Italik Metalware Pvt. Ltd., RAJKOT-GUJARAT V. The Additional Commissioner of Income Tax, Range-1, RAJKOT-GUJARAT

ITA 306/RJT/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0166 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Depreciation
• Section: 234B; 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVAST AVA, AM ITA NO.306/RJT/2011. / ASSESSMENT YEAR 2006-07 ITALIK METALWARE PVT.LTD, G-212 TO 215, LODHIKA GIDC, KALAWAD ROAD, METODA, RAJKOT PAN:AAAC1466Q ( * / APPELLANT) VS. ADDL. COMMISSIONER OF INCOME-TAX, RANGE-1, RAJKOT +,* / RESPONDENT -. / ASSESSEE BY SHRI. R.D.LALCHANDANI . / REVENUE BY SHRI AVINASH KUMAR . / DATE OF HEARING 14.9.2012 . / DATE OF PRONOUNCEMENT 21.09.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 24.5.2011 OF CIT(A), AH MEDABAD FOR THE ASSESSMENT YEAR 2008-09. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN THIS APPEAL READ AS UNDER: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF THE DEPRECIATION ON TWO CARS, MARUTI SWIFT PURCHASED FO R RS.4,24,256/- AND INNOVA PURCHASED FOR RS.10,66,795/-. THESE WERE P URCHASED WITH THE FUNDS OF THE COMPANY AND SHOWN AS ASSETS OF THE COM PANY. THE PAYMENTS WERE MADE BY THE COMPANY BY CHECKS OUT OF THE COMPANYS FUNDS. IN CASE OF MOVABLE PROPERTIES, REGISTRATION IN A PARTICULAR NAME WITH RTO DOES NOT DETERMINE THE OWNERSHIP OF A PA RTICULAR ASSERTS. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLO WANCE OF THE DEPRECIATION IS UNWARRANTED AND UNJUSTIFIED; 2 ITA NO.306/RJT/2011. 2. THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWAN CE THE AMOUNT OF RS.4,02,000/- OUT OF REMUNERATION OF DIRECTORS. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE IS UNWAR RANTED AND UNJUSTIFIED; 3. THE LD. CIT(A) ERRED IN UPHOLDING THE CHARGING INTEREST OF RS.1,07,015/- U/S 234B AND RS.2,765/- U/S 234D. ON THE FACTS AND CIRCUMSTANCES OF THE CASE CHARGING OF THE INTEREST IS NOT JUSTIFIED 3. APROPOS GROUND NO.1, THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 22.12.2006 DECLARING TOTAL INCOME OF RS.68,92,505/-. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF DOOR/WINDOW HANDLES AND NOBS, BATHROOM ACCESSORIES AND SIMILAR PRODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A O OBSERVED THAT THE ASSESSEE HAS PURCHASED TO CARS NAMELY MARUTI SWIFT AND INNOVA FOR RS.4,24,256/- AND RS.10,66,795/- AND CLAIMED DEPRE CIATION AMOUNTING TO RS.65,590/- AND RS.2,22,230/- RESPECTIVELY. THE AO OBSERVED THAT THE CARS WERE PURCHASED IN THE NAME OF SHRI ISHWARBHAI LAK HWANI AND SHRI BRIJESH NANAKRAM LAKHWANI, THEREFORE, HE DISALLOWED THE DEP RECIATION ON THE GROUND THAT THESE CARS WERE PURCHASED IN THE INDIVIDUAL NA MES AND HENCE ASSESSEE COMPANY CANNOT CLAIM DEPRECIATION. THE ASSESSEES C ONTENTION WAS THAT THOUGH THESE CARS WERE PURCHASED IN THE INDIVIDUAL NAME B UT THESE ARE THE DIRECTORS OF THE ASSESSEE-COMPANY. THE AO DID NOT ACCEPT THE CLA IM OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO ON THE GROUND THAT THE DIRECTORS AND THE COMPANY ARE TWO DISTINCT AND INDE PENDENT LEGAL ENTITIES. 5. HAVING HEARD BOTH THE PARTIES, WE HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE OF DEPRECIATION ON THE MOTOR CARS WHETHER IT IS PURCHASED IN THE NAME OF DIRECT ORS OR IN THE NAME OF COMPANY 3 ITA NO.306/RJT/2011. IS NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE OF THE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD. V . CIT [1999] 239 ITR 775/106 TAXMAN 166, WHEREIN THE APEX COURT HAS HELD THAT THE TERM OWNED UNDER SECTION 32 MUST BE ASSIGNED A WI DER MEANING. IN THE CASE BEFORE THE SUPREME COURT, ALTHOUGH A BUILDING WAS FORMALLY NOT REGISTERED IN THE NAME OF THE TAXPAYER THROUGH EXEC UTION OF A CONVEYANCE DEED, THE COURT HELD THAT SINCE THE TAXP AYER HAD ACTUALLY INVESTED IN THE ASSET AND WAS UTILIZING THE SAME AN D THEREBY INCURRING LOSS ON ACCOUNT OF WEAR AND TEAR OF SUCH ASSET, IT WAS ENTITLED TO CLAIM DEPRECIATION IN RESPECT OF THE SAME. SIMILAR VIEW HAS BEEN TAKEN BY VARIOUS COURTS IN THE CASES OF CIT V. SALKIA TRANS PORT ASSOCIATES [1983] 143 ITR 39/13 TAXMAN 191(CAL.), CIT V. NIDISH TRANSPORT CORPN. [1910] 185 ITR 669/[1989] 44TAXMAN 351(KER.), CIT V. DILIP SINGH B AGGA [1993] 201ITR 995/[1994] 77TAXMAN 66(BOM.), CIT V. NAVDURGA TRANS PORT CO. [1999] 235 ITR 158(ALL.) AND CIT V. BASTI SUGAR MILLS CO. LTD. [20 02] 257 ITR 88/123 TAXMAN 693 (DELHI). RESPECTFULLY FOLLOWING THE ABOV E MENTIONED DECISIONS OF HONBLE SUPREME COURT AND THE DECISIONS OF OTHER HIGH COURTS AND TRIBUNAL, WE DIRECT THE AO TO ALLOW DEPRECIATION ON THE CARS AND DELETE THE ADDITION MADE ON THE GROUND OF DEPRECIATION OF RS.2,87,820/-. G ROUND NO.1 TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. 6. APROPOS GROUND NO.2, THE FACTS ARE THAT THE DUR ING THE YEAR UNDER APPEAL THE ASSESSEE PAID REMUNERATION OF RS.28,02,000/- W HEREAS IT WAS PAID RS.23,89,500/- IN THE LAST YEAR. THE AO CALLED FOR EXPLANATION FOR SUCH INCREASE IN REMUNERATION OF THE DIRECTORS. THE ASSESSEE EX PLAINED THE DETAILED REASONS WHICH INCORPORATED IN THE ASSESSMENT ORDER. THE AO FOLLOWING THE REASONS GIVEN BY HIS PREDECESSOR HAS ACCEPTED RS.20,00,000/ - AND DISALLOWED 4 ITA NO.306/RJT/2011. RS.8,02,000/- BEING EXCESSIVE REMUNERATION. ON APP EAL, THE LD. CIT(A) UPHELD THE INCREASE OF 20% IN REMUNERATION IS REASONABLE AND DISALLOWED RS.4.02 LAKHS U/S 40A(2)(A). 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING, SHRI R.D.LALCHANDANI, TH E LD. COUNSEL FOR THE ASSESSEE APPEARED AND CONTENDED THAT THERE ARE FOUR DIRECTORS AND TOTAL REMUNERATION WAS PAID DURING THE YEAR 2004-05 WAS RS.24,25,232/- AND IN THE SUBSEQUENT YEAR 2005-06 WAS RS.28,38,013/-. THEREFO RE INCREASE IN REMUNERATION IS RS.4,12,780/- FOR FOUR DIRECTORS I .E. RS.1,03,195/- PER DIRECTOR. THIS COMES TO RS.8,599/- PER DIRECTOR PER MONTH. CO NSIDERING THE INFLATION AND LIVING STYLE THIS IS VERY NEGLIGIBLE AMOUNT AND HI KE THEREIN. THEREFORE, THE DELETION MADE BY THE AO AND CONFIRMED BY THE LD. CI T(A) BE DELETED. 9. ON THE OTHER HAND, SHRI AVINASH KUMAR, THE LD. DR VEHEMENTLY CONTENDED THAT THE ORDERS PASSED BY BOTH THE AUTHOR ITIES ARE ON GENUINE GROUND AND RELIED THEIR ORDERS. 10. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL O F THE RECORDS, WE FIND THAT THE INCREASE IN REMUNERATION IS GENUINE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LIVING STANDARD AS WELL AS INFLATIO N. THE LD. CIT(A) ALLOWED RS.4.02 LAKHS AND AS PER THE CALCULATIONS SHOWN BY THE LD. COUNSEL FOR THE ASSESSEE THE INCREASE IN REMUNERATION COMES TO RS.8 ,599/- PER DIRECTOR PER MONTH. THEREFORE, WE FIND MERIT IN THE PLEA OF THE LD.COUNSEL FOR THE ASSESSEE AND DIRECT THE AO DELETE THE ADDITION MADE BY HIM. THE GROUND NO.2 IS, THEREFORE, ALLOWED. 11. APROPOS GROUND NO.3 BEING CHARGING OF INTEREST U/S 234B AND U/S 234D. THIS GROUND IS CONSEQUENTIAL IN NATURE. THE AO IS D IRECTED TO CONSIDER OUR 5 ITA NO.306/RJT/2011. DIRECTION AND THEN DECIDE THE GROUND ON INTEREST U/ S 234B AND 234D. THE GROUND NO.3 IS DECIDED ACCORDINGLY. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS TREATED AS ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE D ATE MENTIONED HEREINABOVE. SD SD ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 21 -09-2012. /RAJKOT SRL . .. . +4 +4 +4 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-, 2. +,* / RESPONDENT- 3. : / CONCERNED CIT. 4. :- / CIT (A). 5. 4 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL , RAJKOT.