ITO, New Delhi V. Shri Raj Kumar Prop., New Delhi

ITA 2981/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52660 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 10-08-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: AMIT GOEL
• Keywords: Depreciation; Deemed dividend; Capital expenditure
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.2981/DEL/2011 ASSESSMENT YEAR : 2008-09 INCOME-TAX OFFICER, SHRI RAJ KUMAR PROP. WARD-25(4), NEW DELHI. VS. M/S. RUBBER INDIA, A-10, DSIDC COMPLEX, ROHTAK ROAD, NANGLOI, NEW DELHI. PAN: AAJPK8258M (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. ANUSHA KHURANA, SR. DR. RESPONDENT BY: SHRI AMIT GOEL, CA. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 15 -03-2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PE RTAINING TO THE ASSESSMENT YEAR 2008-09. 2. GROUND NO.1 IS DIRECTED AGAINST THE CIT(A)S OR DER IN DELETING THE ADDITION OF RS.46,88,468/- ON ACCOUNT OF DEEMED DIV IDEND UNDER SEC. 2(22)(E) OF THE ACT. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD SHOWN THAT HE HAD TAKEN A LOAN OF RS.45,00,000/- FROM 2 SHREE RAJ ROTO INDIA PVT. LTD. DURING THE PREVIOUS YEAR. THE ASSESSEE WAS HAVING SHAREHOLDING OF 10% IN HIS INDIVIDUAL CAPACI TY AND 10% SHAREHOLDING IN HUF CAPACITY, IN THE SAID COMPANY SHREE RAJ ROTO INDIA PVT. LTD. IT WAS STATED BY THE ASSESSING OFFICER THAT THE AFORESAID COMPANY HAD RESERVES AND SURPLUS AS ON 31.03.2007 AS WELL AS ON 31.03.2008 A MOUNTING TO RS.82,50,000/- BEING SHARE PREMIUM. THE AO HAD THE REFORE, TAKEN A VIEW THAT THE LOAN OF RS.45,00,000/- TAKEN BY THE ASSESS EE FROM THE SAID COMPANY IS TO BE TAXED IN HIS HAND AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT. HOWEVER, IT WAS POINTED OUT BY THE ASSESSEE THAT TH E LOAN TAKEN WAS RS.41,33,468/- AND RS.5,55,000/-, AGGREGATING TO RS .46,88,468/-. AFTER CONSIDERING THE FACTS OF THE CASE, THE AO MADE THE ADDITION OF RS.46,88,468/- AS DEEMED DIVIDEND U/S 2(22)(E) OF T HE ACT. THE AO ALSO MADE AN ADDITION OF RS.6,11,042/- ON ACCOUNT OF UNE XPLAINED LIABILITIES. IN DOING SO, THE AO OBSERVED THAT THE PERSONAL BALANCE -SHEET OF THE ASSESSEE DISCLOSED THAT THE ASSESSEE HAD ASSETS OF RS.80,08, 925/- AS ON 31.03.2008 AS AGAINST RS.28,97,884/- AS ON 31.03.2006. AFTER CON SIDERING THE LOAN OF RS.45,00,000/- TAKEN BY THE ASSESSEE, THE AO ARRIVE D AT AN AMOUNT OF RS.6,11,042/- AS UNEXPLAINED LIABILITY. HE, THEREF ORE, MADE A SEPARATE ADDITION OF RS.6,11,042/- IN THE ASSESSMENT. 3 4. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LEARNED CIT(A). 5. BEFORE THE LEARNED CIT(A), THE ASSESSEE EXPLAINE D THAT THE LOAN OF RS.5,55,000/- WAS TAKEN FROM THE PROPRIETARY CONCER N NAMELY, M/S. ROTO INDIA, OF THE BROTHER OF THE ASSESSEE AND AS SUCH, THE SAID LOAN OF RS.5,55,000/- TAKEN FROM INDIVIDUAL WOULD NOT BE CO VERED BY THE PROVISIONS CONTAINED IN SEC. 2(22)(E) OF THE ACT. THE ASSESSEE FURTHER CONTENDED BEFORE THE LEARNED CIT(A) THAT IN ORDER TO TREAT ANY LOAN AND ADVANCE TAKEN FROM ANY COMPANY AS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT, IT IS TO BE ESTABLISHED THAT THE LOAN AND ADVANCE HAS BEEN GIVE N OUT OF ACCUMULATED PROFIT AVAILABLE FOR DISTRIBUTION OF DIVIDEND, AND SINCE THE SHARE PREMIUM ACCOUNT CANNOT BE TREATED AS ACCUMULATED PROFIT WIT HIN THE MEANING OF SEC. 2(22)(E) OF THE ACT,, THE AMOUNT OF LOAN TAKEN BY T HE ASSESSEE FROM THE COMPANY CANNOT BE BROUGHT TO TAX AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. IN THIS CONNECTION, HE RELIED UPON SEVER AL DECISIONS REFERRED TO BY THE LEARNED CIT(A) IN HIS ORDER. 6. AFTER CONSIDERING THE FACTS OF THE CASE, ASSESSI NG OFFICERS ORDER, ASSESSEES SUBMISSIONS AND THE VARIOUS DECISIONS C ITED BY THE ASSESSEE, THE LEARNED CIT(A) DELETED THE ADDITION OF RS.46,33,468 /- BY OBSERVING AND HOLDING AS UNDER:- 4 (I) THAT TREATMENT OF LOAN OF RS.5,55,000/- FROM ROTO I NDIA, A PROPRIETARY CONCERN OF THE BROTHER OF THE ASSESSEE, AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT, IS UNCALLED FOR A S IT IS CONTRARY TO THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. (II) THAT SHREE RAJ ROTO INDIA PVT. LTD. (SRIL), A CLOSE LY HELD COMPANY, HAD GIVEN LOAN AND ADVANCES OF RS.41,33,46 8/- TO THE ASSESSEE OUT OF ITS SURPLUSES GENERATED THROUGH SHA RE PREMIUM ONLY AS EVIDENT FROM THE BALANCE-SHEET OF SRIL FILED BEF ORE HIM. THE LEARNED CIT(A) FOLLOWED THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH IN THE CASE OF DCIT VS. MAIPO INDIA LTD. (2008) 24 SOT 42 (DELHI). THE LEARNED CIT(A) HELD THAT LOAN PAID OUT OF SHARE PREMIUM ACCOUNT IS NOT COVERED BY SEC. 2(22)(E) OF THE ACT AFTER FOLLOWING THE AFORESAID DECISION. 7. HENCE, THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. 9. IN SO FAR AS THE ADDITION OF RS.5,55,000/- AS DE EMED DIVIDEND U/S 2(22)(E) IS CONCERNED, IT IS NOT IN DISPUTE THAT TH E LOAN OF RS.5,55,000/- WAS TAKEN BY THE ASSESSEE FROM ROTO INDIA, A PROPRIETAR Y CONCERN OF THE ASSESSEES BROTHER. ON PERUSAL OF SEC.2(22)(E) OF THE ACT, IT IS CLEAR THAT THE LOAN TAKEN BY ANY PERSON FROM ANY INDIVIDUAL, IS NO T COVERED BY SEC. 2(22)(E) OF THE ACT, WHICH IS APPLICABLE ONLY IN CASE OF PAY MENT OF LOAN AND ADVANCES BY A COMPANY TO A SHAREHOLDER. 10. WITH REGARD TO THE ADDITION OF LOAN OF RS.41,33 ,468/-, WE FIND THAT THE SAID AMOUNT WAS PAID OUT OF SHARE-PREMIUM ACCOUNT. 5 11. IN THE CASE OF CIT VS. URMILA RAMESH (1998) 96 TAXMAN 533 (SC) = (1998) 230 ITR 422, THE HONBLE SUPREME COURT HAS C ONSIDERED THE EXPRESSION ACCUMULATED PROFITS WHETHER CAPITALIZE D OR NOT, USED IN SEC. 2(22) OF THE ACT AND THUS, HELD THAT THE PROFITS WH ICH ARE DEEMED TO BE DIVIDEND WOULD BE THOSE WHICH WERE CAPABLE OF BEING ACCUMULATED AND WHICH WOULD ALSO BE CAPABLE OF BEING CAPITALIZED. IN OTHER WORDS, IT WAS HELD THAT THE AMOUNT SHOULD BE IN THE NATURE OF PRO FITS WHICH THE COMPANY COULD HAVE DISTRIBUTED TO ITS SHAREHOLDERS. THIS W OULD CLEARLY EXCLUDE RETURN OF PART OF A CAPITAL TO THE COMPANY, AS THE SAME CA NNOT BE REGARDED AS PROFIT CAPABLE OF BEING CAPITALIZED, THE RETURN BEING OF C APITAL ITSELF. IT WAS FURTHER HELD THAT PROFIT WOULD MEAN ONLY COMMERCIAL PROFIT. 12. IN THE CASE OF JAI KISHAN DADLANI VS. ITO (2005 ) 4 SOT 138 (MUM.), THE ITAT, MUMBAI BENCH HELD THAT THE PURPOSE OF SEC . 2(22)((E) IS TO TAX RECEIPTS FROM COMPANY WHICH ARE OUT OF ACCUMULATED PROFITS AVAILABLE FOR DISTRIBUTION OF DIVIDENDS. IN THAT CASE, SHARE FOR FEITURE RECEIPTS AVAILABLE WITH THE COMPANY WERE HELD TO BE IN THE NATURE OF C APITAL RECEIPTS AND WOULD NOT FORM PART OF ACCUMULATED PROFITS. 13. IN THE CASE OF ACIT VS. GAUTAM SARABHAI TRUST ( 2002) 81 ITD 677 (AHMD.), ITAT AHEMDABAD HAS HELD THAT U/S 2(22)(E) OF THE ACT, ONLY SUCH 6 AMOUNT CAN BE CONSIDERED AS ACCUMULATED PROFIT WH ICH ARE CAPABLE OF BEING DISTRIBUTED TO THE SHAREHOLDERS. 14. IN THE CASE OF DCIT VS. MAIPO INDIA LTD. (2008) 24 SOT (DELHI), ITAT, DELHI BENCH HAS CONSIDERED THE DECISION OF HO NBLE SUPREME IN THE CASE OF CIT VS. URMILA RAMESH (SUPRA) AND SOME OTHE R CASES AND HAS TAKEN A VIEW THAT PAYMENT MADE BY A COMPANY OUT OF ITS SHAR E PREMIUM ACCOUNT COULD NOT BE BROUGHT TO TAX IN THE HANDS OF RECEIVE R AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT INASMUCH AS THE COMPANIES ACT, 1956 PUT A STATUTORY BAR ON SHARE PREMIUM ACCOUNT BEING USED FOR DISTRIBUTIO N OF DIVIDEND. 15. IN THE PRESENT CASE, THE LEARNED CIT(A) HAS FOL LOWED THE DECISION OF ITAT IN THE CASE OF DCIT VS. MAIPO INDIA LTD. (SUPR A) AND HAS HELD THAT THE PAYMENT MADE BY A COMPANY OUT OF ITS SHARE PREM IUM ACCOUNT COULD NOT BE BROUGHT TO TAX IN THE HANDS OF RECEIVER AS DEEME D DIVIDEND U/S 2(22)(E) OF THE ACT. 16. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) INASMUCH AS THE AMOUNT OF RS.41, 33,468/- PAID BY SHREE RAJ ROTO INDIA LTD. TO THE ASSESSEE COMPANY, IS NOT COVERED BY SEC. 2(22)(E) OF THE ACT AS THE SAID AMOUNT WAS PAID OUT OF SHARE PREMIUM ACCOUNT AND NOT OUT OF ACCUMULATED PROFITS. 7 17. FOR THE REASONS GIVEN ABOVE, GROUND NO.1 RAISED BY THE REVENUE IS REJECTED. 18. GROUND NO.2 IS WITH REGARD TO THE OF ADDITION O F RS.6,11,042/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED LIABILITIES SHOWN IN THE BOOKS OF ACCOUNT AS ON 31.03.2008. 19. ON PERUSAL OF THE PERSONAL BALANCE-SHEET, IT WA S FOUND BY THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD SHO WN ASSETS TO THE EXTENT OF RS.80,08,925/- AS ON 31.03.2008 AS AGAINST RS.28,97 ,884/- AS ON 31.03.2007. THE DIFFERENCE BETWEEN THE AMOUNT OF ASSETS AS ON 3 1.03.2008 AS AGAINST THE AMOUNT SHOWN AS ON 31.03.207 WAS REDUCED BY RS.45,0 0,000/- BEING A LOAN AMOUNT TAKEN BY THE ASSESSEE FROM SHREE RAJ ROTO IN DIA PVT. LTD. BALANCE DIFFERENCE OF RS.6,11,042/- HAS BEEN TREATED TO BE UNEXPLAINED BY THE AO AND WAS ADDED TO THE ASSESSEES TOTAL INCOME. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS A PROPRIETOR OF M/S. RUBBER INDIA. THE ASSESSEE HAS PREPARED A BALANCE-SHEET OF M/S. RUBBER INDIA. THE ASSESSEE HAS ALSO FILED HIS PERSONAL BALANCE-SHEET. IN THE PERSONAL CAPITAL ACC OUNT, THE ASSESSEE CREDITED THE SUM OF RS.7,45,865/- ON ACCOUNT OF SALARY, PROF IT FROM RUBBER INDIA, INTEREST EARNED ON EPF ACCOUNT AND SB ACCOUNT, AMOU NT RECEIVED FROM LIC, SALE OF COMPUTER AND CAPITAL GAIN ON SALE OF SHARES . THE ASSESSEE DEBITED THE 8 SUM OF RS.1,34,823/- IN THE CAPITAL ACCOUNT ON ACCO UNT OF INCOME-TAX, DRAWINGS, LIC PAID, PROPERTY TAX, INCOME-TAX PAID A ND TDS LEAVING A NET ADDITION TO CAPITAL AT RS.6.11,041/-. THE AO HAS M ERELY WORKED OUT THE DIFFERENCE OF AMOUNT OF ASSETS SHOWN AS ON 31.03.20 08 AS COMPARED TO 31.03.2007 WITHOUT CONSIDERING THE CREDIT IN THE CA PITAL ACCOUNT. THE ASSESSEE CREDITED THE CAPITAL ACCOUNT BY NET SURPLU S AMOUNT OF RS.6,11,041.62 AND THUS, THE DIFFERENCE OF RS.6,11, 042/- HAS BEEN PROPERLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. WE, THEREFO RE, FIND NO JUSTIFICATION IN THE AFORESAID ADDITION OF RS.6,11,042/- MADE BY THE AO, WHICH HAS BEEN RIGHTLY DELETED BY THE LEARNED CIT(A). THUS, GROUN D NO.2 RAISED BY THE REVENUE IS REJECTED. 21. GROUND NO.3 IS DIRECTED AGAINST THE CIT(A)S OR DER IN DELETING THE ADDITION OF RS.12,33,342/- ON ACCOUNT OF UNEXPLAINE D LIABILITY UNDER THE HEAD SUNDRY CREDITORS. 22. THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.12,33,222/- BY OBSERVING AS UNDER:- THE TOTAL PURCHASES ARE ONLY RS.33,56,108/- BUT T HE AMOUNT PAYABLE TO SUNDRY CREDITORS AMOUNTED TO RS.7 5,30,583/- WHICH IS 225% OF THE PURCHASES. THE ASSESSEES GRO SS PROFIT IS RS.15,82,355/- WHICH IS 27.84%. ALLOWING A MARGIN OF 30% THE AMOUNT PAYABLE TO SUNDRY CREDITORS SHOULD HAVE BEEN 30% OF RS.33,56,108/- COMES TO RS.10,06,832/-. ALLOWING F URTHER BENEFIT OF SUNDRY DEBTORS OF RS.11,57,061/- THE NET LIABILITY WHICH IS NOT PAYABLE AMOUNTED AS 9 SUNDRY CREDITORS 31.03.2008 RS.75,30,583/- LESS 30% OF PURCHASE OF RS.33,56,108/- RS.10,06,83 2/- RS.65,23,751/- LESS BENEFIT OF SUNDRY CREDITORS OF 31.03.2008 RS.11,57,061/- RS.53,66,690 LESS PURCHASES FROM SHREE RAJ ROTO INDIA LTD. CONSIDERED AS LOAN RS.41,33,46 8/- RS.12,33,222/- THE AMOUNT OF RS.12,33,222/- IS TREATED AS NON EXISTENT LIABILITY AS ON A31.03.2008 AND IS TAXED U/S 41 RS.12,33,222/- 23. ON AN APPEAL, THE LEARNED CIT(A) DELETED THE AD DITION BY OBSERVING THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE O LD SUNDRY CREDITORS REMAINING UNPAID DURING THE RELEVANT YEAR AND THERE FORE, THE ADDITION MADE BY THE AO WAS NOT JUSTIFIED. 24. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT THE CAS E WHERE THE AO HAS POINTED OUT ANY DISCREPANCY IN THE ACCOUNTS REGULARLY MAINT AINED BY THE ASSESSEE. THE AO HAS WORKED OUT LIABILITY OF RS.12,33,222/- B Y MAKING HIS OWN ARITHMETICAL CALCULATION WITH REGARD TO THE LIABILI TIES INCURRED BY THE ASSESSEE. THE AO HAS NOT EXAMINED THE DETAILS OF VARIOUS SUND RY CREDITORS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THE AO HAS A LSO NOT BEEN ABLE TO POINT OUT ANY LIABILITY, WHICH HAD CEASED TO EXIST WITHIN THE MEANING OF SEC. 41 OF THE ACT DURING THE YEAR UNDER CONSIDERATION. THE W HOLE OF THE ADDITION 10 MADE BY THE AO IS PURELY BASED ON ASSUMPTION AND PR ESUMPTIONS. WE, THEREFORE, HOLD THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.12,33,222/- MADE BY THE AO TOWARDS ALLEGED NON-E XISTENT LIABILITY. 25. GROUND NO.4 IS WITH REGARD TO THE ADDITION OF R S.90,512/- AND RS.14,399/- MADE BY THE AO ON ACCOUNT OF ADDITIONAL SALES-TAX LIABILITY AND ADDITIONAL ESIC LIABILITY, WHICH HAS BEEN DELETED B Y THE LEARNED CIT(A). 26. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ADDITIONAL SALES-TAX LIA BILITY OF RS.90,512/- AND ESIC LIABILITY OF RS.14,399/- HAS ACTUALLY BEEN PAI D BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN THE LI GHT OF THE PROVISIONS OF SEC. 43B, THE AFORESAID PAYMENT TOWARDS SALES-TAX LIABIL ITY AND ESIC LIABILITY ARE TO BE ALLOWED AS DEDUCTION ON PAYMENT BASIS. IT IS NOT THE CASE OF THE AO THAT THE AFORESAID LIABILITIES HAVE ALREADY BEEN AL LOWED AS DEDUCTION IN EARLIER YEAR ON DUE BASIS. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND RAISED BY THE REVENUE AND HENCE, IT IS REJECTED. 27. GROUND NO.5 IS AGAINST THE CIT(A)S ORDER IN GR ANTING A RELIEF OF RS.2,19,626/- OUT OF DISALLOWANCES MADE OUT OF CAR REPAIR EXPENSES AND DEPRECIATION AND OF RS.93,901/- OUT OF TELEPHONE EX PENSES. 11 28. IN THE ASSESSMENT, THE AO DISALLOWED DEPRECIATI ON OF RS.3,27,510/- ON CARS, VEHICLE EXPENSES OF RS.52,240/- AND TELEPHONE EXPENSES OF RS.1,31,584/-. 29. THE AFORESAID DISALLOWANCES HAVE BEEN DEALT WIT H BY THE LEARNED CIT(A) BY OBSERVING AND HOLDING AS UNDER:- 7.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE RECORDS. THE LOGIC AND W ORKING GIVEN TO ARRIVE THE QUANTUM OF DISALLOWANCE OF TELE PHONE EXPENSES IS UNIQUE. HOWEVER, THE APPELLANT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THAT TELEPHONES AND VEHICLES HAVE BEEN USED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. THE DISALLOWANCE IS THEREFORE, CALLED FOR ON ACCOUN T OF COMPONENT OF PERSONAL NATURE EXPENSES EMBEDDED INTO THESE EXPENSES RELATING TO USAGE OF THE CARS AND TELEPHON ES. THE PERSONAL USE OF TELEPHONES AND CARS BY THE APPELLAN T AND HIS FAMILY MEMBERS CAN NOT BE RULED OUT. THEREFORE, KE EPING IN VIEW FACTS IN ENTIRETY, I AM OF THE CONSIDERED VIEW THAT THE DISALLOWANCE @ 20% OF THESE EXPENSES INCLUDING DEPR ECIATION ON CARS IS CALLED FOR. THE DISALLOWANCE OF DEPRECI ATION ON CARS, IN THE ABOVE MENTIONED CIRCUMSTANCES, IS HELD IN AC CORDANCE WITH THE PROVISIONS OF SECTION 38(2) OF THE ACT. T HUS, THE DISALLOWANCE OF DEPRECIATION OF RS.76,989/- ON CARS IS SUSTAINED. SIMILARLY, DISALLOWANCE OF TELEPHONE EX PENSES OF RS.37,683/- IS SUSTAINED. 7.2 OUT OF THE CARS OF THE APPELLANT MET AN ACCIDEN T IN THE RELEVANT YEAR. TOTAL PAYMENT INCURRED TO GET THAT CAR FUNCTIONAL IS RS.2,26,874/- AS AGAINST RS.1,22,396/- OF REIMBU RSEMENT AMOUNT BY THE INSURANCE COMPANY. THE BALANCE OF RS.1,04,479/- IS DEFINITELY NOT IN THE NATURE OF NO RMAL REPAIR BUT CAPITAL EXPENDITURE. IT IS BASICALLY REPLACEMENT OF THE OLD PARTS WHICH RESULTED ENDURING BENEFIT TO THE APPELLANT AN D THAT IS WHY THE INSURANCE COMPANY DID NOT REIMBURSE THIS SUM. THUS IT IS HELD CAPITAL IN NATURE ALLOWABLE FOR DEPRECIATION @ 15%. THE ALLOWABLE DEPRECIATION ON IT WORKS OUT TO RS.15,672 /-. THE 12 DISALLOWANCE THEREFORE, WORKS OUT TO RS.73,135/- (R S.88,807/- MINUS RS.15,672/-), WHICH REQUIRES TO BE MADE IN PL ACE OF RS.53,240/-. THUS THE CORRESPONDING DISALLOWANCE I S ENHANCED ACCORDINGLY. FURTHER, DISALLOWANCE OF RS.10,000/- IS MADE ON THE SCORE OF FUEL AND MAINTENANCE OF CARS. CONSEQU ENTLY, THE APPELLANT GETS RELIEF OF RS.2,19,626/- OUT OF DISAL LOWANCES MADE OUT OF CAR REPAIRS EXPENSES & DEPRECIATION ON CARS AND RS.93,901/- OUT OF TELEPHONE EXPENSES DISALLOWANCE. THUS THE GROUNDS OF APPEAL NUMBERED 6, 9 AND 10 STAND PARTLY ALLOWED. 30. AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, AND FOR THE REASONS GIVE N BY THE LEARNED CIT(A), WE ARE OF THE CONSIDERED VIEW THAT THE PART RELIEF GRANTED BY THE CIT(A) IS JUSTIFIED. IN THE COURSE OF HEARING OF THIS APPEAL , THE LEARNED DR HAS NOT BEEN ABLE TO POINT OUT ANY IRREGULARITY IN THE CIT( A)S ORDER. WE, THEREFORE, UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSU E. 31. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 32. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 9 TH SEPTEMBER, 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9 TH SEPTEMBER, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER 13 *MG DEPUTY REGISTRAR, ITAT