SHROFF EYE CENTRE,NEW DELHI vs. ACIT, NEW DELHI

This is an appeal by the assessee against the order dated 29.04.2016 of ld. CIT(A)-20, New Delhi.

The only grievance of the assessee in this appeal relates to the sustenance of addition of Rs.1,71,238/- made by the AO out of vehicles repairs & maintenance expenses.

Facts of the case in brief are that the assessee filed its return of income declaring an income of Rs.5,32,05,190/- on 28.09.2012. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee incurred expenses at Rs.8,96,294/- on account of vehicles repairs & maintenance and also 2 Shroff Eye Centre claimed depreciation of Rs.8,16,090/- on the vehicles. The AO disallowed 10% of the aforesaid expenses on account of personal use of vehicles by the partners and the staff members of the assessee firm.

Being aggrieved the assessee carried the matter to the ld. CIT(A) who sustained the addition by observing in para 6.3 of the impugned order as under: “6.3 I have considered the submission of the appellant. As per section 37 of the Act, expenses incurred or expended wholly and exclusively for the purpose of business/profession is to be allowed. The primary onus of proving that such expenditures have been incurred exclusively and wholly for the purpose of business lies on the assessee. I am inclined to agree with the AO that personal element of expenditure on the usage of cars/vehicles cannot be ruled out as no log books are maintained. Therefore, I tend to agree with the AO that 10% disallowances for personal usage of such facilities is quite reasonable.” 5. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the vehicles were used for the purpose of business. Therefore, the disallowance made by the AO and sustained by the ld. CIT(A) was not justified. It was further stated that the depreciation is statutory allowance and when the vehicles were used during the course of regular business, no disallowance can be made out of the depreciation.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the AO did not point out any specific item out of the vehicles repairs & maintenance which was used by the assessee for personal purposes. At the same time, the assessee had also not maintained log book. Therefore, the personal use of the vehicles in such type of cases cannot be ruled out. However, the disallowance made by the AO and sustained by the ld. CIT(A) @ 10% appears to be excessive. We, therefore, to meet the ends of justice, deem it appropriate to sustain the disallowance @ 5% of the vehicles repairs & maintenance and depreciation.

In the result, the appeal of the assessee is partly allowed. (Order Pronounced in the Court on 09/11/2017)