I.T.O. WARD -2(2),R, NAGPUR vs. SHRI DALBIRSINGH M. TULI, NAGPUR

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SH: G.D.AGRAWAL, HON'BLE PRESIDENT AND SH, MAHAVR SINGH, JUDICIAL MEMBER IA Ng_698 NAG/2016 Legeesment Year 2011 13 ITO_ Ward-2(21 , Room No.315, 3d Floor, Aaykar Bhawan, Telankhedi Road, Civil Lines, Nagpur VS Sh, Dalbirsingh MTuli, Block no.2, amalta VIhar; Kamptee Road, Byramji Town, Negpur-440013. PAN-ACFFT5361E (Respondent 3h_ Gitesh Kumar, Sr,DR 3h. Mangj Moryani,Adv; 08,03,2018 08.03,2018 [AppelantL Appellant bx Respoadent by Date OfHearng Date Of Pronouncement QRDER PER BENCH This appeal by Revenue is arising out of the order of Ld.CIT(A}-2, Nagpur vide Order No,CIT(A)-2/207/14-15 dated 22.09.2016. The asseg3ment wa8 framed by ACIT, Circle-2, Nagpur u/s 143(3} of the Income Tax Act; 1961 (in short "Act" ) for A.Y, 2011-12 vide his order dated 14.03.2014, 2 The irst issue in this appeal of the Revenue is ageinst the order of Ld.CITIAJ deleting the addition made by AO by disallowing expenses invoking the provisions of section 4Ofallia) of the Act, For this, Revenue has raised following Ground No.l:- I #Whether on the facts and circumstances in the case, the Ld, CIIYA) is justified in deleting the addition %f Rs.12371135/- made by the A.O. u/ s.4Ofalfia} of LT Act on account of non deduction of TDS on contractual payments made by the assessee to his relatives reported in Audit report under payment made u/ 5.4OfaJ(2)b) of IT_Act,1961? Gr #a I60) APa [TA No.598/NAC/2016 3, Brief facts are that the AO noted that the assessee has debited a sum of Rs.2,74,97,298/ under the head transportation expenses, which includes an amount 0l Rs,1,23,71,- 135/- being payment made to specified persons 4/8 404(21(b) of the Act; According to AO On these transportation expenses of Rs, 1,23, 71,= 135/- the assessee has not deducted the TDS and these payments are in the nature of contractual payments Accordingly, the AQ made disallowance of the sum 11/$ 4Olallia)/ 40A(2)(b) of the Act Aggrieved a53e8se8 prefertred appeal before Ld,CIT(A) who after considering the submissions of the axsessee deleted the addition 4 Ld; CIT(A} deleted the addition vide para 6.0, 6.1 and 6.2 a8 under: 6,0 1 have carefully considered the submissions of the AR of the appellant; the remand report of the AO, and the material on record Ppel 6,1 A remand report In this case was called for uide this office tter dated 16-07-2015. The remand report dated 25-08-2015 has zen received on 28-08-2015. The AO in para 3.1 of his remand report GPv? has recorded the following finding: During the remand proceedings; the assessee has submitted the copy of Audit report for A.Y: 2010-1I and A,X. 2011-12. As per these reports, the assessee has paid Rs.1,23, 71,_ 135/_ and Ps.36, 64,- 50q/_ during the A.Y.ZO1O-Il and A.Y. 201l- 12 respectively to the persons specified uf s. 4OA (2) (b} The same submission Was already made before the AQ during the scrutiny proceedings The assessee hus submitted the copy of FTRs and Computation of income for AY. 2011- 12 0f following specified persons (Copy of subrission enciosed} Karansingh Tuli 2 Harvindersing Tuli 3 Parvinderkaur Tuli Page 2 ITA No.598 / NAG/2016 filed The perusal of these documents shows that the said persons have income from business as per the their retur of income declaring assessee nas 44AE 0f' the ITAct 1961. provisions of Section the has failed to S4 bstantiate his claim by However; the nssessee such 4s bills vouchers regarding the adducing any evidence payments of transportation chorges made to these persons " 6.2 It clearly transpires from the above finding of the AO that the charges amounting to Rs.l, 23,71,135/ pertdin to the transportation A.Y, 2010 -Il and not to the A.Y. 201l-12 under appeal Therefore, on of the facts, it is quite manifest that the Ld. AQ had wrongly the face picked Wp the figures of transportation charges from the Audit report for the addition for the same in AY. 2011-12 A,Y 2010-1 and made which is incorrect; Therefore, the addition f under appeal Rs.1,23,71,135/- prima-facie deserves to be deleted Coming to the 36,64,500/ - pertaining to AY.201}-12 under correct figure of Rs, paid to the persons specified under section appeal which has been 40A(2} %f the Act, it is seen that the appellant has filed the necessary proof in the form of ITRs and computation of income which has duly been verified by the AO during the remand proceedings and a finding has also been incomporated by the AO in his remand to that effect report These persons being family members covered u/s. 40A/2} (b} filed their returns of income as per the provisions of section 44AE hove of the I T Act, I961 and hence are not required to maintain any books of account The Ld AO thus in his remand report has admitted that the figure of transportation chorges of Rs.1,23,71,135/ hs been wrongly adopted as against the correct figure 0f Rs.36,64,500/- pertaining to the year under appeal The appellant has filed a paper bock which is enclosed with the ledger account %f transportation charges which are in conformity with the audited books 0f account of the appellant: The Ld AO has examined the audited books Of account and accepted the same without pointing aut any infirmity with the same Thus, the LdAO after 162 Nageia [TA No.598/NAC/2016 162 having examined the audited financial accounts %f the appellant in the course Of assessment aS well as remand proceedings hus accepted the same without noting any deficiency: Therefore; the inference drawn by the AO that the transportation charges are not genuine is not based on any sound footing: The Ld AO In fact had been hamping on the wrong figures pertaining t0 @ different year i.e. A.Y.2O10-11 as per the audit report 0f that year which is not relevant for the year under appeal: Therefore; such inference drawn by the AO that the transporiation chorges Gre not genuine does not camy any substance. Further that the payment made by the appellant to the family members are not liable to TDS in view Of the provisions of section 194C(6} and 94C(7) of the IT Act,1961. The appellant hs contended before the AO that such payments are not liable to TDS; however; the Ld.AO has refrained from AppE giving any finding on the same Thus, taking into consideration all the rumulative factors the addition made by the AQ being not justified is "directed to be deleted, This ground is allowed. "bxi? Aggrieved Revenue is in appeal before the Tribunal 5 We have heard rival contentions Ont this is8ue &nd gone through facts and circumstances of the ca8e_ We find that the asseg8ee has explained that these amounts pretend to AY 2010-11 amounting to Rs.1,23,71,135/- and not to the AY 20n1-12_ This facts i8 admitted by the AO in his remand report dated 25.08.2015. Once the AO admitted the factual position, we do not want to interfere in the order of Ld.CIT(A) deleting the addition. As regard: to invoking the provision of section 40A(Z](b) of the Act; we are Qf the view that Ld.CITIA) has recorded 8 finding of fact that the transportation charges are genuine ad payment mede by the a8sessee to the femily merbers are not liable to any TDS in view of the provision of section 194C(6) and 194C(7) of the Act to the extent of R8.36,64,500[ which pertains to this year. Hence, we find {64 ITA No.598/NAC/2016 no infirmity in the order of Ld.CITIA) and the same i8 confirmed. This isste of the Revenue 's appeal i8 dismissed, 6 The next issue in this appeal of the Revenue is as regarda to the order of Ld.CITIA) deleting the disallowance of depreciation made by the AO for the reagon that the assessee claimed the deduction twice- For this the Revenue has raised following Ground No.2: 2 "Whether on TaX the facts and circumstances in the case; the Ld Appei 'ITYA) is justified in deleting the addition of Rs.82,36,955/ - on account depreciation of Rs.82,36,955/- claimed twice by including the same der Transportation charges of Rs.27497298/ in total debited in P & Bpd? L Account?" 7 Brief facts are that the AQ noted from the details of transportation charges of R8.2,7497,298/- debited to the P&L A/c by the asgessee, that the asse3se8 has claimed depreciation by including the transportation charges twice amounting ta Rs.82,36,955/- Accordingly, he disallowed the claim ol depreciation: Aggrieved; the assessee preferred appeal before Ld,CIT(A): 8 Ld.CITIAJ allowed the claim of the ag8eg8ee by considering the submissions of the assessee a8 well as remand report of the AQ by observing a8 under - 8.2. #A remand report on the aforesaid claim of the appellant as regards to the transportation charges was called for from the AO. Tne AO has submitted his remand report dated 25-08-2015 which is received in this office on 28-08-2015. The LdAO in pora 4 of his remand report has recorded the following finding: At para 2 (Ground No. 2}, regarding the disallowance of depreciation of Rs.82,36,955/_ On thts issue; the assessee in his Page 15 ITA No.598 NAC/2016 submisston stated that 1 suM 0f Rs.2,74,97,298/ paid for transportation charges and same Were duly shown in the audited Profit Loss account 0f the assessee; The assessee has not included the sum of Rs. 82,36,955/- the same Were 05 depreciation; transportation charges but wrongly typed in the details as depreclation: The Ossessee has also Submitted the copy of account of transportation charges showing the payment 0f Rs. 82,36,955/- 8,3 On careful perusal %f the above finding of the Ld; AO; it is seen that the AO has not disputed the total transportation charges of Rs, 2,74,97,298/ claimed by the appellant as per the audited PaL account The Ld; AQ after perusal of the Copy 0f account and relevant details has also accepted that the Suum of Rs.82,36,955/ included in the transportation charges is not depreciation but the same are transportation charges which i5 wrongly typed as depreciation in the details furnished by h8 appellant as per Annexure-2, which is also forming the part %f the Issessment order IT is thus clearly established that there is no double claim of depreciation: Therefore, the disaliowance made by the Assessing Officer on account of double depreciation deserves to be deleted ApPE; GPI, Aggrieved, Revenue came in Becond appeal before the Tribunal; We have heard the rival contentions And gone through the {acts and 9 circumatances of the case_ We find that the AO in his remand report dated 25.08.2015 categorically admitted that 1 cum of Rg.2,74,97,298/- peid for transportation charges and the same were duly shown in the PtL A/c of the assegsee ad moreover the assessee has not included a sum of Rs.82,36,955/- 18 depreciation because the same were transportation charges and wrongly typed in the details as depreciation: Once the AO admits the mistake, we find Page 16 I62 [TA No.598/NAC/2016 the order of Ld CITIA} deleting the addition. This igque o[ no infirmity in Revenue'8 appeal is accordingly dismissed, 10_ The next issue in this appeal of Revenue is against the order of Ld.CITIA) in deleting the addition in restricting the disallowance of depreciation at against a RuM of Rs.51.90 lacs+ For this; Revenue ha: Rs.25,95,000/- 48 raised following Ground No3:- 3 "Whether on the facts and circumstances in the case, the Ld, CITQA) is justified in deleting the addition of Rs.5,90,000/ - and partly allowing the depreciation Qn the ground that the appellant is ligtble to claim depreciation of Rs.25,95,000/ _ even though the assessee is entitled for 15% of depreciation only?" NAGPuR 11_ Brief facts are that the A0 noted that the assebsee has purchased crane For sum of R8.2.75 crore and Rs.71 lacs aggregating to Ra.3.46 crore vide 1 invoices enclosed 38 Annexure 6 8 7 , According to AO, the as8eggee has purchased these cranes 01.11.2010 and 20.12.2010, thereby the assessee is eligible for depreciation for half of the year 7.59 &5 against the claim of 15%. Aggrieved assessee preferred appeal before Ld.CIT(A} 12_ Ld.CITIA) deleted the disallowance of deprecation partly by observing in para 9.4 & 9.5 as under: 9.4. "On careful examination of the letter dated 1gth August; 2010, it is seen that it is 4 clarificntion letter lt is further seen that the payments for the cranes has been made In the RX 2011-12 to the tune of Rs.3,30,00,000/ _ during the period 01.04.2011 to 27.03.2012 It is further seen that the letter dated 19th August 2010 was first time submitted during the remand proceedings only: The AO during the remand proceedings has asked the appellant to furnish the proof of possession of Paze | 7 ITA No.598/MAG/2016 cranes in the month of August 2010 and it being put to Use_ The appellant however has relied on the clarificatory letter [ssued by Astavinayak Cranes and the agreement for sale entered on 01-1l-2010. The AQ in para 5.2 0f his remnand report has recorded & finding that "From the record, it is seen that the assessee has already submitted a copy of agreement for sale 0f Crawler crane Manitowcc 4100SI SrNo.41510 entered on 01/11/2010 As per Para 2 of the said agreemnent; the crane was inspected and taken complete load test and rial of the said crane at the yard on Bhiwandi By Pass road (Mumbailwhere the crane was stored by the seller: 9.5 From the above finding of the Assessing Officer, it is quite manifest that the appellant has purchased the cranes from Astavinayak Cranes; Mumbai in the month of November 2010 as per the invoices submitted The appellant has also flled the proof of Fayments t MI $ Astauinayak Crunes; Mumbai Therefore , the Ld AO i5 not justified in doubting the genuineness 0f the purchases of cranes: It however is seen: from the records that the appellant has nol conclusively praved the possession and use of such crones in the month of August 2010. The appellant has intered into the agreement for sale for purchase 0f cranes on 0I-ll- 2010 nd inuoices are also raised by the seller in the month of November 2010 Therefore; the use of such cranes in the month %f August 2010 mere at the strength 0f 0 letter dated 19-08-2010 from the seller in absence 0f corroborative proof any transportation, delivery memo and octroi receipts etc does not stand proved Therefare, the appellant is eligible only for SO% of the depreciation at the rate %f 7,596 for the reason that the crunes in question haue been proved to be used by the appellant for his business for the period less than 180 days: In the result, the appellant is eligible claim to deprecintion of Rs. 25,95,000/_ 4S against the claim of Rs. 51, 90,000/- The AO i5 directed to give effect This ground is partly allowed, 1a Aggrieved, now the Revenue is in appeal belore the Tribunal: Page 18 63 ITA No.598/NAC/2016 133 We have heard the rival contentions and gone through the facts and circumstances of the cabe. We find from the facts of the case that L.CITIA) only allowed depreciation 7.5 % , which is eligible only for 509 Qf the deprecation Df the rate applicable to the a8ge8see for the reabon that the agsessee ha8 uged the asset for his business purpose Ior 4 period of less than 180 days. We find no infirmity in the order Of Ld.CIT(A} and hence the game is confirmed. This issue of the Revenue's appeal is dismissed. 14_ The next issue in thig appeal of Revenue is against the order of Ld,CITIA) deleting the disallowance of interest on loan, For thi8 Revenue hes raised following Ground No.4: - #F 4 "Wnether on the facts and circumstances in the case, the Ld.CITIA} justified in deleting the addition of Rs.8,00,000/ - On account of allowance 0f interest on loans?r Brief facts are that the AO noted that the assessee has claimed interest of Rs.8,13,317 /- on total loan raised to the tune cf Rs.1,02,04,279/ The 4O further noted from the balance sheet that a sum of Rs.8 lacs wa8 given by the assessee to BRR Heavy Movers, & proprietary concern of the assessee_ The AO disallowed this interest for lack Of explanation from the assessee and al80 that the as3eapee has uged interest bearing funds for non-busines purpobes; Aggrieved assessee prelerred appeal before Ld.CITIAJ: 16. Md.CITIA) deleted the addition vide para 10.2 of his appellate order a8 under:- 10.2 #On careful examination 0f the material facts, it is seen that out of the total interest debited &t Rs,8,13,318/-, the AO has disallowed the interest of Rs 8,00,000/ on the ground that the interest bearing borrowed funds 169 ITA No.598/NAC/2016 have been used by the assessee for non business purposes In this regard, it is seen that obtained the bank is from total loan the RS 1,02,04,279/- on which interest debited to the P & L account is Rs 8, 13, 318/ On the other hand; aS per the AOs own version aS emanated from para 10 of the Qut %f total aduances given at Rs.29,74,278/ the assessment order, appellant has explained the advances to the extent of Rs.13,51,430/- The AO has recorded & finding that as regards to the balance amount of loans given of Rs. 16,22,848/- the oppellant has not given the and advances details The AO, disallowed substantial therefore, has the bank interest of debited to the PGL Account; The funds borrowed by the Rs.8,00,000/-_ appellant to the Rs.1,02,04,279/-from is the banks of tune not disputed: It is also not disputed that the interest aid an lhe bank loans to the tune of Rs. 8, 13, 31 7/-has been debited to the P8L account The Ld: AO has not brought out & case 4S to how the interest bedring borrowed funds have been utilized for the non business purposes In fact there is an inherent contradiction in the stand taken by the AO that the funds used by the appellant in his proprietary business are for non business purposes: Even during the remand proceedings, the Ld AQ has not established as to how borrowed funds were utilized by the assessee for non business urposes Thus there is nothing to show that the appellant has used the borowed funds for non business purposes, therefore, the adhoc NAC disallowance made by the AO based on presumption and sunises deserves to be deleted This ground is allowed: Aggrieved Revenue care in appeal before the Tribunal: heard the rival contentions and gone through the facts and 17 We have circumstances of the case. we find from the facts of the case that the AO has entire interest debited to the P&L A/c amounting to disallowed the the loan obtained from the bank at R8,l,02,04,279/-. We Rs.8,13,318/ on that out of the loan obtained from bank the a982862e has advanced 88 find Page 40 70 ITA No.598/NAC/2016 interest free only to the extent of Rs,29,74,278/- which is for the purpose o non-business, Accordingly, we are of the view that only proportionate interest the amount of Rs.29,74,278/ should have been disallowed: We direct the On AO accordingly. This issue of the Revenues appeal i8 partly allowed: 18_ The next issue in this appeal of Revenue is against the order ol Ld CITIA) deleting the disallowance of double claim of expenditure by inciuding the same under transportation charges For thi8, Revenue ha8 raised following ground No.5: "Whether On the facts and circumstances in the case, the Ld. CITIA) PFFE justified in deleting the addition of Rs.14,24,635/ on account 0f double Jum of thg expenditure by including the same under Transportation larges of Rs.2,74,97,298/- in total debited in P&L Account?" 4G that the AO noted that the asse38p0 has Brief facts of the case ae Rs,14,24,635/-, which has already been claimed vehicle repair expenses at charges claimed at Rs.2,74,97,278/ included in the transportation AQ disallowed this expense Qf Rg-14,24,635/ Aggrieved Accordingly, the assea88e preferred the appeal before the Ld.CIT(AI: 20_ Ld.CIT(A) allowed the ciaim of the assessee by observing in para 11.3 &s under:- 11.3 "The Assessing Ofjicer in para 7 of his remand report has recorded a finding that the assessee has submitted the ledger account of vehicle maintenance expenses, The Ld,AO has accepted the repairing and contention 0f the appellant that out of the total repairs and maintenance of uehicle expenses at <.55,06,703/- Q sum of Rs: 14,24,635/- being vehicle repairs and maintenance expenses is directly debited to the P&L Page [ 11 ITA No-598/NAC/2016 account 05 the same were claimed to have been incurred by the appellant and the balance Sum of Rs. 40,82,068/ _ being vehicle repair and maintenance expenses is claimed under the head transportation expenses Qs the appellant has received the net transportation charges from various Truck Owners transporters after deduction of uehicle maintenance expenses Thus; the Ld AO hs agreed to the appellant's explanation that there is no double cloim %f vehicle repairing and maintenance expenses to the tune 0 f Rs. 14,24,635 Tne LdAO however; in his remand report has given & passing remark that the claim of the appellant is not accepted for want bills and vouchers for vehicle repairing and maintenance expenses: The Ld. AO in the assessment arder has made the addition on the ground that there is a double addition %f uehicle maintenance and repair expenses to the tune of Ps.14,24,635/ The issue of bills and vouchers Wqs not raised by the Ld Assessing Officer nt the time of assessment in respect of the vehicle repairing and maintenance expenses The books 0f account 0f the appellant are duly audited ul s. 44AB of the Act wuhich were examined by the AO during the assessment proceedings The Ld.AO has accepted the audited books of uccount without finding any tnfirmity with the same. Thus after having examined the audited books %f account in the course Of assessment proceedings and accepting the same as true affairs of assessee's business; the claim 0f the appellant cannot be denied in the absence any adverse corroborative euidence on record Therefore, the addition made by the Assessing Officer on account of double addition deserves to be deleted. Aggrieved Revenue is in second appeal before the Tribunal: 21_ We find that the asbes8ee has claimed totaf expen8e8 for repair and maintenance of vehicles at Rs.55,06,703/- during the previcus year relevant to AY under consideration. The as3e3360 has shown vehicle repair and maintenance expenges at Rs.14,24,635/- in the P&L Alc and also claimed 4 Page 12 appez 122 ItA No.598/NAG/2016 sum of Rs.40,82,068/- for vehicle repair and maintenance expenses The sum of Rs,40,82,068/- were shown under the head transportation expenses A8 the assessee hag received transportation receipt by deducting the aforesaid expenses &nd, therefore, the Bame has not been ciaimed twice. We find no infirmity in the order of LdCIT(A) and the same is confirmed: This issue of Revenue's appeal i8 dismissed. 22_ The next issue in this appeal of Revenue is against the order of Id CIT(A) deleting the addition on account pf non-genuine investment in cranes, For this, Revenue has raised following Ground No.6;- Whether on the facts and circumstances in the case; the Ld.CITA} is Justified in deleting the addition of Rs.18,00,000/ on account of non nuine investment in Cranes?" "a 23. Brief facts related to this issue are that the AO considered the investment in cranes a8 non-genuine for the purpose of allowance of depreciation and also to the payment made to the extent of Rs.18 lacs Accordingly, he disallowed the amount of Rs.IB lacs 48 non-genuine payment on account of purchase of cranes_ Aggrieved; the assessee preferred appeal before Ld.CIT(AJ; 24_ Ld.CIT(A} allowed the claim of the assessee by observing in para 13.2 a8 under: 13.2. "On careful examination of the material facts, it is seen that the appeilant has made the payment by account puyee cheque Ps.3, 46,00,000/ to the tune %f The appellant has filed the Copy 0f account and the details of payment made by cheque before the AO which has been accepted by the AO including the opening and closing balances f Mf Asta) 8 vinayak Cranes, Mumbai In his remand report also the AO hns Page 13 [TA No.598/NAG/2016 confirmed the payments made M/ S Astavinayak Cranes by account payee cheques. Therefore; the investments in cranes being not disputed, the addition made by the AO of Rs.18,00,000/- deserves to be deleted, This ground is allowed Aggrieved; Revenue is in second appeal before the Tribunal, 25_ We have heard the rival contentions and gone through the facts &nd circumstances Of the cage_ We find that the AO himself has accepted the investment in crane and 80 far as payment made to Ashtavinayank Cranes of Mumbai, the same ha8 been accepted and the payment i8 made by cheque. Even in subsequent years, the opening and closing balance of Ashtavinayank cranes is accepted in scrutiny assessment 0/9 143[3) of the Act. Hence, we find no infirmity in the order of Ld,CITIA) and the 8ame i8 confirmed. This issue of Revenue'8 appeal is accordingly disrissed: 26 In the result, the appeal filed by the Revenue is partly allowed, "Rer pronounced in the open court 0n O8th March, 2018. 9m Scl (G.D.AGRAWAL) HON BLE PRESIDENT (MAHAVIR SINGH) JUDICIAL MEMBER Dated: 08th MARCH, 2018 #Amit Kumart Copyto: 1 The Appellant 2, The Respondent 3 The CHIAL Nagpur 4 The CIT; Nagpur 5, The DR, Bench, ITAT, Nagpur (tuccd Ale Ve8y Order #538m Reiistror ITAT; Sn 7an& Aedur "N& 0144 Income Tax Appalarajttual Tr4Tr ta / Nagpur Beict CPur