M/s Shiv Forgings, Ludhiana v. Addl. CIT, Ludhiana

ITA 510/CHANDI/2013 | 2007-2008
Pronouncement Date: 27-11-2014 | Result: Dismissed

Appeal Details

RSA Number 51021514 RSA 2013
Assessee PAN AADFS9343R
Bench Chandigarh
Appeal Number ITA 510/CHANDI/2013
Duration Of Justice 1 year(s) 6 month(s) 21 day(s)
Appellant M/s Shiv Forgings, Ludhiana
Respondent Addl. CIT, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 27-11-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 27-11-2014
Date Of Final Hearing 20-11-2014
Next Hearing Date 20-11-2014
Assessment Year 2007-2008
Appeal Filed On 06-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI T.R. SOOD ACCOUNTANT MEMBER ITA NO. 510/CHD/2013 ASSESSMENT YEARS : 2007-08 M/S SHIV FORGINGS V ADDL CIT 95-B INDUSTRIAL AREA A RANGE VI EXTENSION LUDHIANA LUDHIANA AADFS 9343 R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.R. CHHABRA RESPONDENT BY: SHRI S.K. MITT AL DATE OF HEARING 20.11.2014 DATE OF PRONOUNCEMENT 27.11 .2014 O R D E R PER T.R. SOOD A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD CIT (A)-II LUDHIANA DATED 26.2.2013. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THE LD. CIT(A)-II LUDHIANA HAS ERRED IN LAW AND ON THE FACTS OF THE CASE A) BY ARBITRARILY AND WRONGLY SUSTAINED THE DISALLO WANCE OF BAD DEBT OF RS. 7 30 050/- CLAIMED U/S 36(1)(VII) R.W.S . 36(2)(III) OF IT ACT 1961. B) BY ARBITRARILY AND WRONGLY SUSTAINED THE DISALLO WANCE OF RS. 83 092/- ON ACCOUNT OF FOREIGN TOUR EXPENSES. C) BY ARBITRARILY AND WRONGLY SUSTAINED THE DISALLO WANCE OF RS. 62 204/- ON ACCOUNT OF REPAIR AND MAINTENANCE EXPE NSES BY TREATING THEM AS CAPITAL EXPENDITURE INSTEAD OF AS REVENUE EXPENDITURE. 3 THIS APPEAL IS LATE BY FIVE DAYS. THE ASSESSEE HA S FILED AN APPLICATION FOR CONDONATION OF DELAY. THE LD. C OUNSEL FOR THE ASSESSEE REFERRED TO THE CONDONATION APPLICATIO N AND AFFIDAVIT AND POINTED OUT THAT THE IMPUGNED ORDER W AS SERVED ON THE ASSESSEE ON 2.3.2013 AND THEREFORE APPEAL WA S REQUIRED 2 TO BE FILED BEFORE THE TRIBUNAL BEFORE 1.5.2013. H E SUBMITTED THAT ORIGINALLY THE IMPUGNED ORDER WAS MISPLACED AN D WHEN THE SAME WAS TRACED AND THE APPEAL WAS PREPARED AND SEN T THROUGH COURIER ON 4.5.2013 WHICH HAS BEEN RECEIVED BY THE REGISTRY ON 6.5.2103. IN THESE CIRCUMSTANCES HE MAD E A PRAYER FOR CONDONATION OF DELAY. 4 ON THE OTHER HAND THE LD. DR FOR THE REVENUE OPP OSED THE SUBMISSIONS. 5 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE SA TISFIED THAT THE ASSESSEE HAS SUFFICIENT CAUSE FOR FILING T HE APPEAL LATE AND THEREFORE DELAY IS CONDONED. 6 GROUND NO. 1(A) - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAS MADE CLAIM UNDER THE HEAD SUNDRY BALANCE WRITTEN OFF AMOUNTING TO RS. 11998 16/-. ON FURTHER VERIFICATION IT WAS SEEN THAT THE ASSESSEE HAS WRITTEN OFF THE AMOUNT OF RS. 733050/- GIVEN AS AN ADVANCE TO M/S HASCHO GMBH GERMANY. IN RESPONSE TO THE QUERY REGA RDING THIS ITEM IT WAS SUBMITTED AS UNDER: THE AMOUNT OF ADVANCE OF RS. 7 33 050/- (ERUO 13 5 00.00) GIVEN TO HASCHO GMBH GERMANY IN THE YEAR 2005-06 HAS BEEN W RITTEN OFF DURING THE YEAR UNDER REVIEW. A COPY OF THE INSOLVENCY OF THE SAID CONCERN IS ENCLOSED FOR YOUR REFERENCE THE SAME IS AN ALLOWABL E EXPENDITURE IN VIEW OF THE JUDGMENT IN CASE OF MINDA (HUF) LTD. V. J.C. I.T. DELHI 101 ITD 191(DELHI) COPY OF GIST OF THE SAID JUDGMENT IS EN CLOSED FOR YOUR READY REFERENCE THE ASSESSING OFFICER AFTER EXAMINING THE EXPLANATI ON OBSERVED THAT HE DECISION RELIED ON BY THE ASSESSEE PERTAINS TO P URCHASE OF RAW MATERIAL WHICH FORMS PART OF TRADING RESULTS AND TH EREFORE NOT APPLICABLE. FURTHER SINCE AS PER SEC 36(2) THE ASS ESSEE HAS NOT SHOWN THIS AMOUNT WHILE COMPUTING THE INCOME THERE FORE CLAIM UNDER THE HEAD BAD DEBT WAS NOT ALLOWABLE. SINCE THE ADVANCE 3 WAS GIVEN AGAINST THE CAPITAL ASSET FOR WHICH ONLY DEPRECIATION CAN BE CLAIMED U/S 32 AND THEREFORE CLAIM COULD NOT BE MADE EVEN U/S 37 AS BUSINESS LOSS AND THEREFORE DISALLOWED THIS C LAIM. 7 ON APPEAL VARIOUS OPPORTUNITIES WERE GIVEN TO THE ASSESSEE BUT THE ASSESSEE DID NOT APPEAR. HOWEVER THE LD. CIT(A) AFTER NOTING THE FACTS DECIDED THE ISSUE VID E PARA 4.3 WHICH IS AS UNDER: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND GROUNDS OF APPEAL. THE ASSESSING OFFICER IN A DETAILED ORDER HAS EXAMINED THE PROVISIONS OF SECTION 36(2) AND 37(1) OF IT AC T AND HELD THAT THE CLAIM OF THE APPELLANT WITH REGARD TO WRITE OFF OF THE AFORESAID ADVANCE DOES NOT FALL WITHIN THE SCOPE OF ANY OF TH ESE SECTIONS. THE CASE LAW CITED BY THE APPELLANT IS DISTINGUISHE D ON FACTS. KEEPING IN VIEW THE AFORESAID FACTUAL AND LEGAL POS ITION I SEE NO INFIRMITY WITH THE ORDER OF THE ASSESSING OFFICER. THIS GROUNDS OF APPEAL IS ACCORDINGLY DISMISSED. 8 BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ADVANCE WAS MADE FOR BUSINESS PURPOSES AND THEREFORE SAME WAS ALLOWABLE EXPENDITURE. 9 ON THE OTHER HAND THE LD. D.R FOR THE REVENUE ST RONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 10 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ASSESSING OFFICER IS RIGHT IN OBSERVING THAT THIS C LAIM CANNOT BE ALLOWED AS A CLAIM FOR BAD DEBT BECAUSE THIS DEBT I.E. ADVANCE GIVEN FOR SUPPLY OF MACHINERY HAS NOT BEEN ACCOUNTED FOR WHILE COMPUTING THE BUSINESS INCOME WHICH MEANS THE REQUIREMENT OF SEC 36(2) HAS NOT BEEN COMPILED. F URTHER THIS CLAIM CANNOT BE CLAIMED EVEN AS THE BUSINESS LOSS B ECAUSE THE ADVANCE IS MADE AGAINST THE CAPITAL ASSET AGAINST W HICH THE ASSESSEE WAS ENTITLED FOR DEPRECIATION. THE HON'BL E SUPREME COURT IN CASE OF HASIMARA INDUSTRIES LTD V CIT 230 ITR 927 HAS CLEARLY HELD THAT IF PAYMENT IS MADE UNDER THE HEAD CAPITAL HEAD THEN LOSS OF SAME CANNOT BE ALLOWED AS BUSINESS LOSS. THIS DECISION HAS BEEN FOLLOWED LATER ON BY H ON'BLE DELHI 4 HIGH COURT IN CASE OF CIT V. R.G. SCIENTIFIC ENTERP RISES P. LTD 311 ITR 401 WHEREIN IT WAS AGAIN OBSERVED THAT THE AMOUNT GIVEN FOR PURCHASE OF CAPITAL ASSET CANNOT BE ALLOW ED AS BUSINESS EXPENDITURE IF SUCH AMOUNT IS LOST. THERE FORE IN OUR OPINION THE ASSESSING OFFICER AND THE LD. CIT(A) H AS CORRECTLY DECIDED THE ISSUE AND ACCORDINGLY WE UPHOLD THE ORD ER OF THE LD. CIT(A) IN THIS RESPECT. 11 GROUND NO. 1(B) - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAS INCURRED CERTAIN AMOU NT ON FOREIGN TRAVELING. IT WAS FURTHER SEEN THAT SHRI G .S. MAYO HAS TRAVELED ABROAD ALONG WITH HIS WIFE. ON ENQUIRY IT WAS SUBMITTED AS UNDER: REGARDING THE TOUR EXPENSES OF GURDEEP SINGH MAYO IT IS SUBMITTED THAT HE IS EMPLOYED WITH THE MAIN SUPPLIE R OF THE ASSESSEE I.E. EXCELLENT FORGE PVT LTD WHICH IS A SI STER CONCERN OF THE ASSESSEE FIRM. SHRI MAYO IS A TECHNICAL PERSON AND IS WELL VERSANT IN THE TECHNICALITIES OF THE TRADE. HE VIS ITED U.S.A TO NEGOTIATE EXPORT ORDERS WITH THE CUSTOMERS IN U.S.A AND TO UNDERSTAND THE TECHNICAL SPECIFICATIONS OF THEIR RE QUIREMENTS AND TO DISPLAY THE PRODUCE BEING MANUFACTURED BY THE AS SESSEE FIRM. THE E SPEND FOLLOWING AMOUNT FOR HIS TOUR TO U.S.A. S NO. NATURE OF EXPENSES AMOUNT (RS.) 1 AIR TICKET OF SHRI G.S. MAYO 54 986 2 AIR TICKET OF SMT. G.S. MAYO 54 986 3 OTHER EXPENSES BORNE BY THE FIRM 14 720 IT IS FURTHER SUBMITTED THAT SHRI MAYO IS SENIOR CI TIZEN OF 62 YEARS AGE AND REQUIRED THE COMPANY OF HIS WIFE ALSO FOR T HE LONG JOURNEY TO CARE FOR HIS MEDICAL NEEDS. THE FIRM NEEDED HIS SERVICES URGENTLY FOR BUSINESS PURPOSES AS STATED ABOVE. SO THE ASSESSEE HAD TO BEAR THE EXPENSES OF HIS WIFE ALSO. FURTHER IN RESPECT OF OTHER EXPENSES IT WAS SUBM ITTED AS UNDER: REGARDING THE FOREIGN TOUR EXPENSES PAID TO SHRI G .S. MAYO AND HIS WIFE IT IS SUBMITTED THAT THE ASSESSEE PAID FO R AIR TICKET AND OTHER TOUR EXPENSES. THE FOREIGN EXCHANGE WAS TAKE N BY SHRI PRANAV CHANDA DIRECTOR OF EXCELLENT FORGE (P) LTD. WHO ALSO ACCOMPANIED SHRI MAYO ON BUSINESS TOUR AS EXPLAINED EARLIER. THE FOREIGN EXCHANGE OF 2500 US DOLLAR WAS PURCHASED ON 3.5.2006 FOR RS. 1 12 425/-. 5 THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSE E WAS MAKING MAJORITY OF PURCHASES FROM SISTER CONCERN WH ICH HAD EMPLOYED SHRI G.S. MAYO. FURTHER DIRECTOR OF EXCELL ENT FORGE PVT LTD IS ALSO PARTNER OF THE ASSESSEE FIRM WHO HA D ALSO TRAVELED WITH G.S. MAYO AND PARTICIPATED IN LAS VEG AS HARDWARE FAIR IN USA. THEREFORE THE EXPENSES RELAT ING TO G.S. MAYO WERE HELD TO BE ALLOWABLE. HOWEVER THE EXPEND ITURE PERTAINING TO HIS WIFE AMOUNTING TO RS. 83092/- WAS DISALLOWED. 12 ON APPEAL THIS DISALLOWANCE HAS BEEN CONFIRMED B Y THE LD. CIT(A) VIDE PARA 5.3 WHICH IS AS UNDER: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND GROUND OF APPEAL. THE ASSESSING OFFICER HAS GIVEN DETAILED R EASONS FOR HOLDING THAT THE FOREIGN TRAVEL EXPENSES WITH REGAR D TO WIFE OF MR. G.S. MAYO WAS NOT FOR BUSINESS PURPOSES. THE FACT REMAINS THAT MR. G.S. MAYO IS NOT EVEN AN EMPLOYEE OF THE APPELL ANT BUT AN EMPLOYEE OF THE MAIN SUPPLIER OF THE APPELLANT. TH E ASSESSING OFFICER WAS FAIR AND REASONABLE IN HOLDING THAT THE EXPENDITURE WITH REGARD TO FOREIGN TRAVEL OF MR. MAYO WAS FOR THE BU SINESS PURPOSES OF THE APPELLANT. BEFORE THE ASSESSING OFFICER THE APPELLANT HAD NOT EVEN CLAIMED THAT ANY BUSINESS PURPOSE WAS SERV ED BY THE FOREIGN TRAVEL OF MR. G.S. MAYO. IN THESE FACTS AN D CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER WAS FULLY JUSTIFI ED IN DISALLOWING THE FOREIGN TRAVEL OF THE WIFE OF MR. G.S. MAYO. T HIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 13 BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND T HE LD. CIT(A) AND SUBMITTED THAT G.S. MAYO WAS AN OLDER PE RSON AND NOT KEEPING GOOD HEALTH THEREFORE HE REQUIRED ASSI STANCE OF HIS WIFE AND THUS THE EXPENDITURE IS JUSTIFIED. 14 ON THE OTHER HAND THE LD. DR FOR THE REVENUE ST RONGLY RELIED ON THE ORDER OF THE LD. CIT(A). 15 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. FIRST OF ALL THERE IS NO EVIDENCE ON RECORD TO SHOW THAT SHRI G.S. MAYO REQUIRED ASSISTANCE OF HIS WIFE AS HE WAS S UFFERING FROM SOME DISEASE. IN ANY CASE SHRI MAYO IS NOT EMP LOYEE OF THE COMPANY THEREFORE THERE WAS NO JUSTIFICATION. F URTHER THE 6 EXPENDITURE INCURRED ON WIFE IS IN NATURE OF PERSON AL EXPENDITURE OF THAT EMPLOYEE. HON'BLE MADRAS HIGH COURT IN CASE OF CIT V. T.S. HAJEE MOOSA & COMPANY 153 ITR 422 WHERE SENIOR PARTNER WAS ACCOMPANIED BY HIS WIFE ON FOREIGN TOUR FOR THE PURPOSE OF ATTENDING HIMSELF AS HE WAS A DIABETIC HA HELD AS UNDER: THAT THE EXPENDITURE IN QUESTION WAS IN THE NATURE OF PERSONAL EXPENSES. EVEN ASSUMING THAT THE EXPENDITURE RELAT ED TO BUSINESS PURPOSES THE EXPENDITURE HAD A DUAL OR TWIN PURPOS E AND SERVED NOT ONLY PURPOSE OF BUSINESS BUT ALSO A PERSONAL OR PRIVATE PURPOSE AND AS THE EXPENDITURE DID NOT EXCLUSIVELY SERVE THE BUSINESS IT WILL NOT QUALIFY FOR DEDUCTION U/S 37( 1) OF IT ACT 1961. THE SECTION ALSO DOES NOT PERMIT ANY ALLOWANCE FROM THE POINT OF VIEW OF ANY INDIRECT ADVANTAGE THAT MAY BE SECURED AS A RESULT OF THE EXPENDITURE. THE TRIBUNAL WAS ACCORDINGLY IN ERROR IN HOLDING THAT THE EXPENDITURE WAS LAID OUT WHOLLY AND EXCLUS IVELY FOR BUSINESS PURPOSES. THE EXPENDITURE WAS THEREFORE N OT ALLOWABLE AS A DEDUCTION. THEREFORE IT IS CLEAR FROM ABOVE T HAT EXPENDITURE INCURRED ON FOREIGN TOUR OF SHRI MAYO WAS PERSONAL IN NATURE AND IS NOT ALLOWABLE. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT(A). 16 GROUND NO. 1(C) - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXP ENSES: DATE NARRATION AMOUNT (RS) 31.5.2006 MINERAL FIBRE FALSE CEILING 26 640/- 31.8.2006 ALMIRAH WINDOW ETC. 35 744/- AFTER VERIFICATION OF THE BILLS IT WAS NOTED THAT E XPENDITURE WAS ON CREATION OF NEW ASSET AND NOT FOR REPAIR AND MAINTE NANCE. ACCORDINGLY DISALLOWANCE THIS EXPENDITURE. 17 ON APPEAL THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A) VIDE PARA 6.3 OF HIS ORDER WHICH IS AS UNDER : I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND GROUNDS OF APPEAL. THE APPELLANT HAS NOT CONTENDED THAT HOW T HE ASSESSING OFFICER HAS NOT JUSTIFIED IN HOLDING THAT THE EXPEN DITURE INCURRED ON THESE ASSETS REFERRED ABOVE WERE CAPITAL IN NATURE. WALL CEILING ALMIRAH ETC. ARE NEW ASSETS AND THEREFORE THESE EXP ENSES ARE CAPITAL IN NATURE. IN VIEW OF THESE FACTS THIS GR OUND OF APPEAL IS ACCORDINGLY DISMISSED. 18 BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT EXPENSES RELATES TO SMALL ITEMS THEREFORE SHO ULD BE ALLOWED AS REVENUE EXPENDITURE. 7 19 ON THE OTHER HAND THE LD. DR FOR THE REVENUE ST RONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 20 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE EXPENDITURE INCURRED ON CREATION OF NEW ASSET WHETH ER BY PURCHASING NEW ASSET OR INSTALLATION OF NEW WINDOW OR FALSE CEILING ARE IN THE NATURE OF ENDURING BENEFIT AND T HEREFORE SAME HAD BEEN CORRECTLY DISALLOWED. ACCORDINGLY WE UPHO LD THE ORDER OF THE LD. CIT(A). 21 IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27.11.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR