M/S. TOSHNIWAL PROCESS INSTRUMENT P. LTD, V. THE DY CIT SP. RG.34,

ITA 4047/MUM/2004

• Counselvise Citation: 404719914 RSA 2004
• Duration Of Justice: 7 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 09-08-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 18-05-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: SUBASH SHETTY
• Keywords: Depreciation; Business expenditure; Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.4047/MUM/2004 (ASSESSMENT YEAR: 1993-94) TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD., KHETAN BHAVAN, 198, J. TATA ROAD, MUMBAI -400 020 ....... APPELLANT VS DCIT SPL RANGE 34/ ITO WD 1(3)(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAACTI 1534 H APPELLANT BY: SHRI SUBASH SHETTY RESPONDENT BY: SHRI V.V. SHASTRI DATE OF HEARING: DATE OF PRONOUNCEMENT: 09.08.2011 16.09.2011 O R D E R PER R.S. PADVEKAR, JM: IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) XXI, MUMBAI DATED 21.01.2004 FOR THE A.Y. 1993-94. 2. THE FIRST ISSUE IS REGARDING THE DISALLOWANCE OF ` 8,714/- TOWARDS EMPLOYERS CONTRIBUTION OF PF & FAMILY PENS ION. 3. THE ASSESSEE IS IN THE MANUFACTURING OF SCIENTIF IC AND ELECTRIC INSTRUMENTS. THE SHORT CONTROVERSY ON THE FIRST IS SUE IS THE PAYMENTS MADE BEYOND THE DUE DATE BUT WITHIN THE GRACE PERIO D WHETHER IS ALLOWABLE EXPENDITURE OR NOT? ITA 4047/MUM/2004 TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD. 2 4. THE CONTENTION OF THE ASSESSEE IS THAT THE SUM O F ` 8,714/- INCLUDES AN AMOUNT OF ` 2040/- TOWARDS ESI AND ` 4/- FOR EDLI. MOREOVER, SUM OF ` 6,670/- PERTAINS TO THE DEDUCTION FOR THE MONTH OF MARCH, 1993 WHICH WAS DULY PAID ON 19.04.1993. 5. NOW, THE LAW IS WELL SETTLED THAT IF THE EMPLOYE R DEPOSITED THE AMOUNT PAYABLE UNDER THE EMPLOYEES PROVIDENT FUND ACT AND FAMILY PENSION SCHEME BEYOND THE DUE DATE PRESCRIBED BUT W ITHIN THE GRACE PERIOD THEN THE SAME IS TO BE ALLOWED. 6. WE FIND THAT THE ASSESSEE HAS DEPOSITED THE CONT RIBUTION FOR THE MONTH OF MARCH, 1993 WHICH IS WITHIN THE GRACE PERI OD ALLOWED UNDER THE ESI ACT. WE, THEREFORE, DIRECT THE A.O. TO DEL ETE THE DISALLOWANCE OF ` 8,714/-. ACCORDINGLY, GROUND NO.1 IS ALLOWED. 7. THE NEXT ISSUE IS DISALLOWANCE OF LOSS ON THE CO TTON BUSINESS OF ` 2,44,791/-. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED T HE LOSS OF ` 2,44,791/- TOWARDS COTTON BUSINESS. THE A.O. ASKED FOR DOCUMENTARY EVIDENCE TO SUPPORT THE CLAIM OF THE SAID LOSS. TH E ASSESSEE FILED THE COPY OF THE MINUTES OF THE MEETING OF BOARD OF DIRE CTORS IN WHICH IT WAS STATED THAT THE ASSESSEE-COMPANY DESIRES TO COM MENCE BUSINESS IN A COTTON TRADING. THE ASSESSEE ALSO FILED THE C OPY OF THE ACCOUNT BUT DID NOT FILE ANY BILLS OR VOUCHERS THOUGH THE A .O. ASKED FOR THE SAME. 9. THE ASSESSEE APPOINTED ONE M/S. CHUNILAL KHUMANM AL TO CONDUCT THE BUSINESS ON BEHALF OF THE ASSESSEE. TH E ASSESSEE PRODUCED COPIES OF THE LETTER ADDRESSED TO M/S. CHU NILAL KHUMANMAL TO PROVE THAT HE WAS GIVEN AN ADVANCE OF ` 50,000/- BY CHEQUE AND ITA 4047/MUM/2004 TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD. 3 SAID PARTY WAS CONDUCTING THE BUSINESS ON BEHALF OF THE ASSESSEE. AFTER EXAMINING THE ACCOUNTS OF THE ASSESSEE, THE A .O. CAME TO THE CONCLUSION THAT THERE WAS NO ACTUAL DELIVERY OF THE GOODS PURCHASED NOR THERE WAS PHYSICAL SALE OF THE GOODS. THE A.O. , THEREFORE, CAME TO THE CONCLUSION THAT THE ASSESSEE HAS ONLY DEALT IN THE SPECULATION BUSINESS AND HENCE, LOSS CLAIMED BY THE ASSESSEE IS A SPECULATION LOSS. THE A.O., THEREFORE, DISALLOWED THE LOSS CLA IMED TO BE SUSTAINED IN THE COTTON TRADING. NOW, THE ASSESSEE HAS CHALL ENGED THE SAID DISALLOWANCE BEFORE THE LD. CIT (A) WITHOUT SUCCESS . NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 10. WE FIND THAT THE ASSESSEE PRODUCED COPY OF ACCO UNT OF M/S. CHUNILAL KHUMANMAL IN ITS BOOKS OF ACCOUNT BEFORE T HE A.O. NOTHING WAS PRODUCED TO SHOW THAT THERE WAS PHYSICAL DELIVE RY OF THE GOODS PURCHASED AND ALSO GOODS WERE PHYSICALLY SOLD. IN THE STATEMENT OF ACCOUNT, THE COMMISSION AND BROKERAGE OF GO-DOWN RE NT WAS CHARGED. AS OBSERVED BY THE LD. CIT (A) M/S. CHUNILAL KHUMAN MAL HAS TAKEN THE DELIVERY OF THE COTTON BAILS. THE LD. CIT (A), THEREFORE, CAME TO THE CONCLUSION THAT THE LOSS CANNOT BE TREATED AS A SPE CULATION LOSS BUT AT THE SAME TIME, THE LD. CIT (A) HAS RESERVATION ON T HE GENUINENESS OF THE CLAIM. THE LD. CIT (A) HAS EXAMINED THE MOU DA TED 1.02.1993 BETWEEN THE ASSESSEE AND M/S. CHUNILAL KHUMANMAL. THE LD. CIT (A) HAS OBSERVED THAT THE MOU WAS GENERALLY WORDED. TH E ASSESSEE ALSO DID NOT PRODUCE ANY PROOF TO SHOW THAT M/S. CHUNILA L KHUMANMAL HAD MADE SALES ON BEHALF OF THE ASSESSEE. IT APPEA RS THAT THE LD. CIT (A) HAS CALLED FOR THE REMAND REPORT FROM THE A.O. AND AS PER THE REMAND REPORT THE ASSESSEE PROVED THAT HE HAS MADE THE PAYMENT OF ` 39 LAKHS TO M/S. CHUNILAL KHUMANMAL FOR THE COTTON TRANSACTIONS. 11. WE FIND THAT THE A.O. HIMSELF HAS ADMITTED IN T HE REMAND REPORT THAT THE ASSESSEE MADE PAYMENT OF ` 39 LAKHS TO M/S. CHUNILAL KHUMANMAL FOR THE COTTON TRADING. WE, FURTHER FIND THAT THE LD. CIT (A) HAS MERELY DISALLOWED THE CLAIM ON THE BASIS OF THE WORDINGS IN THE ITA 4047/MUM/2004 TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD. 4 MOU. IN OUR OPINION, THE APPROACH OF THE CIT (A) I S NOT CORRECT. AS PER THE FACTS ON RECORD AS WELL AS THE REMAND REPOR T OF THE A.O. FURNISHED TO THE LD. CIT (A), WE ARE OF THE OPINION THAT THE GENUINENESS OF THE LOSS CLAIMED BY THE ASSESSEE CAN NOT BE DOUBTED. WE, ACCORDINGLY, ACCEPT THE CLAIM OF THE ASSESSEE I N RESPECT OF THE LOSS IN THE COTTON TRADING AND DIRECT THE A.O. TO ALLOW THE SAME AS A NORMAL BUSINESS LOSS. ACCORDINGLY, GROUND NO.2 IS ALLOWED . 12. THE NEXT ISSUE IS THE DISALLOWANCE OF DEPRECIAT ION OF ` 93,675/- ON THE MARUTI-1000 CC CAR ON THE REASON THAT THE SA ID CAR WAS NOT PUT TO USE. 13. THE ASSESSEE HAS SHOWN THE PURCHASE OF INDIVIDU AL MARUTI-1000 CAR. THE A.O. ASKED FOR THE COPY OF THE REGISTRATI ON CERTIFICATE, PURCHASE VOUCHERS ETC. 14. IT WAS FOUND BY THE A.O. THAT THE VEHICLE WAS R EGISTERED ON 16.09.1992 BY REGISTERED AUTHORITY AT GURGAON AND R EGISTRATION NUMBER WAS ALSO GIVEN. AS THE ADDRESS ON REGISTRAT ION WAS THAT OF GURGAON, THE A.O. WAS OF THE OPINION THAT AS THE AS SESSEE HAS NOT ANY BUSINESS CONNECTION IN GURGAON SO SAID VEHICLE WAS NOT USED FOR THE BUSINESS PURPOSE. THE ASSESSEE TRIED TO JUSTIFY TH AT THOUGH THE CAR WAS REGISTERED AT GURGAON ON 16.09.1992, THE CAR WA S BROUGHT TO THE AJMER. THE A.O., THEREFORE, CONCLUDED THAT UP TO 3 1.3.1993 I.E. TILL THE END OF THE ACCOUNTING YEAR, THE ASSESSEE HAS NOT BR OUGHT CAR TO PLACE OF HIS BUSINESS I.E. AJMER. THE A.O. MADE THE DISA LLOWANCE OF THE DEPRECIATION CLAIMED ON THE MARUTI-1000. THE ASSES SEE CHALLENGED THE DISALLOWANCE BEFORE THE LD. CIT (A) WITHOUT SUC CESS. THE LD. CIT (A) HAS OBSERVED THAT THE ASSESSEE MERELY PRODUCED TWO PETROL BILLS CLAIMING THAT THE CAR WAS USED FOR THE ASSESSEES B USINESS AT AJMER. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. WE ARE NO T INCLINED TO ACCEPT THE APPROACH OF THE LD. CIT (A) FOR REFUSING TO ALL OW THE DEPRECIATION MERELY ON THE BASIS OF DATE OF THE REGISTRATION BUT WE FIND THAT NOTHING ITA 4047/MUM/2004 TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD. 5 HAS BEEN PRODUCED BEFORE US TO CONTROVERT THE OBSER VATION OF THE LD. CIT (A) THAT EXPENDITURE WAS NOT MADE ON THE SAID C AR. THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO SUPPORT THE CLAIM THA T THOUGH CAR WAS REGISTERED ON 16.9.1992 BUT SAME WAS USED BY THE AS SESSEE AT AJMER AND EXPENDITURE WAS ALSO MADE ON THE SAID CAR. IT IS A QUESTION OF FACT AND THE SAID FACT HAS NOT BEEN PROVED BY THE A SSESSEE. WE, THEREFORE, CONFIRM THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND GROUND NO.3 IS DISMISSED. 15. THE NEXT ISSUE IS DISALLOWANCE OF PURCHASE OF P AINTING OF ` 15,000/- AND ` 18,319/- TOWARDS PORTRAIT OF THE ASSESSEES CHAIRM AN AND ITS FRAMING CHARGES. 16. SO FAR AS PAINTING OF THE CHAIRMANS PORTRAIT A ND ITS FRAMING CHARGES ARE CONCERNED, THE LD. COUNSEL SUBMITS THAT THE SAME ARE TO BE ALLOWED AS BUSINESS EXPENDITURE UNDER SEC.37(1). HE, FURTHER SUBMITS THAT THE ASSESSEE HAS PAID ` 10,000/- TOWARDS PORTRAIT OF ITS CHAIRMAN LATE SHRI G.S. TOSHNIWAL. THE ASSESSEE HA D TO SPENT ` 8,319/- TOWARDS FRAMING OF THE SAID PORTRAIT. IN O UR OPINION, THERE IS A SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL. WE , THEREFORE, DIRECT THE A.O. TO ALLOW THE CLAIM MADE BY THE ASSESSEE TO WARDS PORTRAIT OF CHAIRMAN IS CONCERNED. SO FAR AS PAINTING WORTH ` 15,000/- WHICH WAS PURCHASED ACROSS THE COUNTER BY PAYING CASH AND SAID PAINTING WAS DISPLAYED IN THE RECEPTION HALL OF THE ASSESSEE -COMPANY AND THE SAID PORTRAIT IS DISPLAYED IN THE FACTORY PREMISES AS THE CHAIRMAN WAS THE PROMOTER AND FOUNDER-MEMBER OF THE COMPANY AND ENTIRE EXPENDITURE IS ALLOWABLE AS A BUSINESS EXPENDITURE. 17. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSE L. SO FAR AS PAINTING WORTH ` 15,000/- IS CONCERNED, AS PER THE LAW APPLICABLE F OR THE A.Y. 1994-95, IT WAS COVERED BY EXPLANATION TO RULE 6DD(J)(I) OF THE I.T. RULES AND SAME IS ALSO DISPLAYED IN THE BU SINESS PREMISES OF THE ASSESSEE. SO FAR AS PORTRAIT OF THE CHAIRMAN I S CONCERNED, WHO IS ITA 4047/MUM/2004 TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD. 6 THE FOUNDER PROMOTER OF THE ASSESSEES BUSINESS, WH Y THE SAME SHOULD NOT BE ALLOWED AS BUSINESS EXPENDITURE? IN OUR OPI NION, THE SAID EXPENDITURE IS ALLOWABLE. WE, ACCORDINGLY, DIRECT THE A.O. TO ALLOW THE ENTIRE EXPENDITURE. 18. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 6TH SEPTEMBER 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATED : 16TH SEPTEMBER 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)XXI, MUMBAI. 4) THE CIT- CITY -I, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 4047/MUM/2004 TOSHNIWAL PROCESS INSTRUMENTS PVT. LTD. 7 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 06.09.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 06.09.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER