ANIL MADHUKAR WAGHADKAR, DOMBIVALI V. ITO WD 3(1), KALYAN

ITA 1813/MUM/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2319 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEELIMA NADKARNI
• Keywords: Business income; Depreciation; Business expenditure; Salary income
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, ITA. NOS. 1813, 1804 & 1811/MUM/2016 (ASSESSMENT YEARS:2007-08, 2008-09 & 2009-10) MR. ANIL MADHUKAR WAGHADKAR VINDHYACHAL, RL-119, MIDC RESI, ZONE DOMBIVLI (E) 421 203 DIST. - THANE APPELLANT VS. INCOME TAX OFFICER, WARD 3(1), KALYAN, RANI MENSION, MURBAD ROAD, KALYAN 421 301, DIST. - THANE RESPONDENT PAN: AALPW5068K & ITA. NOS. 1809, 1810 & 1808/MUM/2016 (ASSESSMENT YEARS:2007-08, 2008-09 & 2009-10) MR. PRAFULLA MADHUKAR WAGHADKAR VINDHYACHAL, RL-119, MIDC RESI, ZONE DOMBIVLI (E) 421 203 DIST. - THANE APPELLANT VS. ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 2 INCOME TAX OFFICER, WARD 3(1), KALYAN, RANI MENSION, MURBAD ROAD, KALYAN 421 301, DIST. - THANE RESPONDENT PAN: AABPW8117H / BY ASSESSEE : SHRI RAJIV KHANDELWAL, A.R. / BY REVENUE : MRS. NEELIMA NADKARNI, D.R. /DATE OF HEARING : 23.06.2016 /DATE OF PRONOUNCEMENT : 27.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: ALL SIX APPEALS FILED BY TWO ASSESSES AGAINST THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-1, THANE, D ATED 22.12.2015 FOR ALL THREE YEARS. SINCE, ISSUES RAIS ED IN ALL APPEALS ARE SIMILAR, SO THEY ARE BEING DISPOSED OF BY COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.1813/MUM/2016 FOR A.Y.2007-08 IN CASE OF ANIL M. WAGHADKAR, ASSESSEE HAS RAISED FOLLOWING GR OUNDS: 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE WHILE CONFIRMING THE ADDITION OF RS.1,09,306/ ON ACCOUNT OF INTEREST ON OVERDRAFT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, THANE ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 3 HEREINAFTER REFERRED TO AS APPALLETE AUTHORITY) AND INCOME TAX OFFICER WARD 3(1) KALYAN (HEREINAFTER REFERRED TO AS ASSESSING AUTHORITY) WERE NOT JUSTIF IED IN TREATING THE EXPENSES AS NOT INCIDENTAL TO THE BUSI NESS OF THE ASSESSEE AS THE OVERDRAFT WAS AVAILED FOR ME ETING THE EXPENSES OF THE BUSINESS OF THE ASSESSEE. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE WHILE CONFIRMING THE ADDITION OF RS.109046/ ON ACCOUNT OF DEPRECIATION, THE LEARNED APPELLATE AUTH ORITY AND THE ASSESSING AUTHORITY WERE NOT JUSTIFIED IN TREATING THE VEHICLE AS NOT BEING USED EXCLUSIVELY FOR BUSINESS PURPOSE AS THE ASSESSEE HAS TO VISIT DIFFE RENT SITES FOR VALUATION AS PER REQUIREMENT OF EACH CASE AND THE CAR WAS USED EXCLUSIVELY FOR THE BUSINESS PURPO SE. 3. THAT THE HONORABLE MEMBERS OF THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI ARE THEREFORE REQUESTED TO DELETE THE UNWARRANTED HUGE ADDITIONS ON ACCOUNT DISALLOWANCE OF INTEREST ON OVERDRAFT RS.109306/- A ND DEPRECIATION RS.109046/- IN ORDER TO MEET THE ENDS OF JUSTICE . 3. ASSESSEE IS A DIRECTOR IN M/S. M.V. WAGHADKAR & SONS JEWELLERS PVT. LTD. AND DERIVES SALARY INCOME FROM THE SAID COMPANY. ASSESSEE IS ALSO A GOVERNMENT APPROV ED VALUER. A SURVEY U/S. 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF ASSESSEE ON 22.11.2012. D URING COURSE OF SURVEY, ASSESSEE MADE A DECLARATION OF IN COME TO THE TUNE OF RS.5,00,000/-. ASSESSING OFFICER THERE FORE ISSUED NOTICE US.148 OF THE ACT ON 27.11.2012 AFTER RECORDING THE REASONS FOR ESCAPEMENT OF INCOME. IN RESPONSE TO THIS NOTICE, ASSESSEE FILED HIS RETURN OF INCOME ON 01.01.2013 DECLARING INCOME FROM SALARY RS. 2,64,000/-, INCOME FROM HOUSE PROPERTY RS.1,68,000/ -, ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 4 INCOME FROM CAPITAL GAIN FROM SALE OF JEWELLERY RS. 62,437/-, INTEREST INCOME RS.1,490/- AND OTHER NET RECEIPTS RS.40,320/-. 4. FIRST ISSUE BEFORE US IS WITH REGARDS TO DISALLO WANCE OF INTEREST ON OVERDRAFT AMOUNTING TO RS.1,09,306/-. AS STATED ABOVE, ASSESSEE HAS SHOWN TOTAL RECEIPTS OF RS.3,74,409/- FROM THIS BUSINESS. THE NET RECEIPTS FROM THIS SOURCE WERE SHOWN AT RS.40,320/- AS UNDER:- BY VALUATION FEES & COMMISSION 3,74,409 TO DEPRECIATION 2,18,092 TO INTEREST 1,09,306 TO BANK CHARGES 1,291 TO SUBSCRIPTION 5,400 NET RECEIPTS 40,320 ------------- 3,74,409 ------------- ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AND JUSTIFY THE CLAIM OF VARIOUS EXPENSES AGAINST HIS RECEIPTS FROM GOVERNMENT APPROVED VALUER BUSINESS. WITH REGARDS TO CLAIM OF INTEREST ON OVERDRAFT ACCOUNT, ASSESSEE SU BMITTED BEFORE THE ASSESSING OFFICER THAT HE HAD AVAILED AN OVERDRAFT ACCOUNT IN CORPORATION BANK BEARING ACCOU NT NO.0602/CCGSL/01/040002 JOINTLY WITH HIS BROTHER SH RI PRAFUL WAGHADKAR. THE BANK HAS CHARGED A TOTAL INT EREST OF RS.2,18,612/- ON THIS ACCOUNT FOR THE YEAR UNDER CONSIDERATION, OUT OF WHICH 50% I.E. RS.1,09,306/- WAS CLAIMED BY ASSESSEE AS DEDUCTION FROM HIS BUSINESS INCOME AS THE ACCOUNT WAS HELD JOINTLY WITH HIS BRO THER ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 5 PRAFUL WAGHADAR. ASSESSING OFFICER AFTER CONSIDERI NG THE ASSESSEES EXPLANATION DISALLOWED THE INTEREST ON O VERDRAFT ACCOUNT BY OBSERVING THAT ASSESSEES BUSINESS ACTIV ITY OF THE GOVERNMENT APPROVED VALUER HARDLY REQUIRED ANY INVESTMENT FOR WORKING CAPITAL OR TOWARDS OF ANY AS SET. HE FURTHER OBSERVED THAT ASSESSEE HAD FAILED TO PRO VE THE USE OF FUNDS FROM THIS ACCOUNT FOR HIS BUSINESS PUR POSE. 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE, CIT(A) HAS CONFIRMED THE ORDER OF ASSESSING OFFICER BY OBSERVING AS UNDER: 12. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSME NT AND THE FACTS OF THE CASE. FROM A PERUSAL OF THE P ROFIT & LOSS ACCOUNT REPRODUCED ABOVE, IT IS SEEN THAT NO EXPENSES ON SALARY OF ANY PERSON OR TRAVELING EXPEN SES ETC. HAVE BEEN CLAIMED BY THE APPELLANT. THEREFORE , THE CONTENTION OF THE APPELLANT THAT THE FUNDS FROM THE OVERDRAFT BANK ACCOUNT HAD BEEN UTILIZED FOR MEETIN G SUCH EXPENSES IS FACTUALLY INCORRECT. MOREOVER, A COPY IF THE OVERDRAFT ACCOUNT WAS CALLED FOR AND THE USE OF FUNDS FROM THIS ACCOUNT WAS EXAMINED. FROM PERUSAL OF THIS BANK ACCOUNT IT IS SEEN THAT NONE OF THE WITHDRAWALS MADE FROM THE OD ACCOUNT HAVE BEEN UTILIZED FOR THE BUSINESS PURPOSE OF THE APPELLANT AND HAVE RATHER BEEN UTILIZED FOR MEETING THE PERSONAL EXPENSES OF THE APPELLANT AND THE CO-OWNER I.E. LIC PREMIUM, MET LIFE INSURANCE, PURCHASE OF CAR, INSURANCE OF CAR, HOUSEHOLD WITHDRAWALS ETC. AS TH E APPELLANT HAS FILED TO ESTABLISH THAT THE FUNDS FRO M THE OD ACCOUNT HAVE BEEN UTILIZED FOR THE BUSINESS PURPOSES, THE DISALLOWANCE OF INTEREST ON OD ACCOUN T HAS RIGHTLY BEEN MADE BY THE AO AND THEREFORE, DISALLOWANCE OF RS.1,09,306/- MADE ON THIS ACCOUNT IS CONFIRMED. ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 6 4.2 SAME HAS BEEN OPPOSED BEFORE ME INTER ALIA SUBMITTING THAT ASSESSEE HAS PURCHASED A VEHICLE FO R THE YEAR UNDER CONSIDERATION AND OVERDRAFT WAS TAKEN FO R THE SAME AND INTEREST THEREON HAS BEEN IS THE SUBJECT M ATTER OF BEFORE ME. LD. AUTHORIZED REPRESENTATIVE CLAIME D THAT SAID VEHICLE HAS BEEN USED FOR BUSINESS PURPOSE OF ASSESSEE. SO, INTEREST ON OVERDRAFT FOR THE SAME S HOULD BE ALLOWED AS BUSINESS EXPENDITURE. IT IS NOT IN DISP UTE THAT ASSESSEE IS USING THE SAID VEHICLE IN QUESTION FOR BUSINESS PURPOSE. ONCE, IT IS USED FOR BUSINESS PURPOSE, TH E OVERDRAFT FOR PURCHASE OF SAME WERE ALSO FALL IN TH E LAW OF BUSINESS PURPOSE. UNDER THE FACTS AND CIRCUMSTANCE S OF THE CASE, INTEREST ON OVERDRAFT DESERVES TO BE ALLO WED AND WE DIRECT ASSESSING OFFICER ACCORDINGLY. 5. NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.1,09,046/-. AS STATED ABOVE, ASSESSEE HAS PURCHASED A CAR VIDE BILL DATED 12.03. 2007 FOR RS.29,38,091/-. THE DEPRECIATION ON THIS CAR F OR SIX MONTHS WAS CLAIMED AGAINST THE BUSINESS RECEIPTS. ASSESSING OFFICER IN THE ASSESSMENT ORDER OBSERVED THAT ASSESSEE IS A DIRECTOR IN THE COMPANY M/S. M.V. WAGHADKAR & SONS JEWELLERS PVT. LTD. WHERE MOST OF HIS TIME IS DEVOTED. THE RECEIPTS OF RS.3,74,409/- FRO M THE BUSINESS OF GOVERNMENT APPROVED VALUER CLEARLY REFL ECTED THE EXTENT AND VOLUME OF BUSINESS DONE BY ASSESSEE. THE ELEMENT OF PERSONAL USE IN THE VEHICLE COULD NOT BE IGNORED. ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 7 THEREFORE, ASSESSING OFFICER DISALLOWED 50% OF DEPR ECIATION CLAIMED ON VEHICLE, WHICH WAS CONFIRMED BY CIT(A). 5.1 LD. AUTHORIZED REPRESENTATIVE OPPOSED THE ORDER OF CIT(A) ON THE GROUND THAT PURCHASE OF THE VEHICLE I N QUESTION NOT IN DISPUTE AND SAME IS BEING USED FOR BUSINESS OF ASSESSEE, THEREFORE, DEPRECIATION THERE ON SHOULD BE ALLOWED. ON THE OTHER HAND, LD. DEPARTME NTAL REPRESENTATIVE SUPPORTED THE ORDER OF AUTHORITIES B ELOW. 5.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, I FIND THAT IT IS NOT DISPUTED THAT ASSESSE E HAS PURCHASED A VEHICLE IN QUESTION. THERE IS NOTHING ON RECORD THAT ASSESSEE HAS OTHER VEHICLE TO BE USED F OR ITS BUSINESS PURPOSE AS GOVERNMENT APPROVED VALUER. SO , VEHICLE IS BOUND TO BE USED IN THE BUSINESS OF ASSE SSEE, THEREFORE, ASSESSEE IS ENTITLED FOR DEPRECIATION TH EREON. HOWEVER, ELEMENT OF PERSONAL USE CANNOT BE OVER-RUL ED, SO, TAKING ALL FACTS AND CIRCUMSTANCES INTO CONSIDERATI ON, DISALLOWANCE OF DEPRECIATION UPTO 10% IS SUSTAINED ON ACCOUNT OF PERSONAL USE AND REST IS DIRECTED TO BE DELETED. 6. AS A RESULT, APPEAL FILED BY ASSESSEE IS PARTLY ALLOWED. 7. NOW WE TAKE ITA NOS.1804, 1811, 1808, 1809 & 1810/MUM/2016. GROUNDS OF THESE APPEALS ARE AS UND ER: SL. NO. ITA NO. A.Y. ASSESSEE GROUND 1 (ADDITION OF RS.) ON GROUND 2 (ADDITION OF RS.) ON ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 8 ACCOUNT OF INTEREST ON OVERDRAFT ACCOUNT OF DEPRECIATION 1 1804/M/16 2008 - 09 ANIL M. WAGHADKAR 1,16,943/ - 2,01,736/ - 2 1811/M/16 2009 - 10 ANIL M. WAGHADKAR 2,31,338/ - 1,71,475/ - 3 1809/M/16 2007 - 08 PRAFULLA M. WAGHADKAR 1,09,306/ - 4 1810/M/16 2008 - 09 PRAFULLA M. WAGHADKAR 1,16,943/ - 1,00,000/ - (MISC. EXP.) 5 1808/M/16 2009 - 10 PRAFULLA M. WAGHADKAR 1,37,588/ - 1,23,543/ - 8. FIRST ISSUE IN ALL APPEALS IS WITH REGARDS TO DISALLOWANCE OF THE INTEREST ON OVERDRAFT, WHICH HA S BEEN ALLOWED BY ME IN ITA NO.1813/MUM/2016 FOR A.Y. 2007 - 08 IN CASE OF ANIL M. WAGHADKAR VIDE PARA NO.4.2. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, ASSESSI NG OFFICER IS DIRECTED TO ALLOW THE ISSUE. 9. NEXT ISSUE IN ITA NOS.1804, 1811 & 1808/MUM/2016 IS WITH REGARDS TO DEPRECIATION ON VEHICLE IN QUEST ION, WHICH HAS BEEN PARTLY ALLOWED BY ME IN ITA NO.1813/MUM/2016 FOR A.Y. 2007-08 IN CASE OF ANIL M . WAGHADKAR VIDE PARA NO.5.2, WHEREIN 90% DEPRECIATIO N HAS BEEN ALLOWED AND 10% DISALLOWED ON PERSONAL ELE MENT OF THE USE OF VEHICLE. FACTS BEING SIMILAR, SO FOLL OWING SAME REASONING, THE ISSUE OF DEPRECIATION IS PARTLY ALLO WED AS INDICATED ABOVE. 10. NEXT ISSUE IN ITA NO.1810/MUM/2016 FOR A.Y. 200 8- 09 IN CASE OF MR. PRAFULLA M. WAGHADKAR IS WITH REG ARDS TO DISALLOWANCE OF MISCELLANEOUS EXPENSES AMOUNTING TO ITA NO.1813/MUM/16 A.Y. 07-08 & ORS. 5 APPEALS [ANIL M. WAGHADKAR. VS. ITO] PAGE 9 RS.1,00,000/-. TAKING ALL FACTS AND CIRCUMSTANCES, THIS DISALLOWANCE IS RESTRICTED TO RS.25,000/-. 11. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF JUNE, 2016. SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER MUMBAI: DATED 27/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ! / CONCERNED CIT 4. !- / CIT (A) 5. )*+ ,--, , / DR, ITAT, MUMBAI 6. +12 34 / GUARD FILE. BY ORDER / , / , ,