ACIT, Faridabad V. M/s ECO Auto Components Ltd, Faridabad

ITA 1679/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9939 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 17-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 24-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: RAM JAI V MOHAN
• Keywords: Depreciation; Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I : NEW DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHAN ITA NO.1679/D/09 ASSESSMENT YEAR : 2004-05 ASSTT. CIT, VS. M/S ECO AUTO COMPONENTS LTD., FARIDABAD 20/4, MATHURA ROAD, FARIDABAD PAN/GIR NO.AAACE3659F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI H.K. LAL, SR. DR RESPONDENT BY : S/SHRI RAM JAI, V. MOHAN, ADVOC ATES O R D E R PER K.G. BANSAL, AM: THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDER OF CIT(A), FARIDABAD, PASSED ON 04.03.2009 IN APPEAL NO.283/06 -07, AND IT PERTAINS TO ASSESSMENT YEAR 2004-05. 2. GROUND NO.1 IS AGAINST THE ALLOWANCE OF EXPENDIT URE OF RS.1,46,810/- AND RS.1,57,522/-, DISALLOWED BY THE ASSESSING OFFI CER OUT OF EXPENSES INCURRED ON RUNNING AND MAINTENANCE OF CAR, ITS DEP RECIATION; AND TELEPHONE EXPENSES RESPECTIVELY. IT IS MENTIONED THAT THE LE ARNED CIT(A) RELIED ON THE ORDER OF ITAT IN THE CASE OF DCIT VS. HARYANA OXYGE N LIMITED (1999) 96 ITD 32 (DELHI), WHICH IS IN CONTRADICTION WITH THE DECISION OF HONBLE ITA NO.1679/D/09 2 MADRAS HIGH COURT IN THE CASE OF CHITRAM & COMPANY (P) LTD., AND MADURA COATS 263 ITR 241. IN THIS CONNECTION, THE LEARNED DR RELIED ON THE ORDER OF ASSESSING OFFICER WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. 257 ITR 673, DINESH MILLS LTD. VS. CIT (2002) 2 57 ITR 673 (GUJ.) AND THE ORDER OF THE TRIBUNAL IN THE CASE OF DCIT VS. H ARYANA OXYGEN LTD. (SUPRA). 2.1 IN THE ASSESSMENT ORDER, IT IS MENTIONED THAT T HE ASSESSEE WAS REQUIRED TO FILE THE RECORD REGARDING INCURRING OF EXPENDITU RE ON VEHICLES WITH A VIEW TO ESTABLISH WHETHER THE EXPENDITURE WAS INCURRED F OR THE BUSINESS OR NOT. THE ASSESSEE DID NOT ESTABLISH THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE , 1/5 TH OF MOTOR CAR RUNNING EXPENSES AND 1/5 TH DEPRECIATION CLAIMED THEREON WERE DISALLOWED. FURTHER, IT IS MENTIONED THAT THE ASSESSEE INCURRED TELEPHONE EXPENSES AMOUNTING TO RS.7,86,110/-, WHICH INCLUDED REIMBURS EMENT OF EXPENDITURE ON RESIDENTIAL TELEPHONES, AMOUNTING TO RS.1,52,525 /-. THE DETAILS OF CALLS MADE COULD NOT BE FURNISHED AND THUS, 1/5 TH OF TELEPHONE THESE EXPENSES WERE ALSO DISALLOWED. THE LEARNED CIT(A) DELETED BOTH T HE DISALLOWANCES BY RELYING ON THE ORDER IN THE CASE OF HARYANA OXYGEN LIMITED (SUPRA). IT WAS ALSO MENTIONED THAT THE ASSESSEE IS A JURISTIC PERS ON. ITA NO.1679/D/09 3 2.2 WE HAVE CONSIDERED THE FACTS OF THE CASE. THE DECISION IN THE CASE OF MADURA COATS 263 ITR 241 WAS RENDERED UNDER THE PRO VISION CONTAINED IN SECTION 40A(5), WHICH IS NO LONGER APPLICABLE TO TH E PROCEEDINGS OF THIS YEAR. IN THE CASE OF SAYAJI IRON & ENGG. COMPANY (SUPRA), IT WAS HELD THAT A COMPANY IS AN ARTIFICIAL PERSON WHICH IS INCAPABLE OF PERSONAL USE OF ITS ASSETS. THEREFORE, IF ANY BENEFIT IS PROVIDED TO T HE DIRECTORS AND EMPLOYEES, THE SAME CAN BE TAXED IN THEIR HANDS AS PERQUISITE. HOWEVER, THE EXPENDITURE WILL BE BUSINESS EXPENDITURE IN THE HANDS OF THE AS SESSEE COMPANY. THUS, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNE D CIT(A) IN THIS MATTER. THEREFORE, THIS GROUND IS DISMISSED. 3. GROUND NO.2 IS THAT THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.7,44, 323/-, IN RESPECT OF NEW PROJECT DEVELOPMENT EXPENSES. IT IS MENTIONED THAT THE ASSESSEE FAILED TO FURNISH ANY DOCUMENT, DETAIL OR JUSTIFICATION THAT THE EXPENDITURE WAS REVENUE IN NATURE. 3.1 IN THIS CONNECTION ALSO, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED COUNSEL RELIED ON THE ORDER OF THE LEARNED CIT(A). IT WAS ALSO SUBMITTED THAT THE ISSU E STANDS COVERED BY THE ORDERS OF ITAT IN THE CASE OF THE ASSESSEE FOR ASSE SSMENT YEARS 2001-02 AND ITA NO.1679/D/09 4 2002-03 IN ITA NOS.541/D/06 AND 2850/D/07 RESPECTIV ELY, COPIES OF WHICH WERE PLACED BEFORE US. 3.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. IN THE ORDER FOR ASSESSMENT YEAR 2002-0 3, THE TRIBUNAL HAD ALLOWED SIMILAR GROUND BY FOLLOWING THE ORDER FOR A SSESSMENT YEAR 2001-02. IN THE ORDER FOR ASSESSMENT YEAR 2001-02, THE HONB LE TRIBUNAL MENTIONED IN PARAGRAPH 5 THAT ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, ASSESSMENT ORDER, APPELLATE ORDER AND THE IMPUGNED APPELLATE O RDER, WE DO NOT FIND ANY REASON TO DIFFER WITH THE FINDINGS OF THE LEARNED C IT(A), AS THE SAME ARE BASED ON FACTS, CONSEQUENTLY THE FINDING OF THE CIT (A) IS UPHELD. RELYING ON THE AFORESAID TWO ORDERS WHICH ARE BINDING IN NA TURE, THIS GROUND IS ALSO DISMISSED. 4. GROUND NO.3 IS AGAINST ALLOWANCE OF A SUM OF RS. 18,88,534/- IN RESPECT OF DEVELOPMENT OF NEW PRODUCTS. IN THIS CO NNECTION ALSO, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHI LE THE LEARNED COUNSEL SUBMITTED THAT THE ADDITION WAS MADE BY THE ASSESSI NG OFFICER BY MISREADING THE ACCOUNTS. IN THIS CONNECTION, SHE D REW OUR ATTENTION TO PAGE 5 OF THE PAPER BOOK, WHICH INTER ALIA CONTAINS THE DETAILS REGARDING THE EXPENDITURE FOR DIVERSIFICATION/EXPANSION/NEW PROJE CTS. THIS ACCOUNT SHOWS OPENING BALANCE OF 236.28, TO WHICH ADDITION OF 7.44 LAC WAS MADE IN ITA NO.1679/D/09 5 THIS YEAR. THIS AMOUNT STANDS COVERED BY GROUND NO .2. AN AMOUNT OF 54.87 WAS WRITTEN OFF DURING THE YEAR, LEAVING THE BALANCE OF 188.85. THE CASE OF THE LEARNED COUNSEL WAS THAT THE EXPENDITUR E IN REGARD TO THIS YEAR HAS ALREADY BEEN CONSIDERED IN GROUND NO.2 AND THE AMOUNT OF RS.18,88,500/- DOES NOT PERTAIN TO THIS YEAR. THUS , THIS AMOUNT OR ANY PART THEREOF COULD NOT BE CONSIDERED IN COMPUTING THE IN COME OF THIS YEAR. 4.1 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. WE FIND THAT THE EXPENDITURE UNDER THIS HEAD AND PERTAINING TO THIS YEAR HAS BEEN CONSIDERED IN GROUND NO.2, WHERE IT HAS BEEN HELD TO BE AN EXPENDITURE OF REVENUE NATURE. THEREFORE, THERE IS NO REASON TO ADD ANY FURTHER AMOUNT ON THIS GROUND. THUS, GROUND NO.3 I S ALSO DISMISSED. 5. IN RESULT, THE APPEAL IS DISMISSED. 6. THIS ORDER WAS PRONOUNCED IMMEDIATELY SOON AFTER THE HEARING WAS OVER ON 17-08-2009. SD/- SD/- ( GEORGE MATHAN ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17-08-2009 NS : ITA NO.1679/D/09 6 COPY OF THE ORDER IN ITA NO.W31679/D/09 FORWARDED T O : - 1. ASSTT. C.I.T., FARIDABAD. 2. M/S ECO AUTO COMPONENTS LTD., 20/4, MATHURA ROAD , FARIDABAD. 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY DY. REGISTRAR, ITA NO.1679/D/09 7