Intervalve (India) Pvt. Ltd., Pune V. Addl. CIT, Pune

ITA 659/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3060 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2010
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 01-06-2009
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Depreciation; Opportunity of being heard; TDS; Set aside
• Section: 43B; 40(a)(ia); 194C; 195; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUNAKARA RAO ITA NO. 659/PN/09 (ASSTT. YEAR 2005-06) INTERVALVE (INDIA) PVT. LTD. 16-B/1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 411001 PAN NO. AAACI3917P .... APPELLANT VS. ADDL. CIT, RANGE-1, PUNE . RESPONDENT ITA NO. 676/PN/09 (ASSTT. YEAR 2005-06) ADDL. CIT, RANGE-1, PUNE .... APPELLANT VS. INTERVALVE (INDIA) PVT. LTD. 16-B/1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 411001 PAN NO. AAACI3917P . RESPONDENT ITA NO. 658/PN/09 (ASSTT. YEAR 2005-06) EL-O-MATIC (INDIA) PVT. LTD. 16-B/1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 411001 PAN NO. AAACE3847J .... APPELLANT VS. ACIT, CIRCLE-1(2), PUNE . RESPONDENT ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 2 OF 9 ITA NO. 677/PN/09 (ASSTT. YEAR 2005-06) ACIT, CIRCLE-1(2), PUNE .... APPELLANT VS. EL-O-MATIC (INDIA) PVT. LTD. 16-B/1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 411001 PAN NO. AAACE3847J . RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK DEPARTMENT BY : SHRI ABHAY DAMLE ORDER PER D. KARUNAKARA RAO AM THERE ARE FOUR APPEALS UNDER CONSIDERATION INVOLVING TW O ASSESSEES NAMELY INTERVALVE (INDIA) PVT. LTD AND EL-O-MATIC (I NDIA) PVT. LTD. THESE ARE THE CROSS APPEALS, ASSESSEE AS WELL AS REVENUE ARE IN CROS S APPEALS AGAINST A ORDER OF CIT(A)-I, PUNE ALL IDENTICALLY DATED 20-03-2009 FOR A.Y 2005-06. FOR THE SAKE CONVENIENCE ALL THESE APPEALS ARE CONSOLIDATED AS TH E ISSUES ARE IDENTICAL. WE SHALL TAKE UP THE APPEAL WISE FOR ADJUDICATION IN T HE FOLLOWING PARAGRAPHS. ITA NO. 659/PN/09 2. IN CONNECTION WITH THE APPEAL NO. 659/PN/09 LD. COUNSEL FOR THE ASSESSEE MENTIONED THAT GROUND NO. 1 & 2 OF THE APPEAL RELATIN G TO DISALLOWANCE OF AIRCRAFT EXPENSES AND THE DEPRECIATION AT THE RATE OF 5 0% WERE ALREADY ADJUDICATED BY THIS TRIBUNAL IN THE CASE OF AVINASH N. BHOSALE VIDE ITA NO. 1425/PN/08 DATED 24-09-2010. BOTH THE PARTIES AGREED TO THE PROPOSAL THAT THESE GROUNDS MUST BE DECIDED IN LINES OF OUR DECISIO N IN THE CASE OF AVINASH N. BHOSALE (SUPRA). WE PERUSED THE PARA 10 TO 14 OF THE SAID ORDER AND FIND THAT THE ISSUES ARE IDENTICAL AND COMPARABLE. FOR THE SAKE OF COMPLETENESS THESE PARAS ARE REPRODUCED AS UNDER:- ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 3 OF 9 10. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S AND THE PAPER BOOKS MADE AVAILABLE TO US. UNDISPUTED FACTS ARE THAT THE ASS ESSEE USED BOTH BELL HELICOPTER AS WELL AS THE CESSNA AIRCRAFT FOR THE MIXED U SE AND THEREFORE, THERE IS NO DISPUTE ON THE INVOKING OF THE PROVISIONS OF SECTION 3 8(2) OF THE ACT. FURTHER, THERE IS NO DISPUTE THAT THE AO RESTRICTED THE DISALLOWAN CE ART 1/7 TH OF THE CLAIM. THE SAME IS EVIDENCED BY FILING THE COPIES OF THE ASSESS MENT ORDERS FOR THE AYS 2002-03 TO AYS 2004-05. THEY ARE PLACED AT PAGES 128 TO 145 OF THE PAPER BOOK. FOR THE INSTANT YEAR, THE AO ADOPTED 30% AS AG AINST 1/7 TH IN THE PAST AND THEREFORE THE ISSUE TRAVELLED TO THE TRIBUNAL FOR THE F IRST TIME FOR THE INSTANT AY. BEFORE, IT IS ADEQUATELY MADE OUT THAT THE 1/7 TH IS REASONABLE. THEREFORE THE ISSUE IN DISPUTE IS WHETHER THE DISALLOWANCE ON ACCOUNTS OF AVIATION EXPENSES AND THE DEPRECIATION OF BOTH BELL HELICOPTOR AND THE CESS NA AIRCRAFT SHOULD BE RESTRICTED TO 1/7 TH OF THE CLAIM OR NOT. 11. IN THIS REGARD, WE HAVE PERUSED THE PROVISIONS OF SECTION 38(2) OF THE ACT WHICH READS AS UNDER. BUILDING, ETC, PARTLY USED FOR BUSINESS, ETC, OR NO T EXCLUSIVELY SO USED SECTION 38(1). (2) WHERE ANY BUILDING, MACHINERY, PLANT OR FURNITURE IS NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE DEDU CTIONS UNDER SUB-CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30, CLAUSES (I) AND (II) OF SECTION 31 AND CLAUSE (II) OF SUB-SECTION (1) OF SECTION 32 SHALL BE RESTRICTED TO A FAIR PROPORTIONATE PART THEREOF WHICH THE ASSESSING OFFICER MAY DETERMINE, HAV ING REGARD TO THE USER OF SUCH BUILDING, MACHINERY , PLANT O R FURNITURE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. FROM THE ABOVE, IT IS EVIDENT THAT THE RESTRICTION SHOU LD BE A FAIR PROPORTIONATE PART THEREOF WHICH THE ASSESSING OFFICER MAY DETERMINE, HAVING REGARD TO THE USER OF SUCH .., MACHINERY , PLANT OR .. FOR THE PU RPOSES OF THE BUSINESS OR PROFESSION. IF THE REQUIREMENT OF THE LAW THAT THE A .O IS UNDER OBLIGATION TO DETERMINE HAVING REGARD TO THE USER OF SUCH MACHINERY FOR DETERMINING THE SAME, THERE IS NEED FOR RELIABLE DATA EITHER SUPPLIED BY THE ASSESSEE OR GARNERED BY THE A.O. NEITHER IS AVAILABLE IN THIS CASE. 12. IN THIS REGARD, WE HAVE PERUSED EXISTING JUDICIAL PR ONOUNCEMENTS AND FOUND THAT THE SPECIAL BENCH DECISION IN THE CASE OF GULA THI SAREE CENTRE (71 ITD 73)(CHD)(SB) WAS IN FAVOUR OF 1/5 TH DISALLOWANCE IN RESPECT OF THE CAR AND COORDINATE BENCH DECISION IN THE CASE OF MAYUR KOTHARI ( 10 SOT 338)(MUM) IS IN FAVOUR OF 1/6 TH AGAIN IN THE CONTEXT OF A CAR AS DISCUSSED IN PARA 8 OF THE DECISION AND RELEVANT PARA 8 OF THE DECISION IN THE CASE OF MAYU R KOTHARI (SUPRA) READS AS UNDER:- WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH SIDES, MA TERIAL ON RECORD AND ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS NOT MAINTAINED THE LOG BOOK. THE POSSIBILITY OF PERSONAL USER OF THE CAR CANN OT BE RULED OUT. IN THE CASE OF GULATI SAREE CENTRE VS ASSTT CIT [1999] 71 IT D 73 (CHD)(SB) [ITAT CHANDIGARH BENCH], THE TRIBUNAL HELD THAT EVEN AFTER TH E INCORPORATION OF THE CONCEPT OF BLOCK ASSET, THE PROVISIONS OF SECTION 38(2 ) WERE APPLICABLE AND THE ASSESSING OFFICER WAS EMPOWERED TO RESTRICT THE DEPREC IATION TO A FAIR PART THEREOF HAVING REGARD TO THE USER OF ASSET FOR THE P URPOSES OF BUSINESS. IN THIS VIEW OF THE MATTER, WE HOLD THAT ORDER OF THE REVENUE AUTHORITIES IS CORRECT IN LAW. AS FAR AS THE PROPORTION OF DISALLOWANCE FOR PERSO NAL USE IS CONCERNED, WE FIND THAT THE REVENUE AUTHORITIES HAVE MADE A REASONAB LE PROPORTIONATE DISALLOWANCE AT THE RATE OF 1/6 TH OF THE TOTAL EXPENSES INCLUDING DEPRECIATION . ACCORDINGLY, WE DECLINE TO INTERFERE IN THE MATTER. FURTHER, IT HAS COME TO OUR NOTICE THAT THE PUNE BENC H HAS TAKEN DECISION IN THE CASE OF M/S KIRLOSKAR OIL ENGINES LTD VIDE ITA NO 1039 AN D 1040 FOR THE AY 1995-96 AND 1996-97 IN CONNECTION WITH THE DISALLOWANCE O F AIRCRAFT EXPENDITURE AND HELD THAT THE DISALLOWANCES AT THE RATE OF 15% (NEA RLY 1/7 TH ) OF THE CLAIM IS FAIR AND REASONABLE. RELEVANT PARA 12 AND 13 OF THE SA ID DECISION IS AS FOLLOWS. ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 4 OF 9 12. GROUND NO 4 IS DIRECTED AGAINST THE CIT(A)S ORD ER IN CONFIRMING AIRCRAFT EXPENSES AMOUNTING TO RS 10,28,179/-. 13. WE HAVE HEARD BOTH THE PARTIES. IN THE ASSESSME NT YEAR 90-91, THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL VIDE ORDER DT 20.7.2005 IN ITA NO. 916/PN/95. HOWEVER, IN ASSESSMENT YEAR 92- 93 THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY OBSERVING THAT THE MATTE R STANDS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSMENT ASSESSMENT YEAR 90-91, THOUGH ACTUALLY IN AY 90- 91 THE MATTER WAS DECIDED AGAINST THE ASSESSEE. THER EFORE, THERE WAS A MISTAKE IN THE TRIBUNALS ORDER IN ASSESSMENT YEAR 92-93. WHILE D ECIDING THIS ISSUE IN ASSESSMENT YEAR 93-94 IN ITA NO 429/PN/97 THIS POSITIO N HAS BEEN CLARIFIED AND THE ISSUE WAS DECIDED AGAINST THE ASSESSEE IN THE LIGHT OF THE TRIBUNALS DECISION FOR ASSESSMENT YEAR 90-91. IN ASSESSMENT YEAR 94-95 VIDE ITA NO 606/PN/99 THE ISSUE WAS ALSO DECIDED AGAINST THE ASSESSEE. IN TH E COURSE OF HEARING OF THIS APPEAL, THE ASSESSEE HAS RELIED ON THE TRIBUNALS DECISION IN AY 92-93 WHICH, IN OUR CONSIDERED VIEW, IS NOT ACTUALLY IN FAVOUR OF THE ASS ESSEE, BUT IS AGAINST THE ASSESSEE. THE CASE OF OTHER ASSESSES WHO SHARED TH E AIRCRAFT EXPENSES IS ON DIFFERENT FOOTING, INASMUCH AS IN THE PRESENT CASE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE AND ESTABLISH THAT THE AIRCRAFT WAS USED FOR THE PURPOSE OF THE ASSESSEES BUSINESS. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT(A) IS UPHELD IN CONFIRMING THE DISALLOWANCE OF RS 10,28,179/- (I.E. 15% OF THE CLAIM ) ON ACCOUNT OF AIRCRAFT EXPENSES. (EMPHASIS SUPPLIED) 13. FROM THE ABOVE, IT IS CLEAR THAT SPECIAL BENCH DECIS ION IN THE CASE OF GULATHI SAREE CENTRE (SUPRA) OR THE DECISION IN THE CASE OF MAYUR KOTHARI (SUPRA) ARE IN THE CONTEXT OF THE PERSONAL CARS; WHEREAS THE PUNE BENCH DECISION IN THE CASE OF M/S KIRLOSKAR OIL ENGINES LTD (SUPRA) RELATES TO THE AVIATION VEHICLES , WHICH IS ALSO THE CASE OF THE ASSESSEE AN WHETHER IT IS THE CASE OF A HELICOPTER OR AIRCRAFT SHOULD NOT MAKE ANY DIFFERENCE. THUS, THE DEC ISION IN THE CASE OF GULATHI SAREE CENTRE (SUPRA) OR THE DECISION IN THE CASE OF MA YUR KOTHARI (SUPRA) ARE DISTINGUISHABLE AS THE SUBJECT MATTER OF THESE APPEALS A RE THE DISALLOWANCE OUT OF THE CLAIMS INVOLVING THE PERSONAL CARS . FURTHER, WE MAY MENTIONED THAT THE REVENUE IS NO FAIR IN ADOPTING 20% (1/5 TH OF THE CLAIM) IN RESPECT OF THE BELL HELICOPTOR AND IN ADOPTING 30% (NEARLY 1/3 TH OF THE CLAIM) IN RESPECT OF THE CESSNA AIRCRAFT AND IN OUR OPINION, IT CONSTITUTES AN ART IFICIAL DIFFERENCE. IT IS ALSO RELEVANT TO MENTION THAT THE SECTION 38(2) REFERS TO T HE EXPRESSION FAIR AND NEITHER OF THE IT AUTHORITIES IE AO OR CIT(A) HAVE UNDE RTAKEN ANY EXERCISE TO ESTABLISH THE SAID FAIRNESS IN ADOPTING THE SAID PERCENTAG ES. IT IS TRUE THAT THE ONUS IS ON THE ASSESSEE TO SUBSTA NTIATE THE CLAIM OF THE ASSESSEE. CONSIDERING THE PECULIAR CIRCUMSTANCES BETTER KNOWN TO THE ASSESSEE, THERE IS SURRENDER OF CLAIM TO THE EXTENT OF 1/7 TH OF THE TOTAL CLAIMS RS 93,96,771/- (IE RS 66,04,980/- ON ACCOUNT OF DEPRECIA TION OF VEHICLES AND RS 27,91,791/- ON ACCOUNT OF AVIATION EXPENSES). AT THIS POINT OF TIME, IN OUR OPINION, THE ONUS HAS SHIFTED TO THE REVENUE TO DEMONS TRATE THAT THE SAID SURRENDER IS INCORRECT AND ESTIMATIONS MADE BY THE AO A RE FAIR WITHIN THE MEANING OF SECTION 38(2) OF THE ACT. FAIRNESS IS AN IMPO RTANT FACTOR IN MATTERS OF QUANTIFICATION OF THE DISALLOWANCES, WHEN SECTION 38(2) OF THE ACT IS INVOKED. THE REVENUE HAS NOT DONE ANY PROBE INDEPENDENTLY TO DEMON STRATE THAT ASSESSEES OFFER IS UNFAIR AND HIS ESTIMATIONS ARE FAIR. HENCE, WE ARE OF THE OPINION, THAT THE ESTIMATIONS MADE BY THE AO, WHICH ARE CONFIRMED IN C ASE OF THE CESSNA AIRCRAFT AND ALTERTED IN CASE OF BELL HELICOPTOR ARE HEREB Y SET ASIDE. 14. IN VIEW OF THE EXISTENCE OF THE PUNE BENCH DECISIO N, WHICH IS BINDING, WE ARE OF THE OPINION, THAT THE OFFER OF THE ASSESSEE TO RESTRICT THE DISALLOWANCE TO 1/7 TH OF THE CLAIMS IN RESPECT OF BOTH BELL HELICOPTOR AND THE CESSNA AIRCRAFT, IS REASONABLE AND FAIR. ACCORDINGLY, THE AO IS DIRECTED. THU S, THE ORIGINAL GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 5 OF 9 FROM THE ABOVE IT IS EVIDENT THE ISSUES ARE ALREADY DE CIDED AND THE IMPUGNED GROUNDS GET COVERED BY THE ABOVE. THEREFORE, WE ARE OF T HE OPINION THAT THIS MATTER SHOULD BE SET ASIDE TO THE A.O FOR DECIDING TH E ISSUE IN THE LINES MENTIONED IN PARA 10 TO 14 OF THE ORDER OF THE TRIBUNAL DATED 24-09-2010 IN THE CASE OF AVINASH N. BHOSALE (SUPRA). ASSESSEE SHALL F ILE THE COPY OF THE ORDER BEFORE THE A.O. A.O SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, GROUND NO. 1, 1.1, 2, 2.1 ARE SET ASIDE. 3. IN CONNECTION WITH GROUND NO. 3 LD. COUNSEL MENTI ONED THAT THE ISSUE IN QUESTION RELATES TO DISALLOWANCE OF RS. 5,00,000/- T OWARDS ENTRANCE FEE FOR MEMBERSHIP OF THE BUSINESS CLUB IN A HOTEL. LD. CO UNSEL RELIED UPON GUJRAT HIGH COURT DECISION IN THE CASE OF GUJRAT STATE EXPORT CORPO RATION LIMITED (GUJ) 209 ITR 649 IN HIS FAVOUR. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON THE KERALA HIGH COURT JUDGEMENT IN THE CASE OF FRAMATONE C ONNECTOR OEN LTD. (KER) REPORTED IN 294 ITR 559 FOR THE PROPOSITION THAT THE ENTRANCE FEE PAID IS CAPITAL IN NATURE. LD. COUNSEL ALSO MENTIONED WHEN THERE ARE 2 DIVERGENT DECISIONS, FAVOURBLE TO THE ASSESSEE MAY BE CONSIDERED IN FAVOU R OF THE ASSESSEE. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE A ND THE DECISIONS FILED BEFORE US. ON PERUSAL, WE FIND THERE IS NEED FOR COMPA RISON OF THE FACTS OF THE PRESENT CASE TO THE FACTS OF THE BOTH CASES DECIDED BY THE HON BLE HIGH COURTS OF KERALA AND GUJARATH. FOR THIS LIMITED EXERCISE, WE ARE O F THE OPINION, THE MATTER SHOULD GO TO THE FILES OF THE CIT(A) FOR WANT OF FAC TS AND A FINDING ON THE APPLICABILITY OF THE DECISIONS. CIT(A) SHALL GRANT T HE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO. 3, 3.1 AND 3.2 ARE SET ASIDE TO THE FILES OF THE CIT(A). 4. REGARDING GROUND NO. 4, LD. COUNSEL MENTIONED THAT THE ISSUE RAISED IN THIS GROUND RELATES TO DEDUCTIBILITY OF TDS IN RESPECT OF THE PAYMENT BY THE ASSESSEE WHICH IS IN THE NATURE OF REIMBURSEMENT OF THE CLAIMS MADE BY THE C & F AGENT. PARA 6.2 AND 6.3 OF THE IMPUGNED ORDER ARE RELEVANT, FOR THE SAKE OF COMPLETENESS THESE PARAS ARE REPRODUCED AS UNDER:- 6.2 THE LEARNED ASSESSING OFFICER HAS DISCUSSED TH E ISSUE IN PARA 5 OF THE ASSESSMENT ORDER. IT IS OBSERVED THAT THE PAYMENT BEING IN THE NATURE OF FREIGHT CHARGES WAS REQUIRED TO BE SUBJECTED TO TDS U/S 194C OF THE INCOME TAX ACT, 1961. AS REGARDS THE CONTENTION OF T HE ASSESSEE THAT SINCE THE SAID PAYMENT WAS MADE TO A NON-RESIDENT, I T WAS OBSERVED BY THE ASSESSING OFFICER THAT STILL ASSESSEE WAS REQUIRED TO DEDUCTED THE TAX U/S. 195 OF THE INCOME TAX ACT, 1961. SINCE THERE WA S FAILURE TO DEDUCT THE TAX, THE EXPENDITURE CLAIMED WAS DISALLOWED INVO KING PROVISIONS OF SECTION 40(A)(AI). ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 6 OF 9 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF TH E APPELLANT AND PERUSED MATERIAL ON RECORD. IT IS A FACT THAT THE EXPEN DITURE INCURRED IS ON ACCOUNT OF FREIGHT CHARGES. THOUGH THE SAID CHARGES WE RE EVENTUALLY PAYABLE TO NON-RESIDENT, NAMELY UZBEKISTAN AIRLINES, APPELLANT HAS NOT DIRECTLY INCURRED SUCH EXPENDITURE BUT THROUGH ATLAS LOG ISTICS WHICH IS A SEPARATE ENTITY. THEREFORE, APPELLANT WAS REQUIRED TO DE DUCT THE TAX OUT OF SUCH PAYMENT BEING IN THE NATURE OF FREIGHT CHARGES AS PROVISIONS OF SECTION 194C ARE CLEARLY ATTRACTED TO SUCH PAYMENT. AS THE APPELLANT HAS FAILED TO DEDUCT THE TAX, IT IS HELD THAT THE ACTIO N OF THE LEARNED ASSESSING OFFICER IN DISALLOWING SUCH EXPENDITURE INVOKING SECT ION 40(A)(IA) IS JUSTIFIED ON FACTS AND IN LAW. THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER IS SUSTAINED. 5. AS EVIDENT FROM THE ABOVE, THIS HAS CRUCIAL ASPECT OF WHETHER THE AMOUNT IN QUESTION IS A CASE OF REIMBURSEMENT OR OTHERWISE. IN THE ABSENCE OF RELEVANT FACTS, WE ARE UNABLE TO ADJUDICATE AND APPLY THE CIT ATIONS RELIED UPON BY THE LD. COUNSEL. THEREFORE, THIS ISSUE SHOULD ALSO GO TO THE FILES OF THE A.O FOR FRESH ADJUDICATION AND DE NOVO DECISION IN THE MATTER. ACCORDINGLY, THIS PART OF GRO UND IS SET ASIDE. 6. REGARDING GROUND NO. 5 & 6 , LD. COUNSEL MENTIONED THAT A.O MADE ADHOC DISALLOWANCE ON ACCOUNT OF TRANSFER AND CONVEYANCE EXPENSES AND MISCELLANEOUS EXPENSES . PARA 7, 7.1, 7.2 AND 7.3 PROVIDES RELEVANT FACTS AS WELL AS THE DECISION OF THE REVENUE AUTHORITIES. FOR THE SAKE OF COMPLETENESS THE SAME ARE REPRODUCED AS UNDER:- 7. GROUND NO. 6 & 7 OF APPEAL ARE DIRECTED AGAINST D ISALLOWANCE OF RS. 50,000/- EACH ON AN ADHOC BASIS OUT OF EXPENSES INC URRED UNDER THE HEADS TRAVELING EXPENSES AND MISCELLANEOUS EXPENSES . 7.1 IN THIS REGARD, APPELLANT DRAWS ATTENTION TO PAGE NO. 1 OF THE ASSESSING OFFICER PARTICULARLY, PARA 2 WHEREIN THE LEARNE D ASSESSING OFFICER STATES THAT BOOKS OF ACCOUNTS VIZ CASH BOOK , LEDGER, BILLS, VOUCHER ETC.; PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS WERE RANDOMLY CHECK / EXAMINED. THE LEARNED ASSESSING OF FICER DISALLOWED RS. 50,000/- EACH AGAINST EXPENSES INCURRED AND ACCO UNTED UNDER THE HEADS TRAVELLING EXPENSES AND MISCELLANEOUS EXPEN SES. IT IS CONTENTION OF THE APPELLANT THAT IN THE ABSENCE OF ANY SPECIFI C REASON, IT WAS NOT FAIR ON THE PART OF THE ASSESSING OFFICER WHILE DISALLOWI NG THE SAME ON AD-HOC BASIS TO CONCLUDE THAT SUCH EXPENSES ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. IT IS PLEADED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE DELETED. 7.2 THE LEARNED ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN PARA 6 & 7 OF THE ASSESSMENT ORDER. IT IS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE BILLS / VOUCHERS PRODUCED BY THE ASSESSEE IN RESPECT OF BOTH TRAVELLING EXPENSES AND MISCELLANEOUS EXPENSES DID N OT JUSTIFY THE VERACITY OF THE EXPENDITURE AND THEREFORE, A LUMPSUM AM OUNT OF RS. 50,000/- EACH WAS DISALLOWED OUT OF THESE EXPENSES. ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 7 OF 9 7.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF TH E APPELLANT AND PERUSED MATERIAL ON RECORD. CONSIDERING THE NATURE OF THE EXPENSES CLAIMED, THE DISALLOWANCE MADE BY THE LEARNED CANNOT BE HELD TO BE FULLY UNJUSTIFIED. HOWEVER, TAKING INTO ACCOUNT THE SUBMIS SION OF THE APPELLANT AND ALSO THE FACT THAT NO BASIS HAS BEEN GIVEN BY T HE ASSESSING OFFICER IN QUANTIFYING SUCH DISALLOWANCE, IT IS FELT THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ON HIGHER SIDE. ACCORDINGLY, THE DISALLOWANCE MADE BY ASSESSING OFFICER IS RESTRICTED TO 50% UNDER BOTH THE HEADS TRAVELLING EXPENSES AND MISCELLANEOUS EXPENSES. APPELLANT G ETS CONSEQUENTIAL RELIEF. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT(A) HAS COME TO THE OPINION THAT THE ADHOC DISALLOWANCE WAS RESTORED BY THE A.O IN VIE W OF THE QUESTIONABILITY OF THE EXPENDITURE CLAIMED. CONSIDERING THE QUANTUM OF T HE DISALLOWANCE VIS--VIS THE TOTAL CLAIM IN THE PROFIT AND LOSS ACCOUNT, ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO. 5 & 6 ARE DISMISSED. 8. GROUND NO. 7 RELATES TO THE GRANTING OF DEDUCTION U/S. 43B IN RES PECT OF THE LEAVE ENCASHMENT PROVISION. AT THE OUTSET LD. CO UNSEL FILED THE COPY OF THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR TH E A.Y 2004-05 VIDE ITA NO. 1180/PN/07 DATED 29-05-2009, FOR THE PROPOSITION THA T IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. RELYING ON THE SU PREME COURT JUDGEMENT IN THE CASE OF BHARAT EARTH MOVER 245 ITR 428(SC). ON PERU SAL OF PARA 2 OF THE ORDER WE FIND THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE, FOR THE SAKE OF COMPLETENESS PARA 2 IS REPRODUCED AS UNDER:- 2. ON HEARING BOTH THE SIDES AND AS ADMITTED BY THE M THIS ISSUE IS NOW STOOD COVERED BY A LATEST DECISION OF THIS BENCH VIZ. ITAT A, PUNE IN THE CASE OF EL-O-MATAIC (INDIA) PVT. LTD. VS. ACIT FOR A.Y. 2004-05, ORDER DATED 31/12/2008 WHEREIN VIDE PARA 4 IT WAS HELD AS U NDER :- 4. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES WE HAVE FOUND THAT THE APPELLANT HAS STATED BHARAT EAR TH MOVER [2002] 245 ITR 428 (S.C). THIS JUDGMENT OF T HE HONBLE SUPREME COURT RELATES TO THE ASSESSMENT YEA R 19978-79. HOWEVER, THE ASSESSMENT YEAR UNDER APPEAL IS A.Y 2004-05. THERE WAS AN AMENDMENT IN THE I.T.ACT IN SECTION 43B BY INSERTION OF CLAUSE (F). THEREFORE, THE ACT PROVIDES THAT ANYTHING CONTAINED IN ANY OTHER PROVISION OF THE ACT, A DEDUCTION OTHERWI SE LIABLE OF ANY SUM PAYABLE BY THE ASSESSEE AS EMPOWE RED IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE SHALL BE ALLOWED IN THE PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. THIS AMENDMENT CAME INTO EFF ECT FROM 01.04.2002. THIS AMENDMENT WAS BROUGHT TO THE NOTICE OF THE HONBLE CALCUTTA HIGH COURT IN THE CA SE OF EXIDE INDUSTRIES LIMITED [2007] 292 ITR 470 (CA L)., WHEREIN IT WAS HELD THAT THE AMENDMENT AS PER SECTI ON ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 8 OF 9 43B(F) WAS STRUCK DOWN BEING ARBITRARY, UNCONSCIONABLE AND DE HORSE THE APEX COURT DECISION IN THE CASE OF BHARAT EARTH MOVERS (SUPRA). ONCE T HE AMENDMENT ITSELF HAS BEEN STRUCK DOWN BY THE HONBL E COURT THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) C ANNOT BE APPROVED, THEREFORE REVERSED. GROUND ALLOWED. RESPECTFULLY FOLLOWING THE PRECEDENTS, WE HEREBY DIREC T TO GRANT RELIEF. ACCORDINGLY, GROUND NO. 7 IS ALLOWED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ITA NO. 676/PN/09 10. ONLY ISSUE IN THAT IS RAISED IN THIS APPEAL OF T HE REVENUE RELATES TO THE ALLOWABLE OF CORRECT RATE OF DEPRECIATION TO THE AIRCRAFT IN QUESTION. ASSESSEE CLAIMED THE DEPRECIATION AT THE RATE OF 40% ON THE AIRCRAFT WHEREAS THE A.O ALLOWED DEPRECIATION AT THE RATE OF 25% ONLY. DURING THE PROCEEDINGS LD. COUNSEL MENTIONED THAT THE AIRCRAFT IN QUESTION WAS O WNED COLLECTIVELY BY FOUR CO OWNERS, WHERE THE ASSESSEE IS ONE AMONGST THEM WITH THE SHARE OF 7.5% OUT OF THE CAPITAL OUTLET FOR ACQUISITION OF THE AIRCRAFT. LD . COUNSEL FURTHER MENTIONED THAT REVENUE HAS ALLOWED THE CLAIM OF DEPRECIATION AT THE RATE OF 40% IN REST OF THE FOUR CO-OWNERS OF THE AIRCRAFT. IT IS ONLY IN THIS CASE, THE A.O DISTURBED THE RATE OF DEPRECIATION. LD. DR RELIED ON THE ORDERS OF THE REVENUE. WE HAVE PERUSED THE RELEVANT ORDERS AS WELL AS THE PAPER BOOK FI LED BEFORE US IN PARA 3.3 OF THE IMPUGNED ORDER IT IS NOTICED THAT CIT(A) GAVE A FINDING THAT THE MEMORANDUM OF UNDERSTANDING (MOU) DATED 27-05-2004, S TATES THAT AIRCRAFT IS PURCHASED COLLECTIVELY BY FOUR PARTIES NAMELY, 1) SERU M INSTITUTE OF INDIA LTD, 2) EL-O- MATIC INDIA LTD., 3) M/S. ARKI AVIATIONS AND 4) INTERVALVE (INDIA) PVT. LTD. WHERE THE ASSESSEE CONTRIBUTED 7.5% TOWARDS THE CAPITA L OUTLAY AS SEEN FROM PARA 3.3.2 THE CIT(A) HAS RIGHTLY COME TO THE CONCLUS ION THAT ASSESSEE IS NOT ONLY THE CO-OWNER OF THE AIRCRAFT BUT ALSO IN FACT HAS THE RIGHT TO USE IT. IN SUCH CIRCUMSTANCES WE FIND NO REASON TO INTERFERE IN THE ORDE R OF THE CIT(A). ACCORDINGLY, GROUNDS RAISED IN THE REVENUES APPEAL A RE DISMISSED. 11. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 659,676,658,677/PN/09 A.Y 2005-06 PAGE 9 OF 9 ITA NO. 658/PN/09 12. AS SEEN FROM THE GROUNDS, ISSUES IN THIS APPEAL OF THE ASSESSEE ARE MORE OR LESS THE SAME AS THAT OF THE ONES RAISED IN APPEAL NO. 659/PN/09. THEREFORE, AS INTIMATED TO THE PARTIES, THE ISSUES RAISED IN THI S APPEAL STAND COVERED BY OUR DECISIONS MENTIONED ABOVE IN CONNECTION WITH THE AP PEAL NO. 659/PN/09. ACCORDINGLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 677/PN/09 14. THIS APPEAL OF THE REVENUE WITH THE SOLE ISSUE RELATE TO THE PROPER RATE OF DEPRECIATION IN RESPECT OF THE AIRCRAFT. BOTH THE PARTIES MENTIONED THAT THIS ISSUE SHOULD BE DECIDED IN THE LINES MENTIONED IN O UR ORDER VIDE ITA NO. 676/PN/09 WHERE WE HAVE HELD THAT ASSESSEE IS A CO-O WNER OF THE AIRCRAFT AND THEREFORE AIRCRAFT IS ENTITLED FOR DEPRECIATION AT THE RAT E OF 40% INSTEAD OF 25% THEREFORE THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 15. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. 16. IN THE RESULT, ALL THE FOUR APPEALS ARE DECIDED AS MENTIONED ABOVE. ORDER PRONOUNCED ON 16 TH DECEMBER, 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 16 TH DECEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ADDL. CIT, RANGE-1, PUNE / ACIT, CIRCLE 1(2), PUNE 3. CIT(A)-I, PUNE 4. CIT-I,PUNE 5. DR TAT A BENCH, PUNE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE