Sudesh Yadav, Mohindergarh V. ITO, Ward-2, Narnaul

ITA 4912/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4240 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 10-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR ANJULA JAIN
• Assessee Lawyers: P C YADAV ADV MS NIDA FATIMA
• Keywords: Depreciation; Revenue expenditure
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.4912/DEL./2018 ASSESSMENT YEAR 2014-2015 SUDESH YADAV C/O P.C. YADAV, ADVOCATE 2 ND FLOOR, 221 DDA SITE-1, NEW RAJINDER NAGAR, MOHINDERGARH, NEW DELHI. ABRPY5153A VS. ITO WARD-2, NARNAUL HARYANA. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SH. P.C. YADAV, ADV. MS. NIDA FATIMA, ADV. FOR REVENUE : DR. ANJULA JAIN, SR. DR DATE OF HEARING : 18.10 .2018 DATE OF PRONOUNCEMENT : 01 .11 .2018 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-ROHTAK DATED 05.06.2018 F OR AY 2014-15. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 2 ITA.NO.4912/DEL./2018 3. ON GROUND NO. 1, ASSESSEE CHALLENGED THE DISALLO WANCE OF RS. 1,96,228/- OUT OF RENOVATION EXPENSES. 4. ASSESSEE IS A PROPRIETOR OF M/S MAHALAXMI PETROL EUM, MAHENDERGARH AND DURING THE YEAR ASSESSEE WAS ENGAG ED IN THE BUSINESS OF RUNNING A RETAIL FUEL OUTLET (PETRO L PUMP) OF HINDUSTAN PETROLEUM CORPORATION LTD.(HPCL). DURING THE YEAR, ASSESSEE HAD DECLARED TOTAL TURNOVER OF RS. 3 0.74 CRORES AS COMPARED TO IMMEDIATE PREVIOUS YEARS TURNOVER O F RS. 26.15 CRORES. THERE IS AN INCREASE IN GP RATIO FRO M 2.64% TO 2.47%. THE RETURN OF INCOME WAS FILED DECLARING IN COME FROM BUSINESS AND PROFESSION AMOUNTING TO RS. 10,58,975/ - AND INCOME FROM HOUSE PROPERTY WERE DECLARED IN A SUM O F RS. 1,87,110/-. SINCE, THERE WERE NO DECLINED IN THE G ROSS PROFIT RATIO, THEREFORE, IT WAS ACCEPTED BY THE AO. THE A O FURTHER NOTED THAT ASSESSEE HAD DEBITED RS. 6,54,094/- ON A CCOUNT OF RENOVATION EXPENSES IN THE BOOKS OF ACCOUNT. DETAI LS OF THE SAME WERE FURNISHED. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME MAY NOT BE CAPITALIZED IN VIEW O F THE ENDURING NATURE OF THESE EXPENSES. THE ASSESSEE HA S SUBMITTED THAT IT IS THE REQUIREMENT OF BUSINESS TO UPKEEP THE DRIVEWAY AND BUILDING FOR SMOOTH FUNCTIONING OF RET AIL OUTLET. THE AO, HOWEVER, KEEPING IN VIEW THE LONG LASTING N ATURE OF EXPENSES TREATED 2/3 RD OF THE EXPENSES AS REVENUE EXPENDITURE AND DISALLOWED 1/3 RD OF THESE EXPENSES ON 3 ITA.NO.4912/DEL./2018 ACCOUNT OF CAPITAL EXPENSES ON WHICH DEPRECIATION W AS ALLOWED. THE AO, ACCORDINGLY, DISALLOWED RS. 1,96, 228/-. THE CIT(A) ON THE SAME REASONING UPHELD THE ADDITION. 5. AFTER CONSIDERING THE RIVAL SUBMISSION, I AM OF THE VIEW, ADDITION IS WHOLLY UNJUSTIFIED. THE ASSESSEE IS RU NNING A BUSINESS OF RETAIL FUEL OUTLET (PETROL PUMP). THER E IS AN INCREASE IN THE GP RATE IN ASSESSMENT YEAR UNDER AP PEAL. AO ACCEPTED SUBSTANTIAL RENOVATION EXPENSES INCURRED B Y ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THUS, IT WAS CONSIDERED AS REVENUE EXPENDITURE. TH E AO HAS NOT BROUGHT ANYTHING ON RECORD, AS TO ON INCURRING RENOVATION EXPENSES WHAT CAPITAL HAD BEEN GENERATED BY THE ASS ESSEE. THE NATURE OF BUSINESS CLEARLY SHOWS THAT RENOVATIO N EXPENSES ARE REQUIRED TO BE INCURRED FOR SMOOTH FUNCTIONING OF RETAIL OUTLET OF PETROL PUMP. SINCE, TURNOVER OF ASSESSEE AND GP RATE HAVE INCREASED, THEREFORE, THERE IS NO QUESTION OF ASSESSEE INFLATING THE EXPENDITURE SO AS TO REDUCE THE TAXAB LE INCOME. THE GENUINENESS OF THE EXPENSES ARE NOT IN DOUBT. IN THIS VIEW OF THE MATTER, I HOLD THAT THE ENTIRE EXPENSES WERE INCURRED ON ACCOUNT OF REVENUE EXPENDITURE. THEREF ORE, DISALLOWANCE OF 1/3 RD OF THE EXPENSES IS WHOLLY UNJUSTIFIED. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE THE ADDITION OF RS. 1,96,228/-. 6. GROUND NO. 1 OF APPEAL OF ASSESSEE IS ALLOWED. 4 ITA.NO.4912/DEL./2018 7. ON GROUND NO. 2, ASSESSEE CHALLENGED THE DISALLO WANCE OF RS. 39,850/- U/S 40(A)(IA) OF THE ACT. 8. AT THE TIME OF VERIFICATION OF LEDGER OF M/S MAH ALAXMI PETROLEUM SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT ASSESSEE HAS PAID CA SH AMOUNTING TO RS. 39,850/- FOR ADVERTISEMENT EXPENSE S (RS. 19,925/- ON 26.09.2013 AND RS. 19,925/- ON 29.09.20 13 TO M/S CBH INTERNATIONAL, NEW DELHI FOR THE SAME BILL) . HENCE, PROVISIONS TO SECTION 194C OF THE ACT WERE FOUND AP PLICABLE IN THE CASE OF THE ASSESSEE FOR DEDUCTING TAX AT SOURC E ON THE PAYMENTS TO CONTRACTOR BY THE ASSESSEE. AO NOTED T HAT UNDER THE PROVISIONS OF SECTION 40(A)(IA) EXPENSES OF PAY MENT TO CONTRACTOR ARE NOT DEDUCTIBLE UNDER THE HEAD PROFI T AND GAINS OF A BUSINESS, IF TAX IS NOT DEDUCTED AT SOURCE OR AFTER SUCH DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE OF FILING OF ITR. SHOW-CAUSE NOTICE WAS ISSUED AS TO WHY THI S AMOUNT BE NOT DISALLOWED FOR VIOLATION OF PROVISIONS OF SE CTION 194C OF THE ACT. AO NOTED THAT NO REPLY HAD BEEN FILED, TH EREFORE, THE AMOUNT OF RS. 39,850/- WAS DISALLOWED U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A) DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND CONFIRM THE ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSION, I AM OF THE VIEW THAT THE ADDITION IS UNJUSTIFIED. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 194C IS NOT APPLICABLE IN TH IS CASE, 5 ITA.NO.4912/DEL./2018 BECAUSE THE AMOUNT PAID IN THE YEAR WAS LESS THAN R S. 75,000/- AS PER PROVISO TO SECTION 194C(5) OF THE A CT. SECTION 194C(5) OF THE ACT PROVIDES NO DEDUCTION SHALL BE MADE FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID TO THE ACCOUNT OF, OR TO, THE CONTRACTOR, I F SUCH SUM DOES NOT EXCEED RS. 30,000/-. PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID D URING THE FINANCIAL YEAR EXCEEDS RS. 75,000/-, THE PERSON RES PONSIBLE FOR PAYING SUCH SUM REFERRED TO IN SUB-SECTION (1) SHAL L BE LIABLE TO DEDUCT INCOME TAX UNDER THIS SECTION. THE ABOV E PROVISION CLEARLY SHOWS THAT NO DEDUCTION IS REQUIRED UNDER T HE ABOVE PROVISION, IF THE AMOUNT PAID TO THE ACCOUNT OF THE CONTRACTOR DOES NOT EXCEED RS. 30,000/-. THE PROVISO TO THIS SECTION PROVIDES THAT WHERE THE AGGREGATE OF THE AMOUNTS PA ID EXCEEDS RS. 75,000/-, SUCH PERSON SHALL BE RESPONSIBLE TO D EDUCT TDS. IN THE PRESENT CASE, THE ASSESSEE HAS NOT PAID MORE THAN RS. 30,000/- ON ONE OCCASION BECAUSE PAYMENT BELOW RS. 30,000/- EACH WAS PAID ON DIFFERENT OCCASIONS. THE AGGREGATE OF THE AMOUNT ALSO DOES NOT EXCEEDS IN A YEAR AT RS . 75,000/-. THEREFORE, ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S 194C(5) OF THE ACT. I, ACCORDINGLY, SET ASIDE THE ORDERS OF T HE AUTHORITIES BELOW AND DELETE THE ADDITION. 6 ITA.NO.4912/DEL./2018 10. IN THE RESULT, THE GROUND NO. 2 OF APPEAL OF TH E ASSESSEE IS ALLOWED. 11. ON GROUND NO. 3, ASSESSEE CHALLENGED THE ADDITI ON OF RS. 79,200/- ON ACCOUNT OF LEASE RENT INCOME. THE AO O N PERUSAL OF THE DOCUMENTS FOUND THAT RENT TO THE EXTENT OF R S. 79,200/- HAS BEEN CREDITED IN THE BANK ACCOUNT OF THE ASSESS EE BUT THE AMOUNT OF THE SAID RENT HAS NOT BEEN REFLECTED IN I TR FOR ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE WAS SHO W CAUSED AS TO WHY THE RENTAL INCOME ABOVE SHOULD NOT BE ADDED TO THE RETURNED INCOME OF THE ASSESSEE. THE ASSESS EE STATED THAT ASSESSEE WAS UNAWARE OF THIS FACT, THEREFORE, IT WAS NOT SHOWN IN THE ITR. THE AO, HOWEVER, MADE ADDITION O F RS. 79,200/-. THE LD. CIT(A) CONFIRM THE ADDITION. 12. AFTER CONSIDERING THE RIVAL SUBMISSION, I AM OF THE VIEW THAT ADDITION IS UNJUSTIFIED. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE IS RECEIVING THIS AMOUNT FR OM HPCL AS LEASE CHARGES AND M/S HPCL IN TURN IS CHARGING T HIS AMOUNT FROM ASSESSEE AS SERVICE CHARGES. THE ASSES SEE IS PAYING IS LEASE RENTAL OF RS. 6,600/- TO M/S HPCL. THEREFORE, THE NET IMPACT OF THIS ENTRY IS REVENUE NEUTRAL. T HE AUTHORITIES BELOW HAVE FAILED TO UNDERSTAND THESE E NTRIES. THE COPIES OF THE ACCOUNTS ARE FILED AT PAGES 38 ONWARD S IN THE PB. HE HAS SUBMITTED THAT ON SIMILAR FACTS NO ADDITION HAVE BEEN MADE IN EARLIER YEAR AND SUBSEQUENT YEAR. IN VIEW OF THE 7 ITA.NO.4912/DEL./2018 ABOVE AND CONSIDERING THE COPY OF THE ACCOUNT OF TH E ASSESSEE IN THE BOOKS OF HPCL LTD. FILED AT PAGES 38 TO 53 O F THE PB, IT IS CLEAR THAT ASSESSEE WAS PAYING THESE LEASE RENTA LS AS WELL AS RECEIVING THE SAME AMOUNT FROM HPCL AS LEASE CHARGE S. LD. COUNSEL FOR THE ASSESSEE, THEREFORE, RIGHTLY CONTEN DED THAT THE NET IMPACT OF THIS ENTRY IS REVENUE NEUTRAL. NOTHI NG IS BROUGHT TO MY NOTICE, IF SIMILAR ADDITIONS HAVE BEE N MADE IN EARLIER YEAR OR SUBSEQUENT YEAR. ADDITION IS, THER EFORE, WHOLLY UNJUSTIFIED. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND DELETE THE ADDITION OF RS. 79,200/-. THIS GROUND O F APPEAL OF ASSESSEE IS ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DELHI DATED: 01.11.2018 *KAVITA ARORA, P.S. 8 ITA.NO.4912/DEL./2018 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI. DATE OF DICTATION 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.10.2018 /29.10.18 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON W HICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 01.11. 18 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF I TAT 01.11.18 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 01.11.18 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER