M/s Shoe Teenik International Corporation Ltd.,, New Delhi v. DCIT, New Delhi

ITA 907/DEL/2010 | 2004-2005
Pronouncement Date: 05-05-2010 | Result: Allowed

Appeal Details

RSA Number 90720114 RSA 2010
Assessee PAN AAECS4253L
Bench Delhi
Appeal Number ITA 907/DEL/2010
Duration Of Justice 2 month(s) 1 day(s)
Appellant M/s Shoe Teenik International Corporation Ltd.,, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 05-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 05-05-2010
Assessment Year 2004-2005
Appeal Filed On 04-03-2010
Judgment Text
I.T.A. NO. 907/DEL/2010 1/7 IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH G BEFORE SHRI A.D. JAIN JUDICIAL MEMBER AND SHRI A K GARODIA ACCOUTANT MEMBER ITA NO.907 /DEL/2010 (ASSESSMENT YEAR 2004-05) M/S. SHOE TECNIK INTERNATIONAL VS. DCIT CIRCLE 8( 1) CORPORATION LTD. NEW DELHI C-2/20 SAFDARJUNG DEV. AREA NEW DELHI-110 016 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAECS4253L APPELLANT BY: SHRI SATISH KHOSLA CA RESPONDENT BY: SHRI KISHORE B SR. DR ORDER PER A. K. GARODIA AM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AG AINST THE ORDER OF LD. CIT(A) XI NEW DELHI DATED 05.02.2010 FOR THE ASSESSMENT YEAR 2004-05. THE ONLY EFFECTIVE GR OUND RAISED BY THE ASSESSEE IS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A)-XI DELHI ERRED IN CONFIRMING T HE ACTION OF THE A.O. IN CONFIRMING THE PENALTY IMPOSE D OF RS.1 80 675/-. I.T.A. NO. 907/DEL/2010 2/7 2. THE BRIEF FACTS OF THE CASE ARE THAT IN THE COUR SE OF ASSESSMENT PROCEEDINGS U/S 143(3) THE A.O. HAS MAD E AN ADDITION OF RS.26 11 338/- BY TREATING THE EXPENSES ON DIES PATTERNS ETC AS CAPITAL EXPENDITURE AND AFTER ALLOWING DEPRECIATION THEREON BUT THIS ADDITION WAS DELETED BY THE LD. CIT(A) AND ON THE SAME NO PENALTY HAS BEEN IMPO SED BY THE A.O. U/S 271(1)(C) AND HENCE THIS DISALLOWANCE/ADDITION IS NOT RELEVANT FOR THE PRESE NT APPEAL. A FURTHER DISALLOWANCE WAS MADE BY THE A. O. OF RS.4 54 454/- ON ACCOUNT OF BELATED PAYMENT OF EMPL OYEES CONTRIBUTION OF PF & ESI. THERE WAS ONE MORE DISALLOWANCE OF RS.1 90 680/- ON ACCOUNT OF 10% OF VEHICLE MAINTENANCE & REPAIRS ON THE BASIS THAT THE RE WAS SOME PERSONAL USE OF THE VEHICLE. IN ADDITION TO T HIS THE DEDUCTION ALLOWED TO THE ASSESSEE U/S 80HHC WAS RED UCED FROM RS.15 84 610/- TO RS.15 00 798/- AND THE SAME RESULTED IN AN ADDITION OF RS.83 812/-. HENCE THE TOTAL DISALLOWANCES/ADDITIONS WHICH ARE RELEVANT IN THE P RESENT APPEAL WERE OF RS.7 28 946/-. AGAINST THESE DISALLOWANCES THE ASSESSEE DID NOT FILE ANY APPEAL BEFORE THE TRIBUNAL. THE A.O. INITIATED PENALTY PROCEEDIN GS AND IMPOSED A PENALTY OF RS.1 80 675/- AND THE PENALTY WAS CONFIRMED BY THE LD. CIT(A) AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. I.T.A. NO. 907/DEL/2010 3/7 3. IT WAS SUBMITTED BY THE LD. A.R. THAT ALTHOUGH T HE ASSESSEE DID NOT FILE ANY QUANTUM APPEAL BEFORE THE TRIBUNAL WITH REGARD TO DISALLOWANCES ON ACCOUNT OF BELATED PAYME NT OF EMPLOYEES CONTRIBUTION OF PF AND ESI AND ON ACCOUNT OF DISALLOWANCE FOR ALLEGED PERSONAL USAGE OF THE VEHI CLE BUT AS PER VARIOUS JUDGEMENTS THESE TWO DISALLOWANCES ARE NOT SUSTAINABLE AND HENCE PENALTY PROCEEDINGS BEING INDEPENDENT OF THE ASSESSMENT PROCEEDING PENALTY O N SUCH DISALLOWANCES SHOULD BE DELETED. 3.1 REGARDING THE REDUCTION IN THE AMOUNT OF DEDUCT ION ALLOWED TO THE ASSESSEE U/S 80HHC IT WAS SUBMITTED THAT THE DEDUCTION U/S 80HHC WAS REDUCED ON ACCOUNT OF EXCLUSION OF 90% OF GROSS INTEREST INCOME FROM PROF IT OF THE BUSINESS AND ALSO ON ACCOUNT OF 90% EXCLUSION F ROM PROFIT OF BUSINESS ON ACCOUNT OF PRIOR PERIOD ADJUS TMENT. IT IS SUBMITTED THAT THE ISSUE REGARDING EXCLUSION FRO M PROFIT OF BUSINESS ON ACCOUNT OF 90% OF INTEREST INCOME SH OULD BE AFTER NETTING OF INTEREST PAYMENT AGAINST INTERE ST RECEIPT AND THIS ISSUE WAS ALWAYS DEBATABLE AND HENCE FOR DISALLOWANCE OF DEDUCTION ON THIS ACCOUNT U/S 80HHC ALSO PENALTY IS NOT JUSTIFIED. 3.2 REGARDING OTHER REDUCTION FORM PROFIT OF BUSINE SS BEING 90% OF PRIOR PERIOD ADJUSTMENT IT WAS SUBMITTED TH AT FOR THIS ALSO PENALTY IS NOT JUSTIFIED BECAUSE THE RED UCTION FORM PROFIT OF BUSINESS ON THIS ACCOUNT IS NOT PROP ER I.T.A. NO. 907/DEL/2010 4/7 ALTHOUGH NO APPEAL HAD BEEN FILED BY THE ASSESSEE I N QUANTUM PROCEEDING. AS AGAINST THIS LD. D.R. SUPPO RTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE ARE IN AGREEMENT WITH THE LD . A.R. THAT THE PENALTY IN THE PRESENT CASE IS NOT JUSTIFI ED BECAUSE WE FIND THAT THE DISALLOWANCE ON ACCOUNT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF & ESI IS NO T PROPER AS PER THE JUDGEMENT OF HON'BLE HIGH COURT O F DELHI RENDERED IN THE CASE OF P M ELECTRONICS REPOR TED IN 313 ITR 161 (DEL.). ALTHOUGH THE ASSESSEE DID NOT CARRY THE MATER IN APPEAL BEFORE THE TRIBUNAL IN QUANTUM PROCEEDINGS BUT THE PENALTY PROCEEDINGS BEING INDEP ENDENT PROCEEDINGS WE HAVE TO CONSIDER THE CORRECT LEGAL POSITION WITH REGARD TO THIS DISALLOWANCE WHILE DECIDING THE PENALTY AND SINCE AS PER THIS JUDGEMENT OF HON'BLE HIGH COU RT OF DELHI DISALLOWANCE ON ACCOUNT OF BELATED PAYMENT O F EMPLOYEES CONTRIBUTION TO PF & ESI IS NOT PROPER N O PENALTY CAN BE IMPOSED FOR SUCH DISALLOWANCE. 4.1 REGARDING DISALLOWANCE OUT OF VEHICLE MAINTENAN CE AND REPAIRS ON THE BASIS OF ALLEGED PERSONAL USE BY DIR ECTOR WE FIND THAT ON THIS ACCOUNT ALSO IN THE CASE OF A CO MPANY DISALLOWANCE IS NOT JUSTIFIED IN THE HANDS OF THE E MPLOYER COMPANY ALTHOUGH THE SAME CAN BE CONSIDERED AS INCO ME I.T.A. NO. 907/DEL/2010 5/7 ON ACCOUNT OF PERQUISITES IN THE HANDS OF EMPLOYEE DIRECTOR. THIS WAS SO HELD BY HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGINEERING CO. VS CIT REPORTED IN 253 ITR 749. SINCE SUCH DISALLOWANCE I TSELF IS NOT PROPER AS PER THIS JUDGEMENT OF HON'BLE HIGH CO URT OF GUJARAT (SUPRA) WE ARE OF THE CONSIDERED OPINION T HAT NO PENALTY IS JUSTIFIED FOR SUCH DISALLOWANCE ALTHOUGH THE ASSESSEE HAS NOT CARRIED THE MATTER IN APPEAL BEFOR E THE TRIBUNAL IN QUANTUM PROCEEDINGS. 4.2 REGARDING THE 3 RD ADDITION/DISALLOWANCE ON ACCOUNT OF ALLOWING LESSER AMOUNT OF DEDUCTION BY THE A.O. U/S 80HHC WE FIND THAT THE SAME WAS REDUCED ON ACCOUNT OF EXCLUSION OF 90% OF INTEREST INCOME AND INCOME ON ACCOUNT OF PRIOR PERIOD ADJUSTMENT FROM BUSINESS PR OFITS. AS PER THE INTEREST DETAILS AVAILABLE IN THE PAPER BOOK WE FIND THAT THE ASSESSEE HAS INTEREST EXPENSES OF RS. 15.80 LACS AND INTEREST INCOME OF RS.1 78 596.20 AND IN T HE P & L ACCOUNT ASSESSEE HAS DEBITED NET AMOUNT OF INTER EST EXPENSES OF RS.14.01 LACS. THIS ISSUE WAS VERY MUC H DEBATABLE AS TO WHETHER FOR THE PURPOSE OF EXCLUSIO N OF 90% OF INTEREST INCOME FROM BUSINESS PROFIT WHETHE R NET INTEREST INCOME SHOULD BE CONSIDERED OR GROSS INTER EST RECEIPT. IN VIEW OF THIS FACT WE ARE OF THE CONSI DERED OPINION THAT FOR SUCH A WRONG CLAIM OF THE ASSESSEE PENALTY IS NOT JUSTIFIED BECAUSE THERE WAS A POSSIB LE VIEW I.T.A. NO. 907/DEL/2010 6/7 AT THE RELEVANT POINT OF TIME THAT ONLY NET INTERES T INCOME IF ANY HAS TO BE CONSIDERED FOR EXCLUSION OF 90% THERE OF FROM PROFIT AS PER CLAUSE (BAA) OF EXPLANATION TO S ECTION 80HHC AND THIS ISSUE AHS BEEN SETTLED VERY RECENTLY BY THE JUDGEMENT OF HON'BLE HIGH COURT OF DELHI RENDERED I N THE CASE OF SRIRAM HONDA POWER EQUIPMENTS REPORTED IN 1 58 TAXMAN 474 (DEL.) DATED 12.01.2007 AND RETURN OF I NCOME WAS FILED AS ON 2.11.2004 AND HENCE AT THAT POINT O F TIME THE ISSUE WAS NOT SETTLED AND IN VIEW OF THIS WE A RE OF THE CONSIDERED OPINION THAT FOR SUCH REDUCTION IN THE A MOUNT OF DEDUCTION ALLOWED TO THE ASSESSEE U/S 80HHC IMPOSITION OF PENALTY U/S 271(1)(C) IS NOT JUSTIFIE D AND HENCE WE DELETE THE SAME. SIMILARLY WE FEEL THAT EXCLUSION OF 90% OF PRIOR PERIOD ADJUSTMENT FROM BU SINESS PROFIT IS ALSO DEBATABLE AND HENCE FOR THIS ALSO P ENALTY IS NOT JUSTIFIED. 5. IN HE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. 6. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 05.05.2010. SD./- SD./- (A. D. JAIN) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:05 TH MAY 2010 SP. I.T.A. NO. 907/DEL/2010 7/7 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI