DCIT, Faridabad V. M/s S.S.P. Pvt. Ltd., Faridabad

ITA 2698/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1265 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 18-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KUMAR GURJAR
• Assessee Lawyers: ASHWANI TANEJA TARUN KUMAR
• Keywords: Depreciation; Period of limitation
• Section: 43B; 37(1); 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `G : NEW DELHI) BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER AND ITA NO.2698/DEL./2009 (ASSESSMENT YEAR : 2005-06) DCIT, CIRCLE 1, VS M/S S.P.S. PVT. LTD., FARIDABAD. 19 DLF INDUSTRIAL AREA, PHASE-II, 13/4, MATHURA ROAD, FARIDABAD. (PAN/GIR NO.AAECS1415J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA/TARUN KUMAR, ADV. REVENUE BY : SHRI ARUN KUMAR GURJAR, SR.DR ORDER PER A.K. GARODIA, AM THIS IS A REVENUE S APPEAL DIRECTED AGAINST THE O RDER OF CIT(A), FARIDABAD DATED 30.3.2009 FOR ASSESSMENT YEAR 2005-06. GROUND NO.1 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.5,7 2,091/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SITE EXPENSES EVEN THOUGH THE ASSESSEE HAD FAILED TO DISCHARGE ITS OBLIGATION TO ESTABLISH THAT HE EXPEN SES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS AS PRO VIDED IN SECTION 37(1) OF THE INCOME-TAX ACT, 1961. 2. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSIN G OFFICER ON PAGE 3 OF THE ASSESSMENT ORDER THAT HE ASSESSEE HAS DEBITED AN AM OUNT OF RS.2288363/- AS SITE EXPENSES TO THE P&L A/C. IT IS FURTHER NOTED BY THE ASSESSI NG OFFICER THAT THESE EXPENSES INCLUDE EXPENDITURE ON VARIOUS HEADS LIKE LODGING, BOARDING , CONVEYANCE ETC. FOR WHICH NO THIRD PARTY VOUCHERS WERE AVAILABLE WITH THE ASSESSEE AND SUCH EXPENDITURE WERE INCURRED IN CASH AND HAVE BEEN CLAIMED ON THE BASIS OF SELF-MAD E VOUCHERS. THE ASSESSING OFFICER DISALLOWED 25% OF SUCH EXPENSES ON THE BASIS OF ASS ESSMENT ORDER OF EARLIER YEARS I.E. ASSESSMENT YEAR 2004-05 AND 04-05. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN I.T.A. NO.2698/DEL./2009 (A.Y. : 2005-06) 2 APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEA LS). THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS REFERRED TO THE TRIBUNAL DECISION IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 IN I.T.A.NO.4393/DEL/2007 D ATED 28.11.2008 AND ALSO ANOTHER ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2001-02 IN I.T.A NO.2051/DEL./2005 DATED 31.5.2007 AND IT HAS BEEN N OTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT IN THOSE YEARS UNDER IDE NTICAL FACTS, THE TRIBUNAL HAS DELETED SIMILAR DISALLOWANCES. HE DELETED IN THE PRESENT Y EAR ALSO. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS THE LD.AR OF THE AS SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOM E-TAX (APPEALS). IT IS ALSO SUBMITTED BY HIM THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02, 03 -04 AND 04-05. HE SUBMITTED A COPY OF TRIBUNAL ORDERS FOR ALL THESE THREE YEARS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL PLACED ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSING OFFICER HAS HIMSELF STATED IN THE ASSESSMENT ORDER THAT THE FACTS IN THE PRESENT YEAR ARE IDENTICAL TO FACTS IN ASSESSMENT YEARS 2003-04 & 04 -05. IN BOTH THESE YEARS, THE TRIBUNAL HAS DELETED SIMILAR DISALLOWANCES WHICH WAS MADE BY THE ASSESSING OFFICER IN THOSE YEARS UNDER IDENTICAL FACTS. WE, THEREFORE, FIND N O REASON TO INTERFERE IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 5. GROUND NO.2 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.1,0 8,992/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY U/S 41 (1) OF THE INCOME-TAX ACT, 1961 EVEN THOUGH THE AS HAD FAILED TO PROVE THAT LIABILI TY SUBSISTS. 6. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSIN G OFFICER IN PARA.3 OF THE ASSESSMENT ORDER THAT HE ASSESSEE HAS SHOWN SUNDRY CREDITORS A MOUNTING TO RS.550.89 LAKH IN THE BALANCE SHEET. THE ASSESSING OFFICER ASKED THE ASS ESSEE TO FURNISH THE DETAILS OF CREDITORS SHOWING BALANCES AS ON 31.3.2005, PRECEDING FOUR YE ARS AND SUCCEEDING TWO YEARS. IN I.T.A. NO.2698/DEL./2009 (A.Y. : 2005-06) 3 REPLY, THE ASSESSEE HAS FILED THE REQUIRED DETAILS. FROM SUCH DETAILS, IT IS NOTED BY THE ASSESSING OFFICER THAT IN RESPECT OF TWO CREDITORS I.E. M/S CHIRAG ENGINEERING CORPORATION AND M/S TECHMARK ENGINEERING, THE AMOUN T OF OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS SAME FOR THE LAST THREE YEARS OR MORE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID TR ADING LIABILITY OF RS.1,08,992/- IN RESPECT OF ABOVE SAID TWO CREDITORS BEING OUTSTANDI NG FOR LAST THREE YEARS OR MORE SHOULD NOT BE DEEMED AS PROFIT OF THE ASSESSEE AS PER SECT ION 41 OF THE ACT BEING CESSATION OF LIABILITY. THE ASSESSEE HAS FILED REPLY, BUT THE A SSESSING OFFICER WAS NOT SATISFIED AND HE MADE ADDITION OF THESE AMOUNT U/S 41(1) OF THE ACT. 7. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), WHO HAS DELET ED THIS ADDITION BY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS VS. CIT, REPORTED IN 236 ITR 518. NOW, THE REVENUE IS IN APP EAL BEFORE US. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THIS IS AN ADMITTED POSITION THAT HE ASSESSEE IS SHOWING BOTH THESE AMO UNTS AS A LIABILITY IN ITS BALANCE SHEET. THE ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY AND HAS NOT CREDITED THE SAME TO THE P&L A/C. UNDER THESE FACTS, WE NOW EXAMINE THE APPLICA BILITY OF SECTION 41(1) OF THE ACT AND THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS (SUPRA). WE FIND THAT AS PER SECTION 41(1), IF THE RE IS REMISSION OR CESSATION OF A TRADING LIABILITY, THE SAME IS TO BE ADDED AS INCOME OF THE ASSESSEE U/S 41(1). WITH EFFECT FROM 1.4.1997, EXPLANATION 1 HAS BEEN ADDED TO SECTION 4 1(1) AS PER WHICH, REMISSION OR CESSATION OF ANY LIABILITY INCLUDE AN UNILATERAL AC T OF THE ASSESSEE OF WRITING OFF SUCH LIABILITY IN HIS BOOKS OF ACCOUNT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT WRITTEN OFF THE LIABILITY IN ITS BOOKS OF ACCOUNT AND HENCE EXPLANA TION 1 OF SECTION 41(1) HAS NO APPLICATION IN THE PRESENT CASE. NOW, WE EXAMINE T HE APPLICABILITY OF THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS (SUPRA). IN THIS CASE, THE FACTS ARE THAT THE ASSESSEE HAS WRITTEN BACK TH E LIABILITY AND CREDITED THE SAME TO THE P&L A/C AND STILL IT WAS HELD BY HONBLE APEX COURT THAT THERE IS NO REMISSION OR I.T.A. NO.2698/DEL./2009 (A.Y. : 2005-06) 4 CESSATION OF LIABILITY BY THE UNILATERAL ACT OF THE ASSESSEE. IT WAS HELD THAT A UNILATERAL ACT ON THE PART OF THE DEBTOR CANNOT BRING ABOUT OF CES SATION OF HIS LIABILITY. HONBLE APEX COURT ALSO EXAMINED THE PRINCIPLE ABOUT EXPIRY OF T HE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT AND HELD THAT SUCH EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTINGUISH THE D EBT, BUT IT WOULD PREVENT THE CREDITORS FORM ENFORCING THE DEBT. THIS JUDGMENT OF THE HON BLE APEX COURT WAS PRIOR TO INCLUSION OF EXPLANATION 1 TO SECTION 41(1), BUT EVEN AFTER I NCLUSION OF EXPLANATION 1 TO SECTION 41(1), IT CANNOT BE HELD THAT THERE IS CESSATION OR REMISSION OF LIABILITY ONLY BECAUSE THE SAME IS BARRED BY LIMITATION AS PER LIMITATION ACT. IN THE PRESENT CASE, THIS IS THE ONLY BASIS OF THE ASSESSING OFFICER TO HOLD THAT HE LIAB ILITY HAS CEASED TO EXIST. WE ARE NOT IN AGREEMENT WITH THE ASSESSING OFFICER ON THIS ACCOUN T AND RESPECTFULLY FOLLOWING THIS JUDGMENT OF HONBLE APEX COURT, WE DECIDE THIS ISSU E IN FAVOUR OF THE ASSESSEE. THIS GROUND OF THE REVENUE IS REJECTED. 9. GROUND NO.3 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.1,1 7,500/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CO NTRIBUTION TOWARDS PF & ESI DISREGARDING HE FACT THAT HE PAYMENTS WERE MADE BEY OND THE DUE DATES AND WERE, THEREFORE, NOT ALLOWABLE U/S 36(1)(VA) AND WERE TO BE TREATED AS INCOME U/S 2(24)(X) OF THE INCOME-TAX ACT, 1961, IN CONTRAVENT ION OF THE DECISION IN THE CASE OF CIT VS. PAMWI TISSUES LIMITED 215 CTR 150 (BOM.) . 10. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSI NG OFFICER IN PARA.5 OF THE ASSESSMENT ORDER THAT AMOUNT OF RS.117500/- ON ACCOUNT OF EMPL OYEES CONTRIBUTIONS TO PF & ESI WERE DEPOSITED LATE BY THE ASSESSEE. IT WAS HELD B Y THE ASSESSING OFFICER THAT HE SAME IS NOT ALLOWABLE AS DEDUCTION IN VIEW OF THE PROVISION S OF SECTION 2(24)(X)/36(1)(VA) OF THE ACT. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAS FOLLOWED THE TRIBUNAL DECISION RENDERED IN THE CASE OF KUBER HIN GES PVT. LTD. VS. ITO AS REPORTED IN 12 DTR 461 AND ALSO THE JUDGMENT OF HOMBLE DELHI H IGH COURT IN THE CASE OF CIT VS. P.M. ELECTRONICS LTD., 177 TAXMAN 01 AND IT WAS HEL D BY HIM THAT EVEN IF THE EMPLOYEES CONTRIBUTIONS OF PF & ESI WERE DEPOSITED LATE BUT B EFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1), THEY ARE ALLOWABLE DEDUCTION U/S 43B READ WITH SECTION 36(1)(VA). I.T.A. NO.2698/DEL./2009 (A.Y. : 2005-06) 5 HE DELETED THIS DISALLOWANCE AND NOW THE REVENUE IS IN APPEAL BEFORE US. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S). IT IS ALSO HIS SUBMISSION THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS TRIBUNAL DECISIONS IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 & 0 4-05. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD WE FIND THAT IN ASSESSMENT YEAR 2004-05, SIMILAR ISSUE WAS RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL BY WAY OF CROSS OBJECTION. IN THAT YEAR, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS CONFIRMED THE DISALLOWANCE ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF & ESI. IN THAT YEAR, THE TRIBUN AL HAS DELETED THIS DISALLOWANCE BY FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA). SINCE THE FACTS ARE IDEN TICAL IN THE PRESENT YEAR, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR AND HENCE BY RESPECTFULLY FOLLOWING THE PRECEDENCE, IN THIS YEAR ALSO THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 12. GROUND NOS.4 & 5 ARE INTER-CONNECTED WHICH READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.3,6 0,887/-- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF TELEPHONE EXP ENSES EVEN THOUGH THESE EXPENSES WERE NOT INCURRED WHOLLY FOR BUSINESS PURP OSES AND IN CONTRAVENTION OF THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SES OF CHITRAM AND CO. (P) LTD. 191 ITR 96 AND MADURA COATS LTD., 263 ITR 241. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.2,6 3,040/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OUT OF VEHICLE R UNNING AND MAINTENANCE EXPENSES EVEN THOUGH THESE EXPENSES WERE NOT INCURR ED WHOLLY FOR BUSINESS PURPOSES AND IN CONTRAVENTION OF THE DECISION OF HO NBLE MADRAS HIGH COURT IN THE CASES OF CHITRAM AND CO. (P) LTD. 191 ITR 96 AN D MADURA COATS LTD., 263 ITR 241. 13. BRIEF FACTS ARE THAT OUT OF VEHICLE EXPENSES IN CURRED BY THE ASSESSEE ON ACCOUNT OF VEHICLE RUNNING AND MAINTENANCE ALONG WITH INTEREST OF CAR LOANS, INSURANCE OF CAR AND DEPRECIATION OF CAR TOTALING TO RS.13,15,200/-, THE ASSESSING OFFICER HAS DISALLOWED 1/5 TH OF THE EXPENSES ON THE BASIS THAT HE SAME HAS BEEN INCURRED FOR NON-BUSINESS PURPOSES. SIMILARLY, HE HAS DISALLOWED 1/5 TH OUT OF TELEPHONE EXPENSES AND IN THIS MANNER, HE H AS I.T.A. NO.2698/DEL./2009 (A.Y. : 2005-06) 6 MADE DISALLOWANCE OF RS.3,60,887/- OUT OF TELEPHONI C EXPENSES AND RS.2,63,040/- OUT OF VEHICLE EXPENSES. 14. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR BOTH THESE ISSUES AND THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DELETED BOTH THESE DISALLO WANCES BY FOLLOWING THE TRIBUNALS DECISION RENDERED IN THE CASE OF DCIT VS. HARYANA O XYGEN LTD., AS REPORTED IN 76 ITD 32 AND IT WAS HELD BY HIM THAT AS PER THIS TRIBUNAL DE CISION NO SUCH DISALLOWANCE CAN BE MADE IN THE HANDS OF THE COMPANY ALTHOUGH THE SAME MAY BE TREATED AS PERQUISITE IN THE HANDS OF THE CONCERNED DIRECTOR. THE COMMISSIONER O F INCOME-TAX (APPEALS) HAS ALSO FOLLOWED THE TRIBUNAL DECISION IN THE ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2001-02 AS PER I.T.A. NO.2051/DEL./05 DATED 31.5.2007. NOW, T HE REVENUE IS IN APPEAL BEFORE US ON BOTH THESE ISSUES. 15. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER FOR BOTH THESE ISSUES WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORD ER OF THE COMMISSIONER OF INCOME- TAX (APPEALS). IT IS ALSO SUBMITTED THAT AS PER T HE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02, THIS ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE . HE HAS DRAWN OUR ATTENTION TO PARA.25 OF THIS TRIBUNAL DEC ISION. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. SINCE THE LD.DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN THE F ACTS IN THE PRESENT YEAR WITH THE FACTS IN ASSESSMENT YEAR 2001-02, WE FIND NO REASON TO TA KE A CONTRARY VIEW IN THE PRESENT YEAR AND HENCE BY RESPECTFULLY FOLLOWING THE TRIBUNAL DE CISION IN EARLIER YEAR OF ASSESSEES OWN CASE, WE DECIDE BOTH THESE ISSUES IN FAVOUR OF THE ASSESSEE IN THE PRESENT YEAR ALSO. GROUND NOS.4 & 5 ARE ALSO REJECTED. 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 18. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARING ON 18.11.2009. SD/- SD/- (GEORGE MATHAN) (A.K. GARODIA) JUDICIAL MEMBER. ACCOUNTANT MEMBER DATED, NOV. 18, 2009. *SKB* I.T.A. NO.2698/DEL./2009 (A.Y. : 2005-06) 7 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A), FARIDABAD. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. BY ORDER (ITAT, NEW DELHI).