Navin Life Guards & Marketing Pvt. Ltd., Ahmedabad V. The ACIT, Circle-5, Ahmedabad

ITA 771/AHD/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8316 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-08-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 30-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN DATES OF HEARING OF
• Assessee Lawyers: A C SHAH
• Keywords: Proportionate interest; Revenue expenditure; Capital expenditure
• Section: 13; 22

Judgement Text

NAVIN LIFE GUARDS & MARKETING PVT LTD . ITA NO. 771/AHD/2016 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [ CORAM : HON BLE JUSTICE P . P BHAT T , PRESIDENT AND PRAMOD KUMAR, VP ] ITA NO . 771 / AHD / 2016 ASSESSMENT YEAR : 2011 - 12 NAVIN LIFE GUARDS & MARKETING PVT LTD . ............. APPELLANT B - 101, SHAKTI ENCLAVE, NR . JUNDGESBUNGLOW, BODEKDEV, AHMEDABAD 380061 ( PAN NO . AAACN0984D ) VS ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE - 5 AHMEDABAD ....... RESPONDENT APPEARANCES BY A . C SHAH FOR THE APPELLANT L . P JAIN FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : DECEMBER 20 TH , 2019 DATE OF PRONOUNCING THIS ORDER : MAR CH 12 TH , 2020 O R D E R PER BENCH: 1 . THIS APPEAL, FILED BY THE ASSESSEE, CHALLENGES CORRECTNESS OF LEARNED CIT ( A ) S ORDER DATED 22 ND FEBRUARY 2016, IN THE MATTER OF ASSESSMENT UNDER SECTION 143 ( 3 ) OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 2011 - 12 . 2 . IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : - NAVIN LIFE GUARDS & MARKETING PVT LTD . ITA NO. 771/AHD/2016 PAGE 2 OF 5 1 . THE LEARNED CIT ( A ) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RTO TAX RS . 24,800 /- AND INSURANCE OF RS . 5,14,326 /- PAID ON PURCHASE OF NEW DUMPERS ON THE GROUND THAT IT IS CAPITAL EXPENDITURE IS AS MUCH AS THE RTO TA X AND INSURANCE IS THE REVENUE EXPENDITURE AND THAT THE SAME SHOULD HAVE BEEN ALLOWED AS DEDUCTION . 3 . THE ASSESSEE IS INTER ALIA, ENGAGED IN THE BUSINESS OF TRANSPORTATION . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID RS . 24,800 /- TOWARDS REGISTRATION CHARGES FOR VEHICLES, AND RS . 5,14,326 /- TOWARDS FIRST INSURANCE CHARGES FOR THE VEHICLES PURCHASED . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE EXPENSES WERE CAPITAL EXPENSES WITHOUT WHICH THE ASSETS COULD NOT BE PUT TO USE . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT ( A ) BUT WITHOUT ANY SUCCESS . THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US . 4 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AN Y DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 5 . WE FIND THAT INSURANCE EXPENSES ARE INCURRED TO PROTECT ANY DAMAGE TO THE ASSET CONCERNED, I . E . VEHICLES IN THIS CASE, AND REGISTRATION EXPENSES ARE INCURRED TO REGISTE R THE VEHICLES AND PAY FOR ROAD TAX . BOTH OF THESE EXPENDITURE ARE INHERENTLY REVENUE EXPENDITURE IN NATURE AND MERELY BECAUSE IT IS A STATUTORY REQUIREMENTS TO REGISTER A VEHICLE WITH THE RTO AND PAY TAX, AND TO INSURE THE VEHICLE BEFORE THE VEHICLES ARE PUT TO USE, THESE EXPENSES WOULD NOT BECOME CAPITAL EXPENDITURE . THE REASONING ADOPTED BY THE AUTHORITIES BELOW, THEREFORE, DOES NOT MEET OUR APPROVAL . ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS . 24,800 /- TOWARDS RTO REGISTRATION EXPENSES, AND RS . 5,14,326 /- TOWARDS INSURANCE EXPENSES THE ASSESSEE GETS THE RELIEF AS SUCH . 6 . GROUND NO 1, IS THUS ALLOWED . 7 . ON GROUND NO 2, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE . 2 . THE LEARNED CIT ( A ) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS . 40,41,291 /- UNDER SECTION 36 ( 1 ) ( III ) ON THE GROUND THAT THE ASSESSEE HAS GIVEN INTEREST NAVIN LIFE GUARDS & MARKETING PVT LTD . ITA NO. 771/AHD/2016 PAGE 3 OF 5 FREE ADVANCED TO SHRI RAJENDRA PRAJAPATI OF RS . 2,13,892 /- AND SHRI RAMES PRAJAPATI OF RS . 4,35,23,023 /- IN AS MUCH AS B OTH THE ADVANCES WERE IN RESPECT OF THE PRECEDING ASSESSMENT YEAR 2010 - 2011 AND THAT SO FAR AS SHRI RAMESH PRAJAPATI IS CONCERNED HE HAS RECEIVED THE SALE PROCEEDS ON SALE OF DUMPERS AND THEN THEREAFTER IT WAS TRANSFERRED TO THE ASSESSEE AND THAT THE ASSES SEE HAS NOT GIVEN ANY ADVANCE . 8 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ON ONE HAND, THE ASSESSEE HAS INCURRED INTEREST COSTS OF RS . 82 . 71 LAKHS, AND, ON THE OTHER HAND, THE ASSESSEE HAS ALSO ADVANCED INTEREST FREE LOANS OF RS . 2,13,892 /- TO RAJENDRABHAI PRAJAPATI AND RS . 4,35,23,023 /- TO RAMESHBHAI PRAJAPATI, WITHOUT E STABLI SHI NG ANY BUSINESS PURPOSE . ACCORDINGLY, HE DISALLOWED PROPORTIONATE INTEREST COMPUTED @12 % P . A . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE CIT ( A ) BUT WITHOUT ANY SUCCESS . LEARNED CIT ( A ) CONFIRMED THE AFORESAID DISALLOWANCE OF RS . 40,41,291 /- AND OBSERVED AS FOLLOWS :- 6 . 2 IN RESPONSE, THE ASSESSEE HAS OFFERED NO EXPLANATION . THE ONLY RESPONSE FURNISHED BY THE ASSESSEE IS AS FOLLOWS : LEDGER ACCOUNT OF SH . RAJENDRABHAI PRAJAPATI FOR TWO YEARS IS ENCLOSED . THE SAID LOAN IS RETURNED BY CHEQUE ON 30 . 03 . 2020 . 6 . 3 SIMILARLY, FROM THE SUBMISSIONS FILED BY THE ASSESSEE ON 30 . 07 . 2013, IT WAS NOTICED THAT AS PER ANNEXURE 22 OF THE SAID SUBMISSION, A SUM OF RS . 6 . 22 CRORES HAD BEEN SHOWN AS ADVANCE TO SH . RAMESH B PRAJAPATI . AS PER THE SAID ANNEXURE, THE ASSESSEE HAS SHOWN RECEIPT OF RS . 1 . 87 CRORES . ACCORDINGLY, VIDE THIS OFFICE NOTICE U / S . 142 ( 1 ) THE ASSESSEE WAS ALSO ASKED THE FO LLOWING : FURTHER, ONCE AGAIN REFERRING TO LOANS AND ADVANCES, YOU HAVE STATED THAT YOU HAVE RECEIVED RS . 1,87,59,840 /- AS INTEREST ON THE LOAN OF RS . 6 . 22 CRORES ADVANCED TO SH . RAMESHBHAI PRAJAPATI IT IS NO CLEAR WHERE AND UNDER WHAT HEAD YOU HAVE OFFERED THIS INCOME . PLEASE EXPLAIN THE SAME . STATE THE RATE OF INTEREST CHARGED AND THE PURPOSE OF THE LOAN . 9 . AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US . NAVIN LIFE GUARDS & MARKETING PVT LTD . ITA NO. 771/AHD/2016 PAGE 4 OF 5 10 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD ANY DULY CONSI DERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 11 . WE FIND THAT THE ASSESSEE HAS FILED DETAILED COPIES OF ACCOUNTS OF THE TWOS PERSONS WHOSE ACCOUNTS SHOWED DUES ON WHICH NO INTERESTS WERE CHARGED, AND THESE ACCOUNTS SHOW A LARGE NUMBER OF CREDITS AND DEBITS . HOWEVER, NONE OF THE AUTHORITIES BELOW HAVE EXAMINED THE NATURE OF BUSINESS RELATIONSHIP REFLECTED BY THESE ENTRIES . WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT THE MATTER FOR ADJUDICATION DENOVO, SO FAR AS THIS DISALLOWANC E IS CONCERNED ANY AS THE MATTER IS BEING SENT BACK FOR ADJUDICATION, WE MAKE IT CLEAR THAT ALL ASPECTS WILL BE OPEN FOR FRESH ADJUDICATION ACCORDINGLY 12 . GROUND NO 2 IS THUS ALLOWED FOR STATISTICAL PURPOSES . 13 . NO OTHER ISSUE WAS RAISED BEFORE US . 14 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERM INDICATED ABOVE . ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - SD/ - JUSTICE P . P BHATT PRAMOD KUMAR ( PRESIDENT ) ( VICE PRESIDENT ) AHMEDABAD, DATED THE 12 TH DAY OF MARCH , 2020 COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE NAVIN LIFE GUARDS & MARKETING PVT LTD . ITA NO. 771/AHD/2016 PAGE 5 OF 5 BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD