Power Build Limited, Dist.Anand V. The ACIT., Anand Circle, Anand

ITA 1762/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8859 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 27-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V C MODI
• Assessee Lawyers: D K PARIKH
• Keywords: Depreciation; Revenue expenditure
• Section: 234B

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM POWER BUILD LIMITED, ANAND SOJITRA ROAD, VALLABH VIDYANAGAR, DIST. ANAND. V/S . ASSTT. CIT, ANAND CIRCLE, ANAND. PAN NO.AABCP2464 K (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI D. K. PARIKH, AR RESPONDENT BY:- SHRI V.C. MODI, ADDL.CIT, DR O R D E R PER D.C.AGRAWAL, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FOL LOWING GROUNDS :- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE OF RS.1,08,995/- BY THE AO OUT OF FOREIGN TRAVELING EX PENSES INCURRED BY DIRECTOR. IT IS SUBMITTED THAT DISALLOWANCE MADE IS UNWARRANTED AND UNCALLED FOR. IT BE HELD SO NOW AND SAME BE DELETED IN TOTO, 2. THE LEARNED CTT(A) HAS ERRED IN CONFIRMING DISAL LOWANCE OF RS 1,00,000 MADE BY THE AO BEING EXPENSES INCURRED FOR CARPET TREATING THE SAME OF CAPITA] NATURE. YOUR APPELLANT SUBMITS THAT PURCHASE OF CARPET IS REVENUE 'EXPENDITURE AND THE SAME BE ALLOWED AS CLA IMED. WITHOUT PREJUDICE TO THE ABOVE, THE AO BE DIRECTED TO ALLOW DEPRECIATION ON THE AMOUNT CAPITALIZED, ITA NO.1762/AHD/2007 ASST. YEAR :2002-03 2 3. THE LEARNED C1T(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS 3,00,000 MADE BY THE AO BEING COMMISSION PAYMENT T O M/S ARIHANT METAL CORPORATION. YOUR APPELLANT SUBMITS THAT DI SALLOWANCE MADE IS UNWARRANTED AND UNJUSTIFIED. IT BE HELD SO NOW AND SAME BE DELETED. 4. THE LEARNED CTT(A) HAS ERRED IN CONFIRMING ACTIO N OF AO OF CHARGING INTEREST U/S 234B AND 234D OF THE ACT. YOUR APPELLA NT SUBMITS THAT THE LEVY OF INTEREST IS INCORRECT AND INVALID AND SAME BE DELETED. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF MANUFACTURING CARPETS. THE FIRST ISSUE RELATES TO C LAIM OF FOREIGN TRAVELING EXPENSES INCURRED BY THE DIRECTOR. THE AO NOTICED T HAT THE DIRECTOR ON WHOM THE EXPENDITURE WAS INCURRED DID NOT HOLD ANY SHARE OF THE COMPANY. SHE ATTENDED BOARD MEETING ON 18.04.2001 O NLY. FOREIGN TRAVEL WAS UNDERTAKEN TO FRANC FURT UNICH AND OTHER PLACES . SHE DID NOT ATTEND ANY OTHER BUSINESS MEETING IN THE YEAR. ACCORDINGLY FOREIGN TRAVEL EXPENSES BY SMT. K. C. PATEL, DIRECTOR WERE CONSIDE RED AS PERSONAL IN NATURE AND ACCORDINGLY DISALLOWED. THE LD. CIT(A) N OTICED THAT HER CONTRIBUTION TO THE WORKING OF THE COMPANY IS NIL. NO EVIDENCE WAS SUBMITTED AS TO WHAT SHE CONTRIBUTED TO THE COMPANY . SHE HAS BEEN RESIDING IN USA SINCE THE TIME OF HER MARRIAGE. 3. WE HAVE HEARD THE PARTIES. NO EVIDENCE IS FURNIS HED AS TO FOR WHAT PURPOSE TO TOUR WAS UNDERTAKEN, WHAT SHE HAS DONE F OR THE COMPANY. NO DETAILS WHATSOEVER WERE FURNISHED IN RESPECT OF THE CLAIM THAT FOREIGN TOUR WAS UNDERTAKEN FOR THE BUSINESS PURPOSES. ACCORDING LY, WE CONFIRM THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. 4. THE NEXT ISSUE IS ABOUT DISALLOWANCE OF RS.1 LAC S INCURRED ON PURCHASE OF CARPET WHICH WAS TREATED AS CAPITAL IN NATURE. THE AUTHORITIES BELOW HAVE DISALLOWED THE CLAIM ON THE GROUND THAT IT IS CAPITAL IN NATURE. 3 THE AO NOTICED THAT CARPET HAS BEEN REPLACED IN A B UILDING WHICH HAS BEEN LET OUT BY THE ASSESSEE AND FROM WHICH ASSESSE E IS DERIVING INCOME UNDER THE HEAD HOUSE PROPERTY. THE AO FURTHER NOTIC ED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 24 WHICH INC LUDES DEDUCTION FOR REPAIRS. THE LD. CIT(A) ALSO CONFIRMED THE SAME FOR THE SAME REASONS. 5. WE HAVE HEARD THE PARTIES. AFTER HEARING THE PAR TIES WE DECLINE TO INTERFERE. THE DEDUCTIONS ARE ALREADY CONSIDERED UN DER THE HEAD INCOME FROM HOUSE PROPERTY HENCE NO FURTHER DEDUCTION CAN BE ALLOWED UNDER THE HEAD BUSINESS. SINCE CARPET IS NOT USED IN BU SINESS, THE QUESTION OF TREATING THE COST OF CARPET AS REVENUE EXPENDITURE IN BUSINESS DOES NOT ARISE. THIS GROUND IS REJECTED. 6. NEXT ISSUE IS ABOUT CLAIM OF DEDUCTION OF RS.3,0 0,000/- BEING COMMISSION PAID TO M/S ARIHANT METAL CORPORATION. T HE AO DISALLOWED THE CLAIM ON THE GROUND THAT ASSESSEE HAS ENTERED I NTO AN AGREEMENT WITH M/S ARIHANT METAL CORPORATION ONLY AFTER THE SALES WERE EXECUTED WITH M/S. PROMAC ENGINEERING INDUSTRIES LTD., BANGALORE. NO EVIDENCE WAS SUBMITTED TO JUSTIFY THE CLAIM OF COMMISSION. THE L D. CIT(A) ALSO CONFIRMED THE DISALLOWANCE ON THE GROUND THAT ASSES SEE FAILED TO PROVE RENDERING OF SERVICES BY M/S ARIHANT METAL CORPORAT ION. 7. WE HAVE HEARD THE PARTIES AND AFTER CONSIDERING THE MATERIAL ON RECORD, WE RESTORE THE MATTER TO THE FILE OF AO TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO FURNISH EVIDENCE OF RENDERING SERVI CES BY M/S ARIHANT METAL CORPORATION. WE NOTICE THAT AO INITIALLY DISA LLOWED THE CLAIM ON THE GROUND THAT AGREEMENT FOR COMMISSION WAS ENTERE D POST-SALES. WHEREAS THE LD. CIT(A) CONFIRMED THE DISALLOWANCE O N THE GROUND THAT FACT OF RENDERING SERVICES IS NOT CORRECT. SINCE AS PECT OF RENDERING 4 SERVICES HAS COME SUBSEQUENTLY IT REQUIRES VERIFICA TION AND OPPORTUNITY TO THE ASSESSEE AND ACCORDINGLY RE-EXAMINATION. AS A R ESULT, THIS GROUND OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 8. THE NEXT ISSUE IS REGARDING CHARGING OF INTEREST UNDER SECTION 234B AND 234D. WE HAVE HEARD THE PARTIES. THE ISSUE OF C HARGING INTEREST UNDER SECTION 234B IS CONSEQUENTIAL IN NATURE. REGARDING CHARGING OF INTEREST UNDER SECTION 234D, LD. CIT(A) HAS GIVEN DIRECTION THAT INTEREST CHARGING AFTER 1.6.2003 WOULD BE PROPER. WE DO NOT FIND ANY ILLEGALITY IN THIS ORDER. THEREFORE, NO INTERFERENCE IS CALLED FOR. TH IS GROUND OF ASSESSEE IS ACCORDINGLY REJECTED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- (MAHAVIR SINGH) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 5/3/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 5/3/2010 5 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD