DCIT, New Delhi v. M/s. Napcon Turbo Chargers Limited, New Delhi

ITA 1183/DEL/2009 | 2005-2006
Pronouncement Date: 04-11-2011 | Result: Dismissed

Appeal Details

RSA Number 118320114 RSA 2009
Assessee PAN AAACN0894J
Bench Delhi
Appeal Number ITA 1183/DEL/2009
Duration Of Justice 2 year(s) 7 month(s) 4 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Napcon Turbo Chargers Limited, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 04-11-2011
Date Of Final Hearing 20-10-2011
Next Hearing Date 20-10-2011
Assessment Year 2005-2006
Appeal Filed On 30-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE SHRI G.D. AGARWAL VICE PRESIDENT AND SHRI RAJPAL YADAV JUDICIAL MEMBER I.T.A NO. 1183/DEL/2009 ASSTT. YEAR : 2005-06 DCIT CIRCLE-13 (1) ROOM NO. 406 C.R. BLDG. I.P. ESTATE NEW DELHI. VS. NAPCON TURBO CHARGERS LIMITED A-11 DDA COMERCIAL COMPLEX DEFENCE COLONY NEW DELHI. PAN AAACN0894J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S. NEGI SR. DR RESPONDENT BY: NONE ORDER PER RAJPAL YADAV : JM THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 17 TH JANUARY 2009 PASSED FOR ASSTT. YEAR 2005-06. IN THE FIRST GROUND OF APPEAL IT IS PLEADED BY THE REVENUE THAT LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F ` 14 28 934/-. ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 31.10.2005. IT HAS DECLARED NIL INCOME AFTER ADJUSTING THE CURRENT YEAR DEPRECIATION OF ` 4 84 03 374/- AGAINST THE CURRENT YEAR INCOME OF ` 3 02 58 671/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT A ND A NOTICE U/S 143 (2) OF THE INCOME TAX ACT WAS SERVED UPON T HE ASSESSEE. IN RESPONSE TO THE NOTICE SHRI ASHOK BHAT IA CHARTERED ACCOUNTANT APPEARED BEFORE THE AO AND SUBMITTED THE DETAILS TIME TO TIME. DURING THE COURSE OF ASSESSMENT PROCE EDING IT REVEAL TO THE AO THAT IN SCHEDULE K OF PROFIT AND L OSS ACCOUNT ASSESSEE HAS DEBITED AN AMOUNT OF ` 1 428 934/- UND ER THE HEAD LATE DELIVERY CHARGES. IN ORDER TO EXAMINE T HE NATURE OF THESE EXPENSES LD. AO DIRECTED THE ASSESSEE TO CLA RIFY AND SHOW HOW LATE DELIVERY CHARGES COULD BE ALLOWED TO THE ASSESSEE. IN THE UNDERSTANDING OF THE AO THESE ARE PENAL IN NATURE. IN RESPONSE TO THE QUERY OF AO ASSESSEE SUB MITTED A DETAILED REPLY VIDE LETTER DATED 23 RD AUGUST 2007. IT POINTED OUT THAT THIS AMOUNT WAS CLAIMED ON ACCOUNT OF DELAY IN DELIVERY OF DIFFERENT CONSIGNMENT TO M/S. MONNAIE D PARIS WH O IS A FOREIGN CUSTOMER OF THE ASSESSEE. ACCORDING TO THE ASSESSEE IT ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 3 COULD NOT DELIVER THE GOODS IN TIME AND THEREFORE C HARGES FOR LATE DELIVERY WAS TO BE PAID. THE ASSESSEE EMPHASIZ ED THAT IT IS NOT ON ACCOUNT OF ANY VIOLATION OF LAW. IT IS NOT I N THE NATURE OF FINE OR PENALTY BUT IT IS A COMMERCIAL COMPENSATIO N FOR NON FULFILLMENT OF ITS PROMISE WITH REGARD TO DELIVERY OF GOODS. THE LD. AO DID NOT ACCEPT THIS CONTENTION OF ASSESSEE. HE OBSERVED THAT IN THE LEDGER ACCOUNT FOUR ENTRIES WERE MADE B Y THE ASSESSEE ON THE LAST DAY I.E. ON 31 ST MARCH 2005 AGAINST THE ENTRY A NARRATION PENALTY FOR DELAY IN SUPPLY I S AVAILABLE. FROM THIS NARRATION IN THE LEDGER ACCOUNT LD. AO CO NSTRUED THAT IT IS PENAL IN NATURE AND ACCORDINGLY HE DISALLOWED THE CLAIM OF ASSESSEE. 3. DISSATISFIED WITH THE DISALLOWANCE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IT HAS FILE D WRITTEN SUBMISSION WHICH HAS BEEN REPRODUCED BY THE LD. CIT (A) ON PAGES NO. 3 TO 6 OF THE IMPUGNED ORDER. THE ASSES SEE MADE REFERENCE TO CIRCULAR 772 DATED 23.12.1998 ISSUED B Y THE BOARD WHEREIN THE BOARD HAS EXPLAINED THE AMENDMENT CARRI ED OUT IN SECTION 37 BY FINANCE ACT 1998. ACCORDING TO THE AS SESSEE ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 4 EXPLANATION TO SECTION 37 HAS BEEN INTRODUCED BY FI NANCE ACT 1998 WHEREBY IT HAS BEEN PROVIDED THAT ANY EXPENDI TURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS A N OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT DEEM TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION SHALL BE MADE IN RESPECT OF SUCH EXPENDIT URE. THE BOARD HAS EXPLAINED THIS EXPLANATION VIDE THIS CIRC ULAR. THE PAYMENT MADE BY THE ASSESSEE IS NOT FOR BREACH OF A NY LAW RATHER IT IS ON ACCOUNT OF NON FULFILLMENT OF ITS C OMMERCIAL OBLIGATION. THE ASSESSEE HAS RELIED UPON DECISION O F HONBLE P & H HIGH COURT IN THE CASE OF CIT V. HOSHIARI LAL K EWAL KRISHAN REPORTED IN (2007) 160 TAXMAN 96. SARDAR PRIT INDE R SINGH V CIT 160 ITR 493 CIT VS. INDO ASIAN SWITCH GEARS ( P) LTD. 222 ITR 772. LD. CIT(A) AFTER AN ANALYSIS OF ALL THE DE TAILS AND THE FACTS AND CIRCUMSTANCES DELETED THE DISALLOWANCES. 4. IN RESPONSE TO THE NOTICE OF HEARING NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTA NCE OF LD. DR WE HAVE GONE THROUGH THE RECORD CAREFULLY AND P ROCEED TO DISPOSE OFF THIS APPEAL EX PARTE QUA THE ASSESSEE. ON PERUSAL OF ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 5 THE RECORD WE FIND THAT PAYMENTS MADE BY THE ASSESS EE WAS IN RESPECT OF NON FULFILLMENT OF ITS PROMISE FOR DELIV ERY OF GOODS IN TIME. THIS PAYMENT WAS COMPENSATORY IN NATURE. IT I S NOT PAID FOR VIOLATION OF ANY LAW. LD. CIT(A) HAS MADE REFER ENCE TO LARGE NUMBER OF DECISIONS ON PAGE NO. 5 & 6 OF THE IMPUGN ED ORDER. IN OUR OPINION IT IS NOT NECESSARY TO RECAPITULATE AND RECITE ALL THE DECISION REFERRED TO ON THIS LEGAL ASPECT BUT S UFFICE IT TO SAY THAT THE CORE OF ALL THE DECISIONS OF THE HONBLE HIGH COURT OR THE TRIBUNAL IS TO THE EFFECT THAT IF THE AMOUNT PA ID IS IN THE NATURE OF COMPENSATION THE SAME WILL BE ALLOWABLE IRRESPECTIVE OF THE NOMENCLATURE USED IN THE BOOKS OF ACCOUNTS. IN THE CASE OF INDO ASIAN SWITCH GEARS (P) LTD. THE AMOUNT WAS PAID BY THE ASSESSEE TO THE PUNJAB STATE ELECTRICIT Y BOARD FOR DELAY IN DELIVERY OF GOODS THE DEDUCTION OF SUCH P AYMENT WAS ALLOWED TO THE ASSESSEE BECAUSE IT WAS NOT ON ACCOU NT OF INFRINGEMENT OF LAW. ON DUE CONSIDERATION OF THE OR DER OF LD. CIT(A) WE ARE OF THE VIEW THAT LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE DISALLOWANCE. ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 6 5. IN THE NEXT GROUND OF APPEAL GRIEVANCE OF REVENU E IS THAT LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANC E OF VEHICLE RUNNING AND MAINTENANCE EXPENSES TO 10% AS AGAINST THE DISALLOWANCE MADE BY THE AO AT 20%. THE ASSESSEE HA S DEBITED A SUM OF `13 26 856/- IN SCHEDULE K OF THE PROFIT AND LOSS ACCOUNT TOWARDS VEHICLE RUNNING AND MAINTENANC E EXPENSES. ON AN ANALYSIS OF THE DETAILS SUBMITTED B Y THE ASSESSEE LD. AO HAS OBSERVED THAT THERE ARE SIX CA RS OUT OF WHICH TWO ARE MERCEDEEZ BENZ AND OTHER FOUR ARE HYU NDAI SONATA LANCER OPEL ASTRA AND OPEL CORSA. ACCORDIN G TO THE AO ALL THESE CARS ARE IN LUXURY SEGMENT AND THEY COUL D NOT BE USED BY THE STAFF MEMBERS. HE THEREFORE FORMED AN O PINION THAT EXCLUSIVE USER OF THESE CARS FOR THE PURPOSE O F THE BUSINESS COULD NOT BE PROVED BY THE ASSESSEE. HE DI SALLOWED 20% OF THE EXPENSES AND MADE AN ADDITION OF ` 2 65 371/-. 6. ON APPEAL LD. CIT(A) HAS RESTRICTED THIS DISALLO WANCE TO 10%. WITH THE ASSISTANCE OF LD. DR WE HAVE GONE THR OUGH THE RECORD AND WE FIND THAT LD. CIT(A) FOLLOWED THE ORD ER OF LD. ITAT IN ASSTT. YEAR 2002-03 AND 2003-04 WHEREIN SU CH ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 7 DISALLOWANCE HAS BEEN RESTRICTED TO 10%. THE AO HAS MADE THE DISALLOWANCE AT 20%. LD. CIT(A) KEEPING IN MIND THE PRINCIPLE OF CONSISTENCY RESTRICTED SUCH DISALLOWANCE AT 10 %. IT IS SUCH AN ISSUE WHERE THERE CANNOT BE ANY STRAIGHT JACKET FORMULA TO DETERMINE UPTO TO WHICH EXTENT SUCH FACILITIES WERE USED FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL PURPOSE. WHERE VER AN ADHOC DISALLOWANCE IS BEING MADE THE ELEMENT OF GU ESS WORK WOULD ALWAYS BE THERE. IN ASSTT. YEAR 2002-03 AND 2 003-04 THE TRIBUNAL CONSIDERED IT REASONABLE TO RESTRICT SUCH DISALLOWANCE AT 10%. LD. FIRST APPELLATE AUTHORITY HAS ALSO EXER CISED HIS DISCRETION FOR CONSIDERING THE REASONABLE AMOUNT AT 10%. BEFORE US NO MATERIAL WAS POINTED OUT WHICH CAN PER SUADE US TO TAKE A DIFFERENT VIEW. THEREFORE WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL ALSO. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER 2011. SD/- S D/- [G.D. AGARWAL] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER DATED: 4.11.2011 ITA NO. 1183/DEL/09 ASSTT. YEAR 2005-06 8 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES