DCIT, Chandigarh V. M/s V.I.R. Foods Ltd., Chandigarh

ITA 487/CHANDI/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8990 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INOSHI SHARMADR
• Keywords: Depreciation; Business expenditure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 487/CHD/2015 ASSESSMENT YEAR: 2011-12 THE DCIT, VS M/S V.I.R. FOODS LTD., CIRCLE 1(1), SCO 2437, SECTOR 22-C, CHANDIGARH. CHANDIGARH. PAN: AACCV0538M (APPELLANT) (RESPONDENT) APPELLANT BY : MS. INOSHI SHARMA,DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 08.11.2016 DATE OF PRONOUNCEMENT : 09.11.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-I CHANDIGARH DATED 02.02.2015 FOR ASSESSMENT YEAR 2011-12. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE FINDINGS OF AUTHORITIES BEL OW. 3. ON GROUND NOS. 1 TO 5, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 50,00,000/- AND RS. 2 1,50,00,000/- IN RESPECT OF THE AMOUNT RECEIVED FRO M M/S MANDIR TIE UP PVT. LTD. 4. THE ASSESSEE CHALLENGED THE ADDITION OF RS. 2.50 CR BEFORE LD. CIT(APPEALS) ON ACCOUNT OF OUTSTANDIN G BALANCE OF UNSECURED LOANS. THE LD. CIT(APPEALS) DELETED THE ADDITION OF RS. 50 LACS AS WELL AS FURT HER DELETED ADDITION OF RS. 1.50 CR ON WHICH REVENUE IS IN APPEAL. REGARDING REST OF THE AMOUNT OF RS. 50 LAC S, THE LD. CIT(APPEALS) CONFIRMED THE ADDITION. THE LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE IS NOT IN APPEAL AGAINST PART OF THE ADDITION MAINTAINED BY L D. CIT(APPEALS). 5. IN THE BACKGROUND OF THESE FACTS, IT IS NOTED IN THE IMPUGNED ORDER THAT AS PER LEDGER ACCOUNT OF M/S MANDIR TIE UP PVT. LTD., THE OUTSTANDING BALANCE OF UNSECURED LOAN FROM THIS COMPANY WAS OF RS. 2.50 CR . IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT OUT OF T HIS AMOUNT, RS. 50 LACS WAS RECEIVED IN THE PRECEDING Y EAR AND OUT OF REST OF THE AMOUNT OF RS. 2 CR, CHEQUE O F RS. 1.50 CR HAD NOT BEEN ENCASHED BY THE ASSESSEE COMPANY AND WAS RETURNED BACK IN THE NEXT YEAR. TH E EXPLANATION OF THE ASSESSEE WAS THAT SINCE RS. 50 L ACS PERTAIN TO THE PRECEDING YEAR, ADDITION OF RS. 50 L ACS OUT OF TOTAL ADDITION SHOULD NOT BE MADE IN ASSESSM ENT YEAR UNDER APPEAL. REGARDING CHEQUES OF RS. 1.50 C R WHICH WAS RETURNED BACK, IT WAS EXPLAINED THAT ADDI TION 3 OF THIS AMOUNT SHOULD NOT BE MADE BECAUSE THIS AMOU NT WAS NOT CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT WAS, THEREFORE, SUBMITTED THAT ADDITI ONS ARE NOT JUSTIFIED. 6. THE LD. CIT(APPEALS), CONSIDERING SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD NOTED THAT SINC E THE AMOUNT OF RS. 50 LACS WAS RECEIVED BY THE ASSESSEE IN PRECEDING YEAR, IT CANNOT BE TREATED AS UNEXPLAINED DURING THE YEAR UNDER CONSIDERATION, THEREFORE, ADD ITION OF RS. 50 LACS WAS DELETED. REGARDING THE CHEQUES RECEIVED OF RS. 1.50 CR WHICH WERE NEVER ENCASHED B Y THE ASSESSEE, IT WAS FOUND BY THE LD. CIT(APPEALS) THAT SAID AMOUNT WAS NEVER RECEIVED BY THE ASSESSEE COMPANY. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AS PER ASSESSMENT ORDER ON THE GROUND THAT SECTION 68 OF THE ACT CLEA RLY STATED THAT IT COVERS THE TOTAL AMOUNT CREDITED IN THE BOOKS OF ACCOUNT. THE SIMPLE POINT INVOLVED IS WHE THER THE AMOUNT OF RS. 1.50 CR WAS CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE OR NOT. THE LD. CIT(APPEALS ) OBSERVED THAT IF THERE WAS NO CREDIT IN THE BANK AC COUNT OF THE ASSESSEE COMPANY, WHICH APPEARS TO BE THE CA SE HERE, THERE CANNOT BE ANY QUESTION OF APPLICABILITY OF SECTION 68 OF THE ACT. SECTION 68 OF THE ACT APPLI ES ONLY WHEN A SUM IS FOUND CREDITED IN THE BOOK WHICH IN T HE CASE OF THE ASSESSEE IS BANK ACCOUNT OF THE ASSESSE E. IF THERE IS NO CREDIT ENTRY MADE IN THE BANK ACCOUNT O F THE 4 ASSESSEE, SECTION 68 OF THE ACT WILL NOT APPLY. THE LD. CIT(APPEALS), ACCORDINGLY, DELETED THE ADDITION OF RS. 1.50 CR. BOTH THE ADDITIONS WERE ACCORDINGLY, DELET ED. 7. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATT ER. ADMITTEDLY, RS. 50 LACS PERTAIN TO THE PRECEDING ASSESSMENT YEAR THEREFORE, SAME CANNOT BE CONSIDERE D IN ASSESSMENT YEAR UNDER APPEAL. IN THE CASE OF TH E REMAINING AMOUNT OF RS. 1.50 CR, THE AMOUNTS ARE STATED TO BE RECEIVED THROUGH CHEQUES WHICH HAVE NO T BEEN ENCASHED. THEREFORE, NO AMOUNT THROUGH ANY CHEQUES HAVE BEEN RECEIVED BY THE ASSESSEE OR CREDI TED IN THE BANK ACCOUNT OF THE ASSESSEE. THEREFORE, TH ERE IS NO CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS PER LAW. THE LD. DR COULD NOT CONTRIBU TE ANYTHING ON THIS ISSUE AND NO MATERIAL HAVE BEEN PRODUCED BEFORE US TO REBUT THE FINDING OF FACT REC ORDED BY THE LD. CIT(APPEALS). IN THIS VIEW OF THE MATTE R, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER BECAUSE NO INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) HAVE BEEN POINTED OUT. THESE GROUNDS OF APPEALS OF THE REVENUE ARE, ACCORDINGLY, DISMISSED. 8. ON GROUND NO.6, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 9,26,995/-. THE ASSESSING OFFI CER MADE THIS ADDITION ON ACCOUNT OF EXPENSES INCURRED ON VEHICLES USED BY THE DIRECTORS. THE ASSESSING OFFI CER 5 NOTICED THAT ASSESSEE COMPANY WAS MAINTAINING LUXUR Y CARS AND HAD INCURRED TOTAL AMOUNT OF RS. 46,34,976 /- ON ACCOUNT OF DEPRECIATION, RUNNING AND MAINTENANCE AND INTEREST ON CAR LOANS. THE ASSESSING OFFICER W AS OF THE VIEW THAT ELEMENT OF PERSONAL USE OF LUXURY CAR S COULD NOT BE RULED OUT SO THE ASSESSING OFFICER DISALLOWED 20% OF THESE EXPENSES. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ADDITION IS UNJUSTIFIED AND RELIED UPON DECISION OF HON'BLE GUJ RAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. COMPA NY 172 CTR 339. 9. THE LD. CIT(APPEALS) NOTED THAT HON'BLE GUJRAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. COMPA NY (SUPRA) HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON MAINTENANCE OF VEHICLES, WHICH WERE AVAILABLE TO THE DIRECTORS FOR THEIR PERSONAL USE, WOULD FALL WITHIN THE MEANING OF REMUNERATION AS DEFINE D IN THE EXPLANATION TO SECTION 198 OF THE COMPANIES ACT AND ONCE SUCH REMUNERATION IS FIXED, IT IS NOT POSS IBLE TO STATE THAT ASSESSEE HAD INCURRED ANY EXPENDITURE FOR PERSONAL USE OF THE DIRECTORS I.E. EVEN IF THERE WA S ANY PERSONAL USE BY THE DIRECTORS, THE SAME WAS AS PER TERMS AND CONDITIONS OF SERVICE AND IT WAS BUSINESS EXPENDITURE IN THE CASE OF THE ASSESSEE. THEREFORE , PERSONAL USER OF THE DIRECTORS HAS TO BE ASSESSED I N THE HANDS OF DIRECTORS AS PERQUISITES AND DISALLOWANCE CANNOT BE MADE IN THE HANDS OF COMPANY ON ACCOUNT O F 6 PERSONAL USER OF VEHICLES BY THE DIRECTORS. THE ADD ITION WAS, ACCORDINGLY, DELETED. 10. AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ISSUE IS CLEARLY COVERED AGAINST THE REVENUE BY JUDGEMENT OF THE HON'BLE GUJRAT HIGH COURT IN THE C ASE OF SAYAJI IRON & ENGG. COMPANY (SUPRA). THE LD. CIT(APPEALS) CORRECTLY FOLLOWED THIS DECISION FOR T HE PURPOSE OF DELETING THE ADDITION. NO INFIRMITY HAV E BEEN POINTED OUT IN THE ORDER OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION. THIS GROUND IS ACCORDINGLY, DISMISSED. 11. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SA INI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9 TH NOVEMBER,2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD