Vijay Power Generators Ltd, v. ITO Ward-17 (3), New Delhi

ITA 2156/DEL/2008 | 2002-2003
Pronouncement Date: 09-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 215620114 RSA 2008
Assessee PAN AAACV0191N
Bench Delhi
Appeal Number ITA 2156/DEL/2008
Duration Of Justice 3 year(s) 6 month(s) 6 day(s)
Appellant Vijay Power Generators Ltd,
Respondent ITO Ward-17 (3), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 09-12-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 09-12-2011
Date Of Final Hearing 17-11-2011
Next Hearing Date 17-11-2011
Assessment Year 2002-2003
Appeal Filed On 03-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 2156(DEL)/2008 ASSESSMENT YEAR: 2002-03 M/S VIJAY POWER GENERATORS IN COME-TAX OFFICER LTD. 60 SHARDHANAND MARG VS. WAR D 17(3) NEW DELHI. DELHI. PAN: AAACV0191N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANAT KAPOOR & SHRI ANKIT GUPTA ADVOCATES RESPONDENT BY : SHRI A.K. MONGA SR. DR DATE OF HEARIN G: 25.11.2011 DATE OF PRONOU NCEMENT: 09.12.2011. ORDER PER K.G. BANSAL : AM IN THIS CASE THE TRIBUNAL HAD PASSED A CONSOLI DATED ORDER FOR ASSESSMENT YEARS 1997-98 1998-99 2001-02 AND 20 02-03 TO 2004-05 IN WHICH ALL THESE APPEALS WERE DISMISSED IN LIMINE FOR NON-PROSECUTION. THIS ORDER WAS RECALLED ON 12.02.2010. 2. THE FACTS IN REGARD TO ASSESSMENT YEAR 2002 -03 ARE THAT THE ASSESSEE-COMPANY FILED ITS RETURN ON 31.03.2003 D ECLARING TOTAL INCOME OF ITA NO. 2156(DEL)/2008 2 RS. 6 80 940/-. THE AO COMPLETED THE ASSESSME NT U/S 143(3) ON 31.03.2005 AT TOTAL INCOME OF RS. 22 09 350/-. W HILE MAKING THE ASSESSMENT THE AO MADE CERTAIN DISALLOWANCES FR OM THE EXPENSES ETC. WHICH ARE DISCUSSED BRIEFLY HEREUNDER:- (I) THE ASSESSEE HAD CLAIMED DEDUCTION OF DEPRECIAT ION OF RS. 52 800/- AND INTEREST OF RS. 26 903/- IN RESPECT O F A NEW CAR PURCHASED IN THIS YEAR. THE DEPRECIATION AND THE EXPENDITURE WERE DISALLOWED ON THE GROUND THAT THE CAR WAS RE GISTERED IN THE NAME OF THE ASSESSEE-COMPANY ON 12.04.2002; (II) THE ASSESSEE HAD CLAIMED THE EXPENDITURE OF RS. 85 000/- AS ELECTRICITY EXPENSES WHICH WERE PAID UNDER PROTES T. IN SUPPORT OF THE CLAIM A COPY OF LETTER DATED 12.03.1999 WA S SUBMITTED TO THE EFFECT THAT THE SUPPLY OF ELECTRICITY WILL BE RES UMED ON PAYMENT OF RS. 85 000/-. THIS AMOUNT WAS DISALLOWED AS I T DID NOT PERTAIN TO THIS YEAR; (III) THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS. 4 0 3 461/- AS VEHICLE RUNNING AND MAINTENANCE EXPENSES. ON V ERIFYING THE ITA NO. 2156(DEL)/2008 3 EXPENSES WITH LEDGER IT WAS FOUND THAT THE EXPEN DITURE AMOUNTED TO RS. 3 69 650/- ONLY. THEREFORE THE DIFFERENCE OF RS. 33 811/- WAS DISALLOWED. A FURTHER SUM OF RS. 40 346/- W AS DISALLOWED ON THE GROUND THAT THE VEHICLE MIGHT HAVE BEEN US ED BY THE DIRECTORS AND THEIR FAMILY MEMBERS FOR PERSONAL U SE. THUS A TOTAL DISALLOWANCE UNDER THIS HEAD AMOUNTED TO RS. 74 157/-; (IV) TELEPHONE EXPENSES WERE CLAIMED AT RS. 10 84 632/ -. THE EXPENDITURE INCLUDED THE PAYMENT MADE IN RESPECT OF RESIDENTIAL TELEPHONES OF THE DIRECTORS AND THEIR MOBILE P HONES. THEREFORE PERSONAL EXPENDITURE WAS COMPUTED AT 10% OF THE T OTAL EXPENDITURE. THUS A SUM OF RS. 1 08 463/- WAS DI SALLOWED; (V) THE AO ALSO EXAMINED THE DETAILS OF OTHER EXPENSE S. THE ACTUAL EXAMINATION WAS DONE BY THE WARD INSPECTOR. HE R EPORTED THAT A NUMBER OF EXPENSES WERE INCURRED IN CASH ALSO. V ARIOUS EXPENSES IN RESPECT OF WHICH BILLS OR VOUCHERS W ERE NOT PRODUCED WERE QUANTIFIED AT RS. 10 49 947/-. THEREFORE TH IS EXPENDITURE WAS ALSO DISALLOWED IN COMPUTING THE TOTAL INCOME. ITA NO. 2156(DEL)/2008 4 3. THESE DISALLOWANCES WERE CHALLENGED BEFORE THE LD. CIT(APPEALS). THE FINDINGS OF THE LD. CIT(APPEALS) AFTER CONSID ERING THE REMAND REPORT OF THE AO ARE SUMMARIZED AS UNDER:- (I) IN RESPECT OF DEPRECIATION AND INTEREST IN RESPECT OF MOTOR CAR IT HAS BEEN MENTIONED THAT THE SAME WAS REGISTERED IN THE NAME OF THE ASSESSEE-COMPANY ON 30.07.2001 AND THEREAFTER CNG KIT WAS FITTED. THE SECOND ENDORSEMENT WAS IN RESPEC T OF THE CNG KIT. THEREFORE IT WAS HELD THAT THE ASSESSEE EXERCISED THE RIGHT OF OWNERSHIP FROM 30.07.2001 AND BOTH THESE DISA LLOWANCES WERE DELETED. (II) THE ASSESSEE HAD CHALLENGED NOT ONLY THE ADDITION BUT ALSO QUANTUM IN RESPECT OF ELECTRICITY AND WATER CHARG ES. THE LD. CIT(APPEALS) DID NOT AGREE WITH THE ASSESSEE I N BOTH THESE MATTERS. IT WAS HELD THAT SINCE THE EXPENDITUR E DID NOT PERTAIN TO THIS YEAR THE DISALLOWANCE OF RS. 85 000/- WAS UP HELD. (III) THE ADDITION OF RS. 33 811/- FROM VEHICLE RUNNIN G AND MAINTENANCE EXPENSES BEING THE DISCREPANCY BET WEEN THE CLAIM ITA NO. 2156(DEL)/2008 5 AND VERIFICATION OF THE CLAIM FROM LEDGER WAS UPH ELD. THE BALANCE DISALLOWANCE OF RS. 40 346/- WAS ALSO UPHELD BY HOLDING THAT DISALLOWANCE AT 10% FOR PERSONAL USE IS REASONA BLE. (IV) 10% OF THE DISALLOWANCE FROM TELEPHONE EXPENSES WAS ALSO UPHELD BY STATING THAT IT IS REASONABLE AND EX PENDITURE TO THIS EXTENT CAN BE ATTRIBUTED TO THE USER OF THE DIREC TORS FOR THEIR PERSONAL PURPOSES. (V) IN RESPECT OF THE LAST DISALLOWANCE OF RS. 10 49 9 47/- BEING UNVERIFIABLE EXPENSES IT IS MENTIONED THAT THESE EXPENSES REMAINED UNVERIFIABLE. THE CLAIM THAT SOME OF TH E EXPENSES WERE MADE BY CHEQUE WAS NOT ACCEPTED. THEREFOR E THE DISALLOWANCE WAS UPHELD. 4. BEFORE US IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD CLAIMED TOTAL EXPENDITURE OF RS. 1 35 654/- AS ELECTRICITY AND WATER CHARGES. IN SUPPORT THEREOF THE CORRESP ONDING LEDGER ACCOUNT WAS FILED. THIS CONTAINS THE DETAILS OF THE EXPE NDITURE OF RS. 1 37 025/- IN THIS YEAR WHICH HAS BEEN REDUCED TO RS. 1 35 654 /- BECAUSE OF THE CREDIT OF ITA NO. 2156(DEL)/2008 6 RS. 1 371/- GRANTED BY WAY OF A JOURNAL ENTRY. THERE IS A DEBIT OF RS. 65 365/- ON 30.03.2002 IN THIS ACCOUNT WITH THE NA RRATION-AMOUNT OF ELECTRICITY CHARGES PROVISIONS MADE DURING THE YE AR 2001-02 AS PER LIST ATTACHED. HOWEVER NO SUCH LIST IS ATTACHED. THE CASE OF THE LD. COUNSEL IS THAT THE AMOUNT OF RS. 85 000/- WAS PAID IN T HE EARLIER YEAR AND NOT IN THIS YEAR. IN THE SUBMISSIONS MADE BEFORE THE L D. CIT(A) IT WAS MENTIONED THAT NO SUCH CLAIM HAD BEEN MADE BY THE ASSESSEE. THE AMOUNT WAS PAID VIDE PAY ORDER NO. 569184 DATED 27.02 .1999 DRAWN ON SYNDICATE BANK. THE AMOUNT WAS PAID UNDER PROTEST. A COPY OF PAY ORDER WAS ALSO FILED BEFORE HER. IN REPLY THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE. FRO M THE PERUSAL OF THE LEDGER ACCOUNT IT WILL BE SEEN THAT THE AFORESAI D SUM OF RS.85 000/- HAS NOT BEEN DEBITED AS EITHER ELECTRICITY OR WATE R CHARGES IN THE YEAR. THERE IS A PROVISION OF RS. 65 357/- WHICH HAS NOT BEE N LOOKED INTO BY THE LOWER AUTHORITIES. BUT THAT IS NOT THE ISSUE IN DISP UTE BEFORE US. LOOKING TO THE AFORESAID FACT THE DISALLOWANCE OF RS. 85 000/- IS DELETED. ITA NO. 2156(DEL)/2008 7 5.1 COMING TO THE DISCREPANCY IN THE LEDGER ACCOU NT OF VEHICLE RUNNING AND MAINTENANCE AND THE CLAIM MADE BY THE ASSESS EE THE DISALLOWANCE OF RS. 33 801/- HAS NOT BEEN PRESSED BEFORE US BY TH E LD. COUNSEL. THEREFORE THIS DISALLOWANCE IS UPHELD. 5.2 IN REGARD TO BALANCE DISALLOWANCE OF RS. 40 3 46/- FROM VEHICLE RUNNING AND MAINTENANCE EXPENSES AND RS. 1 08 463/- FROM TELEPHONE EXPENSES THE CASE OF THE LD. COUNSEL IS THAT THE ASSESSEE IS A LIMITED COMPANY AND IF ANY BENEFIT HAS BEEN GRANTED TO TH E DIRECTORS THE SAME SHALL CONSTITUTE PERQUISITES IN THEIR HANDS. IN SO FAR AS THE ASSESSEE IS CONCERNED THE EXPENDITURE HAS BEEN INCURRED ON S TAFF AND OFFICERS. THE EXPENDITURE IS ALLOWABLE IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGINEERING C O. VS. CIT (2002) 253 ITR 749. IN THE CONCLUDING PARAGRAPH OF THIS DEC ISION IT IS MENTIONED THAT THE TRIBUNAL WAS WRONG WHILE DISALLOWING 1/6 TH OF TOTAL CAR EXPENDITURE AND DEPRECIATION CLAIMED BY THE ASSESSEE ON ACCO UNT OF THE PERSONAL USE OF THE CARS WHICH WERE USED BY THE DIRECTORS. LO OKING TO THIS DECISION THE LD. DR DID NOT MAKE ANY ELABORATE ARGUMENT IN TH IS MATTER BUT RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 2156(DEL)/2008 8 5.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. ADMITTEDLY THE EXPENDITURE HAS BEEN INCURRED ON PERSONNEL OF THE ASSESSEE-COMPANY. EVEN IF IT IS CONSIDERED THAT A BENEFIT HAS BEEN CONFERRED ON THEM THE SAME IS DEDUCTIBLE IN COMP UTING THE TOTAL INCOME OF THE ASSESSEE. IN SO FAR AS THE ASSESSEE IS CON CERNED IT IS A FICTIONAL ENTITY WHICH CANNOT HAVE ANY PERSONAL USE OF VEHICLE AND TELEPHONE. IN THE LIGHT OF THE DECISION OF HONBLE GUJARAT HIGH C OURT (SUPRA) THE DISALLOWANCES OF RS. 40 346/- AND RS. 1 08 463/- ARE DELETED. 5.4 IN REGARD TO THE DISALLOWANCE OF RS. 10 49 94 7/- THE ONLY CASE MADE OUT BY THE LD. COUNSEL WAS THAT SOME OF THE BILLS M IGHT HAVE BEEN LOST OR OMITTED TO BE FILED BEFORE THE AO. THE DISALLOWA NCE IS EXCESSIVE. THEREFORE IT WAS ARGUED THAT SUITABLE RELIEF MA Y BE GIVEN TO IT. IN REPLY THE LD. DR REFERRED TO THE FINDINGS OF THE AO AND THE LD. CIT(APPEALS) THAT BILLS WERE NOT PRODUCED IN RESPECT OF THESE EXPE NSES. IN ABSENCE OF VERIFICATION OF THE EXPENSES IT WAS ARGUED THA T THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES WAS IN ORDER. 5.5 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT A NUMBER OF EXPENSES HA VE ALSO BEEN INCURRED ITA NO. 2156(DEL)/2008 9 THROUGH BANKING CHANNEL. IN SOME CASES THE NAME OF THE PARTY TO WHICH THE PAYMENT WAS MADE IS NARRATED. HOWEVER SOME EXPENSES ARE IN CASH WHICH DO NOT BEAR ANY NAME ALSO. THEREFORE W E ARE OF THE VIEW THAT SOME DISALLOWANCE WAS CALLED FOR ON THE FACTS OF THE CASE. IN A SITUATION LIKE THIS ONLY AN ESTIMATE CAN BE MADE OF THE E XPENSES WHICH IS REQUIRED TO BE DISALLOWED OUT OF CASH EXPENSES OR ON ACCOUN T OF THE FACT THAT BILLS ARE NOT THERE. WE ARE OF THE VIEW THAT A DISAL LOWANCE OF 10% AMOUNTING TO RS. 1 05 000/- WILL MEET THE ENDS OF JUSTICE. THUS THE DISALLOWANCE IS RESTRICTED TO RS. 1 05 000/-. 6. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (K.G. BANSA L) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S VIJAY POWER GENERATORS LTD. DELHI. ITO WARD 17(3) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.