ROSY BLUE (INDIA) P. LTD, MUMBAI V. DCIT CEN CIR-46, MUMBAI

ITA 5143/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6179 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JI TENDRA YADAV
• Keywords: Depreciation
• Section: 14A

Judgement Text

I.T.A NO. 5143/MUM/2009 ASSESSMENT YEAR: 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. [CORAM: N.V.VASUDEVAN, JM AND PRAMOD KUMAR, AM] I.T.A NO. 5143/MUM/2009 ASSESSMENT YEAR: 2007-08 ROSY BLUE INDIA PVT LTD. . APPELLANT VS DY.COMMISISONER OF INCOME TAX, . RESPONDENT CENTRAL CIRCLE 46, MUMBAI. NITESH JOSHI, FOR THE APPELLANT JITENDRA YADAV, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL IS DIRECTED AGAINST CIT(A)S ORDER DATED 2 6 TH MAY, 2009, FOR THE ASSESSMENT YEAR 2007-08. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE IS AGGRIEV ED THAT THE CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE OF ` .8,03,021/- OUT OF VEHICLE EXPENSES, AND OF ` .6,16,154 OUT OF DEPRECIATION ON VEHICLES, ON THE GR OUND THAT THESE ARE PERSONAL EXPENSES IN NATURE. 3. BRIEFLY STATED, MATERIAL FACTS ARE AS FOLLOWS. DURI NG THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, AND HAVING NOTED THAT THE ASSESSEE H AS NOT BEEN ABLE TO PRODUCE LOG BOOK IN RESPECT OF THE VEHICLES, THE ASSESSIN G OFFICER DISALLOWED 10% OF THE EXPENSE ON VEHICLES, AND DEPRECIATION THEREON, ON THE GROUND THAT PERSONAL ELEMENT IN EXPENSES COULD NOT BE RULED OUT. AGGRIE VED, ASSESSEE CARRIED THE MATTER I.T.A NO. 5143/MUM/2009 ASSESSMENT YEAR: 2007-08 2 IN APPEAL BUT WITHOUT ANY SUCCESS. NOT SATISFIED BY THE STAND SO TAKEN BY THE CIT (A) AS WELL, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PER USED THE MATERIAL ON RECORD, WE ARE INCLINED TO UPHOLD THE GRIEVANCE OF THE ASSESSEE FOR THE ELEMENTARY REASON THAT, AS WAS NOTED BY HONBLE GUJRAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO V CIT (253 ITR 749). THE ASSESSEE WHICH IS A L IMITED COMPANY IS A DISTINCT ASSESSABLE ENTITY AS PER DEFINITION OF PERSON UNDER SECT ION 2(31) OF THE ACT, AND, THEREFORE, IT CANNOT BE STATED THAT WHEN THE VEHICLE S ARE USED BY THE DIRECTORS, EVEN IF THEY ARE PERSONALLY USED BY THE DIRECTORS THE VEHI CLES ARE PERSONALLY USED BY THE COMPANY, BECAUSE A LIMITED COMPANY BY ITS VERY NATURE CANNOT HAVE ANY PERSONAL USE. THE LIMITED COMPANY IS AN INANIMATE PERSON AND THERE CANNOT BE ANYTHING PERSONAL ABOUT SUCH AN ENTITY. THE VIEW THAT WE ARE ADOPTING IS SUPPORTED BY THE PROVISIONS OF SECTION 40(C) AND SECTION 40A(5) OF THE A CT. IN THIS VIEW OF THE MATTER, THERE CANNOT BE ANY DISALLOWANCE ON THE GROUND OF P ERSONAL USE OF VEHICLES IN THE CASE OF COMPANIES-AS HAS BEEN DONE IN THIS CASE. WE, TH EREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE ON ACCOU NT OF VEHICLE EXPENSES AND DEPRECIATION ON THE VEHICLES. THE ASSESSEE GETS THE RELI EF ACCORDINGLY. 5. GROUND NO.1 IS THUS ALLOWED. 6. IN SECOND GROUND OF APPEAL, THE ASSESSEE IS AGGRIEVED THAT THE CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE OF ` .3,36,549 UNDER SECTION 14A OF THE INCOME TAX ACT. 7. PARTIES ARE HEARD AND RECORDS HAVE BEEN PERUSED. 8. WE HAVE NOTED THAT IN VIEW OF SPECIFIC OBSERVATION S MADE BY HONBLE BOMBAY HIGH COURT, IN THE CONTEXT OF SECTION 14A THAT WE A RE AT PRESENT DEALING WITH, IN THE CASE OF GODREJ & BOYCE MFG CO. LTD V DCIT(328 ITR 81 ), EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE I.T.A NO. 5143/MUM/2009 ASSESSMENT YEAR: 2007-08 3 THE PROVISIONS OF SUB-SECTION(1) OF SECTION 14A, (AND) FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE W HICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE T OTAL INCOME UNDER THE ACT. THEIR LORDSHIPS HAVE ALSO ADDED THAT THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND C IRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERM ANE MATERIAL ON THE RECORD. WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF ABOVE OBSERVATIONS OF HONBLE JURISDICTIONAL HIGH COURT, AFTER GIVING A FAIR AND R EASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. WE MAY ADD THAT LEARNED COUNSEL HAS SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENSES AT ALL IN EARNING THE DIVIDEND INCOME, AND THAT, ON THE GIVEN FACTS, NO DISALLOWANCE UNDER SECTION 14 A IS WARRANTED . HE SUBMITS THAT IN THE EVENT OF OUR REMITTING THE MATTER TO THE FILE OF THE ASSESSIN G OFFICER, THE ASSESSING OFFICER WILL, IN A RATHER MECHANICAL MANNER, PROCEED TO FIN D A BASIS OF APPORTIONMENT OF EXPENSES EVEN WHEN NO EXPENSES ARE ACTUALLY INCURRED. IN VIEW OF THE APPREHENSIONS TO EXPRESSED BY THE LEARNED COUNSEL, WE D EEM IT NECESSARY TO CLARIFY THAT IT IS OPEN TO THE ASSESSEE TO TAKE ALL SUCH LEGAL AN D FACTUAL ARGUMENTS AS THE ASSESSEE DEEMS FIT, INCLUDING THE ABOVE PLEA, AND THE ASSE SSING OFFICER HAS TO DISPOSE OF THE SAME IN ACCORDANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDER. 10. GROUND NO.2 IS THUS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN TERMS INDI CATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF NOVEMBER, 2010. SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 30 TH NOVEMBER, 2010 PARIDA I.T.A NO. 5143/MUM/2009 ASSESSMENT YEAR: 2007-08 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-, MUMBAI 4. COMMISSIONER OF INCOME TAX, , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI. I.T.A NO. 5143/MUM/2009 ASSESSMENT YEAR: 2007-08 5