VIRCHAND NARSHI SONE (SINCE DECD)) (THROUGH SHRI JAY VIRCHAND SONE) (SON & LEGAL HEIR), THANE v. ITO 13(3)(1), MUMBAI

CO 42/MUM/2009 | 2004-2005
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 4219923 RSA 2009
Assessee PAN ADYPS0844H
Bench Mumbai
Appeal Number CO 42/MUM/2009
Duration Of Justice 3 year(s) 1 month(s) 11 day(s)
Appellant VIRCHAND NARSHI SONE (SINCE DECD)) (THROUGH SHRI JAY VIRCHAND SONE) (SON & LEGAL HEIR), THANE
Respondent ITO 13(3)(1), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 30-03-2012
Date Of Final Hearing 14-03-2012
Next Hearing Date 14-03-2012
Assessment Year 2004-2005
Appeal Filed On 17-02-2009
Judgment Text
ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NOS. 5288/MUM/2007 941 939 & 4430/MUM/2010 ( AYS: 2004-05 TO 2007-08) INCOME TAX OFFICER WARD 13(3)1 ROOM NO.428 4 TH FLOOR AAYAKAR BHAVAN MUMBAI 400020 VS VIRCHAND NARSHI SONI: L/R SHRI JAY VIRCHAND SONI 257/265 NARSHI NATHA STREET 115 NEW ANAND BHAVAN MUMBAI 400 009 PAN NO: ADYPS 0844 H (APPELLANT) (RESPONDENT) C.O. NO.42/MUM/2009 CO NOS.146 & 147/MUM/2010 (ARISING OUT OF ITA NO. 5288/MUM/2007 941 & /MUM/2 010) VIRCHAND NARSHI SONI: L/R SHRI JAY VIRCHAND SONI 257/265 NARSHI NATHA STREET 115 NEW ANAND BHAVAN MUMBAI 400 009 PAN NO: ADYPS 0844 H VS INCOME TAX OFFICER WARD 13(3)1 ROOM NO.428 4 TH FLOOR AAYAKAR BHAVAN MUMBAI 400020 (CROSS OBJECTOR) (RESPONDENT) REVENUE BY: MR. D.S. SUNDER SINGH DR ASSESSEE BY: MR.VIPUL B. JOSHI/KUNAL GOKHALE DATE OF HEARING: 1 4/03/2012 DATE OF PRONOUNCEMENT: 30/03/2 012 O R D E R PER BENCH. THESE ARE REVENUE APPEALS FILED AGAINST THE ORDERS OF THE CIT (A)-XIII MUMBAI IN RESPECTIVE AYS ON WHICH CROSS O BJECTIONS HAVE BEEN FILED BY THE ASSESSEE L.R IN AYS 2004-05 TO 20 06-07. THERE IS NO CROSS OBJECTION FOR AY 2007-08. ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 2 OF 21 2. THE ASSESSEE EXPIRED IN 2008. THE LEGAL HEIR SHRI J AY VIRCHAND SONI WAS BROUGHT ON RECORD AND REVENUE HAD FILED REVISED FORM NO.36 IN THEIR APPEAL IN AY 2004-05. THE LR FI LED A CROSS OBJECTION WITH A PRAYER FOR CONDONATION OF DELAY ST ATING THAT HIS FATHER I.E. THE ASSESSEE EXPIRED ON 08/12/2008 AND HE WAS NOT AWARE ABOUT THE SERVICE OF FORM NO.36 ALONG WITH TH E GROUNDS OF APPEAL ON HIS DECEASED FATHER. IT WAS FURTHER SUBMI TTED THAT AFTER RECEIVING THE NOTICE OF APPEAL ON 12/02/2009 HE FI LED THE CROSS OBJECTION AND PRAYED FOR CONDONATION OF DELAY IN FI LING THE CROSS OBJECTION. HAVING CONSIDERED THE CIRCUMSTANCES AND AFFIDAVIT FILED ON RECORD WE HEREBY CONDONE THE DELAY IN FILING TH E CROSS OBJECTION AND ADMIT THE SAME. 3. THERE ARE VARIOUS ISSUES IN ALL THE YEARS. MANY OF THEM ARE COMMON AND THE LEARNED COUNSEL FILED A DETAILED CHA RT SUMMARIZING THE ISSUES YEAR-WISE WHICH WAS TAKEN INTO CONSIDERATION IN DISPOSAL OF THESE APPEALS ISSUE-W ISE. WE HAVE HEARD LD COUNSEL AND LD. DR IN DETAIL. THEIR ARGUME NTS WERE CONSIDERED AND DISCUSSED WHILE CONSIDERING THE ISSU ES. ISSUE.1: INSURANCE CLAIMS: AY 2004-05 ` `` ` .11 35 751/- AY 2005-06 ` `` ` .5 82 281/- AY 2006-07 ` `` ` .3 41 096/-. 4. THE ASSESSEE IS IN THE BUSINESS OF TRANSPORTATION A ND WAS ACCOUNTING CONSISTENTLY THE INSURANCE CLAIMS IN THE YEAR OF RECEIPT WHEREAS THE AMOUNTS PAID TOWARDS DAMAGES IN THE BUS INESS OF TRANSPORTATION WAS ACCOUNTED AS AND WHEN DAMAGES WE RE PAID OR RECOVERED BY THE RESPECTIVE COMPANIES FOR WHOM THE TRANSPORTATION WAS UNDERTAKEN. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT THE ASSESSEE WAS INCURRING DAMAGES AND WAS ALSO CLA IMING AS AND WHEN THE AMOUNTS WERE EITHER DEDUCTED OR PAID OUT O F THE AMOUNTS RECEIVABLE. CONSEQUENT TO THE INSURANCE TAKEN BY T HE ASSESSEE VARIOUS CLAIMS ARE LODGED WITH THE INSURANCE COMPAN IES WHICH WERE ACCOUNTED FOR IN THE YEAR OF RECEIPT. THE ASSESSING OFFICER IN THE ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 3 OF 21 ABOVE YEARS CONSIDERED THAT THE ASSESSEE HAD MADE C LAIMS TO THE ABOVE EXTENT IN RESPECTIVE YEARS BUT HAS NOT OFFERE D TO TAX EVEN THOUGH THE CORRESPONDING DAMAGES WERE CLAIMED IN TH E PROFIT & LOSS A/C. THE ASSESSEE EXPLAINED THAT HE WAS FOLLOW ING THE METHOD OF ACCOUNTING CONSISTENTLY AND AMOUNTS CANNOT BE AC COUNTED FOR AS INCOME JUST BECAUSE A CLAIM WAS MADE AND EXPLAINED THAT AS AND WHEN THE AMOUNTS ARE RECEIVED FROM THE INSURANCE CO MPANIES THESE WERE ACCOUNTED IN THE LATER YEAR(S). THE ASSE SSING OFFICER DID NOT AGREE AND MADE ADDITION IN THE RESPECTIVE YEARS HOWEVER WITHOUT GIVING CREDIT IN THE LATER YEAR FOR THE AMO UNTS ACCOUNTED IN THAT YEAR. THE CIT (A) CONSIDERING THE FACT THAT AM OUNTS ARE ACCOUNTED FOR AS AND WHEN THEY ARE RECEIVED/SETTLED BY THE INSURER DELETED THE ADDITION. HE ALSO GAVE A FINDING THAT T HE CLAIMS MADE CANNOT BE TREATED AS INCOME UNLESS THEY ARE ACCEPTE D AND SETTLED BY THE INSURANCE CO. THEREFORE HE DELETED THE AMOUNT IN THE RESPECTIVE AYS. THE REVENUE IS IN APPEAL AND RAISED THE ISSUE AS GROUND NO. 1 IN AY 2004-05 GROUND NO.2 IN AY 2005- 06 AND 2006-07. 4.1 WE HAVE CONSIDERED THE ISSUE AND THE RIVAL ARGU MENTS AND EXAMINED THE RECORD. THERE IS NO DISPUTE WITH REFER ENCE TO THE FACT THAT THE ASSESSEE IS CONSISTENTLY ACCOUNTING INSURA NCE CLAIMS RECEIVED IN THE YEAR OF RECEIPT AND AS RIGHTLY POIN TED OUT BY THE CIT (A) THE CLAIMS MADE ON INSURANCE COMPANY CANNOT BE CONSIDERED AS INCOME UNLESS THEY ARE ACCEPTED OR SETTLED BY TH E INSURER. THE ASSESSEE ALSO PLACED A CHART OF THE CLAIMS LODGED A ND RECEIVED IN EARLIER YEARS ALSO THE BASIS OF WHICH THE CIT (A) DELETED IN THE ABOVE YEARS. IT IS ALSO NOTICED THAT EVEN THOUGH THE ASSE SSING OFFICER MADE THE ADDITION IN THE RESPECTIVE AYS THE CORRESPONDI NG ADJUSTMENTS IN THE LATER YEARS ARE NOT MADE BY HIM FOR THE AMOU NTS ACCOUNTED FOR IN THE LATER YEARS. THERE IS NO CONSISTENCY IN THE ASSESSING OFFICER TREATMENT OF THE AMOUNTS INVOLVED. SINCE TH E ASSESSEE HAS CORRECTLY ACCOUNTED ALL THE AMOUNTS AS AND WHEN SET TLED/RECEIVED ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 4 OF 21 THERE IS NO REASON TO INTERFERE WITH THE ORDERS OF THE CIT (A) WHICH ARE TO BE UPHELD BOTH ON FACTS AND ON LAW. JUST BEC AUSE THE CLAIMS WERE MADE THE SAME CANNOT BE TREATED AS INCOME ACC RUED UNLESS THESE AMOUNTS ARE ACCEPTED/ SETTLED. IN VIEW OF THI S WE UPHOLD THE ORDERS OF THE CIT (A) IN THE RESPECTIVE AYS AND DIS MISS THE GROUNDS SO RAISED. ISSUE.2: NSC INTEREST RECEIVED: 5. IN AY 2004-05 ASSESSING OFFICER BROUGHT TO TAX AN AMOUNT OF ` .33 550/- AS INTEREST ACCRUED ON NATIONAL SAVINGS C ERTIFICATE. HOWEVER HE HAS NOT ALLOWED THE DEDUCTION UNDER SEC TION 80L ON THE ABOVE AMOUNT. THE LEARNED CIT (A) DIRECTED THE ASSESSING OFFICER TO CONSIDER THE DEDUCTION. THE REVENUE IS I N APPEAL. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT (A). ASSESSING OFFICER WHILE BRINGING THE AMOUNT TO TAX SHOULD HAVE ALLOWED THE CORRESPONDING DEDUCTION ALLOWABLE UNDER THE ACT. FAILURE ON THE PART OF THE ASSESSING OFFICER IN ALL OWING STATUTORY DEDUCTION UNDER SECTION 80L CANNOT BE ACCEPTED WHEN HE BROUGHT THE AMOUNT TO TAX ON ACCRUAL BASIS EVEN THOUGH THE ASSESSEE WAS OFFERING THEM ON RECEIPT BASIS. WE DO NOT SEE ANY R EASON TO INTERFERE WITH THE ORDERS OF THE CIT (A) WHO CORRECTLY DIRECT ED THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80L. THERE FORE THE REVENUE GROUND NO.2 IN AY 2004-05 IS ACCORDINGLY DI SMISSED. ISSUE.3: CAR EXPENSES AND CAR DEPRECIATION : 6. IN AYS 2004-05 2005-06 AND 2006-07 ASSESSING O FFICER CONSIDERED CAR EXPENSES AND DEPRECIATION ON ONE CAR AS PERSONAL EXPENDITURE AND DISALLOWED. IN AY 2004-05 THE ENTI RE AMOUNT WAS CONFIRMED BY THE CIT (A) WHEREAS IN OTHER YEARS THE CIT (A) CONFIRMED 50% IN AY 2005-06 AND 20% IN AY 2006-07. THE REVENUE HAS NOT COME IN APPEAL FOR THE DELETION WH EREAS THE ASSESSEE HAS RAISED GROUNDS ONLY IN AY 2004-05 AND 2005-06. IT ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 5 OF 21 WAS THE CONTENTION BEING IN TRANSPORT BUSINESS THE ASSESSEE USES 15 CARS FOR VARIOUS BUSINESS PURPOSES AND AT THE MO ST PERSONAL USE OF ONLY ONE CAR THE ASSESSEE ESTIMATED THE PERSONA L EXPENDITURE AT ` .35 655/- AND DISALLOWED AN AMOUNT OF 20% WHILE FIL ING THE RETURN OF INCOME. HOWEVER THE ASSESSING OFFICER DID NOT C ONSIDER THIS AMOUNT AND DISALLOWED THE AMOUNTS RESPECTIVELY IN V ARIOUS YEARS. CONSIDERING THAT THE ASSESSEE ITSELF DISALLOWED 20% OF EXPENDITURE OF ONE CAR FOR PERSONAL USE WHILE ADMITTING THAT ON E CAR IS USED FOR PERSONAL PURPOSES WE ARE OF THE VIEW THAT THERE IS JUSTIFICATION IN DISALLOWING CERTAIN AMOUNT TOWARDS PERSONAL EXPENDI TURE. HOWEVER THERE IS NO CONSISTENCY IN THE ORDERS OF THE CIT (A ) IN RESPECTIVE YEARS. WHILE HE HAS CONFIRMED THE ENTIRE AMOUNT IN AY 2004-05 DISALLOWED BY THE ASSESSING OFFICER HE CONFIRMED 5 0% AND 20% RESPECTIVELY IN LATER YEARS. CONSIDERING THAT THE A SSESSEE HAS ADMITTED THAT ONE PERSONAL CAR CAN BE CONSIDERED OU T OF THE 15 CARS USED IN BUSINESS WE ARE OF THE VIEW THAT 20% OF TH E DISALLOWANCE MADE IN RESPECTIVE YEARS BY THE ASSESSING OFFICER W OULD SUFFICE TOWARDS PERSON EXPENDITURE IN CAR USAGE. THEREFORE THE ORDERS OF THE CIT (A) IN AYS 2004-05 AND 2005-06 ARE MODIFIED TO THAT EXTENT. THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE D ISALLOWANCE TO 20% OF THE ABOVE EXPENDITURE AS FOR PERSONAL USE. IF AN Y AMOUNT WAS ALREADY DISALLOWED BY THE ASSESSEE THE SAME SHOULD BE ADJUSTED OUT OF THE ABOVE DISALLOWANCE. IN CASE THE ASSESSEE DISALLOWED MORE THAN THE AMOUNT DIRECTED TO BE DISALLOWED AS ABOVE THERE IS NO NEED TO DISALLOW ANY FURTHER AMOUNT THAN WHAT WAS A DMITTED BY THE ASSESSEE. WITH THESE DIRECTIONS THE ASSESSEES GRO UND1 IN AY 2004- 05 AND GROUND 3 IN AY 2005-06 ARE PARTLY ALLOWED. ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 6 OF 21 ISSUE.4 HAMALI/LABOUR CHARGES : 7. THE ASSESSEE IN TRANSPORT BUSINESS ENGAGES HAMAL I/LABOUR AND CLAIMED AMOUNTS OF ` .21 10 060/- IN AY 2004-05 ` .26 65 856/- IN AY 2005-06 ` .27 98 272/- IN AY 2006-07 AND ` 28 97 205/- IN AY 2007-08. THE ASSESSING OFFICER CONSIDERING THAT THE RE WERE SELF MADE VOUCHERS WHICH CANNOT BE VERIFIED DISALLOWED THE FOLLOWING AMOUNT IN RESPECTIVE AYS: AY AMOUNT ( ` .) 2004-05 65 000 2005-06 75 000 2006-07 1 00 000 2007-08 2 89 720 7.1 THE LEARNED CIT (A) AFTER CONSIDERING THE ASSESSEES OBJECTIONS CONFIRMED THE ENTIRE AMOUNT IN AY 2004- 05 GRANTED RELIEF OF ` .40 000/- IN AY 2005-06 AND ` .50 000/- IN AY 2006-07 DELETED ` .2 29 720/- IN AY 2007-08. THE ASSESSEE IS AGGRIEVE D IN AY 2004-05 WHEREAS THE REVENUE HAS NOT RAISED ANY OBJ ECTION FOR THE DELETION IN RESPECTIVE AYS. 7.2 IT WAS THE CONTENTION THAT THE ASSESSEE HAS TO NECESSARILY ENGAGE VARIOUS HAMALI/LABOUR IN ITS BUSINESS. BY VE RY NATURE OF THE BUSINESS ASSESSEE CANNOT MAINTAIN 3 RD PARTY EVIDENCE AS THE AMOUNTS WERE INCURRED MAINLY IN CASH. THE LEARNED D EPARTMENTAL REPRESENTATIVE HOWEVER SUBMITTED THAT THE ASSESSIN G OFFICER REASONABLY DISALLOWED THE AMOUNT SINCE HE CANNOT VE RIFY LARGE CLAIMS MADE IN CASH. 7.3 WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE V ARIOUS CLAIMS. AS SEEN FROM THE ORDER OF THE CIT (A) IN AY 2005-06 2006- 07 AND 2007-08 HE HAS RESTRICTED THE AMOUNT PARTLY OUT OF THE ADHOC DISALLOWANCE MADE BY THE ASSESSING OFFICER AN D THERE IS NO APPEAL BY ASSESSEE ON THE DISALLOWANCE CONFIRMED PA RTLY IN OTHER YEARS. CONSIDERING THE AMOUNTS INVOLVED AND REASONA BLENESS OF THE AMOUNT DISALLOWED BY THE CIT (A) TO BE CONSISTENT WITH THE STAND TAKEN IN THE ABOVE YEARS WE ALSO RESTRICT THE DISA LLOWANCE IN AY ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 7 OF 21 2004-05 TO AN AMOUNT OF ` .35 000/- AND THE ASSESSEE GETS RELIEF OF ` .40 000/- IN AY 2004-05. ACCORDINGLY GROUND NO.2 IN AY 2004-05 IS PARTLY ALLOWED. ISSUE.5: BRANCH EXPENSES : 8 THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` .80 000/- IN AY 2004-05 OUT OF THE TOTAL CLAIM OF ` .26 30 284/- FOR THE REASON THAT THE ABOVE SAID EXPENDITURE COULD NOT BE VERIFI ED AS VOUCHERS WERE SELF-MADE. THE ASSESSEE RAISED GROUND NO.A-3 I N THE CROSS OBJECTION WHEREAS SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER IN AY 2005-06 2006-07 AND 2007-08 WHICH W ERE PARTLY CONFIRMED BY THE CIT (A) WERE NOT CONTESTED. CONSID ERING THE REASONABLENESS OF THE AMOUNT DISALLOWED WE AGREE W ITH THE ORDER OF THE CIT (A) WHO CONFIRMED THE AMOUNT TO THE EXTENT OF ` .80 000/-. ACCORDINGLY GROUND NO.3 IN THE C.O BY THE ASSESSEE IS REJECTED. ISSUE. 6: INSURANCE RTO TAX & NATIONAL PERMIT TAX ON NEW TRUCKS: 9 THE ASSESSING OFFICER IN AY 2004-05 2005-06 AND 20 06-07 CONSIDERED THE AMOUNT PAID UNDER THE ABOVE HEADS AS CAPITAL IN NATURE ON PURCHASE OF NEW TRUCKS WHICH SHOULD HAVE BEEN CAPITALIZED BY THE ASSESSEE. THE AMOUNTS INVOLVED A RE AS UNDER: AY 2004-05 ` . 14 27 222/- AY 2005-06 ` . 12 07 818/- AY 2006-07 ` . 28 31 230/- 9.1 THE CIT (A) IN AY 2004-05 GAVE A RELIEF OF AMOU NT OF ` .3 83 500/- PAID TOWARDS NATIONAL PERMIT ON THE REA SON THAT THE NEW TRUCKS DOES NOT REQUIRE NATIONAL PERMIT FOR USA GE. THEREFORE THE AMOUNT TO THAT EXTENT OF RS.3 83 500/ WAS HELD AS REVENUE IN NATURE. ASSESSEE IS CONTESTING CONFIRMATION OF THE BALANCE AMOUNT. IN OTHER YEARS AY 2005-06 AND AY 2006-07 THE LEARN ED CIT (A) CONSIDERING THE COORDINATE BENCH DECISION IN THE CA SE OF ITO VS. ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 8 OF 21 RELIABLE CHEMICAL 14 TTJ (BOMBAY) 497 MANGESH USHA DEVI VS. INCOME TAX OFFICER 3 ITD 75 (HYD.) HELD THAT THE A MOUNTS ARE REVENUE IN NATURE AND DELETED THE ENTIRE ADDITION S O MADE. THE REVENUE IS CONTESTING IN GROUND NO.4 IN THE ABOVE T WO YEARS ON THE DELETION OF THE ENTIRE AMOUNT. 9.2 IT WAS SUBMITTED THAT THERE IS NO DISPUTE WITH REFERENCE TO THE NATIONAL PERMIT TAX WHICH WAS TO BE PAID ANNUALLY F OR AVAILING NATIONAL PERMIT AND WAS RIGHTLY CONSIDERED BY THE C IT (A) AS REVENUE EXPENDITURE. IT WAS ALSO NOT DISPUTED THAT THE RTO TAX AND INSURANCE EVEN THOUGH PAID AT THE TIME OF PURCHASE OF NEW TRUCKS WERE ANNUAL PAYMENTS AS THE VEHICLES INVOLVED WERE COMMERCIAL VEHICLES ON WHICH THESE TAXES ARE PAYABLE YEARLY AN D NOT AS LUMP SUM AMOUNT ON PERSONAL VEHICLES. THEREFORE THE AMO UNTS ARE CORRECTLY HELD AS REVENUE IN NATURE BY THE CIT (A) IN LATER YEARS. 9.3 AFTER CONSIDERING THE RIVAL ARGUMENTS OF THE LE ARNED DEPARTMENTAL REPRESENTATIVE AND THE LEARNED COUNSEL WE ARE OF THE OPINION THAT THE PAYMENT TOWARDS RTO TAX INSUR ANCE ON NEWLY PURCHASED TRUCKS IS OF REVENUE IN NATURE. THE LEARN ED CIT (A) IN FACT FOLLOWED THE COORDINATE BENCH DECISIONS AS QUO TED ABOVE WHILE DELETING THE ADDITIONS SO MADE BY ASSESSING OFFICE R IN AY 2005-06 AND 2006-07. WE ACCORDINGLY CONFIRM THE ORDERS OF T HE CIT (A) IN THE ABOVE YEARS AND REJECT THE GROUND NO.4 RAISED B Y THE REVENUE IN THE ABOVE YEARS. 9.4 COMING TO THE GROUND NO.4 IN AY 2004-05 BY THE ASSESSEE WE AGREE WITH ASSESSEES CONTENTIONS THAT THE AMOUN TS ARE REVENUE IN NATURE. THEREFORE THE ASSESSING OFFICER IS DIRE CTED TO ALLOW THE ENTIRE AMOUNT AS REVENUE EXPENDITURE. WHATEVER DEPR ECIATION IF ANY WAS ALLOWED WHEN IT WAS CAPITALIZED BY THE ASS ESSING OFFICER HAS TO BE WITHDRAWN. WITH THESE DIRECTIONS GROUND 4 RAISED BY THE ASSESSEE IN AY 2004-05 IS ALLOWED. ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 9 OF 21 ISSUE.7: SERVICE CHARGES : 10 THE ASSESSEE MADE PAYMENTS TO SHRI C.P. SHAH & SONS WHERE SONS OF ASSESSEE WERE PARTNERS. THE ASSESSING OFFICER WAS OF THE OPINION THAT SERVICE CHARGES PAID FOR THE ABOVE CONCERN WAS COVERED BY THE PROVISIONS OF SECTION 40A(2)(B) AND ACCORDINGLY CERTAIN AMOUNTS WERE DISALLOWED AS SHOWN IN THE FOL LOWING TABLE. IN ADDITION TO THE AMOUNTS DISALLOWED UNDER SECTION 40 A(2)(B) IN AYS 2005-06 2006-07 AND 2007-08 THE BALANCE OF THE AM OUNT OF THE TOTAL CLAIM WAS ALSO DISALLOWED INVOKING THE PROVIS IONS OF SECTION 40(A)(IA) ON THE REASON THAT THE ASSESSEE HAS NOT D EDUCTED THE TAX ON THE ABOVE SAID AMOUNTS UNDER SECTION 194C. YEAR DISALLOWED ( ` .) U/S 40A DISALLOWED U/S 40(A) 2004-05 3 50 000/- ----- 2005-06 3 75 000/- 4 84 432 2006-07 5 50 000/- 5 72 094 2007-08 5 50 000/- 14 57 758 10.1 THE CIT(A) CONFIRMED DISALLOWANCE IN AY 2004-0 5 FULLY. HOWEVER THE CIT (A) IN LATER THREE YEARS HELD THAT THE AMOUNTS PAID ARE REASONABLE HENCE PROVISIONS OF SECTION 40A(2)(B ) DOES NOT ARISE AND FURTHER THE PROVISIONS OF SECTION 194C ARE ALSO NOT ATTRACTED AS THERE IS NO CONTRACT SO AS TO ATTRACT TDS PROVISION S. ACCORDINGLY HE DELETED ENTIRE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON THE ABOVE ISSUE. THE ASSESSEE IS CONTESTING THE CONFIRM ATION OF DISALLOWANCE IN AY 2004-05 IN GROUND NO.5 IN THE C. O WHEREAS THE REVENUE IS CONTESTING AS GROUND NO.3 IN AYS 200 5-06 AND 2006-07 AND GROUND NO.1 IN AY 2007-08 10.2 THE LEARNED COUNSEL EXPLAINED THE FACTS THAT M /S C.P. SHAH & CONS PROVIDED UN-ADULTERED OILS TO THE ASSESSEE A ND ALSO SUPPLIES TRIP EXPENSES TO THE DRIVERS WHO PARKED THEIR VEHIC LES THERE AND CHARGES AN AMOUNT OF 2% FOR THE CREDIT PROVIDED FOR PURCHASE OF ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 10 OF 21 DIESEL. IT WAS SUBMITTED THAT THESE AMOUNTS WERE SI MILARLY CHARGED TO OTHER PERSONS TO WHOM CREDIT FACILITIES WERE AVA ILABLE AND C.P. SHAH & SONS WAS ALSO RECEIVING THE SAID AMOUNTS FRO M OTHERS AND THEREFORE THERE IS NO NECESSITY FOR DISALLOWING TH E AMOUNT UNDER SECTION 40A(2)(B). FURTHER IT WAS SUBMITTED THAT T HESE AMOUNTS ARE NOT COVERED UNDER THE PROVISIONS OF SECTION 194C AS THERE IS NO CONTRACT NOR THERE IS ANY REQUIREMENT OF TDS AS PE R THE PROVISIONS OF THE ACT. THEREFORE DISALLOWING THE ABOVE AMOUNT UNDER SECTION 40(A)(IA) DOES NOT ARISE. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER RELIED ON THE ORDERS OF THE ASSESSING OFFI CER. 10.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EX AMINING THE RECORD WE ARE OF THE OPINION THAT THE ORDERS OF TH E CIT (A) IN AYS 2005-06 2006-07 AND 2007-08 DOES NOT REQUIRE ANY M ODIFICATION. IN FACT HE HAS CONSIDERED THE FACTS CORRECTLY AND A LLOWED THE AMOUNTS BY HOLDING AS UNDER: (EXTRACTED FROM ORDER IN AY 2005-06) 8.2 I HAVE CONSIDERED THE CONTENTIONS OF THE APPEL LANT AND THE SAME IS DELETED AS IT RELATES TO A PREVALEN T TRADE PRACTICE AND BEING ON PAR WITH THE TRADE PRACTICE N O DISALLOWANCE UNDER SECTION 40A(2)(B) CAN BE MADE ACCORDINGLY APPELLANT GETS RELIEF OF ` .3 75 000/-. THIS GROUND OF APPEAL IS ALLOWED. REGARDING THE BALANCE DISALLOWANCE OF ` .4 84 432/- UNDER SECTION 40(IA) THE LEARNED COUNSEL HAS SUBMI TTED THAT THESE SO CALLED CHARGES ARE NOT FOR RENDERIN G ANY TYPE OF WORK COVERED UNDER SECTION 194C OF THE INCO ME TAX ACT 1961 BUT THEY ARE FOR MAINTAINING THEIR C REDIT ACCOUNT. WHEN PURCHASES ARE AFFECTED AGAINST CASH PAYMENT NO SUCH CHARGES ARE ADDED IN CASH MEMO. BU T WHEN ACCOUNT IS MAINTAINED FOR CREDIT SALES THE CUSTOMERS ARE CHARGES @2% TO 3% ON THE TOTAL AMOUNT OF MONTHLY TRANSACTIONS. THIS HAS GOT NO INTEREST ELEM ENT AT ALL SINCE CHARGE IS @ FLAT RATE OF 2% TO 3% IRRES PECTIVE OF THE PERIOD WHETHER THE PURCHASE IS AFFECTED ON 1 ST DAY OF THE MONTH OR ON THE LAST DAY OF THE MONTH. SUCH CHA RGES ON CREDIT SALES ARE MADE BY M/S NAVNEET MOTORS SUPPLIERS OF SPARE PARTS. THEIR BILL IS ENCLOSED UN DER GR.13. THE SERVICE CHARGE PAID IS A PART OF THE COS T OF DIESEL PURCHASED AND IN ACCOUNTS IT HAS BEEN INCLU DED IN DIESEL COST. THE ASSESSING OFFICER CALLED FOR THE D IESEL ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 11 OF 21 BILLS OF C.P. SHAH & SONS AND ASKED FOR DETAILS OF THE AMOUNT OF SERVICE CHARGES PAID. HE UNJUSTIFIABLY DISALLOWED THIS AMOUNT UNDER SECTION 40(IA). SINCE NO ELEMENT OF CARRYING OUT ANY WORK CONTEMPLA TED IN SECTION 194C OF INCOME TAX ACT 1961 IS DONE NO TDS TO BE MADE. THEREFORE SECTION 40(IA) OF INCOME TAX ACT 1961 IS NOT APPLICABLE. IN REALITY THIS IS NOTHING BUT INCREASED PRICE OF DIESEL PURCHASED ON CREDIT FROM THE PUMPS. HENCE COST OF DIESEL INCREASES. THEREFORE DISALLOWANCE IS NOT JUSTIFIED AND BE DELETED. THE APPELLANT SIMILARLY PAYS TO OTHER PETROL PUMP DEALE RS TOO BESIDES M/S C.P. SHAH & SONS. PLEASE FIND ENCLOSED HEREWITH A COUPLE OF COPIES OF BILLS OF OTHER DEALE RS FROM WHOM CREDIT PURCHASES ARE AFFECTED. THIS CHARGE IS AS PER PREVAILING TRADE PRACTICE. PLEASE FIND ENCLOSED HER EWITH SOME BILLS OF OTHER PETROL PUMPS FOR SALE OF DIESEL ON CREDIT TO OTHER TRUCK OPERATORS. THEREFORE ADDITIO NS OF ` .3 75 000/- UNDER SECTION 40A(2)(B) AND ` .4 85 432/- UNDER SECTION 40(IA) BE DELETED. 8.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND SINCE THE PROVISIONS OF SECTION 194C ARE NOT AT TRACTED TO SUCH PAYMENTS HENCE THE DISALLOWANCE MADE UNDER SECTION 40A(IA) IS DELETED. THE APPELLANT GETS RELI EF OF ` .4 84 432/-. 10.4 NOT ONLY THE ABOVE THE COORDINATE BENCH IN AS SESSEES OWN CASE IN AY 20001-02 IN ITA NO.981/MUM/2007 CONSIDER ED SIMILAR ISSUE IN THAT YEAR AND HELD AS UNDER: 6 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT IN TH IS CASE PROVISION OF SECTION 40A(2)(A) OF THE ACT ARE APPLI CABLE. UNDER SECTION 40A(2)(A) OF THE ACT THE EXPENDITURE INCURRED BY THE ASSESSEE MAY BE DISALLOWED BY THE ASSESSING OFFICER IF HE CONSIDERS IT TO BE EXCESSIV E OR UNREASONABLE HAVING REGARD TO :- (A) THE FAIR MARKET VALUE O THE GOODS/SERVICES OR FACIL ITIES FOR WHICH THE PAYMENT IS MADE; OR (B)THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEES BUSINESS OR PROFESSION; OR (C)THE BENEFIT DERIVED BY OR ACCRUING TO THE ASSESS EE FROM THE PAYMENT. IN THE CASE BEFORE US THERE IS NO DISPUTE THAT M/S. C.P. SHAH & SONS HAS PROVIDED VARIOUS SERVICES TO THE ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 12 OF 21 ASSESSEE INCLUDING CREDIT FACILITY OF BILL AMOUNT A GAINST THE PURCHASES ON DIESEL AND ADVANCE PAYMENTS TO ASSESSEES TRUCK DRIVERS AND FOR THAT SERVICES M/S. C.P. SHAH & SONS CHARGED 2% OF THE BILL AMOUNT AS SERVIC E CHARGES. THE ASSESSING OFFICER OUT OF SERVICE CHARG ES OF ` .10 64 321/- HAS DISALLOWED ` .5.OO LACS AFTER CONSIDERING THAT RS.15 000/- PER MONTH PER EMPLOYEE APPEARS TO BE REASONABLE. IN THE ABSENCE OF ANY MAT ERIAL TO SHOW THE COMPARISON OF 2% OF SERVICE CHARGES WIT H A SALARY OF ` .15 000/- PER MONTH PER EMPLOYEE AS A FAIR MARKET VALUE OF THE SERVICES OR FACILITIES FOR WHIC H THE PAYMENT WAS MADE BY THE ASSESSEE AND KEEPING IN VIEW THAT THE ASSESSEE AND M/S. C.P. SHAH & SONS HA VE ALSO PAID / RECEIVED SIMILAR SERVICE CHARGES TO/FRO M OTHER PARTIES FOR WHICH THERE IS NO DISPUTE WE ARE OF THE VIEW THAT THE SERVICE CHARGES PAID BY THE ASSESSEE TO HIS SISTER-CONCERN IS NEITHER EXCESSIVE NOR UNREASONABL E AND ACCORDINGLY THE ADHOC DISALLOWANCE OF RS.5.OO LACS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT (A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 10.5 SINCE THE ISSUE IS ALREADY DETERMINED IN EARLI ER YEAR IN FAVOUR OF THE ASSESSEE WE HAVE NO HESITATION IN REVERSING THE ORDER OF THE CIT (A) WHO FOLLOWED HIS OWN ORDER IN AY 2001-02. F OR THESE REASONS THE ASSESSEES GROUND NO.5 ON SERVICE CHARG ES IS ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE AMO UNT. CONSEQUENTLY THE REVENUE GROUNDS RAISED IN RESPECT IVE YEARS ALSO STANDS DISMISSED. ISSUE.8: TRUCK TRAFFIC ASSISTANCE CHARGES : 11 SIMILAR TO THE ABOVE SERVICE CHARGES THE ASSESSEE ALSO PAID TRUCK TRAFFIC ASSISTANCE CHARGES TO M/S C.P. SHAH & SONS. THESE CHARGES ARE PAID TOWARDS ALLOWING THE ASSESSEES LA RGE NUMBER OF TRUCKS IN THE PREMISES OF M/S C.P. SHAH & SONS FOR PARKING. THE ASSESSING OFFICER CONSIDERED 1/3 RD OF THE AMOUNT AS EXCESSIVE IN AY 2004-05 WHICH WAS CONFIRMED BY THE CIT (A). HOWEVER IN AY 2005- 06 AND 2006-07 THE ASSESSING OFFICER CONSIDERED AN AMOUNT OF ` .4 LAKHS AS EXCESSIVE UNDER SECTION 40A(2)(B) WHEREAS THE BALANCE OF ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 13 OF 21 ` .8 LAKHS WAS ALSO DISALLOWED INVOKING THE PROVISION S OF SECTION 40(A)(IA) FOR NOT DEDUCTING TDS ON THE ABOVE AMOUNT . WHEREAS THE CIT (A) CONFIRMED IN AY 2004-05 SUCH DISALLOWANCE W HICH WAS CONTESTED IN GROUND NO.6 CIT (A) DELETED PARTLY TH E AMOUNTS IN AY 2005-06 AND 2006-07 AFTER EXTRACTING THE ASSESSEES SUBMISSIONS. THESE ISSUES ARE CONTESTED BY BOTH THE ASSESSEE AND THE REVENUE. AS GROUND NO.1 BY REVENUE IN TWO YEARS AND GROUND N O.2 BY ASSESSEE IN AY 2005-06 AND 2006-07. THE CIT (A) WHI LE DELETING THE AMOUNT HAS HELD AS UNDER:- 4.1 THE LEARNED COUNSEL STATED THAT THE ASSESSING OFFICER ERRED IN DISALLOWING `.12 LAKHS PAID TO M/S C.P. SHAH & SONS AS TRUCK TRAFFIC ASSISTANCE CHARGES. OUT OF RS.12 00 000/- RS. 4 00 000/- ARE DISALLOWE D U/S. 40A (2) (B) OF INCOME TAX ACT 1961 AND RS. 8 00 000/- ARE DISALLOWED U/S. 40 (IA) OF INCOME TA X ACT 1961. RE: RS. 4 00 000/- IT IS RECORDED BY A.O. THAT M/S. C.P. SHAH & SONS IS OWNED BY ASSESSEES SONS. HOWEVER I T IS RUN INDEPENDENTLY BY THEM HAVING A PETROL PUMP AT TALASARI. IT SUPPLIES DIESEL ETC TO VARIOUS TRANSP ORT COMPANIES INCLUDING THE APPELLANT. TALASARI IS IN MAHARASHTRA ON THE BORDER OF MAHARASHTRA AND GUJARA T. THE APPELLANT ON AVERAGE WAS HAVING ABOUT 300 TRUCK S. IT IS GENERAL PRACTICE OF ALL PETROL PUMPS TO CHARG E RS. 100 PER TRUCK ONLY AS PARKING CHARGES FOR ALLOWING BASIC FACILITIES FOR TRUCKS E.G. WASHING AND RUN TIME FAC ILITIES TO THE DRIVERS AND CLEANERS. IT PERMITS PARKING OF THE TRUCKS ON GROUND WITHIN ITS CONTROL DURING DAY AS WELL AS NIGHT. THE TRUCKS ARE PARKED FOR REPAIRS WHEEL CHANGES E TC. TOO. THE TRUCKS AND GOODS IN THE TRUCKS PARKED IN T HEIR COMPOUND ARE SAFE AND SECURED. DURING PARKING PERIO D THE DRIVERS AND CLEANERS TAKE REST TOO. THE TRUCKS ALSO ENJOY OTHER FACILITIES TOO. FOR THESE REASONS TRUC K TRAFFIC ASSISTANT CHARGES @ RS. 1 LAC P.M. ARE PAID BY THE APPELLANT TO M/S. C.P. SHAH & SONS. CONSIDERING DAI LY ON AVERAGE 100 TRUCKS OF THE APPELLANT TOUCHING THE SAID PETROL PUMPS AND PARKED IN THEIR COMPOUND FOR A SHO RT OR LONG TIME THE AVERAGE CHARGE COMES TO RS. 33 PE R DAY PER TRUCK FOR THE PARKING WHICH IS MUCH BELOW REASONABLE LIMIT CONSIDERING RS. 100 PER DAY CHARG ED ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 14 OF 21 BY OTHER PETROL PUMPS. OWNERS OF THE M/S. C.P. SHAH & SONS ARE SONS OF THE APPELLANT DOES NOT JUSTIFY THE DISALLOWANCE PARTICULARLY WHEN THE CHARGES PAID ARE ON THE CONTRARY ON LOWER SIDE. FOR PARKING OF A TRUCK RS. 100 ARE REQUIRED TO BE PAID PER NIGHT FOR PARKING T HE TRUCKS EVEN ON ROAD FOR SECURITY AND SAFETY OF THE TRUCK AND GOODS THEREIN. 4.2 I HAVE CONSIDERED THE SAME AND LOOKING INTO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE ABOVE TH E REASONABLENESS U/S 40A(2)(B) IS THERE TO THE EXTENT OF RS. 2 00 000/- ONLY AND REMAINING IS DISALLOWED AND TO THIS EXTENT THE SAME IS CONFIRMED. THE APPELLANT GETS RE LIEF OF RS. 2 00 000/-. 4.3 THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISAL LOWING ` .8 00 000/- UNDER SECTION 40(A)(IA) OF INCOME TAX A CT 1961 FOR NON DEDUCTION OF TDS. THIS PAYMENT DOES NO T FALL WITHIN SECTION 194C. THE PAYMENT IS MADE FOR FACILITIES PROVIDED AND NOT FOR ANY WORK OR SUPPLY OF LABOUR. SECTION 194C IS NOT VIOLATED. HENCE SECTION 40A(IA) NOT APPLICABLE. THEREFORE ANY DISALLOWANCE UNDER SECTION 40A(IA) OF INCOME TAX ACT 1961 IS UNWARRANTED AND THEREFORE BE DELETED. 11.1. IT WAS THE SUBMISSION THAT M/S C.P.SHAH & SO NS ARE PROVIDING VARIOUS SERVICES NEAR THEIR PETROL PUMP W HICH IS ON THE BORDER OF MAHARASHTRA AND GUJARAT. IT WAS ALSO FURT HER SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE SERVICES BEING R ENDERED BY M/S C.P. SHAH & SONS. THE ONLY DISPUTE IS WITH REFERENC E TO REASONABILITY OF TRUCK SERVICE CHARGES PAID. 11.2. CONSIDERING THE FACTS OF THE CASE AND ARGUMEN TS OF RIVAL PARTIES WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 194C DOES NOT APPLY TO THE AMOUNTS PAID TOWARDS SERVICE CHARGES OF TRUCKS BEING PARKING CHARGES. THEREFORE THE DECISI ON OF THE CIT (A) UNDER SECTION 40(A)(IA) HAS TO BE APPROVED. HOWEVER WITH REFERENCE TO THE REASONABILITY OF THE AMOUNT IT WAS NOTICED THAT FOR THE FIRST TIME ASSESSEE PAID AN AMOUNT OF ` .21 LAKHS IN AY 2004-05 WHEREAS IN LATER TWO YEARS THE AMOUNT PAID WAS ` 12 LAKHS PER YEAR. THE EXPLANATION WAS THAT TRUCK ASSISTANCE CHA RGES WERE PAID ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 15 OF 21 AT ` .1 LAKH PER MONTH CONSIDERING DAILY AVERAGE 100 TRU CKS WHICH COMES TO ` .33/-PER DAY PER TRUCK FOR PARKING. THIS EXPLANATIO N WAS GIVEN IN AY 2005-06 AND 2006-07 WHEREAS IN 2004-05 THE ASSESSEES EXPLANATION WAS THAT THE PAYMENT WAS MAD E AT ` .1.75 LAKHS PER MONTH. EVEN THOUGH THERE IS NO DISPUTE WI TH REFERENCE TO THE SERVICES BEING RENDERED THERE IS LARGE VARIATI ON IN AMOUNTS PAID IN AY 2004-05 AT ` .21 LAKHS I.E. ` .1.75 LAKHS PER MONTH WHEREAS FOR SIMILAR FACILITIES IN AY 2004-05 AND 2005-06 TH E AMOUNT WAS PAID AT ` .1 LAKH PER MONTH. THERE IS NO JUSTIFICATION IN CLA IMING HIGHER AMOUNT IN AY 2004-05 AND LESSER AMOUNT IN AY 2005-06 AND 2006-07. CONSIDERING THAT THE ASSESSING OFFICER DISALLOWED WAS 1/3 RD OF THE AMOUNT IN AY 2004-05 WHICH COMES ALLOWING O F ` .14 LAKHS AS AGAINST ` .12 LAKHS PAID IN LATER YEARS WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) CONFIRMING TH E SAME HAS TO BE UPHELD. AS SEEN FROM THE RECORDS THIS EXPENDITURE WAS CLAIMED FOR THE FIRST TIME IN AY 2004-05 AND THE CIT (A) FOLLOW ING HIS OWN ORDER ON SERVICE CHARGES IN AY 2001-02 CONFIRMED THE DISA LLOWANCE IN THIS YEAR AT ` .7 LAKHS. FOR REASONS STATED ABOVE THERE IS NO JUSTIFICATION FOR CLAIMING SUCH HUGE EXPENDITURE WH EN ASSESSEE HIMSELF IN THE LATER TWO YEARS CLAIMED ONLY ` .12 LAKHS AT ` .1 LAKH PER MONTH. IN VIEW OF THIS WE ARE OF THE OPINION T HAT DISALLOWANCE PER SE MADE IN AY 2004-05 IS REASONABLE CONSIDERING THE FACTS OF THE CASE. THEREFORE ASSESSEES GROUND.6 IN AY 2004 -05 WAS ACCORDINGLY DISMISSED. COMING TO THE ISSUE ON SUSTA INING DISALLOWANCE AT ` .2 LAKHS IN AY 2005-06 AND 2006-07 WE ARE OF THE OPINION THAT THERE IS NO BASIS FOR DISALLOWING SUCH EXPENDITURE AT ` .2 LAKHS OUT OF TOTAL ` .12 LAKHS PAID. CONSIDERING THAT THE ASSESSEE CLAIMED AN AMOUNT OF ` .21 LAKHS IN 2004-05 WHEREAS IN THIS YEAR THE CLAIM WAS ONLY OF ` .12 LAKHS I.E. ` .1 LAKH PER MONTH WE ARE OF THE OPINION THAT THE AMOUNTS CLAIMED IS REASONABLE CONSIDERING THE NUMBER OF TRUCKS THE ASSESSEE OWNED AND THE BUS INESS IN WHICH HE IS INVOLVED. THE AO HIMSELF ALLOWED RS. 14 LAKHS IN AY ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 16 OF 21 2004-05. CONSIDERING THESE FACTS WE ARE OF THE OPI NION THAT THERE IS NO NEED TO RESTRICT THE AMOUNT UNDER SECTION 40A(2) AS DECIDED BY THE CIT (A). THEREFORE PARTLY MODIFYING THE ORDER OF THE CIT (A) WE ALLOW THE ENTIRE AMOUNT AS CLAIMED TO ASSESSEE IN A Y 2005-06 AND 2006-07 AND ACCORDINGLY ASSESSEES GROUND NO.2 IN C .O IS ALLOWED. REVENUES GROUND NO.1 ON THE ISSUE WAS DISMISSED. ISSUE .9: SURVEYORS FEE : 12 IN AY 2005-06 THE ASSESSEE RAISED THE GROUND ON DISALLOWANCE MADE BY THE ASSESSING OFFICER OF ` .1 73 561/- UNDER SECTION 40(A)(IA). THE ASSESSING OFFICER NOTICED TH AT THE ABOVE AMOUNT PAID TO THE SURVEYORS FOR ASSESSING THE DAMA GES WITHOUT MAKING ANY TDS AND ACCORDINGLY INVOKING SECTION 40( A)(IA) HE DISALLOWED THE AMOUNT WHICH IN TURN WAS CONFIRMED BY THE CIT (A). IT WAS THE SUBMISSION THAT SURVEYORS ARE NOT PROFES SIONAL PEOPLE AND THEY ARE ONLY RENDERING TECHNICAL ASSISTANCE TO THE ASSESSEE IN ASSESSING THE DAMAGES. THEREFORE PROVISIONS OF SEC TION 194J ARE NOT APPLICABLE. IT WAS FURTHER SUBMITTED THAT THE S AID AMOUNTS WERE ACTUALLY PAID ON BEHALF OF THE INSURANCE COMPANY AN D WAS REIMBURSED BY THE INSURANCE CO. THEREFORE THE AMOU NTS ALSO NOT AN EXPENDITURE OF THE ASSESSEE. THE LEARNED DEPARTM ENTAL REPRESENTATIVE HOWEVER RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND SUBMITTED THAT PROVISIONS OF SECTION 194J ARE A PPLICABLE EVEN FOR TECHNICAL SERVICES. THEREFORE THE AMOUNT IS CO VERED BY PROVISIONS OF TDS. 12.1 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THERE IS NO FINDING OF NATURE OF SERVICES AND WHOSE LIABILITY TO PAY THE SURVEYORS AND HOW THE AMOUNTS ARE COVERED B Y PROVISIONS OF TDS. ASSESSING OFFICER HAS TO GIVE A FINDING WHE THER THE SURVEYORS HAVE RENDERED ANY TECHNICAL /PROFESSIONAL SERVICES AND IF SO WHETHER THEY FALL UNDER THE FEES FOR PROFESSIONA L /TECHNICAL SERVICES. SINCE NO DETAILS ARE AVAILABLE ABOUT THE SERVICES RENDERED ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 17 OF 21 AND THE NATURE OF THE AMOUNTS PAID WE ARE OF THE O PINION THAT WE CANNOT GIVE ANY DECISION WITHOUT EXAMINATION OF FAC TS. THEREFORE IN THE INTEREST OF THE JUSTICE WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO GIVE A CLEAR FINDING WHETHER T HE SAID AMOUNT PAID BY THE ASSESSEE IS COVERED BY THE PROVISIONS O F SECTION 194J OR ANY OTHER SO AS TO MAKE TDS. UNLESS PROVISIONS OF T DS ARE ATTRACTED SEC. 40(A)(IA) CAN NOT BE INVOKED. ACCOR DINGLY ISSUE IN GROUND NO.4 IN ASSESSEE CO IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING IT ACCORDING TO THE LAW AND FA CTS. ISSUE .10 TRUCK REPAIRS EXPENDITURE : 13 THE ASSESSING OFFICER ON EXAMINING THE TRUCK REPAIR EXPENSES DISALLOWED IN AY 2005-06 AN AMOUNT OF ` .47 67 001/- UNDER SECTION 40A(IA) ON THE REASON THAT TDS WAS NOT MADE BY THE ASSESSEE. THE CIT (A) AFTER EXAMINING THE FACTS AS SUBMITTED BY THE ASSESSEE RESTRICTED THE DISALLOWANCE AMOUNT OF ` .8 58 965/- AND GAVE RELIEF OF ` .39 10 036/-. THE REVENUE IS CONTESTING THE DELETIO N IN GROUND NO.5 IN AY 2005-06. 13.1 WE HAVE CONSIDERED THE ISSUE AND RIVAL CONTENT IONS. AS SEEN FROM THE ORDER OF THE CIT (A) THE ISSUE IS ONE OF FACT AND THE LEARNED CIT (A) EXAMINED THE FACTS AS UNDER AND RESTRICTED THE DISALLOWANCE TO AMOUNTS WHICH ARE ADMITTED TO BE COVERED. THE AS SESSEE HAS NOT CHALLENGED THE RESTRICTION OF THE AMOUNT AS HE ADMI TS THE APPLICABILITY OF THE PROVISIONS AND NON-TDS IN THIS YEAR. THE SUBMISSIONS OF THE ASSESSEE AND THE FINDINGS OF THE CIT (A) ARE AS UNDER: 15.1 THE LEARNED COUNSEL HAS STATED THAT THE ASSESSING OFFICER ERRED IN DISALLOWING ` .47 67 001/- OUT OF REPAIRS & MAINTENANCE CHARGES FOR VEHICLES UNDER SECTION 40 (IA) OF INCOME TAX ACT 1961. DETAILS OF REPAIRS & MAINTENANCE EXPENSES ARE ENCLOSED WHICH INCLUDE ` .11 80 865/- FOR PURCHASE OF SPARE PARTS AND ` .35 81 136/- FOR LABOUR CHARGES. SECTION 194C IS APPLICABLE ONLY IN RESPECT OF LABOUR CHARGES AND NO T IN ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 18 OF 21 RESPECT OF PARTS. THEREFORE DISALLOWANCE IS TOTALL Y UNJUSTIFIED TO THE EXTENT OF ` .11 80 865/- PAID FOR PARTS. OUT OF ` .35 86 136/- PAID AS REPAIR EXPENSES ` .22 75 000/- HAVE BEEN PAID TO M/S C.P. SHAH & SONS . ` .4 44 733/- WERE PAID TO VARIOUS SMALL REPAIRERS BY DRIVERS ON WAY DURING TRIPS. EACH PAYMENT IS MUCH BELOW ` .20 000/-. THESE PAYMENTS ARE MADE BY DRIVERS WHILE ON TRIPS. YOU WOULD APPRECIATE THAT SECTION 1 94C IS APPLICABLE WHEN THE PAYMENT EXCEEDS ` .20 000/- AT A TIME OR ` .50 000/- DURING THE YEAR TO THE SAME PAYEE. HERE SECTION 194C IS NOT APPLICABLE. TO REST OF PAYMENTS OF ` .3 27 165/- (PAID TO INDIA BORING WORKS) ` .2 25 000/- (PAID TO TRIMURTI MOTORS) ` .1 35 000/- (PAID TO SHRI MOTORS) AND ` .1 71 800/- (PAID TO RIO AUTO) (TOTAL ` .8 58 965) PROBABLY SECTION 194C WOULD APPLY. AS PER AMENDED SECTION 40(IA) THE SE FOUR ITEMS OF PAYMENTS WILL BE ALLOWED IN THE YEAR WHEN TDS IS PAID. DISALLOWANCES ` .11 80 865/- (PARTS) ` .4 44 733/- (SUNDRIES) ` .3 908/- ` .1 100/- & ` .2 430/- (BELOW ` .20 000 EACH) BE DELETED. 15.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND THE DISALLOWANCE IS RESTRICTED TO ` .8 58 965/- ONLY AND APPELLANT GETS RELIEF OF ` .39 10 036/- AS NO TDS IS REQUIRED TO BE DEDUCTED ON OTHER PAYMENTS. SINCE THE LEARNED CIT (A) EXAMINED THE ISSUE ON FAC TS WE DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CI T (A). THE AMOUNTS DELETED ARE NOT COVERED BY THE PROVISIONS O F SECTION 194C BEING PURCHASE OF SPARE PARTS AND BEING THE AMOUNTS IN SMALL DENOMINATION TO VARIOUS PERSONS. THEREFORE WE UPHO LD THE ORDER OF THE CIT (A) AND DISMISS THE REVENUE GROUND. ISSUE .11: RTO PENALTY : 14 THIS ISSUE WAS RAISED AS GROUND NO.1 IN AY 2005-06 AND 2006-07 BY THE ASSESSEE AND BY WAY OF ADDITIONAL GR OUND IN THE C.O. FOR AY 2004-05. IT WAS SUBMITTED THAT AT THE T IME OF PREFERRING THE APPEAL THE LEGAL HEIR FORGOT TO INCLUDE THIS G ROUND WHICH WAS CONTESTED BY THE ASSESSEE BEFORE THE CIT (A). SINC E THERE IS OMISSION ON THE PART OF THE LEGAL HEIR WHILE PREFER RING THE CROSS ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 19 OF 21 OBJECTION AND AS THE ISSUE WAS ALREADY DISCUSSED BY THE CIT (A) IN ORDER WE ADMIT THE LEGAL GROUND AS SIMILAR ISSUE W AS ALSO CONTESTED IN OTHER TWO AYS. 14.1 THE ASSESSING OFFICER ON NOTICING THAT THE ASS ESSEE HAD PAID SMALL PENALTIES FOR OVERLOADING THE TRUCKS/OVER SIZ E OF THE TRUCK TO VARIOUS RTA AUTHORITIES ESTIMATED ADHOC PENALTIES OUT OF THE EXPENDITURE CLAIMED AT ` .75 000/- IN AY 2004-05 ` .1 25 000/- IN AY 2005-06 AND ` .1 00 000/- IN AY 2006-07. THE CIT (A) AGREED WITH SUCH ADHOC ESTIMATION OF THE PENALTIES. THEREF ORE THE GROUNDS WERE RAISED ACCORDINGLY. IT WAS SUBMITTED THAT STRI NGENT CONDITIONS IMPOSED BY THE CLIENTS ON THE TRANSPORT OPERATORS W ITH RESPECT TO THE QUANTITY AND TIME TAKEN TO DELIVER THE GOODS RE QUIRE OVERLOAD/OVER SIZING OF THE TRUCKS AND AS PER THE R TA AUTHORITIES TRUCKS WERE ALLOWED TO CARRY SUBJECT TO PAYMENT OF COMPOUNDING CHARGES. THESE ARE NOT FOR ANY INFRACTION OF LAW BU T PAID ONLY FOR THE PURPOSE OF BUSINESS OF TRANSPORTATION. IT WAS SUBMI TTED THAT THE EXPENSES ARE ALLOWABLE EXPENSES UNDER SECTION 37(1) AND RELIED ON THE ORDERS OF THE ITAT ON SIMILAR ISSUES IN DCIT VS . BHARAT C.GANDHI IN ITA NO.4270/MUM/2009 DATED 30 TH MARCH 2011 AND M/S. CHADHA & CHADHA CO. VS. CIT IN ITA NO.6140/MUM /2009 DATED 17.9.2010 WHERE SIMILAR ISSUES WERE CONSIDERE D AND HELD THAT THE AMOUNTS PAID ARE NOT PENALTY UNDER THE MOT OR VEHICLES ACT BUT ONLY COMPENSATORY CHARGES FOR OVERLOAD/OVER SIZ E TRUCKS AND IS THEREFORE ALLOWABLE AS AN EXPENDITURE UNDER SECTION 37(1). IT IS ALSO NOTICED THAT THE ASSESSING OFFICER HAS MENTIONED ON LY SMALL AMOUNT OF LESS THAN ` .5 000/- AFTER VERIFICATION OF THE EXPENDITURE DETAILS BUT ESTIMATED THE AMOUNT ON ADHOC BASIS. SI NCE THERE IS NO BASIS FOR ESTIMATING THE AMOUNT AT ` .1 75 000/- ` .1 25 000/- AND ` .1 00 000/- WE ARE ALSO NOT IN A POSITION TO UPHEL D THE DISALLOWANCE MADE UNDER THIS HEAD ON FACTS ALSO. BO TH ON LAW AS WELL AS ON FACTS THE AMOUNT CLAIMED IS AN ALLOWABL E EXPENDITURE. ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 20 OF 21 ACCORDINGLY RESPECTIVE GROUNDS ARE ALLOWED. THE ASS ESSING OFFICER IS DIRECTED TO ALLOW THE AMOUNTS AS CLAIMED. ISSUE.12. INTEREST ON LOANS : 15 THIS ISSUE WAS RAISED AS AN ADDITIONAL GROUND (7) B Y THE ASSESSEE IN AY 2004-05. IT WAS SUBMITTED THAT IN AY 2005-06 OUT OF THE AMOUNT PAID ` .3 64 950/- THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` .1 01 683/- AS AMOUNT COVERED BY SECTION 36(1)(VII) AND FURTHER IN AY 2006-07 OUT OF THE SAME AMOUNT T HE ASSESSING OFFICER DISALLOWED ` .1 74 994/-. CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE THESE DISALLOWANCES MADE WERE ALLO WED ON THE REASON THAT THE ASSESSEE HAD OWN FUNDS AND INTEREST FREE BORROWED FUNDS AND INTEREST FREE LOAN ADVANCE WERE OUT OF IN TEREST FREE BORROWALS AND OWN FUNDS AND THERE IS NO NEXUS WITH REFERENCE TO INTEREST PAID ON BORROWED FUNDS WHICH WAS UTILIZED IN THE BUSINESS. IT WAS THE SUBMISSION THAT THE REVENUE HAS NOT CONT ESTED THE DELETION OF INTEREST IN AY 2005-06 AND 2006-07. THE ASSESSEE DID NOT CONTEST THE DISALLOWANCE BEFORE THE CIT (A) AND ON NOTICING THESE FACTS THE LEGAL HEIR HAS NOW RAISED THE ISSU E FOR THE FIRST TIME BEFORE THE ITAT. AS SEEN FROM THE ORDER OF THE ASSE SSING OFFICER THE ASSESSING OFFICER CONSIDERED THAT THE ASSESSEE HAS ADVANCED AN AMOUNT OF ` .1 04 35 351/- TO VARIOUS RELATIVES INTEREST FREE A ND HAD TAKEN LOAN FROM OTHERS ` .108 66 759/- AND PAID INTEREST OF ` .12 70 636/-. AS THERE IS NO EXPLANATION THE ASSES SING OFFICER PROPORTIONATELY DISALLOWED THE AMOUNT OF ` .11 37 367/-. THE CIT (A) COULD NOT ADJUDICATE THIS ISSUE AS THE ASSESSEE HAS NOT RAISED ANY GROUND. CONSIDERING THAT THE CIT (A) IN 2005-06 AND 2006-07 ADJUDICATED THE ISSUE ON THE FINDING THAT THERE IS NO DIVERSION OF BORROWED FUNDS AND FURTHER THE ADVANCES ARE GIVEN I N AS EARLY AS IN 1992-93 THE DISALLOWANCE MADE IN THOSE YEARS WERE DELETED. SINCE THE SAME FACTS ARE AVAILABLE ON RECORD WE ARE OF T HE OPINION THAT THIS GROUND RAISED CAN BE ADMITTED AND REQUIRE ADJU DICATION BY THE ASSESSING OFFICER AFRESH AS THE CONTENTION THAT THE ASSESSEE HAS NOT ITA NO.5288 941 939 4430 & COS 42 147 AND 146 V.N SONI MUMBAI PAGE 21 OF 21 ADVANCED ANY FUNDS BORROWED ON INTEREST FOR NON BUS INESS PURPOSES HAS NOT BEEN EXAMINED AS ASSESSEE HAS NOT GIVEN ANY EXPLANATION BEFORE THE ASSESSING OFFICER. IN THE IN TEREST OF JUSTICE WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING O FFICER TO ADJUDICATE AFRESH. THEREFORE THE ADDITIONAL GROUND NO.7 IS AD MITTED AND RESTORED TO THE FILE OF THE ASSESSING OFFICER TO AD JUDICATE ACCORDING TO THE LAW KEEPING IN MIND THE FINDINGS OF THE CIT (A) IN AY 2005-06 AND 2006-07 BOTH ON FACTS AND ON LAW. ASSESSEE SHOU LD BE GIVEN A REASONABLE OPPORTUNITY TO MAKE SUBMISSIONS. WITH TH ESE DIRECTIONS THE GROUND IS CONSIDERED ALLOWED. 16 IN THE RESULT REVENUE APPEALS ARE DISMISSED AND TH E CROSS OBJECTIONS FILED BY THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2012. SD/- SD/- (R.S.PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 30 TH MARCH 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR F BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI