M/s. Ornet Corportion, Ahmedabad V. The Dy.CIT.,Cent.Circle-2(2), Ahmedabad

ITA 895/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9061 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: D P SONI
• Keywords: Depreciation; Business expenditure
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI H.L. KARWA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING :09.09.2009 DRAFTED ON: 9.09 .2009 ITA NO.895/AHD/2009 ASSESSMENT YEAR : 2004-05 M/S. ORNET CORPORATION 3 RD FLOOR, SURYARATH, B/H. WHITE HOUSE, PANCHVATI, AHMEDABAD. VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), AHMEDABAD (THE PRESENT AO) PAN/GIR NO. : AAAFO4542M (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI D.P.SONI RESPONDENT BY: SHRI M.C.PANDIT, SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-XVI, AHMEDABAD, DATED 15.01.2009. 2. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE A ND REQUIRES NO ADJUDICATION BY US. 3. GROUND NO.2 OF THE APPEAL RELATES TO ALLOWANCE O F DEDUCTION UNDER SECTION 80HHC OF RS.28,06,705/- AS AGAINST RS.31,82 ,647/- CLAIMED BY THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT WHILE ALLOW ING THE DEDUCTION UNDER SECTION 80HHC TO THE ASSESSEE, THE LEARNED ASSESSIN G OFFICER WHILE DETERMINING THE INDIRECT COST OF GOODS RELATING TO TRADING GOOD EXPORTED INCLUDED THE AMOUNT OF INTEREST EXPENSES AT RS.3,90 ,582/-. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) REJECTE D THE CONTENTION OF THE ITA NO 895/AHD/2009 M/S.ORNET CORPORATION LTD. ASST.YEAR -2004-05 - 2 - ASSESSEE THAT THE ASSESSEE HAS EARNED GROSS INTERES T INCOME OF RS.9,75,096/- AGAINST WHICH THE EXPENDITURE OF INTEREST WAS RS.11 ,20,600/- AND THEREFORE, THE INDIRECT COST OF INTEREST WOULD BE RS.1,45,504/ - FOLLOWING THE DECISION OF THE PUNJAB AND HARIYANA HIGH COURT IN THE CASE OF RANI PALIWAL VS. CIT (2003) 268 ITR 220 (P&H). 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT ONLY THE NET INTEREST SHOULD BE CONSIDERED IN VIEW OF THE DECISION OF THE HON;BLE DELHI HIGH COURT IN THE CASE OF SHRI RAM HO NDA POWER 289 ITR 475 KEEPING IN VIEW THE FACT THAT THE INTEREST INCOME H AS NOT BEEN ASSESSED BY THE LEARNED ASSESSING OFFICER UNDER THE HEAD INCOME FRO M OTHER SOURCES. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSEE IS INTER ALIA ENGAGED IN EXPORT OF TRADING GOODS. THE LEARNE D ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS INCURRED INTEREST EX PENDITURE OF RS.3,90,582/- FOR THE PURPOSES OF HIS BUSINESS AND THEREFORE, INC LUDED THE SAME IN THE INDIRECT EXPENSES OF THE ASSESSEE FOR CALCULATING T HE AMOUNT OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) ALSO CONFIRMED THE ACTION OF THE LEARN ED ASSESSING OFFICER. THE ASSESSEE ARGUED THAT HE HAS ALSO RECEIVED INTEREST INCOME OF RS.13,42,918/-. THUS, IN EFFECT THERE WAS NO INTEREST EXPENDITURE A ND RATHER THERE WAS NET INTEREST INCOME OF RS.9,52,336/- AND THEREFORE, THE REVENUE WAS NOT JUSTIFIED AN INCLUDING RS.3,90,582/- IN THE INDIRECT EXPENSES FOR CALCULATING THE AMOUNT ALLOWABLE UNDER SECTION 80HHC. WE FIND THAT THE ASS ESSEE HAS FAILED TO BRING ON RECORD ANY MATERIAL TO SHOW THAT BORROWED MONEY WAS NOT UTILISED FOR HIS ITA NO 895/AHD/2009 M/S.ORNET CORPORATION LTD. ASST.YEAR -2004-05 - 3 - TRADING BUSINESS AND SAME WAS UTILISED FOR EARNING INTEREST INCOME. ON THE OTHER HAND, THE CLAIM OF THE ASSESSEE WAS THAT SURP LUS FUNDS WERE INVESTED FOR EARNING INCOME INTEREST. IN THE ABOVE FACTS, IN OUR CONSIDERED OPINION, WHEN THE BORROWED FUNDS WERE UTILISED FOR ASSESSEES BUS INESS PURPOSES, THE LOWER AUTHORITIES HAVE RIGHTLY TREATED INTEREST EXPENDITU RE OF RS.3,90,582/- AS BUSINESS EXPENDITURE OF THE ASSESSEE. WE THEREFORE , DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AU THORITIES. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. GROUND NOT.3 OF THE APPEAL RELATES TO DISALLOWAN CE OF RS.1,12,539/- OUT OF VEHICLE EXPENSES. 9 GROUND NO.4 OF THE ASSESSEE OF APPEAL RELATES TO DISALLOWANCE OF DEPRECIATION OF RS.67,810/- ON THE CAR. 10. SINCE, THE FACTS AND ISSUE INVOLVED IN THE ABOV E GROUNDS ARE COMMON, THEY ARE BEING CONSIDERED AND DECIDED TOGETHER AS U NDER. 11. THE BRIEF FACTS OF THE CASE ARE THAT ON SCRUTIN Y OF THE EXPENSES, THE LEARNED ASSESSING OFFICER OBSERVED THAT CAR EXPENSE S OF RS.95,578/- HAS BEEN TRANSFERRED FROM THE SISTER CONCERN M/S. MANALI DYE CHEM TO THE ACCOUNT OF THE ASSESSEE. FURTHER, A SUM OF RS.20,489/- DEBITED UND ER THE HEAD CAR EXPENSES WAS DEBITED ON 30.01.2004. THE LEARNED ASSESSING OF FICER OBSERVED THAT THE CAR UNDER REFERENCE WAS PURCHASED BY THE ASSESSEE F ROM THE SISTER CONCERN ONLY IN THE MONTH OF FEBRUARY 2004. HE ALSO OBSERVE D THAT EXPENSES OF RS.120/- AND RS.9,160/- HAS BEEN DEBITED ON 11.02.0 4 AND 30.01.2004 RESPECTIVELY. AGAINST THESE EXPENSES, RS. 13,500/- WAS CREDITED IN THE ACCOUNT. HENCE, THE TOTAL CLAIM UNDER THE HEAD CAR EXPENSES WAS RS.1,12,539/-. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSE E COULD NOT PRODUCE THE RTO BOOK WITH RESPECT TO THE PURCHASE OF THE CAR. IN VIEW OF THIS THE LEARNED ITA NO 895/AHD/2009 M/S.ORNET CORPORATION LTD. ASST.YEAR -2004-05 - 4 - ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENSES OF RS.1,12,539/-. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBS ERVED THAT THE LEARNED ASSESSING OFFICER HAS DISALLOWED CAR EXPENSES AND D EPRECIATION ON CAR ON THE GROUND THAT THE ASSESSEE HAS TRIED TO REDUCE ITS PR OFIT BY CLAIMING EXPENSES OF ITS SISTER CONCERN AND THAT THERE WAS NO PROOF REGA RDING THE USE OF THE CAR BY THE ASSESSEE DURING THE YEAR. THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) OBSERVED THAT THE LEARNED AUTHORISED R EPRESENTATIVE DURING THE COURSE OF APPEAL HEARING WAS ASKED HOW CAR EXPENSES WERE INCURRED BY MANALI DYECHEM PARTICULARLY WHEN IT IS CLAIMED THAT THE CA R WAS USED BY THE ASSESSEE DURING THE PERIOD 1.04.2003 TO 4.02.2004. NO SATISF ACTORY REPLY WAS RECEIVED FROM HIM. THEREFORE, THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) WAS OF THE VIEW THAT IT WAS NOT POSSIBLE FOR MANALI DYECHE M TO INCUR EXPENSES SUCH AS FUEL REPAIR ETC. WHEN CAR WAS IN POSSESSION OF THE ASSESSEE AND WAS BEING USED BY THE ASSESSEE. THE FACT THAT EXPENSES WERE INCURR ED BY MANALI DYECHEM FROM 1.04.2003 TO 4.02.2004 ITSELF SHOWS THAT THE C AR WAS NOT BEING USED BY ASSESSEE. FURTHER, IT WAS STATED THAT MANALI DYECHE M WAS THE SISTER CONCERN OF THE ASSESSEE WHOSE BUSINESS CLOSED SINCE LONG. THER EFORE, SUCH EXPENSES WERE NOT ALLOWABLE IN THE HANDS OF MANALI DHYECHEM ON AC COUNT OF CLOSER OF THE BUSINESS, SUCH EXPENSES WERE DIVERTED TO THE ASSESS EE TO REDUCE ITS TAX LIABILITY. HENCE, THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFI CER. 12 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IT IS OBSERVED THAT THE ASSESSEE CLAIMED CAR EXPENSES OF RS.1,12,539/- WHIC H WAS DISALLOWED BY THE LEARNED ASSESSING OFFICER FOR THE REASON THAT THE A SSESSEE COULD NOT PRODUCE THE RTO BOOK AS PROOF OF PURCHASE OF THE CASE BY TH E ASSESSEE AND THAT THE CAR ITA NO 895/AHD/2009 M/S.ORNET CORPORATION LTD. ASST.YEAR -2004-05 - 5 - EXPENSES FOR THE PERIOD 1.04.2003 TO 4.02.2004 WAS INCURRED BY MANALI DYECHEM. THE DISALLOWANCE WAS CONFIRMED BY THE LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) ON AN APPEAL BY THE ASSESSEE. T HE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE MERELY SUBMITTED THA T REGISTRATION OF VEHICLE IN THE NAME OF THE ASSESSEE WAS NOT A REQUIREMENT FOR ALLOWING DEPRECIATION ON THE CAR AND THE EXPENDITURE INCURRED ON THE CAR BY THE ASSESSEE. HOWEVER, HE COULD NOT PRODUCED ANY EVIDENCE TO SHOW THAT THE CA R WAS USED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY GOOD REASO N TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS). IT IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED . 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 11/09/2009. SD/- SD/- ( H.L. KARWA ) ( N.S. SAINI ) JUDICIAL MEMBER ACCO UNTANT MEMBER AHMEDABAD; DATED 11/09/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XVI, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD