Philips Carbon Black Ltd, Kolkata V. ACIT, Cir-10, Kolkata, Kolkata

ITA 741/KOL/2012

• Counselvise Citation: 74123514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S MONDAL
• Assessee Lawyers: D S DAMLE
• Keywords: Bad and doubtful debts
• Section: 115JB

Judgement Text

I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO.: 741/KOL./ 2012 ASSESSMENT YEAR : 2007-2008 PHILIPS CARBON BLACK LTD.,........................ ......APPELLANT 31, NETAJI SUBHAS ROAD, KOLKATA-700 001 [PAN : AABCP 5762 E] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..........RESPONDENT CIRCLE-10, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 & I.T.A. NO.: 939/KOL./ 2012 ASSESSMENT YEAR : 2007-2008 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..........APPELLANT CIRCLE-10, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- PHILIPS CARBON BLACK LTD.,........................ .....RESPONDENT 31, NETAJI SUBHAS ROAD, KOLKATA-700 001 [PAN : AABCP 5762 E] APPEARANCES BY: SHRI D.S. DAMLE, FCA, FOR THE ASSESSEE SHRI A.S. MONDAL, ADDL. SR. D.R., FOR THE DEPARTMEN T DATE OF CONCLUDING THE HEARING : JANUARY 15, 2014 DATE OF PRONOUNCING THE ORDER : JANUARY 29, 2014 O R D E R PER ABRAHAM P. GEROGE : 1. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AN D REVENUE RESPECTIVELY DIRECTED AGAINST THE ORDER DATED 28.03 .2012 OF LD. I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 2 COMMISSIONER OF INCOME TAX (APPEALS)-XXIV, KOLKATA FOR IMPUGNED ASSESSMENT YEAR. 2. ASSESSEE IN ITS APPEAL IS AGGRIEVED ON ADDITIONS MADE WHILE COMPUTING ITS BOOK PROFIT UNDER SECTION 115JB OF TH E INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN RESPECT OF PROVISION F OR DIMINUTION IN THE VALUE OF INVESTMENTS AND PROVISION FOR DOUBTFUL DEB TS, BOTH OF WHICH WERE CONFIRMED BY THE LD. CIT(APPEALS). 3. AS AGAINST THIS, REVENUE IN ITS APPEAL AGGRIEVED ON DELETION OF THE ADDITIONS MADE UNDER THE HEAD AIRCRAFT FLYING RIGH TS CHARGES AND RETAINERSHIP FEES PAID TO M/S. SREEBALA (P) LTD. 4. FACTS APROPOS ARE THAT ASSESSING OFFICER WHILE C OMPUTING THE BOOK PROFIT OF ASSESSEE UNDER SECTION 115JB OF THE ACT A DDED BACK PROVISION OF RS.1,01,01,000/- MADE BY ASSESSEE AGAINST DIMINUTIO N IN THE VALUE OF INVESTMENTS AND PROVISION OF RS.6,24,70,000/- MADE AGAINST DOUBTFUL DEBTS. ASSESSING OFFICER CONSIDERING THE AMENDMENT MADE UNDER SECTION 115JB OF THE ACT BY FINANCE (NO. 2) ACT, 2009 WAS O F THE OPINION THAT PROVISION FOR DIMINUTION IN VALUE OF ANY ASSET WAS REQUIRED TO BE ADDED TO THE BOOK PROFIT. ASSESSING OFFICER NOTED THAT AM ENDMENT WAS RETROSPECTIVELY DONE WITH EFFECT FROM ASSESSMENT YE AR 2001-02. 5. LD. CIT(APPEALS), ON ASSESSEES APPEAL CONFIRMED THE ABOVE ADDITION. ACCORDING TO HIM, VIDE AMENDMENT MADE UND ER SECTION 115JB BY FINANCE (NO.2 ) ACT OF 2009, ANY AMOUNT SET ASIDE A S A PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, WAS REQUIRED TO BE ADDED TO THE BOOK PROFITS. ACCORDING TO HIM, CLAUSE (I) OF EXPLA NATION 1 TO SECTION 115JB(2) WAS CLEAR IN THIS REGARD. 6. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE ORD ERS OF THE AUTHORITIES BELOW SUBMITTED THAT ASSESSEE HAD REDUC ED THE PROVISION OF I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 3 RS.251.01 LAKHS MADE BY IT FOR DIMINUTION IN THE VA LUE OF INVESTMENTS, FROM THE TOTAL AMOUNT OF INVESTMENT. ACCORDING TO H IM, TOTAL INVESTMENT CAME TO RS.3056.53 LAKHS AND AFTER DEDUCTING THE PR OVISION THE NET VALUE OF INVESTMENT WAS RS.2805.52 LAKHS. THIS ALONE WAS SHOWN IN ITS BALANCE- SHEET AS ON 31.03.2007. SIMILARLY ACCORDING TO HIM, OUT OF TOTAL SUNDRY DEBTORS OF RS.23,366.55 LAKHS DEBTS OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS CAME TO RS.4,446.29 LAKHS. THE SAID AMOU NT WAS ARRIVED AT AFTER DEDUCTING THE PROVISION OF RS.1063.70 LAKHS. IN OTHER WORDS, ACCORDING TO HIM, ONLY THE NET AMOUNTS AFTER THE PR OVISIONS WERE SHOWN IN THE BALANCE-SHEET. RELYING ON THE DECISION OF TH E HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS.- YOKOGAWA INDIA LTD. (2012) 204 TAXMAN 305, AR SUBMITTED THAT RETROSPECTIVE AMENDM ENT MADE IN SECTION 115JB DID NOT AFFECT A CASE WHERE ASSESSEE HAD CORRESPONDINGLY/SIMULTANEOUSLY REDUCED THE PROVISIO NS FROM LOANS AND ADVANCES/DEBTORS ON THE ASSETS SIDE OF THE BALANCE- SHEET. ACCORDING TO HIM ONCE SUCH A DEDUCTION WAS EFFECTED IT WAS EQUAL TO A WRITE-OFF AND WAS NO MORE A SIMPLE PROVISION. 7. PER CONTRA LD. DR SUBMITTED THAT ASSESSEE HAD DE BITED THE AMOUNT AS PROVISION AND ONCE IT WAS SO, CLAUSE (I) OF EXPL ANATION 1 TO SECTION 115JB(2) CLEARLY APPLIED. THE SAID EXPLANATION WAS RETROSPECTIVELY ADDED BY FINANCE (NO. 2) ACT OF 2009 WITH EFFECT FROM 1 ST APRIL, 2001. LOWER AUTHORITIES THEREFORE WAS, ACCORDING TO HIM, JUSTIF IED IN MAKING THE IMPUGNED ADDITIONS BEFORE WORKING OUT THE BOOK PROF IT UNDER SECTION 115JB OF THE ACT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE ARE TWO ITEMS, WHICH WER E ADDED BACK BY THE ASSESSING OFFICER FOR COMPUTING PROFITS UNDER SECTI ON 115JB OF THE ACT. THE FIRST OF THIS IS A SUM OF RS.1,01,01,000/- FOR DIMINUTION IN INVESTMENT. THE PROVISION FOR DIMINUTION VALUE OF I NVESTMENT AS ON 31.03.2006 WAS RS.150.00 LAKHS AND SUCH PROVISION A S ON 31.03.2007 WAS I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 4 RS.251.01 LAKHS. THEREFORE, INCREASE IN PROVISION, DEBITED TO THE PROFIT & LOSS ACCOUNT CAME TO RS.101.01 LAKHS. CLAIM OF THE ASSESSEE IS THAT SUCH PROVISIONS WERE DEDUCTED FROM THE TOTAL VALUE OF IN VESTMENTS AND ONLY THE BALANCE INVESTMENT WAS RECKONED FOR THE PURPOSE OF ITS BALANCE-SHEET. THIS CLAIM IS TRUE AS SEEN FROM SCHEDULE 5 OF ITS B ALANCE-SHEET AS ON 31.03.2007. TOTAL VALUE OF INVESTMENT AS PER SCHEDU LE 5 IS RS.3,056.53 LAKHS FROM WHICH THE PROVISION FOR DIMINUTION RS.25 1.01 LAKHS HAS BEEN REDUCED AND THE NET FIGURE OF RS.2805.52 LAKHS ALON E HAS BEEN CARRIED TO THE BALANCE-SHEET. HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) WHILE DWELLING ON THE APPLICABIL ITY OF CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT TO A C LAIM MADE FOR PROVISION AGAINST BAD AND DOUBTFUL DEBTS, HELD AT PARA 8 OF I TS JUDGMENT DATED 29.08.2011 AS UNDER:- 8. IN THE PRESENT CASE , THE DEBT IS AN AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PAYABLE BY THE ASSESSEE AND , THEREFORE , ANY PROVISION MADE TOWARDS IRRECOVERABILITY OF THE DEBT CANNOT BE SAID TO BE A PRO V ISION FOR LIABILITY . THEREFORE IT WAS HELD THAT ITEM (C) OF THE E XPLANATION IS NOT ATTRACTED TO THE FACTS OF T HE CASE . ITEM (C) IN SECTION 115J A AND 115-JB(1) ARE IDENTI CAL . IN ORDER TO ATTRACT THE EXPLANATION THE DEBT WHICH IS DOUBTFUL OR BAD SHOULD SATISFY THE REQUIREMENT CONTEMPLATED IN ITEM (C) OF THE EXPLANATION . IT IS THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISIONS MADE FOR MEETING THE LIABILITY OTHER THAN THE ASCERTAINED LIABILITIES. IN THE INSTANT CA SE ALSO THE BAD AND DOUBTFUL DEBT FOR WHICH A PROVISION IS MADE WHICH IS IN THE NATURE OF DIMINUTION IN THE VALUE OF ANY ASSET WOULD NOT FALL WITHIN ITEM (C) O F E XPLANATION (I) . IT IS IN THAT CONTEXT THE APPELLATE COMMISSIONER AS WELL AS THE T RIBUNAL HAS GRANTED RELIEF TO THE ASSESSEE . REALISING THE FATALITY OF THE SAID ARGUMENT , IT IS CONTENDED NOW THAT ITEM (I) CANNOT AMOUNT TO SATISFACTION AS PROV ISION FOR DIMINISHING IN THE VALUE OF ASSETS IS SUBSTITUTED , IN CASE OF THE ASSESSEE FALLS UNDER ITEM (C) . IN MEETING THE AFORESAID CASE , THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE JUDGMENT OF THE APE X COURT IN THE CASE OF VIJAYA BANK ( SUPRA) WHERE THE APEX COURT HAD AN OCCASION TO CONSIDER HI S EXPLANATION . IT ACCEPTED THE ARGUMENT ON BEHALF OF THE REVENUE TO THE EFFECT THAT THE EXPLANATION MAKES IT V ERY CLEAR THAT THERE IS A DICHOTOMY BETWEEN ACTUAL WRITE OFF ON THE ONE HAND AND PROVISION FOR BAD AND DOUBTFUL DEBT ON THE OTHE R . A MERE DEBIT TO THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE A BAD AND DOUBTFU L DEBT , BUT IT WOULD NOT CONSTITUTE ACTUAL WRITE OFF AND THAT WAS THE VERY R EASON WHY THE EXPLANATION STOOD INSERTED . PRIOR TO THE FINANCE ACT , 2001 MANY ASSESSEES USED TO TAKE THE BENEFIT OF DEDUCTION UNDER SECTION 36(1)(VII) OF TH E 1961 ACT BY ' MERELY DEBITING THE IMPUGNED BAD DEBT TO THE PROFIT AND LO SS ACCOUNT AND , THEREFORE , THE PARLIAMENT STEPPED IN BY WAY OF EXPLANATION TO SAY THAT A MERE REDUCTION OF PROFITS B Y DEBITING THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT PER SE WOULD NOT CONSTITUTE ACTUAL WRITE OFF . THE APEX COURT ACCEPTED THE SAID LEGAL POSITION . HOWEVER IT WAS CLARIFIED THAT BESIDES DEBITING THE PROFIT AND LOSS ACCOUNT AND I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 5 CREATING A PROVISION FOR BAD AND DOUBTFUL DEBT, THE ASSESSEE CORRESPONDINGLY / SIMULTANEOUSL Y OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES / DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET AND , CONSEQUENTIALLY , AT THE END OF THE YEAR , THE FI G URE IN THE LOANS AND ADVANCES OR THE DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET WAS SHOWN AS NET OF THE PROVISION FOR THE IMPUGNED BAD DEBT . THEN THE SAID AMOUNT REPRESENTING BAD DEBT OR DOUBT FUL DEBT CANNOT BE ADDED IN ORDER TO COMPUTE BOOK PROFIT . THEREFORE, AFTER THE EXPLANATION THE ASSESSEE IS NOW REQUIRED NOT ONLY TO DEBIT THE PROFIT AND LO SS ACCOUNT BUT SIMULTANEOUSLY ALSO REDUCE THE LOANS AND AD V ANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET TO THE EXTENT OF THE CORRESPONDING AM OUNT S O THAT , AT THE END OF THE YEAR , THE AMOUNT OF LOANS AND ADVANCES / DEBTORS IS SHOWN AS NET OF THE PRO V ISION S FOR THE IMPUGNED BAD DEBT . THEREFORE , IN THE FIRST PLACE IF THE BAD DEBT OR DOUBTFUL DEBT IS REDUCED FROM THE LOANS AND ADVANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET THE E XPLANATION TO SECTION 115JA OR JB IS NOT AT ALL ATTRACTED . IN THAT CONTEXT EVEN IF AMENDMENT WHICH IS MADE RETROSPECTI V E THE BENEFIT GIVEN B THE TRIBUNAL AND THE APPELLAT E COMMISSIONER TO THE ASSESSEE IS IN NO WAY AFFE C TED . IN THAT VIEW OF THE MATTER , WE DO NOT SEE ANY MERIT IN THIS APPEAL. ONCE ASSESSEE HAS REDUCED AMOUNT SHOWN BY IT AS A P ROVISION FOR DIMINUTION OF INVESTMENT FROM ITS TOTAL VALUE OF IN VESTMENT, IT NO LONGER REMAINED A PROVISION. EFFECTIVELY IT WAS A WRITE OF F. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF VIJAYA BANK VS.- CIT(2010) 323 ITR 166. THEREFORE, THE CL AIM OF ASSESEE WITH REGARD TO DIMINUTION IN VALUE OF INVESTMENT HAS TO SUCCEED. 9. VIS-A-VIS THE CLAIM IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, RELEVANT SCHEDULE 7 OF ITS BALANCE-SHEET IS REPRODUCED HEREUNDER:- SCHEDULE 7 SUNDRY DEBTORS (UNSECURED) AS AT 31.03.2007 AS AT 31.03.2006 DEBTS OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS CONSIDERED GOOD 4,446.29 4,263.29 DOUBTFUL 1063.70 439.00 LESS : PROVISION 1063.70 ----- 439.00 ------ 4,446.20 4,263.29 OTHER DEBTS CONSIDERED 18,920.26 17,948.30 I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 6 GOOD 23,366.55 22,211.59 IT IS NOT CLEAR WHETHER THE TOTAL DEBTS OF RS.23,36 6.55 LAKHS IS AFTER DEDUCTING THE PROVISION OF RS.1,063.70 LAKHS. THE A MOUNT OF RS.624.70 LAKHS CONSIDERED BY THE ASSESSING OFFICER FOR ADDIT ION IS OBVIOUSLY DIFFERENCE BETWEEN OPENING PROVISION OF RS.439 LAKH S AND CLOSING PROVISION OF RS.1063.70 LAKHS, MENTIONED IN THE ABO VE SCHEDULE. IF THE PROVISION DEBITED BY ASSESSEE IS INDEED DEDUCTED FR OM THE TOTAL DEBTS AND ONLY THE NET BALANCE SHOWN IN THE BALANCE-SHEET THE N BY VIRTUE OF DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) THERE CANNOT BE ANY ADDITION OF SUCH AMOUNT UNDER SECTION 115JB OF THE ACT. HOWEVER, AS MENTIONED BY US, THIS ASPECT IS NOT CLEAR. HENCE WE ARE OF THE OPINION THAT THE ISSUE R EGARDING PROVISION FOR DOUBTFUL DEBTS REQUIRES A FRESH LOOK BY THE ASSESSI NG OFFICER. WE, THEREFORE, SET ASIDE THE ORDER OF AUTHORITIES BELOW IN SO FAR AS THIS ASPECT IS CONCERNED, AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICE FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 10. COMING TO THE APPEAL OF REVENUE, BOTH THE ISSUE S RAISED BY THE REVENUE, FIRST OF WHICH IS WITH REGARD TO AIRCRAFT FLYING RIGHTS CHARGES AND THE SECOND WHICH IS REGARDING RETAINERSHIP FEES PAI D TO M/S. SREEBALA (P) LTD. STAND COVERED IN FAVOUR OF THE ASSESSEE, BY TH E DECISION DATED 13.11.2013 OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 235/KOL/2012 FOR ASSESSMENT YEAR 2005-06. RELEVANT PARAS 2 & 3 AND PARAS 8 & 9 OF PAGES 1-2 AND 3-5 ARE REPRODUCED HER EUNDER:- 2. THE FIRST GROUND IS AGAINST THE DELETION OF AD DITION ON ACCOUNT OF EXPENDITURE INCURRED TOWARDS RETAINER-SHIP FEE PAID TO M/S.SREEBALA (P) LTD. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD, IT IS NOTICED THAT THE AUTHORITIES BELOW HA VE RELIED ON THEIR RESPECTIVE DECISIONS TAKEN IN THE EARLIER YEARS ON THE SAME GR OUND FOR THE PURPOSE OF NOT ALLOWING AND ALLOWING THE DEDUCTION. THE APPEAL OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E., 2004-05 CAME UP FOR DECISION BEFORE THE TRIBUNAL. VIDE ORDER IN ITA NO. 566/KOL/2009 , THE TRIBUNAL HAS ACCEPTED THE ASSESSEES CLAIM ON THIS ISSUE BY FOLL OWING THE EARLIER ORDER OF I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 7 THE TRIBUNAL. RELEVANT DISCUSSION IS MADE IN PARA-3 OF THE TRIBUNAL ORDER (A COPY OF WHICH IS AVAILABLE ON RECORD). RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER IN GRANTING THE DEDUCT ION IN RESPECT OF RETAINERSHIP FEE PAID TO M/S SREEBALA (P) LTD. THIS GROUND IS NOT ALLOWED. 8. THE LAST GROUND IS AGAINST THE DELETION OF ADD ITION UNDER THE HEAD AIRCRAFT FLYING RIGHTS CHARGES. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.3.40 CRORES IN RES PECT OF AIRCRAFT FLYING RIGHTS CHARGES. ON BEING CALLED UPON TO JUSTIFY TH E DEDUCTION, THE ASSESSEE STATED THAT IT ENTERED INTO AN AGREEMENT DATED 17-1 1-2003 WITH M/S. SPENCER TRAVEL SERVICES LTD. (STSL FOR SHORT), WHEREBY THE ASSESSEE AGREED TO OBTAIN THE EXCLUSIVE FLYING RIGHTS OF AN AIRCRAFT. IN CONS IDERATION OF THE SAME, THE ASSESSEE AGREED TO PAY A SUM OF RS.3.40 CRORES PER ANNUM TO STSL TOWARDS FLYING RIGHTS CHARGES. IT WAS EXPLAINED THAT ASSESS EE WAS LARGEST CARBON BLACK MANUFACTURER IN THE COUNTRY HAVING MANUFACTURING FA CILITIES AT SEVERAL PLACES AND ALSO HAVING OFFICES AND WAREHOUSES AT DIFFERENT LOCATIONS IN THE COUNTRY TO CATER TO BUSINESS NEEDS. FOR THIS PURPOSE, THE ASSE SSEE STATED TO HAVE OBTAINED THE EXCLUSIVE FLYING RIGHTS OF AN AIRCRAFT FOR WHICH THE ABOVE REFERRED PAYMENT WAS MADE. IT WAS ALSO EXPLAINED THAT STSL W AS TO INCUR ALL COSTS AND EXPENSES ASSOCIATED WITH THE OPERATION OF THE A IRCRAFT. THE ASSESSING OFFICER OPINED THAT THE ASSESSEE FAILED TO EXPLAIN THE BUSINESS EXPEDIENCY OF INCURRING SUCH EXPENDITURE. IN THE ABSENCE OF ANY E XPLANATION FROM THE ASSESSEE ABOUT THE LOG BOOK EXPLAINING THE BUSINESS PURPOSE, THE AO HELD THAT A PART OF SUCH EXPENDITURE MUST BE HELD TO HAV E BEEN INCURRED OR THE PERSONAL PURPOSE OF THE DIRECTORS AND SENIOR MANAGE MENT PERSONNEL. IN THIS BACKDROP OF THE FACTS, HE HELD 25% OF SUCH EXPENDIT URE TOWARDS NON-BUSINESS PURPOSE AND RESULTANTLY MADE ADDITION OF RS.85 LAKH S. THE LD. CIT(A) DELETED THE ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE ADDUC ED NECESSARY MATERIAL TO INDICATE THAT THE AIRCRAFT WAS TAKEN ON HIRE FOR IT S BUSINESS PURPOSES. THE ASSESSING OFFICER IS NOT COMPETENT TO DECIDE THE BU SINESS EXPEDIENCY OF INCURRING ANY EXPENDITURE. BE THAT AS IT MAY, IT IS OBSERVED THAT THE ASSESSING OFFICER DID NOT DENY THAT LOG BOOK OF THE AIRCRAFT WAS NOT FURNISHED BUT ONLY THAT THE PURPOSE FOR WHICH THE JOURNEYS WERE UNDERT AKEN OR THE NAMES OF THE PERSONS WHO UNDERTOOK THE TRAVEL WAS NOT SPECIFIED IN THE LOG BOOK. IT IS IN SUCH CIRCUMSTANCES, THAT HE HELD 25% OF THE EXPENDI TURE FOR NON-BUSINESS PURPOSE. IT IS RELEVANT TO NOTE THAT WE ARE DEALING WITH A CASE OF A LIMITED COMPANY. IT IS A SETTLED LEGAL POSITION THAT THERE CAN BE NO DISALLOWANCE OF ANY EXPENDITURE ON ACCOUNT OF PERSONAL USE BY THE D IRECTORS OF THE COMPANY. THERE IS NO DEARTH OF THE JUDGMENTS AND THE TRIBUNA L ORDERS ON THIS ASPECT OF THE MATTER. THE HONBLE GUJARAT HIGH COURT IN SEVER AL CASES INCLUDING SAYAJI IRON & ENGG.CO. LTD. V. CIT (2002) 253 ITR 749(GUJ) AND DINESH MILLS LTD. V. CIT (2004) 268 ITR 504 (GUJ) AND (2002) 254 ITR 673 (GUJ) HAS HELD THAT THERE CAN BE NO DISALLOWANCE OF EXPENSES BY CONSIDE RING THE PERSONAL USE OF THE ASSETS BY THE DIRECTORS. IT HAS FURTHER BEEN HE LD THAT THIS DISALLOWANCE CANNOT BE SUSTAINED BY TREATING THE EXPENDITURE AS FOR NON-BUSINESS PURPOSE. THE DELHI BENCH OF THE TRIBUNAL IN DY CIT VS. HARYA NA OXYGEN LTD. (2001) 76 ITD 32 (DEL) HAS ALSO TAKEN SIMILAR VIEW. UNDER THE SE CIRCUMSTANCES, WE ARE I.T.A. NOS.: 741/KOL./2012 & 939/K OL/2012 ASSESSMENT YEAR : 2007-08 PAGE 1 TO 8 8 THEREFORE OF THE CONSIDERED OPINION THAT THE LD., C IT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. THE IMPUGNED ORDER IS ACCORDINGLY UP HELD ON THIS ISSUE. 11. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL IN ITA NO. 235/KOL/2012 (SUPRA), WE DISMISS THE GROUNDS TAKEN BY THE REVENUE. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D PRO-TANTO WHEREAS APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF JANUARY, 2014. SD/- SD/- GEORGE MATHAN ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 29 TH DAY OF JANUARY, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.