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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI AMARJIT SINGH&
आदेश / O R D E R
PER Ms. MADHUMITA ROY - JM: Being aggrieved by and/or dissatisfied with the order dated 22.07.2014 passed by the Commissioner of Income Tax(Appeals)-XX, Ahmedabad [Ld.CIT(A) in short] for Assessment Year (AY) 2010-11 arising out of the assessment order dated 20.03.2013 passed by the
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 2 - ACIT, Circle-1, Bhavnagar, the instant appeal has been filed before us by the Revenue with the following grounds:-
The Ld.CIT(A)-XX, Ahmedabad has erred on facts and circumstances of the case in deleting the disallowance of Rs.18,74,523/- made u/s.40(a)(ia) of the Act. 2. The Ld.CIT(A)-XX, Ahmedabad has erred on facts and circumstances of the case, restricting the disallowance to Rs.1 lac and thereby allowing relief of Rs.86,000/- eventhough the assessee has failed to give any evidence of cash expenditure on account of repairing expenses of Rs.1,86,600/-. 3. The Ld.CIT(A)-XX, Ahmedabad has erred on facts and circumstances of the case in allowing the expenditure to Rs.16,25,011/- incurred for the purchase of seats for newly purchased buses as Revenue expenditure.
Ground No.1 :- The brief facts leading to the ground is this that the assessee has made the interest payment of Rs.8,65,018/- to GE Capital and Rs.10,09,505/- to Magma Fin Corp Ltd. totalling to Rs.18,74,523/-. The Assessing Officer Assessing Officer (AO) made the disallowance of the total amount of Rs.18,74,523/- on the premise that no TDS has been made by the assessee while making the credit/payment of the interest to both the parties invoking the provisions of section
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 3 - 40(a)(ia) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").
The learned AR contended before us at the time of hearing that it was a genuine omission on the part of the assessee for not making the TDS but both the recipients of the interest was assessed to tax and interest income has been included by them while computing the total income and the returns of income was filed for the year under consideration and paid the taxes thereon. The learned AR further added that Form No. 26AR.W. Rule 31ACB duly filled in, audit report of both the recipients, acknowledgments of the return of income of both the recipients for the A. Y. 2010-11 along with all other correspondences as per the requirements of section 201 sub-section (1) of the Income Tax Act were placed on record and the condition stipulated under the newly inserted proviso have been duly complied with which has not been controverted by the learned DR.
We have heard the rival submissions made by the respective parties, we have perused the relevant materials available on record. We find that during the course of appellate proceeding the assessee argued that by the Finance Act 2012 second proviso to section 40(a)(ia) has been inserted and according to that if the assessee failed to deduct the
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 4 - whole/part of any tax but the same is not deemed to be an assessee in default under the 1st proviso to section 201(1) then it shall be deemed that the assessee had deducted and paid taxes on such sum on the date of furnishing of return of income by the payee.
4.1. The issue has already been examined by the Hon’ble ITAT in the case of Rajeev Kumar Agarwal in ITA No.337/Agra/2013 for the Assessment Year 2006-07 where in an identical situation it was held that no disallowance under section 40(a)(ia) is called for in respect of the non-deduction of TDS. more so, in view of the applicability of the second proviso of section 40(a)(ia) of the Act with retrospective effect. The learned AR further rely upon the judgment of Commissioner of Income Tax-1 vs Ansal Landmark Township (P) Ltd where the Hon’ble Delhi High Court upheld the ratio of the judgment of Rajeev Kumar Agarwal (supra).
4.2. Taken into consideration of the entire aspect of the matter, we do not find any infirmity in the order passed by the learned CIT(A) and we thus dismiss the said ground of appeal preferred by the revenue.
Ground No. 2 :- The brief facts relating to the Ground No.2 is that upon verification of profit and loss account it was noticed that the assessee has claimed Repairs & Maintenance expenses of Rs.18,65,960/-.
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 5 - Considering the amount involved detailed information in this regard was called for from the assessee and the assessee submitted the ledger accounts of repairs and maintenance expenses as also supporting proof/evidences/bills/invoices where several discrepancies were found for which genuineness of expenses could not be examined by the AO and an amount of Rs.1,86,600/- being 10% of the total expenses was disallowed and added back to the total income of the assessee. During the appellate proceedings, the remand report was called for. In the remand report the AO observed that the genuineness of the transaction could not be ascertained by the AO. In the absence of the valid documents in support of the same the AO found the possibility of bogus entry. The learned CIT(A) in the appellate proceedings observed that the AO has not given any specific finding about any bogus claim of any specific expenditure neither made inquiry or cross verification of the recipients to ascertain the genuineness of the expenditure and considering the same the learned CIT(A) confirmed and restricted to a lump sum disallowance of Rs.1,00,000/-.
The Departmental Representative vehemently argued in support of the order passed by the AO and the assessee's representative has not made any remarkable effort to contradict the same. We find that AO has not made any cross-verification to disprove the genuineness of various repairs and maintenance expenses and he has made disallowance on
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 6 - estimated basis for want of proper bills and vouchers. However, the Ld.CIT(A) has restricted the disallowance to Rs.1,00,000/- on the basis of self made vouchers as it is not possible to keep invoices/bills for each and every petty nature of expenses. We thus find decision of disallowance of Rs.1,00,000/- made by the CIT(A) is justified and we therefore do not find any further reason to interfere with the order passed by the learned CIT(A). Accordingly, the ground of appeal preferred by the revenue stands dismissed.
Ground No.3 relates to allowing the expenses of Rs.16,25,011/- as revenue expenditure incurred for the seat repairing of newly purchased buses.
7.1. The brief facts relating to this ground is this that the assessee has purchased 52 chasis of buses from the companies dealing therein and incurred expenditure of body fabrication thereof. The assessee claimed seat repair expenses of Rs.17,38,988/- as it appears from the Profit & Loss account. The seat repairing expenses in regard to the new buses purchased to the extent of Rs.16,25,011/- has been disallowed by the AO on finding it capital expenditure and added back to the total income of the assessee. The Ld.CIT(A) has disposed of the appeal by deleting the addition and allowed the said repairing expenses as revenue expenditure.
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 7 - 8. At the time of hearing of the matter, the Ld.DR strongly argued supporting the contention made by the AO for disallowance of the amount on the ground that such expenses is capital in nature.
8.1. On the other hand, representative of the assessee vehemently argued that such expenditure is a revenue one. He further added that remodeling of furniture in retail outlet is revenue expenditure as in the case of the assessee. Such issue has been decided in the case of C|IT vs. Delhi Cloth and General Mills Co. Ltd. (1981) 131 ITR 641 (Delhi) as cited by the Ld.AR.
We have heard the rival submissions made by the representative of the parties. We have perused the relevant materials available on record including the order passed by the Ld.AO, Ld.CIT(A) and the remand report as well. The Ld.CIT(A) in his order impugned in this respect observed as follows:-
I have considered the facts of the case, submission made by the appellant, remand report from the A.O, and rejoinder to the remand report. The AO has made the disallowance of Rs.16,25,011/- towards the seat repairing expenses treating the same as capital in nature by rejecting the appellant's claim as revenue expenditure. It has been observed by the A.O. that certain fixed assets in the form of 52 chasis of buses have been purchased by the appellant. On verification of the ledger account of seat
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 8 - repairing expenses and their bills the AO was of the view that the purchases of seats for new buses have been booked by the appellant under the head of seat repairing expenses and those were claimed as revenue expenditure.
On the other side, the appellant contended that the addition have been made by the AO without any show-cause and opportunity of being heard. It was contended that the appellant has incurred body building charges of the new buses which included, the new seats fitting expenses in the newly purchased buses during the year under consideration and all these body building charges have been capitalized. Thus, no expenditure of the seat fitting of the new buses purchased in the year under consideration have been debited in the seat repairing expenses. In fact the appellant was into the business of operation of city bus service in the city of Bhavnagar, Baroda, Anand, Nadiad and Gandhinagar. In the year under consideration with approximately 175 old buses each bus contained on an average seat ranging from 32 to 45 depending of size and model of the buses. Further the seat repairing expense were relating to material purchased for repairing of seats in the old 175 buses and with the use of in-house labour the repairing of seats was carried out as and when it was required. Since the appellant was engaged in the business of public transport and hence the damages of the seats was much more than the normal one. On an average Rs.9,286/- per bus in a year expenditure
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 9 - made was very reasonable and justified in view of the public transportation. Further, it was contended that the expenditure is incurred not only once for all and no new asset has came into the existence or no advantage in the nature of enduring benefit is derived therefore the capitalization of the aforesaid expenditure was not warranted. Further, the expenditure incurred was a part of the normal operations of the business and hence the same cannot be held to be capital. Further, it was not a substantial replacement of the old seats and thus it cannot be said that it was in the nature of capital. In support, he has relied upon the various case laws as reproduced in the preceding paras of this order.
On verification of the details of the expenditure it was seen that the expenditures were regularly made since 26.5.2009 to 15.3.2010 and almost in every month those have been incurred. Had the aforesaid expenditures were pertaining to the newly purchased 52 buses only in that case the entire expenditures would have been claimed by one or few more bills on particular dates instead of incurring through out the year. The expenditures claimed were in small amounts which also does not establish that the same were relating to the new buses only. The AO has not brought anything on record to establish that those expenditures were incurred for the new buses only. On the other side the assessee's plea that it has to make the seat repairing periodically in respect of the 175 old buses being used in its business for public transport. Even the appellant
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 10 - has not granted any depreciation on capitalization of the expenses after considering the same as capital expenditure which also shows that the AO has not appreciated the facts fully and properly. In view of the aforesaid discussion, the claim of the appellant treating the same as normal business expenditures is allowable as revenue expenditure u/s.37 of the I.T. Act.
Under the facts and circumstances of the case, we find that no enduring benefits could be derived out of the expenses in question made by the assessee. Neither any new asset has come into existence nor any substantial replacement of the old seats have taken place. For maintenance of the 175 old buses, the expenditures incurred could be said to be reasonable and normal in nature.
Further that the expenses cannot be said to be bogus since the genuineness of the expenditure has not been questioned by the AO.
9.1. We find no discrepancy in the order passed by the Ld.CIT(A) and consequently we do not justify the order passed by the Ld.AO in adding the income as capital expenditure. The expenditure, in our opinion, is revenue in nature having no enduring benefit. We, therefore, uphold the order passed by the Ld.CIT(A). The ground of appeal is rejected.
ITA No.2713/Ahd/2014 ACIT vs. Vitcos Transportation P.Ltd. Asst.Year – 2010-11 - 11 - 10. In the result, Revenue’s appeal stands dismissed. This Order pronounced in Open Court on 16/ 05 /2018
Sd/- Sd/- (अमरजीत �संह) (सु�ी मधु�मता रॉय) लेखा सद�य �या�यक सद�य (AMARJIT SINGH) ( Ms. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 16/ 05 /2018 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XX, Ahmedabad-380 009 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 15.5.18(dictation-pad - pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …15.5.18 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….16.5.18 7. Date on which the file goes to the Bench Clerk…………………16.5.18 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………