ASSESSEES INCOME. THE PARTICULARS OF SUCH EXPENSE ARE TABULATED AS UNDER:- SR. NO. DATE AMOUNT (RS.) NAME PARTICULARS 1 11.04.2000 8,240 HOTEL SURYA FOOD PACKETS SERVED IN TREASURE HUNT EVENT HELD AT KAMDHENU HONDA WITH VADODARA PATIDAR SAMAJ 2 13.12.2000 20,000 VADODARA YUVA JILLA MORCHA ADVERTISEMENT GIVEN SOUVENIR PUBLISHED BY VADODARA YUVA JILLA MORCHA IN THE YEAR 2001 3 01.03.2001 4,500 BHARAT JEWELLERS PURCHASE OF 10 GM. GOLD COIN UNDER SPECIAL SCHEME FOR THE SALE OF CAR ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 13 - 7.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED IN THIS REG ARD ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF TO THE ASSESSEE AND THE SAME HAS BEE N OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETION OF ADDITION OF RS.32,740/- MADE ON ACCOUNT OF DISALLOWANCE OF ADVERTISEMENT EX PENSES AND ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE A ND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTE D THE ORDER OF THE CIT(A). 7.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT WITH REGARD TO THE EXPENDITURE OF RS.8,240/- AND RS.4,500/- IN RESPECT OF FOOD PACKET S AND GOLD COINS, IT WAS FOUND THAT THE EXPENDITURE WAS INCURR ED DIRECTLY ON ACTIVITIES RELATING TO SALES PROMOTION BY THE CO MPANY. ACCORDINGLY, THE SAME WAS ALLOWABLE AS BUSINESS EXP ENSE, SO THE ADDITION ON THIS ACCOUNT WAS RIGHTLY DIRECTED T O BE DELETED BY THE CIT(A). WITH REGARD TO THE EXPENDITURE OF R S.20,000/- INCURRED ON PUBLISHING ADVERTISEMENT IN A SOUVENIR ISSUED BY THE YOUTH WING OF A POLITICAL PARTY, THIS AMOUNT OF EXPENDITURE IS FOUND DISPROPORTIONATE TO THE VALUE OF THE BENEF IT DERIVED FROM SUCH EXPENSE. THE ADVERTISEMENT HAS BEEN PLAC ED IN A PUBLICATION WITH VERY LIMITED CIRCULATION. THE READ ERS OF THE SOUVENIR WERE PERSONS WHO DID NOT FORM PART OF THE TARGET CLIENT GROUP OF THE ASSESSEE; HENCE, THE CIT(A) HEL D THAT THIS EXPENSE WAS DISPROPORTIONATE TO THE BENEFIT DERIVED AND ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 14 - ACCORDINGLY, CONFIRMED THE DISALLOWANCE TO THE EXTE NT OF RS.10,000/- AND BALANCE AMOUNT WAS DELETED. THIS R EASONED FACTUAL FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 8. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.1,00 ,121/- MADE ON ACCOUNT OF DISALLOWANCE OF ADVANCE FROM CUS TOMERS. THE ASSESSING OFFICER WHILE PURSUING THE DETAILS OF ADVANCE FROM CUSTOMERS FOUND THAT AN AMOUNT OF RS.1,00,121/ - WAS PAYABLE TO BIREN CHAMPANERIYA AND SUCH DUES WERE AD JUSTED BY DEBITING THE ACCOUNTS OF SHRI SAMEER SHAH (RS.12 ,775) AND SAJAN DEVELOPERS (RS.87,3460/-), IN RESPECT OF WHIC H NO EXPLANATION WAS FURNISHED. 8.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED IN THIS REG ARD ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF TO THE ASSESSEE AND THE SAME HAS BEE N OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,00,12 1/- MADE ON ACCOUNT OF DISALLOWANCE OF ADVANCE FROM CUSTOMERS A ND ACCORDINGLY, REQUESTED THAT THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTE D THE ORDER OF THE CIT(A). 8.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT THE ASSESSEE HAS SQUARED UP TH E AMOUNT RECEIVABLE FROM SAMEER SHAH OF RS.12,775/- AND SAJA N ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 15 - DEVELOPERS OF RS.87,346/- BY THE AMOUNT PAYABLE TO BIREN CHAMPANERIYA. SUCH MUTUAL AGREEMENT AND SQUARING O FF IS NOT STRANGE TO BUSINESS CIRCLE. THE MATERIAL THING TO BE SEEN IS WHETHER, AS A RESULT OF SQUARING OFF, ANY AMOUNT HA S ESCAPED TAXATION. IN THE CASE BEFORE US, HAD THE ASSESSEE ADOPTED THE NORMAL COMMERCIAL PRACTICE, IT WOULD HAVE WRITTEN O FF THE AMOUNTS RECEIVABLE FROM SAMEER SHAH AND SAJAN DEVEL OPERS AND ALSO THE AMOUNT PAYABLE TO BIRREN CHAMPANERIYA. THE INCOME OF RS.1,00,121/- U/S 41(1) IN THE CASE OF BI REN CHAMPANERIYA WOULD HAVE BEEN NULLIFIED BY THE EXPEN SE (BAD DEBTS WRITTEN OFF IN THE CASE OF SAMEER SHAH AND SA JAN DEVELOPERS). INSTEAD OF DOING SO, THE ASSESSEE HAS SIMPLY SQUARED UP THE THREE ACCOUNTS. IN THIS BACKGROUND, THE CIT(A) WAS RIGHTLY DELETED THE DISALLOWANCE OF RS.1,00,121 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF ADVANCE FROM CUSTOMERS. THIS REASONED FACTUAL FINDING OF T HE CIT(A) IN THIS REGARDS NEEDS NO INTERFERENCE FROM OUR SIDE AN D THE SAME IS UPHELD. 9. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF LEA SE RENT OF RS.4,06,644/- MADE U/S 40A(2)(B) OF THE ACT. THE AS SESSING OFFICER FOUND THAT THE ASSESSEE PAID LEASE RENT TO MANISH INDUSTRIAL ESTATE AND PANKAJ INDUSTRIAL ESTATE, BOT H OF WHOM WERE RELATED PARTIES COVERED U/S 40A(2)(B). THE PA RTICULARS OF RENT PAID AND AREA OCCUPIED WAS FOUND TO BE DISPROP ORTIONATE AS PER THE DETAILS GIVEN BELOW: NAME OF THE RECIPIENT AREA OCCUPIED SURVE Y NO. RENT PAID (RS.) RATE ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 16 - MANISH INDUSTRIAL ESTATE 19707 SQ. FT. 370/1 50,000/- RS.2.53 PANKAJ INDUSTRIAL ESTATE 12702 SQ. FT. 371/1 25,000/- RS.1.96 IN VIEW OF ABOVE, THE ASSESSING OFFICER HELD THAT T HE RENT PAID TO MANISH INDUSTRIAL ESTATE WAS EXCESSIVE AND SHOUL D BE RESTRICTED TO RS.25,000/- PER MONTH. THE DISALLOWAN CE THUS AMOUNTED TO RS.3,00,000/- WHILE THE RENT PAID TO PA NKAJ INDUSTRIAL ESTATE WAS TO BE RESTRICTED TO RS.16,113 /- AND THE EXCESS AMOUNT OF RS.1,06,644/- (RS.8,887/- X 12) WA S DISALLOWED AS EXCESSIVE. 9.1 IN APPEAL BEFORE THE CIT(A), VARIOUS CONTENTION S WERE RAISED IN THIS REGARD ON BEHALF OF ASSESSEE AND HAV ING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF TO THE A SSESSEE WHICH HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVEN UE INTER ALIA STATING THAT CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,06,644/- MADE U/S 40A(2)(B) OF THE ACT ON ACCO UNT OF DISALLOWANCE OF LEASE RENT AS THE ASSESSEE HAD FAIL ED TO FURNISH THE COMPLETE DETAILS EITHER DURING THE COURSE OF AS SESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS AND ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND T HAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTE D THE ORDER OF THE CIT(A). 9.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT THE ASSESSEE HAS ENTERED INTO THREE AGREEMENTS AS PER THE PARTICULARS GIVEN BELOW:- ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 17 - SR. NO. DATE OF AGREEMENT PREMISES AREA RENT (RS.) NAME OF THE LESSOR 1 02.09.1997 SHOWROOM 6530 SQ. FT. 25,000/- MANISH INDL ESTATE 2 24.12.1998 WORKSHOP 13177 SQ. FT. 25,000/- MANISH INDL ESTATE 3 24.12.1998 STORAGE PARKING PURPOSE 12702 SQ. FT. 25,000/- PANKAJ INDL ESTATE IN THIS BACKGROUND, THE CIT(A) OBSERVED THAT THE AR EA OF SHOWROOM AS PER THE LAY OUT SUBMITTED WAS FACING TH E NATIONAL HIGHWAY. IT HAS A LARGE FRONTAGE AND WAS SUITABLE F OR USE AS SHOWROOM. ON THE OTHER HAND, THE WORKSHOP AND THE S TORAGE PARKING AREA WAS ON THE REAR SIDE AND THEREFORE THE DIFFERENCE IN THE LEASE RENT FOR PREMISES AT SR. NO.1 AS COMPA RED TO PREMISES AT SR. NO.2 & 3 WOULD BE DIFFERENT. THE RE NT PAID FOR PREMISES AT SR. NO. 2 & 3 IS SIMILAR, CONSIDERING T HE AREA OCCUPIED. THEREFORE, THE CIT(A) OBSERVED THAT THE R ENT PAID TO THE PARTIES NAMELY MANISH INDUSTRIAL ESTATE AND PAN KAJ INDUSTRIAL ESTATE WAS REASONABLE AND NOT EXCESSIVE. THE FINDING OF THE ASSESSING OFFICER HAD BEEN ARRIVED AT WITHOU T BRINGING ANYTHING ON RECORD TO SHOW THAT THE RENT WAS EXCESS IVE OR UNREASONABLE. IN THIS BACKGROUND, THE CIT(A) WAS JU STIFIED IN DELETING THE AGGREGATE DISALLOWANCE OF RS.4,06,644/ - MADE BY THE ASSESSING OFFICER U/S 40A(2)(B) ON ACCOUNT OF D ISALLOWANCE OF LEASE RENT. THIS REASONED FACTUAL AND LEGAL FIND ING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHO LD THE SAME. 10. NEXT ISSUE IS RELATED TO THE DISALLOWANCE OF ST AFF WELFARE EXPENSES OF RS.68,768/-. THE ASSESSING OFFICER FOUN D THAT THE ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 18 - STAFF WELFARE EXPENSES WERE MAINLY INCURRED TOWARDS EXPENSES AT HOTELS AND RESTAURANTS. THE ASSESSEE WAS UNABLE TO SUBSTANTIATE SUCH EXPENSES AND HENCE THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENSES. 10.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED IN THIS REG ARD ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF R S.68,768/- MADE ON ACCOUNT OF DISALLOWANCE OF STAFF WELFARE EX PENSES AND ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND T HAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTE D THE ORDER OF THE CIT(A). 10.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, WE FIND THAT PROVIDING HOSPITALITY BY WAY O F MEALS TO ITS CUSTOMERS IS A NORMAL PART OF BUSINESS ACTIVITY. EX PENDITURE LAID OUT ON THIS ACCOUNT WOULD QUALIFY FOR DEDUCTIO N U/S 37(1), UNLESS IT COULD BE SHOWN THAT THE EXPENDITURE WAS I NCURRED FOR NON-BUSINESS PURPOSES. IN THE PRESENT CASE, THE ACC OUNTS HAVE BEEN AUDITED AND THE EXPENSES HAVE BEEN CERTIFIED T O BE FOR BUSINESS PURPOSES. THE CIT(A) HELD THAT NO DISALLOW ANCE OF RS.68,768/- WAS JUSTIFIED. ACCORDINGLY, THE SAME WA S RIGHTLY DELETED BY THE CIT(A). WE UPHOLD THE ORDER OF CIT(A ) ON THIS ISSUE. ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 19 - 11. NEXT ISSUE RELATES TO DISALLOWANCE OUT OF REPAI RS AND MAINTENANCE OF RS.10,07,636/-. THE ASSESSING OFFIC ER FOUND THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON REPAI RS AND MAINTENANCE UNDER THE FOLLOWING HEADS; REPAIRS & MAINTENANCE TO PLANT & MACHINERY RS.6,64,698/ - GENERAL REPAIRS RS.7,17,469 THE ASSESSING OFFICER HELD THAT EXPENDITURE OF RS.2 ,44,762/- (OUT OF 6,64,698/-) WAS CAPITAL IN NATURE, WHEREAS SUPPORTING EVIDENCE FOR AN AMOUNT OF RS.76,000/- WAS NOT FURNI SHED AT ALL. LIKEWISE, NO PARTICULARS OF GENERAL REPAIRS OF RS.7,17,469/- WERE FURNISHED. THUS, RS.10,07,636/- (RS.2,44,762/- + RS.76,000/- + RS.7,17,469/-) WAS DISALLOWED. 11.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED IN THIS REG ARD ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN RESTRICTING THE ADDITION O F RS.10,07,636/- MADE ON ACCOUNT OF DISALLOWANCE OF R EPAIR AND MAINTENANCE EXPENSES FOR FURNITURE AND MACHINERY AN D ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND T HAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTE D THE ORDER OF THE CIT(A). 11.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE EXPENDITURE INCURRED ON RE PAIRS AND ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 20 - MAINTENANCE RELATED TO WHITE-WASHING, REPAIR OF OFF ICE FURNITURE, WATER PROOFING, REMOVAL OF OLD FLOOR CEI LING AND ALTERATIONS THEREOF, KOTA STONE FIXING CHARGES, REP AIR OF WHEEL ALIGNMENT MACHINE, AMC FOR WHEEL ALIGNMENT MACHINE, ETC.ALL THESE EXPENSES WERE NORMALLY REVENUE IN NATURE SINC E THEY PERTAINED TO IMPROVEMENT OF EXISTING ASSET AND NOT CREATION OF ANY NEW ASSET. IN THIS BACKGROUND, THE CIT(A) WAS R IGHTLY DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALL OWANCE OF RS.2,44,762/- AND RESTRICTED THE ADDITION TO RS.10, 07,636/-. THIS FACTUAL AND LEGAL FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 12. THE SECOND DISALLOWANCE IN THIS REGARD WAS OF RS.76,000/-. THE ASSESSING OFFICER OBSERVED THAT N O SUPPORTING EVIDENCE WAS FILED. THE CIT(A), ON PERU SAL OF THE DETAILS OF THE AGGREGATE AMOUNT OF RS.6,64,698/-, F OUND THAT THE EXPENSES PERTAINED TO PURCHASE OF DIESEL, REPAI R OF FURNITURE, WORKSHOP EXPENSES, REPAIR OF AIR CONDITI ONER, PURCHASE OF CONSUMABLE ITEMS, ETC. THEREFORE, HE HE LD THAT THESE EXPENSES WERE NORMALLY NOT CAPITAL IN NATURE NOR CONFER ENDURING BENEFIT ON THE ASSESSEE AND ACCORDINGLY, H E DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.76,000/-. THIS FACTUAL AND LEGAL FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 13. WITH REGARD TO THIRD ITEM OF GENERAL REPAIRS AMOUNTING TO RS.7,17,469/-, IT IS FOUND THAT THE FULL DETAILS OF BILLS/VOUCHERS ETC, HAD BEEN FILED AT THE ASSESSMENT AS WELL AS AT THE APPELLATE ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 21 - STAGE. ON PERUSAL OF THE BILLS, IT WAS FOUND THAT M OST OF THE EXPENSES RELATED TO PURCHASE OF SPARE PARTS AND CON SUMABLE ITEM. HOWEVER, THE ASSESSEE HAD INCURRED EXPENDITUR E OF RS.38,340/- ON PURCHASE OF CAR MUSIC SYSTEM; THEREF ORE, THE SAME WAS NOT ALLOWED AS REVENUE EXPENDITURE. HOWEV ER, AS THE REST OF THE EXPENSES RELATED TO REPLACEMENT OF TYRE S, SHEET COVERS, BATTERY, ETC. WHICH ARE SMALL PARTS AND ACC ESSORIES, THE CIT(A) HAS RIGHTLY DELETED BALANCE OF RS.6,70,000/- WHILE RESTRICTING THE DISALLOWANCE TO RS.1 LAKH. THEREFOR E, HIS ORDER IN THIS REGARD NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 14. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OUT O F TRAVELLING EXPENSES OF RS.5,70,234/-. THE ASSESSING OFFICER F OUND THAT AN EXPENDITURE OF RS.1,20,371/- WAS INCURRED FOR AT TENDING MARRIAGE, VISIT TO NASIK, THAILAND, MUMBAI, GOA ETC . IN RESPECT OF WHICH THE ASSESSEE WAS UNABLE TO SUBSTANTIATE BU SINESS NECESSITY AS ALSO THE BILLS/INVOICES. HE ALSO FOUND THAT CONVEYANCE EXPENSES OF RS.82,349/- WERE UNSUBSTANTI ATED BY INVOICES/BILLS AND RS.3,67,514/- (TOTAL OF VOUCHERS WHERE EXPENSE WAS MORE THAN RS.5,000/-) WERE ALSO UNSUBST ANTIATED. THUS, THE TOTAL OF RS.5,70,234/- (RS.1,20,371/- + R S.82,349/- + RS.3,67,514/-) WAS DISALLOWED. 14.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLA TE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED IN THIS REG ARD ON BEHALF OF ASSESSEE AS DISCUSSED IN PARAGRAPH 16.3 O F THE APPELLATE ORDER AND HAVING CONSIDERED THE SAME, CIT (A) GRANTED RELIEF TO THE ASSESSEE AND THE SAME HAS BEEN OPPOSE D BEFORE US ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 22 - ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,20,371/- FOR MARRI AGE AND RS.4,49,863/- TOWARDS OTHER TRAVELING EXPENSE CLAIM ED AS BUSINESS EXPENDITURE AND ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTO RED. ON THE OTHER HAND, LD AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE SUPPORTED THE ORDER OF THE CIT(A). 14.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, WE FIND THAT THE TOTAL EXPENDITURE INCURRED UNDER THIS HEAD WAS RS.8,61,000/-. OUT OF THIS, THE ASSESSING OFFICER HAS DISALLOWED RS.5,70,234/- - COMPRISING OF RS.1,20,37 1/- BEING EXPENSES INCURRED FOR NON-BUSINESS PURPOSES AND RS.4,49,863/- OUT OF TRAVELING AND CONVEYANCE EXPEN SES. SO FAR AS THE FIRST AMOUNT OF RS.1,20,370/- IS CONCERNED, DETAILS HAVE BEEN GIVEN BEFORE THE CIT(A) AND HAVING CONSIDERED THE SAME, HE OBSERVED THAT NONE OF THE TRIPS WAS UNDERTAKEN B Y ANY OF THE DIRECTORS BUT ONLY THE EMPLOYEES WERE DEPUTED T O ATTEND MARRIAGE OF ANOTHER MANAGER OR FOR ATTENDING MEETIN G WITH LAWYERS OR DEALERS MEETING AND VISITING THE HONDA P LANT AT HONG KONG. THESE WERE CLEARLY NORMAL INCIDENTS OF BUSINESS AND ACCORDINGLY, DISALLOWANCE OF RS.1,20,371/- WAS RIGHTLY DELETED BY THE CIT(A). WITH REGARD TO THE OTHER IT EM AGGREGATING TO RS.4,49,863/-, IT WAS FOUND THAT THE SE EXPENSES ALSO RELATED TO BUSINESS ACTIVITIES AND NOT INCURRE D FOR PERSONAL OR NON-BUSINESS PURPOSES. MOREOVER, THESE EXPENSES WERE CERTIFIED BY THE AUDITORS AND NO INSTANCE OF NON-BU SINESS EXPENSE HAS BEEN POINTED OUT BY THE ASSESSING OFFIC ER. ITA NO.1671/AHD/ 2010 DCIT VS. KAMDHENU MOTROS PVT LTD AY 2001-02 - 23 - ACCORDINGLY, THE DISALLOWANCE OF RS.4,49,863/- WAS RIGHTLY DELETED BY THE CIT(A) AND THE SAME REQUIRES NO INTE RFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 15 TH OF MAY, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 15/05/2015 *BIJU T, PS %& (!) *%)! %& (!) *%)! %& (!) *%)! %& (!) *%)!/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. (-+, / THE RESPONDENT. 3. ! . / CONCERNED CIT 4. . ( ) / THE CIT(A), 5. )12 (! , , / DR, ITAT, AHMEDABAD 6. 2 3 / GUARD FILE. %& %& %& %& / BY ORDER, //TRUE COPY// 4 44 4/ // / 5 5 5 5 (DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD