HANSRAJ MATHURADAS, MUMBAI V. ITO 22(1)(2), MUMBAI

ITA 2397/MUM/2010

• Counselvise Citation: 239719914 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 06-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A G NAYAK
• Assessee Lawyers: MEHUL SINGH
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 2397/MUM/2010. ASSESSMENT YEAR : 2006-07. HANSRAJ MATHURADAS, THE INCOME TAX OFFICER, CHETAN C-WING, RAJAWADI, VS. 22(1)(2), MUMBAI. GHATKOPAR (EAST), MUMBAI 400 077. PAN AACFH 3210R APPELLANT. RESPONDENT. APPELLANT BY : SHRI MEHUL SINGH. RESPONDENT BY : SHRI A.G. NAYAK. DATE OF HEARING : 06-09-2011 DATE OF PRONOUNCEMENT : 16-09-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-33, MUMBAI DATED 18-01-2010. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPE AL INVOLVES TWO ISSUES. FIRST RELATING TO DISALLOWANCE OF RS.46,751/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF CONTRACT FEES AN D SECOND RELATING TO DISALLOWANCE OF RS.2,07,965/- MADE BY THE AO OUT OF DIRECT EXPENSES WHICH HAS BEEN SUSTAINED BY THE LEARNED CIT(APPEALS) TO THE E XTENT OF 50%. 2 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. 3. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AS INSURANCE SURVEYO R AND LOSS ASSESSOR. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY IT ON 31-10-2006 DECLARING TOTAL INCOME OF RS.1,32,780/-. IN THE SAID YEAR, TH E ASSESSEE HAD RECEIVED SURVEY FEES AMOUNTING TO RS.26,72,587/- AGAINST WHICH EXPE NSES INTER ALIA ON ACCOUNT OF CONTRACT FEES AMOUNTING TO RS.46,751/- AND DIRECT E XPENSES AMOUNTING TO RS.2,07,965/- WERE CLAIMED AS DEDUCTION. ALTHOUGH T HE ASSESSEE TRIED TO EXPLAIN BEFORE THE AO THAT THE SAID EXPENSES WERE INCURRED AT PORT ON VARIOUS OCCASIONS, THE AO DID NOT FIND THE SAME TO BE ACCEPTABLE IN TH E ABSENCE OF PROPER DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE TO SU PPORT AND SUBSTANTIATE THE SAME. ACCORDINGLY THE CONTRACT FEES AND DIRECT EXPE NSES CLAIMED BY THE ASSESSEE WERE DISALLOWED BY HIM. ON APPEAL, THE LEARNED CIT( APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF CONTRACT FEES OBSERVING THAT BESIDES PRODUCING THE COPY OF LEDGER ACCOUNT OF SHRI RITESH BHATIA TO WHOM CONTRACT FEES WAS CLAIMED TO BE PAID, THE ASSESSEE COULD NOT PROD UCE ANY OTHER EVIDENCE IN THE FORM OF CONFIRMATION, RETURN OF INCOME OF SHRI RITE SH BHATIA, HIS P.A. NO. OR BANK ACCOUNT DETAILS ETC. TO JUSTIFY ITS CLAIM FOR DEDUC TION ON ACCOUNT OF CONTRACT FEES. AS REGARDS DIRECT EXPENSES, THE LEARNED CIT(APPEALS) A GREED WITH THE STAND OF THE ASSESSEE THAT SOME EXPENSES AT PORTS WERE REQUIRED TO BE INCURRED BY THE ASSESSEE KEEPING IN VIEW THE NATURE OF ITS BUSINESS. HE HELD THAT IN THE ABSENCE OF PROPER DOCUMENTARY EVIDENCE, THE CLAIM OF THE ASSESSEE FOR DIRECT EXPENSES, HOWEVER, WAS NOT FULLY VERIFIABLE. ACCORDINGLY THE DISALLOWANCE OF RS.2,07,965/- MADE BY THE ASSESSEE ON ACCOUNT OF DIRECT EXPENSES WAS SUSTAINE D BY HIM TO THE EXTENT OF 50%. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED B EFORE US THAT THERE WAS NO REASON FOR THE AUTHORITIES BELOW TO DOUBT THE GENUI NENESS OF THE CONTRACT FEES PAID BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS ESP ECIALLY WHEN THE SAID PAYMENT 3 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. WAS SUBJECTED TO DEDUCTION OF TAX AT SOURCE. AS REG ARDS THE DIRECT EXPENSES, HE SUBMITTED THAT EVEN THOUGH THE SAID EXPENSES INCURR ED BY THE ASSESSEE AT PORTS WERE PAID IN CASH, THE DISALLOWANCE SUSTAINED BY THE LEA RNED CIT(APPEALS) TO THE EXTENT OF 50% OUT OF DIRECT EXPENSES IS EXCESSIVE AND UNRE ASONABLE KEEPING IN VIEW THE NATURE OF THE ASSESSEES BUSINESS. 5. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T DISALLOWANCE OUT OF CONTRACT FEES AND DIRECT EXPENSES WAS MADE BY THE A O AND SUSTAINED BY THE LEARNED CIT(APPEALS) MAINLY ON THE GROUND THAT THE ASSESSEE COULD NOT DISCHARGE THE ONUS THAT LAY ON IT TO SUPPORT AND SUBSTANTIATE ITS CLAI M FOR THE SAID EXPENSES BY PRODUCING THE RELEVANT SUPPORTING DOCUMENTARY EVIDE NCE. HE CONTENDED THAT MERELY BECAUSE TDS WAS MADE FROM THE PAYMENT OF THE SAID EXPENSES WILL NOT RESULT IN DISCHARGING THE SAID ONUS AND IN THE ABSE NCE OF ANY PROPER DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE, ITS CLAIM FOR DE DUCTION ON ACCOUNT OF CONTRACT FEES AND DIRECT EXPENSES WAS RIGHTLY DISALLOWED BY THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS CONTRACT FEES, IT IS OBSERVED THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON PAYMENT OF RS.46,751/- T O ONE SHRI RITESH BHATIA WAS DISALLOWED BY THE AO FOR LACK OF PROPER DOCUMENTARY EVIDENCE TO SUPPORT THE SAME AND THE LEARNED CIT(APPEALS) HAS CONFIRMED THE SAID DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED EVIDENCE IN THE FORM OF CONFIRMATION, RETURN OF INCOME OF SHRI RITESH BHATIA AS WELL AS HIS P.A. NO ., BANK ACCOUNT DETAILS ETC. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD, TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE FROM THE PAYMENT OF RS.46, 751/- MADE TO SHRI RITESH BHATIA ON ACCOUNT OF CONTRACT FEES AND THE SAME. IN OUR OPINION, COUPLED WITH OTHER DETAILS FILED BY THE ASSESSEE WAS SUFFICIENT TO EST ABLISH THE GENUINENESS OF THE EXPENSES INCURRED BY THE ASSESSEE ON PAYMENT OF CON TRACT FEES TO SHRI RITSH BHATIA. 4 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. THERE IS NO DISPUTE THAT SUCH EXPENDITURE IS REQUIR ED TO BE INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS BUT THE DISALLOWANCE WAS MAD E MAINLY FOR THE LACK OF SUPPORTING EVIDENCE TO SUPPORT THE CLAIM OF THE ASS ESSEE. IN OUR OPINION, THE FACTUM OF DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE FROM THE SAID PAYMENT IS SUFFICIENT TO FILL THIS GAP AND RELYING ON THE SAME, WE ARE OF TH E VIEW THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON PAYMENT OF CONTRACT FEES TO RITE SH BHATIA CAN REASONABLY BE ALLOWED. AS REGARDS DIRECT EXPENSES, IT IS OBSERVED THAT THE LEARNED CIT(APPEALS) HAS RIGHTLY HELD IN HIS IMPUGNED ORDER THAT SUCH EX PENSES ARE REQUIRED TO BE INCURRED AT PORTS BY THE ASSESSEE KEEPING IN VIEW T HE VERY NATURE OF ITS BUSINESS. THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DIREC T EXPENSES, HOWEVER, WAS SUSTAINED BY HIM TO THE EXTENT OF 50% OF THE TOTAL EXPENSES DUE TO UNVERIFIABLE ELEMENT INVOLVED IN THE SAID EXPENSES. IN OUR OPINI ON, THE DISALLOWANCE SO SUSTAINED BY THE LEARNED CIT(APPEALS) IS ON THE HIG HER SIDE KEEPING IN VIEW THE NATURE OF THE EXPENSES INCURRED BY THE ASSESSEE WHI CH ARE ESSENTIALLY REQUIRED TO BE PAID IN CASH BY WAY OF SELF MADE VOUCHER. WE, THERE FORE, FIND IT FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE MADE ON THIS ISSUE TO 25% OF THE TOTAL EXPENSES. GROUND NO. 1 OF THE ASSESSEES APPEAL IS THUS PARTL Y ALLOWED. 7. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.1,68,925/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) BEING 50% OF THE TOTAL BULK SURVEY MATERIAL EXPENSES CLAIMED BY THE ASSESSEE. 8. THE ASSESSEE HAD CLAIMED BULK SURVEY MATERIAL EX PENSES TO THE TUNE OF RS.3,37,849/-.IT WAS EXPLAINED BY THE ASSESSEE BEFO RE THE AO THAT IT HAD OUTSOURCED THEIR BULK SURVEY ACTIVITIES TO ONE CONCERN, NAMELY , M/S A.K. MARINE. IT WAS SUBMITTED THAT THE SAID CONCERN WAS CARRYING ON ACT IVITY OF UNLOADING THE OIL FROM SHIP INTO OIL TANKER AT PORT ON BEHALF OF THE ASSES SEE AND THE EXPENSES PERTAINING TO THE SAID ACTIVITY AS INCURRED BY M/S A.K. MARINE WE RE CLAIMED BY THE ASSESSEE 5 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. UNDER THE HEAD BULK SURVEY MATERIAL EXPENSES. THE ASSESSEE, HOWEVER, COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM FOR BULK SURVEY MATERIAL EXPENSES AND IN THE ABSENCE OF THE SAME, T HE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BULK SURVEY MATERIAL EXPENS ES WAS DISALLOWED BY THE AO TO THE EXTENT OF 50%. ON APPEAL, THE LEARNED CIT(A PPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO OBSERVING THAT THERE WA S NOTHING PRODUCED BY THE ASSESSEE EVEN BEFORE HIM TO SUPPORT ITS CLAIM FOR B ULK SURVEY MATERIAL EXPENSES. HE HELD THAT THE SAID EXPENSES IN THE ABSENCE OF SU CH SUPPORTING EVIDENCE WERE UNVERIFIABLE AND THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF 50% OF SUCH EXPENSES WAS QUITE FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT SOME OF THE WORK ENTRUSTED TO THE ASSESSEE FIRM WAS ASSIGNED BY IT TO A SUB CONTRACTOR, NAMELY, M/S A.K. MARINE. HE INVITED OUR ATTENTION TO THE LEDGER ACCOUNT EXTRACT OF BULK SURVEY EXPENSES PLACED AT PAGE NO. 46 AND 47 OF HIS PAPER BOOK TO SHOW THAT MOST OF THE PAYMENTS MADE TO M/S A.K. MARINE WERE BY ACCOUNT PA YEE CHEQUES AND EVEN TAX AT SOURCE WAS ALSO DEDUCTED FROM SUCH PAYMENT. HE S UBMITTED HAT SUCH PAYMENTS WERE REGULARLY MADE BY THE ASSESSEE EVEN IN THE EAR LIER YEARS AND THERE WAS NO DISALLOWANCE MADE OUT OF THE SAID EXPENSES IN THE E ARLIER YEARS. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTH ORITIES BELOW IN SUPPORT OF REVENUES CASE ON THIS ISSUE THAT THE DISALLOWANCE OF 50% OUT OF BULK SURVEY MATERIAL EXPENSES WAS JUSTIFIABLY MADE FOR WANT OF PROPER DOCUMENTARY EVIDENCE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE NATURE OF BULK SURVEY EXPENSES CLAIMED BY IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE AUTH ORITIES BELOW AND EVEN THE DETAILS THEREOF WERE FURNISHED. THE SAID EXPENSES T O THE EXTENT OF 50%, HOWEVER, WERE DISALLOWED BY THE AUTHORITIES BELOW ON THE GRO UND THAT IN THE ABSENCE OF 6 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. PROPER DOCUMENTARY EVIDENCE, THE SAME WERE FULLY VE RIFIABLE. IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED ON RECO RD BEFORE US A LEDGER ACCOUNT EXTRACT OF BULK SURVEY EXPENSES AT PAGE NO. 46 AND 47 OF HIS PAPER BOOK AND A PERUSAL OF THE SAME SHOWS THAT MOST OF THE PAYMENTS APPEARING THEREIN WERE MADE TO M/S A.K. MARINE BY CHEQUES AND EVEN TAX AT SOUR CE WAS ALSO DEDUCTED FROM THE SAID PAYMENTS. IN OUR OPINION, HAVING REGARD TO THE SE FACTS OF THE CASE AS WELL AS THE FACT THAT THE ASSESSEE FIRM HAD EARNED INCOME O F ABOUT RS.22 LAKHS FROM THE SURVEY ACTIVITY, THERE WAS NO REASON FOR THE AUTHOR ITIES BELOW TO MAKE ANY DISALLOWANCE OUT OF BULK SURVEY EXPENSES. IN THIS V IEW OF THE MATTER, WE DELETE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LE ARNED CIT(APPEALS) ON THIS ISSUE AND ALLOW GROUND NO. 2 OF THE ASSESSEES APPE AL. 11. THE ISSUE RAISED IN GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS.80,000/- MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(APP EALS) OUT OF PROFESSIONAL FEES. 12. UNDER THE HEAD ADMINISTRATIVE EXPENSES, THE A SSESSEE HAD CLAIMED A SUM OF RS.1,83,500/- INCURRED ON PROFESSIONAL FEES. THE SAID AMOUNT WAS COMPRISING OF A SUM OF RS.1,60,000/- PAID ON ACCOUNT OF FEES FOR CARRYING OUT OFFICE ADMINISTRATION AND BUSINESS PROMOTION WORK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO FURNISH ANY DET AILS WHATSOEVER REGARDING THE FEES OF RS.1,60,000/- CLAIMED TO BE PAID FOR CARRYI NG OUT OFFICE ADMINISTRATION AND BUSINESS PROMOTION WORK. THE ASSESSEE ALSO COULD NO T OFFER ANY SATISFACTORY EXPLANATION AS REGARDS THE NATURE OF THE SERVICES R ENDERED TO JUSTIFY THE PAYMENT OF FEES OF RS.1,60,000/-. THE AO, THEREFORE, DISALLOWE D THE SAID FEES TO THE EXTENT OF 50%. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO OBSERVING THAT THE ASSESSEE COULD NOT EIT HER FURNISH ANY DETAILS OF THE WORK DONE BY MR. RITESH BHATIA TO WHOM THE AMOUNT O F RS.1,60,000/- WAS PAID OR 7 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. PRODUCE ANY EVIDENCE TO SUPPORT AND SUBSTANTIATE IS CLAIM FOR THE DEDUCTION ON ACCOUNT OF FEES PAID FOR OFFICE ADMINISTRATION AND BUSINESS PROMOTION WORK. 13. THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OU R ATTENTION TO THE LEDGER EXTRACT OF PROFESSIONAL FEES ACCOUNT PLACED AT PAGE NO. 48 OF HIS PAPER BOOK TO SHOW THAT 8 INSTALMENTS OF RS.20,000/- EACH WERE RE GULARLY PAID TO SHRI RITESH BHATIA BY CHEQUES. HE CONTENDED THAT THERE WAS THUS NO REASON FOR THE AUTHORITIES BELOW TO DOUBT THE GENUINENESS OF THE PAYMENT OF PR OFESSIONAL FEES PAID BY THE ASSESSEE TO SHRI RITESH BHATIA AND DISALLOWANCE MAD E ON THIS ISSUE IS NOT SUSTAINABLE. 14. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT IN THE ABSENCE OF ANY EXPLANATION OFFERED BY THE ASSESSEE AS REGARDS THE NATURE OF PROFESSIONAL SERVICES RENDERED BY SHRI RITSH BHATIA IN CONNECTION WITH OF FICE ADMINISTRATION AND BUSINESS PROMOTION WORK, THE DISALLOWANCE TO THE EX TENT OF 50% OUT OF FEES PAID TO HIM WAS RIGHTLY MADE BY THE AUTHORITIES BELOW. HE C ONTENDED THAT MERELY BECAUSE THE PAYMENT TO SHRI RITESH BHATIA WAS MADE BY THE C HEQUES AND TAX WAS DEDUCTED AT SOURCE WILL NOT DISCHARGE THE ONUS THAT LAY ON T HE ASSESSEE TO ESTABLISH THAT THE SAID PAYMENTS WERE MADE FOR THE PURPOSE OF ITS BUSI NESS. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT NO EXPLANAT ION WHATSOEVER HAS BEEN OFFERED BY THE ASSESSEE EITHER BEFORE THE AUTHORITIES BELOW OR EVEN BEFORE US IN RESPECT OF THE EXACT NATURE OF SERVICES RENDERED BY SHRI RITES H BHATIA IN CONNECTION WITH OFFICE ADMINISTRATION AND BUSINESS PROMOTION WORK. AS RIGHTLY CONTENDED BY THE LEARNED DR, THE ONUS IN THIS REGARD IS ON THE ASSES SEE TO ESTABLISH THAT EXPENSES INCURRED ON PROFESSIONAL FEES PAID TO SHRI RITESH B HATIA WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND THI S ONUS CANNOT BE SAID TO BE 8 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. DISCHARGED MERELY BY SHOWING THAT SUCH PROFESSIONAL FEES WAS PAID BY CHEQUE AND TAX AT SOURCE WAS ALSO DEDUCTED FROM SUCH PAYMENT. WE, THEREFORE, FIND OURSELVES IN AGREEMENT WITH THE LEARNED CIT(APPEALS) THAT THE DISALLOWANCE OF RS.80,000/- OUT OF PROFESSIONAL FEES WAS RIGHTLY MADE BY THE AO DUE TO THE FAILURE OF THE ASSESSEE TO ESTABLISH THE BUSINESS EXPEDIENCY OF TH E SAID PAYMENT AND UPHOLDING THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON T HIS ISSUE, WE DISMISS GROUND NO. 3 OF THE ASSESSEES APPEAL. 16. THE ISSUE RAISED IN GROUND NO. 4 AND 5 RELATES TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) OU T OF CONVEYANCE AND TELEPHONE EXPENSES OF RS.4,818/- AND RS.17,224/- RE SPECTIVELY. IN ITS PROFIT & LOSS ACCOUNT, THE ASSESSEE FIRM HAD DEBITED A SUM OF RS. 24,088/- ON ACCOUNT OF CONVEYANCE EXPENSES AND A SUM OF RS.86,120/- ON ACC OUNT OF TELEPHONE EXPENSES. IN THE ABSENCE OF ANY RECORD MAINTAINED BY THE ASS ESSEE IN THE FORM OF LOG BOOK OR CALL REGISTER TO ESTABLISH THAT THE SAID EXPENSES W ERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THE SAME WERE DISALLOWED B Y THE AO TO THE EXTENT OF 20%. BEFORE THE LEARNED CIT(APPEALS), THE ASSESSEE SUBMI TTED THAT THE CONVEYANCE EXPENSES AND TELEPHONE EXPENSES WERE ALREADY SUBJEC TED TO FRINGE BENEFIT TAX (FBT) AND SINCE FBT WAS ALREADY PAID BY THE ASSESSE E ON THE SAID EXPENSES, DISALLOWANCE OF THE SAID EXPENSES FOR PERSONAL ELEM ENT WAS NOT PERMISSIBLE. THE LEARNED CIT(APPEALS) DID NOT FIND MERIT IN THIS CON TENTION OF THE ASSESSEE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE A O OUT OF CONVEYANCE AND TELEPHONE EXPENSES. 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS TAKEN US THROUGH THE CBDT CIRCULAR NO. 8/2005 DATED 29-08-2005 GIVING EX PLANATORY NOTES ON THE PROVISIONS RELATING TO FRINGE BENEFIT TAX AS INTROD UCED BY THE FINANCE ACT, 2005 AND 9 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. INVITED OUR ATTENTION TO THE RELEVANT PORTION THERE OF TO EXPLAIN THE OBJECT BEHIND LEVYING FRINGE BENEFIT TAX. AS INDICATED IN THE SAI D CIRCULAR, THE FRINGE BENEFIT TAX HAS BEEN INTRODUCED AS A SURROGATE TAX ON EMPLOYER WITH THE OBJECTS OF RESOLVING THE PROBLEMS IN TAXING SOME PERQUISITES/FRINGE BENE FITS IN THE HANDS OF THE EMPLOYEES IN TERMS OF SECTION 17. FURTHER, AS EXPLA INED IN PARA NO. 3.2 OF THE CIRCULAR, THE SCOPE OF THE TERM FRINGE BENEFITS PR OVIDED IS DEFINED IN SECTION 115WB(1) TO MEAN ANY CONSIDERATION FOR EMPLOYMENT P ROVIDED BY WAY OF ANY PRIVILEGE, SERVICE FACILITY OR AMENITY, DIRECTLY OR INDIRECTLY, PROVIDED BY AN EMPLOYER, WHETHER BY WAY OF REIMBURSEMENT OR OTHERW ISE, TO HIS EMPLOYEES. MOREOVER, AS CLARIFIED IN THE SAID CIRCULAR WHILE A NSWERING FREQUENTLY ASKED QUESTION NO. 15, FRINGE BENEFIT IS DEEMED TO HAVE B EEN PROVIDED IF THE EMPLOYER HAS INCURRED EXPENSES FOR ANY OF THE PURPOSES REFER RED TO IN THE RELEVANT PROVISIONS AND THERE IS NO REQUIREMENT TO SEGRAGATE SUCH EXPEN SES BETWEEN THOSE INCURRED FOR OFFICIAL PURPOSES AND PERSONAL PURPOSES. IT WAS FUR THER CLARIFIED WHILE ANSWERING QUESTION NO. 81 THAT WHEN EXPENDITURE ON RUNNING AN D MAINTENANCE OF MOTOR CARS IS LIABLE TO FRINGE BENEFIT TAX, THE EMPLOYEES WILL NOT BE LIABLE TO INCOME TAX ON THE PERQUISITE VALUE OF MOTOR CAR PROVIDED BY THE EMPLO YER. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, CIRCULAR NO. 8/2005 DATED 29-08-2005 ISSUED BY THE BOARD EXPLAINING THE PROVISIONS RELATING TO FRINGE BENEFIT TAX THUS MAKES IT CLEAR THAT FRINGE BENEFIT TAX IS LEVIED ON THE EXPE NSES INCURRED BY THE EMPLOYER IRRESPECTIVE OF WHETHER THE SAME ARE INCURRED FOR O FFICIAL OR PERSONAL PURPOSES. IN OUR OPINION, ONCE FRINGE BENEFIT TAX IS LEVIED ON S UCH EXPENSES AS HAS BEEN DONE IN THE PRESENT CASE, IT FOLLOWS THAT THE SAME ARE TREA TED AS FRINGE BENEFITS PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLOYEES AND THE S AME HAVE TO BE APPROPRIATELY ALLOWED AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IN THAT VIEW OF THE MA TTER, WE DELETE THE DISALLOWANCE 10 ITA NO. 2397/MUM/2010 ASSESSMENT YEAR : 2006-07. MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) OUT OF CONVEYANCE AND TELEPHONE EXPENSES AND ALLOW GROUND NO. 4 AND 5 OF THE ASSESSEES APPEAL. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF SEPT., 2011. SD/- SD/- (R.V. EASWAR) (P.M. J AGTAP) PRESIDENT. ACC OUNTANT MEMBER MUMBAI, DATED : 16 TH SEPT., 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES , MUMBAI. WAKODE.