ACIT, Faridabad V. M/s. Talbros Engineering Ltd, Faridabad

ITA 4166/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4201 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 31-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 23-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GULATI
• Assessee Lawyers: ASHWANI KUMAR TANEJ
• Keywords: Gift; Depreciation; Additional evidence; Assessment record
• Section: 191

Judgement Text

I.T.A. NO.4166 /DEL/09 1/6 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.4166 /DEL/2009 ASSESSMENT YEAR : 2004-05 ACIT, M/S TALBROS ENGINEERING LTD., CIRCLE-1, PLOT NO.7-75, SECTOR-6, FARIDABAD. V. FARIDABAD. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AABCT-0247-C APPELLANT BY : SHRI MANISH GULATI, SR. DR. RESPONDENT BY : SHRI ASHWANI KUMAR TANEJ, ORDER. PER A.K. GARODIA, AM: THIS IS REVENUE'S APPEAL DIRECTED AGAINST THE ORDER OF LD CIT(A), FARIDABAD DATED 26.8.2009 FOR ASSESSMENT YEAR 2004- 05. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 3,40,048/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FOREIGN TRAVELING E XPENSES EVEN THOUGH THE ASSESSEE HAD FAILED TO ESTABLISH THAT THESE EXP ENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT(A) HAS ERREDON FACTS AND IN LAW IN DELETING THE ADDITION O F RS.89,211/- AND RS.2,35,722/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF TELEPHONE, . I.T.A. NO.4166/DEL/09 2/6 VEHICLE MAINTENANCE EXPENSES, INSURANCE OF CAR AND DEPRECIATION ON CAR, IGNORING THE REAL LIFE FACTUAL PROPOSITION THAT POS SIBILITY OF USER OF TELEPHONE, VEHICLE COULD NOT BE ABSOLUTELY RULED OU T AND IN CONTRAVENTION OF THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASES OF CIT V. CHITRAM AND CO. (P)_ LTD. 191 ITR 96 AND CIT V. MAD URA COATS LTD. 263 ITR 241. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 1,15,584/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALES PROMOTION EXP ENSES EVEN THOUGHT THE ASSESSEE HAD FAILED TO ESTABLISH THAT THESE EXP ENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. 3. REGARDING GROUND NO.1, THE FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO.2 OF THE ASSESSMENT ORDER THAT T HE ASSESSEE HAS CLAIMED DEDUCTION OF RS.17,18,995/- TOWARDS FOREIGN TRAVELI NG EXPENSES. IT IS NOTED BY THE ASSESSING OFFICER THAT THIS INCLUDES EXPENSES OF RS .13,60,194/- STATED TO BE TOTAL BOARDING AND LODGING EXPENSES. IT WAS SUBMITTED BEF ORE THE ASSESSING OFFICER THAT THESE EXPENSES ARE INCURRED IN RELATION TO SOL ICIT BUSINESS ABROAD. IT IS ALSO SUBMITTED THAT SHRI RAJESH TALWAR HAS VISITED DURIN G THE MONTHS OF MAY, AUGUST, OCTOBER AND MARCH TO UK, USA, SRILANKA, MALAYSIA AN D KAULAMPUR. THE ASSESSING OFFICER DISALLOWED 25% OF THE EXPENSES OU T OF HOTEL BOARDING AND LODGING EXPENSES AND IN THIS MANNER HE HAS MADE DIS ALLOWANCE OF RS.3,40,048/- BY HOLDING THAT TO THIS EXTENT, THE EXPENSES ARE IN CURRED FOR NON BUSINESS PURPOSE. 4. REGARDING GROUND NO.2, THE FACTS ARE THAT THE AS SESSEE COMPANY HAS INCURRED AN AMOUNT OF RS.5,35,267/- ON USE OF TELEP HONE BUT NO LOG BOOK/REGISTER HAS BEEN MAINTAINED. IT IS HELD BY T HE ASSESSING OFFICER THAT USE OF TELEPHONE FOR NON BUSINESS PURPOSE CANNOT BE RULED OUT AND HE MADE DISALLOWANCE OF RS.89,210/- TO THE EXTENT OF 1/6 TH OF TOTAL EXPENSES. SIMILARLY, IT IS ALSO NOTED BY HIM THAT THE ASSESSEE HAS INCURRED EX PENSES OF RS.8,19,290/- ON . I.T.A. NO.4166/DEL/09 3/6 ACCOUNT OF MAINTENANCE OF VEHICLE AND RS.37,073/- O N ACCOUNT OF CAR INSURANCE AND HAS CLAIMED DEPRECIATION ON CAR TO THE EXTENT O F RS.5,57,974/- AND IN THIS MANNER TOTAL AMOUNT OF RS.14,14,337/- WAS INCURRED BY THE ASSESSEE ON ACCOUNT OF CAR RUNNING AND MAINTENANCE. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE COULD NOT PRODUCE ANY LOG BOOK/REGISTE R FOR USE OF VEHICLE ONLY FOR BUSINESS PURPOSE. IT IS ALSO HELD BY THE ASSESSING OFFICER THAT USE OF VEHICLES FOR NON BUSINESS PURPOSE CANNOT BE RULED OUT AND HE MAD E DISALLOWANCE OF RS.2,35,722/- OUT OF VEHICLE MAINTENANCE EXPENSES T O THE EXTENT OF 1/6 TH OF TOTAL SUCH EXPENSES. 5. REGARDING GROUND NO.3, THE FACTS ARE THAT ON SAM E PAGE OF THE ASSESSMENT ORDER, IT IS NOTED BY THE ASSESSING OFFI CER THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS.11,55,842/- TOWARDS SALES PROMOTION EXPENSES. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT FROM TH E DETAILS, IT IS NOTED THAT THE COMPANY HAS DISTRIBUTED GIFTS AND THERE ARE IMPREST PAYMENTS TO VARIOUS EMPLOYEES. THE ASSESSING OFFICER MADE DISALLOWANCE TO THE EXTENT OF 10% OF THESE EXPENSES ON ACCOUNT OF UN-VOUCHED PERSONAL LE DGER EXPENSES NOT RELATING TO THIS BUSINESS AND IN THIS MANNER HE MADE DISALLO WANCE OF RS.1,15,584/-. 6. BEING AGGRIEVED, THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A)ON ALL THESE ABOVE ISSUES AND LD CIT(A) HAS D ELETED ALL THE ABOVE DISALLOWANCES AND NOW THE REVENUE IS IN APPEALED BE FORE US. 7. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER WHEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD AND AFTER CONSIDERING THE FACTS OF THE PRESENT CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT (A). REGARDING DELETION OF DISALLOWANCE OUT OF TRAVELING EXPENSES, WE FIND THA T THIS ASPECT WAS DECIDED BY THE LD CIT(A) AS PER PARA NO.8 OF HIS ORDER WHICH I S REPRODUCED BELOW:- . I.T.A. NO.4166/DEL/09 4/6 PARA 8. I HAVE CAREFULLY CONSIDERED THE CONTENTION S OF THE LD AR AND PERUSED THE ORDER OF ASSESSMENT . I HAVE ALSO GONE THROUGH THE ASSESSMENT RECORDS AND VARIOUS DOCUMENTS PLACED BY THE LD AR IN THE PAPER BOOK AND HOLD AS FOLLOW:- THE DETAILS OF FOREIGN TRAVELING SUBMITTED BY THE A SSESSEE SHOWS THAT THE VISITS WERE UNDERTAKEN TO MEET ITS CUSTOMERS SITUAT ED AT THESE PLACES. THAT THESE CUSTOMERS WERE VISITED IS ESTABLISHED BY THE EVIDENCES FILED IN THE FORM OF MAILS SENT BY THE ASSESSEE COMPANY TO O NE OF ITS CUSTOMERS LOCATED IN USA BY THE NAME OF BEARMACH WHEREIN THE VISIT TO THE CUSTOMERS AND EXAMINATION OF SHAFTS WAS DISCUSSED. THE ASSESSEE HAS FURTHER GIVEN ASSURANCE OF MONITORING FURTHER SUPPL IES TO BEARMACH IN VIEW OF TECHNICAL SHORT COMINGS IN THEIR PREVIOUS SUPPLI ES. ANOTHER EMAIL SENT TO WORLD WIDE ON THE 16 TH MARCH, 2004 MENTIONS ITS CUSTOMERS G. MUTHUMALA MOTORS IN SRILANKA AND DISCUSSES MATTER R ELATING TO PRICES OF ITS PRODUCTS. THESE TWO DOCUMENTS ESTABLISH THE FA T OF VISIT TO USA AND SRILANKA FOR BUSINESS PURPOSE. THE CO0PY OF ACCOUNT S OF THE PARTIES VISITED IN THE COURSE OF THESE TRAVELS SHOWING TRANSACTIONS WITH THEM IN FUTURE YEARS ALSO ESTABLISH THAT THE PLACES VISITED BY THE DIRECTOR HAD CUSTOMERS OF THE ASSESSEE LOCATED THERE AND DUE TO THE VISIT, BUSINESS DEVELOPMENT TOOK PLACE WHICH RESULTED IN FURTHER SALES TO THEM IUN FUTURE YEARS. THE QUANTUM OF SALE TO ALLMAKES LTD. BORDER HOLDING LTD . AND MIDWEST TRUCK AND AUTO PARTS INC. LOCATED IN USA RS.2,92,15,070/- DURING THE IMPUGNED ASSESSMENT YEAR WHICH INCREASED TO RS.3,82,28,851/ - IN THE NEXT F.Y. WXE AUTO ENTERPRISES LOCATED IN MALYSIA WAS SOLD GO ODS AMOUNTING TO RS.12,74,015.70 IN THE F.Y. AND RS.5,12,324.73 IN T HE NEXT F.Y. FURTHER, THE FACT THAT THE ASSESSING OFFICER HAS ACCEPTED TH E FOREIGN TRAVELING EXPENSES HAVING BEEN INCURRED FOR BUSINESS PURPOSE BY ALLOWING A PART OF IT, A PARTIAL DISALLOWANCE COULD NOT HAVE BEEN MADE BY HIM AND THAT TOO WITHOUT ANY BASIS. IN THIS CONNECTION, THE LD ARS RELIANCE ON THE ABOVE . I.T.A. NO.4166/DEL/09 5/6 JUDGMENTS IS VERY MUCH PERTINENT AND WELL TARGETED. IN VIEW OF THE SAME, THE DISALLOWANCE MADE FOR A SUM OF RS.3,40,048/- IS DELETED. 9. FROM THE ABOVE, WE FIND THAT LD CIT(A) HAS GIVEN AMPLE REASONS FOR DELETING THE DISALLOWANCE. WE ALSO FIND THAT APART FROM DOUBTING, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY ADVERSE MATER IAL TO JUSTIFY PARTIAL DISALLOWANCE OUT OF FOREIGN TRAVELING EXPENSES AND HENCE WE CONFIRM THE ORDER OF THE LD CIT(A) ON THIS ISSUE. 10. REGARDING GROUND NO.2, WE FIND THAT LD CIT(A) H AS DECIDED THIS ISSUE ON THE BASIS OF PARA 11 OF HIS ORDER WHICH IS ALSO REP RODUCED BELOW:- PARA 11. I HAVE CAREFULLY CONSIDERED THE CONTENTI ONS OF THE LD AR AND PERUSED THE ORDER OF ASSESSMENT. I HAVE ALSO GONE T HROUGH THE ASSESSMENT RECORDS, ADDITIONAL EVIDENCES AND VARIO US DOCUMENTS PLACED BY THE LD AR IN THE PAPER BOOK AND HOLD AS FOLLOWS: - IN VIEW OF THE FACT THAT ALL DETAILS WERE FILED, BO OKS WERE EXAMINED, DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER ON AN ADHOC BASIS WITHOUT POINTING OUT ANY SPECIFIC INSTANCE OF NON B USINESS USE AND THE ASSESSEE BEING A COMPANY WHICH IS A SEPARATE JURIST IC ENTITY I.E. A COMPANY WHICH COULD NOT HAVE PERSONALLY US MADE ON THIS BEHALF, FOLLOWING THE DECISION OF JURISDICTIONAL TRIBUNAL I N THE CASE OF HARYANA OXYGEN V. DCIT 76 ITD 32 (DEL.). 11. WE FIND THAT AS PER ABOVE PARA OF THE ORDER OF LD CIT(A), IT HAS BEEN HELD BY HIM THAT THE ASSESSING OFFICER HAS MADE ADHOC DI SALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC INSTANCE OF NON BUSINESS USE. IT I S ALSO HELD BY LD CIT(A) THAT THE ASSESSEE BEING A COMPANY, WHICH IS A SEPARATE J URISTIC ENTITY I.E. COMPANY, IT CANNOT HAVE PERSONAL USE OF VEHICLE AND TELEPHONE. THIS IS BY NOW SETTLED . I.T.A. NO.4166/DEL/09 6/6 POSITION. HENCE, WE DO NOT FIND ANY REASON TO INTER FERE IN THE ORDER OF LD CIT(A) ON THIS ISSUE ALSO. GROUND NO.2 OF THE REVENUE IS A LSO REJECTED. 12. REGARDING GROUND NO.3, WE FIND THAT LD CIT(A) H AS DECIODED THIS ISSUE AS PER PARA NO.14 OF HIS ORDER. IN THIS PARA, IT IS ST ATED BY THE LD CIT(A) THAT ALL THE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. BOOKS OF ACCOUNTS AND VOUCHERS WERE EX AMINED BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND NO SPECI FIC INSTANCE OF NON BUSINESS USE HAS BEEN POINTED OUT BY HIM AND HENCE THE DISAL LOWANCE ON ADHOC BASIS CANNOT BE SUSTAINED. ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A) IN THE ABSENCE OF ANY SPECIF IC INTANCE HAVING BEEN POINTED OUT BY THE ASSESSING OFFICER REGARDING ALLEGED NON BUSINESS USE AND HENCE GROUND NO.3 OF THE REVENUE IS ALSO REJECTED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH APRIL ,2010. SD/- SD/- (A.D. JAIN) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 9 .4.2010. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).