The ACIT, Circle-1, JAMNAGAR V. Ashwani Metals Pvt. Ltd., JAMNAGAR

ITA 473/RJT/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9072 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DM RINDANI
• Assessee Lawyers: C S ANJARIA
• Keywords: Depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] LOZJH IZNHI DQEKJ LOZJH IZNHI DQEKJ LOZJH IZNHI DQEKJ LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA DSFM;K] YS[KK LNL; ,OA EGKOHN IZLKN] U;KF;D LNL; DS LE{KA DSFM;K] YS[KK LNL; ,OA EGKOHN IZLKN] U;KF;D LNL; DS LE{KA DSFM;K] YS[KK LNL; ,OA EGKOHN IZLKN] U;KF;D LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER (1). . / I.T.A. NO.473/RJT/2014 ( / ASSESSMENT YEAR : 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JAMNAGAR. / VS. M/S. ASHWANI METALS PVT. LTD. 64, DIGVIJAY PLOT, JAMNAGAR. ./ ./ PAN/GIR NO. : AADCA 9579 Q ( / APPELLANTS ) .. ( / RESPONDENTS ) ASSESSEE BY : SHRI. C. S. ANJARIA, SR. D.R. REVENUE BY : SHRI. D. M. RINDANI, A.R. / DATE OF HEARING 03/04/2017 ! / DATE OF PRONOUNCEMENT 21/04/2017 '# / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT/REVE NUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- JAMNAGAR, DATED 23/05/2014 FOR THE ASSESSMENT YEAR (AY)2010-11. ITA NO.473/RJT/ 2014 ACIT VS. ASHWANI METALS PVT. LTD. ASST.YEAR 2010-11 - 2 - 2. DEPARTMENT HAS BEEN TAKEN FOLLOWING GROUNDS OF APPEALS: (I) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW 50% DEPRECIATION IN RESPECT OF HONDA CITY JAZZ CAR AGAINST 15% ALLOWED BY THE AO. (II) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW A SUM OF RS.26,25,000/- ON ACCOUNT OF EXCESS REMUNERATION CLAIMED BY THE DIRECTORS OF THE COMPANY. 3. FACTS OF THE CASE ARE THAT, THE APPELLANT IS EN GAGED IN THE MANUFACTURING AND TRADING IN BRASS PARTS. AO IN THE ASSESSMENT ORDER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED THAT THE ASSESSEE/APPELLANT HAD CLAIMED DEPRECIATION @ 50% I N RESPECT OF HONDA CITY JAZZ MOTOR CAR WHICH WAS PURCHASED DURING THE YEAR. SINCE THE RATE OF DEPRECIATION ALLOWABLE ON MOTOR CARS IS ONLY 15% AS PER LAW, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE REASON FOR CLA IM OF EXCESSIVE DEPRECIATION. 4. IT WAS EXPLAINED THAT THE HONDA CITY JAZZ MOTOR CAR WAS COVERED IN THE DEFINITION OF COMMERCIAL VEHICLE AND THEREFO RE WAS ELIGIBLE FOR CLAIM OF DEPRECIATION @ 50%. 5. AO OF THE OPINION THAT HONDA CITY JAZZ MOTOR CAR WAS ELIGIBLE IS NOT A COMMERCIAL VEHICLE, THEREFORE, INSTEAD OF DEP RECIATION CLAIMED OF RS. 3,93,612/- CLAIMED @ 50% OF THE COST OF THE HON DA CITY JAZZ MOTOR ITA NO.473/RJT/ 2014 ACIT VS. ASHWANI METALS PVT. LTD. ASST.YEAR 2010-11 - 3 - CAR, ONLY 15% DEPRECIATION WAS ALLOWED AND THE BALA NCE 35% I.E. RS. 2,75,528/- WAS ADDED TO THE TOTAL INCOME OF THE APP ELLANT. 6. FURTHER, THE APPELLANT HAS CLAIMED EXPENSES ON A CCOUNT OF DIRECTORS REMUNERATION TO THE TUNE OF RS.52,50,000 /-. IT WAS OBSERVED THAT THE TOTAL AMOUNT OF INDIRECT EXPENSES COMPRISI NG VARIOUS ADMINISTRATIVE EXPENSES DEBITED TO THE PROFIT AND L OSS ACCOUNT IS RS.1,15,22,623/- OUT OF WHICH THE DIRECTORS REMUNE RATION ALONE IS RS.52,50,000/-. THEREFORE, APPELLANT ASKED BY THE A O AND HE HAS TAKEN INTO ACCOUNT THE NATURE OF BUSINESS, TURNOVER, PROF IT RATIO, LOCATION ETC AND AMOUNT OF DIRECTORS REMUNERATION PAID BY THEM. 7. CONSIDERING THE FACT THAT THERE MIGHT BE OTHER COMPARABLE COMPANIES WHICH MIGHT BE PAYING MORE DIRECTORS REM UNERATION BUT HAVE ESCAPED THE ATTENTION OF THE ASSESSING OFFICER A LE NIENT VIEW IS BEING TAKEN AND ONLY 50% OF THE DIRECTORS REMUNERATION PA YMENT CLAIM OF RS.52,50,000/- WAS DISALLOWED U/S. 40A(2)(B) AND AD DED TO THE TOTAL INCOME OF THE APPELLANT. 8. AGAINST THE SAID ORDER APPELLANT PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A), WHO ALLOWED THE APPEAL O F THE ASSESSEE. 9. NOW DEPARTMENT HAS COME BEFORE US. ITA NO.473/RJT/ 2014 ACIT VS. ASHWANI METALS PVT. LTD. ASST.YEAR 2010-11 - 4 - 10. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER AND PAPER BOOK FILED BY THE ASSESSEE, DISCUSSED UNDER R ULE 18(VI). IN PREVAILING PRACTICE OF THE TRANSPORT IS, THEY ISSUE TWO TYPES OF REGISTRATION CERTIFICATE, ONE FOR THE PRIVATE VEHICLE ANOTHER FO R COMMERCIAL VEHICLE AND FOR THAT FEE IS ALSO DIFFERENT AND NUMBER PLATE OF THE SAID VEHICLE IS ALSO DIFFERENT. WHEN WE SPECIFICALLY ASKED FROM THE LEAR NED AR THAT THIS CAR IS USED FOR WHICH PURPOSE, HE CANDIDLY SAID THAT THIS VEHICLE USE FOR PRIVATE PURPOSE ONLY NOT FOR COMMERCIAL PURPOSE AND ALSO DR EW OUR ATTENTION TOWARDS DEPRECIATION TABLE OF NEW APPENDIX-I OF INC OME TAX RULES. BUT IN OUR CONSIDERED OPINION SAME IS NOT APPLICABLE IN TH E INSTANT CASE. THEREFORE, IN OUR OPINION ASSESSEE IS ENTITLED FOR 15% OF THE DEPRECIATION ONLY. 11. ON THIS GROUND WE SET ASIDE THE ORDER OF CIT(A) . 12. THE SALARY IS DEPEND ON THE INDIVIDUAL EXPERTIS E AND EXPERIENCE AND ACCOMPLISHMENT. THE DETERMINATION OF SALARY IS EQUALLY DEPENDENT UPON THE NATURE OF WORK INVOLVED AND RISK PROFILE O F THE ASSESSEE COMPANY. THEREFORE, BENCH MARKING THE SAME WITH COM PARABLE MAY NOT BE NECESSARY TO BE AN ABSOLUTE METHOD TO INDULGE IN TO ESTIMATED DISALLOWANCES, COUPLED WITH THIS BOTH ASSESSEE AS W ELL AS THE DIRECTOR EMPLOYEES ARE IN THE SAME TAX BRACKET. THEREFORE, C ULPABILITY ON THE ITA NO.473/RJT/ 2014 ACIT VS. ASHWANI METALS PVT. LTD. ASST.YEAR 2010-11 - 5 - TOUCH STONE OF SECTION 40(A)(2)(B) CANNOT BE INFERR ED STRAIGHT AWAY. WE ARE NOT CONVINCED BY THE PROCESS OF REASONING ASSIG NED BY THE AO FOR MAKING IMPUGNED DISALLOWANCES. 13. IN THE RESULT, APPEAL OF THE DEPARTMENT IS PART LY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 21/04/2017 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LNL; U;KF;D LNL; YKS[KK LNL; U;K F;D LNL; YKS[KK LNL; U;K F;D LNL; YKS[KK LNL; U;K F;D LNL; (PRADIP KUMAR KEDIA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 21/04/2017 PRITI YADAV, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ %& ' / CONCERNED CIT 4. ' ( ) / THE CIT(A)-JAMNAGAR. 5. ()* ++%& , %&! , , / DR, ITAT, RAJKOT 6. *-. / / GUARD FILE. / BY ORDER, ( + //TRUE COPY// / !'# ( DY./ASSTT.REGISTRAR) #$ % , , / ITAT, RAJKOK TRUE COPY