AUTOMOTIVE MANUFACTURERS P.LTD, MUMBAI V. ASST CIT CIR 10(1), MUMBAI

ITA 1984/MUM/2013

• Counselvise Citation: 198419914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 12-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: RAJESH P SHAH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND VIVEK VARMA, JUDICIAL MEMBER ITA NO.1984/M/2013 ASSESSMENT YEAR: 2004-05 M/S. AUTOMOTIVE MANUFACTURERS PVT. LTD. 108, AUTOMOTIVE HOUSE, BAZAR WARD, KURLA (W), MUMBAI 400 070 PAN: AAACA3428K VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 10(1) MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH P. SHAH, A.R. REVENUE BY : SHRI A.R. NINAWE, D.R. DATE OF HEARING : 11.06.2014 DATE OF PRONOUNCEMENT : 18.06.2014 O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 08.01.13 FOR THE ASSESSMENT YEAR 2004-05, IN THE MA TTER OF ORDER PASSED BY AO UNDER SECTION 143(3) READ WITH SECTION 254 OF THE I NCOME TAX ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PE RUSED. THE FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALES OF VEHICLES. DURING THE COURSE OF SCRUTINY OF ASSESSM ENT, AO DISALLOWED 20% OF MISCELLANEOUS EXPENDITURE AMOUNTING TO RS.13,17,282 /-. BY THE IMPUGNED ORDER LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 10% BY OBSERVING THAT ALL THE VOUCHERS PRODUCED BY ASSESSEE WERE NOT VERIFIABLE. AGAINST THIS ORDER OF LD. CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO. 1984/M/2013 M/S. AUTOMOTIVE MANUFACTURERS PVT. LTD. 2 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT ASSESSEE IS HAVING DEALERSHIP OF LIGHT MOTOR VEHICLE AND ALSO T RUCKS AND CHASES. IT ALSO CARRIES THE SERVICE OF VEHICLES FROM ITS SERVICE ST ATION. BEFORE THE AO, ASSESSEE FURNISHED COMPLETE DETAILS OF EXPENDITURE INCURRED UNDER THE HEAD OF MISCELLANEOUS EXPENSES. WE FOUND THAT ASSESSEE HAD BRANCHES AT DIFFERENT PLACES LIKE PUNE, NAGPUR, AURANGABAD, NASHIK, BAROD A ETC. AS THE VOUCHERS WERE THOUSAND IN NUMBER, ALL COULD NOT BE PLACED BE FORE THE AO DURING THE COURSE OF SCRUTINY ASSESSMENT. HOWEVER, THE EXPENS ES WERE RANGING BETWEEN RS.10/- TO RS.10,000/-. WE HAVE GONE THROUGH THE N ATURE OF EXPENSES SO INCURRED. NOWHERE AO HAS DOUBTED GENUINENESS OF EX PENSES NOR IT WAS CASE OF AO THAT EXPENSES WERE NOT INCURRED FOR THE PURPO SE OF BUSINESS. KEEPING IN VIEW THE SPECIFIC NATURE OF BUSINESS BEING CARRIED ON BY ASSESSEE, HAVING DIFFERENT BRANCHES IN VARIOUS CITIES WHEREIN INCURR ING OF SUCH EXPENSES ARE INEVITABLE, WE DIRECT THE AO WILL RESTRICT THE DISA LLOWANCE TO 5%. WE DIRECT ACCORDINGLY. 4. THE AO HAS ALSO MADE DISALLOWANCE UNDER SECTION 14A AMOUNTING TO RS.4,79,925/-. BY THE IMPUGNED ORDER LD. CIT(A) HA S CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.25,000/- AFTER HAV ING FOLLOWED THE OBSERVATION: 4.1 I HAVE CONSIDERED THE FACTS OF THE CASE. THIS ISSUE HAS COME INTO CONSIDERATION IN A.Y. 2005-06 WHEREIN MY PREDECESSO R HAS HELD AS UNDER: THE FACTS OF THE YEAR UNDER CONSIDERATION ARE SAME AS OF A.Y. 2007-08. THE MAJOR PART OF THE INVESTMENT CONSISTS OF SHARES OF BAJAJ AUTO LTD. WHICH IS VERY OLD INVESTMENT. THE INVESTMENT IN OTHER SHARES HAS ALSO BEEN CLAIMED TO BE VERY OLD. THE FACT OF OWN FUNDS I.E. CAPITAL AND RESERVES & SURPLUS WERE MUCH MORE THAN INVESTMENTS WERE ALSO SAME. MOREOVER THE INVE STMENTS WERE MADE IN EARLIER YEARS I.E. FROM 1964 ONWARD. THERE WAS NO INTEREST COST INVOLVED. THE PORTFOLIO CONSIST OF S HARES OF FIVE ITA NO. 1984/M/2013 M/S. AUTOMOTIVE MANUFACTURERS PVT. LTD. 3 COMPANIES ONLY AND THEREFORE, NO SUBSTANTIAL COST O N ACCOUNT OF MANAGERIAL AND ADMINISTRATIVE EXPENSES WAS REQUIRED . HOWEVER, INCURRING OF SOME EXPENSES ON ACCOUNT OF CLERICAL/M ANAGERIAL AND ADMINISTRATIVE EXPENSES CANNOT BE TOTALLY RULED OUT . IN THE FACTS AND CIRCUMSTANCES, THE DISALLOWANCE MADE BY THE A.O . IS REDUCED TO RS.25,000/- ON ACCOUNT OF ADMINISTRATIVE AND MAN AGERIAL COST INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. CONSIDERING THE DECISION OF MY PREDECESSOR, I RESTR ICT THE DISALLOWANCE TO ONLY RS.25,000/- AS OFFERED BY THE APPELLANT AND THE RELIEF TO THE ASSESSEE BY THIS PROCESS IS RS.3,89,1 20/-. HENCE RS.3,89,120/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. IT IS CLEAR FROM THE ORDER OF LD. CIT(A) THAT AF TER CONSIDERING DECISION OF EARLIER YEAR, HE HAS RESTRICTED DISALLOWANCE ON ACC OUNT OF INDIRECT EXPENDITURE TO RS.25,000/-. HOWEVER, LD. CIT(A) HAS NOT CONSID ERED THE DISALLOWANCE OF DIRECT EXPENDITURE COMPUTED BY THE AO FOR EARNING O F EXEMPT INCOME AT RS.4,14,120/-. AS THE ADDITION ALREADY MADE IN THE ORDER UNDER SECTION 143(3) DATED 31.01.06 WAS RS.1,56,288/-, THE BALANCE OF RS .2,57,832/- (RS.4,14,120/- RS.1,56,288/-) WAS ADDED BY THE AO. HOWEVER, THI S DISALLOWANCE WAS NOT CONSIDERED BY THE LD. CIT(A) AND DURING THE COURSE OF HEARING BEFORE US, ASSESSEE ALSO COULD NOT POINT OUT ANY MISTAKE IN SU CH CALCULATION, ACCORDINGLY WE UPHOLD THE ADDITION OF RS.2,57,832/- BEING DIREC T EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 18.06.2014. SD/- SD/- (VIVEK VARMA) (R.C . SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18.06.2014. * KISHORE, SR.P.S. ITA NO. 1984/M/2013 M/S. AUTOMOTIVE MANUFACTURERS PVT. LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.