M/s Jain Shawls, Ludhiana V. Addl. CIT, Ludhiana

ITA 872/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64000 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 21-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 872/CHD/2012 ASSESSMENT YEAR : 2006-07 M/S JAIN SHAWLS V. ADDL C.I.T. RANGE III WAIT GANJ, LUDHIANA LUDHIANA AACFJ 0397 H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ASHWANI KUMAR RESPONDENT BY SHRI N.K. SAINI DATE OF HEARING 31.10.2012 DATE OF PRONOUNCEMENT 31.10.2012 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-II, LUDHIANA, DATED 27.6.2012. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 THAT ORDER PASSED U/S 250(6) OF THE INCOME-TAX A CT, 1961 BY THE LD. CIT(A)-II, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIE D TO ARBITRARILY UPHOLD THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 1,66,119/- ON THE PURCHASE OF NEW CAR AT THE CLOSE OF THE YEAR. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD THE DISALLOWANCE OF RS. 62,055/- OUT OF INTEREST ACCOUN T MADE BY THE AO BY RESORT TO PROVISIONS OF SECTION 36(1)( III) ON AN INTEREST FREE LOAN OF RS. 5,00,000/- GIVEN TO SH RI SUBHASH JAIN. 3. GROUND NO. 1 AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE PURCHASE A NEW CAR ON 31.3.2006 ON WHI CH DEPRECIATION AT RS. 1,66,119/- WAS CLAIMED. ON ENQ UIRY THE ASSESSEE FURNISHED INSURANCE COVER NOTE AND BILL FO R PURCHASE OF DIESEL FROM M/S NATIONAL PETRO WAYS, CHANDIGARH DATED 30.3.2006. COPY OF TEMPORARY REGISTRATION CERTIFIC ATE WAS ALSO 2 FILED. INFORMATION WAS CALLED FROM THE EMM PEE MOT ORS LTD, CHANDIGARH WHO CLAIMED THAT INVOICE WAS ISSUED ON 1 5.16 HRS. IT WAS FURTHER NOTED THAT THE ASSESSEE HAD ALSO SPE NT AN AMOUNT OF RS. 16,995/- ON ACCESSORIES WHICH WERE BR OUGHT FROM M/S EMM PEE MOTORS LTD. CHANDIGARH. IT WAS FURTH ER NOTED THAT THE BUSINESS OF THE ASSESSEE WAS SITUATED AT L UDHIANA WHEREAS THE CAR WAS PURCHASED FROM CHANDIGARH THERE FORE, ACCORDING TO THE AO THE CAR WAS NOT USED FOR BUSINE SS PURPOSES IN THE RELEVANT AY AND ACCORDINGLY THE CLA IM OF DEPRECIATION WAS DENIED. 4 ON APPEAL BEFORE THE LD. CIT(A), IT WAS MAINLY SU BMITTED THAT THE AO HAS DOUBTED THE DELIVERY OF THE CAR WHI CH TOOK PLACE ON 30.3.2006. SAME WAS ALSO EVIDENCED ALSO BY INSURANCE COVER NOTE AND PURCHASE OF FUEL. IT WAS ALSO CONTENDED THAT THE AOS OBSERVATION THAT THE CAR WA S NOT USED FOR BUSINESS PURPOSES BUT AS PER TRADITION THE SAME WAS TAKEN TO SOME RELIGIOUS PLACE, IS CORRECT BUT SAME IS ALS O PART OF THE BUSINESS PURPOSES. 5 THE LD. CIT(A) DID NOT FIND FORCE IN THE SUBMISSI ONS AND REJECTED THE CLAIM OF THE DEPRECIATION. 6 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE THE AO AND THE LD. CIT(A). HE EMPHASIZED THAT EVEN WHEN THE CAR WAS TAKEN TO A TE MPLE THAT IS ALSO A PART OF THE BUSINESS BECAUSE EVERY BUSINE SSMAN WOULD LIKE TO GET THE BLESSINGS OF THE GOD. HE ALS O EMPHASIZED THAT THE INSURANCE COVER AND DIESEL BILL S HAVE ALREADY BEEN FURNISHED, THEREFORE, THE CLAIM OF DE PRECIATION WAS CORRECTLY MADE. 3 7 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RE FERRED TO PARA 3.3 OF THE APPELLATE IMPUGNED ORDER AND SUBMIT TED THAT IF THE INVOICE WAS DATED 31.3.2006 THEN HOW CAN THE AS SESSEE PURCHASE DIESEL ON A PREVIOUS DAY I.E. 30.3.2006. EVEN THE INSURANCE COULD NOT HAVE BEEN PURCHASED ON THE EARL IER DATE. 8 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND FORCE IN THE SUBMISSIONS OF THE LD. DR FOR THE REVE NUE. IT MAY BE POSSIBLE THAT INSURANCE COVER MAY HAVE BEEN ISSU ED IN THE PREVIOUS EVENING BECAUSE A DEALER OF CAR WOULD GET THE DOCUMENTS READY BEFORE DELIVERY BECAUSE THE CAR CAN NOT GO OUT OF THE SHOW ROOM WITHOUT INSURANCE. HOWEVER, IT CA NNOT BE DISPUTED THAT DATE OF INVOICE OF THE CAR IS DATED 3 1.3.2006 AND THE INVOICE WAS ISSUED ON 15.16 HRS THEN HOW CAN PO SSIBLY THE DIESEL BE PURCHASED OF MARCH 30 TH ITSELF. THIS ITSELF SHOWS THAT THIS IS SIMPLE CASE OF MANIPULATION AND THE CAR HAS NOT BEEN USED AT ALL ON 31.3.2006. THE LD. CIT(A) HAS RECOR DED A DETAILED FINDING IN THIS RESPECT IN PARA 3.3 WHICH IS AS UNDER: 3.3 I HAVE CAREFULLY CONSIDERED APPELLANTS SUBMIS SIONS. THE APPELLANT HAS NOT CONTROVERTED OR DISPUTED THE FACT THAT THE CAR WAS PURCHASED VIDE INVOICE DATED 31.3. 2006. THE APPELLANT HAS SUBMITTED THAT THE CAR WAS PURCHA SED ON 30.3.2006. THE APPELLANT HAS NOT GIVEN ANY REAS ON WHATSOEVER IN ORDER TO EXPLAIN AS TO WHY THE INVOIC E OF THE CAR WAS ISSUED ON 31.3.2006 ALTHOUGH THE CAR WA S ACTUALLY PURCHASED ON 30.3.2006. THE ONLY EVIDENCE WITH REGARD TO THE APPELLANTS CLAIM FOR PURCHASE OF CAR ON 30.3.2006 IS A INSURANCE COVER NOTE ISSUED ON 30.3. 2006 AND BILL OF PURCHASE OF DIESEL DATED 30.3.2006. IN THIS REGARD AS OBSERVED BY THE AO THE COVER NOTE OF THE INSURANCE IS NORMALLY TAKEN BEFORE THE DELIVERY OF THE VEHICLE AND IN THIS CASE THE COVER NOTE WAS ISSUED ON 30.3.2006 AT 19.05 PM. AS REGARDS THE BILL FOR PUR CHASE OF DIESEL, THE AO HAS RIGHTLY POINTED OUT THAT DIES EL CANNOT BE PURCHASED ON 30.3.2006 AT CHANDIGARH FOR A VEHICLE WHICH HAS NOT BEEN DELIVERED. FURTHER THE INVOICE OF THE CAR WAS ISSUED AT 15.16 PM ON 31.3.2006. THEREFORE, IT IS APPARENT THAT THE DELIVERY OF THE CAR WAS TAKEN BY THE APPELLANT ON 31.3.2006. THEREAFTER TH E APPELLANT GOT THE ACCESSORIES FITTED IN THE CAR. A LL T HIS WAS DONE AT CHANDIGARH. THE BUSINESS PREMISE OF TH E 4 APPELLANT IS AT LUDHIANA. THEREFORE, NO BUSINESS P URPOSE COULD HAVE BEEN SERVED BY THE CAR BY USING IT AT CHANDIGARH. IT HAD TO BE FIRST BROUGHT TO LUDHIANA ON 31.3.2006 AND ALSO PUT TO USE FOR BUSINESS PURPOSES ON 31.3.2006 TO JUSTIFY THE CLAIM OF DEPRECIATION. TH E AO IN A DETAILED ORDER HAS ESTABLISHED THAT FROM THE EVID ENCE ON RECORD IT IS QUITE APPARENT THAT THE APPELLANT COUL D NOT HAVE USED THE CAR FOR BUSINESS PURPOSES ON 31.3.200 6. IN THESE CIRCUMSTANCES, THE AO WAS FULLY JUSTIFIED IN DISALLOWING THE DEPRECIATION CLAIMED ON THE CAR. I SEE NO REASON TO INTERFERE WITH THE ORDER OF THE AO ON THI S COUNT. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. IN OUR OPINION, THE LD. CIT(A) WAS TOTALLY RIGHT IN DENYING THE DEPRECIATION BECAUSE DIESEL COULD NOT HAVE BEEN PUR CHASED A DAY BEFORE THE PURCHASE OF THE CAR. ACCORDINGLY W E CONFIRM THE ORDER OF THE LD. CIT(A) AND UPHOLD THE DENIAL O F CLAIM OF DEPRECIATION. 9 GROUND NO. 2 DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS ADVANCED A LOAN OF RS . 5.00 LAKHS ON 3.6.2005 TO ONE SHRI SUBHASH JAIN WHO IS R ELATED TO THE ASSESSEE. THEREFORE, FOLLOWING THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT V. ABHIS HEK INDUSTRIES, 286 ITR 1 (P & H) PROPORTIONATE INTERES T WAS DISALLOWED. 10 BEFORE THE LD. CIT(A), IT WAS MAINLY SUBMITTED T HAT IT WAS ONLY A TEMPORARY LOAN AND NO NEXUS WAS PROVED BY TH E AO THAT LOAN WAS GIVEN OUT OF BORROWED FUNDS. HOWEVER, THE LD. CIT(A) DID NOT FIND FORCE IN THE SUBMISSIONS AND CONFIRMED THE ADDITION. 11 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THERE WAS NO NEXUS BETWEEN THE LOAN GIVEN BY THE AS SESSEE AND THE BORROWED FUNDS. 5 12 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE ST RONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 13 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES, WE ARE UNABLE TO AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. HON'BLE PUNJAB & HARYANA HIGH COURT I N CASE OF CIT V. ABHISHEK INDUSTRIES (SUPRA) HAVE OBSERVED TH AT IF THE MONEY HAS NOT BEEN LENT OUT OUT OF BORROWED FUNDS A ND HAS BEEN GIVEN OUT OF SURPLUS FUNDS THEN WHERE IS THE N EED TO BORROW. NORMAL ASSUMPTION IS THAT BORROWED MONEY HA S BEEN USED FOR BUSINESS PURPOSES. NO EVIDENCE OR DETAIL HAS BEEN PRODUCED THAT THE LOAN WAS NOT GIVEN OUT OF THE BOR ROWED FUNDS. WE ARE OF THE OPINION THAT THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT V. ABHIS HEK INDUSTRIES (SUPRA) IS SQUARELY APPLICABLE. ACCORDI NGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) AND UPHOLD THE DISALLOWANCE OF INTEREST. 14 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED ON 31.10.2012 (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 31.10.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 6