M/s. New Kashmir Steel Rolling Mills, Jammu V. The Dy. Commissioner of Income-tax, Jammu

ITA 595/ASR/2014

• Counselvise Citation: 59520914 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-09-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 07-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RATINDER KAUR
• Assessee Lawyers: TARUN BANSAL
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.595(ASR)/2014 ASSESSMENT YEAR:2002-03 PAN: AABFN0941L M/S. NEW KASHMIR STEEL ROLLING MILLS, VS. DY. COM MR. OF INCOME TAX, INDUSTRIAL AREA, GANGYAL, CENTRAL CIRCLE, JAMMU. JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. TARUN BANSAL, ADV. RESPONDENT BY:SMT. RATINDER KAUR, DR DATE OF HEARING:21.09.2015 DATE OF PRONOUNCEMENT: 13/11/2015 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2002-03, TAKING THE FOLLOWING GROUNDS: 1. THAT THE ORDER UNDER APPEAL IS AGAINST LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED IN NO T ACCEPTING THE APPEAL OF THE APPELLANT AND DELETING THE DISALL OWANCE MADE ON ACCOUNT OF TRUCK EXPENSES. 3. THAT THE LD. CIT(A) HAS ALSO ERRED IN CONFIRMING THE 10% DISALLOWANCE OF TELEPHONE EXPENSES AND 25% DISALLOW ANCE OF THE DEPRECIATION. 4. THAT IN ANY CASE THE DISALLOWANCES SUSTAINED BY THE LD. CIT(A) ARE EXCESSIVE. 2. GROUND NO. 1 IS GENERAL. ITA NO.595(ASR)/2014 2 3. APROPOS GROUND NO.2, THE AO MADE DISALLOWANCE OF RS.60,000/- OUT OF TRUCK EXPENSES, OBSERVING THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.23,15,306/- UNDER THE HEAD OF TRUCK EX PENSES, BUT TRUCK EXPENSES BELOW RS.2500/- WERE NOT FULLY VOUCHED. I N MAKING THE DISALLOWANCE, THE AO FOLLOWED THE ORDER DATED 19.01 .2009 PASSED BY THE AMRITSAR BENCH OF THE TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2004-05, WHEREIN A SIMILAR DISALLOW ANCE OF TRUCK EXPENSES WAS MADE TO THE TUNE OF RS.70,000/- OUT OF A TOTAL DEBIT OF RS.26,89,386/-, OBSERVING, INTER-ALIA, THAT THE ASS ESSEE WAS A PARTNERSHIP FIRM HAVING MANY PARTNERS AND THE PERSO NAL USAGE OF THE TRUCK COULD NOT BE RULED OUT; AND THAT HAD THE ASSE SSEE FURNISHED THE ENTIRE DETAILS, SUPPORTED BY VOUCHERS AND LOG BOOK, ADDITION COULD NOT HAVE BEEN MADE. 4. THE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY T HE AO, OBSERVING THAT THE FACTS FOR THE YEAR UNDER CONSIDERATION WER E NOT DIFFERENT FROM THOSE FOR THE ASSESSMENT YEAR 2004-05; AND THAT IN THE ABSENCE OF VOUCHERS AND LOG BOOK, A NOMINAL AMOUNT OF DISALLO WANCE HAD CORRECTLY BEEN MADE. 5. AS AGAINST THE ACTION OF THE LD. CIT(A), THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED BEFORE ME THAT A COPY OF TH E LEDGER ACCOUNT OF THE TRUCK EXPENSES IN QUESTION IS AT APB 45 118; THAT AT APB 119 TO 164 IS THE HEAD-WISE AND DATE-WISE BREAK-UP OF EXP ENSES; AND THAT APB 164 IS HEAD-WISE EXPENSES DEBITED TO TRUCK EXPENSE S ACCOUNT. IT HAS BEEN SUBMITTED THAT AS AVAILABLE FROM THESE DOCUMEN TS, THE EXPENSES CONCERN SMALL ITEMS, FOR WHICH, IT HAS BEEN URGED T HAT IN ANY CASE, THE DISALLOWANCE IS EXCESSIVE. 6. ON THE OTHER HAND, PLACING RELIANCE ON THE IMPUG NED ORDER, THE LD. DR, HAS CONTENDED THAT THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE ITA NO.595(ASR)/2014 3 NOT DIFFERENT FROM THOSE BEFORE THE TRIBUNAL FOR TH E AY 2004-05; THAT NOT RULING OUT PERSONAL USAGE OF THE TRUCK, 10% DISALLO WANCE HAS BEEN MADE BY THE AO, WHICH HAS CORRECTLY BEEN AFFIRMED BY T HE LD. CIT(A) TO BE JUSTIFIED. 7. A PERUSAL OF THE STATEMENT OF TRUCK EXPENSES BEL OW RS.2500/- FOR THE YEAR UNDER CONSIDERATION (APB 119 TO 164) SHOWS THAT THESE EXPENSES ARE UNDER THE HEADS OF TOLL TAX. MOBILE OI L, DIESEL, REPAIR & MAINTENANCE, PARKING, WEIGHING AND FOOD EXPENSES. I T IS SEEN THAT AS PER THE LEDGER STATEMENT OF TRUCK EXPENSES, AS AVAILABL E AT APB 45 TO 118, THESE EXPENSES ARE MOSTLY SMALL EXPENSES. SUCH DETA ILS ARE NOT SHOWN TO HAVE BEEN PRODUCED BEFORE THE TRIBUNAL FOR THE AY 2 004-05, THE ORDER OF THE TRIBUNAL FOR WHICH YEAR WAS FOLLOWED BY THE AU THORITIES BELOW. THEREFORE, IN VIEW OF ALL THESE DETAILS FILED BY THE ASSESSEE, CONSIDERING THAT STILL, PERSONAL USAGE CANNOT BE RULED OUT, THE DISALLOWANCE OF RS.60,000/- IS SCALED DOWN BY 50% TO RS.30,000/-. G ROUND NO.2 IS PARTLY ACCEPTED. 8. SO FAR AS REGARDS GROUND NO.3, THE AO MADE 10% D ISALLOWANCE ON TELEPHONE EXPENSES AND 25% DISALLOWANCE OF CAR DEPR ECIATION, WHICH DISALLOWANCES WERE UPHELD BY THE LD. CIT(A). 9. THE TELEPHONE EXPENSES INCLUDED THOSE RELATED TO TELEPHONE INSTALLED AT THE RESIDENCE OF THE PARTNERS. THE ELE MENT OF PERSONAL USAGE WAS TAKEN INTO CONSIDERATION. THE DISALLOWANCE WAS MADE @ 10%. SO FAR AS REGARDS THE CAR DEPRECIATION DISALLOWANCE, SUCH DISALLOWANCE WAS MADE AT 25% ON THE REASON THAT THE ASSESSEE HAD HIM SELF DISALLOWED 25% OF THE CAR EXPENSES BEING ATTRIBUTABLE TO PERSO NAL USAGE OF CARS BY THE PARTNERS OF THE ASSESSEE FIRM. SIMILAR DISALLOW ANCE WAS UPHELD BY THE TRIBUNAL VIDE ORDER DATED 19.01.2009, PASSED U/S 25 4(1) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05 ITA NO.595(ASR)/2014 4 10. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN A BLE TO SAY MUCH ABOUT THE DISALLOWANCE OF TELEPHONE EXPENSES. THIS DISALLOWANCE IS, THEREFORE, CONFIRMED. 11. SO FAR AS REGARDS THE DISALLOWANCE OF CAR DEPRE CIATION, THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THAT THE AS SESSEE ITSELF DISALLOWED 25% OF CAR EXPENSES. IT HAS BEEN CONTENDED THAT THE DEPRECIATION CANNOT BE LINKED WITH THE CAR EXPENSES. HERE, THE ASSESSEE CLAIMED CAR EXPENSES OF RS.17,236/-. DEPRECIATION WAS CLAIMED AT RS.59,8 82/-. OUT OF CAR EXPENSES, THE ASSESSEE ITSELF DISALLOWED 25%. THE D ISALLOWANCE OF CAR DEPRECIATION AMOUNTS TO RS.14,970/-. 12. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO RELEVANCY OR CO-RELATION BETWEEN CAR EXPENSES AND D EPRECIATION AND SINCE CAR DEPRECIATION HAS BEEN ALLOWED U/S 32 OF THE ACT , IF THE USAGE IS LESS THAN 180 DAYS, THEN @ 50% OF THE NORMAL DEPRECIATIO N AND IF THE USAGE IS MORE THAN 180 DAYS, THEN @ 100% OF NORMAL DEPREC IATION RATE. RELIANCE HAS BEEN PLACED ON MUKESH K. SHAH VS. ITO , 303 ITR 409 (MUM). LASTLY, IT HAS BEEN CONTENDED THAT IN ANY C ASE, THE DISALLOWANCE IS EXCESSIVE. 13. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 14. IT HAS ALSO BEEN CONTENDED BY THE LD. DR, THAT AS PER THE PROVISIONS OF SECTION 32 OF THE ACT, WHEREIN ANY BU ILDING, MACHINERY, PLANT OR FURNITURE, IS NOT EXCLUSIVELY USED FOR THE PURPOSES OF BUSINESS OR PROFESSION, THE DEDUCTIONS, INTER-ALIA, UNDER SECTI ON 32(1)(II) SHALL BE RESTRICTED TO FAIR PROPORTIONATE PART THEREOF, WHIC H THE AO MAY DETERMINE HAVING REGARDING TO THE USER OF SUCH BUILDING, MACH INERY, PLANT OR ITA NO.595(ASR)/2014 5 FURNITURE FOR THE PURPOSES OF BUSINESS OR PROFESSIO N. IT HAS BEEN CONTENDED THAT IN THE PRESENT CASE, BY ITSELF DISAL LOWING 25% OF THE CAR EXPENSES, THE ASSESSEE HAS ADMITTED THE PERSONAL U SAGE OF THE CAR FOR 25% OF THE TIME; AND THAT THEREFORE, THE DISALLOWAN CE OF DEPRECIATION HAS CORRECTLY BEEN LINKED WITH THE CAR EXPENSES. 15. HERE, THE CONTENTION ON BEHALF OF THE DEPARTMEN T IS FOUND TO BE CORRECT. BY ITSELF DISALLOWING 25% OF THE CAR EXPEN SES, THE ASSESSEE HAS ITSELF ADMITTED PERSONAL USAGE OF THE CAR FOR 25% O F THE TIME. THE DEPRECIATION DISALLOWANCE TO THE EXTENT OF 25% IS, THEREFORE, HELD TO BE JUSTIFIED. ACCORDINGLY, GROUND NO.3 IS REJECTED. 16. AS PER GROUND NO.4, THE DISALLOWANCES SUSTAINED BY THE LD. CIT(A) ARE EXCESSIVE. THIS ISSUE STANDS DEALT WITH WHILE D EALING WITH GROUND NOS. 2 & 3. THIS GROUND IS DISPOSED OF ACCORDINGLY. 17. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH NOV EMBER, 2015 SD/- (A.D. JAIN) JUDICIAL MEMBER /SKR/ DATED: 13/11/2015 COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. NEW KASHMIR STEEL ROLLING MILL S, JAMMU 2. THE DCIT, CC, JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR)