M/s KCI Bearings (I) P. Ltd., Surendranagar V. The Dy.Commr. of Income Tax, Surendranagar Circle, Surendranagar

ITA 445/RJT/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6684 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-02-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DM RINDANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 445/RJT/2016 ASSESSMENT YEAR : 2013-14 M/S. KCI BEARINGS (INDIA) PVT LTD, 1-KCI COMPOUND, OLD JUNCTION ROAD, NEAR WATER TANK, SURENDRANGAR-363001 PAN : AABCT 1214 H VS THE DCIT, SURENDRANAGAR CIRCLE, SURENDRANAGAR / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI D.M. RINDANI, AR REVENUE BY : SHRI PRAVEEN KUMAR, SR DR / DATE OF HEARING : 22/02/2017 / DATE OF PRONOUNCEMENT: 14/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-7, AHME DABAD DATED 24.10.2016 PASSED FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL OF THE ASSESSEE READ AS UN DER:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 7, AHMEDABAD ERRED IN UPHOLDING DISALLOWANCE OF RS.5,97,649/- MA DE BY THE ASSESSING OFFICER U/S 36(1)(VA) BEING EMPLOYEES' CO NTRIBUTION TOWARDS PROVIDENT FUND AND STATE INSURANCE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 7, AHMEDABAD ERRED IN UPHOLDING DISALLOWANCE OF RS.91,756/- MADE BY THE ASSESSING ITA NO. 445/RJT/2016 M/S. KCI BEARINGS (INDIA) PVT LTD VS. DCIT AY: 2013-14 2 OFFICER BEING 10% OF TRAVELLING EXPENSES OF RS. 9,1 7,568/- CLAIMED BY THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 7, AHMEDABAD ERRED IN UPHOLDING DISALLOWANCE OF RS.1,04,718/- MA DE BY THE ASSESSING OFFICER BEING 10% OF MOTOR CAR EXPENSES O F RS. 10,47,182/- CLAIMED BY THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 7, AHMEDABAD ERRED IN RESTRICTING THE DISALLOWANCE OF RS.9,030/- OUT OF RS. 18,058/- MADE BY THE ASSESSING OFFICER BEING 10% OF TELEPHON E EXPENSES OF RS.90,291/- CLAIMED BY THE APPELLANT. 3. GROUND NO.1 PERTAINS TO DISALLOWANCE OF RS.5,97, 649/- UNDER SECTION 36(1)(VA) ON ACCOUNT OF DELAY IN DEPOSIT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND STATE INSUR ANCE. THE LD. AR FOR THE ASSESSEE, SHRI D.M. RINDANI, FAIRLY ADMITTED AT THE TIME OF HEARING THAT THE ISSUE, AT PRESENT, IN THE ABSENCE OF SUPRE ME COURT DECISION, IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT S TATE ROAD TRANSPORT CORPORATION, (2014) 366 ITR 170 (GUJ.). ACCORDINGL Y, GROUND NO.1 OF THE ASSESSEE IS DISMISSED. 4. GROUND NO. 2 RELATES TO DISALLOWANCE OF RS.91,75 6/- BEING 10% OF THE TRAVEL EXPENSES OF RS.9,17,568/-, INCLUDING FOR EIGN TRAVEL EXPENSES, CLAIMED BY THE ASSESSEE. THE LD. AR FOR THE ASSESS EE PLEADED THAT THE DISALLOWANCE OF TRAVELLING EXPENSES AT 10% IS AD-HO C AND EXCESSIVE AND SOUGHT SUITABLE RELIEF. WE NOTE THAT THE CIT(A) HA S OBSERVED THAT THE PURPOSE OF TRAVELLING UNDERTAKEN IS NOT ESTABLISHED . IT WAS FURTHER OBSERVED BY THE CIT(A) THAT PERSONAL ELEMENT IN THE EXPENSES CANNOT BE RULED OUT. THE CIT(A) ACCORDINGLY AFFIRMED THE DIS ALLOWANCE OF 10% ESTIMATED BY THE ASSESSING OFFICER. THE LD. AR COU LD NOT PINPOINT ANY ITA NO. 445/RJT/2016 M/S. KCI BEARINGS (INDIA) PVT LTD VS. DCIT AY: 2013-14 3 PARTICULAR DEFICIENCY IN THE OBSERVATIONS MADE BY T HE CIT(A). ACCORDINGLY, WE DECLINE TO INTERFERE WITH THE ACTIO N OF THE CIT(A). GROUND NO.2 IS ACCORDINGLY DISMISSED. 5. GROUND NO.3 PERTAINS TO DISALLOWANCE OF RS.1,04, 718/- BEING 10% OF THE MOTOR CAR EXPENSES OF RS.10,47,182/- CLAIMED BY THE ASSESSEE. LD AR ARGUED THAT THE ESTIMATIONS MADE ARE AD-HOC AND EXCESSIVE AND SOUGHT SUITABLE RELIEF. WE NOTE THE CONTENTION OF THE ASSESSEE THAT THE COMPANY HAS ALREADY CONSIDERED THE VALUE OF PERQUIS ITE AND THE SAME IS ADDED IN THE CASE OF SIX DIRECTORS AS PER 3(2) OF I T RULES. IT WAS DEMONSTRATED BY THE ASSESSEE THAT THE COMPANY HAS A LREADY ADDED RS.2,36,000/- IN THE CASE OF ALL SIX DIRECTORS. IN SUPPORT THEREOF FORM NO.16 WAS ENCLOSED BEFORE CIT(A) AS A PROOF FOR CON SIDERING USE OF MOTOR CAR BY THE DIRECTORS AS PERQUISITE. WE NOTE THAT T HE CIT(A) HAS NOT COMMENTED ON THIS FACTUAL ASPECT WHILE CONFIRMING T HE ACTION OF THE ASSESSING OFFICER. WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE. THE ASSESSEE HAVING SHIFTED PERQUISITE ELEMENT IN THE H ANDS OF THE DIRECTORS FOR TAXATION, NO ESTIMATION OF AD-HOC DISALLOWANCE WOULD BE BEFITTING. THUS, WE ACCEDE TO THE CONTENTION RAISED BY THE LD. AR AND DIRECT THE ASSESSING OFFICER TO DELETE THE AFORESAID DISALLOWA NCE OF RS.1,04,718/-. GROUND NO.3 IS ACCORDINGLY ALLOWED. 6. GROUND NO.4 RELATES TO DISALLOWANCE OF RS.9,030/ - CONFIRMED BY THE CIT(A) BEING 10% OF THE TELEPHONE EXPENSES OF R S.90,291/- AS AGAINST DISALLOWANCE OF RS.18,058/- MADE BY THE ASSESSING O FFICER. WE NOTE THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT T HE ASSESSEE IS OBLIGED BY THE CONTRACTUAL OBLIGATION TO PROVIDE TELEPHONE AT THE RESIDENCES OF THE DIRECTORS WHO ARE REQUIRED TO ATTEND BUSINESS CONVE RSATION 24X7 AND THUS ITA NO. 445/RJT/2016 M/S. KCI BEARINGS (INDIA) PVT LTD VS. DCIT AY: 2013-14 4 IT CANNOT BE SAID THAT THERE CAN BE ELEMENT OF PERS ONAL USE. IT WAS FURTHER CONTENDED THAT THE ELEMENT TOWARDS PERSONAL USER CA N, AT BEST, BE ADDED IN THE HANDS OF THE BENEFICIARY DIRECTORS AND NOTHI NG COULD BE DISALLOWED IN THE HANDS OF THE COMPANY. WE FIND MERIT IN THE C ONTENTIONS OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE SUSTAINED BY THE CIT(A). ACCORDINGLY, GROUND NO.4 IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14 TH MARCH, 2017 AT AHMEDABAD SD/- SD/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED 14/03/2017 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. , / DR, ITAT, RAJKOT 6. & / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) ' #, / ITAT, RAJKOT