VISHAL CHEMTRADE PVT. LTD., Kota V. ACIT, Kota

ITA 507/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87517 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH DHK
• Assessee Lawyers: C M BIRLA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 507/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S. VISHAL CHEMTRADE (P) LTD. , F-31, CHAMBAL INDUSTRIAL AREA, KOTA CUKE VS. THE ACIT CIRCLE- 1 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCV 8455 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI C.M. BIRLA, JKTLO DH VKSJ LS@ REVENUE BY : MRS. NEENA JEPH LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/11/2014 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16/01/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) KOTA DATED 29-03-2012 FOR THE ASSESSMENT YE AR 2007-08. 2.1 DURING THE COURSE OF HEARING, THE LD. AR HAS NO T PRESSED THE GROUND NO. 3. THEREFORE, THE SAME IS DISMISSED BEIN G NOT PRESSED AND GROUND NO. 1 AND 2 OF THE ASSESSEE ARE AS UNDER FOR ADJUDICATION. 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E OF TRANSPORTATION EXPENSES OF RS. 2,79,585/- WITHOUT CONSIDERING THIS FACT THAT OVERLOADING EXPENSES PAI D TO RTO AUTHORITIES CANNOT BE EQUATED TO PENALTY FOR ILLEGA L / UNLAWFUL ITA NO. 547/JP/2012 M/S. VISHAL CHEMTRADE (P) LTD. VS. ACIT CIRCLE- 1, KOTA . 2 ACT AND THEREFORE, BEING NOT COVERED WITH PROVISION OF SECTION 37(1) EXPLANATION 1 IT IS ALLOWABLE ONE. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E OF MOBILE PURCHASE EXPENSES OF RS. 39,270/- TREATING I T AS CAPITAL EXPENDITURE IGNORING THIS FACT THAT ITS LIF E BEING VERY SHORT IT WAS REVENUASED EXPENDITURE (ON REPLACEMENT COST THEORY). 3.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN AUTHORIZED DEALER OF LIQUID CHEMICALS MANUFACTURED BY SVCI, A UNIT OF DCM SHRIRAM CONSOLIDATED LTD. THE SUPPLY ORDERS ARE RECEIVED FR OM THE PARTIES IN TERMS OF NUMBER OF TANKERS WHICH ARE LOADED FROM DI FFERENT DESTINATIONS. THE LOADING CAPACITY OF THE ASSESSEE'S TANKER NO RJ 20/G/4435 IS 16.2 MT AS AGAINST THE RTO PASSING CAPACITY OF 11.14 MT. AS A SAFETY POLICY WHILE TRANSPORTING LIQUID CHEMICALS, CARE IS TAKEN THAT TANKER IS SUFFICIENTLY FILLED AS PARTIALLY FILLED TANKERS ARE PRONE TO ACCIDENTS. DURING SOME RTO INSPECTION IT WAS FOUND THAT ASSESSEE'S TA NKER WAS CARRYING MORE TONNAGE THAN ITS REGISTERED CAPACITY WHICH IS VIOLATION OF RTO RULES. AS A CONSEQUENCE FOR SPOT RELEASE OF TANKER THE DRI VER OF ASSESSEE IS REQUIRED TO PAY COMPOSITION FEE LEST TANKER IS NOT IMPOUNDED. THIS COMPOSITION AMOUNT PAID TO RTO HAS BEEN ALLOWED TO THE ASSESSEE AS REVENUE EXPENDITURE IN EARLIER YEARS. FOLLOWING SAM E PRACTICE THE ASSESSEE HAD PAID A SUM OF RS. 2,79,585/- AS COMPOS ITION FEE AS REVENUE ITA NO. 547/JP/2012 M/S. VISHAL CHEMTRADE (P) LTD. VS. ACIT CIRCLE- 1, KOTA . 3 EXPENDITURE. AUTHORITIES BELOW HOWEVER HAVE TREATED THE COMPOSITION MONEY AS PENALTY AND NOT ALLOWABLE U/S 37(1) OF THE ACT. 3.2 THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO THE RELEVANT RTO RULES AND CONTENDS THAT THE AMOUNT PAID TOWARDS COMPOSITION FEE IS NOT IN THE NATURE OF PENALTY BUT IT IS OVER-UTILIZA TION OF TONNAGE WHICH IS CHARGED IN MULTIPLICATION AS COMPOSITION FEE. IT IS A COMMON PRACTICE IN TRANSPORTATION TRADE THAT MANY A TIME THE LIQUID TA NKERS ARE FOUND TO BE OVER-LOADED AND SUBJECTED TO RTO COMPOUNDING FEE WH ICH IS PAID TO AVOID TANKER IMPOUNDING TO AVOID LOSS OF BUSINESS. THIS EXPENDITURE IS INCURRED IN THE REGULAR COURSE OF BUSINESS WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. AR PLACED RELIANCE I N THE CASE OF AGARWAL ROADLINES (P) LTD. VS. DCIT (2010) 129 TTJ 49 (AHD. )(U.O.) HOLDING THAT OVERLOAD CHARGES FOR TRANSPORTATION OF GOODS TO RTO IS ALLOWABLE EXPENDITURE AS IT IS COMPENSATORY IN NATURE AND NOT PENAL AS ALLEGED BY THE AO. FURTHER RELIANCE IS PLACED IN THE CASE OF P RAKASH COTTON MILLS (P) LTD. VS. (1993) 201 ITR 684 (SC) AND WESTERN COAL F IELDS LTD. VS. ACIT (2009) 124 TTJ (NAG. 659 WHEREIN THIS PRINCIPLE IS FOLLOWED. 3.3 THE LD. DR IS HEARD ON THIS ISSUE. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PERUSAL OF THE RTO RU LES, IT EMERGES THAT ITA NO. 547/JP/2012 M/S. VISHAL CHEMTRADE (P) LTD. VS. ACIT CIRCLE- 1, KOTA . 4 COMPOUNDING FEE IS COMPENSATORY IN NATURE AS THE IM POUNDING OF TRUCK WOULD HAVE AFFECTED THE REVENUE GENERATING APPARATU S OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF ITAT AHEMDAB AD BENCH IN THE CASE OF AGARWAL ROAD LINES (P) LTD. VS. ACIT (SUPRA ) AND OTHER CASES CITED SUPRA, THE GROUND NO. 1 OF THE ASSESSEE IS AL LOWED. 4.1 APROPOS SECOND GROUND, THE ASSESSEE PURCHASED T WO MOBILE PHONES FOR RS. 39,270/- AS THE LIFE OF THE MOBILE P HONES ARE VERY SHORT. THE ASSESSEE HAS CLAIMED IT AS REVENUE EXPENSES WHI CH WAS ESSENTIAL FOR DAY TO DAY CONDUCT OF ITS BUSINESS OPERATION. THE A O HOWEVER, ALLOWED DEPRECIATION THEREON. THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ADDITION MADE BY THE AO. 4.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT MOBILE PHONES ARE NECESSARY AND REVEWABLE TOOLS OF COMMUNICATION TO C ARRY ON ITS REGULAR BUSINESS SMOOTHLY AND EFFICIENTLY. THEIR LIFE IS SH ORT AND BECOME OBSOLETE IN 2-3 YEAR, THE PURCHASE THEREOF AMOUNTS TO REVENU E EXPENDITURE. THEREFORE, THE ASSESSEE'S CLAIM FOR ALLOWANCE OF RE VENUE EXPENDITURE ON MOBILE PHONES IS FULLY JUSTIFIED. 4.3 THE LD. DR IS HEARD ON THIS ISSUE. 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL FOR ITA NO. 547/JP/2012 M/S. VISHAL CHEMTRADE (P) LTD. VS. ACIT CIRCLE- 1, KOTA . 5 THE ASSESSEE. IT IS A COMMON KNOWLEDGE THAT LIFE SP AN OF MOBILE PHONE IS VERY SHORT AND IT IS USE IN DAY TO DAY CARRYING OF THE BUSINESS IS UNDISPUTED. THE WEAR AND TEAR ALSO TAKES PLACE ON M OBILE PHONE FOR WHICH REVENUE EXPENDITURE IS ALLOWABLE. THUS GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 /01 /2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16 TH JANUARY, 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. VISHAL CHEMTRADE (P) LTD., KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE- 1, KOTA . 3. VK;DJ VK;QDR@ CIT, 4. VK;DJ VK;QDRVIHY@ THE CIT(A), KOTA 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.507/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR