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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV & SHRI PRADIPKUMAR KEDIA
Assessee by : Shri Piyush Agrawal, AR Revenue by : Shri S.K. Dev, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 08/08/2019 घोषणा क� तार�ख /Date of Pronouncement: 19/08/2019 आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-1, Ahmedabad dated 30.10.2017 passed for Asstt.Year 2014-15.
Assessee has raised mainly two grounds in its appeal. In the first ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming the disallowances of Rs.25,000/- out of Vehicle maintenance expenses.
2 3. We have heard both the parties on this issue and gone through orders of the Revenue authorities. The assessee is a private limited company. In its return for the Asstt.Year 2014-15, it has claimed a sum of Rs.4,42,918/- as vehicle maintenance expenses. This was restricted to 1/5th by the ld.AO on the ground that assessee has not given any log book showing details of use of vehicles for the purpose of business/personal. In the absence of the same, the ld.AO believed that element of personal user cannot be ruled out. The issue was agitated by the assessee before the ld.First Appellate Authority who confirmed the same, and is in further appeal before the Tribunal.
Before the Tribunal, the assessee relied upon the decision of Hon’ble Gujarat High Court in the case of Sayaji Iron & Engineering Co. Ltd., 253 ITR 749 (Guj) and prayed for deletion of the addition.
On due consideration of the facts, we are of the view that issue in dispute is covered by the decision of Hon’ble Gujarat High Court in the case of Sayaji Iron & Engineering Co. Ltd., (supra), wherein it is held that since the assessee being a separate legal entity, the question of personal element involved in the expenditure does not arise. In the absence of evidence to prove otherwise, we do not find any necessity to disallow the impugned expenditure made on the basis of estimation of personal expenditure. Thus, this ground of appeal is allowed.
In the second ground of appeal, assessee is challenging confirmation of disallowance of Rs.5,78,411/- made by the AO out of payment and provisions to employees.
3 7. As the facts emerges out from the record, the ld.AO noticed that the assessee has debited an amount of Rs.18,78,411/- under the head “payment and provisions to employees”, which the AO doubted on the ground that business of the assessee was discontinued. The ld.AO sought explanation of the assessee in this behalf. Assessee submitted its reply vide letter dated 15.11.2016, which reads as under: "As regards employees benefit expenses ofRs.18,78,411/-, kindly note that during the year under consideration salary expenses were incurred. Skeleton staff is maintained to run and manage the company affairs. The staff includes accountant, peon, clerk, record keeper etc. Even thought the manufacturing operations have been temporarily suspended such administrative staff have been maintained. Persons are required to attend banking work, prepare books of accounts, get the books audited and make compliance with various government agencies. In view of the above facts and circumstances it is requested that the expenses in question being incurred only to run the company and also being lesser than earlier years and the same not being capital, personal or prohibited under any law should be allowed."
The ld.AO was not satisfied with the above explanation of the assessee. He maintained that since there was no business activity, and no income has been declared by the assessee during the year, expenditure could not be allowed. However, the ld.AO gave a relief of Rs.3,00,000/- and the balance amount of Rs.15,78,411/- was disallowed and added to the total income of the assessee. Assessee carried the matter before the ld.CIT(A) but of no avail, hence, assessee is before the Tribunal.
Before us, the ld.counsel for the assessee, at the very outset submitted that similar issue was come up before the Tribunal for the assessment years 2011-12 to 2013-14 and the Tribunal has restricted the disallowance upto 50%, and therefore, since facts
4 and circumstances being same, the claim of the assessee in this year also may be allowed on the same footing. He placed on record copy of the order of the Tribunal dated 17.9.2018 passed in 561 and 3537/Ahd/2016. On the other hand, the ld.DR relied upon the orders of the Revenue authorities below.
We have considered rival submissions and gone through the record carefully. We find that similar issue was considered by the Tribunal in the case of the assessee for the Asstt.Year 2011-12 to 2013-14, and the Tribunal has partly allowed its claim by restricting the claim upto 50%. To appreciate the issue, we would like to reproduce the relevant part from the order of the Tribunal as under: “11. During the course of assessment proceedings, the assessing officer noticed that assessee has debited an amount of Rs. 26,90,440/- under the head payment and provisions for employees. The assessing officer observed that this claim of the assessee is not proper as the business operation of the assessee has been discontinued since long and the assessee has declared only income from other sources. The assessee explained that statement of three employees were recorded u/s. 131 of the act and they had admitted that they were rendering services for the performance of work of the assessee company during the year under consideration, therefore, there was no question of disallowing the salary expenses. The assessing officer has not accepted the explanation of the stating that the factory and business operation of the assessee company has been closed since long therefore, he has allowed the salary expenses to the extent of.Rs.5 lacs only. The assessee has preferred; appeal before the Id. Id.CIT(A) who has sustained the disallowance on the ground that services were not rendered for business purposes. 12. We have heard the rival contentions and perused the material on record carefully. It is noticed that all the three employees whose statements were recorded had admitted that they were working for the assessee company. The assessing officer has not disproved that the staff members and employees were net employed and not rendered services to the assessee company during the year under consideration. The assessee has submitted the supporting details during the course of assessment proceedings claiming that the staff employees have- rendered services on account of which it has earned income from other sources. Looking to the above facts and circumstances we observe that the assessing officer has made the disallowance only on estimated basis without disproving the claim of the assesses that employees and staff have rendered services during the year under -consideration. However, we consider that employees" have also rendered services to the other group concerns of the assessee, therefore, we are of the view that disallowance under :the head payment for employees provision to the extent of 50% will be the reasonable. Therefore, we restrict the disallowance
5 to the extent of Rs. 50% i.e. of Rs.26,90,440/- under the head payment on provision of employees and allow the claim to the extent of Rs. 13,45,220/- In the result, the appeal of the assessee on this issue is partly allowed.”
In the light of the above order of the Co-ordinate Bench of the Tribunal, and the facts and circumstances being similar with that assessment years 2011-12 to 2013-14, and the ld.DR was also not able to demonstrate that how the facts in this year is different from earlier years, therefore, we are not inclined to deviate from the view taken by the Tribunal on this issue, and therefore, we restrict the disallowance to the extent of 50% and thus partly allow this ground of appeal.
In the result, appeal of the assessee is partly allowed. Order pronounced in the Court on 19th August, 2019.