Dy.CIT,Cir.10, Pune, Pune v. Steel Engineering Works Pvt.Ltd.,, Pune

ITA 542/PUN/2007 | 2003-2004
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 54224514 RSA 2007
Assessee PAN UTFIT2020A
Bench Pune
Appeal Number ITA 542/PUN/2007
Duration Of Justice 4 year(s) 3 month(s) 12 day(s)
Appellant Dy.CIT,Cir.10, Pune, Pune
Respondent Steel Engineering Works Pvt.Ltd.,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-07-2011
Date Of Final Hearing 21-06-2011
Next Hearing Date 21-06-2011
Assessment Year 2003-2004
Appeal Filed On 17-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO. 542/PN/2007 (ASSTT. YEAR: 2003-04) . DY. COMMISSIONER OF INCOME TAX APPELLANT CIRCLE 10 AKURDI PUNE V. M/S. STEEL ENGINEERING WORKS PVT. LTD. RESPONDEN T S.NO. 134 MIDC BHOSARI PUNE 411026. C.O. NO. 26/PN/2007 (ARISING OUT OF ITA NO. 542/PN/2007) (ASSTT. YEAR: 2003-04) M/S. STEEL ENGINEERING WORKS PVT. LTD. CROSS OBJECTOR S.NO. 134 MIDC BHOSARI PUNE 411026. V. DY. COMMISSIONER OF INCOME TAX RESPONDENT CIRCLE 10 AKURDI PUNE ASSESSEE BY : SHRI ABAY AUCHAT DEPARTMENT BY : MS. NEERU MALHOTRA ORDER PER I.C. SUDHIR JM THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE GROUND THAT THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF R S.1300455/- ON ACCOUNT OF DEDUCTION U/S. 80IA BEING THE PROPORTIONATE AMOUNT OF LABOUR CHARGES RECEIVED HOLDING THAT THE LABOUR CHARGES ARE DERIVED FROM I NDUSTRIAL UNDERTAKING AND HENCE DEDUCTION U/S. 80 IA IS ALLOWABLE. ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 2 2. THE RELEVANT FACTS ARE THAT THE A.O DISALLOWED R S. 13 00 455/- TOWARDS DEDUCTION U/S. 80IA OF THE ACT. THE A.O MADE THE D ISALLOWANCE ON THE BASIS THAT THE ASSESSEE HAD DISCLOSED INCOME BY WAY OF LABOUR CHARGES ONLY. THE EXPLANATION OF THE ASSESSEE REMAINED THAT RAW MATERIAL IS SUPP LIED BY THE RESPECTIVE CUSTOMERS AND AFTER WELDING AND POLISHING IT IS RETURNED TO THE RESPECTIVE PARTIES. IT WAS SUBMITTED THAT IT RECEIVES ORDER FROM SISTER CONCER N. THE ONLY STOCK IS CONSUMABLES SPARES ETC. CONSIDERING THESE FACTS THE A.O WAS OF THE VIEW THAT THE JOB TAKEN UP BY THE ASSESSEE DID NOT AMOUNT TO PROFIT AND GAIN D ERIVED FROM AN INDUSTRIAL UNDERTAKING AND THE INCOME IS BY WAY OF LABOUR CHAR GES ONLY. THEREFORE THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80IA WAS NO T ALLOWABLE. THE LD CIT(A) HAS HOWEVER DELETED THE DISALLOWANCE BY ACCEPTING THE CONTENTION OF THE ASSESSEE. 3. BEFORE US THE LD. D.R. HAS PLACED RELIANCE ON T HE ASSESSMENT ORDER ON THIS ISSUE. HE REITERATED FINDING OF THE A.O THAT THE A SSESSEE HAS DISCLOSED INCOME BY WAY OF LABOUR CHARGES ONLY HENCE THERE IS NO PROFI T AND GAINS DERIVED FROM ANY INDUSTRIAL UNDERTAKING ELIGIBLE FOR CLAIMING DEDUC TION U/S. 80IA OF THE ACT. 4. THE LD. A.R ON THE OTHER HAND TRIED TO JUSTIFY FIRST APPELLATE ORDER. HE SUBMITTED THAT THE ASSESSEE HAS DONE JOB WORK. TH E CUSTOMERS HAD SUPPLIED THE RAW MATERIAL WHICH AFTER WELDING AND POLISHING AS PER THEIR SPECIFICATION THE PRODUCTS WERE RETURNED TO THEM. HE REFERRED PAGE NOS. 1 TO 4 OF THE PAPER BOOK TO EXPLAIN THE PROCESS INVOLVED BY THE ASSESSEE IN MAN UFACTURING THE ULTIMATE PRODUCT AS PER SPECIFICATION OF THE RESPECTIVE CUSTOMERS. HE SUBMITTED THAT THE ASSESSEE IS MANUFACTURING TRAILING ARM ASSEMBLY FOR WHICH R AW MATERIAL LIKE PIPE TRAILING ARM TUBE TRAILING ARM HUB ASSEMBLY (FLANGE & HUB) SOFT ABSORBER BRACKETS AND REINFORCEMENT BRACKETS ARE REQUIRED. THE ASSESSEE WITH THE HELP OF 3 TYPES OF MACHINES I.E. CO2 WELDING OUTFIT 2020 AMPS MACHINE S PRECISION DRILLING MACHINES AND SPECIAL PURPOSE TAPPING MACHINES ARE REQUIRED . HE ALSO EXPLAINED 7 TYPES OF PROCESS INVOLVED IN THE MANUFACTURING FOR THE FINAL PRODUCT TRAILING ARM ASSEMBLY. ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 3 AT PAGE NO. 2 OF THE PAPER BOOK HE HAS ALSO MADE A VAILABLE A PROCESS FOLLOW CHART TO MAKE THE PROCESS INVOLVED UNDERSTANDABLE IN EASI ER WAY. THE LD. A.R. ALSO REFERRED PAGE NO. 8 OF THE PAPER BOOK I.E. SOURCES AND APPLICATION OF FUNDS INVOLVED BY THE ASSESSEE IN THE MANUFACTURING AND PAGE NO. 1 5 OF THE PAPER BOOK I.E. DETAILS OF MANUFACTURING EXPENSES. HE SUBMITTED THAT THE A SSESSEE IS MANUFACTURING MOTOR VEHICLE PARTS FROM THE RAW MATERIAL SUPPLIED BY THE SISTER CONCERNS AND REPORT THE SAME IN THE SHAPE OF FINAL PRODUCT TO TH EM. THE MANUFACTURING WORK IS DONE UNDER CONTRACT. THE GOVERNMENT HAS ALSO RECOG NIZED THE ASSESSEE AS SMALL SCALE UNIT. THE LD. A.R. POINTED OUT THAT THE ASSE SSEE IS MANUFACTURING TRAILING ARM SIMPLY ON JOB WORK BASIS FOR PRINCIPAL MANUFACTURER WHO IS REQUIRED TO PAY EXCISE DUTY AS PER LAW. HENCE THE MOVEMENT OF INPUTS AND MANUFACTURED PRODUCTS TRAILING ARM IS MADE UNDER EXCISE CHALLANS. THE LD . A.R. ALSO PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S. VENUGOPAL FOODS PVT. LTD. ITA NOS. 1434 TO 1437 611/PN/2008 AND C.O. NOS. 7 TO 10/PN/2010 ORDER DATED 16 TH JULY 2010 WHEREIN IT WAS HELD THAT THE ASSESSEE A CTIVITY OF MANUFACTURING BUSINESS ON JOB WORK BASIS WAS ELIGIB LE TO CLAIM DEDUCTION U/S. 80 I A OF THE ACT. HE HAS ALSO PLACED RELIANCE ON THE DECISION RELIED UPON BEFORE THE AUTHORITIES BELOW. 5. THE LD. D.R. ON THE OTHER HAND PLACED RELIANCE ON THE FOLLOWING DECISIONS : THE ORDER IS PRONOUNCED IN THE OPEN COURT ON TH JULY 2011. I) CIT V/S. STERLING FOODS (1999) 237 ITR 579 (S.C) II) ORISSA STATE WAREHOUSING CORPORATION & ANR. V/S. CI T (1999) 237 ITR 589 (SC). 6. CONSIDERING THE ABOVE SUBMISSION WE FIND THAT T HE LD CIT(A) HAS PASSED A REASONED ORDER ON THE ISSUE. AFTER DISCUSSING THE C ASE OF THE PARTIES HE HAS COME TO THE CONCLUSION THAT THE MANUFACTURED TRAILING ARM ASSEMBLY IS A DISTINGUISHED AND MARKETABLE PRODUCT. HE HAS ALSO DISCUSSED THE REQUIREMENT OF FULFILLMENT OF THE INGREDIENTS TO CLAIM DEDUCTION U/S. 80 IA OF THE AC T IN THE PRESENT CASE. HE HAS RIGHTLY OBSERVED THAT CLAUSE (3) OF SUB-SECTION (2) TO SECTION 80IA DOES NOT SAY THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER THIS SECTION ON FEW PRODUCES OR ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 4 MANUFACTURED ARTICLE OR THINGS EXCLUSIVELY BELONGIN G TO IT. THE ASSESSEE IS MANUFACTURING THE TRAILING ARM ASSEMBLY ON JOB WORK FOR PRINCIPAL MANUFACTURER M/S. STEEL ENGINEERS AND M/S. SAI SAMARTH ENGINEERI NG CO. THERE IS NO DISPUTE THAT THE MOMENT THERE IS A TRANSFORMATION INTO A NEW CO MMODITY HAVING ITS OWN CHARACTER USE AND NAME WHETHER IT BE THE RESULT O F ONE PROCESS OR SEVERAL PROCESSES MANUFACTURE TAKES PLACE. IN THIS REGA RD THE ASSESSEE HAS REFERRED DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. J.B. KHARWAR & SONS (1987) 163 ITR 394(GUJ.) BEFORE THE LD CIT(A). THE DECISION OF THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF WA RREN LABORATORIES (P.) LTD. V/S. DCIT (2005) SOT 638 (MUM) HOLDING THAT WHERE GOODS BELONGING TO OTHERS ARE MANUFACTURED BY THE ASSESSEE AND IT DERIVED PROFITS BY WAY OF JOB CHARGES THE ASSESSEE IS ENTITLED TO DEDUCTION AS ALSO BEEN RE FERRED BY THE ASSESSEE. CONSIDERING THESE SUBMISSIONS THE LD. CIT(A) HAS C OME TO THE FOLLOWING DECISION VIDE PARA NO. 10.3 OF THE FIRST APPELLATE ORDER : 10.3 THE SUBMISSION HAS BEEN CAREFULLY CONSIDERED. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS DIS ALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80IA ON THE GROUND THAT THE ASSES SEE COMPANY IS NOT DOING MANUFACTURING BUSINESS AND ITS NATURE OF ACTIVITIES IS WELDING ONLY. THEREFORE THE MOOT QUESTION TO BE DECIDED IN THE C ASE IS WHETHER THE ACT OF WELDING UNDERTAKEN BY THE ASSESSEE COMPANY CAN BE R EGARDED AS MANUFACTURING ACTIVITY OR NOT. GOING BY ITS DEFIN ITION MANUFACTURE MEANS FABRICATE PRODUCE TURN OUT CONSTRUCT FORM FASH ION ASSEMBLE BUILD CREATE FORGE. THUS THE ACT OF ASSEMBLING ALSO FALLS UNDER THE CATEGORY OF MANUFACTURING. AN ORIGINAL EQUIPMENT MANUFACTURER (OEM) IS A RECOGNIZED TERM AND REFERS TO A COMPANY THAT BUILDS PRODUCTS O R COMPONENTS THAT ARE USED IN PRODUCTS SOLD BY ANOTHER COMPANY (OFTEN CAL LED A VALUE ADDED RESELLER OR VAR). AN OEM TYPICALLY BUILDS TO ORDE R BASED ON DESIGNS OF THE VAR. FOR EXAMPLE HARD DRIVES OF COMPUTER SYSTEMS MAY BE MANUFACTURED BY A CORPORATION SEPARATE FROM THE ONE MARKETING TH E COMPUTERS OR A LOUDSPEAKER IN A STEREO SYSTEM MADE BY A COMPANY TH AT SPECIALIZES IN AUDIO MANUFACTURING. SIMILARLY AN ASSEMBLY LINE IS A MA NUFACTURING PROCESS IN WHICH INTERCHANGEABLE PARTS ARE ADDED TO A PRODUCT IN A SEQUENTIAL MANNER TO CREATE A FINISHED PRODUCT. IN FACT MANUFACTURE IS A PROCESS WHICH RESULTS IN AN ALTERATION OR CHANGE IN THE GOODS WHICH ARE SUBJ ECTED TO SUCH ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 5 MANUFACTURE. A COMMERCIALLY NEW DIFFERENT ARTICLE I S PRODUCED. JUDGED ON THESE CRITERIA IT BECOMES DIFFICULT TO AGREE WITH THE VIEW OF THE ASSESSING OFFICER THAT THE APPELLANT IS NOT INVOLVED IN MANUF ACTURING ACTIVITY. FOR BEING ELIGIBLE TO DEDUCTION U/S 80IA THE ACT REQUIRES TH E ASSESSEE TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS WHICH IN MY OPINION AS EXPLAINED EARLIER THE APPELLANT IS DOING. IT WILL NOT BE OUT OF PLACE TO MENTION HERE THAT ON IDENTICAL FACTS THE CLAIM OF DEDUCTION U/S 80IA HA S BEEN ALLOWED BY THE ASSESSING OFFICER IN EARLIER YEARS. I THEREFORE H OLD THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING APPELLANTS CLAIM OF DEDUCTION U/S 80IA AND THE SAM E IS DIRECTED TO BE ALLOWED. 7. WE FIND THAT THE FIRST APPELLATE ORDER ON THIS ISSUE AS DISCUSSED ABOVE IS COMPREHENSIVE AND REASONED ONE WHICH DOES NOT REQ UIRE INTERFERENCE. THE SAME IS ACCORDINGLY UPHELD. 8. THE DECISIONS RELIED UPON BY THE LD. D.R. ARE H AVING DISTINGUISHABLE FACTS HENCE ARE NOT HELPFUL TO THE REVENUE. IN THE CASE OF CIT V/S. STERLING FOODS (SUPRA) THE ISSUE INVOLVED WAS THE MEANING OF DE RIVED FROM REFERRED IN SECTION 80HH OF THE ACT. THE ASSESSEE WAS ENGAGED IN PROCE SSING PRAWNS AND OTHER SEA FOODS WHICH WERE EXPORTED AND IT HAD ALSO EARNED SO ME IMPORT ENTITLEMENT GRANTED BY THE CENTRAL GOVERNMENT UNDER AN EXPORT PROMOTION SCHEME. THE ISSUE WAS AS TO WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM DED UCTION U/S. 80 HH ON THE PROFITS EARNED FROM SALE OF IMPORT ENTITLEMENTS. THE HONB LE COURT WAS PLEASED TO HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE CLAIMED D EDUCTION AS THE PROFIT DOES NOT DERIVE FROM INDUSTRIAL UNDERTAKING. LIKEWISE IN TH E CASE OF ORISSA STATE WAREHOUSING CORPORATION AND ANR. V/S. CIT (SUPRA) THE ISSUE WAS AS TO WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION U/S. 10(29 ) OF THE ACT ON THE INCOME FROM LETTING OUT GODOWNS OR WAREHOUSES FOR WHICH THE CON DITION WAS THAT LETTING OUT SHOULD BE FOR STORAGE PROCESSING OR FACILITATING M ARKETING OF COMMODITY. THE ASSESSEE WAS HELD NOT ENTITLED FOR THE CLAIMED EXEM PTION IN ABSENCE OF FULFILLING THE CONDITIONS OF THE SECTION. ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 6 9. AS DISCUSSED ABOVE WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER ON THE ISSUE AS THE SAME IS COMPREHENSIVE AND REASONED ON E WE ARE THEREFORE NOT INCLINED TO INTERFERE THERE WITH. THE SAME IS UPHE LD. THE GROUND IS ACCORDINGLY REJECTED. 10. IN RESULT APPEAL IS DISMISSED. C.O. NO. 26/PN/2009 11. THE ASSESSEE HAS OBJECTED THE FOLLOWING DISALLO WANCES SUSTAINED BY LD CIT(A): I) DISALLOWANCE OF EXPENSES ON ACCOUNT OF PROFESSIO NAL TAX AMOUNTING TO RS. 2500/- OUT OF RW.5000/- II) DISALLOWANCE OF EXPENSES ON ACCOUNT OF SALARY AND WAGES AMOUNTING TO RS.3 230/- OUT OF RS. 24 68 850/- AGAINST WHICH THE ASSESSEE HAS PRODUCED DETAILS OF RS. 24 65 620/- ACCORDINGLY DIF FERENCE OF RS.3 230/- IS DISALLOWED. III) DISALLOWANCE OF EXPENSES ON ACCOUNT OF TELEPHONE EX PENSES AMOUNTING TO RS.10 000/- OUT OF RS.48 040/- IV) DISALLOWANCE OF EXPENSES ON ACCOUNT OF TRAVELING EXPENSES AMOUNTING TO RS. 20 000/- OUT OF RS. 78 106/- V) DISALLOWANCE OF EXPENSES ON ACCOUNT OF LABOUR WELFA RE EXPENSES AMOUNTING TO RS.25 000/- OUT OF RS. 2 20 015/-. 12. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVA NCED BY THE PARTIES ON THE ABOVE OBJECTIONS. WE HAVE ALSO GONE THROUGH THE OR DERS OF THE AUTHORITIES BELOW AND MATERIAL AVAILABLE ON RECORD IN VIEW OF THE ARG UMENTS ADVANCED BY THE PARTIES. OBJECTION NO.1 13. THE ASSESSEE HAD DEBITED PROFESSIONAL TAX OF RS . 5000/- TO THE PROFIT AND LOSS ACCOUNT. THE A.O. HELD THAT THE DEDUCTION OF PROFESSIONAL TAX IS ALLOWABLE TO THE EXTENT OF RS. 2500/- ONLY AND THUS IN ABSENCE O F ANY EXPLANATION MADE BY THE ASSESSEE THE A.O DISALLOWED THE EXCESS CLAIM OF PR OFESSIONAL TAX OF RS. 2500/-. THE ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 7 LD CIT(A) HAS UPHELD THE SAME IN ABSENCE OF ANY EXP LANATION IN THIS REGARD MADE BY THE ASSESSEE BEFORE HIM. 14. BEFORE THE TRIBUNAL THE LD. A.R. SUBMITTED THA T THE ASSESSEE COMPANY HAD PAID RS. 5000/- TOWARDS PROFESSIONAL TAX LIABILITY OUT OF WHICH RS. 2500/- WAS ON BEHALF OF THE ASSESSEE COMPANY AND RS. 2500/- WAS O N BEHALF OF THE DIRECTOR. THE PAYMENT WAS MADE BY CHEQUE. THE SAME IS DEDUCTIBLE AS BUSINESS EXPENDITURE. IN SUPPORT HE REFERRED THE PAGE NO. 4 OF THE PAPER BOOK I.E. EXTRACT OF PAYMENT VOUCHER. 15. HAVING GONE THROUGH THE PAYMENT VOUCHER WE FIN D THAT THE AMOUNT OF RS. 5000/- HAS BEEN PAID THROUGH CHEQUES UNDER THE HEAD PROFESSIONAL TAX (FIRM). FROM THIS VOUCHER IT IS NOT CLEAR THAT RS. 2500/- WAS PAID AS PROFESSIONAL TAX FOR THE ASSESSEE COMPANY AND REMAINING 2500/- WAS PAID AS A PROFESSIONAL TAX FOR ITS DIRECTOR. WE ALSO FAILED TO UNDERSTAND AS TO WHY THE ASSESSEE HAD NOT FURNISHED SUCH EXPLANATION BEFORE THE AUTHORITIES BELOW. UND ER THESE CIRCUMSTANCES WE DO NOT FIND REASONS TO INTERFERE WITH THE ORDERS OF T HE AUTHORITIES BELOW ON THIS ISSUE. THE SAME IS UPHELD. OBJECTION NO. 1 IS ACCORDINGLY REJECTED. OBJECTION NO. 2 16. THE A.O DISALLOWED EXPENSES OF RS. 3230/- IN ABSENCE OF DETAILS OF THE TOTAL DEBITED AMOUNT OF RS. 24 68 850/- ON ACCOUNT OF SAL ARY AND WAGES. THE ASSESSEE COULD PRODUCE THE DETAILS OF ONLY RS. 24 65 620/- . SINCE THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE BEFORE THE LD CIT(A) THE L T CIT(A) HAS UPHELD THE ADDITION. 17. BEFORE THE TRIBUNAL THE CONTENTION OF THE LD. A.R. REMAINED THAT THE ASSESSEE COMPANY WAS ABLE TO PRODUCE ALMOST ALL THE RECORD AND VOUCHERS DURING ITS SCRUTINY ASSESSMENT. HOWEVER THE AMOUNT OF RS.323 0/- HAS BEEN DISALLOWED. HE REFERRED PAGE NO. 5 AND 6 OF THE PAPER BOOK I.E. LE DGER ACCOUNT MAINTAINED FOR SALARY AND WAGES FOR THE PERIOD. HE SUBMITTED FURT HER THAT THE ASSESSEE COMPANY HAD PAID BONUS TO A CASUAL WORKER OF RS.3180/- IN CASH ON 3 RD NOVEMBER 2002. IN ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 8 SUPPORT HE REFERRED PAGE NO. 5 OF THE PAPER BOOK. ON VERIFICATION OF THE SAME WE HAVE NO REASON TO DOUBT THIS EXPLANATION OF THE ASS ESSEE AS THE PAYMENT IS STATED TO HAVE BEEN MADE THROUGH VOUCHER NO. 863 TO ONE SH RI SHEKHAR WAGH. WE THUS DIRECT THE A.O TO DELETE THE DISALLOWANCE TO THE E XTENT OF RS. 3180/- ONLY. THE OBJECTION NO. 2 IS PARTLY ALLOWED. OBJECTION NO. 3 18. THE ASSESSEE DEBITED RS. 48 040/- ON ACCOUNT OF TELEPHONE AND POSTAGE EXPENSES TO THE PROFIT & LOSS ACCOUNT. IN ABSENCE OF CALL REGISTER BILLS VOUCHERS ETC THE A.O. DISALLOWED RS. 10 000/- ON THE BASIS THAT THE ELEMENT OF PERSONAL USER OF THESE FACILITIES CANNOT BE IGNORED. THE LD CIT( A) HAS UPHELD THE SAME. 19. BEFORE THE TRIBUNAL THE LD. A.R. PLACED RELIAN CE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND E NGINEERING CO. V/S. CIT 253 ITR 749 (GUJ.) HOLDING THAT EVEN IF THERE WAS ANY PERSO NAL USE BY THE DIRECTORS THAT WAS AS PER THE TERMS AND CONDITIONS OF SERVICE AND IN SO FAR AS THE ASSESSEE WAS CONCERNED IT WAS BUSINESS EXPENDITURE. NO PART OF THE EXPENDITURE COULD BE DISALLOWED. 20. IN ABSENCE OF ANY EVIDENCE PLACED BY THE ASSESS EE THAT THE PERSONAL USER OF THE FACILITIES OF TELEPHONE AND PASSAGE WAS PART A ND PARCEL OF THE TERMS AND CONDITIONS OF THE SERVICES OF THE DIRECTOR AND EMPL OYEES WE ARE OF THE VIEW THAT THE ABOVE CITED DECISION IS NOT HELPFUL TO THE ASSESSEE . IN ABSENCE OF MAINTENANCE OF PROPER BOOKS TO VERIFY THE NATURE OF CALLS AND OTHE R EXPENSES THE POSSIBILITY OF PERSONAL USER OF THESE FACILITIES CANNOT BE TOTALLY RULED OUT. WE HOWEVER ARE OF THE VIEW THAT CONSIDERING THE TOTALITY OF FACTS AND CI RCUMSTANCES ESPECIALLY THE TURNOVER OF THE ASSESSEE A DISALLOWANCE OF RS. 5000/- IN TH IS REGARD WILL MEET THE END OF JUSTICE. WE ORDER ACCORDINGLY. OBJECTION NO. 3 IS THUS PARTLY ALLOWED. GROUND NO. 4 ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 9 21. THE A.O. DISALLOWED RS. 20 000/- OUT OF RS. 78 106/- CLAIMED ON ACCOUNT OF EXPENSES ON TRAVELLING AND CONVEYANCE IN ABSENCE O F THE DETAILS AND DUE TO POSSIBILITY OF UTILIZATION OF THE SAME FOR THE PURP OSES OTHER THAN BUSINESS. SINCE THE ASSESSEE COULD NOT IMPROVE ITS CASE BEFORE THE LD C IT(A) HE HAS UPHELD THE DISALLOWANCE MADE BY THE A.O;. 22. BEFORE THE TRIBUNAL THE LD. A.R. CITED THE DEC ISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGINEERING CO . V/S. CIT (SUPRA) WITH THIS SUBMISSION THAT THE EXPENSES CLAIMED ON ACCOUNT OF CONVEYANCE ALLOWANCE WERE PAID TO EMPLOYEES ON MONTHLY BASIS AS PART OF REMUN ERATION REIMBURSEMENT OF PETROL/CONVEYANCE EXPENSES TO EMPLOYEES WHILE DOIN G DUTIES OF OFFICE. WE FIND NO REASON TO INTERFERE WITH THE ORDERS OF THE AUTHORIT IES BELOW IN PRINCIPLE AS IN ABSENCE OF FULL DETAILS AND EVIDENCE IN SUPPORT BU T AT THE SAME TIME WE ARE OF THE VIEW THAT A SELF MADE VOUCHER BEARING THE DETAILS O F EXPENDITURE FOR PETTY EXPENSES CANNOT BE DOUBTED ON THIS BASIS ALONE THAT IT IS SE LF MADE. WE THUS CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE ESPECIALLY THE TURNOVER OF THE ASSESSEE REDUCE THE DISALLOWANCE TO RS. 10 000/-. IT IS ORDERED ACCORDINGLY. OBJECTION NO. 4 IS THUS PARTLY ALLOWED. OBJECTION NO. 5 23. THE A.O. DISALLOWED RS. 25 000/- OUT OF RS. 2 2 0 015/- DEBITED TOWARDS LABOUR EXPENSES ON THE BASIS THAT MOST OF THE EXPE NSES WERE MADE IN CASH AND WERE SUPPORTED WITH SELF MADE VOUCHERS. THE LD CIT (A) HAS UPHELD THE SAME. 24. BEFORE THE TRIBUNAL THE LD. A.R. SUBMITTED THA T LABOUR WELFARE EXPENSES WERE INCURRED MAINLY FOR LUNCH DINNER TEA AND SNA CKS PROVIDED TO THE STAFF DURING THE WORKING HOURS. IT ALSO INCLUDES EXPENSES TOW ARDS MEDICAL TREATMENT/FIRST AID FACILITIES FOR THE EMPLOYEES UNIFORM EXPENSES AND UPKEEP. HE REFERRED PAGE NOS. 17 TO 28 OF THE PAPER BOOK I.E. EXTRACT OF LABOUR WELFARE EXPENSES. ITA . NO 542/PN/2007 M/S. STEEL ENGINEERING WORKS PVT. LTD. A.Y. 2003-04 PAGE OF 10 10 25. CONSIDERING THE SUBMISSIONS WE REITERATE THAT IF SELF MADE VOUCHER BEARS ALL THE ESSENTIAL VERIFIABLE DETAILS OF THE CLAIMED EX PENDITURE OF PETTY NATURE THE SAME CANNOT BE DOUBTED MERELY BECAUSE IT IS SELF MADE. WE THUS CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE RESTRICT THE DISALLOWANCE TO RS. 20 000/-. IT IS ORDERED ACCORDINGLY. THE OBJECTIO N NO. 5 IS THUS PARTLY ALLOWED. 26. CONSEQUENTLY THE APPEAL IS DISMISSED AND THE CROSS OBJECTION IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH JULY 2011 SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 29TH JULY 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -V PUNE 4 . THE CIT(A)- III PUNE 5. THE D.R. B BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE