CC-1 Petro Point, Panchkula V. ITO, W-1, Panchkula

ITA 336/CHANDI/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8004 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARVIND SUDERSHAN
• Keywords: Depreciation; Non-deduction of tax
• Section: 40(a)(ia); 194A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, SMC, CHANDIGARH , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 336/CHD/2019 / ASSESSMENT YEAR : 2013-14 CC-1, PETRO POINT, HOUSE NO. 303, SECTOR 7, PANCHKULA VS. THE ITO, WARD-1, PANCHKULA ./PAN NO. AAHFC5050H / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI AJAY JAIN, CA ' ! / REVENUE BY : SH. ARVIND SUDERSHAN, SR. DR # $ % /DATE OF HEARING : 01.01.2020 &'() % / DATE OF PRONOUNCEMENT : 01.01.2020 / ORDER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 18.01.2019 OF THE COMMISSIONER OF INCOM E TAX (APPEALS), PANCHKULA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF RS. 433486/- U/S 40(A)(IA) OF THE INCOM E TAX ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON INTEREST PAID TO PARTNERS. 2. THAT THE CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF RS. 42333/- ON ACCOUNT OF PERSONAL USE OF CAR AND TELEPHONE. ITA NO. 336-CHD/2019- CC-1, PETRO POINT, PANCHKULA 2 3. THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF RS. 20140/- ON ACCOUNT OF NON- PRODUCTION OF BILLS AND VOUCHERS. 3. GROUND NO.1 : VIDE GROUND NO.1 THE ASSESSEE HAS ASSAILED THE CONFIRMATION OF ADDITION MADE BY THE ASSESSING OFFI CER OF RS. 4,33,486/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 19 61 (IN SHORT 'THE ACT'). 4. THE BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE APPELLANT FIRM HAD RECEIVED A LOAN FROM ITS PARTNERS AND INTEREST WAS PAID TO THEM. THE ASSESSING OFFICER MADE THE IMPUGNED DISALLOWANCE U/ S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194A OF THE ACT. 5. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE RELEVANT PROVISIONS OF SECTION 194 A(3)(IV) OF THE ACT, WHICH READ AS UNDER:- 194A. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN I NCOME BY WAY OF INTEREST ON SECURITIES, SHALL, AT THE TIM E OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT TH E TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INC OME-TAX THEREON AT THE RATES IN FORCE : (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT AP PLY (IV) TO SUCH INCOME CREDITED OR PAID BY A FIRM TO A PARTNER OF THE FIRM; ITA NO. 336-CHD/2019- CC-1, PETRO POINT, PANCHKULA 3 6. IN VIEW OF THE EXPRESS PROVISIONS OF SECTION 194 A(3)(IV) OF THE ACT, I FIND THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194A(1) OF THE ACT, H ENCE, NO DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE AC T IS WARRANTED. THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES, THEREFO RE, IS NOT SUSTAINABLE IN THE EYES OF LAW AND THE SAME IS ACC ORDINGLY ORDERED TO BE DELETED. 7. GROUND NO.2 : VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE CONFIRMATION OF ADDITION OF RS. 42,333/- ON ACCOUNT OF PERSONAL USE OF CAR AND TELEPHONE. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT ASS ESSING OFFICER DISALLOWED 1/6 TH OF THE EXPENDITURE INCURRED ON RUNNING AND MAINTEN ANCE OF VEHICLE AND TELEPHONE USE ASSUMING THAT THE PERS ONAL USE OF THE VEHICLE COULD NOT BE RULED OUT. THE LD. CIT(A), HOW EVER, RESTRICTED THE SAID EXPENDITURE @ 10% OF THE TOTAL EXPENDITURE. 9. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE ASSESSEE HAS COME IN APPEAL BEFORE US. 10. I HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. A UTHORIZED REPRESENTATIVES OF BOTH THE PARTIES AND GONE THROUG H THE RECORD. A PERUSAL OF THE IMPUGNED ORDER OF THE ASSESSING OFFI CER AS WELL OF ITA NO. 336-CHD/2019- CC-1, PETRO POINT, PANCHKULA 4 CIT(A) REVEAL THAT NO SPECIFIC JUSTIFICATION HAS BE EN GIVEN BY BOTH THE LOWER AUTHORITIES IN MAKING THE IMPUGNED DISALLOWAN CE OF THE EXPENDITURE CLAIMED. TOTAL SUM OF RS. 3,63,036/- HAD BEEN CLAIMED IN THE PROFIT & LOSS ACCOUNT BY THE ASSESSEE ON VEHICLE RUNNING, MAINTEN ANCE & DEPRECIATION ON CAR AND INSURANCE OF THE CAR. SO FAR AS THE DEP RECIATION ON CAR AND INSURANCE OF CAR EXPENSES ARE CONCERNED, THE SAME W ERE REQUIRED TO BE ALLOWED TO THE ASSESSEE IRRESPECTIVE OF THE ANY PER SONAL USE, AS THE DEPRECIATION ON BLOCK OF ASSETS IS ALLOWABLE AS PRO VIDED UNDER THE RULES AND INSURANCE ON CAR IS TO BE MANDATORILY / STATUT ORILY REQUIRED TO BE PAID. CONSIDERING THE AMOUNT OF EXPENDITURE AND ABO VE FACTS, IN MY VIEW, NO DISALLOWANCE ON ESTIMATION BASIS IS ATTRAC TED IN RESPECT OF THE CAR / VEHICLE USE. THE DISALLOWANCE MADE BY THE LOW ER AUTHORITIES IN RESPECT OF EXPENDITURE ON VEHICLES IS, THEREFORE, O RDERED TO BE DELETED. HOWEVER, SO FAR AS THE TELEPHONE EXPENSES ARE CONCE RNED, A SUM OF RS. 60,506/- HAVE BEEN CLAIMED AS TELEPHONE EXPENDI TURE. HOWEVER, THERE IS NO SPECIFIC JUSTIFICATION ON THE PART OF T HE ASSESSEE BEFORE EITHER OF THE LOWER AUTHORITIES AS TO HOW THE ASSESSEES B USINESS REQUIRES SO MUCH USE OF TELEPHONE. IN VIEW OF THIS, THE DISALLO WANCE RESTRICTED BY THE LD. CIT(A) OF THE 10% OF THE TELEPHONE EXPENSES IS CONFIRMED. 11. GROUND NO.3 : VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF A SUM OF RS. 20,140/- OUT OF THE TO TAL EXPENDITURE ITA NO. 336-CHD/2019- CC-1, PETRO POINT, PANCHKULA 5 CLAIMED ON ACCOUNT OF STAFF WELFARE EXPENSES. THE ASSESSEE HAS CLAIMED A SUM OF RS. 2,11,890/- AS STAFF WELFARE EXPENSES. THE ASSESSEE WAS ASKED TO PRODUCE THE BILLS / VOUCHERS IN RESPECT OF THE SAME. THE ASSESSING OFFICER NOTICED THAT THE ASSESS EE COULD NOT FURNISH THE BILLS OF RS. 20,140/- AND, HE, ACCORDINGLY DISA LLOWED A SUM OF RS. 20,140/- OUT OF THE TOTAL EXPENDITURE OF RS. 2,11,8 90/- CLAIMED UNDER THE HEAD STAFF WELFARE EXPENSES. THE LD. CIT(A) CON FIRMED THE ADDITION SO MADE BY THE ASSESSING OFFICER 12. I HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. A UTHORIZED REPRESENTATIVES OF BOTH THE PARTIES AND HAVE GONE T HROUGH THE RECORD. THE STAFF WELFARE EXPENSES HAVE BEEN CLAIMED ON ACCOUNT OF CERTAIN BENEFITS PAID TO THE WORKERS FOR THEIR APPRECIATION INCLUDING OFFERING OF REWARDS AND LUNCH ETC. OUT OF THE TOTAL EXPENDITURE OF RS. 2,11 890/-, THE ASSESSEE HAS DULY PRODUCED THE BILLS OF APPROX. RS. 1,90,000/-. CONSIDERING THE NATURE OF THE EXPENSES AND ALSO CON SIDERING THAT THE ASSESSEE HAS PROVED THE INCURRING OF MOST OF TH E EXPENSES, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF A SUM OF RS. 20,140/-, ONLY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE BIL LS AND VOUCHERS OF THE SAME, IS NOT JUSTIFIED ESPECIALLY CONSIDERING T HE NATURE OF EXPENDITURE INCURRED IN RESPECT OF WHICH SOMETIMES BILLS / VOUCHERS ARE NOT ISSUED. IN VIEW OF THIS, THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES ON THIS ISSUE IS ORDERED TO BE DELETED. ITA NO. 336-CHD/2019- CC-1, PETRO POINT, PANCHKULA 6 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.01.2020. SD/- ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 01.01.2020 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR