ACIT, Kota V. M/S BHATIA CORPORATION PVT. LTD., Kota

ITA 417/JPR/2012

• Counselvise Citation: 41723114 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation
• Section: 43B; 143(3); 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 417/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 THE A.C.I.T. CIRCLE-1, KOTA. CUKE VS. M/S BHATIA CORPORATION PVT. LTD. 23-24-B, SMALL SCALE INDUSTRIAL AREA, OPP- RAJASTHAN PATRIKA, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AACCB 8402 C VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI.K @ C.O. NO. 42/JP/2012 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 417/JP/2012) M/S BHATIA CORPORATION PVT. LTD. 23-24-B, SMALL SCALE INDUSTRIAL AREA, OPP- RAJASTHAN PATRIKA, KOTA. CUKE VS. THE A.C.I.T. CIRCLE-1, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AACCB 8402 C IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK (ADDL.C.I.T.) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 24/11/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 16/01/2015 ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 2 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 29/02/2012 OF LD. CIT (A), KOT A FOR A.Y. 2008-09. RESPECTIVE GROUNDS OF APPEAL AS WELL AS C.O. ARE AS UNDER:- GROUNDS IN REVENUE APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN:- (I) RESTRICTING THE DISALLOWANCE TO RS. 72,377/- AS AGAINST RS. 1,44,755/- ON ACCOUNT OF SHOWROOM EXPENSES; (II) RESTRICTING THE DISALLOWANCE TO RS. 1,25,000/- AS AGAINST RS. 2,02,102/- ON ACCOUNT OF REPAIR AND MAINTENANCE; (III) DELETING THE DISALLOWANCE OF RS. 8,44,216/- O N ACCOUNT OF UNEXPLAINED, UNVOUCHED INCENTIVE AND REMUNERATION PAID TO THE CUSTOMERS; (IV) THE APPELLANT CRAVES LIBERTY TO RAISE ADDITIO NAL GROUND AND TO MODIFY/AMEND THE GROUND OF APPEAL AT THE TIME OF HEARING. GROUNDS IN CROSS OBJECTION 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS. 61,783/- INCURRED ON FOREIGN TRAVELLING EXPENDITURE OF DIRECTORS EMPLOYEES BY HOLDING THAT THE EMPLOYEES ARE DIRECTORS WIVES WHO TRAVELLED WITH THE DIRECTORS DUE TO THEIR PERSONAL RELATIONS. ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 3 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING AD HOC DISALLOWANCE OUT OF VARIOUS EXPENDITURES AS UNDER:- STAFF WELFARE EXPENSES RS. 19,038/- SHOW ROOM EXPENSES RS. 72,378/- BUSINESS PROMOTION EXPENSES RS. 42,361/- REPAIR & MAINTENANCE EXPENSES RS.1,25,000 /- 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS. 58,315/- OUT OF DEPRECIATION ON VEHICLES BY HOLDING THAT THE VEHICLES ARE NOT ALLOWE D TO BE USED WITHOUT INSURANCE WHICH WAS DONE AFTER THE END OF THE YEAR IGNORING THAT THE VEHICLES WERE REGISTERED BY RTO AS ON 31/3/2008 AND THUS WERE USED DURING THE YEAR. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS. 11,200/- OUT OF PAYMENT OF RS. 55,105/- OF ROAD TAX FOR TRUCKS BY TREATING THE SAM E AS PREPAID EXPENDITURE AND NOT ALLOWING THE DEDUCTION FOR SAME U/S 43B. 5. THE ASSESSEE CRAVES RIGHT TO ADD, ALTER, AMEND A ND MODIFY ANY OF THE GROUND OF APPEAL. 6. NECESSARY COST BE AWARDED TO THE ASSESSEE. 2. THE ASSESSEE DERIVED INCOME FROM AUTHORIZED DEALE R FOR SALE OF VEHICLES, SPARE PARTS AND ACCESSORIES OF M/S MARUTI UDYOG LTD. FOR REPAIRS. THE ASSESSMENT PROCEEDINGS WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE AC T) ON 26/12/2010 BY THE LEARNED ADDL. CIT, RANGE-1, KOTA MAKING THE T OTAL TAXABLE ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 4 INCOME OF THE ASSESSEE AT RS. 1,16,22,904/-. FOLLOWI NG ADDITIONS WERE MADE BY THE ASSESSING OFFICER, WHICH IS AS UNDER:- 1. DISALLOWANCE OUT OF DEALER CONFERENCE AND TRAVELING EXPENSES RS. 1,73,613/- 2. DISALLOWANCE OUT OF STAFF WELFARE EXPENSES RS. 19,038/- 3. DISALLOWANCE OUT OF SHOWROOM EXPENSES RS. 1,44,755/- 4. DISALLOWANCE OUT OF BUSINESS PROMOTION. RS. 42,361/- 5. DISALLOWANCE OUT OF REPAIR AND MAINTENANCE EXPENSES RS. 2,02,102/- 6. DISALLOWANCE OUT OF COMMISSION EXPENSES RS. 1,35,564/- 7. DISALLOWANCE OUT OF DEPR. ON VEHICLES (8,020+50,295) RS. 58,315/- 8. DISALLOWANCE OUT OF ENTERTAINMENT EXPENSES RS. 6,980/- 9. DISALLOWANCE OUT OF TRUCK EXPENSES RS. 11,200/- 10. DISALLOWANCE OUT OF INCENTIVE & REMUNERATION RS. 8,44,216 RS. 16,38,144/- PAID TO CUSTOMERS ASSESSED INCOME RS. 1,16,22,904/- ROUNDED OFF RS. 1,16,22,900/- THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSE SSEE HAD CONFIRMED RS. 14,47,551/- UNDER THE HEAD SHOWROOM EX PENSES. THE LEARNED ASSESSING OFFICER GAVE REASONABLE OPPORTUNI TY OF BEING HEARD TO ASSESSEE TO FURNISH THE DETAILS. THE ASSESSEE HAD FI LED REQUIRED DETAILS AND COPY OF LEDGER ACCOUNT. ON VERIFICATION OF DETA ILS, IT WAS FOUND THAT MOST OF EXPENSES WERE INCURRED IN CASH ON THE BASIS OF SELF MADE ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 5 VOUCHERS, THEREFORE, A LUMP SUM ADDITION OF RS. 1,4 4,755/- BEING 10% OF TOTAL CLAIM WAS DISALLOWED BY THE ASSESSING OFFICE R. UNDER THE HEAD REPAIR AND MAINTENANCE, THE ASSESSE E HAD CLAIMED EXPENSES OF RS. 20,21,020/- IN P&L ACCOUNT. ON VERIFICATION OF DETAILS FILED, IT WAS FOUND BY THE ASSESSING OFFICER THAT A BILL DATED 06/8/2007 OF RS. 32,412/- ISSUED BY FRIG CARE CENTR E AND PAYMENT OF RS. 54,140/- TO JVVN LTD. WERE INCLUDED THEREIN. MON TH WISE SALARY PAYMENT HAD ALSO BEEN INCLUDED. THE ASSESSEE WAS ALSO FAILED TO PRODUCE ALL THE BILLS AND VOUCHERS RELATED TO REPAI R AND MAINTENANCE EXPENSES. THEREFORE, HE PRESUMED THAT THE ENTIRE EX PENSES WERE NOT RELATED TO THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY. THUS, A LUMP SUM DISALLOWANCE OF RS. 2,02,102/- BEING 10% WAS DISA LLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER THE ASSESSING OFFICER VERIFIED THE INCENTI VE AND REMUNERATION PAID TO THE CUSTOMERS, WHICH HAD BEEN DEBITED IN TOTAL AT RS. 23,85,961/- IN P&L ACCOUNT. ON VERIFICATION OF DETAIL, THE LEARNED ASSESSING OFFICER FOUND THAT AN AMOUNT OF RS. 11,07 ,092/- HAD BEEN CLAIMED AS PAID TO THE CUSTOMERS, RS. 7,52,466/- HA D BEEN DEBITED AS SERVICE TAX EXPENSES AND RS. 5,26,403/- HAD BEEN PA ID TO THE EMPLOYEE. HE FURTHER FOUND THAT OUT OF TOTAL INCENT IVE RECEIVED FROM ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 6 M/S SUNDARAM FINANCE LTD., 7,89,279/- WAS PAID TO CU STOMERS AND RS. 1,10,763/- HAD BEEN PAID AGAINST THE SERVICE TAX. H OWEVER, IN OTHER CASES, NO SUCH EVIDENCE WAS FOUND. THE FINANCE COMPAN Y HAD DECIDED ITS TERMS WITH THE ASSESSEE COMPANY AND CUSTOMERS MU TUALLY. THE ASSESSING OFFICER TREATED THE ASSESSEE AS A FACILIT ATOR IN THIS CASE, INTENDS TO GIVE ANY FURTHER BENEFIT OVER AND ABOVE THE BENEFIT BEING GIVEN BY THE FINANCE COMPANY, THEY SHOULD GET REFLE CTED IN THE DOCUMENTS PREPARED BY THE FINANCIAL COMPANY AS WELL AS WAS FOUND IN CASE OF SUNDERAM FINANCE BECAUSE THE DEALER WAS SHAR ING LIABILITY OF CUSTOMER IN REPAYMENT OF LOAN TAKE. NO SUCH EVIDENC E WAS FOUND IN OTHER CASES EXCEPT SELF PREPARED DOCUMENTS BY THE A SSESSEE COMPANY. NEVERTHELESS, THE BENEFIT OF SERVICE TAX PAID WAS GI VEN IN OTHER CASES AS WELL. THUS, TOTAL ADDITION OF RS. 8,44,216/- WAS MADE TO THE TOTAL INCOME FOR WANT OF PROPER VERIFICATION OF THE EVIDEN CES MAINTAINED IN THIS REGARD. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL PARTLY AFTER CONSIDERING THE ASSESSEES REPL Y I.E. THE LEARNED ASSESSING OFFICER MADE AD HOC/LUMP SUM ADDITION OUT OF EXPENSES CLAIMED BY THE APPELLANT. HE HAD NOT BEEN POINTED O UT ANY SPECIFIC ITEM ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 7 OF EXPENSES WHICH HAD NOT BEEN INCURRED WHOLLY AND EX CLUSIVELY FOR BUSINESS PURPOSES. THE CASH PAYMENT PERMITTED UNDER THE LAW FOR EXPENSES CANNOT BE BASIS OF ADDITION. THE LEARNED C IT(A) HAD FOUND THAT THESE DISALLOWANCES EXCESSIVE, THEREFORE, HE R ESTRICTED THE ADDITION TO 5% OF TOTAL EXPENSES. FOR REPAIR AND MAINTENANCE, LEARNED CIT(A) OBSER VED THAT MOST OF THE EXPENSES WERE SUPPORTED BY BILLS AND VOUCHERS , SOME DISALLOWANCE WAS CONSIDERED JUSTIFIED. AFTER CONSIDER ING THE FACT THAT PART OF THE EXPENSES ARE FULLY VOUCHED AND SUPPORTE D BY THE THIRD PARTY VOUCHER, THE DISALLOWANCE WAS RESTRICTED TO RS. 1,25, 000/- AND DELETED THE REMAINING ADDITION OF RS. 77,102/-. UNDER THE HEAD INCENTIVE AND REMUNERATION PAID TO THE CUSTOMERS, IT HAS BEEN OBSERVED BY THE LEARNED CIT( A) THAT THIS EXPENDITURE CAN BE SUMMARIZED AS UNDER:- I) PAID TO CUSTOMERS RS. 11,07,092/- II) SERVICE TAX RS. 07,52,466/- III) PAID TO EMPLOYEES RS. 05,26,403/- TOTAL RS. 23,85,961/- THE ASSESSEE HAD RECEIVED INCENTIVE FROM SUNDERAM F INANCE AT RS. 7,89,279/-. REMAINING INCENTIVE WAS RECEIVED FRO M VARIOUS BANKS ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 8 I.E. RS. 3,17,813/-, WHICH HAS ALSO BEEN PASSED ON T O THE CUSTOMERS. THE ASSESSEE RECEIVED INCENTIVE FROM MARUTI INSURANC E AMOUNTING TO RS. 89,76,823/-. THE ASSESSEE PAID TO THE EMPLOYEE OUT OF THIS INCENTIVE AT RS. 4,47,726/- AND ONLY RS. 21,058/- WA S PASSED ON TO THE CUSTOMERS. ACCORDINGLY HE HELD THAT INCENTIVE PAID TO THE EMPLOYEES WAS REASONABLE AND NO DISALLOWANCE IS CALLED FOR. 4. NOW THE REVENUE IS IN APPEAL AS WELL THE ASSESSEE IS IN C.O. BEFORE US. THE LEARNED D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE EXPENSES INCU RRED BY THE ASSESSEE EITHER IN CASH WAS NOT SUPPORTED WITH PROPER BILLS OR VOUCHERS, THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LE ARNED ASSESSING OFFICER. 5. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF THE BUSINESS AND DULY SUPPORTED WITH PROPER SUPPORTINGS AND BILLS. THE NATURE OF THESE EXPENSES ARE SUCH THAT PAKKA BILLS ARE NOT POSSIBLE AND FEW PAYMENTS ARE TO BE MADE IN CASH. HOWEVER, PAYMENT IN CASH DOES NOT MEAN THAT THE EXPENSES ARE NOT GENUINE. EACH CA SH PAYMENT IS SUPPORTED BY THE SIGNATURE OF THE RECIPIENT ON THE VOUCHERS. HENCE, SIMPLY BECAUSE THE PAYMENT IS IN CASH NO ADVERSE IN FERENCE IS CALLED ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 9 FOR. THE EXPENSES ARE REASONABLE CONSIDERING THE VOL UME OF BUSINESS OF THE ASSESSEE. THE LOWER AUTHORITIES HAVE NOT POINTED OUT ANY SPECIFIC PAYMENT WHICH IS NOT VERIFIABLE. IT IS NOT THE CASE OF THE LOWER AUTHORITIES THAT EXPENSES ARE INFLATED OR FAKE. THUS , EXPENSES ARE FULLY VERIFIABLE. IN RESPECT OF FEW INSTANCES OF EXPENDITURE OF RS. 64 ,980/- UNDER THE HEAD BUSINESS PROMOTION & RS. 86,552/- UNDER THE HE AD REPAIR & MAINTENANCE POINTED OUT BY THE AO IS CONCERNED, IT IS TO BE NOTED AS UNDER:- - RS. 64,980/- INCURRED TOWARDS MARRIAGE & BIRTHDAY GI FTS TO THE FAMILY MEMBERS OF THE STAFF IS A NORMAL BUSINESS/CO URTESY EXPENDITURE INCURRED IN THE COURSE OF RUNNING THE B USINESS. THE SAME IS TO MAINTAIN CORDIAL RELATIONS WITH THE STAFF OF THE COMPANY WITH WHOSE EFFORTS ASSESSEE WAS ABLE TO ACHI EVE SALES TARGET FIXED BY M/S MARUTI UDYOG LTD., THEREBY RECE IVING INCENTIVES. - RS. 32,412/- WAS INCURRED ON PURCHASE OF ELECTRIC WIR ES & CABLES FROM M/S FRIDGE CARE CENTRE. THE SAME WERE USED FOR REPLACEMENT OF ELECTRIC WIRING AT ASSESSEES CITY OF FICE AT NEW COLONY, KOTA & AT WORKSHOP AT 13-16B, INDUSTRIAL ARE A, KOTA. COPY OF VOUCHER & BILLS IS AT. THE SAME WERE ALSO SUB MITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LE TTER DT. 09.12.2010. - THE TOTAL AMOUNT PAID TO JVVNL WAS RS. 80,840/- OUT O F WHICH RS. 18,200/- WAS TOWARDS SECURITY DEPOSITS, RS. 8,500 /- WAS TOWARDS FIXED & OTHER CHARGES & RS. 54,140/- WAS FOR 11KW LINE ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 10 CHARGES. THUS, THE AMOUNT OF RS. 54,140/- WAS THE EXP ENDITURE INCURRED FOR INCREASING THE POWER LOAD WHICH RELATES TO THE BUSINESS OF THE ASSESSEE. THUS, THE EXPENDITURE INCURRED BY ASSESSEE IS NECESS ARILY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LEARNED CIT(A) HAS ALSO ACCEPTED THE EXPLANATION OF THE ASSESSEE BUT STILL WITHOUT ANY BASIS CONFIRMED THE DISALLOWANCE OF RS. 19,038/- & RS. 42, 361/- OUT OF STAFF WELFARE & BUSINESS PROMOTION EXPENSES RESPECTIVELY & RESTRICTED THE DISALLOWANCE OUT OF SHOWROOM EXPENSES TO RS.72,377/- & REPAIR & MAINTENANCE EXPENSES TO RS. 1,25,000/-. NO DISALLOWA NCE CAN BE MADE JUST FOR THE SAKE OF DISALLOWANCE. HENCE, THE ENTIRE DISALLOWANCE BE DELETED. RELIANCE IS ALSO PLACED ON THE FOLLOWING CASE LAWS:- (I) WIDEX INDIA (P) LTD. VS. DCIT 66 DTR 57 (DEL.)(TR IB.) (II) CIT VS. ORACLE INDIA (P) LTD. 199 TAXMAN 181 (D EL) (HC) (MAG.) (III) ARTHUR & ANDERSON & CO. VS. ACIT (2010- TIOL-4 16-ITAT) (IV) SEASONS CATERING SERVICES (P) LTD. VS. DCIT 4 3 DTR 397 (DEL) (TRIB) HE FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED GROSS COMMISSION/INCENTIVE OF RS. 2,67,51,209/- FROM VARI OUS BANKS/FINANCE COMPANIES/INSURANCE COMPANIES AGAINST WHICH IT HAS I NCURRED EXPENSES OF RS. 23,85,961/- TOWARDS SERVICE TAX & INCENTIVE P AID TO ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 11 CUSTOMERS/EMPLOYEES. IN COURSE OF ASSESSMENT PROCEE DINGS, ASSESSEE HAS FURNISHED THE FINANCE/BANK WISE DETAILS OF THE G ROSS COMMISSION RECEIVED & INCENTIVE/SERVICE TAX PAID. IN RESPECT O F SERVICE TAX PAID, COMPLETE DETAILS WERE FURNISHED WHICH WAS ACCEPTED B Y THE AO. IN CASE OF INCENTIVE GIVEN TO THE CUSTOMERS/EMPLOYEES, SAMP LE COPY OF THE CUSTOMER LEDGER ACCOUNT, COPY OF INVOICE, CUSTOMER PAYMENT DETAILS, LETTER FROM THE FINANCE COMPANY CONTAINING DETAILS OF THE AMOUNT PASSED ON TO CUSTOMERS IN RESPECT OF FINANCE THROUG H SUNDRAM FINANCE LTD. , SBI , ICICI BANK & HDFC BANK WAS FILED. THE LE ARNED AO ACCEPTED THE INCENTIVE PASSED ON TO THE CUSTOMER IN RESPECT OF FINANCE THROUGH SUNDARAM FINANCE LTD. BUT WITHOUT ANY BASIS IGNORED THE SIMILAR INCENTIVE PASSED ON TO THE CUSTOMER WHERE FI NANCE IS OBTAINED FROM OTHER BANKS. IN CASE OF INCENTIVE PAID TO THE EMPLOYEES/ADJUSTED IN CUSTOMER ACCOUNT AGAINST THE MARUTI INSURANCE RE MUNERATION, SAMPLE VOUCHERS WERE FURNISHED WHERE THE DETAILED CAL CULATION OF THE INCENTIVE & ITS PAYMENT BY CHEQUE IS INDICATIVE. THE LEARNED CIT(A), CONSIDERING THESE EVIDENCES, HAVE, THEREFORE, RIGHT LY ALLOWED THE INCENTIVE PASSED ON TO THE CUSTOMERS/EMPLOYEES IN R ESPECT OF OTHER BANKS/INSURANCE COMPANIES. IN VIEW OF ABOVE, THE GROUND OF THE ASSESSEE BE ALLOWED BY DISMISSING THE GROUND OF THE DEPARTMENT. ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 12 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT HAD N OT REVERTED THE FINDING GIVEN BY THE LEARNED CIT(A) WITH RESPECT TO SHOWROOM EXPENSES, THEREFORE, WE CONFIRM THE ADDITION MADE BY THE LEARNED CIT(A). HE WAS REASONABLE TO ACCEPT THE ASSESSEES SU BMISSION, THEREFORE, REVENUES APPEAL IS DISMISSED ON THIS GR OUND. THE DISALLOWANCE CONFIRMED UNDER THE HEAD REPAIR AND MAI NTENANCE EXPENSES, THE ASSESSEES ARGUMENTS HAS BEEN FOUND C ONVINCING. HE ALSO FURNISHED COPY OF EVIDENCE AT PAGE NOS. 17 TO 19 OF PAPER BOOK, WHICH HAS ALSO BEEN SUBMITTED BEFORE THE ASSESSING OFFICE R, WHICH SHOWS THAT THE ASSESSEE HAD PURCHASED THE CABLE FROM FRIG CARE CENTRE, 7, AERODRAME CIRCLE, KOTA VIDE BILLS NO. 1133 DATED 06 /8/2007 AND 1117 DATED 04/8/2007, RS. 80,840/- PAID TO JVVN LTD. AS PER PAPER BOOK PAGE NO. 20-21. HOWEVER, EXPENDITURE INCURRED BY THE ASSESSEE UNDER THIS HEAD AT RS. 20,21,020/-. THE ASSESSING OFFICER DISALLOWED 10% OUT OF TOTAL EXPENSES AT RS. 2,02,102/-, WHICH WAS RESTRI CTED BY THE ASSESSING OFFICER AT RS. 1,25,000/-. THE LEARNED A.R . HAS NOT CONTROVERTED THE FINDINGS GIVEN BY THE LEARNED CIT( A) AS WELL AS THE ASSESSING OFFICER THAT THE ASSESSEE WAS UNABLE TO PR ODUCE THE COMPLETE BILLS AND VOUCHERS RELATED TO REPAIR AND MAINTENANC E. THEREFORE, HE WAS ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 13 REASONABLE TO RESTRICT THE DISALLOWANCES AT 5%. ACCO RDINGLY, THE REVENUES APPEAL AS WELL AS C.O. OF THE ASSESSEE ARE DISMISSED ON THIS GROUND. THE LEARNED CIT(A) ALLOWED THE FULL EXPENSES UNDER THE HEAD INCENTIVE AND REMUNERATION PAID TO THE CUSTOMERS AF TER VERIFYING EACH ITEM, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DR, THEREFORE, WE DISMISS THE REVENUES APPEAL ON THIS GROUND. 7. NOW, WE ARE TAKING REMAINING GROUNDS OF C.O. OF TH E ASSESSEE. IN THE FIRST GROUND OF THE C.O. THE APPELLANT HAD CHAL LENGED THE DISALLOWANCE OF RS. 61,783/- INCURRED ON FOREIGN TRA VELING EXPENDITURE OF DIRECTORS, EMPLOYEES BY HOLDING THAT THE EMPLOYE ES WERE DIRECTORS WIVES, WHO TRAVELLED WITH THE DIRECTORS DUE TO THEIR PERSONAL RELATION. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSE SSEE INCURRED EXPENDITURE ON TRAVELLING AT RS. 8,83,522/-. IT IS FOUND THAT RS. 1,37,598/- AND RS. 1,66,598/- WERE INCURRED ON ACCOU NT OF FOREIGN TRAVELLING OF DIRECTORS FAMILY MEMBERS ALONGWITH SH RI RAM BHATIA AND HIS FAMILY MEMBERS ON VARIOUS DATES. THE EXPENSES OF RS. 68,000/- AND RS. 1,04,814/- WERE INCURRED ON FOREIGN TRAVELLING O F CHILDREN AND WIVES. THE ASSESSEE FAILED TO JUSTIFY SUCH FOREIGN TRAVELLI NG FOR BUSINESS PURPOSES, THEREFORE, HE HELD THAT THE EXPENSES OF R S. 1,73,613/- WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PU RPOSES. THE LEARNED ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 14 CIT(A) VERIFIED THE EXPENDITURE, WHICH WAS FOUND AT R S. 1,66,598/- IN PLACE OF RS. 1,73,613/- AND HELD THAT NONE OF THE E MPLOYEE OTHER THAN THE FAMILY MEMBERS OF DIRECTORS WENT ON TOUR TO CHIN A AND ATHENS AND TRAVELLED FOR THEIR PERSONAL RELATION NOT AS AN EMP LOYEE OF THE COMPANY. ACCORDINGLY, HE HELD PERSONAL EXPENDITURE INCURRED BY THE COMPANY. HE CONFIRMED THE ADDITION OF RS. 1,04,814/- AND DELETE D THE BALANCE ADDITION OF RS. 68,799/-. THE LEARNED AR ARGUED THAT SALARIES OF SMT. JAYA BH ATIA AND SMT. SHALINI BHATIA WERE ALLOWED BY THE LEARNED ASSESSING OFFICER AS EMPLOYEES. THIS ITSELF ESTABLISHES THAT ALTHOUGH THE Y WERE DIRECTORS WIVES BUT THEY WERE WORKING IN THEIR CAPACITY AS AN E MPLOYEE OF THE COMPANY AND THEREFORE THE EXPENDITURE INCURRED ON T HEIR FOREIGN TRAVELLING IS NECESSARILY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS AND QUALIFY FOR DEDUCTION U/S 37(1) OF THE ACT. HE RELI ED UPON THE FOLLOWING CASE LAWS: I) MAHESH CHAND JAIN VS. ACIT 108 TTJ 190 (DEL.)(TRI B.). II) DCIT VS. PAREKH PLAST INDIA (P.) LTD. 137 ITD 20 8 (MUM.) (TRIB.)(2012) III) CIT & ANR. VS. LUWA INDIA LTD. 75 DTR 367 (KAR.) (HC) (2012) IV) RAHULJEE & CO. (P) LTD. VS. ITAT & ORS. 73 DTR 8 9 (DEL.) (HC) (2012) THEREFORE, HE PRAYED TO DELETE THE ADDITION CONFIRME D BY THE LEARNED CIT(A). ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 15 THE LEARNED D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND ARGUED THAT THE DIRECTORS WIVES WERE NOT G ONE TO ANY BUSINESS PURPOSES TO FOREIGN. AFTER CONSIDERING BOTH THE SIDES AND CASE LAWS REFE RRED BY THE LEARNED A.R., WHICH ARE NOT SQUARELY APPLICABLE ON THE CASE OF ASSESSEE AS THE RELATIVE IN ALL THE CASE LAWS REFERRED BY TH E ASSESSEE WERE ON FOREIGN TOUR RELATED TO BUSINESS PURPOSES. HOWEVER, IN CASE OF ASSESSEE, NO EVIDENCE WAS PRODUCED BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US THAT PURPOSE OF THE DIRECTORS AS WELL AS T HEIR WIVES AND DIRECTORS EMPLOYEES WAS FOR BUSINESS. THEREFORE, WE CO NFIRM THE ORDER OF THE LEARNED CIT(A). 8. THE FIRST POINT OF SECOND GROUND OF ASSESSEES C .O. IS AGAINST CONFIRMING THE AD HOC DISALLOWANCE UNDER THE HEAD ST AFF WELFARE EXPENSES. THE STAFF WELFARE EXPENSES CLAIMED BY THE A SSESSEE AT RS. 1,90,382/-, THE LEARNED ASSESSING OFFICER DISALLOWE D RS. 19,038/- BEING 10% OF TOTAL EXPENSES CLAIMED ON THE GROUND THAT TH E EXPENSES WERE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PUR POSES AND ON SELF MADE VOUCHERS , WHICH HAS BEEN CONFIRMED BY THE LEAR NED CIT(A) BY OBSERVING THAT THE DISALLOWANCES WERE HAVING PERSONAL NATURE AND CLAIMED ON SELF MADE VOUCHERS. THE LEARNED AR REITER ATED THE SAME ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 16 ARGUMENTS THAT NO SPECIFIC DEFECTS HAD BEEN POINTED OUT BY THE LEARNED ASSESSING OFFICER AND THE LEARNED CIT(A) EXCEPT CLA IMED ON SELF MADE VOUCHERS. HE FURTHER SUBMITTED THAT RS. 64,980/- WAS INCURRED TOWARDS MARRIAGE AND BIRTHDAY GIFTS TO THE FAMILY MEMBERS O F THE STAFF IS A NORMAL BUSINESS/COURTESY. THE EXPENDITURE INCURRED I N COURSE OF RUNNING THE BUSINESS FOR MAINTENANCE OF CORDIAL REL ATION WITH THE STAFF. AFTER CONSIDERING THE ASSESSMENT ORDER AS WELL AS FI NDING GIVEN BY THE LEARNED CIT(A) WE HOLD THAT NO SPECIFIC DEFECTS HAD BEEN POINTED OUT BY THE LOWER AUTHORITIES EXCEPT HOLDING THAT THEY WERE C LAIMED ON SELF MADE VOUCHERS. THE ASSESSEE HAD INCURRED THESE EXPEN SES ON STAFF WELFARE, WHICH ARE REQUIRED TO MAINTAIN THE CORDIAL R ELATION WITH THE STAFF, SO THAT THE COMPANYS TARGET CAN BE ACHIEVED . WE FIND THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES, THEREFORE WE DELETE THE ADDITION CONFIRMED BY THE LEARNED CIT(A) ON THIS GROUND. ACCORDINGLY, THIS GROUND OF A SSESSEES C.O. IS ALLOWED. 9. THE THIRD GROUND OF ASSESSEES C.O. IS AGAINST DI SALLOWANCE OF RS. 58,315/- OUT OF DEPRECIATION ON VEHICLES BY HOLDING THAT THE VEHICLES ARE NOT ALLOWED TO BE USED WITHOUT INSURANCE, WHICH WAS DON E AFTER THE END OF THE YEAR IGNORING THAT THE VEHICLES WERE REGISTER ED BY THE RTO AS ON ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 17 31/3/2008. THE LEARNED ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE HAD CLAIMED DEPRECIATION ON DEMO MOTOR CAR FOR RS. 8,03,951/-. DURING THE YEAR, THE ASSESSEE ADDED ALTO OF RS. 2,51,400/- , SWIFT OF RS. 7,16,983/- AND WAGON-R OF RS. 3,79,209/- IN THIS LI ST OF ASSETS ON 31/3/2008, WHICH WAS THE LAST DAY OF FINANCIAL YEAR. THE R.C. OF WAGON- R AND ALTO HAD BEEN ISSUED ON 31/3/2008 AND INSURAN CE WAS TAKEN ON 2/4/2008. IT HAS BEEN HELD BY THE ASSESSING OFFICER THAT UNINSURED MOTOR VEHICLES CANNOT BE USED FOR THE PURPOSE OF TR ANSPORTATION. ACCORDINGLY HE DISALLOWED THE DEPRECIATION ON WAGON- R AND ALTO AT RS. 50,295/-, WHICH HAS BEEN CONFIRMED BY THE LEARNED C IT(A) BY OBSERVING THAT NO VEHICLE IS ALLOWED TO USE WITHOUT INSURANCE, WHICH WAS TAKEN AFTER THE END OF THE YEAR. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT TH E MOTOR CARS WERE USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S. HE ALSO SUBMITTED THAT DETAILS OF ADDITIONS SHOWING BILL DAT E, REGISTRATION DATE, INSURANCE DATE AND PUT TO USE DATE WAS SUBMITTED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DT. 09.12.2010, WHICH PROVED THAT WAGON R & ALTO WERE REGISTERED ON 31.03.2008 AND AS SOON AS THEY WERE REGISTERED AND PLACED AT THE SHOWROOM OF ASSESSE E FOR DEMONSTRATION, THE SAME ARE PUT TO USE. THE SUBSEQUE NT INSURANCE ON ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 18 02.04.2008 HAS THUS NO RELEVANCE IN SO FAR AS THE O WNERSHIP AND THE USE OF THE DEMO CARS ARE CONCERNED. THERE IS NO LAW T HAT WITHOUT INSURANCE, A VEHICLE CANNOT BE USED. THE ASSESSEE H AS, THUS, SATISFIED THE CONDITION OF SECTION 32(1) AND THEREFORE ENTITL ED TO DEPRECIATION THEREON. HE RELIED UPON THE DECISION IN THE CASE O F GOVERDHAN PRASAD SINGHAL VS. ITO & ANR. 27 DTR 1 (JPR.)(TRIB.) FOR TH E CAR TAKEN ON THE BASIS OF DELIVERY NOTE ON 31/3/2003 AND AJAY GOYAL VS. ITO 99 TTJ 164 (JOD.)(TRIB.) AND PRAYED THAT THE ADDITION CONFIRMED BY THE CIT(A) MAY BE DELETED. THE LEARNED D.R. SUPPORTED THE ORDER OF THE LEARNED CIT(A). AFTER CONSIDERING THE FACTS OF THE CASE, WE HOLD THAT BOTH THE VEHICLES WERE REGISTERED ON 31/3/2008 AND VEHICLES WERE USED FOR D EMO PURPOSES WHICH CAN SAFELY BE PLACED AT THE BUSINESS PREMISES FOR THE PURPOSE OF DEMO. EVEN ON DEMO VEHICLES, THE INSURANCE IS REQUI RED BUT THE ASSESSEE HAD PLACED THESE VEHICLES IN ITS SHOWROOM F OR DEMO PURPOSES, WHICH PROVED THAT THE ASSETS WERE USED ON LAST DATE F OR THE PURPOSE OF BUSINESS, ACCORDINGLY, DEPRECIATION CLAIMED BY THE ASSESSEE IS JUSTIFIED. THEREFORE, WE ALLOW THIS GROUND OF ASSESSEES C.O. 10. THE 4 TH GROUND OF THE ASSESSEES C.O. IS AGAINST CONFIRMIN G THE DISALLOWANCE OF RS. 11,200/- OUT OF PAYMENT OF RS. 5 5.105/- OF ROAD TAX ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 19 FOR TRUCKS BY TREATING THE SAME AS PREPAID EXPENDIT URE. THE LEARNED ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIM ED RS. 1,84,758/- UNDER THE HEAD TRUCK EXPENSES. ON VERIFICATION OF D ETAILS, IT WAS FOUND BY THE ASSESSING OFFICER THAT RS. 55,105/- WAS PAID/ DEPOSITED ON ACCOUNT OF ROAD TAX ON 25/3/2008, WHICH INCLUDED A S UM OF RS. 11,200/- AS PREPAID ROAD TAXES, WHICH PERTAINED TO NEXT FINAN CIAL YEAR. THUS, HE MADE ADDITION OF RS. 11,200/- IN THE INCOME OF THE ASSESSEE, WHICH WAS CONFIRMED BY THE LEARNED CIT(A) BY OBSERVING THAT AS PER SECTION 43B OF THE ACT, THE EXPENSES IS ALLOWABLE IF THE SAME IS ALLOWABLE OTHERWISE. THIS EXPENSE OF RS. 11,200 IS NOT ALLOWABLE OTHERWISE AS PERTAINED TO NEXT YEAR. THE LEARNED AR SUBMITTED THAT AS PER SECTION 43B, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT, IS ALLOWABLE IN TH E PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID. THE ROAD TAX IS EXPE NDITURE ALLOWABLE UNDER THE ACT AND THEREFORE THE SAME IS TO BE ALLOWE D ON ACTUAL PAYMENT BASIS EVEN IF A PART OF IT RELATE TO THE SU BSEQUENT YEAR. HE RELIED UPON THE FOLLOWING CASE LAWS:- (I) PAHARPUR COOLING TOWERS PVT. LTD. VS. CIT 61 DTR 309 (CAL.)(HC) (II) DCIT VS. GLAXO SMITHKLINE CONSUMER HEALTH CARE LTD. 107 ITD 343 (CHD.)(SB) (III) K.C.P. LTD. VS. ITO 38 ITD 15 (HYD.)(SB) (IV) CIT VS. SOUTHERN ROADWAYS LTD. 265 ITR 404 (MAD. )(HC) ITA 417/JP/2012 & C.O. 42/JP/2012_ ACIT VS BHATIA CORP. PVT. LTD. 20 (V) CIT VS. MODIPON LTD. 205 TAXMAN 79 (DEL.)(HC)(MA GZ.) THE LEARNED D.R. HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). AFTER CONSIDERING THE SUBMISSIONS O F BOTH THE PARTIES AND THE CASE LAWS CITED BY THE ASSESSEE, WE FIND THAT THE PAYMENT OF ROAD TAX IN ADVANCE IS ALLOWANCE U/S 43B EVEN PERTAI NED TO SUBSEQUENT YEAR. ACCORDINGLY, THE ASSESSEES C.O. IS ALLOWED ON THIS GROUND. 11. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D AND C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/01/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED 16 TH JANUARY, 2015. *RANJAN. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-1, KOTA. 2. IZR;FKHZ @ THE RESPONDENT- M/S BHATIA CORPORATION PVT. LTD., KO TA. 3. VK;DJ VK;QDRVIHY @ THE CIT(A),KOTA 4. VK;DJ VK;QDR @ CIT, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA 417/JP/2012 & C.O. 42/JP/2012). VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR