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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. These are the appeals filed by the assessee against the order of the ld CIT(A)- 2, Faridabad dated 16.05.2014 for the Assessment Year 2008-09 and dated 09.06.2014 for the Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal for the Assessment Year 2008-09:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making disallowance of Rs. 13,91,283/- u/s 40(a)(ia) being interest expenses.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making an addition of Rs. 98,250/- u/s 40(a)(ia) of the Income Tax Act, 1961 being freight charges paid.
3. That having regard to the facts and circumstances of the case, Ld. CTT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making an adhoc disallowance of Rs, 42,847/- being l/8lh of the repair and maintenance expenses.
4. That having regard to the facts and circumstances of the case, Ld. C1T(A) has erred in law and on facts in making an adhoc disallowance of Rs. 92,464/- being l/2th of total disallowance made by Ld. A.O. of Rs. 1,84,928/- on depreciation on car and telephone expenses.
Page 2 of 5 5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order without giving adequate opportunity of being heard 6. That in any case and in any view of the matter, action of Ld, CIT(A) in confirming the action of Ld. A.O in making the impugned additions are - bad in law and against the facts and circumstances of the case.”
The assessee has raised the following grounds of appeal for the Assessment Year 2009-10:-
“1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. A.O. in making disallowance of Rs. 16,72,812/- u/s 40(a)(ia) being interest expenses.
That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the disallowance u/s 40(a)(ia) is bad in law and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining 50% of the disallowance made by Ld. A.O. out of repair and maintenance, interest, insurance and depreciation on car and telephone expenses.
4. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. A.O. in passing the impugned assessment order without giving adequate opportunity of being heard.
5. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned additions are bad in law and against the facts and circumstances of the case.”
Now we first come to the appeal of assessee for Assessment Year 2008-09.
The first ground of appeal
is with respect to disallowance u/s 40a(ia) of the Act of Rs. 1391283/- on account of interest expenditure. The assessee has paid interest to various non-banking companies admittedly on sum of Rs. 1391283/- tax has not been deducted therefore, same is disallowed. On appeal before the ld CIT(A) the above disallowance is confirmed.
6. The ld AR submitted that it has been held by several judicial pronouncements that proviso inserted to the above provisions is retrospective in operation and therefore assessee should get benefit of the above proviso. He further submitted that all these companies are well known non-banking financial companies and therefore it is natural that all of them have shown this income in their income tax records. He further submitted that in view of this the assessee may be granted an opportunity to establish the same.
7. The ld DR vehemently opposed the arguments of the assessee relying upon the order of the lower authorities.
Page 3 of 5 8. We have carefully considered the rival contentions. The Hon'ble Delhi High Court in case of CIT-1 Vs. Ansal Landmark Township Pvt Ltd 377 ITR 635 (del) has held that second proviso to the above section is declaratory and curative in nature and it has retrospective effect from 01.04.2005. In view of this, we set aside this ground of the appeal back to the file of the ld AO with a direction to grant the assessee an opportunity to substantiate its claim of allowability with respect to the above proviso. In the result, the ground No. 1 of the appeal of the assessee is allowed.
Ground No. 2 of the appeal is also with respect to addition of Rs. 98250/- on account of freight charges on which tax has not been deducted. In view of our above direction in ground No. 1 of the appeal we also give similar direction to the ld AO and set aside the issue back to the file of ld AO. In the result, Ground No. 2 of the appeal of the assessee is allowed accordingly.
Ground No. 3 of the appeal of the assessee is with respect to disallowance of Rs. 42847/- being 1/8th of repair and maintenance expenses. The ld Assessing Officer has disallowed the above expenditure for the reason that personal use of car and telephone cannot be ruled out and further assessee could not prove that entire expenses were incurred for business purpose only. The ld CIT(A) reduced the above disallowance on account of car and telephone by 50%. The assessee is aggrieved and contested the above disallowance.
Before us the ld AR submitted that none of the repair and maintenance expenditure is on account of personal use. He submitted copy of repairs and maintenance expenditure at Page No. 70 to 72 of the paperbook.
Ld DR vehemently relied upon the orders of the lower authorities.
We have carefully considered the rival contentions and we are the opinion that the assessee has submitted the details of this expenditure, which are backed by the proper evidences. The ld Assessing Officer could not point out any expenditure not incurred for the purposes of the business. In view of this, we are of the opinion that this disallowance cannot be sustained and hence, deleted. In the result ground No. 3 of the appeal of the assessee is allowed.
Ground No. 4 of the appeal of the assessee is with respect to disallowance of Rs. 92464/- on depreciation on car and telephone expenses. The ld AO disallowed the same holding that the assessee might have incurred some expenditure for personal nature. The ld CIT(A) has reduced the disallowance by 50%.
The ld AR submitted that there cannot be any disallowance on account of depreciation as car is used for the business purposes. Further, he submitted that Page 4 of 5 even if there is personal use granting of statutory disallowance of depreciation cannot be made.
The ld DR vehemently relied upon the orders of the lower authorities.
We have carefully considered the rival contentions and we are of the opinion that personal use of car cannot fetter the granting of statutory allowance of depreciation on car used by the assessee for the purpose of his business in view of the decision of the coordinate bench cited before us of Mukesh K. Sah Vs. ITO 92 ITD 349. In view of this, we direct the ld Assessing Officer to delete the disallowance of depreciation. With respect to disallowance of depreciation we do not find much force in the contention of the assessee therefore those disallowances are confirmed. In the result ground No. 4 of the appeal of the assessee is partly allowed.
Ground No. 5 to 7 are general in nature and therefore same are dismissed.
In the result appeal of the assessee for AY 2008-09 is partly allowed.
Now we come to the appeal of the assessee for the AY. 2009-10.
The first ground of appeal
of the assessee is against disallowance Rs. 1672812/- u/s 40a(ia) on account of interest expenditure. The assessee has paid interest to various non-banking companies on which admittedly on sum of Rs. 1672812/- tax has not been deducted therefore, same is disallowed. On appeal before the ld CIT(A) the above disallowance is confirmed.
22. The ld AR submitted that it has been held by several judicial pronouncements that proviso inserted to the above provisions are retrospective in operation and therefore assessee should get benefit of the above proviso. He further submitted that all these companies are well known non-banking financial companies and therefore it is natural that all of them have shown this income in their income tax records. He further submitted that in view of this the assessee may be granted an opportunity to establish the same.
23. The ld DR vehemently opposed the arguments of the assessee relying upon the order of the lower authorities.
24. We have carefully considered the rival contentions. The Hon'ble Delhi High Court in case of CIT-1 Vs. Ansal Landmark Township Pvt Ltd 377 ITR 635 (del) has held that second proviso to the above section is declaratory and curative in nature and it has retrospective effect from 01.04.2005. we have also deiced ground No. 1 of the appeal of the assessee for AY 2008-09 on identical grounds. In view of this, we set aside this ground of the appeal back to the file of the ld AO with a direction to grant the assessee an opportunity to substantiate its claim of allowability with respect to