ACIT, New Delhi V. M/s Pal Enterprises, New Delhi

ITA 1789/DEL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7481 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 19-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: SANTOSH K AGGARWAL
• Keywords: Depreciation
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `F : NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ITA NO.1789/DEL./2010 (ASSESSMENT YEAR : 2004-05) ACIT, CIRCLE 22(1), VS. M/S PAL ENTERPRISES, NEW DELHI. OKHLA INDL. AREA, PHASE I, NEW DELHI. (PAN/GIR NO.AAAFP6080D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANTOSH K. AGGARWAL, ADV. REVENUE BY : SMT. ANUSHA KHURANA, SR.DR ORDER PER U.B.S. BEDI, J.M. THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)- XXV, NEW DELHI DATED 11.02.201, RELEVANT TO ASSESSM ENT YEAR 2004-05, WHEREBY THE FOLLOWING THREE EFFECTIVE GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DIRECTION THE ASSESSING OFF ICER TO ALLOW DEPRECIATION ON VEHICLE AMOUNTING TO RS.9,95,124/- IGNORING THE PROVISIONS OF SECTION 38(2) OF THE ACT. FURTHER, T HE CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE MADE ON VEHICLE MAINTENA NCE ON THE GROUND THAT THE SAME EXPENSES WERE NOT RELATED TO THE BUSI NESS OF THE ASSESSEE. 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DIRECTING THE ASSESSING OFF ICER TO RECOMPUTE THE DEDUCTION U/S 80HHC(3)(A) BY REDUCING 90% OF THE GR OSS DEPB RECEIPTS AND THE DUTY DRAW BACK FROM THE PROFITS OF THE BUSI NESS IGNORING THE PROVISIONS OF 1 ST TO 5 TH PROVISO TO SUB SECTION (3) OF SECTION 80HHC OF THE ACT. 3. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN WRONGLY PRESUMING THE FACT THAT THE ASSESSEE HAS FULFILLED BOTH THE CONDITIONS AS LAID DOWN IN THE T HIRD PROVISO UNDER SECTION 80HHC(3) OF THE ACT. I.T.A. NO.1789/DEL./2010 (A.Y. : 2004-05) 2 2. AS REGARDS FIRST ISSUE IN RELATION TO DEPRECIATI ON IS CONCERNED, THE ASSESSING OFFICER MADE DISALLOWANCE ON ACCOUNT OF VEHICLE EXP ENSES AND DEPRECIATION TO THE EXTENT OF RS.7,84,079 AND RS.9,95,124, RESPECTIVELY. THE ASSESSEE WAS ASKED TO FILE THE COPY OF LOG BOOK TO JUSTIFY THAT THE VEHICLE HAS BEEN EXCLU SIVELY USED FOR BUSINESS PURPOSES. IN REPLY THERETO, THE ASSESSEE SUBMITTED BEFORE THE AS SESSING OFFICER THAT NO SUCH LOG BOOK IS BEING MAINTAINED. SO, ASSESSING OFFICER HELD TH AT NON-BUSINESS AND PERSONAL USE OF THE VEHICLE CANNOT BE RULED OUT. SO, HE MADE A DISALLO WANCE OF 1/8 TH OF THE ABOVE EXPENSES AMOUNTING TO RS.2,22,400/-, AS NOT BEING RELATED TO THE BUSINESS OF THE ASSESSEE. 3. AGAINST SUCH DISALLOWANCE, ASSESSEE PREFERRED AP PEAL AND CIT(A) UPHELD THE DISALLOWANCE WITH RESPECT TO VEHICLE EXPENSES, BUT HE ALLOWED DISALLOWANCE RELATING TO DEPRECATION ON VEHICLES, FOR THE REASON THAT ESSENT IAL CONDITION FOR CLAIM OF DEPRECIATION THAT VEHICLE WAS OWNED BY THE ASSESSEE WAS USED DUR ING THE PREVIOUS YEARS FOR THE PURPOSES OF BUSINESS WAS ACCEPTED BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER WAS DIRECTED TO ALLOW DEPRECIATION ON VEHIC LES IN FULL AS PER I.T. RULES, 1962. 4. AGGRIEVED BY THIS ORDER OF CIT(A), DEPARTMENT HA S COME UP IN APPEAL AND WHILE REFERRING TO THE PROVISIONS OF SECTION 38(2) OF THE I.T. ACT, 1961, IT WAS PLEADED THAT SUCH PROVISIONS OF LAW HAS BEEN IGNORED BY THE CIT(A). THEREFORE, HIS ORDER SHOULD BE SET ASIDE ON THE POINT OF DEPRECIATION AND OF THE ASSES SING OFFICER BE RESTORED. 5. LD.DR WHILE REITERATING THE GROUND AS RAISED IN HIS APPEAL HAS PLEADED FOR SETTING ASIDE THE ORDER AND RESTORING THAT OF THE ORDER OF ASSESSING OFFICER WITH RESPECT TO DEPRECIATION ALLOWANCE CLAIMED BY THE ASSESSEE AND TO THE EXTENT DISALLOWED BY ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD AS WELL AS RELEVANT PROVISIONS OF LAW AND FIND THAT ASSESSING OFFICER DISALLOWED 1/8 TH OF VEHICLE EXPENSES AS WELL AS DEPRECIATION AND CIT(A) HAS CON FIRMED THE DISALLOWANCE ON ACCOUNT OF VEHICLE EXPENSES, BUT HAS ALLOWED RELIEF IN RESP ECT OF DEPRECATION BY DELETING SUCH DISALLOWANCE WITHOUT ASSIGNING ANY APPROPRIATE REAS ON WHEREAS AS PER SECTION 38(2) OF THE ACT, REASONABLE PARTIAL DISALLOWANCE OF THE DE PRECIATION COULD BE MADE IN VIEW OF USAGE. THEREFORE, WE ARE OF THE VIEW THAT WHEN VEH ICLE EXPENSES HAS BEEN DISALLOWED, THERE WAS NO REASON FOR CIT(A) TO DELETE THE SAME P ROPORTION WITH RESPECT TO DEPRECIATION. AS SUCH WHILE ACCEPTING THIS GROUND OF APPEAL OF THE REVENUE, WE HOLD THAT I.T.A. NO.1789/DEL./2010 (A.Y. : 2004-05) 3 THE ADDITION AS MADE BY THE ASSESSING OFFICER IN TH IS REGARD IS CALLED FOR SO WE SET ASIDE ORDER OF CIT(A) AND RESTORE THAT OF ASSESSING OFFIC ER. 7. NEXT ISSUE AS CONTAINED IN GROUND NOS.2 & 3 IS C ONCERNED, LD.COUNSEL FOR THE ASSESSEE, AT THE VERY OUT SET, SUBMITTED THAT VARIO US DECISIONS OF DIFFERENT HIGH COURTS ON THIS POINT HAVE ALREADY COME INCLUDING THE DECISION REPORTED IN THE CASE OF CIT VS. KALPATRU COLOURS & CHEMICALS, 328 I.T.R. 451 (DEL.) AND THE MATTER HAS ALSO BEEN HEARD IN THE HONBLE SUPREME COURT IN NOVEMBER, 2011 AND JUDGMENT IS RESERVED. THEREFORE, IN THE INTEREST OF JUSTICE, THIS ISSUE CAN BE SET A SIDE AND MATTER CAN BE RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER FOR DECIDING IT AFRES H IN THE LIGHT OF THE LATEST LAW IN EXISTENCE OR TO BE PRONOUNCED DURING THE DE NOVO AS SESSMENT PROCEEDINGS. TO THIS MOVE OF THE LD.COUNSEL FOR THE ASSESSEE, LD.DR COULD NOT CONTROVERT THE SAME, BUT RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE HEARD BOTH THE SIDE AND CONSIDERED THE M ATERIAL ON RECORD AS WELL AS PRECEDENT RELIED UPON BY THE LD.COUNSEL FOR THE ASS ESSEE AND FIND IT JUST AND APPROPRIATE TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD AND REMIT THE MATTER BACK ON THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO RE-DECIDE THE ISSUE IN VIEW OF THE LATEST DECISION AVAILABLE OR PRONOUNCED DURING THE DE NOVO ASSESSMENT PROCEEDINGS AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WE HOLD AN D DIRECT ACCORDINGLY. 9. AS A RESULT, THE APPEAL OF THE DEPARTMENT IS AC CEPTED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 20.01.2012. SD/- SD/- (A.N. PAHUJA) ACCOUNTANT MEMBER (U.B.S. BEDI ) JUDICIAL MEMBER DATED : JANUARY 20, 2012 SKB COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXV, NEW DELHI. 5. CIT(ITAT) DEPUTY REGISTRAR, ITAT I.T.A. NO.1789/DEL./2010 (A.Y. : 2004-05) 4