ACIT, Faridabad V. M/s. A.R. Industries (P) Ltd., Faridabad

ITA 1893/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3704 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C GUPTA
• Assessee Lawyers: K SHANKARAN MANAGER ACCOUNTS
• Keywords: Depreciation; Revenue expenditure
• Section: 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO.1893(DEL)/2010 ASSESSMENT YEAR: 2001-02 ASSTT. COMMISSIONER OF INCOME M/S A. R. INDUSTRIES (P) LTD., TAX, CIRCLE-II, CGO COMPLEX, VS. 14/6, MA THURA ROAD, FARIDABAD. FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C. GUPTA, SR. DR RESPONDENT BY: SH RI K.SHANKARAN, MANAGER (ACCOUNTS) ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE REVENUE EMANATES FROM T HE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), FARIDABAD, IN APPEAL NO. 66/04-05 DATED 08.03.2010, PERTAINING TO ASSESSMENT YEAR 2001-02. THE REVENUE HAS TAKEN THREE SUBSTANTIVE GROUNDS IN THE APPEAL, WHICH READ AS UNDER:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN ALLOWI NG DEDUCTION OF RS. 19,65,000/- CLAIMED BY THE ASSESSEE ON ACC OUNT OF DEVELOPMENT CHARGES FOR THE PRODUCT DEVELOPMENT AS REVENUE EXPENDITURE BY RELYING ON TRIBUNALS ORDER FOR THE ASSESSMENT YEAR 2000-01 DATED 03.05.2005 IN ASSESSEES CA SE AGAINST WHICH REVENUES APPEAL IS PENDING BEFORE THE HONBLE HIGH COURT AND WITHOUT GIVING ANY REASONS OF HIS OW N. ITA NO. 1893(DEL)/2010 2 (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 1,35,000/- MADE BY THE ASSESSING OFFICER ON ACCOU NT OF CONSULTANCY CHARGES BY RELYING UPON EARLIER ORDE RS AGAINST WHICH REVENUES APPEAL IS PENDING BEFORE THE C OURT AND WITHOUT GIVING ANY REASONS OF HIS OWN. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 25,869/-, RS. 58,269/- AND RS. 36,711/- MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF TELEPHONE AND CAR EXPENS ES IGNORING THE REAL LIFE FACTUAL PROPOSITION THAT POSSIBILITY OF INCURRING EXPENSES ON TELEPHONE AND CAR FOR NON-BUSINESS P URPOSES COULD NOT BE ABSOLUTELY RULED OUT AND IS CONTRARY TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHITRAM & CO. (P) LTD. 191 ITR 96 AND VIT VS. MADURA COATS L TD, 263 ITR 241. 2. IT WAS THE COMMON CASE OF BOTH THE PARTIES TH AT THESE GROUNDS STAND COVERED BY THE DECISION OF SMC BENCH OF DELHI TRI BUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2000-01 IN ITA NO. 3706(DEL)/2004 DATED 03.05.2005, A COPY OF WHICH WAS PLACED BEFORE US. 2.1 THE FINDING OF THE TRIBUNAL IN RESPECT OF G ROUND NO. 1 IS CONTAINED IN PARAGRAPH 7 OF THAT ORDER, WHICH READS AS UN DER:- 7. AFTER HEARING THE RIVAL SUBMISSIONS I FIND THAT ASSESSEE DESERVES TO SUCCEED ON THIS GROUND. THE RE IS NO DISPUTE THAT THE EXPENSES WERE INCURRED AND T HE PAYMENTS WERE MADE BY THE ASSESSEE COMPANY. THE EXPENS ES WERE INCURRED ON CASTINGS, LABOUR AND ELECTRICITY. TH ESE EXPENSES CANNOT BE HELD CAPITAL IN NATURE BECAUSE THEY DID NOT HAVE ANY BENEFIT OF ENDURING NATURE. THE SAMPLES WERE PREPARED FOR ITA NO. 1893(DEL)/2010 3 GETTING THE ORDER FROM VARIOUS COMPANIES, I.E., MAHINDRA & MAHINDRA, BALERO & SCORPIO; AND TATA INDICA. THE SAMPLES WERE SENT FOR APPROVAL OF THE PRODUCT AND THEREA FTER THE PRODUCT WAS PRODUCED. THEREFORE, AN EXPENDITURE INCURRED ON SAMPLES AND ON CASTINGS FOR PREPARING THE SAMPL ES CANNOT BE HELD CAPITAL IN NATURE. I FURTHER NOTE THAT TH E ASSESSEE COMPANY FILED RETURN SHOWING LOSS. THEREFORE, IT CANNOT BE SAID THAT THERE WAS ANY MOTIVE BEHIND THE EX PENDITURE SHOWN AS REVENUE AS THERE WAS NO EFFECT ON R EVENUE. THE ASSESSED INCOME OF THE ASSESSEE IS IN NEGATIVE FIGURE, THEREFORE, FOR THIS REASON ALSO I AM OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ARE ALLOW ABLE AS REVENUE IN NATURE. IN VIEW OF ALL THESE FACTS AN D CIRCUMSTANCES I DIRECT THE AO TO TREAT THESE EXPENSES AS REVENUE IN NATURE AND ALLOW THE SAME. 2.2 THE FINDING OF THE TRIBUNAL IN RESPECT OF GRO UND NO. 2 READS AS UNDER:- AFTER HEARING BOTH THE SIDES I FIND THAT THIS M ATTER NEEDS RE- VERIFICATION. I NOTED THAT THE AO HAS NOT ASKED ANY FURTHER EXPLANATION AS TO WHAT TYPE OF SERVICES WERE OBTAINED BY THE ASSESSEE FROM MR. G.K. SONI DURING THE YEAR UNDER CONSIDERATION OR WHICH PARTIES WERE CONTACTED BY MR. G.K. SONI DURING THE YEAR UNDER CONSIDERATION. THERE IS NO DISPUTE THAT PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. HOWEVER, THE ONUS LAY UPON THE ASSESSEE TO PROVE THAT THE EXPENSES INCURRED WERE FOR THE PURPOSE OF BUSI NESS. THEREFORE, I RESTORE THIS MATTER TO THE FILE OF AO TO RE-EXAMINE THE ISSUE AFTER AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE. 2.3 THE FINDING OF THE TRIBUNAL IN RESPECT OF GRO UND NO. 3 READS AS UNDER:- GROUND NOS. 2 & 3 RELATE TO DISALLOWANCE OF EX PENSES OUT OF CAR RUNNING, PETROL EXPENSES, DEPRECIATION ON CAR AND ITA NO. 1893(DEL)/2010 4 TELEPHONE EXPENSES. THE BENCHES OF THE ITAT IN THE COUNTRY ARE TAKING CONSISTENT VIEW THAT IN CASE OF COMP ANY NO PERSONAL USER IS INVOLVED. LATEST DECISION IS REPORTED IN 76 ITD 32. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. VS. CIT (2002) 253 ITR 7 49 (GUJ.) HAS ALSO TAKEN SIMILAR VIEW. THEREFORE, IN VIEW OF THE PRECEDENCE, I ALLOW THESE GROUNDS BY HOLDING TH AT NO DISALLOWANCE CAN BE MADE IN THE HANDS OF THE COM PANY ON ACCOUNT OF PERSONAL USE. 3. CONCURRING WITH THE AFORESAID ORDER OF THE T RIBUNAL, ALL THESE GROUNDS ARE DISMISSED. 4. IN THE RESULT, THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 2ND JULY, 2010. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 2ND JULY,2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S A.R. INDUSTRIES (P) LTD., FARIDABAD. ACIT, CIRCLE-II, FARIDABAD. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR. ASSISTANT REGISTRAR.