M/s. J. J. & COMPANY, Sanawad V. The ITO wd- 5(3), Indore

ITA 376/IND/2014

• Counselvise Citation: 37622714 RSA 2014
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: PRAMOD GUPTA
• Keywords: Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH (SMC), INDORE BEFORE SHRI B.C. MEENA HONBLE ACCOUNTANT MEMBER ITA NO. 376/IND/2014 A.Y. 2006-07 J.J. COMPANY SANAWAD PAN AAEFJ 61962 ::: APPELLANT VS INCOME TAX OFFICER WARD 5(3) INDORE ::: RESPONDENT ` APPELLANT BY SHRI PRAMOD GUPTA RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 20.4.2015 DATE OF PRONOUNCEMENT 20 .4.2015 O R D E R THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A)-II, INDORE, DATED 28.2.2014. 2 2. THE ASSESSEE IS A PROPRIETORSHIP FIRM ENGAGED IN TH E BUSINESS OF PURCHASE AND SALE OF TOBACCO, BEEDI AND MATC H BOXES. THE RETURN OF INCOME WAS FILED DECLARING INCOM E AT RS. 1,21,640/- ON 4.10.2006. THE ASSESSING OFFICER MADE ADDITION OF RS. 10,000/- OUT OF RS. 45,390/- ON ACCOU NT OF CAR LOAN AND RS. 4,170/- ON ACCOUNT OF SHOP EXPENSES, TREATING THE SAME AS PERSONAL EXPENSES. THE ASSESSEE HAS ALSO FILED RETURN U/S 115WB(3) OF THE ACT WITH REGARD TO VALUATION OF FRINGE BENEFITS ON 28.9.2006 DECLARING FR INGE BENEFIT AT RS. 39,943/- WHICH WAS REVISED AND FRINGE BENEFITS WERE REDUCED TO RS. 7,605/- AND THE ASSESS ING OFFICER INCREASED THE DISALLOWANCE TO RS. 47,548/- CONSIDERING THE FRINGE BENEFITS U/S 115WB(2)(I) ON THE EXPENSES OF REPAIRS, EXPENSES OF RUNNING INCLUDING F UEL AND ALSO DEPRECIATION ON THIS SCORPIO JEEP MANUFACTURED BY MAHINDRA & MAHINDRA WHICH THE ASSESSEE HAS TREATED AS MINI BUS AND NOT COVERED UNDER THE CATEGORY OF CAR. TH IS 3 ISSUE REGARDING THE FRINGE BENEFIT HAS BEEN RAISED BY THE ASSESSEE IN GROUND NO. 1 OF THE ASSESSEES APPEAL WHICH READS AS UNDER :- 1. THAT (AO) ERRED TO ADD RS.39943/- AS FRINGE BENEFIT ON THE SCORIO-MINI BUS AND LEVIED FBT THEREON AND FURTHER CIT(A) ALSO ERRED TO UPHELD THE CONTENTION OF A.O. WHICH IS WRONG ON FACTS, EVIDENCES AND AGAINST THE LAW. 3. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE CATEGORIZATION OF VEHICLE FOR REGISTRATION PURPOSES WI LL NOT CHANGE THE BASIC CHARACTER OF THE VEHICLE. SCORPIO JEEP OF MAHINDRA & MAHINDRA CANNOT BE TREATED AS MINI BUS. THE UTILITY OF THIS VEHICLE IS AS OF A CAR. THEREFORE, FO R CALCULATING THE FRINGE BENEFIT, IT HAS TO BE CONSIDERE D AS CAR AND EXPENSES ON REPAIRS AND RUNNING OF THIS VEHICLE AND DEPRECIATION SHALL BE CONSIDERED FOR WORKING OUT F RINGE BENEFITS. AT THE TIME OF PLEADINGS, THE LEARNED AR W AS ALSO NOT SERIOUS ABOUT PURSUING THIS ISSUE. CONSIDERING THE 4 TOTALITY OF THESE FACTS, WE DISMISS THIS GROUND OF TH E ASSESSEES APPEAL. 4. IN GROUND NO. 4 THE ISSUE IS WITH REGARD TO ENHANCEMENT OF INCOME BY THE LD. CIT(A) BY RS.96,072 /- AS SALARY TO PARTNERS AND RS. 5,000/- AS DEPRECIATION ON ACCOUNT OF PERSONAL USE OF SCORPIO. THE ASSESSEE IS A PARTNERSHIP FIRM AND THERE WERE FOUR PARTNERS INCLUDIN G SMT. AYESHA BEE AND SMT. MUNAWWAR BEE. THE ASSESSEE HAS PAID REMUNERATION OF RS. 48,036/- EACH TO THESE TWO PARTNERS. THE ASSESSING OFFICER INQUIRED ABOUT THIS PAYMENT BUT DID NOT MAKE ANY ADDITION ON THIS ISSUE. T HE CIT(A) MADE ORDER U/S 250(4) OF THE ACT AND ASKED REM AND REPORT AND DISALLOWED THIS AMOUNT AND ENHANCED THE INCOME. THE CIT(A) ALSO DISALLOWED RS. 5,000/- OUT OF DEPRECIATION ON SCORPIO ON ACCOUNT OF PERSONAL USE. 5 5. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. IN THE PARTNERSHIP DEED THERE WAS A PROVISION FOR PAYMENT OF REMUNERATION TO PARTNERS. CLAUSE 6(A) READS AS UNDER :- (6)- ) , . 1 , . 2 . 3 ! ' # $ % #& ' ( ' # ) *+ ' ,-. /0 ' 12 3' 01 /56 2003 7# (7 + 8 ' 9 20 , 000/- /; /; #& $ ,-. (7 < 2 40(>& ) # ? # 5 , 7 >>->> &'@ #&@ ' >A ( #) THE CLAUSE IN THE PARTNERSHIP DEED CLEARLY STATES THAT SMT. AYESHA BEE AND SMT. MUNAWWAR BEE SHALL LOOK AFTER WHOLE BUSINESS ALONG WITH SHRI HAROON ALI. THE LD. CI T(A) AND THE ASSESSING OFFICER HAVE COMPLETELY IGNORED THI S FACT. THE LEARNED CIT(A) HAS ALSO DISALLOWED THIS AMOUNT ON THE GROUND THAT IN SIMILAR CIRCUMSTANCES, THE HONB LE ITAT HAS GRANTED RELIEF IN THE CASE OF RAJENDRA PRASAD 6 GUPTA VS. DCIT IN APPEAL NO. IT(SS) A NO. 41 TO 47/IND/2011 ORDER DATED 14.6.2012, HOWEVER, THE DEPARTMENT HAS ALREADY FILED APPEAL AGAINST THE SAID ORDER IN THE HONBLE M.P. HIGH COURT. IN VIEW OF THE SAME, THE CONTENTION OF THE APPELLANT WAS REJECTED. THAT THERE WAS A PROVISION IN THE PARTNERSHIP THAT PARTNERS SHALL BE PAID REMUNERATION AND THE REMUNERATION WAS PAID AS PER CLAUSE 6(A) OF THE PARTNERSHIP DEED. THE CLAUSE ALSO ST ATES THAT THESE TWO PARTNERS SHALL ALSO LOOK AFTER THE WHOLE BUSINESS. THE REVENUE HAS NOT BROUGHT ANYTHING ON REC ORD THAT THESE LADY PARTNERS HAVE NOT CONTRIBUTED TO THE BUSINESS OF THE ASSESSE. THE REMUNERATION WAS PAID AS PE R THE TERMS OF PARTNERSHIP DEED. THE LADY PARTNERS WERE ENGAGED IN WEIGHING AND SORTING OF TOBACCO. THE REVE NUE HAS FAILED TO CONTROVERT THIS ASPECT OF THE ASSESSEES SUBMISSION. IN OUR CONSIDERED VIEW, SIMPLY BECAUSE T HE PARTNERS WERE LADIES AND PARDANASEE, IT CANNOT BE 7 CONCLUDED THAT THEY HAVE NOT WORKED FOR THE FIRM AND N OT TAKING PART IN DAY TO DAY WORK WHERE THE PARTNERSHIP D EED SPECIFICALLY PROVIDE FOR THEIR ROLE IN THE BUSINESS. MOREOVER, DURING THE YEAR, GROSS PROFIT OF THE ASSESS EE HAS INCREASED FROM 19.43% TO 25.32%.THE ASSESSING OFFICE R AS WELL AS THE CIT(A) HAVE COMPLETELY GOT MISGUIDED BY THE ASPECT THAT PARTNERS ARE LADIES AND PARDANASSEE. IF THE REVENUE AUTHORITIES TREAT THE PARTNERSHIP DEED AS NON- GENUINE AND ONLY ONE PARTNER AS WHOLESOLE THEN THEY SHOULD NOT HAVE MADE ASSESSMENT IN THE STATUS OF PARTNERSHIP. KEEPING ALL THESE FACTS IN VIEW AND THE VARIOUS DECISION RELIED ON, WE ARE OF THE VIEW THAT TH E CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE INCOME BY DISALLOWING THE REMUNERATION PAID TO THE PARTNERS BY TH E ASSESSE. THEREFORE, WE DIRECT TO DELETE THE SAME. 6. WITH REGARD TO THE DISALLOWANCE OF DEPRECIATION, WE HOLD THAT WE HAVE SUSTAINED THE ADDITION OF FRINGE BENE FITS, 8 THEREFORE, THERE IS NO QUESTION OF ANY FURTHER DISALL OWANCE FROM THE DEPRECIATION. I DIRECT TO DELETE THE SAME. 7. AFTER HEARING BOTH THE SIDES, WE FIND NO MERIT IN GROUND NOS. 2, 3 AND 5. WE DISMISS THE SAME. GROUND N O. 6 IS PRE-MATURE AND GROUND NO. 7 IS GENERAL IN NATURE. THE SAME ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 20 TH APRIL, 2015 SD/- (B.C. MEENA) ACCOUNTANT MEMBER APRIL 20 TH ,2015 COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R (6) GUARD FILE DN/- 9