The Dy. CIT Circle-7, Ahmedabad V. M/s Arvind Bechardas Jewellers, Ahmedabad

ITA 899/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9283 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 23-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Keywords: Depreciation
• Section: 37(1); 201

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI A.N.PAHUJA ITA NO.899/AHD/2009 (ASSESSMENT YEAR : 2005-06 ) DCIT CIRCLE 7, AHMEDABAD VS. M/S ARVIND BECHARDAS JEWELLERS, 101, 102, 1 ST FLOOR, SIDDHI VINAYAK COMPLEX, SATELLITE, AHMEDABAD. (APPELLANT) (RESPONDENT) C.O.NO.71/AHD/2009 (IN ITA NO.899/AHD/2009) (ASSESSMENT YEAR : 2005-06 ) M/S ARVIND BECHARDAS JEWELLERS, 101, 102, 1 ST FLOOR, SIDDHI VINAYAK COMPLEX, SATELLITE, AHMEDABAD. VS. DCIT CIRCLE 7, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT, SR. D.R. RESPONDENT BY : SHRI S.N.SOPARKAR, A.R. WITH SHRI JAIMIN GANDHI ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THE APPEAL BY THE REVENUE AND C.O. BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-XI, AHMEDABAD DATED 07. 1.2009 RELATING TO ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER: 1. THE LD. COMMISSIONER OF INCOME TAX (A) XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION M ADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON MOTOR CAR OF RS.96,546/-. 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSE E DERIVES INCOME FROM MANUFACTURING AND SALE OF GOLD ORNAMENTS, T RADING IN GOLD BARS, SILVER BARS, SILVER ORNAMENTS ETC. THE ASSESSING OFFICE R HAS DISALLOWED AN AMOUNT OF RS.96,546/- IN RESPECT OF CERTAI N VEHICLES WHICH WERE REGISTERED WITH THE RTO AUTHORITIES IN THE NAME OF ONE OF THE PARTNERS OF THE FIRM. 4. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE STATING THAT SINCE THE VEHICLES ARE TRANSFERRED TO THE ASSESSEE FIRM AND ARE USED FOR THE BUSINESS PURPOSE. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF MY SORE MINERALS LTD. V. CIT (1999) 239 ITR 775 (SC), CIT V. DILIP SINGH SARDARSINGH BAGGA (1993) 201 ITR 995 (BOMAY-NAGPUR) AND CIT V. NIDISH TRANSPORT CORPORATION (1990)185 ITR 669 (KER.), AND OTHERS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI S.N.SOPAR KAR, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE H AS SUBMITTED ALL THE DETAILS IN RESPECT OF OWNERSHIP OF THE VEHICLES AND THE REGISTRATION BOOK WITH RTO AUTHORITIES. HE FURTHER SUBM ITTED THAT IN RESPECT OF CERTAIN VEHICLES, AS STATED HEREINBELOW THE RE GISTRATION WITH RTO AUTHORITIES IN THE REGISTRATION BOOK STANDS IN THE NAME OF SHRI VIJAYBHAI SONI, A PARTNER OF THE FIRM: I) SAFARI CAR II) ACCENT VIVA CAR III) SCOOTER 6. SHRI S.N.SOPARKAR, THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT ON PAGE 6 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICE R HAS ACCEPTED AS CORRECT THE FACT THAT THE OWNERSHIP OF THE ABO VE VEHICLES HAS 3 BEEN TRANSFERRED BY SHRI V.B.SONI TO THE ASSESSEE FIRM A LONGWITH THE TRANSFER OF HIS PROPRIETARY BUSINESS OF THE FIRM. THE ON LY OBJECTION OF THE ASSESSING OFFICER IS THAT IN THE RTO REGISTRATION BOOK, T HE NAME OF THE PARTNER WAS SHRI VIJAY BHAI SONI. IN OUR VIEW, THE C IT(A) HAS CORRECTLY ALLOWED THE DEPRECIATION TO THE ASSESSEE. IN THE CASE OF DILIP SINGH SARDARSINGH BAGGA (SUPRA), THE HONBLE BOMBAY HIGH COU RT HAS HELD THAT REGISTRATION UNDER THE MOTOR VEHICLE ACT IS NOT ESSENTIAL PRE-REQUISITE FOR THE ACQUISITION OF OWNERSHIP OF THE MOTOR VEHICLE BUT AS AN OBLIGATION IS CAST UPON AN OWNER OF THE VEHICLE FOR THE PURPOSE OF RU NNING THE VEHICLES IN ANY PUBLIC PLACE. IN THE SAID CASE, THE ASSESSEE HAD PURCH ASED MOTOR VEHICLE FOR A VALUABLE CONSIDERATION AND HAD USED THE SA ME FOR HIS BUSINESS. THE HONBLE HIGH COURT HELD THAT BENEFIT OF D EPRECIATION CANNOT BE DISALLOWED ON THE GROUND THAT TRANSFER WAS NOT RECOR DED UNDER THE MOTOR VEHICLE ACT OR VEHICLE STOOD IN THE NAME OF VEND OR IN THE RECORDS OF AUTHORITIES UNDER THE MOTOR VEHICLE ACT. SIMILARLY, I N THE CASE OF NIDISH TRANSPORT CORPORATION (SUPRA), THE HONBLE KERALA HIGH COURT HELD THAT FOR THE TRANSFER OF THE OWNERSHIP OF THE MOTOR VEHICLE, MU TATION OF THE NAME IN THE CERTIFICATE OF REGISTRATION WAS NOT NECESSARY AND THE VEHICLE COULD BE SOLD AND PURCHASED WITHOUT FOLLOWING THE PROCEDURE P RESCRIBED UNDER SEC. 31 OF THE MOTOR VEHICLE ACT. THE ASSESSEES WERE THE OWN ERS OF THE VEHICLES AND, THEREFORE, THEY USED THEM IN THEIR BUSIN ESS AND, THEREFORE, THEY WERE ENTITLED TO DEPRECIATION ON THEM. IN VIEW OF THE ABOVE DECISIONS, WE DO NOT FIND ANY INFIRMITY IN THE FINDING S OF THE CIT(A) AND ACCORDINGLY WE DISMISS GROUND NO.1 OF THE APPEAL. 7. GROUND NO.2 OF THE APPEAL READS AS UNDER: 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHMEDABAD H AS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OUT OF ADVERTISEMENT EXPENSES FROM RS.2,29,000/- TO RS.1,14,500/-. 8. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION AND VIDE GROU ND NO.1 OF 4 THE C.O., THE ASSESSEE HAS CHALLENGED THE ACTION OF CIT(A) IN PARTLY CONFIRMING THE DISALLOWANCE OF ADVERTISEMENT EXPENSES OF RS.1,14,500/-. 9. THE ASSESSING OFFICER HAS DISALLOWED THE PAYMENTS MADE T O THE FOLLOWING PARTIES: I) RS.11,000/- - CHAROTAR LEUVA PATEL SAMAJ II) RS.2,500/- - ACCOUNTANT MEMBER III) RS.11,000/- - JAIN JAGRUTI CENTRE, DHANGADHRA IV) RS.2,500/- - ANANT SHRI SUKUMARJI TRUST V) RS.10,000/- - SARDAR JAIN MANDAL VI) RS.21,000/- - LOK SEVA FOUNDATION VII) RS.71,000/- - BHAGWATI BANQUESTS VIII) RS.1,00,000/- - ABAD ROUND TABLE RS.2,29,000/- THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF RS.2,29,0 00/- CONSIDERING THE ABOVE PAYMENTS AS PAYMENTS IN THE NATUR E OF CHARITY/DONATION. 10. ON APPEAL, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW 50% OF THE AFORESAID EXPENDITURE WHICH CAME TO RS.1,14,500/ - AND THE BALANCE AMOUNT WAS DELETED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI S.N.SOPA RKAR, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD MADE THE ABOVE PAYMENTS FOR ADVERTISEMENT RELEASED IN THE M AGAZINES PUBLISHED BY THE ABOVE PARTIES. THE ASSESSEE HAS SUBMITTED THE PHOTOCOPIES OF THE MAGAZINES WHERE THE ABOVE ADVERTISEM ENTS HAVE APPEARED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SHRI S.N.SOPARKAR, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE 5 ASSESSING OFFICER HAS MADE THE DISALLOWANCE CONSIDERING THE ABOVE PAYMENTS AS PAYMENTS IN THE NATURE OF CHARITY/DONATION , DISREGARDING THE FACT THAT THE ADVERTISEMENT OF THE ASSESSEES BUSINESS HAVE A PPEARED, IN FACT, IN THE MAGAZINES WIDELY CIRCULATED BY THE ABOVE P ARTIES. IN OUR VIEW, THE CIT(A) WAS NOT JUSTIFIED IN DISALLOWING 50% OF T HE EXPENSES. THE AUTHORITIES BELOW HAVE NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE. IT IS CLAIMED THAT THE EXPENDITURE HAS BEEN INCURRED ON ADVERTISEMENT IN SOUVENIRS. THUS IN VIEW OF BOARDS CIRCULAR NO.200 DATED 28.06.1976 (REPORTED IN 1976 CTR (JOURN) 460: (1976) 104 ITR ( ST)50), EXPENDITURE ON ADVERTISEMENT IN SOURVENIRS IS EXPENDITURE INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND AS SUCH IS ALLOWA BLE AS DEDUCTION U/S 37(1) OF THE I.T.ACT, 1961. THERE WAS NO JUSTIFICATION IN STATING THAT PART OF EXPENDITURE WAS IN THE NATURE OF DONATION. ACCORDINGLY, WE ALLOW GROUND NO.1 OF THE ASSESSEES C.O. A ND DISMISS GROUND NO.2 OF THE REVENUES APPEAL. 12. GROUND NO.3 OF THE APPEAL READS AS UNDER: 3. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION M ADE ON ACCOUNT OF DISALLOWANCE OF WEIGHT LOSS OF RS.5,03,154/-. 13. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIM ED WEIGHT LOSS TO THE EXTENT OF 4698.90 GMS. OF 22 CARAT G OLD. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN REGARDING THE SA ID WEIGHT LOSS. THE ASSESSEE VIDE ITS WRITTEN SUBMISSIONS DATED 28.9.2007, 12.12.2007 AND 24.12.2007 STATED THAT IT HAD PURCHASED OLD GOLD ORNAMENTS OF THE CUSTOMERS. THESE ORNAMENTS CONTAINED IMPURITY I.E. ALLOYS. IN ORDER TO CONVERT THESE ORNAMENTS INTO PURE GOLD, THEY WERE SENT TO INDEPENDENT REFINERY WHICH WAS NOT RELATED TO THE ASSESSEE. WHEN THE REFINING IS DONE BY THE REFINERY WHAT THE ASSESSEE GETS IS PURE GOLD. IN THE PROCESS THERE WAS WEIGHT LOSS IN RESPECT OF ALLOYS. THE ASSESSEE ALSO CONTEND ED THAT IT 6 HAD MAINTAINED COMPLETE DOCUMENTARY EVIDENCE AND QUANT ITATIVE RECORDS IN RESPECT OF THE WEIGHT LOSS, COPIES OF WHICH WERE SUBMIT TED TO THE ASSESSING OFFICER WITH ITS WRITTEN SUBMISSIONS. THE ASSESSEE H AD EXPLAINED THAT THERE WAS NO CLAIM OF MONETARY LOSS DEBI TED IN PROFIT AND LOSS ACCOUNT AND NO EXPENDITURE OR LOSS WAS CLAIMED FROM T HE TOTAL INCOME. THE ASSESSING OFFICER DID NOT FIND ANY MERIT IN T HE ABOVE SUBMISSIONS OF THE ASSESSEE AND HE, THEREFORE, DISALLOWED AN AMOUNT OF RS.5,03,154/- FOR THE REASONS MENTIONED ON PAGE 4 OF THE ASSESSMENT ORDER. 14. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSER VING AS UNDER: 4.2 IT MAY BE SEEN THAT THE APPELLANT HAS MAINTAINE D ALL SUPPORTING DETAILS WITH REGARD TO THE PURCHASE OF OLD GOLD AND OBTAINING THE PURE GOLD AFTER GETTING IT MELTED. TH EREFORE, IT CANNOT BE SAID THAT THE CLAIM OF THE APPELLANT OF WEIGHT LO SS AT 2.525% IS AS EXCESSIVE, EVEN THOUGH HE HAS ALLOWED THE WEIGHT LOSS AT 2%. IT MAY BE FURTHER SEEN THAT ALL THE DETAILS ARE METICULO USLY MAINTAINED BY THE APPELLANT WITH REGARD TO THE WEIGHT LOSS. THER EFORE, IT APPEARS TO ME THAT TREATING THE PART OF THE WEIGHT L OSS CLAIMED AS EXCESSIVE CANNOT BE JUSTIFIED. HENCE HAVING VERIFIED THE D ETAILS FURNISHED BY THE A.R. AND ALSO CONSIDERING THE SUBMISSIONS OF THE A.R. I AM OF THE VIEW THAT THE WEIGHT LOSS CLAIMED BY THE APPELLANT IS IN ORDER. HENCE, THE ADDITION MADE ON THIS COUNT IS DE LETED. 15. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH THE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A). TH ERE IS NO MATERIAL ON RECORD TO SHOW THAT THE CLAIM OF THE ASSESSEE OF WEIGHT LOSS AT 2.525% IS AS EXCESSIVE, EVEN THOUGH THE ASSESSING OFFICER HAS ALLOWED T HE WEIGHT LOSS AT 2%. IT SEEMS THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON ASSUMPTIONS AND ON ESTIMATE BASIS. IN FACT, THE ASSESSING OFFI CER HAS NOT BROUGHT ANY MATERIAL ON RECORD WHILE STATING THAT W EIGHT LOSS OF 0.525% IS EXCESSIVE. ON THE OTHER HAND, THE ASSESSEE WAS MAINTAININ G ALL SUPPORTING DETAILS WITH REGARD TO PURCHASE OF OLD GOLD AND WAS OBTAINING THE PURE GOLD AFTER GETTING IT MELTED. THUS, CONSIDER ING THE ENTIRE FACTS 7 AND CIRCUMSTANCES OF THE PRESENT CASE, IT CANNOT BE SAID THA T WEIGHT LOSS CLAIMED AT 2.525% BY THE ASSESSEE WAS EXCESSIVE IN ANY MANNE R. ACCORDINGLY, WE DISMISS GROUND NO.3 OF THE REVENUES APP EAL. 16. IN C.O.NO.71/AHD/2009, THE ASSESSEE HAS RAISED GROUND NO.2 WHICH READS AS UNDER: 2. THAT ON FACTS AND IN LAW, THE LEARNED CIT(A)-XI, HAS G RIEVOUSLY ERRED IN CONFIRMING THE DISALLOWANCE OF CCIDENT INSURANCE OF RS.33,061/-. 17. THE RELEVANT FACTS NOTED BY THE A.O. ARE AS UNDER: IT IS SEEN ON SCRUTINY OF FORM NO.3CD THAT THE AUDITOR S IN HIS REPORT IN FORM NO.3 CONSTRUCTION DIVISION AT COL. NO.1 7B HAS REMARKED THAT PARTNERS PERSONAL ACCIDENT INSURANCE PREMI UM IS DEBITED TO P&L ACCOUNT AND CLAIMED AS EXPENDITURES. THE INSURANCE PREMIUM PAID ON THE PERSONAL ACCIDENT POLICY OF THE PAR TNERS IS PERSONAL IN NATURE AND THE SAME IS NOT ALLOWABLE U/S 3 1(II) OR UNDER ANY OTHER PROVISIONS OF THE I T ACT THEREFORE THE EXPE NDITURE DEBITED TO P&L ACCOUNT ON ACCOUNT OF PREMIUM PAID FOR PERSONAL ACCIDENT INSURANCE OF PARTNERS WHICH AMOUNT TO RS.33,061/ IS DISALLOWED. 18. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE. 19. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH THE PARTIES, WE DO NOT FIND ANY MERIT IN THIS GROUND OF C.O. IT IS SEEN THAT INSURANCE PREMIUM PAID IS IN THE NAME OF ONE OF THE PARTNERS. THE INSURA NCE PREMIUM PAID ON THE PERSONAL INSURANCE POLICY OF THE PARTNER IS PERSON AL IN NATURE AND HENCE, THE SAME CANNOT BE ALLOWED. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE UPHOLD THE FINDIN GS OF THE CIT(A) ON THIS ISSUE AND REJECT THE GROUND. 8 20. IN THE RESULT, THE APPEAL IS DISMISSED WHILE THE C. O. OF THE ASSESSEE IS ALLOWED PARTLY, AS INDICATED ABOVE. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.8 .2009. SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED:28.8.2009 PSP* COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.