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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
ASSESSEE BY : None REVENUE BY : Ms. Sangeeta Yadav, Sr. DR Date of Hearing : 06.07.2022 Date of Order : 08.07.2022
ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the Revenue is directed against the order of the ld.
CIT (Appeals)-35, New Delhi dated 29.05.2019 for the assessment year 2016-17. 2. The grounds of appeal taken by the Revenue read as under :-
“1. Whether on the facts and circumstances of the case, the ld. CIT (A) has erred in deleting the addition of Rs.36,54,670/- made by the Assessing Officer on account of Vehicle Maintenance Expenses, Depreciation on Vehicle and Traveling Expenses, ignoring the findings of the AO that some of the expenses were incurred in cash and were not properly vouched and that the assessee failed to
Whether on the facts and circumstances of the case, the ld. CIT (A) has erred in deleting the addition of Rs.23,82,106/- made by the AO in respect of delayed payment of Employee’s contribution to the Provident Fund, ESI and other welfare funds, not appreciating that the Employee’s contribution to PF & ESI is governed by the provision of section 2(24) read with section 36(1)(va) and not by section 43B of the Income Tax Act, 1961.”
Assessee in this case is engaged in the business of manufacturing and trading of yarn and garments. Assessing Officer (AO) examined vehicle maintenance expenses, traveling expenses and depreciation on vehicles and made 10% estimated disallowance by following observations :-
“4. During the year under consideration the assessee company has debited following expenses in profit and loss account :
Vehicle Maintenance expenses Rs.1,05,88,522/- 2. Depreciation on vehicles Rs. 44,75,910/- 3. Travelling Expenses Rs.2,14,82,268/-
During the course of assessment proceedings, assessee was asked to furnish the details of above expenses. Perusal of details in respect of above expenses filed during the course of assessment proceedings, it reveals that some of above expenses have not been found properly vouched and payments of some expenses were made in cash. The personal use of vehicles by the Directors and their family members, cannot also be ruled put. In earlier assessment years this fact was taken into account while charging FBT but during the year under reference the FBT provisions are not applicable which means the personal and non-business use of vehicles has to be considered as per the ./2019 normal provisions of the Income Tax Act. Since, the assessee failed to substantiate that the whole of the expenses were actually being incurred on account of above heads of expenses, the same cannot be allowed as such. Onus is on the assessee to prove that, these expenses have been incurred wholly and exclusively for the purposes of the business. Same view has been supported in the case of CIT vs T.S. Hajee Moosa & Co. (Mad.) 153 ITR 422, Mysore Kirloskar Ltd. Vs CIT (Kar) 166 ITR 836, Siddho Mal & Sons vs. ITO (Del) 122 ITR 8391 wherein it has been held that:- The adverb ‘wholly' in the phrase ‘laid out or expended .....for business' refers to the quantum of expenditure. The adverb 'exclusively' has reference to the object or motive of the act behind the expenditure. Unless such motive is solely for promoting the business, the expenditure will not qualify for deduction.
4.1. Similar additions have been made in the earlier Assessment Years i.e. in A.Y.2014-15 & A.Y.2015-16 and ld.CIT(A) has deleted this addition. However, Revenue is in appeal before ITAT on this issue. 4.2. Therefore, to cover up any possible leakage/ pilferage under these head of expenses, I disallow 1/10th of above expenses which comes to Rs.36,54,670/- and added back to the taxable income of the assessee company.”
Upon assessee’s appeal, ld. CIT (A) deleted the disallowance by accepting assessee’s submissions and held that no disallowance was required. He concluded as under :- “In the present case, the Appellant is a Pvt. Ltd. Company with audited books of accounts and the AO has made adhoc disallowances, in a routine manner, without giving any logical reason and also without rejecting the books of accounts. In view of the submissions filed by the Appellant, the addition is deleted.”
have heard the ld. DR of the Revenue. None has appeared on behalf of the assessee despite issuance of notice.
Upon careful consideration, we note that AO has given a finding inter alia that some of the expenses have not been properly vouched. AO went on to make 10% disallowance. Ld. CIT (A) deleted the disallowance by accepting that in a private limited company, there may not be a personal use and that disallowance was made in a routine matter and that it was made without rejecting books of account.
We are of the opinion that if the assessee did not submit proper vouchers just because it was a private limited and books were audited, there is no law that entire expenditure is to be allowed or that books have to be rejected before disallowance of some expenditure. How absence of vouchers is not a logical reason is also not clear from the ld. CIT (A)’s order. However, we are of the opinion that disallowance made by the AO on the facts and circumstances of the case is on higher side, hence we restrict the disallowance to 5%. We order accordingly.
Apropos the issue of disallowance of PF and ESI expenditure, these disallowances were deleted by the ld. CIT (A) by making following observations :-
“The AO has made Disallowances u/s 36(1)(va) of the Act in respect of delayed deposit of Employees Provident Fund, ESI
Respectfully following the decision by the jurisdictional Hon'ble Delhi High Court in its judgement in the case of CIT vs AIMIL Ltd. (321 ITR 508), the deposit of employee's contribution of PF and ESI of Rs.23,82,106/- by the appellant beyond the due date u/s 36(1)(va), but before the due date of filing of Income Tax Return, is allowed. This is also in line with maintaining judicial discipline on this issue. Therefore, the ground no.4 is allowed.”
Upon hearing ld. DR of the Revenue, we find that the issue is squarely covered in favour of the assessee by Hon’ble jurisdictional High Court referred above. Ld. DR could not dispute this proposition and accordingly, we confirm the order of the ld. CIT (A) deleting the disallowance.
In the result, the appeal of the Revenue is partly allowed. Order pronounced in the open court on this 8th day of July, 2022.