M/s Juhi Alloys Pvt. Ltd., Kanpur V. Dy. Commissioner Of Income Tax-VI, Kanpur

ITA 648/LKW/2013

• Counselvise Citation: 64823714 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SWATI RATNA
• Keywords: Business income; Depreciation; Business expenditure; Proportionate interest
• Section: 40A(3); 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.648/LKW/2013 ASSESSMENT YEAR:2009 - 10 DY.C.I.T., RANGE - VI, KANPUR. VS M/S JUHI ALLOYS PVT. LTD., 123/360, FAZALGANJ, KANPUR. PAN:AAACJ3420A (RESPONDENT) (APPELLANT) SHRI ASHISH JAISWAL, ADVOCATE APPELLANT BY SMT. SWATI RATNA, D. R. RESPONDENT BY 15/04/2015 DATE OF HEARING 15 /06/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, KANPUR DATED 13/03/2013 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE U/S 40A(3) AT RS.5,00,000.00 WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE. 2. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT( A) HAS ERRED IN CONFIRMING ADDITION OF RS.4,44,392.00 MADE BY LD. ASSESSING OFFICER BY RESORTING TO PROVISIONS OF SECTION 14A READ WITH SECTION 8D. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF R S.1,94,694.00 CLAIMED AS HIRE CHARGES ON 2 CAR WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE / AND SUBMISSIONS OF THE ASSESSEE. 4. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.1,12,321.00 OUT OF DEPRECIATION ON CAR WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE. 5. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER AS WELL AS OBSERVATIONS OF LD. ASSESSING OFFICER NOT CORRECT AND IN FACT, LEGALLY AS WELL AS FACTUALLY, ASSESSEE WAS ELIGIBLE FOR ALL CLAIMS WHICH WERE DISALLOWED BY THE LD. ASSESSING OFFICER AND NO ADDITION WAS WARRANTED. 6. THAT THE ADDITIONS/DISALLOWANCES AS WELL AS APPEAL ORDER AS WELL AS ASSESSMENT OR DER IS BAD IN LAW AS WELL AS ON FACTS IN AS MUCH AS CONFIRMING / MAKING ADDITION / DISALLOWANCE. 3. REGARDING GROUND NO. 1 OF THE APPEAL, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT CASH PAYMENT WAS MADE ON 01/04/2008 AND SUPPLY WAS RECEIVED ON 30 TH MAY 2008. HE ALSO SUBMITTED THAT THE ASSESSEE MADE CASH PAYMENT UNDER COMPULSION BECAUSE THE SUPPLIER REFUSED TO MAKE SUPPLIES WITHOUT GETTING CASH PAYMENT OF EARLIER OUTSTANDING AND THEREFORE, THE DISALLOWANCE IS NOT JUSTIFIED. 4. AS AGAINST THIS, LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS IS NOT IN DISPUTE THAT THE ASSESSEE MADE CASH PAYMENT IN EXCESS OF THE LIMIT PRESCRIBED U/S 40A(3) OF THE ACT AND THEREFORE, DISALLOWANCE IS PROPER IF THE PAYMENT IN CASH IS NOT COVERED BY ANY SITUATION PRESCRIBED UNDER RULE 6DD OF THE INCOME TAX RULES. IN THE PRESENT CASE, THIS IS THE ONLY EXPLANATION OFFERED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND BEFORE U S ALSO THAT 3 THE PAYMENT IN CASH TO M/S RADHA KRISHNA ISPAT PVT. LTD. WAS MADE OUT OF BUSINESS EXIGENCY AND COMPULSION. IT IS CATEGORICALLY SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT PAYMENT IN CASH WAS MADE TO THIS PARTY ON 01/04/2008 AND SUPPLY WAS R ECEIVED ON 30 TH MAY 2008. THIS DO NOT SUPPORT THIS CONTENTION THAT THERE WAS ANY BUSINESS EXIGENCY TO MAKE CASH PAYMENT BECAUSE WHEN THE SUPPLY WAS MADE BY THE PAYEE AFTER ALMOST 2 MONTHS FROM THE DATE OF MAKING CASH PAYMENT, IT CANNOT BE SAID THAT IF THE PAYMENT WAS MADE BY THE ASSESSEE BY CHEQUE ON 01/04/2008 RESULTING IN CLEARING OF CHEQUE WITHIN 2 - 3 DAYS IN NORMAL CASES, THERE IS ANY BUSINESS EXIGENCY IN MAKING CASH PAYMENT. IF THE SUPPLY IS RECEIVED ON THE SAME DATE OF MAKING CASH PAYMENT AND ALSO IF NON RECEIPT OF SUPPLY ON THE SAID DATE IS GOING TO ADVERSELY AFFECT THE BUSINESS OF THE ASSESSEE, THERE MAY BE A CASE OF BUSINESS EXIGENCY IN MAKING CASH PAYMENT. IN THE PRESENT CASE, IT IS ADMITTED POSITION THAT THE SUPPLY WAS RECEIVED AFTER ALMOST TWO MONTHS OF MAKING CASH PAYMENT AND IT IS ALSO NOT SHOWN THAT NON RECEIPT OF SUPPLY ON 30 TH MAY 2008 ALSO COULD HAVE RESULTED INTO AN IRREPARABLE LOSS TO THE ASSESSEE. UNDER THIS FACTUAL POSITION, WE ARE OF THE CONSIDERED OPINION THAT THE CASH PAYMENT CANNO T BE ACCEPTED TO BE MADE BECAUSE OF BUSINESS EXIGENCY AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 1 IS REJECTED. 6. REGARDING GROUND NO. 2, IT WAS SUBMITTED BY LEARNED A.R. OF THE AS SESSEE THAT NO DISALLOWANCE SHOULD BE MADE U/S 14A OUT OF INTEREST EXPENDITURE BECAUSE INVESTMENT IS OF ONLY RS.88.85 LACS WHEREAS INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE COMPANY IS RS.511.13 LACS IN THE FORM OF SHARE CAPITAL AND RS.812.59 LACS IN THE FORM OF RESERVE & SURPLUS. 7. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE BALANCE SHEET OF THE ASSESSEE COMPANY, AVAILABLE ON PAGE NO. 87 OF THE PAPER BOOK, THE INVESTMENT WAS ONLY RS.17,06,980/ - AS ON 31/03/2007 WHICH HAS GONE UP TO RS.88,85,839/ - AS ON 31/03/2008. HENCE, IT IS SEEN THAT THE MAJORITY OF INVESTMENT WAS MADE IN THE FINANCIAL YEAR 2007 - 08 RELEVANT TO ASSESSMENT YEAR 2008 - 09. RULE 8 D HAS BECOME OPERATIVE FROM ASSESSMENT YEAR 2008 - 09. AS PER RULE 8D, IF THE ASSESSEE IS HAVING MIXED FUNDS THEN PROPORTIONATE DISALLOWANCE OF INTEREST EXPENDITURE HAS TO BE MADE. THIS IS NOT IN DISPUTE THAT THE ASSESSEE WAS HAVING MIXED FUNDS IN THE YEAR OF INVESTMENT I.E. IN FINANCIAL YEAR 2007 - 08 AS WELL AS IN THE PRESENT YEAR ALSO. THE ASSESSEE WAS HAVING BORROWED FUNDS TO THE EXTENT OF RS.1,570.57 LAC AS ON 31/03/2008. THE SAID LOAN INCLUDED VERY SMALL AMOUNT OF VEHICLE LOAN, WHICH CAN BE SAID AS SP ECIFICALLY INVESTED IN BUSINESS ASSETS EARNING TAXABLE INCOME BUT THE MAJORITY OF BORROWED FUNDS IS IN THE FORM OF CASH CREDIT FACILITY FROM PNB, WHICH IS NOT DIRECTLY RELATABLE TO USE IN BUSINESS INCOME. UNDER THESE FACTS, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE BECAUSE THE AUTHORITIES BELOW HAVE COMPUTED THE DISALLOWANCE TO BE MADE U/S 14A BY INVOKING THE PROVISIONS OF RULE 8D. THE ASSESSING OFFICER HAS WORKED OUT THE DISALLOWANCE OF INTEREST TO THE EXTEN T OF RS.3,99,963/ - ON THE BASIS OF PROPORTIONATE INTEREST EXPENDITURE AND A FURTHER DISALLOWANCE OF RS.44,429/ - HAS BEEN WORKED OUT ON ACCOUNT OF ADMINISTRATIVE EXPENSES CALCULATED TO THE EXTENT OF 0.5% OF THE AVERAGE INVESTMENT. WE DO NOT FIND ANY INFIRM ITY IN THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF FACTS DISCUSSED ABOVE. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF LEARNED CIT(A). GROUND NO. 2 IS REJECTED. 9. REGARDING GROUND NO. 3, IT WAS SUBMITTED BY THE LEARNED A.R. OF THE ASSESS EE THAT THE INVOICE FOR PURCHASE OF CAR IS AVAILABLE ON PAGE NO. 2 OF THE PAPER BOOK AS PER WHICH THE INVOICE IS DATED 21/04/2007 ALTHOUGH THE 5 CAR WAS INCLUDED IN THE FIXED ASSETS SCHEDULE OF THE ASSESSEE COMPANY IN THE PRESENT YEAR AND THE HIRE CHARGES PA YABLE FOR PRECEDING YEAR IS ALSO ALLOWABLE IN THE PRESENT YEAR AND THE DISALLOWANCE IS NOT JUSTIFIED. 10. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 10 OF THE ASSESSMENT ORDER THAT THE ASSESSEE CLAIMED HIRE CHARGES AMOUNTING TO RS.1,94,694/ - RELATING TO MERCEDES CAR PURCHASED BY ONE OF THE DIRECTORS SHRI YOGESH AGARWAL IN HIS NAME FOR THE PERIOD RELATING TO FINANCIAL YEAR 2007 - 08 RELEVANT TO ASSESSMENT YEAR 2008 - 09. WHEN THE ASSESSING OFFICER CONFRONTED THE ASSESSING OFFICER ON THIS ISSUE AND WAS ASKED TO JUSTIFY THE HIRE CHARGES OF RS.1,94,694/ - , IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT VEHI CLE WAS PURCHASED BY DIRECTOR OF THE ASSESSEE COMPANY IN THE YEAR 2007 - 08 AND NOT BY THE ASSESSEE COMPANY BUT LATER ON, IN THIS YEAR, POSSESSION HAS BEEN TAKEN BY THE COMPANY ON THE CONDITION THAT ALL THE MONEY BORNE BY THE DIRECTOR/ORIGINAL BUYER SHALL BE BORNE BY THE ASSESSEE COMPANY AND ALL THE LIABILITIES OF THE ORIGINAL BUYER SHALL BE PAID BY THE ASSESSEE COMPANY. IT WAS ALSO SUBMITTED THAT THE DIRECTORS OF THE ASSESSEE COMPANY HAS RAISED BILLS IN THIS YEAR TO THE COMPANY FOR HIRE CHARGES AND THEREFOR E, ASSESSEE COMPANY HAS CLAIMED THE SAME AS EXPENDITURE IN THE PRESENT YEAR. HE ALSO SUBMITTED THAT THE LIABILITY WAS NOT KNOWN TO THE ASSESSEE IN THE ASSESSMENT YEAR 2008 - 09 AND THEREFORE, NO PROVISION FOR PAYMENT OF HIRE CHARGES WAS MADE IN THE BOOKS IN ASSESSMENT YEAR 2008 - 09. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION BECAUSE IT IS AN ADMITTED POSITION THAT THE CAR WAS PURCHASED BY DIRECTOR IN 2007 - 08 AND THE ASSESSEE COMPANY HAS TAKEN POSSESSION OF THE CAR IN THE PRESENT YEAR ONLY AND THEREFORE, ANY EXPENSES INCURRED BEFORE TAKING POSSESSION OF THE CAR BY THE ASSESSEE COMPANY IS NOT 6 ALLOWABLE AS BUSINESS EXPENDITURE BECAUSE SUCH EXPENSES CANNOT BE CONSIDERED AS EXPENSES INCURRED FOR EARNING BUSINESS INCOME. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, THIS GROUND IS REJECTED. 12. REGARDING GROUND NO. 4, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE CAR WAS PURCHASED IN THE NAME OF YOGESH KUMAR AGARWAL AS PER INVOICE AVAILABLE ON PAGE NO. 2 OF THE PAPER BOOK AND THE SAME IS APPEARING IN THE FIXED ASSETS IN SCHEDULE - D OF THE BALANCE SHEET APPEARING ON PAGE NO. 13 OF THE PAPER BOOK. HE ALSO SUBMITTED THAT ADMITTEDLY THE PURCHASE INVOICE OF THIS CAR IS DATED 21/04/2007 AND THE SAME WAS INCLUDED IN THE FIXED ASSETS OF TH E ASSESSEE COMPANY IN THE PRESENT YEAR FOR FIRST TIME BUT THIS IS A FACT THAT THE CAR WAS USED FOR THE BUSINESS OF THE ASSESSEE AND THEREFORE, DEPRECIATION ON THE SAME IS ALLOWABLE. HE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS ALSO ALLOWED THE DEPRECI ATION BUT THE SAME WAS RESTRICTED BY THE CIT(A) TO DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE CAR BY ADJUSTING THE DEPRECIATION ALLOWABLE FOR ASSESSMENT YEAR 2007 - 08 . 13. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 1 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE INVOICE VALUE OF THE CAR I.E. RS.25,36,871/ - WITHOUT EXCLUDING DEPRECIATION IN RESPECT OF THE ASSESSMENT ORDER 2008 - 09 BUT THE ASSESSING OFFICER CALCULA TED THE DEPRECIATION ALLOWABLE IN THE PRESENT YEAR FIRST CALCULATING THE WRITTEN DOWN VALUE ON 01/04/2008 AFTER REDUCING DEPRECIATION ALLOWABLE FOR ASSESSMENT YEAR 2008 - 09 TO THE EXTENT OF RS.3,80,518/ - FROM VALUE OF THE CAR. SINCE THIS IS NOT IN DISPUTE THAT THE CAR IN QUESTION WAS PURCHASED IN FINANCIAL YEAR 2007 - 08 AS PER INVOICE DATED 24/01/2007 AVAILABLE ON PAGE NO. 2 OF THE PAPER BOOK, FOR THE PURPOSE OF 7 COMPUTING DEPRECIATION IN THE PRESENT YEAR, THE OPENING WRITTEN DOWN VALUE HAS TO BE CONSIDERED A ND NOT THE INVOICE VALUE OF THE CAR IN THE PRESENT YEAR. CONSIDERING THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT(A). GROUND NO. 4 IS REJECTED. 15. IN THE RES ULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 /06/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR