The Ayurvedeeaya Arkashala, Satara V. Addl CIT Rg- Satara., Satara

ITA 622/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4355 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS S PRAVEENA
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.622/PN/2012 (ASSESSMENT YEAR : 2005-06) THE AYURVEDEEYA ARKASHALA LTD. 165/166, SHUKRAWAR PETH, SATARA 415 002 (MAHARASHTRA) PAN : AABCT1292M . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX SATARA RANGE, SATARA . RESPONDENT APPELLANT BY : MR. SUNIL PATHAK RESPONDENT BY : MRS. S. PRAVEENA DATE OF HEARING : 22-04-2013 DATE OF PRONOUNCEMENT : 12-06-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATE D 31.03.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 20.12.2007 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THIS A PPEAL RELATES TO THE DISALLOWANCE OF RS.12,34,606/- REPRESENTING EXPENDI TURE INCURRED ON REPAIRS. THE RELEVANT FACTS ARE THAT APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS ENGAGE D IN THE BUSINESS OF MANUFACTURE AND SALE OF AYURVEDIC MEDICINES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS REQUIRED TO EXPLAIN THE J USTIFICATION FOR CLAIMING A SUM OF RS.12,34,606/- DEBITED UNDER THE HEAD REPAI RS TO BUILDING AS A ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 REVENUE EXPENDITURE. THE DETAILS OF SUCH EXPENDITUR E, AS DETAILED IN PARA 2.3 OF THE ORDER OF THE ASSESSMENT, ARE AS UNDER :- STATEMENT BETWEEN 01/04/2004 TO 31/03/2005 ACCOUNT NO. 9505 A/C NAME REPAIR OF BUILDING A/C --------------------------------------------------- --------------------------------------------------- -- DATE NARRATION DEBIT RS. CREDIT RS. OPENING BALANCE B/F 0.00 05/07/04 TO COLOURING 34C 6,500.00 05/07/04 TO PARTITION 16J 50,000.00 17/07/04 TO MUM COLOURING 69J 3,500.00 31/07/04 TO MUM 131J 800.00 30/08/04 TO MAHAMUNI 104J 18,000.00 27/09/04 TO LAB KATTA 94J 19,861.00 29/09/04 TO REST ROOM 99J 6,505.00 24/01/05 TO 188C 12,500.00 19/02/05 TO MATERIAL 79C 14,055.00 24/02/05 TO SHED LAB 99J 10,945.00 30/03/05 TO SHIVGAN 318J 3,80,000.00 30/03/05 TO MAHAMUNI 318J 7,11,940.00 --------------------------------------------------- --------------------------------------------------- -- TOTAL 12,34,606.00 CLOSING BALANCE C/D 12,34,606.00 =================================================== ======== 12,34,606.00 12,34,606.00 =================================================== ======= 3. THE ASSESSING OFFICER HELD THAT THE EXPENDITURE INCURRED ON FOR COMPOUND WALL, LAB KATTA, REST ROOM, LAB SHED, DIGG ING, ETC. AMOUNTING TO RS.12,34,606/- WAS A CAPITAL EXPENDITURE AS SUCH AN EXPENDITURE BENEFITED THE ASSESSEE IN THE SUBSEQUENT YEARS ALSO. ACCORDIN GLY, THE SAID EXPENDITURE WAS DISALLOWED. THE CIT(A) HAS ALSO UPHELD THE DISA LLOWANCE BY NOTICING THAT THE SAID EXPENDITURE WAS NEITHER IN THE NATURE OF C URRENT REPAIRS SO AS TO FALL UNDER SECTION 30 OF THE ACT AND NOR WAS REVENUE EXP ENDITURE SO AS TO FALL UNDER SECTION 37 OF THE ACT. ACCORDINGLY, DISALLOWA NCE MADE BY THE ASSESSING OFFICER OF RS.12,34,606/- WAS SUSTAINED BY THE CIT( A) AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT FACTORY PREMISES OF THE ASSESSEE ARE ABOUT 80 YEARS OLD AND SPREAD OVER AN AREA OF ABOUT 2 ACRES AND DUE TO PASSAGE OF TIME RE PAIRS WERE UNDERTAKEN. THE LEARNED COUNSEL SUBMITTED THAT THE MAJOR EXPENS E IN DISPUTE WAS ON ACCOUNT OF REPLACEMENT OF OLD WIRE MESH COMPOUND WA LL BY RCC WALL ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 AMOUNTING TO RS.7,11,940/- AND REBUILDING & STRENGT HENING THE RETAINING EXISTING WALL ON WHICH AN AMOUNT OF RS.3,80,000/- W AS SPENT. ON THIS ASPECT A REFERENCE HAS BEEN MADE TO THE WRITTEN SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, WHICH HAVE BEEN REPRODUCED IN PA RA 2.6 OF THE ASSESSMENT ORDER. IT WAS POINTED OUT THAT PART OF THE COMPOUND WALL WAS OF BARBED WIRE WHICH HAD BECOME OLD AND BROKEN IN PARTS, AND WHICH WAS REPLACED BY RCC AND WIRE MESH COMPOUND WALL. FURTHER, IT WAS POINTE D OUT THAT THE RETAINING WALL ON ANOTHER SIDE OF THE FACTORY, ON WHICH A CUL VERT FLOWS, WAS STRENGTHENED AND REBUILT IN PARTS AS IT WAS DAMAGED DUE TO HEAVY FLOW OF RAIN WATER. THE RESULTANT EXPENDITURE HAS NOT BROUGHT INTO EXISTENC E ANY NEW ASSET AND IT WAS INCURRED ONLY WITH A VIEW TO PRESERVE AND MAINTAIN AN EXISTING ASSET. IN FACT, WITH REGARD TO THE EXPENDITURE INCURRED ON CONSTRUC TION OF COMPOUND WALL IN PLACE OF BARBED WIRE FENCE EXISTING EARLIER, THE LE ARNED COUNSEL REFERRED TO THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF CIT VS. SOUTHERN ROADWAYS LTD. (2008) 304 ITR 84 (MAD.) WHEREIN SUCH EXPENDITURE HAS BEEN HELD TO BE A REVENUE EXPENDITURE. WITH REGARD TO TH E OTHER EXPENDITURE ALSO IT IS SOUGHT TO BE MADE THAT THEY ARE ROUTINE IN NATUR E AND DOES NOT RESULT IN CREATING ANY NEW ASSET BUT MERELY TO PRESERVE AN EX ISTING ASSET AND IN ORDER TO FACILITATE CARRYING ON BUSINESS IN A MORE EFFICI ENT MANNER. IT IS THUS CONTENDED THAT THE LOWER AUTHORITIES HAVE WRONGLY H ELD THE IMPUGNED EXPENDITURE TO BE A CAPITAL EXPENDITURE. IN ANY CAS E, IT IS SUBMITTED THAT CIT(A) PROCEEDED ON A LONG PREMISE THAT ASSESSEE HAD CLAIM ED THE IMPUGNED EXPENDITURE AS CURRENT REPAIRS UNDER SECTION 30 O F THE ACT. IN THE COURSE OF ARGUMENTS, RELIANCE HAS BEEN PLACED ON THE FOLLOWIN G DECISIONS IN THE CASE OF : - (I) ZENITH STEEL PIPES LTD. (NO.1) VS. CIT (1990) 185 ITR 126, (II) CIT VS. BHARAT SURYODAYA MILLS CO. LTD. (199 3) 202 OTR 942 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS CONTENDED THAT THE EXPENDITURE INCURRED WAS WITH A VIEW TO ACQUIRE A FRESH BENEFIT OR ADVANTAGE THAT DID NO T EXIST EARLIER AND SINCE THE ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 EXPENDITURE WAS RELATABLE TO THE CAPITAL ASSETS, IT CANNOT BE SAID THAT IT WAS FOR ROUTINE CURRENT REPAIRS TO THE BUILDING. IN THIS MA NNER, THE ORDERS OF THE AUTHORITIES BELOW HAVE BEEN DEFENDED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN SO FAR AS THE MAJOR AMOUNT OF EXPENDITURES OF RS.3,80,000/- AND R S.7,11,940/- ARE CONCERNED, THEY RELATE TO MONEYS SPENT BY ASSESSEE ON THE COMPOUND WALL OF ITS FACTORY PREMISES. IN THIS REGARD, THE CIT(A) HA S NOTICED IN PARA 3.3.5 OF HIS ORDER THAT IT IS A CASE OF TOTAL REPLACEMENT OF EXI STING BARBED WIRE FENCE WITH NEW RCC COMPOUND WALL AND MAKING OF A RETAINING WAL L ON OTHER SIDE. ON THIS BASIS, IT IS SOUGHT TO BE MADE OUT ON BEHALF OF THE REVENUE THAT THE SAID EXPENDITURE CAN NEITHER BE SAID TO BE CURRENT REPA IRS TO THE EXISTING BUILDING WITHIN THE MEANING OF SECTION 30 OF THE ACT AND NOR THE EXPENDITURE CAN BE SAID TO BE OF A REVENUE NATURE FALLING UNDER SECTIO N 37 OF THE ACT AS IT WAS INCURRED AS A PART OF OVERALL ENHANCEMENT OR IMPROV EMENT OF THE AVAILABLE PREMISES SO AS TO MAKE THE PREMISES MORE ENDURING. 7. BEFORE THE LOWER AUTHORITIES WHILE EXPLAINING TH E BACKGROUND FOR INCURRENCE OF THE SAID EXPENDITURE, ASSESSEE HAD EX PLAINED THAT ITS FACTORY PREMISES WERE 80 YEARS OLD AND SPREAD OVER AN AREA OF ABOUT 2 ACRES AND THAT IT WAS NOT A SINGLE STRUCTURE BUILDING BUT A CLUSTE R OF SIX DIFFERENT STRUCTURES BUILT OVER THE YEARS ON NEED BASIS. THE FACTORY CAM PUS WAS TRIANGULAR IN SHAPE HAVING TWO SIDES FACING THE ROAD AND ON THE T HIRD SIDE THERE IS A CULVERT. THE ASSESSEE EXPLAINED THAT THE ROAD FACING SIDE WA S HAVING A BARBED WIRE FENCE/COMPOUND WHICH HAD BECOME OLD AND WAS IN A BR OKEN CONDITION FOR YEARS. SIMILARLY, ON THE THIRD SIDE ON WHICH THE CU LVERT FLOWED, DUE TO CONSISTENT MONSOON RAINS THERE WAS AN EROSION IN TH E STRENGTH OF THE RETAINING WALL WHICH WAS BUILT IN THE PAST AND WAS ACCORDINGL Y DAMAGED AT SOME PLACES OR WASHED AWAY BY THE FLOW OF RAIN WATER. THUS ON T HE TWO SIDES COVERED BY THE BARBED WIRE FENCE, ASSESSEE CONSTRUCTED A COMPO UND WALL WITH RCC AND ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 WIRE MESH COSTING RS.7,11,940/-. ON THE SIDE FACING THE CULVERT, ASSESSEE UNDERTOOK STRENGTHENING AND REPAIRING THE RETAINING WALL WITH RCC COSTING RS.3,80,000/-. 8. IN THE CASE OF SOUTHERN ROADWAYS LTD. (SUPRA) TH E HONBLE MADRAS HIGH COURT WAS DEALING WITH AN EXPENDITURE INCURRED ON CONSTRUCTION OF A COMPOUND WALL IN PLACE OF A BARBED WIRE FENCE AND I T WAS HELD THAT THE EXPENDITURE INCURRED WAS A REVENUE EXPENDITURE. IN COMING TO SUCH CONCLUSION, THE HONBLE MADRAS HIGH COURT REFERRED TO AN EARLIER DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ZENITH STEEL PIPES LTD. (NO.1) (SUPRA) WHEREIN IT HAS BEEN HELD THAT PUTTING UP A BARBED WIRE FENCE WAS A REVENUE EXPENDITURE. THE HONBLE MADRAS HIGH COURT ALSO REFERRED TO JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS. B.V. RAMCHANDRAPPA AND SONS (1991) 191 ITR 34 (KAR.) WHE REIN ALSO AN EXPENDITURE INCURRED FOR REPLACING OLD BARBED WIRE FENCE BY A COMPOUND WALL WAS HELD TO BE A REVENUE EXPENDITURE. IN FACT, IT W OULD BE APPROPRIATE TO REFER TO THE FOLLOWING PORTION OF THE JUDGEMENT OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF B.V. RAMCHANDRAPPA AND SONS (SUPRA) WHICH WAS ALSO NOTED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOU THERN ROADWAYS LTD. (SUPRA) IN COMING TO CONCLUDE THAT THE EXPENDITURE INCURRED ON THE CONSTRUCTION OF COMPOUND WALL IN PLACE OF BARBED WI RE FENCE IS A REVENUE EXPENDITURE :- THE PURPOSE OF THE FENCE AROUND THE BUSINESS PREMI SES WAS TO PREVENT TRESPASSERS AND THIEVES FROM ENTERING INTO THE PREMISES; THE DOMINANT PURPOSE WAS TO SAFEGUARD THE PROPERTY IN THE PREMIS ES. THE MATERIALS IN THE PREMISES WERE PART OF THE BUSINESS ASSETS OF THE AS SESSEE. IN THIS CONTEXT, THE COMPOUND WALL COULD NOT BE TREATED IN ISOLATION. IT WAS PART OF THE BUSINESS PREMISES AND WHEN ONLY A PART OF THE PREMISES WAS R EPLACED, PRIME FACIE, IT WOULD BE A CASE OF REPAIR. THE IDENTITY OF THE ENTI RE ASSET AS A WHOLE WAS NOT AFFECTED AT ALL. THE WORKS CARRIED OUT CONTRIBUTED TO THE BETTER AND SAFER UTILIZATION OF THE EXISTING BUSINESS ASSET. THE WOR KS EFFECTED, WHEN CONSIDERED IN PROPORTION TO THE ENTIRE BUSINESS PREMISES, DID NOT RESULT IN SIGNIFICANT REPLACEMENT SO AS TO ALTER THE CHARACTER OF THE BUS INESS PREMISES. THEREFORE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE EXPENDIT URE INCURRED ON REPLACEMENT ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 OF THATCHED ROOF WITH ASBESTOS SHEETS AND BARBED WI RE FENCE WITH COMPOUND WALL WAS REVENUE EXPENDITURE. 9. IN VIEW OF AFORESAID DISCUSSION, IN OUR VIEW, TH E EXPENDITURE INCURRED BY THE ASSESSEE ON RAISING OF A COMPOUND RCC WALL IN P LACE OF BARBED WIRE FENCE AND STRENGTHENING OF RETAINING WALL FACING TH E CULVERT ARE EXPENDITURES INCURRED FOR BETTER AND SAFER UTILIZATION OF THE EX ISTING BUSINESS ASSET. IN FACT, THE SAID EXPENDITURE CONSIDERED IN PROPORTION TO TH E ENTIRE BUSINESS DOES NOT RESULT IN ANY SIGNIFICANT REPLACEMENT SO AS TO ALTE R THE CHARACTER OF THE BUSINESS PREMISES WHERE THE ASSESSEE IS UNDERTAKING ITS MANUFACTURING ACTIVITIES. 10. WE HAVE ALSO PERUSED THE OTHER ITEMS OF EXPENDI TURE ENUMERATED, FOR EXAMPLE- COLOURING, PARTITION, FIXING OF WATER TANK STAND, INSTALLATION OF ALUMINUM DOOR, ETC.. THESE EXPENSES CANNOT BE VIEWE D IN ISOLATION TO THE OVERALL BUSINESS ASSETS OF THE ASSESSEE-NAMELY, FAC TORY PREMISES WHERE MANUFACTURING ACTIVITIES ARE BEING CARRIED OUT. THE Y DO NOT RESULT IN CREATION OF ANY NEW AND INDEPENDENT ASSET AND CANNOT BE TERMED AS CAPITAL EXPENDITURE. THOUGH THE BENEFITS OF THE AFORESAID EXPENDITURE MA Y BE AVAILABLE TO THE ASSESSEE OVER A PERIOD OF TIME YET THE SAID PROPOSI TION WOULD NOT MAKE IT A CAPITAL EXPENDITURE SO LONG AS IT CAN BE APPRECIATE D THAT THE EXPENSES HAVE BEEN INCURRED WITH THE OBJECTIVE OF BEING IN THE RE VENUE FIELD AND NOT IN THE CAPITAL FIELD. THEREFORE, THE CLAIM OF ASSESSEE THA T THE AFORESAID EXPENDITURE IS LIABLE TO BE ALLOWED UNDER SECTION 37 OF THE ACT IS HEREBY UPHELD. 11. BEFORE PARTING WE MAY REFER TO THE JUDGEMENTS O F THE HONBLE SUPREME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT (1997) 224 ITR 414 (SC) AND SARAVANA SPINNING MILLS PVT. LTD. (2007) 293 IT R 201 (SC), REFERRED TO BY THE CIT(A) IN PARA 3.3.3 AND 3.3.4 RESPECTIVELY OF HIS ORDER. THE CIT(A) HAS REFERRED TO THE MEANING OF THE EXPRESSION CURRENT REPAIRS UNDER SECTION 31 OF THE ACT EXPLAINED BY THE HONBLE SUPREME COURT. IN THE SAID JUDGEMENTS, ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 ASSESSEE HAD CLAIMED CERTAIN EXPENDITURE ON BUILDIN G, MACHINERY, ETC. WHICH WAS CLAIMED AS CURRENT REPAIRS IN TERMS OF SECTIO N 31 OF THE ACT. CLEARLY THE CASE BEFORE US IS BASED ON THE ALLOWABILITY OF THE IMPUGNED EXPENDITURE UNDER SECTION 37 OF THE ACT AND NOT AS CURRENT REPAIRS UNDER SECTION 30 OR 31 OF THE ACT. THEREFORE, THE RELIANCE PLACED BY THE CIT(A) O N THE AFORESAID JUDGEMENTS IS NOT JUSTIFIED. 12. IN THE RESULT, WE SET-ASIDE THE ORDER OF THE CI T(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.12,3 4,606/-. THUS, ON THIS GROUND ASSESSEE SUCCEEDS. 13. THE SECOND ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.6, 83,680/- OUT OF TRANSPORTATION CHARGES BY INVOKING SECTION 40(A)(IA ) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD INCURRED AN EXPEN DITURE TOWARDS TRANSPORT, FREIGHT AND OCTROI CHARGES AMOUNTING TO RS.6,83,680 /- BY WAY OF PAYMENTS TO THREE PARTIES ON WHICH THE REQUISITE TDS WAS NOT DE DUCTED AND THEREFORE, HE APPLIED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE SAME. THE CIT(A) HAS ALSO UPHELD THE DISALLOWANCE, AGAINS T WHICH ASSESSEE IS IN APPEAL BEFORE US. 14. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE MERELY SUBMITTED THAT THE ASSESSEE WISHED TO RELY ON THE SUBMISSIONS MADE BEFORE THE CIT(A) AND NO OTHER ARGUMENT HAS BEEN ADVANCED. THE FIRST POIN T MADE BY THE ASSESSEE BEFORE THE CIT(A) WAS THAT EACH PAYMENT MADE TO THE TRANSPORT CONTRACTORS WAS BELOW RS. 20,000/- AND THEREFORE ASSESSEE WAS N OT LIABLE TO DEDUCT TAX AT SOURCE FROM SUCH PAYMENTS. IN THIS REGARD THE CIT(A ) HAS REFERRED TO THE FIRST PROVISO TO SECTION 194C(3) OF THE ACT INSERTED BY T HE FINANCE (NO.2) ACT, 2004 WITH EFFECT FROM 01.10.2004. THE CIT(A) FOUND THAT PAYMENTS FOR FREIGHT INWARD/OUTWARD CONSTITUTING THE EXPENDITURE OF RS.6 ,83,680/- WERE MADE AFTER ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 01.10.2004 TO THE THREE PARTIES AND THE AGGREGATE O F THESE PAYMENTS IN EACH CASE EXCEEDED RS.50,000/- DURING THE YEAR AND THERE FORE THE SAME ARE COVERED BY THE AMENDED FIRST PROVISO TO SECTION 194 C(3) OF THE ACT AND ACCORDINGLY, ASSESSEE WAS LIABLE TO DEDUCT TAX AT S OURCE ON SUCH PAYMENTS. THE AFORESAID FACTUAL POSITION BROUGHT OUT BY THE C IT(A) HAS NOT BEEN NEGATED BEFORE US AND THEREFORE THE SAME IS HEREBY AFFIRMED . 15. THE SECOND POINT MADE BY THE ASSESSEE BEFORE TH E CIT(A) WAS THAT EACH TRUCK OWNER, ON WHOSE BEHALF THE PAYMENTS WERE MADE TO TRANSPORT CONTRACTORS DID NOT OWN MORE THAN ONE VEHICLE AND T HEREFORE IN TERMS OF SECOND PROVISO TO SECTION 194C(3) OF THE ACT SUCH P AYMENTS ARE NOT LIABLE FOR TDS. ON THIS ASPECT, THE CIT(A) HELD THAT SECOND PR OVISO TO SECTION 194C(3) OF THE ACT, INTRODUCED BY THE FINANCE ACT, 2005 WAS SPECIFICALLY MADE EFFECTIVE FROM 01.06.2005 AND SINCE IN THE PRESENT CASE, THE AFORESAID PAYMENTS IN QUESTION WERE MADE PRIOR TO SUCH DATE I.E. UPTO 31. 03.2005 THEREFORE ASSESSEE WAS LIABLE TO DEDUCT THE REQUISITE TAX AT SOURCE UNDER SECTION 194C(3) AS IT EXISTED FOR THE YEAR UNDER CONSIDERAT ION. THE AFORESAID POSITION BROUGHT OUT BY THE CIT(A) IS NOT IN DISPUTE AND THE REFORE WE FIND NO REASONS TO INTERFERE WITH THE SAME. 16. AS A RESULT OF THE AFORESAID WE HEREBY AFFIRM T HE ACTION OF THE CIT(A) IN HOLDING THAT THE ASSESSING OFFICER WAS JUSTIFIED IN INVOKING SECTION 40(A)(IA) OF THE ACT FOR MAKING DISALLOWANCE OF EXPENDITURE REPR ESENTED BY PAYMENTS OF RS.6,83,680/- OUT OF TRANSPORTATION CHARGES. THUS, ON THIS ASPECT ASSESSEE FAILS. 17. THE LAST ISSUE IS WITH REGARD TO THAT DISALLOWA NCE OF 10% OUT OF EXPENDITURE OF POSTAGE, TELEPHONE EXPENSES, TRAVELL ING AND OTHER MISCELLANEOUS EXPENSES RETAINED BY THE CIT(A). THE ASSESSING OFFICER HAD DISALLOWED 15% OF SUCH EXPENDITURE. WE FIND THAT TH E DISALLOWANCE OF 15% ITA NO.622/PN/2012 THE AYURVEDEEYA ARKASHALA LTD. A.Y. 2005-06 WHICH STOOD REDUCED TO 10% BY THE CIT(A), IS BASED ON MERE SURMISES AND CONJECTURES WITHOUT THERE BEING ANY PARTICULAR EVID ENCE OF THE EXPENSES OF NON-BUSINESS OR PERSONAL NATURE. THEREFORE, THE SAM E IS LIABLE TO BE DELETED IN ENTIRETY. ACCORDINGLY, WE SET-ASIDE THE ORDER OF TH E CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE ADDITION. ON THIS ASPECT ASSESSEE SUCCEEDS. 18. RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 12 TH JUNE, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY I.T.A.T., PUNE