M/s Kamal Metal (P) Ltd, Amritsar. V. The Income Tax Officer, Amritsar.

ITA 578/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8682 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL C A SH RAHUL DHAWAN
• Keywords: Depreciation
• Section: 142(1); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. T.S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.578(ASR)/2016 ASSESSMENT YEAR:2013- 14 M/S. KAMAL METALS (P) LTD. OPP. VERKA MILK PLANT BYE PASS, AMRITSAR. PAN:AACK-6438P VS. INCOME TAX OFFICER, WARD 4(2), AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. PADAM BAHL (C.A) RESPONDENT BY: SH. RAHUL DHAWAN (D.R) DATE OF HEARING:20.03.2017 DATE OF PRONOUNCEMENT: 20.03.2017 ORDER PER N.K.CHOUDHRY (JM): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT-2, AMRITSAR, DATED 30.09.2016 FOR ASST. YEAR:2013- 14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. (I) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL)- 2, AMRITSAR HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS.90,420/- @ 10% OF RS.9,04,200/- BEING EXPENSES INCURR ED ON CAR MAINTENANCE, CAR DEPRECATION AND TELEPHONE EXPENSES . (II) THAT THE LD. COMMISSIONER OF INCOME TAX(APPEAL)-2 HAS FAILED TO APPRECIATE THAT NO DISALLOWANCE OF EXPENSES FO R PERSONAL USE OF CARS AND TELEPHONE EXPENSES BY DIRECTORS CA N BE MADE IN HANDS OF THE COMPANY. ITA NO.578 (ASR)/2016 ASST. YEAR : 2013-14 2 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RETURN OF INCOME DECLARING TAXABLE INCOME AT RS.13,09,420/- WAS FILED ON 22.09.2013 ELECTRONICALLY, SUBSEQUENTLY, THE CASE WAS SELECTED INTO SCRUTINY THROUGH, CASS, NOTICE U/S 143(2) DATED 02,092014 WAS ISSUED BY DCIT CIRCLE IV AMRITSAR AND SERVED UPON THE ASSESSES ON 03.09.2014 FIXING THE CASE FOR HEARING ON 16,09,2014. LATER ON, JURISDICTION OVER THE CASE WAS ASSIGNED TO THE UNDERSIGNED AND FRESH NOTICE U/S 143(2) OF THE IT ACT WA S ISSUED AND SERVED UPON THE ASSESSES. LATER ON NOTICE U/S 143(2) AND 142(1) ALONG WITH DETAILED QUESTIONNAIRE WERE ISSUED TO THE ASSESSES, IN RESPONSE TO THESE NOTICES, SHRI VINOD SHARAIA ACCOUNTS OFFICER, ON BEHALF OF THE ASSESSEE COMPANY ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED THE REQUISITE DETAILS. THE NECESSARY DETAILS/EXPL ANATION FILED HAVE ALSO BEEN EXAMINED AND PLACED ON RECORD AND THE CASE WAS DISCUSSED WITH HIM. THE TOTAL INCOME OF THE ASSESSEE IS ASSESSED WITH THE FOLLOWING REMARKS:- FINALLY THE ASSESSING OFFICER FRAMED THE ASSESSMENT ORDER IN THE BELOW MENTIONED SEQUENCE. ITA NO.578 (ASR)/2016 ASST. YEAR : 2013-14 3 02. ON SCRUTINY OF THE DETAILS FILED BY THE ASSESSES IT IS NOTICED THAT-THE ASSESSES HAS MADE INVESTMENT OF RS.2,43,028/- IN MUTUAL FUND INCOME OF WHICH IS EXEMPT. ON ONE HAND ASSESSEE IS PAYING INTEREST OH THE BORROWED FUND S @ 14% P,A AND ON THE OTHER HAND HE HAS MADE INVESTMEN T OF RS. 2,49,028/- TO EARN TAX FREE INCOME. AS PER PROVISIO NS OF SECTION 14A, OF THE IT ACT 1961, THE PROPORTIONATE EXPENDITURE TO EARN TAX FREE INCOME IS TO BE DISALLOWE D. ACCORDINGLY INTEREST OF RS.34,864/- IS DISALLOWED AND ADD ED TO THE TAXABLE INCOME OF THE ASSESSEE. (ADDITION OF RS.34,864/-) 03. ON PERUSAL OF P&L ACCOUNT OF THE ASSESSEE IT IS NOTICED THAT THE ASSESSES FIRM HAS CLAIMED AND DEBITED RS. 1,85,298/- UN DER THE HEAD SALES PROMOTION EXPENSES, 8S. 36,884/- UNDER T HE; HEAD MISC. EXPENSES' AND RS,3,90,348 UNDER THE HEAD TRAV ELING EXPENSES, ON VERIFICATION, IT IS FOUND THAT SAME OF THESE EXPENSES ARE NOT PROPERLY VOUCHED OR THE VOUCHERS ARE SEL F MADE. THE ASSESSEE HAS MENTIONED THAT THESE ARE PETTY EXPENSES FOR WHICH PROPER BILLS AND VOUCHERS ARC NOT RECEI VED. AFTER DISCUSSION DISALLOWANCE OF RS.50,000/- IS MADE ON THI S ACCOUNT AND ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. ( ADDITION OF RS.50,000/-) ITA NO.578 (ASR)/2016 ASST. YEAR : 2013-14 4 04. FURTHER ON PERUSAL OF F&L ACCOUNT IT IS NO TICED THAT THE ASSESSEE HAS CLAIMED AND DEBITED FOLLOWING EXPENSES, DETAILS OF WHICH AXE AS UNDER:- |SR. NO. EXPENSES RS. 1. DEPRECIATION OF CARS 4,79,322/- 2. TELEPHONE EXPENSES 3,29,270/- 3. CAR MAINTENANCE 95,607/- THE ASSESSES WAS ASKED TO BIFURCATE THE ABOVE EXPEN SES, HOW MUCH USE OF CAR AND TELEPHONE FOR BUSINESS PURPOSE AND HOW MUCH FOR PERSONAL USE. THE ASSESSEE HAS FAILED TO BIFURCATE THE ABOVE EXPENSES AND USE OF CAR AND TELEPHONE FOR THE PER SONAL USE BY THE PARTNERS AND THEIR FAMILY CANNOT BE RULED CU T, AND THEREFORE, THE ASSESSES VIDE THIS OFFICE ENTRY DATED 16.0 2.2016 AS TO WHY 1/6 TH OUT OF ABOVE EXPENSES MAY NOT BE DISALLOWED FOR NON- BUSINESS PURPOSES OF CAR AND TELEPHONE WHICH HA S BEEN AGREED UPON BY THE ASSESSEE AND THEREFORE IT IS REASONABL E TO DISALLOW 1/6 TH OUT OF ABOVE EXPENSES FOR PERSONAL USE OF CAR AND TELEPHONE WHICH COMES TO RS.1,50,700/- AND ADDED TO TH E TAXABLE INCOME OF THE ASSESSEE. (ADDITION OF RS.1,50,200/-) 05. SUBJECT TO THE ABOVE REMARKS, INCOME OF THE ASSESSE S IS RECOMPUTED AS UNDER:- 1. INCOME UNDER THE HEAD BUSINESS & PROFESSION ITA NO.578 (ASR)/2016 ASST. YEAR : 2013-14 5 INCOME UNDER THIS HEAD AS DECLARED BY THE ASSESSES RS.13,09,420/- ADDITIONS AS DISCUSSED ABOVE: AS DISCUSSED IN PARA 2 RS, 34,864/- AS DISCUSSED IN PARA 3 RS. 50,000/- AS DISCUSSED IN PARA 4 RS. 1,50,700/- TOTAL ADDITION RS.2,35,564/- TOTAL ASSESSED INCOME RS.15,44,984/- ASSESSED AT THE INCOME OF RS.15,44,984/-. CHARGE INTEREST U/S 234A, 234B AND 234C. GIVE CREDIT OF PREPAID TAXES. ISSU E DEMAND NOTICE, CHALLANS AND OTHER NECESSARY FORMS. 4. FEELING AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED THE INSTANT APPEAL BEFORE THE LD . CIT(A), WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, WHILE CONFIRM ING THE DISALLOWANCES UNDER DEPRECIATION OF CAR MAINTENANCE AND TELEPHONE EXPENSE, HOWEVER, REDUCED THE DISALLOWANCES TO THE TUNE OF 10% OF THE EXPENDITURE CLAIMED INSTEAD OF DISALLOWANCE OF 1/6 TH OF THE EXPENDITURE CLAIMED UNDER THESE HEADS CONSIDERING THE EX CESSIVE. 5. FEELING AGGRIEVED BY THE SAID ORDER PASSED BY THE L D. CIT(A), THE ASSESSEE PREFERRED THE INSTANT APPEAL ONLY ON THE CO NFIRMATION OF ADDITION OF RS.90,420/- AT THE RATE OF 10% OF RS.90,4 20/- BEING EXPENSES INCURRED ON CAR MAINTENANCE AND ITS DEPRECATION AND TELEPHONE EXPENSES. THE LD. CIT(A) WHILE CONSIDERING T HE SUBJECTED DISALLOWANCE GIVEN THE FINDING AS UNDER: ITA NO.578 (ASR)/2016 ASST. YEAR : 2013-14 6 THE ARGUMENT OF THE APPELLANT WAS ESSENTIALLY THAT NO DISALLOWANCE OF EXPENSES FOR PERSONAL USE CAN BE MADE IN T HE HANDS OF THE COMPANY BECAUSE ITS DIRECTORS ARE EMPLOYEES O F THE COMPANY AND DRAW SALARY FROM THE COMPANY. THE ARGUMENT OF THE APPELLANT IS CONSIDERED BUT NOT TENABLE BECAUSE THE APPELLANT IS NOT A PUBLIC LIMITED COMPANY BUT A PRIVATE LIMITED COMPANY AND THEREFORE THE CASE LAWS RELIED UPON BY THE APPELLA NT ARE NOT APPLICABLE AND HENCE DISTINGUISHED. THEREFORE THE PERSONAL USE OF THE CAR AND TELEPHONE T O SOME EXTENT BY THE DIRECTORS OF THE COMPANY CANNOT BE RULED OUT AND ACCORDINGLY SOME DISALLOWANCES IS CALLED FOR OUT OF THE EX PENSES UNDER HEADS DEPRECIATION ON CAR, CAR MAINTENANCE AND TE LEPHONE EXPENSES. THE DISALLOWANCE OF 1/6 TH OF THE EXPENDITURE CLAIMED UNDER THESE HEADS IS CONSIDERED EXCESSIVE AND IS REDUCED TO 10% OF THE EXPENDITURE CLAIMED UNDER THESE HEADS. 6. WE HAVE CONSIDERED THE FACTUAL MATRIX OF THE CASE AN D RIVAL SUBMISSIONS OF THE PARTIES, AS THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) ALTHOUGH ALLOWED THEIR APPEAL IN PARTS, HOWEVER, UPHELD 10% OF THE EXPENDITURE CLAIMED WITHO UT ANY REASONS JUST SIMPLY ON THE ASSUMPTION, THEREFORE, LIABLE TO BE DELETED. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER PASSED A VERY REASONED ORDER AND FURTHER THE LD. CIT(A ) HAS ALSO CONSIDERED THE RELEVANT FACTS AND PROVISIONS OF LAW AND R IGHTLY FURTHER RIGHTLY CONFIRMED THE DISALLOWANCES @ 10% AND EVEN OTHE RWISE MAXIMUM BENEFITS HAVE ALREADY BEEN GIVEN TO THE ASSESSEE , THEREFORE, THE ORDER OF THE LD. CIT(A) DOES NOT REQUIRE TO BE I NTERFERED WITH. 7. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AND RIVAL SUBMISSIONS OF THE PARTIES. IT REFLECTS FROM THE ORDER OF ITA NO.578 (ASR)/2016 ASST. YEAR : 2013-14 7 LD. CIT(A) THAT WHILE REDUCING THE DISALLOWANCES HOLD T HAT THE PERSONAL USE OF THE CAR AND TELEPHONE TO SOME EXTENT BY THE DI RECTORS OF THE COMPANY CANNOT BE RULED OUT, WHICH, IN OUR CONSIDERED O PINION IS JUST AN ASSUMPTION AND ONCE 90% OF THE ALLOWANCE HAVE BEEN A LLOWED THEN THERE IS NO PURPOSE TO DISALLOW THE MINIMAL AMOUNT, TH EREFORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE CONSIDERED OPINION THAT JUSTICE WOULD BE MET, IF THE AP PEAL OF THE ASSESSEE IS ALLOWED AND ADDITION OF RS.90,420/- IS DELETED . HENCE, THE SAME IS DELETED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALL OWED BUT SUBJECT TO EXCEPTION. ORDER PRONOUNCED IN THE OPEN COURT ON 20.03. 2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:20.03.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER