KALPAJ REALTY P.LTD,MUMBAI vs. ITO WD 9(2)(2), MUMBAI

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ITA 4272/MUM/2016Status: DisposedITAT Mumbai29 December 2016AY 2012-133 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that for a corporate entity, there cannot be a personal element in expenses authorized by the Board of Directors and related to business. An ad-hoc disallowance without specific instances of non-business expenditure is untenable.

What were the facts?

The assessee, a corporate entity, incurred expenses for a motor car, repairs, and insurance. The Assessing Officer made an ad-hoc addition of 25% of these expenses, treating it as personal element.

What were the issues?

Whether an ad-hoc disallowance of 25% of depreciation, repairs, and insurance on a motor car is justified for a corporate entity based on alleged personal use.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI G.S.PANNU

For Appellant: Shri Rajesh P. Shah
For Respondent: Ms Beena Santosh
Hearing: 27/12/2016Pronounced: 29/12/2016

ORDER The captioned appeal filed by the assessee pertaining to assessment year 2012-13 is directed against an order passed by CIT(A)-20, Mumbai dated 12/03/2016, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 10/11/2013.

2.

In this appeal, the only grievance of the assessee is against an adhoc addition of Rs.2,29,440/- being 25% of depreciation on motor car, repairs & maintenance and insurance disallowed by the income-tax authorities by treating it as an expenditure of personal element.

3.

Before me, the Ld. Representative for the assessee pointed out that assessee is a corporate entity and the entire expenditure is authorized by the Board of directors and is in relation to the business of the assessee. It is pointed out that there cannot be a personal element in case of the expenses incurred by a corporate entity as laid down by the Hon'ble Gujarat High Court in the case of Sayaji Iron And Engg. Co. vs CIT, 253 ITR 749(Guj).

4.

On the other hand, Ld. Departmental Representative has pointed out that the disallowance was made by the Assessing Officer as no explanation was offered by the assessee.

5.

In my considered opinion, since the assessee is a corporate entity, the impugned adhoc disallowance made on the basis of alleged personal use is not sustainable having regard to the judgment of the Hon’ble Gujarat High Court in the case of Sayaji Iron & Engg. Co.(supra). In any case, the assessee has maintained Books of account and the Assessing Officer has not pointed out any specific instance of expenditure which is of non-business nature and in such a circumstance, adhoc disallowance @ 25% is untenable. The same is hereby directed to be deleted. Thus, assessee succeeds in this appeal.

6.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 29/12/2016

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