Shri Maulesh Ashokkumar Patel, Ahmedabad V. The ACIT., Circle-11, Ahmedabad

ITA 1763/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6366 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 27-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: PRAVIN R SHAH
• Keywords: Business income; Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING :1.06.2010 DRAFTED ON:1.06.10 ITA NO.1763/AHD/2007 ASSESSMENT YEAR : 2004-2005 MAULESH ASHOKKUMAR PATEL C/O. SHREE LAXMI BIDI TRADING CO., CEMENT CHAWL, GOMTIPUR ROAD, AHMEDABAD-21 VS. ACIT, CIR-11, AHMEDABAD. PAN/GIR NO. : AEHPP6276Q (APPELLANT) .. (RESPONDENT) ITA NO.1764/AHD/2007 ASSESSMENT YEAR : 2004-2005 RAMESHBHAI JASWANTLAL PATEL C/O. SHREE LAXMI BIDI TRADING CO., CEMENT CHAWL, GOMTIPUR ROAD, AHMEDABAD-21 VS. ACIT, CIR-11, AHMEDABAD. PAN/GIR NO. : AAMPP6701D (APPELLANT) .. (RESPONDENT) ITA NO.1765/AHD/2007 ASSESSMENT YEAR : 2004-2005 KIRTIKUMAR PRAHLADBHAI PATEL C/O. SHREE LAXMI BIDI TRADING CO., CEMENT CHAWL, GOMTIPUR ROAD, AHMEDABAD-21 VS. ACIT, CIR-11, AHMEDABAD. PAN/GIR NO. : AAMPP6697E (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI PRAVIN R. SHAH A.R. RESPONDENT BY: SHRI C.K.MISHRA SR. D.R. - 2 - O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE APPEALS FILED BY THREE DIFFERENT ASS ESSEES AGAINST THE ORDER OF THE CIT(A), FOR ASSESSMENT YEAR 2004-05. A LL THESE APPEALS HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE ONLY DISPUTE, COMMON T O ALL THESE APPEALS, IS WITH REGARD TO DISALLOWANCE OF EXPENSES OUT OF M OTOR CAR, DEPRECIATION, AND OTHER EXPENSES. SINCE THE FACTS I N ALL THESE APPEALS ARE SIMILAR IN NATURE, TO BE PRECISE, WE ARE GIVING FAC TS OF THE APPEAL IN ITA NO.1763/AHD/2007. 2. THE ASSESSEE, BEING ONE OF THE PARTNERS, HAS EA RNED INTEREST OF RS.2,37,342/- FROM PARTNERSHIP FIRM. HE CLAIMED DEP RECIATION ON MOTOR CAR OF RS.1,63,600/- AND MOTORCAR EXPENSES OF RS.25 ,925/- AGAINST THE SAID INTEREST INCOME. THE INTEREST INCOME RECEIVED FROM VARIOUS PARTNERSHIP FIRMS HAS BEEN SHOWN AS BUSINESS INCOME U/S 28(V) OF THE INCOME TAX ACT, 1961 AND AGAINST THAT HE HAS CLAIME D DEPRECIATION ON MOTOR CAR AND MOTOR CAR EXPENSES. IN THE GROUP CASE S OF THE ASSESSEE, THE TRIBUNAL HAS ALLOWED IDENTICAL EXPENSES AGAINST THE INTEREST EXPENSES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S NOT MAINTAINED ANY LOG BOOK. FURTHER, THE ASSESSEE COULD NOT ESTABLISH DIRECT NEXUS BETWEEN THE INTEREST INCOME EARNED AND CAR UTILIZED FOR EAR NING SUCH INTEREST INCOME. HE HAS ALSO OBSERVED THAT THE ASSESSEE HAS FAILED TO JUSTIFY THAT THE CAR WAS NECESSARY TO EARN SUCH INTEREST INCOME WHEREIN THE FIRM HAS ITS OWN SOURCES TO CARRY OUT THE BUSINESS. THE CAR OWNED BY THE ASSESSEE WAS USED FOR HIS PERSONAL PURPOSES AND EXPENDITURE FOR MAINTENANCE AS WELL AS RUNNING OF THE CAR CANNOT BE CONSIDERED AS BUSINESS EXPENDITURE - 3 - AND DEDUCTIBLE OUT OF SHARE/INTEREST INCOME RECEIVE D FROM THE FIRMS FULLY. THE ASSESSING OFFICER HELD THAT IN ABSENCE OF NEXUS OF USE OF CAR FOR EARNING OF THE INTEREST INCOME FROM THE FIRM, THE D EPRECIATION AS WELL AS OTHER CAR EXPENDITURES CANNOT BE FULLY CONSIDERED A S BUSINESS EXPENDITURE. IN VIEW OF THESE FACTS AND PERSONAL US E OF THE CAR, THE ASSESSING OFFICER ALLOWED ONLY 20% OF THE CLAIM OF DEPRECIATION AND CAR RUNNING EXPENSES AND REST OF 80% HAS BEEN DISALLOWE D TREATING IT AS INCURRED FOR PERSONAL PURPOSES. 3. ON APPEAL, THE CIT(A) HELD AS UNDER: 3.4. THE CONTENTION OF THE LEARNED AUTHORISED REPR ESENTATIVE HAS BEEN CAREFULLY CONSIDERED AND PERUSED THE CASE LAW RELIED UPON. I HAVE CONSIDERED THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSE SSING OFFICER HAS ACCEPTED THE INTEREST INCOME AS BUSINESS INCOME WHICH THE APPELLANT HAS NOT DISPUTED. THE ASSESSING OFFICER H AS CLEARLY MENTIONED THAT THE APPELLANT DOES NOT MAINTAIN LOG BOOK. IN ABSENCE OF LOG BOOK IT IS NOT POSSIBLE TO ASCERTAIN THE QUANTUM OF USE OF THE CAR FOR BUSINESS PURPOSES. LOG BOOK IS A PRIMARY DOCUMENT BY WHICH IT CAN BE ASCERTAINED HOW THE CAR HAS BEEN USED. THOSE EXPENSES WHICH ARE INCURRED FOR EARNING THE INCOME CAN BE SAID ALLOWABLE FOR COMPUTING INCOME UNDER SP ECIFIC HEAD. MERE, IN THE PRESENT CASE, THE APPELLANT COULD NOT ESTABLISH THAT CAR OWNED BY HIM HAS BEEN WHOLLY AND EXCLUSIVELY USED F OR EARNING THE INTEREST INCOME. THE LEARNED AUTHORISED REPRESE NTATIVE HAS EXPLAINED THAT CAR HAS BEEN USED FOR BUSINESS OF TH E FIRM THEN WHATEVER THE EXPENSES INCURRED FOR RUNNING THE CAR ARE ALLOWABLE IN THE HANDS OF THE FIRM BUT INSTEAD OF THAT THE AP PELLANT HAS CLAIMED DEPRECIATION AND RUNNING OF THE CAR AGAINST THE INTEREST INCOME WITH A CONTENTION THAT THE CAR HAS BEEN USED FOR EARNING INTEREST INCOME WHICH APPEARS TO BE FULLY NOT CORRE CT. IN ABSENCE OF PRIMARY DOCUMENT LIKE LOG BOOK AND FAILURE ON TH E PART OF THE APPELLANT TO ESTABLISH THE NEXUS, THE ASSESSING OFF ICER HAS ALLOWED 20% OF DEPRECIATION AND CAR RUNNING EXPENSES WHICH IS APPARENTLY LOWER SIDE IN VIEW OF DECISION OF THE HON'BLE ITAT IN THIS GROUP CASES. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTA NCES OF THE CASE, STATUS OF VEHICLE OWNED BY THE FIRMS AND HON' BLE ITAT'S - 4 - DECISION ON THIS ISSUE IN GROUP CASES OF THE APPELL ANT, THE ASSESSING OFFICER IS DIRECTED TO ALLOW 30% OF DEPRE CIATION AND CAR RUNNING EXPENSES AND BALANCE 70% MAY BE TREATED AS CONFIRMED.' BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), T HE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE, FILED COPY OF THE CONSOLIDATED ORDER OF THE TRIBUNAL DATED 18.07.2007 PASSED IN THE CASE OF OTHER FOUR PARTNERS OF THE FIRM FOR ASSESSMENT YEAR 2004-05 AND SUBMITTED THAT THE TRIBUNAL IN THE CASE OF THOSE PA RTNERS HAVE ALLOWED DEDUCTION OF 50% OF THE DEPRECIATION AND EXPENSES O N MOTOR CAR. FOLLOWING THE SAME, THE DISALLOWANCE SHOULD BE REST RICTED TO 50% OF DEPRECIATION AND EXPENSES ON MOTOR CAR IN PLACE OF 70% SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO CON CORD WITH THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE LEARN ED ASSESSING OFFICER DISALLOWED 80% OUT OF TOTAL DEPRECIATION AND MOTOR CAR EXPENSES CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSE SSEE HAS NOT MAINTAINED ANY LOG BOOK, COULD NOT ESTABLISH NEXUS BETWEEN THE INTEREST INCOME EARNED AND CAR UTILISED FOR EARNING OF SUCH INTEREST INCOME, AND THE ASSESSEE FAILED TO JUSTIFY THAT THE CAR WAS NEC ESSARY TO EARN SUCH INTEREST INCOME WHEREIN THE FIRM HAS ITS OWN SOURCE S TO CARRY OUT THE BUSINESS. HE FURTHER OBSERVED THAT THE CAR WAS OWN ED BY THE ASSESSEE, - 5 - WHICH WAS USED FOR HIS PERSONAL PURPOSES AND EXPEND ITURE FOR MAINTENANCE AND RUNNING OF THE CAR CANNOT BE CONSID ERED AS BUSINESS EXPENDITURE AND DEDUCTIBLE OUT OF SHARE/INTEREST IN COME EARNED FROM THE FIRMS FULLY. IN APPEAL, THE LEARNED COMMISSIONER O F INCOME TAX(APPEALS) RESTRICTED THE DISALLOWANCE TO 70% OF DEPRECIATION AND EXPENDITURE ON RUNNING OF MOTOR CAR. WE FIND THAT T HE TRIBUNAL IN THE SIMILAR FACTS AND CIRCUMSTANCES, IN THE CASE OF OTH ER PARTNERS OF THE FIRM VIDE CONSOLIDATED ORDER DATED 18.07.2007 IN ITA NOS .2104/AHD/2007, 2105/AHD/2007, 2106/AHD/2007 AND 2107/AHD/2007 IN T HE ASSESSMENT YEAR 2004-05 HAS RESTRICTED THE DISALLOWANCE FOR PE RSONAL USE OF CAR TO 50% OF THE DEPRECIATION AND EXPENSES ON RUNNING OF MOTOR CAR. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW ANY GOOD REASON TO NOT TO FOLLOW THE ORDER OF THE TRIBUNAL IN THE C ASE OF OTHER PARTNERS OF THE FIRM. RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL IN THE CASE OF OTHER PARTNERS OF THE FIRM, WE MODIFY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND RESTRICTED THE DISALLOWANCE TO 50% ON DEPRECIATION AND MOTOR CAR RUNNING EXPENS ES. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING IN THE PRESENCE OF THE PARTIES ON 01 ST DAY OF JUNE 2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 1 ST DAY OF JUNE, 2010 PARAS - 6 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XVII, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 01.06.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 01.06.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 01.06.2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 01.06.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 01.06.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK 01.06.2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------