The DCIT, Circle-2(1)(2), Ahmedabad V. M/s.Komal Amin Exports Pvt.Ltd., Ahmedabad

ITA 3417/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7960 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 08-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: ANIL R SHAH
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 3417/AHD/2015 & C.O. NO. 14/AHD/2015 (ASSESSMENT YEAR: 2011-12) THE D.C.I.T. CIRCLE-1(3), BARODA ASHISH NARENDRA SHAH. 12, PARITOSH, ANKUR PARK SOCIETY, OPP. SUBHANPURA SUBSTATION, VADODARA- 390027 V/S V/S ASHISH NARENDRA SHAH. 12, PARITOSH, ANKUR PARK SOCIETY, OPP. SUBHANPURA SUBSTATION, VADODARA- 390027 THE D.C.I.T. CIRCLE-1(3), BARODA (APPELLANT) (RESPONDENT) PAN: AJCPS 5639J APPELLANT BY : SHRI S.K. DEV, SR. D.R. RESPONDENT BY : SHRI ANIL R. SHAH & KINJAL S HAH ( )/ ORDER DATE OF HEARING : 13 -12-201 7 DATE OF PRONOUNCEMENT : 18 -12-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 3417 & C.O. 14/AHD/2015 . A.Y. 2011-1 2 2 1. ITA NO. 3417/AHD/2015 & C.O. NO. 14/AHD/2015 ARE AP PEAL BY THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-II, BARODA DATED 17.09.2014 PERTAINING TO A. Y. 2011-12. 2. THE APPEAL AND THE CROSS OBJECTION WERE HEARD TOGET HER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. REVENUE HAS RAISED THREE SUBSTANTIVE GROUNDS OF AP PEAL. GROUND NO. 1 RELATES TO THE RESTRICTION OF THE ADDITION @ 10% AS AGAINST 20% MADE BY THE A.O. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 30 LACS MADE U/S. 40A(2)(B) OF THE ACT ON ACCOUNT OF REMUNERATION PAI D TO THE FATHER OF THE ASSESSEE AND GROUND NO. 3 RELATES TO THE GRANTING O F RELIEF OF RS. 5,05,828/- TO THE ASSESSEE OUT OF THE ADDITION OF RS. 10 LACS MAD E BY THE A.O. ON ACCOUNT OF NON-GENUINE BILLS AND VOUCHERS. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF HIRING OF MACHINERIES, CRANES AND TOOLS . THE RETURN FOR THE YEAR WAS ELECTRONICALLY FILED ON 22.09.2011 DECLARING TOTAL INCOME OF RS. 1,01,23,640/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 5. ON VERIFICATION OF THE DETAILS FURNISHED, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED RS. 2,11,577/- AS MOTOR CAR EXPENSES. THE A .O. WAS OF THE OPINION THAT THE PERSONAL USES OF THE CAR CANNOT BE RULED O UT AND ACCORDINGLY DISALLOWED 20% OF THE EXPENSES AND 20% OF THE DEPRECIATION AND MADE TOTAL DISALLOWANCE OF RS. 1,30,029/-. ITA NO. 3417 & C.O. 14/AHD/2015 . A.Y. 2011-1 2 3 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) AND THE FIRST APPELLATE AUTHORITY REDUCED THE DISALLOWANCE FROM 20% TO 10%. 7. WE FIND THAT THE ASSESSEE HAS CLAIMED TOTAL EXPENSE S OF RS. 2,11,577/- UNDER THE HEAD MOTOR CAR EXPENSES. THIS INCLUDED INTEREST ON MOTOR CAR LOAN RS. 81,681/-, CAR INSURANCE RS. 16,155/- AND MOTOR CAR EXPENSES AT RS. 1,13,741/-. EVEN, IF THE ASSUMPTION OF THE A.O. OF THE PERSONAL USES OF CAR IS ACCEPTED THE SAME CANNOT BE APPLIED TO THE INTEREST ON LOAN AND THE INSURANCE PREMIUM. AT THE MOST, THE SAME CAN BE APPLIED TO THE MOTOR CAR EXPENSES OF RS. 1,13,741/-. HOWEVER, THE DEPRECIATION IS ALLOWABLE TO THE ASSES SEE EVEN IF THE ASSET IS USED FOR ONE DAY, THEREFORE, THERE CANNOT BE ANY ELEMENT OF PERSONAL USES. WE FIND THAT THE LD. CIT(A) HAS REASONABLY RESTRICTED THE D ISALLOWANCE TO 10% AND THE SAME SHOULD MEET THE ENDS OF JUSTICE. GROUND NO. 1 IS DISMISSED. 8. THE A.O. FOUND THAT THE ASSESSEE HAS CLAIMED AN AMO UNT OF RS. 57,08,479/- TOWARDS COMPENSATION TO EMPLOYEES. ON VERIFYING THE DETAILS, THE A.O. FOUND THAT THE ASSESSEE HAS PAID RS. 30 LACS TO HIS FATHE R. INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT, THE A.O. DISALLOWED T HE ENTIRE REMUNERATION PAID TO THE FATHER AT RS. 30 LACS. 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND GOT THE RELIEF. 10. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. LD. COUNSEL FOR THE ASSESSEE PLACED HEAVY RELIANCE ON T HE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PWS ENGINEERS LIMITED IN TAX APPEAL NO. 209 OF 2015. ITA NO. 3417 & C.O. 14/AHD/2015 . A.Y. 2011-1 2 4 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THE A.O. HAS MADE THE DISALLOWANCE OF RS. 30 LACS U/S. 40A(2)(B) OF THE ACT BUT WE FIND THAT NOWHERE THE A.O. HAS BROUGHT A NYTHING ON RECORD TO SHOW THAT THE PAYMENT IS EXCESSIVE AND NOT AS PER T HE PREVAILING MARKET RATE. THE ENTIRE ADDITION HAS BEEN MADE ON PRESUMPTION AN D SURMISES AND ON WRONG ASSUMPTION OF THE PROVISIONS OF SECTION 40A(2)(B) O F THE ACT WITHOUT BRINGING ON RECORD ANY COMPARABLE CASE. 12. WE FURTHER FIND THAT BOTH THE ASSESSEE AND HIS FATH ER ARE TAXED AT THE SAME RATE OF TAX APPLICABLE TO THE HIGHEST SLAB. IT WOULD BE PERTINENT TO REFER TO THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT O F GUJARAT IN THE CASE OF PWS ENGINEERS LIMITED (SUPRA) AND THE SAME READS AS UNDER:- 6. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. THE QUESTION OF APPLICABILITY OF SECTION 40A(2) OF THE ACT TO THE RESTRICTED DISA LLOWANCE OF RS. 47,90,178/- IS ALREADY CONCLUDED BY THIS COURT BY THE SAID ORDER D ATED 31.3.2015. WE MAY THEREFORE, PROCEED ON THAT BASIS. DESPITE THIS, THE QUESTION THAT STILL SURVIVES IS WHETHER THE REVENUE CAN TAX THE SAME INCOME IN THE HANDS OF THE COMPANY ON WHICH THE DIRECTORS HAD ALREADY PAID THE TAX AT THE SAME RATE AT WHICH THE COMPANY WOULD HAVE BEEN LIABLE TO BE ASSESSED. IN T HIS CONTEXT, WE MAY RECALL THAT CONSISTENTLY BEFORE ASSESSING OFFICER, CIT(APP EALS) AND TRIBUNAL, THE ASSESSEE HAD CANVASSED THAT ALL THE FOUR DIRECTORS WHO HAD RECEIVED SUCH REMUNERATION, WERE TAXED IN THE HIGHEST BRACKET OF 30%; AT THE SAME RATE AT WHICH THE ASSESSEE COMPANY AT THE RELEVANT TIME WAS ASSESSED. IN FACT, THE ASSESSEE HAD DEMONSTRATED BEFORE CIT(APPEALS) THAT THE TAX LIABILITY OF THE COMPANY ON SUCH DISPUTED REMUNERATION AMOUNT WAS EX ACTLY THE SAME AS THE TAX THE FOUR DIRECTORS HAD PAID TO THE REVENUE. TO THESE FACTUAL ASPECTS, EVEN THE REVENUE HAS, AT NO STAGE RAISED ANY DISPUTE. WE MAY THEREFORE, PROCEED ON THE BASIS THAT THE ELEMENT OF EXCESSIVE REMUNERATION RE PRESENTS THAT INCOME OF THE ITA NO. 3417 & C.O. 14/AHD/2015 . A.Y. 2011-1 2 5 COMPANY WHICH WAS EVENTUALLY TAXED IN THE HANDS OF THE DIRECTORS AT THE SAME RATE AT WHICH; HAD IT NOT BEEN SO DISTRIBUTED; WOUL D HAVE BEEN TAXED IN THE HANDS OF THE COMPANY. IN THAT VIEW OF THE MATTER, THE QUE STION OF REVENUE NEUTRALITY WOULD IMMEDIATELY ARISE. A CERTAIN INCOME HAS ALREA DY BEEN TAXED IN THE HANDS OF THE DIRECTORS. PERMITTING THE REVENUE TO TAX THE SAME INCOME AGAIN AT THE SAME RATE IN THE HANDS OF THE PRINCIPAL PAYER WOULD AMOUNT TO DOUBLE TAXATION. ONLY ON THIS COUNT, WE ANSWER QUESTION IN FAVOUR OF THE APPELLANT-ASSESSEE AND AGAINST REVENUE, ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE TRIBUNAL. THE TAX APPEAL IS DISPOSED OF ACCORDINGLY. 13. ON FINDING PARITY OF THE FACTS, RESPECTFULLY FOLLOW ING THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE DECLI NE TO INTERFERE. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 14. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT, THE A.O. FOUND THAT THE ASSESSEE HAS CLAIMED RS. 49,41,725/- TOWARDS REPAIRS & MAINTENAN CE EXPENSES. ON VERIFICATION OF THE DETAILS, THE A.O. NOTICED THAT THE AMOUNT OF RS. 49,29,825/- IS CLAIMED TOWARDS REPAIRS & MAINTENANCE OF MACHINE RY. ON VERIFICATION OF THE BILLS/VOUCHERS, THE A.O. FOUND THAT VOUCHERS TO THE EXTENT OF RS. 10 LACS WERE SELF MADE VOUCHERS. THE A.O. DOUBTED THE GENUINENES S OF THE EXPENDITURE TO THE EXTENT OF RS. 10 LACS AND MADE THE ADDITION OF RS. 10 LACS. 15. ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) AND EXPLAINED THAT IN THE IMMEDIATELY PRECEDING YEAR, THE PERCENTAGE OF SUCH EXPENDITURE TO THE SALES WAS 26.46% WHEREAS THE SAME IS 14.75% DURING THE YEAR U NDER CONSIDERATION. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS OF THE OPINION THAT 10% DISALLOWANCE OUT OF REPAIRS & MAINTENANCE WILL BE SUFFICIENT TO CHECK ITA NO. 3417 & C.O. 14/AHD/2015 . A.Y. 2011-1 2 6 THE PILFERAGE DUE TO INSTANCES OF CASH PAYMENT AND SELF-MADE VOUCHERS. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 4,94,172/ -. 16. BEFORE US, THE LD. D.R. SIMPLY SUPPORTED THE FINDIN GS OF THE A.O. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FINDINGS OF THE LD . CIT(A). 17. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS TRUE THAT SOME OF THE EXPENDITURE WERE SUPPORTED BY SELF-MADE VOUCHERS. IN THIS LINE OF TRADE CERTAIN EXPENDITURES ARE BOUND TO BE SUPPORTE D BY SELF-MADE VOUCHERS. ALL THAT HAS TO BE SEEN IS WHETHER THE EXPENDITURE HAVE BEEN INCURRED IN RELATION TO THE BUSINESS ACTIVITIES OF THE ASSESSEE OR NOT. THERE IS NO FINDING BY THE A.O. THAT THE EXPENDITURES HAVE NOT BEEN INCURR ED FOR CARRYING ON THE BUSINESS OF THE ASSESSEE. IN OUR CONSIDERED OPINION , THE LD. CIT(A) HAS JUDICIOUSLY THE RESTRICTED THE DISALLOWANCE TO RS. 4,94,172/- AND THEREFORE, CALLS FOR NO INTERFERENCE. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. 19. COMING TO THE CROSS OBJECTION OF THE ASSESSEE VIDE GROUND NO. 1 & 2, THE ASSESSEE HAS ALLEGED THAT THE LD CIT(A) OUGHT TO HA VE GIVEN TOTAL RELIEF TO THE ASSESSEE INSTEAD OF RESTRICTING THE DISALLOWANCES. 20. W DO NOT FIND ANY MERIT IN THIS CLAIM OF THE ASSES SEE AS THE LD. CIT(A) HAS JUDICIOUSLY THE RESTRICTED THE DISALLOWANCE OUT OF MOTOR CAR EXPENSES AND REPAIRS AND MAINTENANCE EXPENSES WHICH CALL FOR NO INTERFERENCE. GROUND NO. 1 & 2 ARE DISMISSED. ITA NO. 3417 & C.O. 14/AHD/2015 . A.Y. 2011-1 2 7 21. GROUND NO. 3 IS IN SUPPORT OF THE FINDINGS OF THE L D. CIT(A) AND THEREFORE NEEDS NO SEPARATE ADJUDICATION. ORDER PRONOUNCED IN OPEN COURT ON 18- 12- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 18/12/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD