DCIT, New Delhi V. M/s ILac Investment Pvt. Ltd., New Delhi

ITA 5396/DEL/2010

• Counselvise Citation: 539620114 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y S KAKKAR
• Assessee Lawyers: RAJESH DUREGA
• Keywords: Depreciation
• Section: 56(2); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 5396/DEL/2010 ASSESSMENT YEAR: 2006-07 DCIT, CIRCLE 11(1), ROOM NO. 312, C.R. BUILDING, NEW DELHI. VS. M/S ILAC INVESTMENT P. LTD., G-28, KALKAJI, NEW DELHI. AAACI1924Q (APPELLANT) (RESPONDENT) APPELLANT BY : MS. Y.S. KAKKAR, SR. DR RESPONDENT BY : SH. RAJESH DUREGA, ADV. O R D E R PER S.V. MEHROTRA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AND DIRECT ED AGAINST THE ORDER OF LD. CIT(A) DATED 24.09.2010 FOR THE A.Y. 2 006-07. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF INV ESTMENT AND TRADING IN SHARES. THE ASSESSEE HAD FILED ITS RETU RN OF INCOME DECLARING TOTAL INCOME AT RS. 19,01,676/-. THE ASSESSMENT WA S COMPLETED AT A TOTAL INCOME OF RS. 37,27,496/- AFTER MAKING FOLLOW ING DISALLOWANCES: - (I) U/S 14A OF THE I.T. ACT 1579525 (II) DEPRECIATION ON CAR 246295 3. LD. CIT(A) WHILE PARTLY ALLOWING THE ASSESSEES APPEAL DELETED THE DISALLOWANCE IN RESPECT OF DEPRECIATION ON CAR AND RESTRICTED THE ITA NO. 5396/D/2010 2 DISALLOWANCE U/S 14A TO RS. 4,85,538/- AS AGAINST R S. 15,79,525/- MADE BY THE AO. 4. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), TH E DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL WHICH READ AS UNDER: - 1. THE ORDER OF LD. CIT(A) IS WRONG, PERVERSE, IL LEGAL AND AGAINST THE PROVISIONS OF LAW, LIABLE TO BE SET ASIDE. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION O F RS. 2,46,000/- ON ACCOUNT OF DEPRECIATION ON CAR. 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION O F RS. 15,79,525/- U/S 14A OF THE I.T. ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 5. GROUND NO. 1 IS GENERAL AND DOES NOT CALL FOR AN Y ADJUDICATION. 6. BRIEF FACTS APROPOS GROUND NO. 2 ARE THAT AO NOT ICED THAT ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 2,46,295/- ON CAR. HE NOTICED THAT ASSESSEE HAD NOT USED THE CAR FOR BUSINESS PURPOSES AS NO EXPENSE FOR THE CAR RUNNING HAD BEEN CLAIMED. HE, THEREFORE, D ISALLOWED THE ASSESSEES CLAIM OF DEPRECIATION. 7. BEFORE THE LD. CIT(A), THE ASSESSEE HAD MADE FOL LOWING SUBMISSIONS: - DURING THE APPELLATE PROCEEDINGS, THE APPELLANT H AS SUBMITTED THAT THE AO WHILE DISALLOWING THE DEPRECIATION ON CAR OVERLO OKED THE FACT THAT THE APPELLANT HAD CREDITED AN INCOME OF RS. 346500/- AS CAR HIRE CHARGES IN THE PROFIT AND LOSS ACCOUNT AND DULY SHOWN IT AS IN COME IN ITS RETURN OF INCOME. IT WAS ALSO SUBMITTED BY THE APPELLANT THA T THE DEPRECIATION ON CAR WAS DULY DISCLOSED IN THE RETURN OF FRINGE BENE FITS FILED BY IT AND THE SAME HAS BEEN ACCEPTED BY AO. IT HAS ALSO BEEN SUB MITTED THAT THE DEPRECIATION WAS CLAIMED AGAINST THE CAR ON WHICH H IRE CHARGES HAD BEEN SHOWN. IN VIEW OF THE ABOVE, IT HAS BEEN SUBM ITTED THAT THE ADDITION MADE BY AO MAY BE DELETED. ITA NO. 5396/D/2010 3 8. LD. CIT(A) DELETED THE DISALLOWANCE FOR THE FOLL OWING REASONS: - I) FROM THE DETAILS FILED BY THE ASSESSEE IT WAS F OUND THAT THE CAR ON WHICH DEPRECIATION HAD BEEN CLAIMED WAS GIVEN ON HI RE TO M/S DALMIA (BROS.) PVT. LTD. AND THE INCOME ON ACCOUNT OF HIRE CHARGES OF RS. 3,46,500/- WAS DULY REFLECTED AS INCOME IN T HE ACCOUNTS OF THE ASSESSEE. II) THE CLAIM OF DEPRECIATION ON THE CAR WAS DULY R EFLECTED BY THE ASSESSEE IN THE RETURN OF FRINGE BENEFIT WHICH WAS ACCEPTED BY THE AO AS CORRECT. III) FROM THE ABOVE FACTS, IT WAS CONCLUDED THAT TH E CAR WAS BEING USED FOR BUSINESS PURPOSES BY THE ASSESSEE. IV) THE DEPRECIATION HAD BEEN DULY TAXED UNDER THE PROVISIONS OF FRINGE BENEFITS. V) THE AO HAD NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE CAR WAS NOT BEING USED FOR BUSINESS PURPOSES. 9. LD. DR SUBMITTED THAT BEFORE THE AO THE DETAILS REGARDING FRINGE BENEFITS WERE NOT FILED AND THE AO HAS GIVEN A FIND ING THAT THE CAR WAS NOT USED FOR THE BUSINESS PURPOSES. LD. COUNSEL SU BMITTED THAT DEPRECIATION ON CAR @ 20% HAD BEEN TAKEN AS PART OF FRINGE BENEFITS AND, THEREFORE, DISALLOWANCE OF THE SAME AGAIN WOUL D RESULT IN DOUBLE DISALLOWANCE. HE FURTHER SUBMITTED THAT, IN ANY CA SE, CAR WAS PROVIDED ON HIRE TO M/S DALMIA (BROS.) PVT. LTD. THE HIRE CHARG ES FROM WHICH HAVE DULY BEEN TAKEN INTO ACCOUNT AS ASSESSEES INCOME. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. LD. CIT(A) HAS DE LETED THE DISALLOWANCES, INTER-ALIA, ON THE GROUND THAT THE C LAIM OF DEPRECIATION ON CAR WAS DULY REFLECTED BY THE ASSESSEE IN THE RETUR N OF FRINGE BENEFIT, ITA NO. 5396/D/2010 4 WHICH WAS ACCEPTED BY THE AO AS CORRECT. SECTION 1 15WA DEFINES THE CHARGE OF FRINGE BENEFIT TAX IN ADDITION TO THE INC OME TAX CHARGED UNDER THE INCOME TAX ACT. THIS ADDITIONAL INCOME TAX IS IN RESPECT OF FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED B Y AN EMPLOYER TO HIS EMPLOYEES DURING THE PREVIOUS YEAR. SECTION 115WB DEFINES FRINGE BENEFITS BEING VARIOUS BENEFITS WHICH ARE PROVIDED IN CONSIDERATION FOR EMPLOYMENT. ALL THE ITEMS MENTIONED UNDER THIS SEC TION ARE TO BE INCLUDED IN FRINGE BENEFITS. SUB-SECTION (2) LAYS DOWN VARIOUS ITEMS WHICH ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLO YER TO HIS EMPLOYEES AND ARE THUS, COVERED UNDER FRINGE BENEFI TS. SECTION 115WB SUB-SECTION (2) CLAUSE (H) READS AS UNDER: - 115WB(2)(H) REPAIR, RUNNING (INCLUDING FUEL), MAINTENANCE OF MOTOR CARS AND THE AMOUNT OF DEPRECIATION THEREON; 11. THUS, DEPRECIATION ON MOTOR CARS PROVIDED BY TH E EMPLOYER TO HIS EMPLOYEES IN COURSE OF BUSINESS RESULTS INTO FRINGE BENEFITS TO THE EMPLOYEES. ONLY 20% OF THE DEPRECIATION IS TO BE T REATED AS FRINGE BENEFITS IN VIEW OF SECTION 115WC(1)(C) AND NOT THE ENTIRE DEPRECIATION. IN THE BACKDROP OF AFOREMENTIONED LEGAL POSITION WH EN WE EXAMINE THE ASSESSEES CLAIM THEN WE FIND THAT THIS COULD NOT B E A BASIS FOR DELETING THE DISALLOWANCE BECAUSE ASSESSEES CLAIM IS THAT I T HAD PROVIDED THE CAR ON HIRE TO M/S DALMIA (BROS.) PVT. LTD. AND NOT TO THE EMPLOYEES OF ASSESSEE. IN THE FRINGE BENEFIT TAX RETURN, ASSESS EE HIMSELF HAD SHOWN THE DEPRECIATION AS PART OF FRINGE BENEFITS AND, TH EREFORE, AO COULD NOT REDUCE IT FROM THE RETURN. THEREFORE, MERELY BECAU SE IN ASSESSMENT ORDER OF FRINGE BENEFIT, THE ASSESSEES CLAIM HAD B EEN ACCEPTED IS OF NO CONSEQUENCE IN INCOME TAX PROCEEDINGS. THE ADDITIO N TO FRINGE BENEFIT HAD BEEN MADE ON THE BASIS OF ASSESSEES CLAIM. TH IS DOES NOT PRECLUDE THE AO TO EXAMINE THE ASSESSEES CLAIM UNDER THE PR OVISIONS OF CHAPTER IV OF THE I.T. ACT DEALING WITH COMPUTATION OF BUSI NESS INCOME. IN THIS ITA NO. 5396/D/2010 5 REGARD, THE AO HAS OBSERVED THAT ASSESSEE HAS NOT U SED THE VEHICLE FOR BUSINESS PURPOSES. HOWEVER, THE LD. CIT(A) HAS OBS ERVED THAT ASSESSEE HAD SHOWN INCOME ON ACCOUNT OF HIRE CHARGES AT RS. 3,46,500/- WHICH WAS REFLECTED IN ASSESSEES ACCOUNTS. FROM THESE F ACTS IT IS EVIDENT THAT ASSESSEES CLAIM WAS SELF CONTRADICTORY. 12. LD. COUNSEL HAS RIGHTLY POINTED OUT THAT EVEN I F THIS INCOME WAS ASSESSED AS INCOME FROM OTHER SOURCES, DEPRECIATION HAD TO BE ALLOWED. THIS CLAIM WAS NOT BEFORE THE AO. IT IS NOT CLEAR WHETHER THE HIRE CHARGES INCOME WAS IN RESPECT OF THE SAME CAR OR NOT IN RES PECT OF WHICH FRINGE BENEFIT TAX HAS BEEN PAID BY THE ASSESSEE. THEREFO RE, THE FACTS NEEDS TO BE RE-MARSHALED IN THIS REGARD. HOWEVER, IF IT IS FOUND THAT THE HIRE CHARGES HAVE BEEN TAXED AS ASSESSEES INCOME IN RES PECT OF THAT CAR FOR WHICH DEPRECIATION WAS CLAIMED, THEN DEPRECIATION I N RESPECT OF THAT CAR HAS TO BE ALLOWED U/S 56(2) READ WITH SECTION 57(II ). WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF AO TO DECIDE THE DENOVO. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 13. BRIEF FACTS APROPOS GROUND NO. 3 ARE THAT ASSES SEE HAD SHOWN DIVIDEND INCOME OF RS. 47,90,010/-. THE AO REQUIRE D THE ASSESSEE TO FURNISH THE WORKING OF DISALLOWANCE U/S 14A AS PER RULE 8D. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, HE MADE A D ISALLOWANCE UNDER RULE 8D AT RS. 15,79,525/-. LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 4,85,538/-. THE DEPARTMENT IS AGGRIEVED. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. WE FIND THAT THE H ONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT & OTH RS. HAS, INTER-ALIA, OBSERVED THAT AO IS REQUIRED TO DETERMINE THE AMOUN T OF EXPENDITURE ON ITA NO. 5396/D/2010 6 THE BASIS OF A REASONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. THIS DECISION WAS NOT AVAILABLE TO THE ASSESSING OFFICER WHEN HE PASSED THE ASSTT. ORDER. WE, THEREFORE, RESTORE THE MATTER TO THE FILE OF AO FOR QUANTIFYING THE EXPENDITURE IN VIEW OF THE OBSERVAT IONS MADE BY THE HONBLE DELHI HIGH COURT IN THE AFORESAID JUDGMENT. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 15. IN THE RESULT, DEPARTMENTAL APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.03.2012 SD/- SD/- (A.D. JAIN) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 23.3.12 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR