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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R.S. SYAL
This appeal by the assessee arises out of the order passed by the CIT(A)-2, Kolhapur on 07-02-2018 in relation to the assessment year 2010-11.
Ground Nos. 1 & 2 are against the confirmation of disallowance of Vehicle diesel expenses of Rs.9,59,655/- and Maintenance expenses of Rs.3,86,000/-.
Yalgud Foods & Milk Products Pvt. Ltd.,
Briefly stated, the facts of the case are that the assessee is in the business of manufacture and sale of bakery products.
The Assessing Officer (AO) found that the assessee incurred Distribution expenses of Rs.20,74,840/-. On being called upon to furnish the details, the assessee submitted that diesel expenses of Rs.9,83,669/- were incurred for vehicles owned by Directors and their relatives. Apart from that, Maintenance and repair expenses of Rs.3,78,379/- were incurred for vehicles owned by the Directors. The assessee also paid rent for the vehicles owned by Directors and their relatives at Rs.4,82,000/- and vehicle hiring charges to outside party at Rs.2,30,792/-. The AO observed that the assessee incurred Diesel expenses and Maintenance expenses in respect of vehicles of directors and their relatives at Rs.9.83 lakh and odd and Rs.3.78 lakh and odd respectively. He further observed that the assessee also used vehicles for some third parties at hiring charges of Rs.2,30,792/-, for which no diesel expenses were incurred. Invoking the provisions of section 40A(2)(b), the AO made disallowance of Rs.9,59,655/- on account of diesel expenses and Rs.3,86,000/- on account of maintenance expenses. The ld. CIT(A) sustained the disallowance.
Yalgud Foods & Milk Products Pvt. Ltd.,
Having heard both the sides and gone through the relevant material on record, it is found as an admitted position that the assessee was using vehicles of directors, their relatives and third parties for supply of bakery products in the far off places as well. The vehicle used for some third party was meant for use only in a limited area. An affidavit of Shri Ramesh Chougule, whose vehicle was used on hire, has also been placed on record, asserting that the he was purchasing goods from the assessee and bringing his own vehicle. It was enroute his business premises that he was also delivering bakery products of the assessee in the nearby vicinity, for which he was paid lump sum charges of Rs.8,000/- per month.
Thus, it is seen that the circumstances in which the vehicle of Shri Ramesh Chougule was used without incurring any diesel or maintenance charges are quite different from the normal vehicles used by the assessee for his business.
However, it is pertinent to note that out of Rs.9,59,000/- paid to the relatives towards diesel, one of the Directors debited a sum of Rs.1,29,363/- to his personal Profit and loss account and further sum of Maintenance charges of Yalgud Foods & Milk Products Pvt. Ltd., Rs.12,874/- were also debited in his personal Profit and loss account. In this view of the matter, these two amounts cannot be allowed as deduction in the hands of the assessee.
Considering the fact that there were certain discrepancies in the vouching of the expenses, I am of the considered opinion that it would be just and fair if the disallowance is sustained at 20% of the remaining amount from Diesel expenses and Maintenance expenses in addition to confirmation of disallowance at Rs.1,29,363/- out of Diesel expenses and Rs.12,874/- out of Maintenance expenses. I order accordingly.
The only other ground which survives in this appeal is against the confirmation of addition u/s.40(a)(ia) of the Act in respect of rent paid by the assessee to the owners of vehicles.
The assessee paid Rs.4,82,000/- to four parties as listed on page 12 of the assessment order. The AO opined that in the absence of assessee deducting the tax at source u/s.194-I, the amount was disallowable u/s.40(a)(ia) of the Act. The ld. CIT(A) sustained the disallowance.
Having heard the rival submissions and gone through the relevant material on record, it is seen that payment of rent of Yalgud Foods & Milk Products Pvt. Ltd., Rs.96,000/- to Shri Ramesh Chougule is admittedly without deduction of tax at source and the assessee has not further placed on record any evidence to demonstrate that Shri Ramesh Chougule included this amount in his return of income. I, therefore, uphold the disallowance to this extent.
As regards the remaining amount of Rs.2,04,000/- paid to Shri Annaso A. Patil; Rs.98,000/- paid to Smt. Minal A.
Patil; and Rs.84,000/- paid to Dadaso Patil, the ld. AR stated that these 3 persons included the amount of rent in their respective total incomes. Going by the second proviso to section 40(a)(ia), no disallowance can be made on the recipients showing the amount in their respective total incomes. Under these circumstances, I set aside the impugned order on this score and remit the matter to the file of the AO for examining the assessee’s contention. In case such amount of rental income is found to have been included by the afore referred three persons in their respective incomes, then no disallowance should be made in the hands of the assessee u/s. 40(a)(ia) of the Act.
Yalgud Foods & Milk Products Pvt. Ltd.,
In the result, the appeal is partly allowed. Order pronounced in the Open Court on 03rd January, 2020. S