ACIT, New Delhi v. M/s. Escorts Automobiles Ltd, New Delhi

ITA 3251/DEL/2009 | 2005-2006
Pronouncement Date: 23-04-2010 | Result: Dismissed

Appeal Details

RSA Number 325120114 RSA 2009
Assessee PAN AAACE0077C
Bench Delhi
Appeal Number ITA 3251/DEL/2009
Duration Of Justice 9 month(s) 6 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Escorts Automobiles Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 23-04-2010
Date Of Final Hearing 04-02-2010
Next Hearing Date 04-02-2010
Assessment Year 2005-2006
Appeal Filed On 17-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.3469/DEL/2009 ASSESSMENT YEAR : 2005-06 M/S ESCORTS AUTOMOTIVES LTD. 11 SCINDIA HOUSE CONNAUGHT CIRCUS NEW DELHI. PAN : AAACE0077C VS. DCIT CIRCLE 11 (1) NEW DELHI. ITA NO.3251/DEL/2009 ASSESSMENT YEAR : 2005-06 ACIT CIRCLE 11 (1) CR BUILDING NEW DELHI. M/S ESCORTS AUTOMOTIVES LTD. 11 SCINDIA HOUSE CONNAUGHT CIRCUS NEW DELHI. PAN : AAACE0077C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.M. MEHTA ADVOCATE REVENUE BY : SHRI.STEPHEN GEORGE CIT DR ORDER PER R.C. SHARMA: ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 14.05.2009 F OR ASSESSMENT YEAR 2005-06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE IT ACT. 2. THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FIRST GRIEVANCE OF THE ASSESSEE RELATE TO DISALLOWANCE OF BUSINESS PROMOTION ITA NO.3469/DEL/2009 ITA NO.3251/DEL/2009 2 EXPENSES OF RS.17.19 LACS. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LEASING FINANCING AND T RADING IN SHARES AND DEBENTURES. DURING THE YEAR UNDER CONSIDERATION IT CLAIMED BUSINESS PROMOTION EXPENSES OF RS.27.19 LACS IN RESPECT OF GIFT ITEMS DISTRIBUTED BY IT. THE ASSESSING OFFICER DECLINED DEDUCTION BY OBSERVING T HAT NONE OF THE BILLS OF BUSINESS PROMOTION EXPENSES ARE IN THE NAME OF THE COMPANY AND THEY ARE IN THE NAME OF DIRECTORS. IT WAS EXPLAINED THAT ALL T HESE GIFTS ARE ITEMS FOR PRESENTATION. BEING NOT IN AGREEMENT WITH THE ASSE SSEE THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT. BY THE IMPUGNED ORDE R THE CIT (A) ALLOWED RS.10 LACS BY OBSERVING THAT LOOKING TO THE GROSS TURNOVE R OF THE ASSESSEE AND THE NATURE OF ITS BUSINESS IT IS REASONABLE TO ALLOW R S.10 LAC AS BUSINESS PROMOTION EXPENSES AGAINST THE ASSESSEES CLAIM OF RS.27.19 L ACS. BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT IN VIEW OF THE ASSESSEES BUSINESS OF LEASING FINA NCING AND TRADING OF SHARES IT USED TO GIVE PRESENTS TO ITS EXISTING AND POTENTIAL CLIENTS WHICH IS CUSTOMARY IN NATURE. NOTHING SPECIFIC WAS BROUGHT ON RECORD BY THE LOWER AUTHORITY TO ALLEGE THAT EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE O F BUSINESS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ACHIEVED A TU RNOVER OF RS.16.13 CRORES FROM ITS TRADING BUSINESS AND WAS HAVING INTEREST I NCOME OF RS.5.35 CRORES. THUS THE EXPENDITURE SO INCURRED FOR PROMOTION OF BUSINESS IS TO BE ALLOWED AS BUSINESS EXPENDITURE. GENUINENESS OF EXPENSES SO I NCURRED WERE NOT DOUBTED. KEEPING IN VIEW ASSESSING OFFICERS ALLEGATION THAT BILLS HAVE NOT BEEN PROPERLY MAINTAINED WE DIRECT TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 10% OF THE EXPENDITURE. WE DIRECT ACCORDINGLY. 4. THE NEXT GRIEVANCE OF THE ASSESSEE RELATE TO ADD ITION OF RS.1 96 20 831/- ON ACCOUNT OF INTEREST INCOME. IN THIS REGARD AT PAGE 3 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSERVED THAT THERE WERE DISCREPANCY WITH REGARD TO INTEREST INCOME SHOWN BY THE ASSESSEE WHEN COMPARE D WITH THE TDS CERTIFICATE ITA NO.3469/DEL/2009 ITA NO.3251/DEL/2009 3 FILED ALONG WITH THE RETURN. HE THEREFORE ADDED RS.1 96 20 831/- IN THE ASSESSEES INCOME BEING THE DIFFERENCE AMOUNT AS PE R THE TDS CERTIFICATE. BY THE IMPUGNED ORDER THE LD. CIT (A) CONFIRMED THE AD DITION. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT THE ASSESSEE COMPANY HAS PLACED INTER CORPORATE DEP OSIT OF RS.38.83 CRORES WITH M/S AAA PORTFOLIOS PVT. LTD. FOR DIFFERENT PER IODS. OUT OF THE DEPOSITS OF RS.38.83 CRORES A SUM OF RS.37.18 CRORES WERE PLACE D IN EARLIER ASSESSMENT YEARS AND THE BALANCE OF RS.1.65 CRORES HAS BEEN PL ACED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . WE ALSO FOUND THAT INTER CORPORATE DEPOSITS WERE PLACED AT DIFFERENT RATES O F INTEREST. HOWEVER M/S AAA PORTFOLIOS PVT. LTD. IN VIEW OF THE NEGOTIATION GO ING ON WITH THE ASSESSEE COMPANY DEDUCTED HIGHER TDS ON THE PRESUMPTION THA T HIGHER INTEREST HAVE TO BE PAID TO THE ASSESSEE COMPANY. HOWEVER ULTIMATE LY THE INTEREST PAID WAS AS PER THE JOINT DECISION OF BOTH THE PARTIES. TOTAL INTEREST OF RS.2 99 43 788/- WAS PAID BY M/S AAA PORTFOLIOS PVT. LTD TO THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION. RELEVANT CONFIRMATION FROM M/S AAA PORTFOLIOS PVT. LTD WAS ALSO OBTAINED AND PLACED BEFORE THE ASSESSING OFFICER AL ONG WITH THE COPY OF LEDGER ACCOUNT OF THE INTEREST PAID BY M/S AAA PORTFOLIOS PVT. LTD TO THE ASSESSEE COMPANY. THE ACTUAL AMOUNT OF INTEREST PAID BY M/S AAA PORTFOLIOS PVT. LTD AND RECEIVED BY THE ASSESSEE COMPANY WERE DULY CONFIRME D BEFORE THE ASSESSING OFFICER BY PRODUCING NECESSARY CERTIFICATES. WE AL SO FOUND THAT AFTER DEDUCTING TDS OF RS.26 03 395/- NET INTEREST AMOUNTING TO RS .2 73 40 393/- WAS PAID TO THE ASSESSEE COMPANY. THE TDS DEDUCTED WAS DULY DE POSITED IN THE BANK ACCOUNT. ACCORDINGLY WE FOUND THAT THE ASSESSEE W AS NOT IN RECEIPT OF EXTRA INTEREST OF RS.1 96 20 831/- ADDED BY THE ASSESSING OFFICER. THIS INTEREST WAS NEITHER DUE IN FAVOUR OF ASSESSEE NOR IT WAS RECEIV ED BY THE ASSESSEE MERELY BECAUSE TDS WAS DEDUCTED ON HIGHER INTEREST AMOUNT THE SAME CANNOT BE DEEMED TO BE ASSESSEES INCOME UNLESS ANY COGENT MA TERIAL IS PLACED ON RECORD TO SUBSTANTIATE SUCH ACCRUAL OF INCOME. THUS WE D O NOT FIND ANY MERIT IN THE ITA NO.3469/DEL/2009 ITA NO.3251/DEL/2009 4 ACTION OF LOWER AUTHORITIES FOR MAKING ANY ADDITION ON ACCOUNT OF INTEREST OF RS.1 96 20 831/-. THE SAME IS DIRECTED TO BE DELET ED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART IN TERMS INDICATED HEREINABOVE WHEREAS THE APPEAL OF THE REV ENUE IS DISMISSED. . THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.04.20 10. [RAJPAL YADAV] [R.C. SHARMA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 23.04.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES