M/s Nahan Ferro Alloys & Chemicals Pvt. Ltd., Kala Amb V. DCIT, Yamunanagar

ITA 433/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5360 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.433CHD/2011 (ASSESSMENT YEAR : 2006-07 NAHAN FERRO ALLOYS & CHEMICALS PVT. LTD. VS. THE D.C.I.T., KALA AMB. YAMUNANAGAR. PAN: AAACN4615K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI N.K.SAINI, DR O R D E R THE APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 25.1.2011 RELATING TO ASSE SSMENT YEAR 2006-07 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME-T AX ACT. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL : 1. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEAL S) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.5636/- OUT OF TELEPHONE, TRAVELING AND INSURANCE EXPENSES FOR ALLEGED PERSONAL USE IN CASE OF A COMPANY WHICH IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS ) HAS FURTHER ERRED IN SUSTAINING THE ADHOC DISALLOWANCE AT 10% AS AGAINST 15% MADE BY THE ASSESSING OFFICER OUT OF EXPENSES CLAIMED IN RESPEC T OF ELECTRIC REPAIRS, MACHINERY REPAIRS AND BUILDING REPAIRS ETC. WHICH IS ARBITRARY & UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS ) HAS FURTHER ERRED IN NOT ALLOWING DEDUCTION UNDER 2 SECTION 80IC OF THE ACT ON WEIGH BRIDGE RECEIPTS AND INTEREST RECEIPTS WHICH ARE ARBITRARY AND UNJUSTIFIED. 4. WITHOUT PREJUDICE TO THE ABOVE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS FURTHER ERRED IN ALLOWING EXPENSES OF RS.1,00,000/- ONLY AS AGAINST RS.2,14,357/- CLAIMED AGAINST THE WEIGH BRIDGE RECEIPTS WHICH ARE ARBITRARY & UNJUSTIFIED. 5. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS ) HAS FURTHER ERRED IN NOT ALLOWING THE ADJUSTMENT OF INTEREST INCOME OF RS.9250/- AGAINST BANK CHARGES WHICH IS ARBITRARY & UNJUSTIFIED. 6. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED OF LAW AND FACTS OF THE CASE AND IS, THUS, UNTENABLE. 3. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OUT OF TELEPHONE, TRAVELING AND INSURA NCE EXPENSES FOR PERSONAL USE THE LEARNED A.R. FOR THE ASSESSEE POI NTED OUT THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND NO DISALL OWANCE IS WARRANTED ON ACCOUNT OF PERSONAL USE BY THE DIRECTORS OF THE ASSESSEE COMPANY. 4. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 5. ON THE PERUSAL OF RECORD I FIND THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY AND CERTAIN DISALLOWANCE WAS MADE I N THE HANDS OF THE SAID COMPANY FOR PERSONAL USE UNDER THE HEAD TELEP HONE, TRAVELING AND INSURANCE, ETC. THERE IS NO MERIT IN THE AFORESAID DISALLOWANCE BEING MADE IN THE HANDS OF THE COMPANY WHERE THE SAID FAC ILITIES, IF ANY, ARE UTILIZED BY THE DIRECTORS AND STAFF OF THE COMPANY. I FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. NUCHEM LTD. (2011) 55 DTR (P&H) 14. THE ASSESSING 3 OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE OF R S.5636/-. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS ALLOWED. 6. THE GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINS T THE DISALLOWANCE OUT OF EXPENSES CLAIMED UNDER THE HEAD ELECTRIC RE PAIRS, MACHINERY REPAIRS AND BUILDING REPAIRS. THE ASSESSING OFFIC ER HAD DISALLOWED 10% OF THE EXPENSES AS BEING NOT VERIFIABLE AS THE SOME OF THE EXPENSES WERE SUPPORTED BY THE INTERNAL VOUCHERS WHICH WERE NOT SIGNED ALSO. THE CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 10% O F THE EXPENSES. THE DISALLOWANCE IN THE PRESENT CASE HAS BEEN MADE PURE LY ON ESTIMATE BASIS AND I RESTRICT THE SAID DISALLOWANCE TO 5% OF THE T OTAL EXPENDITURE CLAIMED UNDER THE HEAD ELECTRIC REPAIRS, MACHINERY REPAIRS AND BUILDING REPAIRS. 7. THE GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINS T NON-ALLOWANCE OF DEDUCTION UNDER SECTION 80IC OF THE ACT WAS NOT PRE SSED BY THE ASSESSEE AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 8. VIDE GROUND NO.4 THE ASSESSEE HAD RAISED THE ALT ERNATE ISSUE THAT WHILE COMPUTING THE PROFITS OF BUSINESS ELIGIBLE FO R DEDUCTION UNDER SECTION 80IC OF THE ACT, THE WEIGH BRIDGE RECEIPTS ARE TO BE EXCLUDED. HOWEVER, THE EXPENSES DIRECTLY RELATED TO SUCH WEIG H BRIDGE RECEIPTS HAVE TO BE ADDED AND THE ONLY NET RECEIPTS HAVE TO BE EXCLUDED FROM THE ELIGIBLE PROFITS OF BUSINESS. THE ASSESSEE HAD CLA IMED THE SAID EXPENDITURE AT RS.2,14,357/- WHICH WAS NOT ALLOWED BY THE ASSESSING OFFICER. 9. THE CIT(A) VIDE PARA 3.08 HELD AS UNDER : 3.08 IN THE COMMENTS ON THE WRITTEN SUBMISSIONS, T HE A.O. SUBMITTED THAT EXPENSES CLAIMED TO BE INCURRED AMOUNTING TO RS.2,14,357/- FOR WEIGH BRIDGE RECEIPTS OF RS.3,74,760/- IS EXCESSIVE. THE A.O. FURTHER SUBMITTED THAT OUT OF TOTAL SALARY OF 4 RS.3,21,604/- DEBITED IN THE P&L (AGAINST GROSS REVENUE RECEIPTS OF MORE THAN RS.1.62 CRORES), SALARY TO THE EXTENT OF RS.1,44,082/- HAS BEEN ALLOCATED TO BUSINESS OF WEIGH BRIDGE INVOLVING RECEIPTS OF JUST RS.3,74,760/-. SIMILARLY ALL OTHE R EXPENSES SUCH AS BONUS, LEAVE WITH WAGES, PF & ESI, PRINTING & STATIONERY, BUILDING REPAIR & MAINTENANCE, OIL & LUBRICANT ETC. HAVE BEEN ALLOCATED ARBITRARILY WITHOUT ANY BASIS. THE APPELLANT IN THE REJOINDER REITERATED ITS SUBMISSIO NS THAT TO EARN WEIGH BRIDGE RECEIPT OF RS.3.75 LACS, THE EXPENDITURE REQUIRED IS ALARY TO STAFF SOCIAL BENEFITS ATTACHED TO IT, BUILDING REPAIR, WEIGH BRIDGE REPAIR & MAINTENANCE, PRINTING AND STATIONERY AND A SMALL AMOUNT OF OIL & LUBRICANT. THE APPELLANT HAS, HOWEVER, NOT ABLE TO PRODUCE ANY RECORD IN SUPPORT OF HIS CLAIM THAT EXPENSES OF RS.2,14,357/- WERE INCURRED FOR OPERATING THE WEIGH BRIDGE. THE APPELLANT, AS SUCH, HAS NOT BEEN ABLE TO ADDRESS/REBUT THE FINDINGS MADE BY THE A.O. IN HIS COMMENTS ON ITS WRITTEN SUBMISSIONS. TAKING IN VIEW OF ENTIRETY OF FACTS, TOTAL EXPENSES OF RS. ON E LAC IS HELD TO BE INCURRED FOR RUNNING AND OPERATIN G WEIGH BRIDGE. AS FAR AS BANK INTEREST IS CONCERNED , THE SAME IS TO BE TAKEN AS INCOME FROM OTHER SOURCES AND HENCE IS TO BE REDUCED FROM THE INCOME FOR WORKING OUT THE ELIGIBLE INCOME FOR ALLOWING DEDUCTION U/S 80IC OF THE ACT. THE A.O. I S ACCORDINGLY DIRECTED TO WORK OUT THE DEDUCTION U/S 80IC OF THE ACT AS PER LAW. 10. ON THE PERUSAL OF THE RECORD AND THE SUBMISSION S MADE BY THE LEARNED A.R. FOR THE ASSESSEE I FIND THAT THE CIT(A ) HAS REPRODUCED THE WRITTEN SUBMISSIONS OF THE ASSESSEE IN PARA 3.06 IN WHICH THE ASSESSEE HAD TABULATED THE EXPENSES INCURRED FOR CARRYING OU T WEIGH BRIDGE OPERATION. THE SAID EXPENSES INCLUDED THE EXPENDIT URE ON SALARY, BONUS, PF, ESI IN ADDITION TO BUILDING REPAIRS, PRINTING & STATIONERY, OIL & 5 LUBRICANT AND WEIGH BRIDGE REPAIR & MAINTENANCE. T HE SAID EXPENDITURE EXCEPT FOR THE WEIGH BRIDGE REPAIR & MAINTENANCE EX PENSES HAVE BEEN BOOKED BY THE ASSESSEE ON THE GROUND THAT CERTAIN E XPENSES ARE LINKED TO THE SAID WEIGH BRIDGE OPERATION CARRIED ON BY THE A SSESSEE. FROM THE PERUSAL OF THE DETAILS REPRODUCED AT PAGE 10 OF THE APPELLATE ORDER IT TRANSPIRES THAT AS AGAINST THE TOTAL SALARY OF RS.3 ,21,604/- THE ASSESSEE CLAIMS THAT THE SALARY IN RELATION TO WEIGH BRIDGE OPERATION TOTAL TO RS.1,44,082/- AND TO THE MANUFACTURING PROCESS RS.1 ,77,522/-. SIMILARLY, THE OTHER EXPENSES ON ACCOUNT OF BONUS, PF, ESI, ETC. HAVE BEEN BIFURCATED. THE EXPENSES ON BUILDING REPAIRS HAVE ALSO BEEN BIFURCATED UNDER THE TWO HEADS. I AM IN CONFORMITY WITH THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.1 LAC. THE GROUND NO.4 RAISED BY THE ASSESSEE IS THUS DISM ISSED. 11. THE GROUND NO.5 RAISED BY THE ASSESSEE IS AGAIN ST THE ADJUSTMENT OF BANK CHARGES AGAINST BANK INTEREST INCOME EARNED BY THE ASSESSEE. WHEN CONFRONTED, THE ASSESSEE WAS UNABLE TO EXPLAIN HOW THE BANK CHARGES ARE RELATABLE TO THE BANK INTEREST EARNED BY THE ASSESS EE. IN THE ABSENCE OF ANY EVIDENCE ON RECORD, THE ASSESSEE IS NOT ENTITLE D TO CLAIM THE SET OFF OF THE BANK CHARGES AGAINST BANK INTEREST. THE GR OUND OF APPEAL RAISED BY THE ASSESSEE IS DISALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF JUNE, 2011. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 29 TH JUNE, 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH