Luthra & Luthra Chartered Accountants, New Delhi V. ACIT, Circle-63(1), New Delhi

ITA 3945/DEL/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6711 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 23-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALKA GAUTAM
• Keywords: Depreciation; TDS
• Section: 43B; 40(b)

Judgement Text

IN THE INCOME TAX APPLLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE SH. AAKASH DEEP JAIN, VICE PRESIDENT AND SH. N. K. BILLAIYA, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA No.3945/Del/2018 Assessment Year: 2013-14 Luthra & Luthra Chartered Accountants A-16/9, Vasant Vihar, New Delhi PAN No. AAAFL1231A Vs ACIT Circle – 63 (1) New Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. Atul Ninawat, CA Respondent by Ms. Alka Gautam, Sr. DR Date of hearing: 09/12/2021 Date of Pronouncement: 09/12/2021 ORDER PER N.K. BILLAIYA AM: This appeal by the assessee is preferred against the order of the CIT(A)-20, New Delhi dated 29.03.2018 pertaining to A.Y. 2013-14. 2. The assessee has raised the following grounds of appeal :- 2 1. That on the facts and circumstances of the case and law on the point, the assessment order passed by the Learned Assessing Officer ("Ld. AO") is bad in law. 2. That the Learned Commissioner of Income Tax (Appeals) ("Ld. CIT(A)) has erred in law and facts in confirming the order of the Ld. AO in respect of disallowance of amount of statutory dues payable as on the last day of the previous year and paid within prescribed due dates on the ground that the appellant is following cash system of accounting. 3. That on the facts and circumstances of the case the Ld. CIT(A) has erred in law and facts in confirming the disallowance made by Ld. AO on account of TDS payable in the assessment order and concluding that 'tax' as referred in section 43B of the Act doesn't include tax deducted at source by the appellant. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the disallowance made by Ld. AO u/s 36(l)(va) of the Act, on account of deposition of employee's contribution to provident fund ignoring the fact that the appellant had deposited the aforesaid amount before due date of filing the return of income under the Act and was thus duly allowable u/s 43B of the Act. 5. That the Ld. CIT(A) has erred in law in confirming the disallowance made in assessment order in respect of bonus paid, under the partnership deed to its partner's under section 40(b) of the Act completely disregarding the fact that Partnership deed clearly states that partners were entitled to bonus and the same was within the limits prescribed limit under that section. 6. That the Ld. CIT(A) has erred in law and facts of the case in confirming the ad-hoc disallowances made in assessment order to the extent of 5% in respect of Vehicle expenses and depreciation on car and 10% of the telephone to the extent of Rs. 11,353/- without pin pointing any specific voucher which were of personal use and acting against her own adjudication that adhoc disallowance deserves to be rejected. 7. That the Ld. AO has erred in law and facts of the case in making adhoc disallowances of 10% of depreciation on telephone, entertainment expenses, 3 staff welfare expenses and Diwali expenses without specifying any basis. Further the Ld. CIT(A) has erred in law by not adju4ieating the grounds of appeal corresponding to the disallowance. The Appellant has filed a rectification request for adjudication of the aforesaid grounds of appeal before Ld. CIT(A). 8. The above grounds are without prejudice to each other. 3. Ground No.1 is of general in nature and needs no separate adjudication. 4. Ground No.2, 3 and 4 are interlinked and relate to the disallowance of expenses shown as payable in the balance sheet. 5. During the course of the scrutiny assessment proceeding the AO noticed that the assessee has shown statutory liabilities of Rs.381146/- on account of TDS payable, Rs.30135/- on account of EPF contribution and Rs.4,700/- on account of Profession Tax. Since the assessee was following cash system of accounting the AO was of the opinion that accrued liability cannot be allowed as deduction when a person is following cash system of accounting and accordingly made the disallowances which were confirmed by the CIT(A). 4 6. Before us the counsel for the assessee vehemently stated that the payments have not been allowed even in the year in which the assessee has made the payments. 7. We find force in the contention of the counsel. The AO is directed to allow the payment in the year in which the payments have actual been made after due verification. The assessee is directed to furnish necessary evidences in support of its claim. 8. Ground No.2, 3 and 4 taken together are allowed for statistical purpose. 9. Proceeding further the AO noticed that the assessee has paid remuneration to partners Rs.75,68,448/-which included bonus of Rs.9,38,448/-. The assessee was asked to justify the claim. In its reply the assessee stated that the same has been paid as per the deed of partnership. The AO was of the opinion that the deed neither quantifies the amount of bonus nor does it explain how to decide on the quantum of bonus. 10. The AO observed that the partnership deed is clear on the fixed remuneration to be paid to the partners but no specific provisions has been made for the bonus paid. The AO accordingly disallowed the claim of bonus of Rs.9,38,448/-. 5 11. The assessee agitated the matter before the CIT(A) but without any success. 12. Before us the counsel for the assessee stated that bonus is part of remuneration and the total remuneration is as per the relevant provisions of the Act and the same deserve to be allowed. 13. Per contra the DR strongly supported the findings of the lower authorities. 14. We have carefully considered the orders of the authorities below. There is no dispute that there is a specific provision in the partnership deed in respect of payment of remuneration to partners. It is also not in dispute that bonus paid to partners is part of the remuneration. This means that the total allowance of the remuneration to partners has to be judged in the light of the provisions contained section 40(b) of the Act. The AO is directed to verify whether the overall remuneration including bonus is within the permissible limit of the relevant provisions of section 40 (b) of the Act and if found so the same should be allowed. 15. Ground No.5 is treated as allowed for statistical purpose. 16. The AO further found that the assessee in his books of account have claimed following expenses :- 6 17. Assuming personal usage of telephone and cars, the AO made ad-hoc disallowance of 10% and made addition of Rs.712839/-. When the matter was agitated before the CIT(A) the CIT(A) was of the opinion that 5% expenses claimed on account of vehicle expenses and depreciation on car to be disallowed and accordingly restricted the disallowance of Rs.113687/- and gave part relief to the assessee. In so far as telephone expenses are concerned the CIT(A) found that four partners were using mobile phones whose expenses have been claimed. The CIT(A) was of the opinion that 10% of the expenses incurred on four mobile phones should be disallowed and accordingly restricted the disallowance on account of mobile bills to Rs.11353/-. 18. Before us the Counsel for the assessee stated that each and every expenditure claimed is supported by proper bills and vouchers and, therefore, no disallowance is called for. The DR supported the findings of the AO. 7 19. We have carefully considered the orders of the authorities below. It is not in dispute that the disallowances have been made on ad-hoc basis without pointing out any specific defect in the accounts. However, personal usage of vehicle/ telephone cannot be ruled out. We find that the CIT(A) has restricted disallowance to 5% on account of vehicle expenses and depreciation on car and has further restricted the disallowance on account of mobile phone expenses only to the personal usage of four persons, we do not find any error or infirmity in the findings of the CIT(A). Thus ground No. 6 and 7 are accordingly dismissed. 20. In the result, the appeal filed by the assessee is partly allowed. 21. Decision announced in the open court in the presence of both the representatives on 09.12.2021. Sd/- Sd/- (A.D. JAIN) (N. K. BILLAIYA) VICE PRESIDENT ACCOUNTANT MEMBER *NEHA* Date:- 09.12.2021 8 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for Pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the website of ITAT 09.12.2021 Date on which the file goes to the Bench Clerk Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order