M/s. Sag New Look, Moradabad v. DCIT, Moradabad

ITA 3332/DEL/2009 | 2006-2007
Pronouncement Date: 13-01-2010 | Result: Dismissed

Appeal Details

RSA Number 333220114 RSA 2009
Assessee PAN AANFS2300L
Bench Delhi
Appeal Number ITA 3332/DEL/2009
Duration Of Justice 5 month(s) 20 day(s)
Appellant M/s. Sag New Look, Moradabad
Respondent DCIT, Moradabad
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 13-01-2010
Date Of Final Hearing 13-01-2010
Next Hearing Date 13-01-2010
Assessment Year 2006-2007
Appeal Filed On 24-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH G DELHI ] BEFORE SHRI A. D. JAIN JM SHRI K. D. RANJAN AM I. T. APPEAL NOS. 3332 (DEL) OF 2009 ASSESSMENT YEAR : 2006-07. M/S. SAG NEW LOOK DY. COMMISSIONER O F INCOME-TAX IQBAL HOUSE TAVELA STREET VS. R A N G E : II M O R A D A B A D - 244 001 [U.P.] M O R A D A B A D. P A N / G I R NO. AAN FS 2300 L. A N D I. T. APPEAL NOS. 3335 (DEL) OF 2009 ASSESSMENT YEAR : 2006-07. DY. COMMISSIONER OF INCOME-TAX M/S. SAG NEW LOOK R A N G E : II VS. IQBAL HOUSE TAVELA STREET M O R A D A B A D. M O R A D A B A D - 244 001 [U.P.] P A N / G I R NO. AAN FS 2300 L. ( APPELLANTS ) ( RES PONDENTS ) ASSESSEE BY : SHRI P. K. MISRA C. A.; DEPARTMENT BY : SHRI MUKESH VERMA SR. D. R.; O R D E R. PER K. D. RANJAN AM : THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE AR ISE OUT OF ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BAREILLY. TH ESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF FOR THE SAKE OF CONVENIENCE BY TH IS CONSOLIDATED ORDER. 2 I. T. APPEAL NOS. 3332 (DEL) OF 2009 A N D I. T. APPEAL NOS. 3335 (DEL) OF 2009 2. THE FIRST ISSUE FOR CONSIDERATION IN ASSESSEE'S APPEAL RELATE TO CONFIRMING THE DISALLOWANCE OF CAR EXPENSES DEPRECIATION AND TELE PHONE EXPENSES TO THE EXTENT OF 5 PER CENT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER WHILE COMPUTING THE INCOME OF ASSESSEE FIRM DISALLOWED 10 PER CENT OF CAR EXPE NSES AMOUNTING TO RS.25 306/- 10 PER CENT OF DEPRECIATION ON CAR AND TELEPHONE EXPENSES ON TH E GROUND THAT POSSIBILITY OF USE OF CAR AND TELEPHONE FOR PERSONAL USE BY THE PARTNERS COULD NO T BE RULED OUT IN THE ABSENCE OF ANY LOG BOOK MAINTAINED BY THE ASSESSEE. ON APPEAL THE LD. CIT (APPEALS) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5 PER CENT OF CAR EXPENSES AND 5 P ER CENT OF DEPRECIATION ON CAR. 3. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS ISSUES RELATING TO DISALLOWANCE O F TELEPHONE EXPENSES CAR RUNNING EXPENSES AND DEPRECIATION ARE COVERED AGAINST THE A SSESSEE BY THE DECISION OF ITAT DELHI BENCH 'G' IN ASSESSEE'S OWN CASE IN ITA. NO. 1082 A ND 1473 (DEL) OF 2008 FOR ASSESSMENT YEARS 2003-04 AND 2004-05. THE ITAT WHILE CONFIRMI NG THE ADDITION TO THE EXTENT OF 5 PER CENT HELD AS UNDER :- ' 7. WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 37 OF THE ACT THE EXPENDITUR E WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS IS ALLOWABLE A S DEDUCTION. THE ASSESSEE HAS NOT MAINTAINED ANY LOG BOOK IN RESPECT OF CAR E XPENSES. LIKEWISE IN RESPECT OF TELEPHONE EXPENSES THE DETAILS OF PHONE S / BILLS WERE NOT FURNISHED. THE ASSESSING OFFICER HAS ALSO NOTED THAT THERE WAS NO BAR OR RESTRICTION FOR EITHER BY THE PARTNERS OR THEIR FAMILY MEMBERS TO U SE THE LANDLINE OR MOBILE PHONES FOR PERSONAL USE. THEREFORE THE POSSIBILIT Y OF PERSONAL USE OF VEHICLE AND TELEPHONE COULD NOT BE RULED OUT. HONBLE MADR AS HIGH COURT IN THE CASE OF KANTHIMATHI PLANTATION P. LTD VS. STATE OF TAMIL NADU 215 ITR 203 HELD THAT SINCE THE LOG BOOK AND TRIP SHEETS WERE NOT PR ODUCED TO SHOW THAT THE CAR IN QUESTION WAS USED SOLELY AND EXCLUSIVELY FOR THE PURPOSE OF AGRICULTURE 25 PER CENT OF DISALLOWANCE OF THE CLAIM WAS JUSTIFIED . RESPECTFULLY FOLLOWING THE PRECEDENT IT IS HELD THAT THE LD. CIT (APPEALS) WAS JUSTIFIED IN RESTRICTING 5 PER CENT OF THE EXPENDITURE IN RESPECT OF CAR AND TELEP HONE FOR NON-BUSINESS 3 I. T. APPEAL NOS. 3332 (DEL) OF 2009 A N D I. T. APPEAL NOS. 3335 (DEL) OF 2009 PURPOSES IN THE ABSENCE OF LOG BOOK OR CALL REGISTE R TO SHOW THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 8. AS REGARDS THE DISALLOWANCE OF DEPRECIATION HONBLE MADRAS HIGH COURT IN THE CASE OF CHITRAM AND COMPANY LTD VS. CI T 191 ITR 96 HELD THAT WHERE MACHINERY WAS USED PARTLY FOR BUSINESS PURPOS ES AND PARTLY FOR NON- BUSINESS PURPOSES THE DEPRECIATION IS TO BE ALLOWE D IN ACCORDANCE WITH THE PROVISIONS OF SECTION 38(2) AND NOT UNDER SECTION 3 2(1) OF THE ACT. IN THE CASE BEFORE US WE HAVE UPHELD DISALLOWANCE OF 5 PER CEN T OF CAR EXPENSES FOR NON- BUSINESS PURPOSES THE DISALLOWANCE OF DEPRECIATION TO THE EXTENT OF 5 PER CENT WILL BE JUSTIFIED UNDER SECTION 38(2) OF THE ACT. WE ACCORDINGLY UPHOLD THE ORDER OF THE LD. CIT (APPEALS) IN RESPECT OF TELEPH ONE EXPENSES CAR EXPENSES AND DEPRECIATION ON CAR. ' 4. SINCE THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE CASE FOR ASSESSMENT YEARS 2003-04 AND 2004-05 RESPECTFULLY FOLLOWING THE PRE CEDENT WE UPHOLD THE CONFIRMING THE DISALLOWANCE OF 5 PER CENT OF TELEPHONE EXPENSES C AR MAINTENANCE EXPENSES AND DEPRECIATION THEREON. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS). 5. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CONF IRMING THE DISALLOWANCE OF FOREIGN TOUR EXPENSES TO THE EXTENT OF 5 PER CENT. THE ASSESSIN G OFFICER DISALLOWED 10 PER CENT OF FOREIGN TRAVELLING EXPENSES AS IN THE LAST YEAR ON THE GROU ND THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE FOREIGN CURRENCY PURCHASED WAS INCURRED WH OLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE LD. CIT (APPEALS) REDUCED THE DISAL LOWANCE TO THE EXTENT OF 5 PER CENT. 6. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH IS ISSUE IS ALSO COVERED AGAINST THE ASSESSEE BY THE DECISION OF ITAT DATED 23RD JANUARY 2009 IN ITA. NOS. 1082 AND 1473 (DEL) OF 2008 FOR ASSESSMENT YEARS 2003-04 AND 2004-05 W HEREIN IT HAS BEEN HELD THAT THE ENTIRE 4 I. T. APPEAL NOS. 3332 (DEL) OF 2009 A N D I. T. APPEAL NOS. 3335 (DEL) OF 2009 EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND THE ASSESSEE HAS NOT FURNISHED THE TOTAL DETAILS OF EXP ENSES INCURRED DURING FOREIGN TRAVEL. SINCE THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF ASSESSMENT YEARS 2003-04 AND 2004-05 AND THE ASSESSEE HAS NOT BROUGHT ANY MATERI AL CONTRARY TO THAT OF EARLIER YEARS WE DO NOT FIND ANY REASON NOT TO FOLLOW THE DECISION OF T HE ITAT WHEREIN SIMILAR DISALLOWANCE WAS CONFIRMED. RESPECTFULLY FOLLOWING THE PRECEDENT W E DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE DISA LLOWANCE TO THE EXTENT OF 5 PER CENT OF FOREIGN TRAVEL EXPENSES. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 8. NOW WE WILL TAKE UP THE REVENUE'S APPEAL. THE O NLY ISSUE CONTESTED IN REVENUE'S APPEAL RELATES TO ALLOWING THE BENEFIT OF SECTION 8 0-IB OF THE ACT IN RESPECT OF DUTY DRAWBACK. THE ASSESSING OFFICER WHILE COMPUTING DEDUCTION UND ER SECTION 80-IB OF THE ACT EXCLUDED DUTY DRAWBACK BEING EXPORT INCENTIVES FROM THE ELIG IBLE BUSINESS INCOME AND ALLOWED DEDUCTION ON THE BALANCE INCOME. ON APPEAL THE LD. CIT (APPEALS) ALLOWED DEDUCTION UNDER SECTION 80-IB OF THE ACT ON DUTY DRAWBACK RECEIVED BY IT ALSO. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT HAS BEEN SUBMITTED BY THE LD. SR. DR THAT THE ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LI BERTY INDIA VS. CIT 317 ITR 218 WHEREIN IT HAS BEEN HELD AS UNDER :- ' THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 8 0-IB OF THE INCOME- TAX ACT 1961 IN RESPECT OF DUTY DRAWBACK AMOUNTIN G TO RS.1 74 316/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON TH E GROUND THAT THE SAID INCOME WAS NOT 'DERIVED FROM' THE BUSINESS OF THE A SSESSEE AS PER THE REQUIREMENT OF SECTION 80-IB. THE COMMISSIONER (AP PEALS) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE DUTY D RAWBACK RECEIVED BY THE ASSESSEE WAS INEXTRICABLY LINKED WITH THE PRODU CTION COST AND THUS DUTY DRAWBACK WAS A TRADING RECEIPT OF THE INDUSTRI AL UNDERTAKING AND 5 I. T. APPEAL NOS. 3332 (DEL) OF 2009 A N D I. T. APPEAL NOS. 3335 (DEL) OF 2009 THEREFORE IT FORMED PART OF THE INCOME DERIVED FROM SUCH INDUSTRIAL UNDERTAKING. THE TRIBUNAL UPHELD THE ACTION OF THE ASSESSING OFFICER NOT ALLOWING DEDUCTION UNDER SECTION 80-IB ON THE AMOUN T OF DEPB AND DUTY DRAWBACK BEING EXPORT INCENTIVES AT TWENTY-FIVE PER CENT OF RS.22 70 056/- BEING RS.5 67 514/-. ON APPEAL : HELD DISMISSING THE APPEAL THAT FOR APPLICATION OF THE WORDS 'DERIVED FROM' THERE MUST BE A DIRECT NEXUS BETWEEN THE PROF ITS AND GAINS AND THE INDUSTRIAL UNDERTAKING. THUS THE INCOME OF THE AS SESSEE FROM DUTY DRAWBACK COULD NOT BE HELD TO BE INCOME 'DERIVED FR OM' SPECIFIED BUSINESS. ' 10. SINCE THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) RESPECTFULLY FOLLOWING THE PRECEDENT IT IS HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80-IB OF THE ACT IN RESPECT OF DUTY DRAWBACK. WE THEREFORE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 11. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED. 12. TO SUM UP THE APPEAL FILED BY THE ASSESSEE IS DISMISSED AND THE APPEAL FILED BY THE REVENUE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON : 13TH JANUARY 2010. SD/- SD/- [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13TH JANUARY 2010. *MEHTA * 6 I. T. APPEAL NOS. 3332 (DEL) OF 2009 A N D I. T. APPEAL NOS. 3335 (DEL) OF 2009 COPY OF THE ORDER FORWARDED TO : - 1. APPELLANTS. 2. RESPONDENTS. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT.