M/s. Meba Brass, Moradabad v. DCIT,

I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 1/1 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH E NEW DELHI BENCH E NEW DELHI BENCH E NEW DELHI BENCH E BEFORE SHRI I. P. BANSAL JUDICIAL MEMBER AND SHRI A K GARODIA ACCOUTANT MEMBER ITA NO. 459 460 461 /DEL/2009 (ASSESSMENT YEAR 2003-04 2004-05 & 2005-06) DCIT RANGE 1 VS. M/S. MEBA BRASS MORADABAD PANDIT NAGLA BY PASS MORADABAD. C.O. NO.33 34 35/DEL/2009 (ASSESSMENT YEAR 2003-04 2004-05 & 2005-06) M/S. MEBA BRASS VS. DCIT RANAGE 1 PANDIT NAGLA BY PASS MORADABAD MORADABAD (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AADFM6635Q APPELLANT BY: SHRI K. RAVI RAMCHANDRAN SR. DR RESPONDENT BY: SHRI K. SAMPATH ADV. ORDER ORDER ORDER ORDER PER BENCH: PER BENCH: PER BENCH: PER BENCH: 1. THESE ARE THREE APPEALS BY THE REVENUE AND THREE CROSS OBJECTIONS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 2004- 05 & 2005-06 WHICH RE DIRECTED AGAINST THREE SEPARA TE ORDERS OF CIT(A) BAREILLY ALL DATED 06.11.2008. FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS AND CROSS OBJECTIONS ARE DISPOSED OFF BY WAY OF THIS COMMON ORDER. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR T HE ASSESSMENT YEAR 2003-04 I.E. I.T.A. NO. 459/DEL/2009. 3. GROUNDS NOS. 1 4 ARE INTERCONNECTED WHICH READ AS UNDER: 1) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LA W AS WELL FACTS OF THE CASE IN TREATING THE AMOUNT OF ` 81 37 369/- AS BEING EXPORT TURNOVER OF THE ASSESSEE AFFECTED DURI NG THE ASSESSMENT YEAR 2003-04. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 2/2 2) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL AS IN THE FACT OF CASE IN TREATING THE SUM OF ` 81 37 369/- AS EXPORT TURNOVER THROUGH TO THE FINANCIAL YEAR ENDIN G 31.03.2003 IN SPITE OF THE FACT THAT BILL OF LADING IN RESPECT OF SUCH GOODS WERE ISSUED BY SHIPPING AUTHORITIES/COMP ANY AS A DATE BEYOND 31.03.2003. 3) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL AS IN FACT OF THE CASE WHILE IN ALLOWING CLAIM OF T HE ASSESSEE FOR ` 81 37 369/- AS ITS EXPORT TURNOVER ON THE BAS IS OF PROVISIONS OF CUSTOM DUTY ACT. WHILE ALLOWING CLAI M OF THE ASSESSEE HE FAILED TO APPRECIATE THAT CUSTOMS DUTY ACT DOES IN NO WAY SPECIFY ANY POINT OF TOME AS ON WHICH GOO DS CAN BE TERMED AS EXPORTED OUT OF INDIA. IT SIMPLY SAYS TH AT GOODS INTENDED TO BE EXPORTED OUT OF INDIA IS NOT A BANNE D ITEM AND THE CUSTOM DUTY ON SUCH GOODS IS ACTUALLY PAID. 4) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL AS IN THE FACT OF THE CASE IN ACCEPTING THE CLAIM O F THE ASSESSEE AS MENTIONED IN SL. NO.1-3 ABOVE AS ITS EX PORT TURNOVER IN SPITE OF THE FACT THAT GOODS UNDER CONS IDERATION AS ON THE DATE 31.03.2003 WAS EVEN NOT HANDED OVER TO SHIPPING COMPANIES FOR ITS TRANSPORTATION AND AS SUCH WAS LY ING AT PORT FOR WANT OF HANDING IT OVER FOR SHIPMENT. 4. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. ON PAGE 2 OF THE ASSESSMENT ORDER THAT ON SCRUTINY OF DETAILS IT WAS NOTED THAT ACCORDING TO THE BILL OF LADING THE EXP ORT SALE IN RESPECT OF VARIOUS INVOICES AMOUNTING TO ` 81 37 369/- WERE EXPORTED OUT OF INDIA DURING THE NEXT PREVIOUS YEAR. THE A.O. ASKE D THE ASSESSEE TO SHOW CAUSE WHY THE VALUE OF EXPORT INVOICE BE NOT E XCLUDED FORM EXPORT TURNOVER FOR THE PURPOSE OF CALCULATION OF D EDUCTION U/S 80HHC BECAUSE THE SAME DOES NOT FALL WITHIN THE DEF INITION OF EXPORT TURNOVER AND THE COST OF SUCH GOODS MAY NOT BE TREATED AS CLOSING STOCK BEING GOODS IN TRANSIT AT PORT. REPL Y WAS FILED BY THE ASSESSEE BEFORE THE A.O. BUT THE A.O. WAS NOT SATIS FIED. THE A.O. WORKED OUT DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC AFTER EXCLUDING THIS AMOUNT OF ` 81 37 369/- FROM THE DEC LARED EXPORT TURNOVER OF THE ASSESSEE. IN THIS MANNER THE A.O. REDUCED THE AMOUNT OF DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 8 0HHC. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A). LD. CIT(A) HAS HELD THAT IN HIS VIEW THE ACTION OF THE A.O. TO I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 3/3 EXCLUDE THE SAID AMOUNT OF EXPORT SALES FROM EXPORT TURNOVER WAS NOT JUSTIFIED. NOW THE REVENUE IS IN APPEAL BEFOR E US ON THIS ISSUE. 5. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). A QUERY WAS RAI SED BY THE BENCH FROM THE LD. D.R. THAT IF IT IS HELD THAT THE EXPOR T WAS NOT COMPLETE THEN IT HAS TO BE ACCEPTED THAT SALES WAS NOT COMPL ETE AND HENCE NOT ONLY EXPORT SALES BUT THE TOTAL SALES OF THE AS SESSEE HAS TO BE REDUCED BY THE SAME AMOUNT AND THE COST OF SUCH GOO DS LYING AT PORT OR ITS MARKET VALUE WHICHEVER IS LOWER HAS TO BE ADDED IN THE INCOME OF THE ASSESSEE AFTER EXCLUDING THE EXPORT S ALES PROCEEDS ON THIS ACCOUNT AND AS A RESULT NOT ONLY DEDUCTION AL LOWABLE TO THE ASSESSEE U/S 80HHC BUT ALSO THE GROSS TOTAL INCOME OF THE ASSESSEE WILL GO DOWN. IN THIS SITUATION THERE WILL BE NO IMPACT ON THE NET INCOME OF THE ASSESSEE IN THE PRESENT YEAR. IN REP LY LD. D.R. HAD NOTHING TO SAY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE OBJECTION OF THE A.O. IS THAT SINCE THE BILL OF LADING WAS ISSUED BY THE CUSTOM AUTHORITY IN THE NEXT YEAR TH E EXPORT WAS NOT COMPLETE IN THE PRESENT YEAR. AS AGAINST THIS THE BASIS OF THE ORDER OF LD. CIT(A) IS THAT SINCE THE GOODS ARE HANDED OV ER TO THE CUSTOM AUTHORITIES AND AFTER INSPECTION AND EXAMINATION OF THE GOODS THE SAME ARE SEALED IN THE CONTAINERS AT THE LEVEL OF C USTOM AUTHORITIES AT THE SITE OF THE PORT THE EXPORTER DOES NOT HAVE ANY CONTROL ON THE ACTUAL DATE OF SHIPMENT THROUGH SEA OR BY ANY OTHER ROUTE AND THEREFORE IN THE CONSIDERED VIEW OF THE CIT(A) TH E ACTION OF THE A.O. WAS NOT JUSTIFIED. WE HAVE NOTICED ONE MORE REASON THAT EVEN IF IT IS HELD THAT DEDUCTION IS NOT ALLOWABLE TO THE ASSESSE E U/S 80HHC IN THE PRESENT YEAR BECAUSE EXPORT WAS NOT COMPLETE IN THE PRESENT YEAR IN VIEW OF THE BILL OF LADING OF A DATE RELATI NG TO THE NEXT YEAR IN OUR CONSIDERED OPINION IT HAS TO BE HELD THAT N OT ONLY THE EXPORT WAS NOT COMPLETE BUT IN FACT EVEN THE SALES WAS NOT COMPLETE AND I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 4/4 THEREFORE THE SALE VALUE OF THESE GOODS CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE OF THE PRESENT YEAR AND ONLY STOCK VALUE OF SUCH GOODS TO THE EXTENT OF COST OR MARKET PRICE WH ICHEVER IS LOWER CAN BE CONSIDERED WHICH WILL RESULT INTO THE INCOME OF THE ASSESSEE BEING REDUCED BY THE AMOUNT OF DIFFERENCE BETWEEN T HE SALE PRICE AS PER THE ASSESSEE AND THE VALUE OF CLOSING STOCK ON THE BASIS OF COST OR MARKET PRICE WHICHEVER IS LOWER. IF THIS I S DONE THEN ALSO THERE WILL BE NO IMPACT ON THE TOTAL INCOME OF THE ASSESSEE BECAUSE ON ONE SIDE THE GROSS TOTAL INCOME WILL GO DOWN AND ON THE OTHER SIDE THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 8 0HHC WILL GO DOWN. UNDER THESE FACTS WE FEEL THAT NO INTERFERE NCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. AS PER THE DEFINITION OF EXPORT TURNOVER AS PER EXPLANATION (B) TO SECTION 80HHC AL SO WHAT IS REQUIRED IS THAT THE AMOUNT OF SALE PRICE IS RECEIV ED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE PRESCRIB ED TIME ON ACCOUNT OF GOODS EXPORTED OUT OF INDIA AND CUSTODY OF GOODS HAS BEEN HANDED OVER BY THE ASSESSEE TO THE CUSTOM AUTH ORITIES IN THE PRESENT YEAR AND ONLY THE BILL OF LADING WAS ISSUED BY THE CUSTOM AUTHORITIES IN THE NEXT YEAR. UNDER THESE FACTS T HE QUESTION IS WHETHER THE EXPORT SALES IS OF THE CURRENT YEAR OR IS OF NEXT YEAR. WE HAVE SEEN THAT IN OUR VIEW AS PER ABOVE DISCUSS ION IT WILL NOT MAKE ANY IMPACT BECAUSE IF WE HOLD THAT IT IS EXPOR T SALES OF THE NEXT YEAR THEN ALSO ONLY THE VALUE OF STOCK OF THE SE GOODS HAS TO BE CONSIDERED IN THE PRESENT YEAR AND NOT ITS SALE VAL UE FOR DETERMINING THE INCOME OF THE ASSESSEE IN THE PRESENT YEAR AND IT WILL RESULT INTO LOWERING OF GROSS TOTAL INCOME BY THE SAME AMOUNT B Y WHICH THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC WILL BE REDUCED. HENCE WE FEEL THAT WHEN THE CUSTODY OF GOODS WAS H ANDED OVER BY THE ASSESSEE TO THE CUSTOM AUTHORITIES AND EXPORT H AS ACTUALLY TAKEN PLACE EITHER IN THIS YEAR OR IN THE NEXT YEAR AFTER A FEW DAYS AFTER EXPIRY OF THE PRESENT YEAR FOR NO FAULT OF T HE ASSESSEE SUCH TRANSACTION CAN BE CONSIDERED AS AN EXPORT OF THE P RESENT YEAR. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 5/5 HENCE WE DO NOT FIND ANY REASON TO INTERFERE IN TH E ORDER OF LD. CIT(A) ON THIS ISSUE. THESE GROUNDS OF THE REVENU E ARE REJECTED. 7. THE NEXT GROUND OF THE REVENUES APPEAL (GROUND NO.5) IS REPRODUCED HERE AS UNDER: 5. WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LA W AS WELL AS IN THE FACT OF THE CASE BENEFIT OF DEDUCTION U/S 80 HHC ON 90% ` 3 68 828/- REPRESENTING AMOUNT OF DEPB INSPIRE OF THE FACT THAT AS PER THE AMENDED PROVISIONS OF SECTION 80HHC HAVING RETROSPECTIVE EFFECT BENEFIT SO ALLOWED IS NOT AVAI LABLE TO THE ASSESSEE WHERE EXPORT TURNOVER EXCEEDS ` TEN CRORE AND THE ASSESSEES EXPORT TURNOVER WAS EXCEEDING THIS AMOUN T. AS UNMENTIONED PARA 2(A) OF THE STATEMENT OF FACT ENCL OSED IT MAY BE SEEN THAT EVEN AFTER EXCLUDING THE AMOUNT OF ` 81 37 369/- OUT OF THE EXPORT TURNOVER EXPORT TURNO VER STOOD AT ` 12 15 62 337/-. 8. REGARDING THIS ISSUE IT WAS SUBMITTED BY THE LD . D.R. THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF THE JUDGMENT OF HON'BLE HIGH COURT OF BOMB AY RENDERED IN THE CASE OF KALPTARU COLOUR & CHEMICALS VS CIT AS R EPORTED IN 328 ITR 451. AS AGAINST THIS LD. A.R. SUPPORTED THE O RDER OF LD. CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE ARE IN AGREEMENT WITH THE LD. D.R. THAT THIS ISSUE IS REQU IRED TO BE RESTORED BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION I N THE LIGHT OF JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY RENDERED I N THE CASE OF KALPTARU COLOUR & CHEMICALS VS CIT (SUPRA). ACCORD INGLY WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RES TORE BACK THE MATTER TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CAS E OF KALPATARU (SUPRA) AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. WE WOULD LIKE TO POINT OUT THAT AS PER T HIS JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IT WAS HELD THAT THE ENTIRE SALE PROCEEDS OF DEPB IS TO BE CONSIDERED AS PROFIT ON S ALE OF DEPB FOR EXCLUSION OF 90% THEREOF FROM THE PROFIT OF BUSINES S AND THERE IS NO COST INCURRED FOR OBTAINING THESE DEPB AND THEREFOR E THE ENTIRE SALE PROCEEDS OF DEPB IS PROFIT ON SALE OF DEPB. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 6/6 10. IN THE RESULT THIS APPEAL OF THE REVENUE STAND S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR T HE ASSESSMENT YEAR 2004-05 I.E. I.T.A. NO. 460/DEL/200 9. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL ARE AS UNDER: 1) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LA W AS WELL FACT OF THE CASE IN T5EATING THE AMOUNT OF ` 2 34 07 874 /- AS BEING EXPORT TURNOVER OF THE ASSESSEE AFFECTED DURING THE ASSESSMENT YEAR 2004-05. 2) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL AS IN THE FACT OR CASE IN TREATING THE SUM OF ` 2 3 4 874/- AS EXPORT TURNOVER THROUGH TO THE FINANCIAL YEAR ENDIN G 31.03.2004 IN SPITE OF THE FACTS THAT BILL OF LADIN G IN RESPECT OF SUCH GOODS WERE ISSUED BY SHIPPING AUTHORITIES/COMP ANY AS A DATE BEYOND 31.03.2004. 3) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL AS IN THE FACT OF THE CASE WHILE IN ALLOWING CLAIM OF THE ASSESSEE FOR `2 34 07 874/- AS ITS EXPORT TURNOVER ON THE BASIS OF PROVISIONS OF CUSTOM DUTY ACT. WHILE ALLOWING C LAIM OF THE ASSESSEE HE FAILED TO APPRECIATE THAT CUSTOMS DUTY ACT DOES IN NO WAY SPECIFY ANY POINT OF TOME AS ON WHICH GOO DS CAN BE TERMED AS EXPORTED OUT OF INDIA. IT SIMPLY SAYS TH ATS GOODS INTENDED TO BE EXPORTED OUT OF INDIA IS NOT A BANNE D ITEM AND THE CUSTOM DUTY ON SUCH GOODS IS ACTUALLY PAID. 4) WHETHER THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL AS IN THE FACT OF THE CASE IN ACCEPTING THE CLAIM O F THE ASSESSEE AS MENTIONED IN SL. NO.1 TO 3 ABOVE AS ITS EXPORT TURNOVER IN SPITE OF THE FACT THAT GOODS UNDER CONS IDERATION AS ON THE DATE 31..03.2004 WAS EVEN NOT HANDED OVER TO SHIPPING COMPANIES FOR ITS TRANSPORTATION AND AS SU CH WAS LYING AT PORT FOR WANT HANDING IT OVER FOR SHIPMENT . 5) ORDER OF THE A.O. IN RESPECT OF GROUNDS OF APPEA L TAKEN AS ABOVE MAY BE RESTORED BY SETTING ASIDE THE ORDER OF THE CIT(A) BAREILLY IN THIS RESPECT. 12. IT WAS AGREED BY BOTH THE SIDES THAT ONLY ONE I SSUE IS INVOLVED IN THE PRESENT APPEAL OF THE REVENUE WHICH IS IDEN TICAL TO THE ISSUE INVOLVED AS PER GROUND 1-4 OF THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2003-04 AND HENCE IN THE PRESENT Y EAR ALSO THIS ISSUE CAN BE DECIDED ON SIMILAR LINE. IN THE ASSES SMENT YEAR 2003- 04 WE HAVE CONFIRMED THE ORDER OF LD. CIT(A) ON TH IS ISSUE AND HENCE IN THE PRESENT YEAR ALSO WE CONFIRM THE ORDE R OF LD. CIT(A) ON I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 7/7 THIS ASPECT. THEREFORE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC HAS TO BE WORKED OUT WITHOUT EXCLUDING THE EX PORT TURNOVER OF ` 2 34 07 974/- WHICH IS THE DISPUTED AMOUNT OF EXPORT TURNOVER BECAUSE IT WAS ALLEGED BY THE A.O. THAT THIS IS NOT EXPORT TURNOVER OF THE PRESENT YEAR FOR THE REASON THAT BILL OF LADING IS OF NEXT YEAR. WE ALSO FIND THAT IN THE ASSESSMENT ORDER THE A.O. HA S RECASTED THE TRADING CUM P & L ACCOUNT OF THE ASSESSEE. HE HAS ADDED BACK THE DISPUTED AMOUNT OF EXPORT TURNOVER OF `81 37 369/- OF ASSESSMENT YEAR 2003-04 IN THE PRESENT YEAR AND HE HAS EXCLUDE D THE DISPUTED AMOUNT OF EXPORT TURNOVER OF THE PRESENT YEAR I.E. ` 2 34 07 874/- AND HE HAS INCLUDED THE STOCK VALUE OF SUCH TURNOVE R OF THE PRESENT YEAR AFTER EXCLUDING THE GP THEREOF @13.40%. HE HA S ALSO MADE SIMILAR ADJUSTMENT REGARDING DEPB BENEFIT ETC. IN C ONNECTION OF DISPUTED EXPORT TURNOVER OF THE PRECEDING YEAR AND OF THE PRESENT YEAR. AS PER OUR DECISION IN ASSESSMENT YEAR 2003- 04 AND IN THE PRESENT YEAR I.E. EXPORT TURNOVER DECLARED BY THE A SSESSEE SHOULD BE ACCEPTED WE DIRECT THE A.O. TO RECOMPUTE THE IN COME OF THE ASSESSEE AS WELL AS THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC BY IGNORING THE RECASTED TRADING P & L ACCOUN T IN THE ASSESSMENT ORDER AND ON THE BASIS OF THE P & L ACCO UNT SUBMITTED BY THE ASSESSEE AFTER MAKING SUCH ADJUSTMENT WHICH ARE PERMISSIBLE IN LAW WITHOUT MAKING ANY ADJUSTMENT RE GARDING THE DISPUTED EXPORT TURNOVER OF ASSESSMENT YEAR 2003-04 I.E. `81 37 369/- AND ALSO REGARDING DISPUTED EXPORT TUR NOVER OF THE PRESENT YEAR OF `2 34 07 874/- AND CONSEQUENTIAL DE PB AMOUNT. WITH THESE OBSERVATIONS WE CONFIRM THE ORDER OF LD . CIT(A) AND THE A.O. IS DIRECTED TO GIVE EFFECT TO THE ABOVE DIRECT IONS. 13. IN THE RESULT THIS APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 14. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR T HE ASSESSMENT YEAR 2005-06 I.T.A. NO. 461/DEL/2009. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 8/8 1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) BAREILLY WAS JUSTIFIED IN LAW AS WELL A S FACT IN TREATING THE ABOUT OF ` 2 34 07 874/- TOWARDS TURNO VER FOR ASSESSMENT YEAR 2004-05 WHILE THE SAME PERTAINED TO ASSESSMENT YEAR 2005-06 AS THE GOODS WORTH THAT AMO UNT WERE EXPORTED OUT OF INDIA DURING THE PREVIOUS YEAR S RELEVANT TO ASSESSMENT YEAR 2005-06. 2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT(A) WAS RIGHT IN HOLDING THAT INCOME IN FORM OF DUTY DRAWBACK OF `11 75 244/- INCIDENTAL TO THE EXPORTS OF ` 2 74 07 874/- PERTAINED TO ASSESSMENT YEAR 2004-05 AND NOT TO ASSESSMENT YEAR 2005-06 AS ASSESSED BY THE A.O. 3) SINCE THE RELIEF ALLOWED IN ASSESSMENT YEAR 2005 -06 IS CONSEQUENTIAL TO THE APPEAL ORDER FOR ASSESSMENT YE AR 2004- 05 FOR WHICH APPEAL TO ITAT HAS BEEN FILED A CONSE QUENTIAL ORDER MAY BE PASSED IN VIEW OF THE ORDER TO BE PASS ED BY THE HONBLE ITAT IN DEPARTMENTAL APPEAL FOR ASSESSMENT YEAR 2004-05. 4) THE ORDER OF THE A.O. IN RESPECT OF THE ABOVE GR OUNDS OF APPEAL MAY BE RESTORED AND THE ORDER OF THE CIT(A) MAY BE SET ASIDE. 15. THE BRIEF FACTS OF THE CASE ARE THAT CERTAIN AD JUSTMENTS WERE MADE BY THE A.O. IN THE ASSESSMENT ORDER FOR THE AS SESSMENT YEAR 2004-05 AS PER WHICH HE HAS REDUCED THE INCOME OF T HE ASSESSEE IN ASSESSMENT YEAR 2004-05 TO THE EXTENT OF ` 54 82 29 3/- ON THIS BASIS THAT EXPORT SALES OF ` 2 34 07 874/- ALTHOUGH CLAIMED BY THE ASSESSEE IN ASSESSMENT YEAR 2004-05 IS RELATED TO A SSESSMENT YEAR 2005-06. SINCE THIS MUCH INCOME WAS REDUCED BY THE A.O. FROM THE INCOME OF THE ASSESSEE IN ASSESSMENT YEAR 2004-05 THE SAME WAS ADDED BY HIM IN THE PRESENT YEAR. AGAINST THE SAME THE ASSESSEE WAS IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THE ADDITION IN THE PRESENT YEAR AND NOW THE REVENUE IS IN APPEAL BEFO RE US. 16. IT WAS AGREED BY BOTH THE SIDES THAT IN THE PRE SENT YEAR THE ISSUE INVOLVED IS CONSEQUENTIAL TO THE ISSUE INVOLV ED IN THE ASSESSMENT YEAR 2004-05. IN THE ASSESSMENT YEAR 20 04-05 WE HAVE ALREADY HELD THAT INCOME OF THE ASSESSEE HAS T O BE ASSESSED BY THE A.O. ON THE BASIS OF P & L ACCOUNT SUBMITTED BY THE ASSESSEE AND THE RECASTED P & L ACCOUNT IN THE ASSESSMENT OR DER HAS TO BE IGNORED. CONSEQUENTLY THE INCOME WHICH WAS REDUC ED BY THE A.O. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 9/9 IN ASSESSMENT YEAR 2004-05 WILL STAND INCREASED IN THAT YEAR ITSELF AND HENCE NO FURTHER ADDITION IS REQUIRED TO BE MAD E IN THE PRESENT YEAR. ACCORDINGLY WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) IN THE PRESENT YEAR THE APPEAL OF THE REVENUE IS DI SMISSED. 17. NOW WE TAKE UP THE CO FILED BY THE ASSESSEE IN ASSESSMENT YEAR 2003-04 C.O. NO.34/DEL/2009. GROUND NO.1 OF T HE C.O. IS AS UNDER: 1.(A) THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE LD. CIT(A) HAS ERRED IN LAW TO CONFIRM THE ADDITION S OF: I) 153 455/- ON ACCOUNT OF DUTY DRAWBACK IN RESPECT OF EXPORT INVOICES NO.1848 1850 & 1928 II) ` 38 761/- ON ACCOUNT OF DEPB IN RESPECT OF EXP ORT INVOICE NO.1687. BEFORE CONFIRMING ADDITIONS LD. CIT(A) HAS NOT CON SIDERED TO THE FACTS THAT INVOICE NO.1687 1848 & 1850 WERE NO N CLAMING INVOICES AND NO INCENTIVE WAS NEVER CLAIMED OR RECE IVED THEREON. UNCLAIMED ORIGINAL DOCUMENTS WERE PRODUCED BEFORE L D. LOWER AUTHORITIES WITHOUT MAKING ANY CLAIM APPELLAN T WAS NOT UNDER OBLIGATION TO SHOW ANY RECEIPTS IN RESPECT OF SUCH EXPORT SALES. (B) THAT BECAUSE THE INCENTIVE AMOUNT ON INVOICE NO .1928 DATED 31.3.2003 WAS NOT CLEAR IT WAS THE INVOICE O F LAST DAY OF ACCOUNTING YEAR THEREBY NO INCENTIVE WAS ACCOUNTED FOR IN THIS ACCOUNTING YEAR BUT THE SAME HAS DULY CREDITED ON ITS RECEIPT ON 4.11.2004 AT `48922/-. THEREFORE NO FURTHER ADDITION SHOULD BE MADE IN THI S YEAR OR LD. A.O. BE DIRECTED TO REDUCE THE INCOME OF SUBSEQ UENT YEAR FROM SUCH RECEIPTS. 18. REGARDING GROUND NO.1(A) IT WAS SUBMITTED BY T HE LD. A.R. THAT LD. CIT(A) HAS NOT CONSIDERED THE IMPORTANT FA CTUAL ASPECT THAT NO EXPORT INCENTIVE WAS CLAIMED OR RECEIVED WITH RE GARD TO THREE EXPORT INVOICES NO.1687 1848 AND 1850. REGARDING INVOICE NO.1928 IT WAS SUBMITTED THAT THE EXPORT INCENTIVE REGARDING THIS INVOICE WAS REALIZED ON 4.11.2004 AT ` 48 922/- AND THE SAME WAS ACCOUNTED FOR IN THAT YEAR BECAUSE THE INVOICE NO.1 928 IS DATED 31.03.2003 AND SINCE THIS INVOICE WAS OF LAST DATE OF THE ACCOUNTING YEAR NO INCENTIVE WAS ACCOUNTED FOR IN THE PRESENT YEAR. IT IS SUBMITTED THAT FOR THIS REASON THE ADDITION UPHELD BY THE LD. CIT(A) I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 10/10 OF `53 455/- AND `38 761/- SHOULD BE DELETED. LD. D.R. SUPPORTED THE ORDER OF LD. CIT(A). 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THESE TWO ADDITIONS OF `53 455/- AND `38 76 1/- WERE UPHELD BY THE LD. CIT(A) ON THIS BASIS THAT SINCE THE ASSE SSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THESE EXPORT INCEN TIVES ON ACCOUNT OF DEPB OR DUTY DRAWBACK SHOULD HAVE BEEN A CCOUNTED FOR BY THE ASSESSEE IN THE PRESENT YEAR ITSELF. WE FIN D THAT WITH REGARD TO INVOICE NO.1928 DATED 31.03.2003 FOR WHICH DUTY DRAWBACK WAS ACTUALLY RECEIVED BY THE ASSESSEE OF ` 48 922/- TH ERE IS NO DISPUTE THAT IT WAS RECEIVED BY THE ASSESSEE ALTHOUGH NOT I N THE PRESENT YEAR. HENCE TO THIS EXTENT WE DO NOT FIND ANY RE ASON TO INTERFERE IN THE ORDER OF LD. CIT(A) BECAUSE ADMITTEDLY THE ASS ESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE THIS EXPORT INCENTIVE WAS REQUIRED TO BE CONSIDERED IN THE PRESENT YEAR I TSELF. REGARDING REMAINING 3 INVOICES NOS.1687 DEPB RECEIPT OF `38 761/- INV. NO.1948; DUTY DRAWBACK `1 165/- AND INV. NO.1850 D UTY DRAWBACK `3 368/- WE FIND THAT IT IS THE CLAIM OF THE ASSES SEE BEFORE US THAT SUCH EXPORT INCENTIVE WITH REGARD TO THESE THREE IN VOICES WAS NEVER CLAIMED OR RECEIVED. IF IT IS A FACT THAT NO SUCH EXPORT INCENTIVE WAS CLAIMED OR RECEIVED BY THE ASSESSEE THEN EVEN UNDE R MERCANTILE SYSTEM OF ACCOUNTING NO SUCH ADDITION CAN BE MADE FOR AN INCOME WHICH WAS NEVER RECEIVED OR EARNED BY THE ASSESSEE. BUT THIS CONTENTION OF THE ASSESSEE HAS TO BE CROSS-CHECKED AND HENCE WE RESTORE BACK THIS ISSUE TO THE FILE OF THE A.O. FOR A FRESH DECISION REGARDING THESE 3 INVOICES. IF THE ASSESSEE CAN ES TABLISH THAT NO EXPORT INCENTIVE WAS EVER CLAIMED OR RECEIVED BY TH E ASSESSEE WITH REGARD TO THESE THREE INVOICES THEN NO SUCH ADDITIO N SHOULD BE MADE. WE WOULD LIKE TO MAKE IT CLEAR THAT THE BURD EN IS ON THE ASSESSEE TO ESTABLISH THAT NO SUCH EXPORTS INCENTIV E WAS EVER I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 11/11 CLAIMED OR RECEIVED BY THE ASSESSEE. GROUND NO.1 I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 20. GROUND NO.2 OF THE CO IS AS UNDER: 2) THAT LD. CIT(A) HAS ERRED IN LAW TO CONFIRM THE DISALLOWANCES OF DEPRECIATION CLAIMED AT `90 480/- & ` 83 970/- ON ADDITIONS MADE UNDER THE HEAD OF COMPUT ER AND MACHINERY ACCOUNTS RESPECTIVELY. PURCHASES WERE FULLY VOUCHED AND VERIFIABLE PAYMENT S WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. GOODS WERE PUT TO USE FOR BUSINESS PURPOSES DURING ACCOUNTING YEAR JUST A FTER PURCHASES. THEREFORE THERE IS NO JUSTIFICATION TO DISALLOW DE PRECIATION THEREON. 21. REGARDING THIS ISSUE IT IS SUBMITTED BY THE LD . A.R. THAT SINCE THE PAYMENTS WERE MADE THROUGH A/C PAYEE CHEQUES AN D GOODS WERE PUT TO USE FOR BUSINESS PURPOSES DURING THE PR ESENT YEAR THERE IS NO JUSTIFICATION TO DISALLOW DEPRECIATION THEREO N. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE LD. CIT(A) ON PAGE 12OF HIS ORDER THAT THE A.O. HAS STATED IN THE ASSESSMENT OR DER THAT ASSESSEE HAD SHOWN ADDITION OF ` 1 50 800/- ON ACCO UNT OF PURCHASE OF COMPUTER AND CLAIMED DEPRECIATION ACCORDINGLY. BUT THIS CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE A.O. ON THIS BAS IS THAT RELEVANT BILLS WERE NOT FURNISHED BY THE ASSESSEE AND ACCORD INGLY HE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRECIATI ON ON COMPUTER TO THE EXTENT OF 60% WHICH COMES TO ` 90 480/-. IT IS ALSO NOTED BY THE LD. CIT(A) THAT THE ASSESSEE DID NOT SUBMIT THE BILL FOR ADDITION OF ` 83 970/- ALSO OF VARIOUS MACHINES PURCHASED UN DER BLOCK OF ASSETS AND FORV THIS ALSO THE A.O. MADE DISALLOWAN CE OF CONSEQUENTIAL DEPRECIATION OF ` 20 992/- BEING 25% OF ` 83 970/-. WE FIND THAT ASSESSEE HAS GIVEN NAMES OF SUPPLIES O F THESE ITEMS I.E. COMPUTER AS WELL AS OTHER MACHINERY ITEMS. IF THE ORIGINAL BILLS WERE MISPLACED THE ASSESSEE COULD HAVE OBTAINED DU PLICATE INVOICE I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 12/12 FROM THEIR SUPPLIERS BUT SINCE IT WAS NOT DONE IT CANNOT BE ACCEPTED THAT THE PAYMENTS MADE BY THE ASSESSEE TO THESE PAR TIES WERE ON ACCOUNT OF PURCHASE OF COMPUTER/EQUIPMENTS AND HENC E NO DEPRECIATION CAN BE ALLOWED IN THE ABSENCE OF ANY E VIDENCE REGARDING PURCHASE OF COMPUTER/EQUIPMENT. WE THER EFORE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CI T(A) ON THIS ISSUE. GROUND NO.2 OF THE C.O. IS REJECTED. 23. GROUNDS NOS. 3 &4 OF THE C.O. ARE INTERCONNECTE D WHICH ARE AS UNDER: 3) THAT LD. CIT(A) HAS NO JUSTIFICATION TO SUSTAIN ED DISALLOWANCE ON ACCOUNT OF CAR RUNNING & MAINTENANC E EXPENSES. DISALLOWANCES HAVE MADE SIMPLY UPON PRESUMPTION AND SURMISES WITHOUT POINTING ANY AMOUN T OF PERSONAL NATURE WHICH HAS DEBITED IN THE BOOKS OF THE FIRM. 4) THAT LD. CIT(A) HAS ERRED IN LAW TO CONFIRM DISA LLOWANCES OF CAR DEPRECIATION MADE AT `34 463/- BY APPLYING S ECTION 38(2) WHILE SECTION 38(2) IS NOT APPLICABLE FOR CAR DEPRECIATION. BEFORE CONFIRMING DISALLOWANCES LD. CIT(A) HAS NOT CONSIDERED TO THE FACTS THAT DEPRECIATION IS ALLOWABLE AT FULL RATE EVEN IF VEHICLE RUNS FOR A SINGLE DAY FOR BUSINESS PURPOSES AT ANY TIME DURING ACCOUNTING YEAR. THEREFORE THERE IS NO JUSTIFICATION TO DISALLOW PRO PORTIONATE DEPRECIATION FOR CAR RUNNING. IT IS FURTHER TO SUB MIT THAT THERE IS NO NEXUS BETWEEN EXPENSES INCURRED FOR RUNNING O F ANY VEHICLE AND DEPRECIATION ALLOWABLE THEREON UNDER TH E PROVISIONS OF THE ACT. 24. THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. M ADE DISALLOWANCE TO THE EXTENT OF 10% OUT OF VEHICLE RU NNING EXPENSES AND DEPRECIATION ON CAR ON THIS BASIS THAT SINCE TH E ASSESSEE HAS NOT FURNISHED ANY LOG BOOK REGARDING RUNNING OF CAR PERSONAL USAGE OF CAR CANNOT BE RULED OUT. LD. CIT(A) HAS CONFIRM ED THIS DISALLOWANCE AND NOW THE ASSESSEE IS IN APPEAL THR OUGH THIS C.O. 25. IT IS SUBMITTED BY THE LD. A.R. THAT NO SUCH DI SALLOWANCE ON THE BASIS OF PERSONAL USE IS JUSTIFIED. REGARDING DISALLOWANCE OF DEPRECIATION ON MOTORCAR IT IS SUBMITTED THAT SECT ION 38(2) IS NOT APPLICABLE FOR CAR DEPRECIATION BECAUSE MOTORCAR IS NOT PLANTS & MACHINERY. LD. D.R. SUPPORTED THE ORDER OF AUTHORIT IES BELOW. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 13/13 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGA RDING DISALLOWANCE OF 10% OUT OF VEHICLE RUNNING EXPENSES WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) BECAUSE NO LOG BOOK WAS MAINTAINED BY THE ASSESSEE AND HENCE PERSO NAL USAGE OF THE CAR CANNOT BE RULED OUT. THE ASSESSEE IS AN AO P AND NO EVIDENCE HAS BEEN FURNISHED BEFORE US TO SHOW THAT ANY CAR WAS MAINTAINED IN THE PERSONAL CAPACITY BY THE MEMBERS OF THE AOP AND HENCE WE DO NOT FIND ANY REASON TO INTERFERE IN TH E ORDER OF LD. CIT(A) ON THIS ISSUE. DISALLOWANCE OF 10% OF EXPEN SES IS NOT EXCESSIVE ALSO. REGARDING DEPRECIATION ON MOTORCAR IT IS SUBMITTED BY THE LD. A.R. THAT SECTION 38(2) IS NOT APPLICABL E TO MOTOR CAR BUT WE ARE NOT IN AGREEMENT WITH HIM BECAUSE ADMITTEDLY IN THE DEPRECIATION SCHEDULE DEPRECIATION RATE FOR MOTOR CAR IS UNDER THE HEADING OF PLANT & MACHINERY AND HENCE IT CANNOT B E ACCEPTED THAT MOTOR CAR IS NEITHER PLANT NOR MACHINERY. IN OUR C ONSIDERED OPINION THE PROVISIONS OF SECTION 38(2) ARE APPLICABLE TO M OTOR CAR ALSO. WE HOLD ACCORDINGLY. THESE GROUNDS OF ASSESSEES CROS S OBJECTION ARE ALSO REJECTED. 27. GROUND NO.5 OF THE C.O. IS AS UNDER: THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN LAW TO CONFIRM THE DISALLOWANCE S OF `22 772/- & `46 029/- OUT OF FOREIGN TOUR & FOREIGN EXHIBITION EXPENSES RESPECTIVELY. DISALLOWANCES HAVE MADE SIM PLY UPON PRESUMPTION AND SURMISES WITHOUT POINTING OUT ANY INADMISSIBLE AMOUNT. FURTHER BEFORE CONFIRMING DIS ALLOWANCES TO THE DECISIONS OF HONORABLE HIGHER COURTS WHICH W ERE PLACED BEFORE HIM. 28. THE BRIEF FACTS OF THE CASE ARE THAT OUT OF FOR EIGN TRAVEL EXPENSES OF ` 2 27 724/- THE A.O. MADE DISALLOWANC E OF ` 22 772/- BEING 10% OF SUCH EXPENSES. THIS DISALLOWANCE WAS MADE BY THE A.O. ON THIS BASIS THAT SOME ELEMENT OF PERSONAL EX PENSES DURING FOREIGN TOUR IS ALWAYS THERE. IN ADDITION TO THIS IT IS ALSO NOTED BY THE A.O. THAT OUT OF EXPENSES ON ACCOUNT OF FOREIGN EXHIBITION OF ` 19 86 640/- THE ASSESSEE HAS INCURRED ` 9 20 585/- ON ACCOUNT OF I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 14/14 FOREIGN CURRENCY AND ON THE SAME LOGIC OF SOME PERS ONAL EXPENSE HE DISALLOWED 10% I.E. ` 92 058/-. LD. CIT(A) REDU CED IT BY 50% BUT CONFIRMED THE DISALLOWANCE IN FULL THAT OF FOREIGN TRAVEL EXPENSES. NOW THE ASSESSEE HAS RAISED THIS ISSUE BEFORE US B Y WAY OF C.O. THE LD. A.R. SUBMITTED THAT NO SUCH DISALLOWANCE ON THE BASIS OF PERSONAL USE IS JUSTIFIED. RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF MIDLAND INTERNATIO NAL VS DCIT 112 TTJ 210 (DEL.) AND IN THE CASE OF ACIT VS M TECH AU TO LTD. 112 TTJ 455 (DEL.). LD. D.R. SUPPORTED THE ORDER OF LD. CI T(A). 29. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT NO DETAIL HAS BEEN FURNISHED B Y THE ASSESSEE REGARDING EXPENSES OUT OF FOREIGN EXCHANGE OF ` 2 2 7 724/- AND ` 9 20 588/- USED BY THE ASSESSEE IN RESPECT OF FOREI GN TRAVEL AND FOREIGN EXHIBITION. IN THE ABSENCE OF ACTUAL DETAI LS OF THESE EXPENSES OUT OF FOREIGN CURRENCY THE A.O. COULD NO T POINT OUT THE EXACT AMOUNT OF PERSONAL EXPENSES AND UNDER THESE F ACTS HE IS LEFT WITH NO OPTION BUT TO MAKE AN ESTIMATED DISALLOWANC E. 30. REGARDING TWO TRIBUNAL DECISION CITED BY THE L D. A.R. WE FIND THAT THESE JUDGEMENTS ARE OF NO HELP TO THE ASSESSE E BECAUSE THE FACTS ARE DIFFERENT. THE TRIBUNAL DECISION RENDERE D IN THE CASE OF MIDLAND INTERNATIONAL VAS DCIT 112 TTJ 210 IS NOT A PPLICABLE IN THE PRESENT CASE FOR THE REASON THAT THIS IS A LIMITED COMPANY AND BECAUSE OF THIS REASON IT WAS HELD BY THE TRIBUNAL IN THAT CASE THAT DISALLOWANCE FOR PERSONAL USE IN CASE OF A COMPANY IS NOT SUSTAINABLE BY FOLLOWING THE JUDGEMENT OF GUJARAT H IGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGINEERING C O. 253 ITR 749 (GUJ.). IN THE PRESENT CASE ASSESSEE IS NOT A LIM ITED COMPANY AND HENCE THIS TRIBUNAL DECISION IS OF NO HELP IN THE P RESENT CASE. SIMILARLY ANOTHER TRIBUNAL DECISION CITED BY THE L D. A.R. I.E. ACIT VS M. TECH AUTO LTD. 112 TTJ 4455 IS ALSO RENDERED IN THE CASE OF A COMPANY. MOREOVER IT HAS BEEN OBSERVED BY THE TRI BUNAL IN PARA 19 I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 15/15 OF THIS ORDER THAT THE ADDITION HAS BEEN MADE BY TH E A.O. WITHOUT POINTING OUT ANY PARTICULAR VOUCHER THE EXPENDITUR E OF WHICH WAS UNRELATED TO THE BUSINESS OF THE ASSESSEE. HENCE T HIS IS NOT THE FACT OF THIS CASE AND PROPER DETAILS WERE NOT FURNISHED BY THE ASSESSEE WHEREAS IN THE PRESENT CASE THE REQUIRED DETAILS R EGARDING EXPENSES OUT OF FOREIGN CURRENCY HAS NOT BEEN FURNI SHED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW OR EVEN BEFOR E US AND HENCE THIS TRIBUNAL DECISION IS ALSO OF NO HELP TO THE PR ESENT CASE. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. THIS G ROUND OF C.O. IS ALSO REJECTED. 31. THE REMAINING GROUND OF THE C.O. IS AS UNDER: WITHOUT PREJUDICE TO WHAT HAS BEEN SAID ABOVE APPE LLANTS APPEAL IS NOT TENABLE ON THE FOLLOWING GROUNDS: I) IT HAS NOT BEEN FILED ON PRESCRIBED FORM 36 II) GROUNDS OF APPEAL HAVE NOT FILED WITH MEMO OF APPEAL III) AS PER DEFICIENCY MARKED AT THE TIME OF FILING DATE OF SERVICE OF ORDER APPEAL AGAINST WHICH HAS FILED WA S NOT MENTIONED IN COL. NO.9 OF APPEAL MEMO. IV) THERE IS FALSE VERIFICATION ON APPEAL MEMO. IT HAS VERIFIED ON 22 ND OCTOBER 2008 WHILE THE FIRST APPEAL ORDER HAS PASSED ON 6 TH NOVEMBER & HAS SERVED ON 8 TH DECEMBER 2008. 32. THIS GROUND WAS NOT PRESSED BY THE LD. A.R. AND HENCE THE SAME IS REJECTED AS NOT PRESSED. 33. IN THE RESULT C.O. FILED BY THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 34. NOW WE TAKE UP C.O. OF THE ASSESSEE FOR THE AS SESSMENT YEAR 2004-05 I.E. C.O. NO.33/DEL/2009. THE GROUNDS RAIS ED BY THE ASSESSEE IN THE C.O. ARE AS UNDER: 1) THAT LD. CIT(A) HA NO JUSTIFICATION TO SUSTAINE D DISALLOWANCE ON ACCOUNT OF CAR RUNNING & MAINTENANC E EXPENSES. DISALLOWANCES HAVE MADE SIMPLY UPON PRESU MPTION AND SURMISES WITHOUT SPECIFYING ANY AMOUNT WHICH I S OF PERSONAL NATURE BUT DEBITED IN THE BOOKS OF THE FIR M. 2) THAT LD. CIT(A) HAS ERRED IN LAW TO CONFIRM DISA LLOWANCE OF CAR DEPRECATION MADE AT ` 38 285/- BY APPLYING S ECTION I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 16/16 38(2) WHILE SECTION 38(2) IS NOT APPLICABLE FOR CA R DEPRECATION. BEFORE CONFIRMING DISALLOWANCE LD. CI T(A) HAS NOT CONSIDERED TO THE FACTS THAT DEPRECIATION IS AL LOWABLE AT FULL RATE EVEN IF VEHICLE RUNS FOR A SINGLE DAY FOR BUSINESS PURPOSES AT ANY TIME DURING ACCOUNTING YEAR. THERE FORE THERE IS NO JUSTIFICATION TO DISALLOW PROPORTIONATE DEPRECIATION FOR CAR RUNNING. IT IS FURTHER TO SUBMIT THAT THER E IS NO NEXUS BETWEEN EXPENSES INCURRED FOR RUNNING OF ANY VEHICL E AND DEPRECIATION ALLOWABLE THEREON UNDER THE ACT. 3) THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE LD. CIT(A) HAS ERRED IN LAW TO CONFIRM THE DISALLOW ANCE OF ` 88 663/- OUT OF FOREIGN TOUR EXPENSES & ` 44 559/- OUT OF TELEPHONE EXPENSES. DISALLOWANCES HAVE MADE SIMPLY UPON PRESUMPTION & SURMISES WITHOUT POINTING OUT ANY INA DMISSIBLE AMOUNT. FURTHER BEFORE CONFIRMING DISALLOWANCES LD . CIT(A) HAS NOT CONSIDERED TO THE DECISIONS OF HONBLE COUR TS WHICH WERE PLACED BEFORE HIM. 4) THAT THERE IS NO JUSTIFICATION TO DISALLOW OF ` 19 022/- & ` 20 000/- OUT OF EXHIBITION & REPAIR MAINTENANCE EXP ENSES RESPECTIVELY BEING MADE IN CASH. ALL ARE PETTY IN NATURE FOR WHICH PAYMENT THROUGH CHEQUE IS NOT POSSIBLE. 5) THAT LD. CIT(A) HAS NO JUSTIFICATION TO CONFIRM ` 23 627/- ON ACCOUNT OF DEPRECIATION DISALLOWED ON POLLUTION MACHINE BY LD. A.O. SUPPORTING VOUCHERS WERE PRODUCED & MACHIN E WAS PUT TO USE DURING ACCOUNTING YEAR. 6) THAT THE CLAIM OF DEDUCTION U/S 80HHC ON DEPB WA S IN ORDER LD. LOWER AUTHORITIES HAVE UNLAWFULLY DISALL OWED THE SAME. WITHOUT PREJUDICE TO WHAT HAS BEEN SAID ABOVE APPEL LANTS APPEAL IS NOT TENABLE THE FOLLOWING GROUNDS: I) IT HAS NOT BEEN FILED ON PRESCRIBED FORM 36. II) GROUNDS OF APPEAL HAVE NOT FILED WITH MEMO OF A PPEAL. III) AS PER DEFICIENCY MARKED AT THE TIME OF FILING DATE OF SERVICE OF ORDER APPEAL AGAINST WHICH HAS FILED WA S NOT MENTIONED IN COL. NO.9 OF APPEAL MEMO. IV) THERE IS FALSE VERIFICATION ON APPEAL MEMO. A) VERIFICATION DATE COLUMN BLANK DATE OF VERIFICATION HAS NOT MENTIONED B) MEMO OF APPEAL HAS SIGNED AND NAMED BY DIFFERENT PERSONS. IN VERIFICATION COLUMN NAME I A. K. SINGH I.T.O.-1(1) MBD THE APPELLANT HAS WRITTED BUT THE SAME HAS SIGNED & SEALED BY A.K. PANDEY DY CIT RANGE 1 MORADABAD. 35. IT WAS GREED BY BOTH THE SIDES THAT GROUND NO.1 OF THE C.O. IN THE PRESENT YEAR IS SIMILAR TO GROUND NO.3 IN ASSES SMENT YEAR 2003- 04 AND GROUND NO.2 OF THE C.O. IN THE PRESENT YEAR IS SIMILAR TO I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 17/17 GROUND 4 OF THE C.O. IN THE ASSESSMENT YEAR 2003-04 . IN THAT YEAR BOTH THESE GROUNDS WERE REJECTED BY US AND ACCORDIN GLY IN THE PRESENT YEAR ALSO BOTH THESE GROUNDS ARE REJECTED. 36. REGARDING GROUNDS NOS. 3 & 4 OF THE C.O. IN THE PRESENT YEAR IT IS SUBMITTED THAT THE ISSUE REGARDING DISALLOWAN CE OUT OF FOREIGN TOUR EXPENSES AND DISALLOWANCE OUT OF EXHIBITION EX PENSES ARE SIMILAR TO GROUND NO.5 OF THE C.O. RAISED IN THE AS SESSMENT YEAR 2003-04. REGARDING DISALLOWANCE OUT OF TELEPHONE E XPENSES IT WAS SUBMITTED THAT THE DISALLOWANCE IS EXCESSIVE AND RE GARDING THE DISALLOWANCE OUT OF REPAIR & MAINTENANCE EXPENSES IT IS SUBMITTED THAT THE SAME IS WITHOUT ANY BASIS AND MOREOVER EXC ESSIVE. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THERE ARE 4 DISALLOWANCE BEING DISPUTED BY THE ASSE SSEE AS PER GROUNDS NOS. 3 & 4 OF THE C.O. THE TWO DISALLOWANC ES I.E. OUT OF FOREIGN TOUR EXPENSES AND OUT OF EXHIBITION EXPENSE S ARE ADMITTEDLY SIMILAR TO GROUND NO.5 RAISED BY THE ASSESSEE IN AS SESSMENT YEAR 2003-04. IN THAT YEAR BOTH THESE DISALLOWANCES WE RE CONFIRMED BY US AND FOR THE SAME REASON IN THIS YEAR ALSO THES E DISALLOWANCES ARE CONFIRMED. REGARDING DISALLOWANCE OF ` 44 559/ - OUT OF TELEPHONE EXPENSES WE FIND THAT IT IS NOTED BY THE LD. CIT(A) ON PAGE 14 OF HIS ORDER THAT THE DISALLOWANCE OF ONLY 10% WAS MADE BY THE A.O. AS PERSONAL USE OF TELEPHONE CANNOT BE RUL ED OUT. CONSIDERING THE FACTS IN ITS ENTIRETY WE DO NOT FI ND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO BECAUSE DISALLOWANCE OUT OF TELEPHONE EXPENSES TO THE EXTEN T OF 10% IS NEITHER UNREASONABLE NOR EXCESSIVE. REGARDING 4 TH DISALLOWANCE OF `20 000/- OUT OF REPAIR AND MAINTENANCE EXPENSES W E FIND THAT IT HAS BEEN NOTED BY THE LD. CIT(A) ON PAGES 14-15 OF HIS ORDER THAT IT WAS NOTED BY THE A.O. THAT OUT OF TOTAL EXPENSES OF ` 1 19 762/- UNDER THE HEAD REPAIR & MAINTENANCE EXPENSES IT WA S NOTED BY THE A.O. THAT THE EXPENDITURE OF ` 35 142/- WAS INCURRE D BY THE ASSESSEE I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 18/18 BY MAKING CASH PAYMENT. IT IS ALSO OBSERVED BY TH E A.O. THAT NO SUPPORTING BILLS OR VOUCHERS ARE FURNISHED IN SUPPO RT OF THE SAID CLAIM AND HENCE HE MADE AD-HOC DISALLOWANCE OF ` 3 5 000/. OUT OF THE SAME CIT(A) HAS CONFIRMED THE DISALLOWANCE OF ONLY ` 20 000/-. SUBSTANTIAL RELIEF HAS ALREADY BEEN ALLOWED BY CIT( A) ON THIS ACCOUNT AND HENCE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. ACCORDINGLY BOTH THESE GROUNDS OF THE ASSESSEE ARE REJECTED. 38. REGARDING GROUND 5 WE FIND THAT IT IS NOTED BY THE LD. CIT(A) ON PAGES 16 & 17 OF HIS ORDER THAT FOR THE ADDITION OF ` 1 89 608/- REGARDING PLANT & MACHINERY AND SOME OTHER ASSETS NO SUPPORTING PROOF OR EVEN WRITTEN SUBMISSION HAS BEEN FILED AND ON THIS BASIS HE CONFIRMED THE DISALLOWANCE OF DEPRECIATION TO THE E XTENT OF ` 23 627/- ALTHOUGH HE HAS DELETED THE DISALLOWANCE O F DEPRECIATION ON CYCLE FURNITURE FIXTURES AND FANS FOR WHICH TH E ASSESSEE COULD PRODUCE SUPPORTING EVIDENCE REGARDING PURCHASES. S INCE NO EVIDENCE REGARDING PURCHASE OF THESE ASSETS HAS BEE N PRODUCED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW OR EVEN B EFORE US DEPRECIATION CAN NOT BE ALLOWED AND HENCE WE DO NO T FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON T HIS ISSUE ALSO. GROUND NO.5 OF THE ASSESSEE IS ALSO REJECTED. 39. REGARDING GROUND NO.6 WE FIND THAT THE ISSUE R EGARDING ALLOWABILITY OF DEDUCTION U/S 80HHC ON DEPB HAS TO GO BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY RENDERED IN THE CASE O F KALPATARU AS REPORTED IN 328 ITR 451. ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND REFER THE MATTER BACK TO T HE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF THE DECISION O F HON'BLE HIGH COURT OF BOMBAY RENDERED IN THE CASE OF KALPATARU (SUPRA) . THE A.O. SHALL PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD. GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 19/19 40. THE REMAINING GROUNDS WERE NOT PRESSED BY THE L D. A.R. AND ACCORDINGLY REJECTED AS NOT PRESSED 41. NOW WE TAKE UP THE C.O. OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2005-06 I.E. C.O. NO.35/DEL/2009. THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. ARE AS UNDER: 1) THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THESE LD. CIT(A) HAS ERRED IN LAW TO CONFIRM THE DISALLOWANCE OF ` 1 21 333/- OUT OF FOREIGN TOUR & ` 41 871/- OUT OF TELEPHONE EXPENSES. DISALLOWANCES HAVE MADE SIMPLY UPON PRESUMP0TION & SURMISES WITHOUT POINTING OUT ANY INADMISSIBLE AMOUNT. FURTHER BEFORE CONFIRMING DIS ALLOWANCES LD. CIT(A) HAS NOT CONSIDERED TO THE DECISIONS OF H ONBLE COURTS WHICH WERE PLACED BEFORE HIM. 2) THAT THERE IS NO JUSTIFICATION TO DISALLOW OF ` 18 300/- & ` 20 000/- OUT OF INDIAN EXHIBITION & REPAIR MAINTENA NCE EXPENSES RESPECTIVELY BEING MADE IN CASH. ALL ARE PETTY IN NATURE FOR WHICH CHEQUES WERE NOT POSSIBLE. 3) THAT LD. CIT(A) HAS NO JUSTIFICATION TO SUSTAINE D DISALLOWANCE ON ACCOUNT OF CAR RUNNING & MAINTENANC E EXPENSES. DISALLOWANCES HAVE MADE SIMPLY UPON PRESUMPTION AND SURMISES WITHOUT SPECIFYING ANY AMO UNT WHICH IS OF PERSONAL NATURE BUT DEBITED IN THE BOOK S OF THE FIRM. 4) THAT LD. CIT(A) HAS ERRED IN LAW TO CONFIRM DISA LLOWANCES OF CAR DEPRECIATION BY APPLYING SECTION 38(2) WHILE SECTION 38(2) IS NOT APPLICABLE FOR CAR DEPRECIATOR BEFORE CONFIRMING DISALLOWANCES LD. CIT(A) HAS NOT CONSIDERED TO THE FACTS THAT DEPRECIATION IS ALLOWABLE AT FULL RATE IF VEHICLE R UNS AT ANY TIME DURING ACCOUNTING YEAR FOR BUSINESS PURPOSES EVEN F OR A SINGLE DAY. THEREFORE THERE IS NO JUSTIFICATION TO DISALL OW PROPORTIONATE DEPRECIATION. IT IS FURTHER TO SUBMI T THAT THERE IS NO NEXUS BETWEEN EXPENSES INCURRED FOR RUNNING OF N AY VEHICLE AND DEPRECIATION ALLOWABLE THEREON UNDER TH E ACT. WITHOUT PREJUDICE TO WHAT HAS BEEN SAID ABOVE APPEL LANTS APPEAL IS NOT TENABLE ON THE FOLLOWING GROUNDS: I) IT HAS NOT BEEN FILED ON PRESCRIBED FORM 36 II) GROUNDS OF APPEAL HAVE NOT FILED WITH MEMO OF A PPEAL III) DATE OF SERVICE OF ORDER APPEAL AGAINST WHICH HAS FILED WAS NOT MENTIONED IN COL. NO.9 OF APPEAL MEMO AT TH E TIME OF FILING APPEAL AS PER DEFICIENCY MARKED. IV) ASSESSMENT ORDER WAS PASSED BY ADDITIONAL CIT BUT APPEAL HAS PREFERRED BY THE DY. CIT SECONDLY VERIFI CATION HAS SIGNED BY SHRI A K PANDEY DCIT MORADABAD BUT CUTTING HAS ATTESTED BY SHRI C PS YADAV I.T.O. ITA T NEW DELHI. I.T.A. NO.459 460 461/DEL/2009 C.O. NO.33 34 35/DEL/2009 20/20 42. IT WAS AGREED BY BOTH THE SIDES THAT ALL THE GR OUNDS RAISED BY THE ASSESSEE IN THIS YEAR ARE SIMILAR TO VARIOUS GR OUNDS RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2004-05 AND THERE I S NO GROUND IN THE PRESENT YEAR REGARDING DEDUCTION ALLOWABLE TO T HE ASSESSEE U/S 80HHC WITH REGARD TO DEPB. IN ASSESSMENT YEAR 2004 -05 ALL THESE ISSUES WHICH ARE RAISED BY THE ASSESSEE IN THAT C.O . WERE DECIDED AGAINST THE ASSESSEE. FOR THE SAME REASONS IN THI S YEAR ALSO ALL THESE GROUNDS OF THE ASSESSEE ARE REJECTED. THE LA ST GROUND OF THE C.O. WAS NOT PRESSED BY THE ASSESSEE AND ACCORDINGL Y REJECTED AS NOT PRESSED. 43. IN THE RESULT C.O. FOR THE ASSESSMENT YEAR 200 5-06 IS DISMISSED. 44. IN THE COMBINED RESULT THE APPEAL OF THE REVENU E FOR ASSESSMENT YEAR 2003-04 IS PARTLY ALLOWED FOR STATI STICAL PURPOSES APPEAL FOR ASSESSMENT YEAR 2004-05 IS ALLOWED FOR S TATISTICAL PURPOSES AND APPEAL FOR THE ASSESSMENT YEAR 2005-06 IS DISMISSED. CROSS OBJECTIONS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 IS DISMISSED AND REMAINING TWO CROSS OBJECTIONS ARE PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 45. PRONOUNCED IN THE OPEN COURT ON 11 TH FEB. 2011. SD./- SD/. (I. P. BANSAL) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:11 TH FEB. 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI