DCIT, Jaipur V. RAJASTHAN PATRIKA (P) LTD., Jaipur

ITA 555/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5097 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATEJA
• Assessee Lawyers: O P AGARWAL C AS DH
• Keywords: Gift; Depreciation; Business expenditure; Additional depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LN L; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 555 & 556/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 & 12-13. THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S. RAJASTHAN PATRIKA (P) LTD., JLN MARG, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACR 7856 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA ( CIT) & SHRI O.P. BATEJA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL & SHRI O.P. AGARWAL (C.AS) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.07.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29/07/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINS T TWO ORDERS OF LD. CIT (APPEALS)-2, JAIPUR DATED 25.03.2015 AND 26.03.2015 PERTAINING TO ASSESSMENT YEARS 2011-12 AND 12-13. THE GROUNDS RAISED BY THE REVENUE IN BOTH THE APPEALS ARE COMMON EXCEPT CHANGE IN FIGURES. GROUNDS IN ITA NO. 555/JP/2015 ARE AS UNDER :- 1. DELETING THE ADDITION OF RS. 16,52,979 MADE BY THE AO ON ACCOUNT OF SALES PROMOTION AND PUBLICITY EXPENSES AND RS.30 ,98,896/- ON ACCOUNT OF TELEPHONE, FESTIVAL CELEBRATION, HOSPITA LITY EXPENSES ETC WITHOUT APPRECIATING THE FACT AS BROUGHT OUT BY THE AO. 2. DELETING THE ADDITION MADE BY THE AO BY DISALLOWING THE CLAIM OF ADDITION DEPRECIATION OF RS. 2,75,15,648/-. 2 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. 2. SINCE GROUNDS INVOLVED IN THESE APPEALS ARE COMM ON, WE ARE DISPOSING OFF BOTH THESE APPEALS TOGETHER FOR THE SAKE OF CONVENI ENCE. WE ARE DEALING WITH THE APPEAL IN ITA NO. 555/JP/2015 AND THE OUTCOME WILL BE APPLICABLE TO ITA NO. 556/JP/2015 ALSO. 3. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE I.T . ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND ASSESSMENT WAS FRAMED VIDE ORDER DATED 14.02.2014. WHILE FRAMING THE ASSESSMENT, THE AO COMPUTED THE INCOME AT RS. 6,32,69,160/- AS AGAINST THE RETURNED INCOME OF RS. 3,05,01,640/- TH EREBY MADE AN ADDITION OF RS. 3,27,67,523/- ON ACCOUNT OF DISALLOWANCE OF EXPENSE S INCURRED ON SALES PROMOTION, TELEPHONE, FESTIVAL CELEBRATION, TRAVELING, HOSPITA LITY, GENERAL EXPENSES, VEHICLE RUNNING, FOUNDATION DAY CEREMONY AND ADDITIONAL DEP RECIATION ETC. AGGRIEVED BY THIS ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE LD . CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS AND RELYING ON THE DECISIONS OF HIS PREDECESSOR IN ASSESSMENT YEARS 2007-08, 08-09, 09-10 AND 10-11 PARTLY ALLOWED THE APPEAL BY ALLOWING THE CLAIM OF SALES PROMOTION, PUBLICITY EXPENSES, TELEPHONE, FES TIVAL CELEBRATION, HOSPITALITY EXPENSES AND ADDITIONAL DEPRECIATION. THE LD. CIT ( A) HAS SUSTAINED THE DISALLOWANCE ON ACCOUNT OF GENERAL EXPENSES TO THE TUNE OF RS. 5 ,00,000/-. 4. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 4.1. THE FIRST GROUND IS AGAINST DELETING THE ADDIT ION OF RS. 16,52,979/-. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE IN EARLIER YEARS. HE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SYNOPSIS AS UNDER :- 3 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. THIS GROUND OF APPEAL RELATES TO DELETION OF DISA LLOWANCE OF RS.16,52,979/- OUT OF SALES PROMOTION AND PUBLICITY EXPENSES AND RS.30,98 ,896/- OUT OF TELEPHONE, FESTIVAL CELEBRATION, HOSPITALITY EXPENSES ETC. IN THIS REGARD, AT THE OUTSET AS SUBMITTED ABOVE TH IS GROUND OF APPEAL IS SQUARELY COVERED BY ORDERS OF HONBLE ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS THEREFORE, THE SAME DESERVES TO BE DELETED. OUR SUBMISSION ON MERITS IS AS UNDER: FOLLOWING ARE THE DISALLOWANCES, DELETION OF WHICH HAS BEEN CHALLENGED IN THIS GROUND OF APPEAL: S. NO. PARTICULARS AMOUNT CLAIMED AMOUNT DISALLOWED PERCENTAGE DISALLOWED % OF EXPENSES CLAIMED TO TURNOVER 1. SALES PROMOTION & PUBLICITY EXPENSES TOTAL EXPENSES CLAIMED : RS. 8,03,41,474.00 EXPENSES NOT DOUBTED: RS. 4,72,81,890.00 EXPENSES DOUBTED: RS. 3,30,59,585.00 16,52,979.00 5% OF 3,30,59,585.00 1.81% 2. TELEPHONE EXP. 1,70,66,369.00 5,00,000.00 LUMP SUM 0.38% 3. FESTIVAL CELEBRATION EXP. 68,97,290.00 6,89,729. 00 10% 0.15% 4. TRAVELLING EXP. TOTAL EXPENSES CLAIMED : RS.2,56,96,196.00 EXPENSES NOT DOUBTED: RS. 1,98,09,750.00 EXPENSES DOUBTED: RS.58,86,446.00 5,88,645.00 10% OF 58,86,446.00 0.58% 5. HOSPITALITY/ BUSINESS EXP. 76,38,595.00 7,63,860.00 10% 0.17% 6. VEHICLE RUNNING EXP. 72,77,832.00 3,63,892.00 5% 0.16% 8. FOUNDATION DAY CEREMONY EXP 19,27,695.00 1,92,770.00 10% 0.04% 146845451.00 4751875.00 IN THIS REGARD IT IS SUBMITTED THAT NATURE OF EXPEN SES ALONGWITH THE DETAILED CHART CONTAINING THE BRANCH WISE EXPENSES INCURRED AND CO PIES OF FEW VOUCHERS WERE FURNISHED ON VARIOUS DATES DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. FURTHER, BOOKS OF ACCOUNTS WERE ALSO PRODUCED WHICH WERE EXA MINED BY LD. AO AND HE FAILED TO POINT OUT ANY SINGLE INSTANCE WHERE THE EXPENSES CLAIMED COULD BE ALLEGED AS EITHER 4 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. EXCESSIVE OR NOT SUPPORTED BY LEGIBLE / LEGAL BILL / VOUCHER OR WERE NOT INCURRED FOR BUSINESS PURPOSES AND BY MAKING GENERAL REMARKS , DISALLOWANCES HAVE BEEN MADE IN AN ARBITRARY MANNER. FROM THE PERUSAL OF THE ABOVE TABLE IT CLEARLY TRAN SPIRES THAT THE DISALLOWANCES WERE MADE BY AO MERELY ON THE BASIS OF ALLEGATION OF PO SSIBILITY OF PERSONAL USE OR NON BUSINESS USE OR NON-VERIFIABLE WITHOUT MAKING ANY EFFORT TO ESTABLISH SUCH ALLEGATION AND BY IGNORING THE FACT THAT THE ASSESSEE IS A PRI VATE LIMITED COMPANY WHERE ALLEGATION OF PERSONAL USE CANNOT BE MADE AND ALSO IGNORING THE EVIDENCES IN THE SHAPE OF VOUCHERS SUBMITTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS. IT IS SUBMITTED THAT OUT OF THE TOTAL ADDITION MADE AT RS . 3,27,67,523/- WHICH HAS BEEN WORKED OUT FROM THE TOTAL EXPENSES OF RS. 21,14,92, 895/- CLAIMED UNDER VARIOUS HEADS IN THE PROFIT & LOSS A/C, AS WELL AS ON ACCOUNT OF ADDITIONAL DEPRECIATION, THE LD. AO MISERABLY FAILED TO BRING ON RECORD A SINGLE INCIDE NCE WHERE ANY EXPENSE EVEN AS SMALL AS OF RS. 100/- CAN BE ALLEGED TO BE INCURRED FOR NON BUSINESS PURPOSE OR NOT SUPPORTED BY BILL / VOUCHER, MORE PARTICULARLY WHEN COMPLETE DETAILS OF THE EXPENSES INCURRED WERE FILED BEFORE THE LD. AO AND BOOKS OF ACCOUNTS WERE EXAMINED BY HIM AS PER HIS CONVENIENCE. IT IS TRITE LAW THAT THE AO CANNOT WALK INTO THE SHOES OF THE BUSINESSMAN TO JUDGE THE BUSINESS EXPEDIENCY OF A P ARTICULAR EXPENSE INCURRED AT A PARTICULAR POINT IN PARTICULAR CIRCUMSTANCES. THE H ONBLE SUPREME COURT IN THE CASE OF INDIAN MOLASSES CO. (PVT.) LTD. V. COMMISSIONER OF INCOME-TAX REPORTED IN 37 ITR 66 (SC) , HAS CATEGORICALLY LAID DOWN THE CONDITIONS WHICH SHOULD BE SATISFIED FOR ALLOWABILITY OF BUSINESS EXPENDITURE WHICH IS REPRO DUCED AS UNDER: (I) THE EXPENDITURE IN QUESTION SHOULD NOT BE OF THE NA TURE DESCRIBED UNDER THE SPECIFIC PROVISIONS OF SECTIONS 30 TO 36; (II) THE EXPENDITURE SHOULD NOT BE OF THE NATURE OF CAPI TAL EXPENDITURE; (III) IT SHOULD NOT BE A PERSONAL EXPENDITURE; AND (IV) THE EXPENDITURE SHOULD HAVE BEEN LAID OUT OR EXPEND ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PRO FESSION. IT IS THUS CLEAR THAT CONDITIONS AT (I), (II) AND ( III) ABOVE ARE NEGATIVE CONDITIONS WHEREAS THE CONDITION AT (IV) ABOVE IS A POSITIVE C ONDITION. IF THE EXPENDITURE SATISFIES THE NEGATIVE CONDITIONS, IT HAS TO SATISFY THE POSI TIVE CONDITION IN ORDER TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 37(1) OF THE ACT. THUS, SECTION 37(1) ALLOWS DEDUCTION OF ANY 'EXPENDITURE' SUBJECT TO CONDITIONS NOTICED ABO VE. THE CASE OF THE ASSESSEE 5 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. FULFILLS ALL THE CONDITIONS LAID DOWN THEREFORE THE EXPENDITURE AS CLAIMED IS ALLOWABLE IN TERMS OF THE PROVISIONS OF SECTION 37(1) OF THE INCOME TAX ACT, 1961. THE SUBMISSION ON EACH INDIVIDUAL EXPENSE IS AS UND ER: 1. SALES PROMOTION AND PUBLICITY EXPENSES: A SUM OF RS. 16,52,979/- WAS DISALLOWED @ 5% OUT OF ADVERTISEMENT AND PUBLICITY EXPENSES CLAIMED AT RS. 3,30,59,585/- BY THE ASSESS EE COMPANY IN ITS PROFIT & LOSS ACCOUNT, THE BREAK-UP OF WHICH IS AS UNDER: NATURE AMOUNT ADVERTISEMENT AND PUBLICITY I) ON CIRCULATION 96,09,494.00 II) ON OTHERS 2,34,50,091.00 TOTAL 3,30,59,585.00 THE LD. AO WHILE MAKING DISALLOWANCE MADE FOLLOWING ALLEGATIONS: A. THE EXPENDITURE CLAIMED ARE PRIMARILY IN THE NATURE OF ENTERTAINMENT, B. ASSESSEE HAS FAILED TO GIVE EVIDENCES OF DISTRIBUTI ON OF GIFTS TO CUSTOMERS, C. THE EXPENSES ARE FOR NON-BUSINESS PURPOSES. IN THIS REGARD, IT WAS SUBMITTED THAT DURING THE YE AR UNDER APPEAL, ASSESSEE COMPANY LAUNCHED ITS LEADING DAILY NEWSPAPER (PATRIKA - H INDI DAILY) IN THE STATE OF CHHATTISGARH FROM RAIPUR (ON 19.09.2010) AND FROM B HILAI (ON 24.09.2010) CITIES. FURTHER, THE PATRIKA HINDI DAILY NEWSPAPER WAS AL SO LAUNCHED IN IMMEDIATELY PRECEDING ASSESSMENT YEAR IN FOUR CITIES OF MADHYA PRADESH NAMELY JABALPUR (ON 26.12.2009), GWALIOR (ON 28.03.2010), RATLAM CITY ( ON 12.09.2009) AND AT UJJAIN CITY (ON 23.08.2009). IN ORDER TO ESTABLISH ITS NEW SPAPER-PATRIKA IN THE MAJORITY PART OF THE STATES OF MADHYA PRADESH AND CHHATTISGA RH AND TO COPE UP WITH THE MARKET COMPETITION FROM THE OTHER COMPETITIVE NEWSPAPERS, THE ASSESSEE HAD TO MAKE EXTENSIVE PUBLICITY BY WAY OF HOARDINGS, BANNERS, R OAD SHOWS, EVENTS, FM PUBLICITY, FLEX DISPLAYS, ADVERTISEMENT IN OTHER MEDIA AND MAN Y OTHER WAYS BESIDES LUNCHING VARIOUS PROMOTIONAL SCHEMES TO ESTABLISH & INCREASE THE CIRCULATION OF ITS NEWSPAPER. THE EXPENSES INCURRED ON THESE SCHEMES WAS NOT DOUB TED BY LD. AO WHICH INCLUDED THE GIFTS AND PRIZES DISTRIBUTED TO THE HAWKER. 6 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. IT IS FURTHER STATED THAT IN ORDER TO ESTABLISH IN THE NEW MARKET IN THE STATE OF MADHYA PRADESH AND CHHATTISHGARH, THE TOTAL EXPENDITURE IN CURRED BY PATRIKA AT INDORE, BHOPAL, JABALPUR, GWALIOR AND RAIPUR BRANCH HAD COS TED AROUND 1.88 CRORES WHICH AMOUNTS TO APPROX 57% OF THE TOTAL EXPENSES INCURRE D ON ADVERTISEMENT AND PUBLICITY EXPENSES INCURRED AT RS. 3.30 CRORES DURING THE YEA R UNDER APPEAL. UNDERSTANDABLY, THIS EXPENDITURE WAS VERY NECESSARY KEEPING IN VIEW THE NEED OF ESTABLISHING BUSINESS IN A NEW MARKET IN AS MUCH AS ADVERTISING AND PUBLI CITY PLAY A MAJOR ROLE FOR AN ENTERPRISE IN ESTABLISHING ITSELF IN A NEW MARKET, THEREFORE, THE HEAVY EXPENSES INCURRED ON THE NEW BRANCHES IN THE STATE OF MADHYA PRADESH IS CLEARLY JUSTIFIED. BESIDES GIVING THRUST ON THE PUBLICITY AND SALES PR OMOTION IN THE STATE OF MADHYA PRADESH VARIOUS PROMOTIONAL SCHEMES WERE ALSO LAUNC HED IN OTHER STATES I.E. RAJASTHAN, KARNATAKA AND GUJARAT WHERE SUBSTANTIAL AMOUNT WAS SPENT AND THE NECESSARY DETAILS OF SUCH EXPENDITURE WERE ALSO SUB MITTED BEFORE LD. AO WHO FAILED TO APPRECIATE THE SAME. IT IS FURTHER SUBMITTED THAT WHILE MAKING DISALLOW ANCES LD. AO ALLEGED THAT CERTAIN EXPENSES INCLUDED IN BUSINESS EXPENSES WERE FOR NON -BUSINESS PURPOSES E.G. FOR FOOD AND REFRESHMENTS, TRAVELLING AND CONVEYANCE, HOTEL BOOKING, EVENT AND FAIR AND OTHERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS DETAILS OF ENTIRE EXPENSES CLAIMED AT RS. 3,30,59,584/- WERE SUBMITTED, OUT OF WHICH ONLY A S UM OF RS. 11,05,431/- RELATED TO FOLLOWING EXPENSES WHICH ARE DOUBTED BY THE LD. AO: TRAVELLING & CONVEYANCE 1,03,259.00 FOOD & REFRESHMENT 1,08,466.00 FIRE WORKS 3,65,000.00 FLOWER & BOUQUETS 1,61,422.00 OTHERS 3,67,284.00 HOWEVER, AS AGAINST THE TOTAL ENTIRE EXPENSES OF RS . 11,05,431/- AS DOUBTED, A DISALLOWANCE OF RS. 16,52,979/- IS MADE WHICH IS HI GHER THAN THE TOTAL AMOUNT SPENT AND CLAIMED UNDER THESE HEAD. THUS, IN LIGHT OF THE THESE FACTS IT IS CLEAR THAT THE EXPENSES CLAIMED BY ASSESSEE WERE COMPLETELY GENUIN E AND REASONABLE. AT THIS JUNCTURE, KIND ATTENTION OF YOUR HONOUR IS INVITED TO THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AVERY INDUSTRIES LTD. REPORTED IN (2006) 206 CTR 347 WHEREIN THE COURT HAS CATEGORICALLY HELD THAT THE EXPENSES 7 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. INCURRED ON DISTRIBUTING PRIZE ITEMS TO DEALERS AND SELLING AGENTS IS AN ALLOWABLE BUSINESS EXPENDITURE . IN THIS CASE IT WAS HELD THAT DEALERS SELLING THE PRODUCTS OF A MANUFACTURER ARE CERTAINLY ITS LIFELINE AND IF AMOU NT IS SPENT ON DISTRIBUTION OF PRIZES TO THEM THAT CERTAINLY PROMOTES GOODWILL AND ENHANC ES BUSINESS AND HENCE ALLOWABLE AS REVENUE EXPENDITURE. IN OUR CASE WE ARE DISTRIBU TING THE PRIZES NOT TO THE DEALERS OUT TO THE CUSTOMERS DIRECTLY. SIMILARLY IN THE CASE OF HERO HONDA MOTORS LTD. VS. JT. CIT REPORTED IN 103 ITD 157 (ITAT DELHI) THE COMPANY HAD INCURRED AN EXPENDITU RE OF RS. 25,93,750/- ON PRESENTATION OF ARTICLES. OUT OF THIS AMOUNT, A SUM OF RS. 21,93,750/- WAS SPENT ON REFRIGERATORS PRESENTED TO DEALERS FOR ACHIEVING TA RGET UNDER THE INCENTIVE SCHEME OF THE COMPANY. THE EXPENDITURE WAS RIGHTLY CONSIDERED TO BE AN INCENTIVE TO THE DEALERS TO BOOST ITS SALES AND IT WAS WHOLLY & EXCLUSIVELY RELATED TO THE BUSINESS OF THE ASSESSEE AND WAS HELD FULLY ALLOWABLE. IN THIS REGA RD RELIANCE IS ALSO PLACED ON THE FOLLOWING :- - HONDA SIEL CARS INDIA LTD. V. ACIT [2010] 1 ITR (T RIB) 497 DELHI - CIT VS. SPICE COMMUNICATIONS LTD. [2010] 35 SOT 78 DELHI OTHER GIFTS INCLUDE GIFTS GIVEN MAINLY TO HAWKERS, SELLING AGENTS & ADVERTISEMENT AGENCIES ON CEREMONIAL OCCASIONS. SUCH AN EXPENDITU RE IS HELD AS ALLOWABLE BUSINESS EXPENDITURE IN THE CASE OF CIT VS. VARINDER AGRO CHEMICALS LTD. 205 CTR 334 (P&H) . FURTHER, AS SUBMITTED ABOVE, THE LD. CIT(A) BY FOLL OWING THE DECISION OF APPELLATE ORDERS OF PREVIOUS ASSESSMENT YEAR HAS DELETED THE DISALLOWANCES MADE BY LD. AO UNDER VARIOUS HEADS OD EXPENSES. IT IS ALSO A MATTE R OF FACT THAT SUCH ORDERS OF PRECEDING ASSESSMENT YEARS STOOD CONFIRMED BY THE H ONBLE ITAT THUS THE GROUND RAISED IS SQUARELY COVERED THEREFORE, IN VIEW OF THE ABOVE OBSERVATIONS, IT IS SUBMITTED THAT THE DISALLOWANCE OF RS. 16,52,979/- MADE ON ACCOUNT OF DISALLOWANCE OF SALES PROMOTION AND PUBLICITY EXPENSES MAY PLEASE BE DELETED. WITH REGARD TO OTHER EXPENSES SUCH AS TELEPHONE EXP ENSES, FESTIVAL CELEBRATION EXPENSES, TRAVELING EXPENSES, HOSPITALITY / BUSINES S EXPENSES, VEHICLE RUNNING 8 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. EXPENSES AND FOUNDATION DAY CEREMONY EXPENSES, IT I S SUBMITTED THAT DISALLOWANCES OF SIMILAR NATURE WERE ALSO MADE IN THE PRECEDING ASSE SSMENT YEARS STARTING FROM 2007- 08 TO 2010-11 WHEREIN SIMILAR ALLEGATIONS AND OBSER VATIONS ABOUT THE EXPENSES CLAIMED WERE MADE BY THE ASSESSING OFFICER, HOWEVER , IN APPEAL, THE DISALLOWANCES SO MADE BY LD. AO STOOD DELETED BY THE HONBLE CIT( A) AND LATER BY HONBLE ITAT. HOWEVER, ON MERITS HEADWISE SUBMISSION IS MADE AS U NDER: TELEPHONE EXPENSES: A LUMP SUM DISALLOWANCE OF RS. 5,00,000/- WAS MADE OUT OF TELEPHONE EXPENSES CLAIMED AT RS. 1,70,66,369/-. IN THIS REGARD IT WAS SUBMITTED THAT THE ASSESSEE COMPANY HAS BRANCHES AND UNITS SPREAD ALL OVER THE COUNTRY WHICH ARE MORE THAN 34 (23 BRANCHES AND 11 UNITS) IN NUMBERS AND LOOKING T O THE NATURE OF BUSINESS, IT IS WELL UNDERSTOOD THAT, THE USAGE OF TELEPHONE IS THE BACK BONE OF THE BUSINESS WHICH IS MAINLY DEPENDENT UPON THE FAST NEWS NETWORK, WHICH IS POSSIBLE ONLY THROUGH TELECOMMUNICATION NETWORK. HOWEVER, THE LD. AO MERE LY ON THE BASIS OF ASSUMPTION AND PRESUMPTION DISALLOWED THE LUMP SUM AMOUNT OUT OF THE TOTAL EXPENDITURE CLAIMED. IT IS PRACTICALLY NOT POSSIBLE TO MAINTAIN CALL REG ISTER IN A CASE IN THE CASE OF A COMPANY WHOSE TURNOVER IS MORE THAN 442 CRORES AND 34 BRANCHES & UNITS SITUATED AT DIFFERENT PLACES THROUGHOUT INDIA, KEEPING IN VIEW THE FACT THAT, USE OF TELECOMMUNICATION SERVICES IS VERY CRUCIAL TO THE B USINESS CARRIED ON BY ASSESSEE. IT HAS TO BE EXAMINED FROM THE VIEW POINT OF A BUSINES SMAN & NATURE OF BUSINESS. TIME INVOLVED FOR NOTING A CALL, MAY NOT BE FRUITFUL RAT HER A COST BEARING EXERCISE AND LOOKING TO THE COST INVOLVED IT IS PRACTICALLY NOT VIABLE TO MAINTAIN SUCH RECORD IN THE KIND OF BUSINESS ASSESSEE IS INVOLVED. THE COLLECTI ON OF NEWS FROM OTHER PART OF WORLD IS POSSIBLE ONLY WITH THE HELP OF TELECOMMUNICATION SERVICES WHICH FACT CANNOT BE DENIED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BRANCH -WISE DETAILS AND COPY OF LEDGER ACCOUNTS OF TELEPHONE EXPENSES AS APPEARING IN THE BOOKS OF ACCOUNTS OF RESPECTIVE BRANCHES WERE SUBMITTED BEFORE THE LD. AO WHICH REM AINED UNCONTROVERTED. THE ENTIRE EXPENDITURE IS VERIFIABLE AND THEREFORE NO D ISALLOWANCE COULD HAVE BEEN MADE 9 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. IN THE FACTS AND CIRCUMSTANCES OF THE CASE. SINCE T HE ASSESSEE COMPANY IS A CORPORATE ENTITY, PERSONAL USE IN RESPECT OF THE EXPENSES CLA IMED CANNOT BE EVALUATED OR CONSIDERED. IN THIS REGARD RELIANCE IS PLACED ON TH E FOLLOWING DECISIONS: ACIT VS. M/S ANIL SPECIAL STEEL INDUSTRIED LTD. (IT AT, JAIPUR) (2014) 52 TW (IV) 189 ADVERTING THE LAST GROUND REGARDING ADHOC DISALLOWA NCE ON VEHICLE AND TELEPHONE EXPENSES. THE ASSESSEE HAS PAID FBT TAX THEREON. BE SIDES, THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO.VS CIT, 253 ITR 749 HOLDING AS UNDER:- IN THE CIRCUMSTANCES, IN OUR OPINION, THE TRIBUNA L WAS WRONG WHILE DISALLOWING 1/6TH OF THE TOTAL CAR EXPENDITURE AND DEPRECIATION CLAIMED BY THE ASSESSEE ON ACCOUNT OF THE PERSONAL USE OF THE CARS WHICH WERE USED BY THE DIRECTORS. WE, THEREFORE, ANSWER THE QUESTION IN THE NEGATIVE, I.E ., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THUS IN VIEW OF THE FACTS AND CIRCUMSTANCES AND BY RESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO.VS CIT (SUPRA ,ORDER OF CIT(A) IS UPHELD. AFTER CONSIDERING THE ABOVE SUBMISSIONS, IT IS PRAY ED THAT THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED. FESTIVAL CELEBRATION EXPENSES: DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPA NY HAD CLAIMED A SUM OF RS. 68,97,290/- ON ACCOUNT OF FESTIVAL CELEBRATION EXP ENSES INCLUDED IN THE HEAD MISCELLANEOUS EXPENSES OUT OF WHICH A SUM OF RS. 6,89,729/- (10% OF 68,97,290/-) WAS DISALLOWED. IN THIS REGARD, IT IS SUBMITTED THAT THE ENTIRE EXP ENDITURE CLAIMED WAS INCURRED ON FESTIVAL OF DIWALI WHICH HAS BEEN LAID OUT / EXPE NDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. NECESSARY DETAILS OF EXPENSES INCURRED WERE SUBMITTED BEFORE THE LD. AO. IT IS FURTHER SUBMITTED THAT WHOLLY AND EXC LUSIVELY DO NOT MEAN NECESSARILY. THE BUSINESSMAN AND NOT THE TAX COLLECTOR IS TO JUD GE FOR THE JUSTIFICATION OF THE EXPENDITURE. THERE HAVE BEEN SPECIFIC INSTRUCTIONS OF CBDT ABOUT DIWALI AND MOHURAT EXPENSES AND THE SAME HAVE BEEN CONSIDERE D ALLOWABLE (13/A/20/68 DATED 03.10.1968) . 10 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. IN SUPPORT OF THE ABOVE CONTENTIONS, RELIANCE IS PL ACED ON THE FOLLOWING CASE LAWS: PUNJAB POWER PACKS LTD. VS. DY. CIT 71 ITD 163 (CH D.); 79 ITD 233 (PUNE) CIT VS. SHALIMAR IND.LTD. 78 TAXMAN 521 (CAL.) CIT VS. MOHAN MEAKIN LTD. 189 TAXMAN 377 (DELHI ) IT IS FURTHER SUBMITTED THAT, MOST OF PAYMENTS WERE MADE THROUGH CHEQUES. A VERY NOMINAL AMOUNT WAS PAID IN CASH. THE ENTIRE EXPENDI TURE IS SUPPORTED BY VOUCHERS AND DULY AUDITED AND VERIFIABLE. IT NEED NOT BE MEN TIONED THAT, IN OUR SOCIETY, THE GIFTS GIVEN ARE CUSTOMARY IN NATURE PARTICULARLY WHEN THE OCCASION IS OF A FESTIVAL AS AUSPICIOUS AS DIWALI. THERE IS AND CAN BE NO PERS ONAL ELEMENT OF DIRECTORS IN THESE GIFTS. THE ARTICLES WERE GIVEN IN GIFTS TO ADVERTIS ING AGENTS, OFFICIALS OF BANKS AND PERSONS CONNECTED WITH THE BUSINESS OF THE ASSESSEE SO AS TO ENABLE ITSELF TO MAINTAIN HEALTHY AND HARMONIOUS RELATIONSHIPS WHICH IS NECES SARY FOR THE ENLARGEMENT OF THE BUSINESS OF THE ASSESSEE COMPANY. THE EXPENDITURE I NCURRED ON DISTRIBUTION OF GIFTS IS JUSTIFIED KEEPING IN VIEW THE NATURE OF BUSINESS, T URNOVER AND OTHER RELATED FACTORS (205 CTR 334 (P&H). ANY DISALLOWANCE UNDER THIS HEA D WILL NOT BE JUSTIFIABLE IN VIEW OF THE JUDGMENTS OF HONBLE TRIBUNAL IN ASSESS EES CASES FOR ASSESSMENT YEARS 1993-94 TO 1997-98. FURTHER THE LD. AO HAS ALSO IGN ORED THE FACT THAT DIWALI IS ONE OF THE MAIN FESTIVALS OF THE COUNTRY AND A COMPANY AS BIG AND POPULAR AS THE ASSESSEE WHOSE PRESENCE IN EVERY HOUSE CANNOT BE IGNORED THE REFORE THE COMPANY CANNOT LIVE IN ISOLATION AND SHOULD DISCHARGED ITS SOCIAL OBLIG ATIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 10.02.2014 ASSESSE HAS SUBMITTED BRANCH- WISE EXPENSES INCURRED ON VARIOUS HEAD AND COPIES O F FEW VOUCHERS WERE ALSO SUBMITTED. LD. AO WHILE MAKING DISALLOWANCE MAINLY ALLEGED THE PERSONAL ELEMENT INVOLVED IN SUCH EXPENSES BY GROSSLY IGNORING THE F ACT THAT ASSESSEE IS A PRIVATE LIMITED COMPANY HAVING SEPARATE LEGAL ENTITY AND LO OKING THE BILLS AND VOUCHERS OF THE EXPENSES INCURRED IT IS VERY CLEAR THAT THEY HAVE B EEN INCURRED ON THE OCCASION OF DIWALI AND ARE IN THE NATURE OF PETTY SWEETS AND GI FT DISTRIBUTED TO BUSINESS ASSOCIATES AND CUSTOMERS, THUS THE EXPENSES INCURRED IS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSES AND IS ALLOWABLE U/S 37(1) OF THE INCOME TAX ACT, 1961. IN THE CIRCUMSTANCES, IT IS PRAYED THAT ORDER OF LD . CIT(A) MAY PLEASE BE UPHELD. 11 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. TRAVELLING EXPENSES: A DISALLOWANCE OF RS. 5,88,645/- OUT OF THE TOTAL E XPENSES CLAIMED AT RS. 2,56,96,196/- WAS MADE. THE TRAVELLING EXPENSES INC LUDE THE FOLLOWING ITEMS: S. NO. HEAD AMOUNT REMARKS 1. LOCAL TRAVELING STAFF 1,94,75,332.00 NOT DOUBTED 2. FOREIGN TRAVELING STAFF 3,34,418.00 NOT DOUBTED 3. LOCAL TRAVELING DIRECTORS 33,63,266.00 10% DISALLOWED 4. FOREIGN TRAVELING DIRECTORS 25,23,180.00 10% DISALLOWED TOTAL 2,56,96,196.00 FROM THE PERUSAL OF THE ABOVE DETAILS, YOUR HONOUR WOULD OBSERVE THAT A SUM OF RS. 1,98,09,740/- WAS INCURRED ON THE TRAVELING AND CON VEYANCE OF THE STAFF WHO HAD UNDERTAKEN JOURNEY IN PERFORMANCE TO THEIR OFFICIAL DUTIES AS THE ASSESSEE COMPANY HAS ITS OFFICES AT VARIOUS PLACES THROUGHOUT THE INDIA WHICH HAS NOT BEEN DOUBTED BY THE LD. AO. IN FACT, THE LD. AO HAS FOUND THAT THE EXPE NSES INCURRED BY ASSESSEE COMPANY ON TRAVELLING OF THE STAFF PERSONS IS ACCEP TABLE AND HE HAD NOT DOUBTED THE SAME. HOWEVER, HE ALLEGED THAT THE REMAINING AMOUNT OF RS. 58,86,446/- WAS SPENT ON THE TRAVELLING OF DIRECTORS AND THEREFORE, THE SAME IS LIABLE TO BE DISALLOWED AND CERTAIN VOUCHERS ARE SELF MADE. MERELY BY OBSERVING SO, THE LD. AO DISALLOWED THE AMOUNT OF RS. 5,88,645/- BEING 10% OF THE AMOUNT SPENT ON THE TRAVELLING OF DIRECTORS WITHOUT EXACTLY SPECIFYING AS TO HOW THE SAID AMOUNT WAS NO T ALLOWABLE. LD. AO FAILED TO APPRECIATE THAT THE DIRECTORS HAD UNDERTAKEN THOSE TRAVELS NOT FOR PERSONAL PURPOSE OR FOR PLEASURE, RATHER TRAVELLING WAS DONE FOR BUSINE SS PURPOSES AND THE DIRECTORS WERE ON OFFICIAL DUTY OF THE COMPANY WHILE TRAVELING AND THEREFORE, NO ALLEGATION OF PERSONAL USE CAN BE MADE. FURTHER, THE ASSESSEE IS A PRIVATE LIMITED COMPANY WHICH IS QUITE DIFFERENT FROM PARTNERSHIP / PROPRIETARY CONC ERNS. IN A PRIVATE LIMITED COMPANY A DIRECTOR CANNOT USE THE RESOURCES OF THE COMPANY FO R HIS PERSONAL USE. ONE OF THE DIRECTOR I.E. SHRI GULAB KOTHARI IS A RE NOWNED JOURNALIST AND WRITER AND HAD UNDERTAKEN EXTENSIVE TRAVELLING TO ATTEND VARIOUS S EMINARS AND TO INTERACT WITH VARIOUS DIGNITARIES OF THE COUNTRY AND ALSO OUTSIDE THE COU NTRY AND THE INFORMATION / DATA / EXPERIENCE GATHERED / COLLECTED BY HIM FROM SUCH ME ETINGS / SEMINARS / VISITS MANIFESTED ITSELF IN THE FORM OF ARTICLES PUBLISHED IN THE NEWSPAPER WHICH ULTIMATELY BENEFITED THE ASSESSEE COMPANY. 12 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. LOOKING TO THE NATURE OF THE BUSINESS OF THE ASSESS EE WHERE DAY-TO-DAY UPDATION ABOUT THE INFORMATION OF THE EVENTS HAPPENED AROUND THE W ORLD IS THE BACKBONE AND FOR WHICH TRAVELLING IS ONE OF THE MODE TO COLLECT SUCH INFORMATION AND UPDATE ABOUT THE LATEST PRINT AND MEDIA TECHNOLOGY ADOPTED BY OTHER ORGANIZATIONS ENGAGED IN THE SIMILAR KIND OF BUSINESS WITHIN THE COUNTRY AND OUT SIDE THE COUNTRY. THESE VISITS SINCE BEING THE BACKBONE OF THE BUSINESS OF THE ASSESSEE ARE REGULARLY UNDERTAKEN BY ITS DIRECTORS AND SENIOR OFFICIALS OUT OF WHICH THE JOU RNEY UNDERTAKEN BY THE OFFICIALS HAVE BEEN ALLOWED BUT DISALLOWANCES HAVE BEEN MADE OUT O F THE JOURNEY UNDERTAKEN BY THE DIRECTORS WHO ALSO VISITED FOR THE PURPOSES AS STAT ED ABOVE. THE JOURNEYS UNDERTAKEN ARE NOT ONLY FOR COLLECTING INFORMATION BUT ALSO WI TH A VIEW TO EXPLORE NEW BUSINESS AVENUES AND ALSO TO UNDERSTAND THE LATEST PRINTING TECHNOLOGY AVAILABLE IN THE WORLD SO AS TO REDUCE THE PRINT COST AND THE TIME UNDERTAKEN IN THE PROCESS OF PRINTING OF A NEWSPAPER. THEREFORE, IN THE CIRCUMSTANCES IT IS SU BMITTED THAT THE EXPENSES CLAIMED DESERVED TO BE ALLOWED IN TOTO AND HENCE, THE ORDER OF LD. CIT(A) MAY PLEASE BE UPHELD. WITH REGARD TO THE ALLOWABILITY OF THE EXPENSES AS DETAILED ABOVE, IT IS FURTHER SUBMITTED THAT ALL THESE EXPENSES HAVE BEEN INCURRE D IN THE NORMAL COURSE OF BUSINESS AND ARE UNDER BUSINESS EXPEDIENCY AND THUS ARE ALLO WABLE AS PER THE PROVISIONS OF SECTION 37(1) OF THE INCOME TAX ACT, 1961. IT IS FU RTHER SUBMITTED THAT NONE OF THE PAYMENT WAS MADE TO ANY RELATED PARTY NOR HAS BEEN ALLEGED BY LD. AO AS BEING EXCESSIVE OR UNREASONABLE, THE EXPENSES HAVE BEEN D ISALLOWED MERELY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS. THE EXPENDITURE SO INCURRED BY THE ASSESSEE QUALIFI ES FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT AS IT FULFIL S AND MEETS ALL THE CONDITIONS FOR ALLOWABLILITY OF EXPENDITURE UNDER THAT SECTION. T HE PROVISIONS OF SECTION 37 OF THE ACT IS REPRODUCED HEREIN BELOW FOR THE SAKE OF READ Y REFERENCE: 1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITU RE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' 13 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. EXPLANATION.-FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO H AVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. (2B) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1), NO ALLOWANCE SHALL BE MADE IN RESPECT OF EXPENDITURE INCURRED BY AN AS SESSEE ON ADVERTISEMENT IN ANY SOUVENIR, BROCHURE, TRACT, PAMPHLET OR THE LIKE PUBLISHED BY A POLITICAL PARTY. IT IS SUBMITTED THAT THE EXPENDITURE HAS BEEN INCUR RED BY THE ASSESSEE WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND IS NOT A PERSONAL OR CAPITAL EXPENDITURE, AND IS THEREFORE ELIGIBLE AS DEDUCTION U/S 37(1) OF THE ACT BEING AN EXPENDITURE INCURRED IN THE ORDINARY COURSE OF BUSINESS. IT IS ALSO PERTINENT TO MENTION THAT NONE OF THE PAYMENT HAS BEEN MADE TO ANY RELATED PARTIES WH ATSOEVER. SINCE THE EXPENDITURE CLAIMED UNDER THESE HEADS DULY PASSES THROUGH THE A CID TEST MENTIONED ABOVE THEREFORE IN THE CIRCUMSTANCES IT IS SUBMITTED THAT , THE EXPENDITURE BEING MADE IN THE NORMAL COURSE OF BUSINESS, THEREFORE, THE DISALLOWA NCE OF RS. 5,88,645/- DESERVES TO BE DELETED. THUS IT IS PRAYED BEFORE YOUR HONOUR TH AT THE ORDER OF LD. CIT(A) MAY PLEASE BE UPHELD. HOSPITALITY / BUSINESS EXPENSES: DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPA NY HAD CLAIMED A SUM OF RS. 76,38,595/- ON ACCOUNT OF HOSPITALITY EXPENSES IN CLUDED IN THE HEAD MISCELLANEOUS EXPENSES APPEARING IN SCHEDULE Q TO BALANCE SHEE T OUT OF WHICH A SUM OF RS. 7,63,859/- BEING 10% OF TOTAL EXPENSES WAS DISALLOW ED BY LD. AO. IN THIS REGARD, IT IS SUBMITTED THAT THESE EXPENSES WERE INCURRED IN RESPECT OF LODGING AND BOARDING, AIR TICKETS EXPENSES ETC. OF THE REPR ESENTATIVES, SUPPLIERS AND OTHER OFFICIALS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS SUMMARY OF THE BRANCH-WISE EXPENSES WAS SUBMITTED BEFORE THE LD. AO . IT WAS STATED THAT T HE ENTIRE AMOUNT IS SPENT ON VARIOUS BUSINESS CONNECTED PERSONS SUCH AS NEWSPAPERS REPRESENTATIVES, SUPPLIERS OF RAW MATERIAL AND STORES ITEMS, AND FOR EIGN DIGNITARIES. IN THIS LINE OF BUSINESS OF THE ASSESSEE, IT IS CUSTOMARY TO INVITE HUMANITIES AND DIGNITARIES FOR PUBLICITY AND COVERAGE IN NEWSPAPERS. MOST OF EXPEN SES WERE INCURRED THROUGH ACCOUNT PAYEE CHEQUES AND PAYMENTS OF SOME VERY SMA LL AMOUNTS WERE MADE IN CASH 14 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. AND SUCH INSTANCES ARE VERY SMALL IN COUNT. BRANCH- WISE DETAILS AND COPIES OF FEW BILLS AND VOUCHERS WERE ALSO SUBMITTED DURING THE COURSE OF ASSESSMENT VIDE LETTER DATED 12.02.2014 WITH REMAINED UNCONTROVERTED. SUCH PAYME NTS ARE ALSO SUPPORTED BY PROPER VOUCHERS AND RECEIPTS. FURTHER, SIMILAR DISALLOWANCES MADE IN EARLIER YEAR S WERE DELETED BY APPELLATE AUTHORITIES AS STATED ABOVE. THUS IT IS PRAYED BEFO RE YOUR HONOUR TO DELETE THE ADDITION AND CONFIRM THE ORDER OF LD. CIT(A). VEHICLE RUNNING EXPENSES: A SUM OF RS. 3,63,892/- WAS DISALLOWED OUT OF TOTAL EXPENSES OF RS. 72,77,832/- CLAIMED IN PROFIT & LOSS ACCOUNT. IT IS SUBMITTED T HAT THE ASSESSEE COMPANY IS MANAGED BY THE INDEPENDENT PROFESSIONALS WHICH IS S OLELY FOR THE PURPOSE OF BUSINESS AND VEHICLES ARE BEING USED BY SUCH PROFESSIONALS. THE ASSESSEE IS A SEPARATE LEGAL ENTITY AND THE NECESSARY PERQUISITE VALUE OF THE FA CILITY OF VEHICLE USED BY THE DIRECTORS AND EMPLOYEES HAVE SEPARATELY BEEN SHOWN IN THEIR I NDIVIDUAL INCOME TAX RETURNS, THEREFORE, FURTHER DISALLOWANCE OF THE SAME OUT OF THE EXPENSES CLAIMED BY THE ASSESSEE COMPANY IS NOT JUSTIFIABLE. COPY OF FORM 1 6 OF DIRECTOR SHOWING DETAILS OF PERQUISITES AS SUBMITTED BEFORE LD. AO. HOWEVER, LD . AO INSTEAD OF APPRECIATING THE FACT THAT DUE TAX ON SUCH FACILITY HAS ALREADY BEEN PAID BY RESPECTIVE PERSON AS PERQUISITE ALLEGED THAT PERQUISITE VALUE FURTHER PR OVES THE PERSONAL USER. WHILE ALLEGING SO LD. AO TOTALLY MISUNDERSTOOD THE CONCEP T OF TAXATION OF PERQUISITE AND ALLOWABILITY OF CORRESPONDING EXPENSES IN THE HANDS OF THE EMPLOYER WHERE IF THE EMPLOYER PROVIDED ANY FACILITY TO ITS EMPLOYEE INCL UDING DIRECTOR AND IF SUCH PERSON HAS PAID TAX IN HIS INDIVIDUAL CAPACITY AS PERQUISI TE VALUE OF SUCH FACILITY NO DISALLOWANCE COULD BE MADE IN THE HANDS OF EMPLOYER . THE VALUE OF PERQUISITE TAKEN IN THE INDIVIDUAL HANDS OF THE DIRECTORS IS AS UNDE R: S. NO. NAME OF DIRECTOR VALUE OF PERQUISITE (CARS) 1. GULAB KOTHARI 39,600.00 2. MILAP KOTHARI 39,600.00 3. HANUMAN PRASAD TIWARI 28,800.00 4. NIHAR KOTHARI 28,800.00 5. SIDDHARTH KOTHARI 28,800.00 THUS THE ALLEGATION OF LD. AO DESERVES TO BE IGNORE D AND EXCLUDED. 15 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. IT IS FURTHER SUBMITTED THAT THE EXPENSE CLAIMED BE ING MOST REASONABLE LOOKING TO THE VOLUME AND NATURE OF THE BUSINESS AND ALSO CONSIDER ING THE FACT THAT THERE ARE 34 BRANCHES AND UNITS SPREAD ALL OVER THE COUNTRY WHER E THE VEHICLES WERE USED BY THE STAFF FOR BUSINESS PURPOSES. THE ASSESSEE COMPANY I S A CORPORATE ENTITY AND AS SUCH THERE CAN BE NO PERSONAL USE OF VEHICLES. IN THIS R EGARD RELIANCE IS PLACED ON THE DECISION OF DELHI BENCH OF ITAT GIVEN IN THE CASE O F SEASONS CATERING SERVICES (P) LTD. VS. DY.CIT REPORTED IN (2010) 134 TTJ (DEL) 554 . SINCE THERE IS NO PERSONAL ELEMENT, NO DISALLOWANCE FOR PERSONAL USE SHOULD BE MADE AS PER THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS. CIT REPORTED IN 253 ITR 749 . LD. AO IN ARBITRARY MANNER, BY GROSSLY IGNORING T HE NATURE OF BUSINESS OF THE ASSESSEE AND THE JUDICIAL PRONOU NCEMENT, MADE THE DISALLOWANCE. IT IS THEREFORE PRAYED THAT THE DISALLOWANCE MADE O UT OF VEHICLE RUNNING EXPENSES DESERVES TO BE DELETED AND ORDER OF LD. CIT(A) DESE RVES TO BE UPHELD. FOUNDATION DAY EXPENSES: A SUM OF RS. 1,92,770/- WAS DISALLOWED OUT OF TOTAL EXPENSES OF RS. 19,27,695/- CLAIMED BY ASSESSEE. IN THIS REGARD, IT IS SUBMITTE D THAT THE ASSESSEE COMPANY HAS BEEN CELEBRATING ITS FOUNDATION DAY FROM YEAR TO YEAR WH ICH IS ATTENDED BY ALL THE EMPLOYEES OF THE COMPANY, ITS ASSOCIATES WHICH INCL UDES SELLING AGENTS, HAWKERS AND ADVERTISEMENT AGENTS BESIDES THE LEADING PERSONALIT IES OF THE CITY. THE SUMMARY OF THE EXPENSES CLAIMED AT EACH INDIVIDUAL CENTRE / OFFICE AS SUBMITTED BEFORE THE LD. AO AND THE COPIES OF FEW BILLS AND VOUCHERS AS SUBMITT ED ON 12.02.2014. YOUR HONOUR WOULD APPRECIATE THAT THE EXPENDITURE INCURRED IS M OST REASONABLE AND GENUINE AND THEREFORE CANNOT BE DISALLOWED. THE EXPENDITURE ON SUCH FUNCTION IS TOTALLY ALLOWAB LE IN THE LIGHT OF DECISIONS OF CIT VS. MEHSANA DISTT CO-OPERATIVE MILK PRODUCERS UNION LTD. (1994) 207 ITR 140 (GUJ.) & CIT VS. ADITYA MILLS LTD. (1994) 209 ITR 933 (RAJ.) & CIT VS. CHEMCROWN (INDIA) LTD. 262 ITR 177 (CAL.) FURTHER THE ENTIRE EXPENDITURE WAS INCURRED IN THE NORMAL COURSE OF BUSINESS AND ITS UTILITY TO THE BUSINESS CANNOT BE DENIED MERELY BY ALLEGING THE PERSONAL ELEMENT COULD BE INVOLVED, MORE PARTICULARLY WHEN THE ASSESSEE BE ING A PRIVATE LIMITED COMPANY HAVING SEPARATE LEGAL ENTITY AND CANNOT BE PUT AT P AR WITH A PROPRIETOR OR PARTNERSHIP 16 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. FIRM WHERE THE PROPRIETOR / PARTNER HAS THE FULL CO NTROL OVER THE DAY TO DAY BUSINESS OPERATION INCLUDING THE EXPENSES INCURRED. IN THE C ASE OF THE ASSESSEE COMPANY, IT HAS 34 BRANCHES AND UNITS SPREAD THROUGHOUT INDIA AND W HERE ALL THE AFFAIRS OF THE COMPANY ARE TAKEN CARE OF BY THE EMPLOYEES / STAFF OF THE ASSESSEE COMPANY, THEREFORE PERSONAL INVOLVEMENT OF ANY PERSON CANNOT BE ALLEGE D IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE CIRCUMSTANCES IT IS HUMBLY PRAYED THAT THE O RDER OF LD. CIT(A) MAY PLEASE BE UPHELD. HE SUBMITTED THAT SINCE THE FACTS INVOLVED IN THE Y EAR UNDER CONSIDERATION ARE IDENTICAL TO EARLIER YEARS, THEREFORE, HE REQUESTED THAT THE ORDER OF LD. CIT (A) BE CONFIRMED. 4.2. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS AND RELIED ON THE ORDER OF THE AO. 4.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD, AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE LD. CIT (A) HAS GIVEN A FINDING OF FACT THAT THE ASSESSEE HAD SUBMITTED SUM MARY OF SALES PROMOTION AND PUBLICITY EXPENDITURE, COPIES OF BILLS, VOUCHERS ET C. BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR VERIFICATION. THE AO HAS NOT POINTED A SINGLE INSTANCE TO SHOW THAT THE EXPENDITURE INCURRED BY THE ASSESS EE WERE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS FINDI NG OF LD. CIT (A) IS NOT CONTRADICTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. MOREOVER, THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF COORDINA TE BENCH IN THE CASE OF ASSESSEE IN ITA NOS. 519/JP/2012 & OTHERS IN FAVOUR OF THE A SSESSEE. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT (A) WHICH IS HEREBY UPHELD. 17 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. 5. GROUND NO. 2 RELATES TO DELETION OF ADDITION OF ADDITIONAL DEPRECIATION OF RS. 2,75,15,648/-. 5.1. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THIS GROUND IS COVERED BY THE DECISION OF COORDINATE BENCH IN ITA NO. 519/JP/2012 & OTHERS FOR THE ASSESSMENT YEARS 2006-07 AND 08-09 IN FAVOUR OF THE ASSESSEE. IN THIS REGARD, HE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTE N SUBMISSIONS. THEREFORE, HE REQUESTED THAT THE ORDER OF LD. CIT (A) BE UPHELD. 5.2. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS AND SUPPORTED THE ORDER OF AO. 5.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT THE ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF COORDINATE BENCH IN ITA NOS. 519/JP/2012 & OTHERS, BY OBSERVING IN PARA 5.9 OF ITS ORDER AS UNDER :- 5.9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON THE RECORD REGARDING THE ISSUE OF ADDI TIONAL DEPRECIATION. IN OUR CONSIDERED VIEW, NEWS PAPERS AND PERIODICALS ARE DISTINCT COMMODITY THAN THE PAPER, PRINTING INK AND OTHER IN GREDIENTS USED THEREIN. SINCE A NEW COMMERCIAL PRODUCT COMES INTO EXISTENCE, THE PROCESS INVOLVED FOR SUCH TRANSFORMATION AMOUNTS TO PRODUCTION AND MANUFACTURE. OUR VIEW IS FORTIFIED BY HONBLE DELH I HIGH COURT AND ITAT BENCHES OF COCHIN AND AHMEDABAD. RESPECTFULLY FOLLOWING THEM WE UPHOLD THE ORDERS OF LD. CIT (A) ON THIS ISSUE O F ADDITIONAL DEPRECIATION. APROPOS AY 2006-07, SINCE RELYING ON SAYAJI IRON AND ENGG. CASE (SUPRA), WE HAVE ALREADY HELD THAT THERE CAN BE NO ATTRIBUTION OF PERSONAL USER IN CASE OF A LIMITED C OMPANY, THE ORDER OF 18 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD. LD. CIT (A) DELETING THE DISALLOWANCE OF DEPRECIATI ON IN THIS BEHALF IS UPHELD. REVENUE APPEALS ARE THUS DISMISSED. IN THE LIGHT OF ABOVE, RESPECTFULLY FOLLOWING THE D ECISION OF COORDINATE BENCH, SUPRA, WE ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION BY RE JECTING THE GROUND OF THE REVENUE. THE ORDER OF LD. CIT (A) IS UPHELD. APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 556/JP/2015 : 6. SINCE WE HAVE ALLOWED THE CLAIM OF THE ASSESSEE BY REJECTING THE GROUNDS OF THE REVENUE IN ITA NO. 555/JP/2015, ON THE SAME REA SONING WE DISMISS THE APPEAL OF THE REVENUE IN ITA NO. 556/JP/2015 BY ALLOWING T HE CLAIM OF THE ASSESSEE. 7. IN TOTALITY, APPEALS OF THE REVENUE ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 29/07/20 16. SD/- SD/- HKKXPUN ( DQY HKKJR ) (BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 29/07/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR. 2. THE RESPONDENT- RAJASTHAN PATRIKA PVT. LTD., JAI PUR. 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 555 & 556/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 19 ITA NOS. 555 & 556/JP/2015 DCIT VS. RAJASTHAN PATRIKA PVT. LTD.