Ashoo Decor (India), New Delhi V. JCIT, New Delhi

ITA 2380/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3266 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2380/DEL /2015 ASSESSMENT YEAR: 2010-11 ASHOO DECOR (INDIA), PLOT NO. 1, (31/3F), STREET NO. 1, ANAND PARRBAT INDL. AREA, NEW DELHI. (PAN: AAIFA8801D) VS DCIT, CIRCLE-16(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN, ADV. SHRI ASHISH GOY AL, CA RESPONDENT BY : SHRI AMIT JAI N, SR. DR DATE OF HEARING : 23.11.2017 DATE OF PRONOUNCEMENT : 20.02.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 30.01.2015 PASSED BY THE LD . CIT(A)-17, NEW DELHI FOR ASSESSMENT YEAR 2010-11 WHEREIN, VIDE THE IMPUGNED ORDER, THE LD. COMMISSI ONER OF INCOME TAX(A) HAS DISMISSED THE ASSESSEES APPEA L CHALLENGING THE DISALLOWANCE OF EXCESS INTEREST PAI D TO PARTNERS AMOUNTING TO RS. 1,01,026/- AND 1/10 TH OF THE ITA NO. 2380/DEL/2015 ASSESSMENT YEAR 2010-11 2 EXPENSES ON TELEPHONE, VEHICLE RUNNING AND MAINTENA NCE AND DEPRECIATION ON MOTOR CAR AMOUNTING TO RS. 1,18,697/-. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THE APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] IS BAD BOTH IN THE EYE OF LAW A ND ON FACTS. 2. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED [CIT(A)] HAS ERRED BOTH ON FACTS AND IN LAW , IN CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS. 1,01,026/- ON ACCOUNT OF INTEREST ON PARTNERS CAPI TAL. (II) THAT THE ABOVE DISALLOWANCE WAS MADE IGNORING THE FACT THAT THE INTEREST ON PARTNERS CAPITAL IS TO B E PROVIDED AS PER THE TERM OF PARTNERSHIP DEED ONLY. 3.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS. 1,18,697/- ON ACCOUNT OF CAR AND TELEPHONE EXPENSES . (II) THAT THE DISALLOWANCE HAS BEEN CONFIRMED DESP ITE THE SAME HAVING BEEN MADE ARBITRARILY @ 10% WITHOUT THERE BEING ANY BASIS FOR THE SAME. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE RETURN IN T HIS CASE WAS FILED DECLARING AN INCOME OF RS. 56,50,790/- AND TH E ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 58,70,510/-. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED ITA NO. 2380/DEL/2015 ASSESSMENT YEAR 2010-11 3 THAT THE ASSESSEE FIRM WAS PAYING INTEREST TO ITS P ARTNERS ON THE CREDIT OPENING BALANCE IN THE CAPITAL ACCOUNTS. TH E ASSESSING OFFICER WAS OF THE OPINION THAT THE INTEREST TO PAR TNERS WAS TO BE COMPUTED ON REDUCING BALANCE/DAILY BALANCE METHOD. THE ASSESSING OFFICER ALSO NOTED THAT DURING ASSESSMENT YEAR 2009- 10, THE EXCESS INTEREST PAID TO THE PARTNERS WAS DI SALLOWED. THE ASSESSING OFFICER PROCEEDED TO RE-COMPUTE THE INTER EST AND CALCULATED EXCESS INTEREST AT RS. 1,01,026/-. THE ASSESSING OFFICER ALSO MADE AD HOC DISALLOWANCES BEING 1/10 TH OF THE TOTAL EXPENSES INCURRED IN RESPECT OF EXPENSES ON ACCOUNT OF VEHICLE RUNNING AND MAINTENANCE AND ON ACCOUNT OF DEPRECIAT ION ON MOTOR CAR. THESE ADDITIONS WERE CONFIRMED BY THE L D. CIT (A) AND NOW THE ASSESSEE IS BEFORE THE ITAT CHALLENGING THE UPHOLDING OF DISALLOWANCE BY THE LD. CIT (A). 4. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE ISS UE OF INTEREST TO PARTNERS WAS COVERED IN FAVOUR OF THE ASSESSEE I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 BY ITATS ORDE R IN ITA NO. 1054/DEL/2013 DATED 18.4.2011 WHEREIN THE ITAT HAD DELETED A SIMILAR ADDITION ON IDENTICAL GROUND. 4.1 WITH RESPECT TO AD HOC DISALLOWANCE ON ACCOUNT OF CAR AND ITA NO. 2380/DEL/2015 ASSESSMENT YEAR 2010-11 4 TELEPHONE EXPENSES, IT WAS SUBMITTED THAT THESE DIS ALLOWANCES HAD BEEN MADE ARBITRARILY WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT WAS A LSO SUBMITTED THAT THE TOTAL SALES DURING THE YEAR WERE RS. 13,57 ,66,892/- AND THE TOTAL EXPENDITURE WAS LESS THAN 1% OF THE TOTAL SALES. IT WAS ALSO SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE DULY AUDITED AND NO SIMILAR DISALLOWANCE HAD BEEN MADE IN EARLIER YE ARS. 5. THE LD. SR. DR SUPPORTED THE ORDER OF THE AUTHOR ITIES BELOW AND SUBMITTED THAT THE DISALLOWANCES HAD BEEN RIGHT LY MADE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE ISSUE O F DISALLOWANCE OF EXCESS CLAIM OF INTEREST PAID TO PARTNERS IS CONCER NED, IT IS SEEN THAT THE OPENING BALANCE OF THE PARTNERS CAPITAL AC COUNT IS MUCH LESS THAN A CLOSING BALANCE OR THE PROFITS REDUCED BY THE DRAWINGS. THUS, THE ADDITION MADE BY THE ASSESSING OFFICER IS TAX NEUTRAL BECAUSE WHATEVER IS ALLOWED IN THE HANDS OF THE FIRM IS CHARGEABLE TO TAX IN THE HANDS OF PARTNERS. IN THE CASE OF DEVAL UTENSILS FACTORY VS. DCIT REPORTED IN 98 TTJ 501, I T WAS HELD THAT WHERE THE DRAWINGS ARE DEEMED TO HAVE BEEN MADE BY PARTNERS ON DAY TO DAY BASIS, THEN RESPECTIVE PROFITS ARE AL SO TO BE CREDITED ITA NO. 2380/DEL/2015 ASSESSMENT YEAR 2010-11 5 ON DAY TO DAY BASIS. WE FIND THAT THE ITAT DELHI B ENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 HAS FOLLOWED THIS ORDER AND ALLOWED THE ASSESSEES GROUND WITH R ESPECT TO EXCESS INTEREST ON CAPITAL ACCOUNT PAID TO PARTNERS . THERE IS NO FACTUAL DIFFERENCE IN THIS YEAR FROM THE FACTS IN A SSESSMENT YEAR 2009-10 AND THE LD. SR. DR COULD NOT POINT OUT ANY CONTRARY JUDGMENT FAVOURING THE REVENUE IN THIS REGARD. THE REFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH FOR THE EARLIER YEAR AND THE ONE RENDERED IN DEVAL UTENSILS FACTORY VS. DCIT (SUPRA), WE ALLOW GROUND NO. 1 OF THE ASSESSEE S APPEAL. 6.1 AS FAR AS GROUND NO.2 CHALLENGING THE CONFIRMAT ION OF DISALLOWANCE ON ACCOUNT OF AD HOC ADDITION IS CONCERNED, WE FIND THAT THIS ISSUE ALSO, NECESSARILY, HAS TO BE DECIDE D IN FAVOUR OF THE ASSESSEE AS THE ASSESSING OFFICER HAS NOT POINTED O UT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE AS SESSEE. THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT SPECIFIC INSTANCES WHERE THE VOUCHERS WERE NOT PRODUCED BY THE ASSESSE E WHEN SO REQUIRED BY THE ASSESSING OFFICER. THIS ISSUE IS C OVERED IN FAVOUR OF THE ASSESSEE BY A PLETHORA OF ORDERS OF ITAT DEL HI BENCH, SOME OF WHICH ARE AS UNDER- ITA NO. 2380/DEL/2015 ASSESSMENT YEAR 2010-11 6 1. M/S DHIR & DHIR ASSOCIATES VS ASSTT.CIT, NEW DELHI DATED 16.06.2017 2. ACIT VS AMTEK AUTO LIMITED (2006) 112 TTJ 455 3. SHRI DEVENDER KUMAR VS ITO IN ITA NO. 3239/DEL/201 4 DATED 30.08.2016 4. SHRI GAGAN GOYAL VS JCIT IN ITA NO. 1514/DEL/2015 DATED 2.8.2016 5. ACIT VS PRECISION PIPES & PROFILES CO. LTD. IN ITA NO. 4257 & 42358/DEL/2012 DATED 12.10.2012 6.2 THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.02. 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 20 TH FEBRUARY, 2018 GS ITA NO. 2380/DEL/2015 ASSESSMENT YEAR 2010-11 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR