Chloritech Industries, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 4581/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0119 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 31-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 28-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Keywords: Depreciation
• Section: 80HHC; 80IB; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING : 31-8-2010 DRAFTED ON:31-8-201 0 ITA NO. 4581 /AHD/ 2007 ASSESSMENT YEAR :2004-05 M/S. CHLORITECH INDUSTRIES, HARIKUNJ, OPP. C.N. VIDYALAYA, AMBAWADI, AHMEDABAD. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-10, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD. PAN/GIR NO. : AABFC 2255 J (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY: SHRI VIMALENDU VERMA, D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XVI, A HMEDABAD, DATED 31-10-2007. 2. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE OF THE ASSESSEE FILED ADJOURNMENT APPLICATION SEEKING ADJO URNMENT OF HEARING ON THE GROUND THAT SHRI VARTIK R. CHOKSHI, CHARTERED ACCOUNTANT IS APPEARING BEFORE VISHAKHAPATNAM BENCH OF THE TRIBUNAL. THE BENCH WAS OF THE VIEW THAT THE APPEAL OF THE ASSESSEE CAN BE DECIDED WITHOUT THE ASSISTANCE OF THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND THEREFORE, PROCE EDED TO DECIDE THE APPEAL AFTER CONSIDERING THE MATERIALS AVAILABL E ON RECORD AND THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTAT IVE. 3. GROUND NO.1 OF THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HOLDIN G THAT EXPORT PROFITS FOR COMPUTING DEDUCTION UNDER SECTION 80HHC SHOULD BE FIRST - 2 - REDUCED BY THE DEDUCTION AVAILABLE TO THE ASSESSEE UNDER SECTION 80IB. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC REDUCED BUSINESS PROFIT OF `.6,15,10,655/- BY THE AMOUNT OF `.35,62,105/- BEING DEDUCTION ALLOWED UNDER SECTION 80IB OF THE A CT AND ARRIVED AT THE DEDUCTION ALLOWABLE UNDER SECTION 80HHC AT `.36 ,42,689/- IN PLACE OF `.43,72,602/- CLAIMED BY THE ASSESSEE WITHOUT RE DUCING THE AMOUNT OF DEDUCTION ALLOWABLE UNDER SECTION 80IB WHILE COM PUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. THEREBY THE LEARNED ASSESSING OFFICER DISALLOWED EXCESS DEDUCTION OF `.7,29,913/- CLAIMED UNDER SECTION 80HHC OF THE ACT. ON APPEAL, THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION OF THE MADRAS SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. ROHIN I GARMENTS (2007) 294 ITR (AT) 15 (CHENNAI)(SB) CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER. 5. BEING AGGRIEVED BY THE SAID ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE IS IN APPEAL B EFORE US. 6. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY TH E DECISION OF THE DELHI SPECIAL BENCH OF THE TRIBUNAL IN CASE OF ACIT V. HINDUSTAN MINT & AGRO PRODUCTS (P) LTD. (2009) 119 ITD 107 (SB) (D EL) WHEREIN IT WAS HELD THAT IN VIEW OF PROVISIONS OF SECTION 80IA (9) DEDUCTION UNDER SECTION 80HHC IS TO BE ALLOWED ON PROFITS AND GAINS AS REDUCED BY THE DEDUCTION CLAIMED AND ALLOWED UNDER SECTION 80IB/IA . THEREFORE, WE DO NOT FIND ANY MISTAKE IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), WHICH IS CONFIRMED AND THE GR OUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 7. GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHOLD ING THE DISALLOWANCE OF A PART OF DEPRECIATION ON MOTOR CAR . - 3 - 8. THE BRIEF FACTS ARE THAT THE LEARNED ASSESSING O FFICER OBSERVED THAT THE ASSESSEE HAS PURCHASED A NEW CAR AND PETRO L AND MAINTENANCE OF VEHICLE WERE DEBITED IN THE PROFIT A ND LOSS ACCOUNT. THE ASSESSEE HAS ADDED 1/6 TH OF THE EXPENSES SUOMOTO BUT HAS NOT ADDED ANY PART OF THE DEPRECIATION ATTRIBUTABLE TO THE PERSONAL USE OF THE CAR BY THE PARTNERS. HE ACCORDINGLY, DISALLOWE D 1/6 TH DEPRECIATION ON MOTOR CAR CLAIMED BY THE ASSESSEE. 9. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE DISALLOWANCE BY FOLLOWING THE DECISIO N OF THIS TRIBUNAL IN THE CASE OF PIONEER BARREL MANUFACTURING CO. IN ITA NO.252/AHD/2000. 10. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESEN TATIVE AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE I NSTANT CASE, THE LEARNED ASSESSING OFFICER DISALLOWED 1/6 TH OF DEPRECIATION ON CAR ON THE GROUND OF PERSONAL USER OF THE CAR WHICH WAS CO NFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE A SSESSEE BEING AGGRIEVED FILED APPEAL BEFORE US. WE FIND THAT IT I S NOT IN DISPUTE THAT THE CAR WAS USED FOR PERSONAL PURPOSES IN AS MUCH A S THE ASSESSEE HIMSELF IN THE RETURN OF INCOME DISALLOWED 1/6 TH OF CAR RUNNING EXPENSES FOR PERSONAL USE. AS THE PERSONAL USER OF CAR WAS ESTIMATED AT 1/6 TH BY THE ASSESSEE HIMSELF, THE DISALLOWANCE OF DEPRE CIATION OF 1/6 TH ON CAR BY THE LEARNED ASSESSING OFFICER DOES NOT R EQUIRE ANY INTERFERENCE BY US. THEREFORE, THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONFIRMED AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 11 GROUND NO.3 OF THE APPEAL IS DIRECTED AGAINST DI SALLOWANCE OF `.1,32,236/- OUT OF TELEPHONE EXPENSES CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 12. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNE D ASSESSING OFFICER OBSERVED THAT TELEPHONE EXPENSES OF `.6,61, 180/- FOR VARIOUS TELEPHONE CONNECTIONS INSTALLED AT OFFICE, FACTORY AND RESIDENCE AS - 4 - WELL AS MOBILE PHONES PROVIDED TO THE PARTNERS WERE DEBITED AND PERSONAL USE OF THE TELEPHONES AND MOBILES BY THE P ARTNERS COULD NOT BE RULED OUT. HE ACCORDINGLY, DISALLOWED 1/5 TH OF SUCH EXPENSES WHICH WORKED OUT TO `.1,32,236/- TREATING THE SAME AS FOR PERSONAL USE. 13. IN APPEAL, BEFORE THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) THE ASSESSEE ARGUED THAT FACTORY OF THE A SSESSEE IS LOCATED OUTSTATION I.E. AT NANDESARI, VADODARA. SO THE TEL EPHONE EXPENSES OF `.6,61,180/- ON TOTAL TURNOVER OF `.28.92 CRORES IS REASONABLE AND NO PART OF SUCH EXPENSES SHOULD HAVE BEEN TREATED AS E XPENDITURE FOR PERSONAL USE. 14. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT THE ASSESSEE HAS NOT PRODUCED ANYTHING TO SHOW THAT THE RE WAS NO PERSONAL USE OF MOBILE/TELEPHONE BY THE PARTNERS AT OFFICE/RESIDENCE/FACTORY. HE OBSERVING THAT DISALL OWANCE OF 1/5 TH OF TOTAL EXPENSES IS REASONABLE ON ACCOUNT OF PERSONAL USE OF TELEPHONE/MOBILE AND ALSO OBSERVING THAT SIMILAR DI SALLOWANCE WAS UPHELD BY HIS PREDECESSOR IN ASSESSMENT YEAR 2003-0 4 CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER. 15. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESEN TATIVE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE IN STANT CASE, THE ASSESSEE CLAIMED TELEPHONE EXPENSES AT `.6,61,180/- . THE LEARNED ASSESSING OFFICER DISALLOWED 1/5 TH OUT OF THE SAME ON THE GROUND THAT PERSONAL USE OF THE TELEPHONE BY THE PARTNERS CANNO T BE RULED OUT. IN APPEAL, THE ASSESSEE SUBMITTED BEFORE THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) THAT ITS TOTAL TURNOVER OF THE YEAR UNDER CONSIDERATION WAS `.28.92 CRORES AND KEEPING IN VIE W THIS BACKGROUND THE TOTAL TELEPHONE EXPENSES OF `.6,61,180/- DOES N OT WARRANT ANY DISALLOWANCE ON ACCOUNT OF PERSONAL USER. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER ON THE GROUND THAT SIMILA R DISALLOWANCE WAS MADE IN THE CASE OF THE ASSESSEE IN EARLIER ASSESSM ENT YEAR 2003-04. - 5 - WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD BY T HE REVENUE TO SHOW THAT THE TELEPHONE WAS USED FOR PERSONAL PURPO SES. THE DISALLOWANCE WAS MADE MERELY ON THE BASIS OF SURMIS ES. FURTHER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NO T DEALT WITH THE CONTENTION OF THE ASSESSEE THAT EXPENSES OF `.6,61, 180/- UNDER THE HEAD TELEPHONE EXPENSES WAS FOR BUSINESS NEED OF TH E ASSESSEE AND THE SAME WAS JUSTIFIED KEEPING IN VIEW THE BUSINESS TURNOVER PROCURED BY THE ASSESSEE OF `.28.92 CRORES DURING THE YEAR U NDER CONSIDERATION. NO MATERIAL WAS BROUGHT BEFORE US BY THE REVENUE TO SHOW THAT THE DISALLOWANCE WAS MADE OF ONLY THAT EXPENDITURE WHIC H EXCEEDS THE PROPORTION OF THE EXPENDITURE ALLOWED TO THE TOTAL TURNOVER AS IN THE IMMEDIATELY PRECEDING YEAR. FURTHER, IN ABSENCE OF ANY MATERIAL TO SHOW THAT TELEPHONE EXPENSES CLAIMED DURING THE YEA R WAS EXCESSIVE OR THE SAME INCLUDES ANY PERSONAL EXPENDITURE IN OU R CONSIDERED OPINION THE DISALLOWANCE MADE ARBITRARILY IS NOT SU STAINABLE. WE THEREFORE, DELETE THE DISALLOWANCE OF TELEPHONE EXP ENSES OF `.1,32,236/- AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 01ST SEPTEMBER,2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD: ON THIS 01ST DAY OF SEPTEMBER, 2010 COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE R ESPONDENT 3. THE CIT CONCERNED 4. THE LD. C IT (APPEALS)-XVI,ABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD - 6 - DATE INITIALS 1. DRAFT DICTATED ON 31-8-2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 31-8-2010 ------ ------------- 3. DRAFT PROPOSED & PLACED 31-8-2010 --- ---------------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 31-8-2010 ----------- -------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- -- ------------------ 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ----------- ----- ---------------------