Shri S.M. Chitle, v. The I T O 4 (1),

ITA 310/IND/2008 | misc
Pronouncement Date: 04-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 31022714 RSA 2008
Bench Indore
Appeal Number ITA 310/IND/2008
Duration Of Justice 1 year(s) 9 month(s) 27 day(s)
Appellant Shri S.M. Chitle,
Respondent The I T O 4 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 04-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 04-05-2010
Date Of Final Hearing 26-04-2010
Next Hearing Date 26-04-2010
Assessment Year misc
Appeal Filed On 08-07-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO.310/IND/2008 A.YS. 2003-04 SHRI S.M. CHITLE INDORE APPELLANT PAN - ABAPC-4968-B VS INCOME TAX OFFICER 4(1) INDORE RESPONDENT APPELLANT BY : SHRI MANOJ PHADNIS RESPONDENT BY : SMT. APARNA KARAN SR. DR O R D E R PER JOGINDER SINGH JM THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 18.3.2008 ON THE FOLLOWING GROUNDS :- 1. ADDITION OF RS.10 000/- ON ACCOUNT OF FEES PAID FOR APPEAL TO ITAT 1.1. THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THAT THE FEES IN RELATION TO FILING OF APPEAL BEFORE THE HONBLE ITAT AS PERSONAL EXPENDITURE. THE APPEAL WAS IN RELATION TO THE ADDITIONS MADE REGARDING THE BUSINE SS OF THE ASSESSEE. 2 1.2. THAT THE ADDITIONS CONFIRMED BY THE HONBLE CIT(A) ARE NOT IN ACCORDANCE WITH THE LAW AND MAY PLEASE BE DELETED. 2.0 ADDITION OF RS.69 113/- ON ACCOUNT OF INTEREST PAID FOR CAR LOANS. 2.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THAT THE USE OF THE CASE IS WHOLLY FOR THE PERSONAL PURP OSES AND HAS ERRED IN DISALLOWING THE INTEREST PAID ON THE L OAN AS PERSONAL EXPENDITURE. 2.2 THAT THE ADDITIONS CONFIRMED BY THE HONBLE CI T(A) ARE NOT IN ACCORDANCE WITH THE LAW AND MAY PLEASE BE DE LETED. 30. ADDITION OF RS.7 300/- AND RS.14 100/- OUT OF T OTAL ADDITION OF RS.76 267/- ON ACCOUNT OF BONUS PAID TO EMPLOYEES. 3.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THAT THE AMOUNT OF RS.7 300/- ON THE GROUND THAT THE SAM E IS NOT ALLOWABLE FOR THE YEAR UNDER CONSIDERATION AS IT PE RTAINED TO THE PREVIOUS YEAR. 3.2 THAT THE HONBLE CIT(A) HAS ERRED IN NOT CONSI DERING THE PROVISIONS OF CLAUSE (C) OF SECTION 43B READ WI TH CLAUSE (II) OF SUB-SECTION (1) OF SECTION 36 OF THE IT ACT . 3.3 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THE ADDITION ON ACCOUNT OF BONUS PAID TO MR. SOIN OF RS . 14 100/- MERELY BECAUSE NO SALARY IS PAID TO MR. SOIN DURIN G THE EYAR UNDER CONSIDERATION. 3.4 THAT THE ADDITIONS CONFIRMED BY THE HONBLE CI T(A) ARE NOT IN ACCORDANCE WITH THE LAW AND MAY PLEASE BE DE LETED. 4.0 ADDITION OF RS. 8 000/- ON ACCOUNT OF PAYMENT O F PROFESSIONAL FEES. 4.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THAT THE PAYMENT FOR THE PURPOSE OF PROFESSIONAL CHARGES FOR ATTENDING THE APPEAL BEFORE THE HONBLE ITAT IS A P ERSONAL EXPENDITURE OF THE ASSESSEE. 3 4.2 THAT THE CHARGES FOR THE PROFESSIONAL PAYMENT MADE FOR THE BUSINESS PURPOSES BY THE ASSESSEE CANNOT BE TREATED AS PERSONAL EXPENDITURE. 4.3 THAT THE ADDITIONS CONFIRMED ARE NOT IN ACCORD ANCE WITH THE LAW AND MAY PLEASE BE DELETED. 5.0 ADDITION OF RS.21 971/- ON ACCOUNT OF VEHICLE M AINTENANCE EXPENSES. 5.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THE ADDITION MADE BY THE LD. A.O. ON ACCOUNT OF VEHICLE MAINTENANCE ON AD-HOC BASIS. 5.2 THAT THE ADDITIONS MADE ARE ON SURMISES AND ASSUMPTIONS. 5.3 THAT THE ADDITIONS MADE MAY PLEASE BE DELETED. 6.0 ADDITION OF RS. 1 04 595/- ON ACCOUNT OF DEPRE CIATION ON CAR. 6.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THE DISALLOWANCE MADE BY THE LD. A.O. ON ACCOUNT OF THE DEPRECIATION. 6.2 THAT THE ADDITIONS ARE MADE ON SURMISES AND ASSUMPTIONS AND ARE THEREFORE CONTRARY TO THE LAW. 6.3 THAT THE ADDITIONS MADE ARE NOT IN ACCORDANCE WITH THE LAW AND MAY PLEASE BE DELETED. 7.0 ADDITION OF RS.5 000/- ON ACCOUNT OF PAYMENT OF PROFESSIONAL FEES. 6.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THAT THE PAYMENT FOR THE PURPOSE OF PROFESSIONAL CHARGES FOR ATTENDING THE APPEAL BEFORE THE HONBLE ITAT IS A P ERSONAL EXPENDITURE OF THE ASSESSEE. 6.2 THAT THE CHARGES FOR THE PROFESSIONAL PAYMENT MADE FOR THE BUSINESS PURPOSES BY THE ASSESSEE CANNOT BE TREATED AS PERSONAL EXPENDITURE. 4 6.3 THAT THE ADDITIONS CONFIRMED ARE NOT IN ACCORD ANCE WITH THE LAW AND MAY PLEASE BE DELETED. 8.0 ADDITION OF RS.2 83 500/- ON ACCOUNT OF PRESUME D INTEREST ON LOAN GIVEN BY THE ASSESSEE TO HIS FATHER. 8.1 THAT THE HONBLE CIT(A) HAS ERRED IN CONFIRMIN G THE ADDITIONS MADE BY THE LD. A.O. WHICH IS A NOTIONAL INCOME AND NOT THE REAL INCOME IN THE HANDS OF THE ASSESSE E. 8.2 THAT THE HONBLE CIT(A) HAS ERRED IN APPLYING THE PROVISIONS OF SECTION 61 IN THE PRESENT CASE. 8.3 THAT THE ADDITIONS MADE ARE NOT IN ACCORDANCE WITH THE LAW AND MAY PLEASE BE DELETED. 2. DURING HEARING WE HAVE HEARD SHRI MANOJ PHADNIS LD. COUNSEL FOR THE ASSESSEE AND SMT. APARNA KARAN SR. DR. THE L D. COUNSEL FOR THE ASSESSEE MR. PHADNIS CONTENDED THAT GROUND NO. 1 PERTAINS TO FEES PAID TOWARDS FILING OF APPEAL BEFORE THE TRIBUNAL WHEREAS GROUND NOS. 4 AND 7 PERTAIN TO PAYMENT OF PROFESSIONAL FEES THER EFORE ARGUED TO BE ALLOWABLE EXPENSES. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE THOUGH DEFENDED THE IMPUGNED ORDER BUT DID NOT CONT ROVERT THE CLAIM OF THE ASSESSEE BY CLAIMING THAT IT IS AN EXPENDITURE OF PERSONAL NATURE THEREFORE IS NOT ALLOWABLE. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON THE FILE. THE AMOUNT OF RS. 1 0 000/- WAS INCURRED AS A FEE FOR FILING APPEAL BEFORE THE TRIBUNAL WHER EAS THE AMOUNTS OF RS.8 000/- AND RS. 5 000/- WERE PAID AS PROFESSIONA L CHARGES FOR ATTENDING THE HEARING BEFORE THE TRIBUNAL. IN VIEW OF THIS FACTUAL POSITION 5 SUCH PAYMENTS IN ANY MANNER CANNOT BE SAID TO BE PERSONAL IN NATURE AS THE PAYMENTS WERE MADE FOR BUSINESS PURPOSES CO NSEQUENTLY GROUND NOS. 1 4 AND 7 ARE ALLOWED. 3. THROUGH GROUND NOS. 2 5 AND 6 THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.69 113/- ON ACCOUNT OF INTEREST PAID FOR CAR LOAN ADDITION OF RS.21 971/- ON ACCOUNT OF VEHICLE MAINTENANCE AN D RS.1 04 595/- ON ACCOUNT OF DEPRECIATION ON CAR. THE CONTENTION RAI SED ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING AND 1/5 TH OF EXPENSES FOR THE ASSESSMENT YEAR 2003-04 WERE DISAL LOWED BY THE ASSESSEE ITSELF. KEEPING IN VIEW THE TOTALITY OF FA CTS THE INTEREST PAID ON CAR LOANS IS AN ALLOWABLE DEDUCTION WHEREAS THE AD DITION ON ACCOUNT OF VEHICLE MAINTENANCE EXPENSES THE PERSONAL USE CANN OT BE RULED OUT THEREFORE 20% OF THE TOTAL CLAIM IS DISALLOWED CO NSEQUENTLY IT IS PARTLY ALLOWED. AS FAR AS THE DEPRECIATION ON CAR IS CONCE RNED THOUGH IT IS AN ALLOWABLE DEDUCTION BUT STILL SINCE PERSONAL USE CA NNOT BE RULED OUT THEREFORE 20% OUT OF TOTAL CLAIM IS DISALLOWED TH EREFORE PARTLY ALLOWED. 4. GROUND NO. 3 PERTAINS TO ADDITIONS OF RS.7300/- AND RS.14 100/- OUT OF TOTAL ADDITION OF RS.76 267/- ON ACCOUNT OF BONUS PAID TO EMPLOYEES. AFTER HEARING THE RIVAL SUBMISSIONS WE HAVE FOUND THAT THE BONUS UNDER CONSIDERATION AMOUNTING TO RS.7300/- WAS CLAI MED TO BE PAID TO MR. SOIN AND SHRI SUDHIR CHOUHAN. THE STAND OF TH E REVENUE IS THAT THE 6 IMPUGNED PAYMENT (RS. 4500 + RS. 2800) SHOULD HAVE BEEN CLAIMED IN THE CONCERNED YEAR PAID BEFORE THE SPECIFIED DATE THEREFORE IS NOT AN ALLOWABLE EXPENSES. IT IS SEEN THAT RS.45 000/- WA S PAID ON 29.10.2002 AND RS. 2800/- WAS PAID ON 29.10.2002 RESPECTIVELY TO THE AFORESAID PERSONS. THE RETURN WAS FILED BY THE ASSESSEE ON 31 ST OCTOBER THEREFORE IN VIEW OF SECTION 43B READ WITH SECTIO N 36(1)(II) IT IS AN ALLOWABLE DEDUCTION AS PROVIDED IN PROVISO WHICH SP EAKS ABOUT ACTUAL PAYMENT BEFORE THE DUE DATE FOR FURNISHING THE RETU RN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF PREVIO US YEAR AND EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE CONSE QUENTLY THE AMOUNT OF RS.7300/- IS ALLOWED IN FAVOUR OF THE ASS ESSEE. AS FAR AS THE AMOUNT OF RS.14 100/- ON ACCOUNT OF BONUS PAYMENT TO THE EMPLOYEES IS CONCERNED WE HAVE FOUND THAT T HERE WAS NO SALARY PAID TO THE CONCERNED EMPLOYEES BY THE ASSESSEE FIR M. IF THE SALARY WAS NOT PAID DURING THE RELEVANT PERIOD THEREFORE THERE IS NO QUESTION OF PAYMENT OF BONUS. NO DETAILS IN SUPPORT OF ITS CLAI M WERE FILED BY THE ASSESSEE AT ANY STAGE THEREFORE IT CANNOT BE ALLO WED. RESULTANTLY THIS GROUND IS PARTLY ALLOWED. 5. THE LAST GROUND PERTAINS TO ADDITION OF RS.2 83 500/- ON ACCOUNT OF PRESUMED INTEREST ON LOAN GIVEN BY THE ASSESSEE TO HIS FATHER. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE AMOUNT OF RS.18 90 190/- WAS ADVANCED TO THE FATHER BY THE AS SESSEE. THE FATHER 7 EARNED INTEREST ON THIS AMOUNT AND OFFERED THE INTE REST FOR TAX IN ITS RETURN. AS PER THE REVENUE SINCE NO BUSINESS ACTI VITY WAS DONE BY THE FATHER OF THE ASSESSEE AFTER 31.3.2001 THEREFORE IT CANNOT BE SAID TO BE A BUSINESS LOAN AS EVEN NO INTEREST WAS CHARGED FRO M THE FATHER. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT IT IS A DIVERSION OF INCOME SIMPLY TO EVADE TAX. ON PERUSAL OF RECORD A ND AFTER HEARING THE RIVAL SUBMISSIONS WE HAVE FOUND THAT THE OPENING CA PITAL OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS RS.1 14 15 000/- CONSEQUENTLY THE IMPUGNED AMOUNT IS MUCH LOWER THAN THE TOTAL OPENING CAPITAL. THE STAND OF THE REVENUE IS THAT THOUGH ON E CAN EMPLOY HIS MONEY AS HE LIKES BUT MAY NOT PASS ON THE BENEFIT WHICH ORDINARILY AND LEGITIMATELY BE KEPT BY HIM. THE ASSESSEE GAVE INT EREST FREE LOAN OF RS.18 90 190/- TO HIS FATHER ON WHICH THE ASSESSIN G OFFICER ADDED 15% OF THE AMOUNT (RS.2 83 528/-) AS DEEMED INCOME OF T HE ASSESSEE FOR THE REASONS AS MENTIONED IN SUB-PARA (B) OF PARA 14.3 O F THE ASSESSMENT ORDER. IF THE TOTALITY OF FACTS IS CONSIDERED IT C AN BE SAID THAT IT IS NOT A CASE OF REVOCABLE TRANSFER OF ASSET WITHIN THE MEAN ING OF PROVISIONS OF SECTION 61 READ WITH SECTION 63 AS THE OWNERSHIP OF ASSET HAS NOT BEEN TRANSFERRED THEREFORE SUCH PROVISIONS ARE NOT APP LICABLE. TO PUT IT DIFFERENTLY THE ABSOLUTE OWNERSHIP OF AN ASSET MUS T BE TRANSFERRED AT THE FIRST INSTANCE AND THE RELEVANT AGREEMENT SHOULD PR OVIDE FOR RE-TRANSFER OF SUCH OWNERSHIP TO THE TRANSFEROR LATER ON TO ATT RACT THE PROVISIONS OF 8 SECTION 61. HOWEVER IN THE PRESENT CASE IT IS NO T SO AS THE MONEY HAS BEEN GIVEN AS A LOAN ONLY. IN THIS VIEW OF THE MATT ER WE HOLD THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) IS NOT CORRECT. THEREFORE THIS GROUND OF THE ASSESSEE IS ALLOWED. FINALLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 4TH MAY 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MAY 4 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DBN/