PRAFULLA MADHUKAR WAGHADKAR,DOMBIVALI vs. ITO WD 3(1), KALYAN

All six appeals filed by two assesses against the order of Commissioner of Income-Tax (Appeals)-1, Thane, dated 22.12.2015 for all three years. Since, issues raised in all appeals are similar, so they are being disposed of by common order for the sake of convenience.

“1. That on the facts and the circumstances of the case while confirming the addition of Rs.1,09,306/ on account of interest on Overdraft, the learned Commissioner of Income Tax (Appeals)-I, Thane A.Y. 07-08 & Ors. 5 appeals [Anil M. Waghadkar. vs. ITO] Page 3 hereinafter referred to as Appallete Authority) and Income Tax Officer ward 3(1) Kalyan (hereinafter referred to as Assessing Authority) were not justified in treating the expenses as not incidental to the business of the assessee as the overdraft was availed for meeting the expenses of the business of the assessee.

2. That on the facts and the circumstances of the case while confirming the addition of Rs.109046/ on account of Depreciation, the learned Appellate Authority and the Assessing Authority were not justified in treating the vehicle as not being used exclusively for business purpose as the Assessee has to visit different sites for valuation as per requirement of each case and the car was used exclusively for the business purpose.

3. That the Honorable Members of the Income Tax Appellate Tribunal, Mumbai are therefore requested to delete the unwarranted huge additions on account disallowance of interest on Overdraft Rs.109306/- and depreciation Rs.109046/- in order to meet the ends of justice.”

To Depreciation 2,18,092 To Interest 1,09,306 To Bank charges 1,291 To Subscription 5,400 Net Receipts 40,320 ------------- 3,74,409 ------------- Assessing Officer asked the assessee to explain and justify the claim of various expenses against his receipts from Government Approved Valuer business. With regards to claim of interest on overdraft account, assessee submitted before the Assessing Officer that he had availed an overdraft account in Corporation Bank bearing account no.0602/CCGSL/01/040002 jointly with his brother Shri Praful Waghadkar. The Bank has charged a total interest of Rs.2,18,612/- on this account for the year under consideration, out of which 50% i.e. Rs.1,09,306/- was claimed by assessee as deduction from his business income as the account was held jointly with his brother A.Y. 07-08 & Ors. 5 appeals [Anil M. Waghadkar. vs. ITO] Page 5 Praful Waghadar. Assessing Officer after considering the assessee’s explanation disallowed the interest on overdraft account by observing that assessee’s business activity of the Government Approved Valuer hardly required any investment for working capital or towards of any asset. He further observed that assessee had failed to prove the use of funds from this account for his business purpose.

4.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee, CIT(A) has confirmed the order of Assessing Officer by observing as under: “12. I have carefully considered the appellant’s submissions, observations of the AO in the assessment and the facts of the case. From a perusal of the Profit & Loss Account reproduced above, it is seen that no expenses on salary of any person or traveling expenses etc. have been claimed by the appellant. Therefore, the contention of the appellant that the funds from the overdraft bank account had been utilized for meeting such expenses is factually incorrect. Moreover, a copy if the overdraft account was called for and the use of funds from this account was examined. From perusal of this bank account it is seen that none of the withdrawals made from the OD Account have been utilized for the business purpose of the appellant and have rather been utilized for meeting the personal expenses of the appellant and the co-owner i.e. LIC Premium, met life insurance, purchase of car, insurance of car, household withdrawals etc. As the appellant has filed to establish that the funds from the OD Account have been utilized for the business purposes, the disallowance of interest on OD Account has rightly been made by the AO and therefore, disallowance of Rs.1,09,306/- made on this account is confirmed.” A.Y. 07-08 & Ors. 5 appeals [Anil M. Waghadkar. vs. ITO] Page 6 4.2 Same has been opposed before me inter alia submitting that assessee has purchased a vehicle for the year under consideration and overdraft was taken for the same and interest thereon has been is the subject matter of before me. Ld. Authorized Representative claimed that said vehicle has been used for business purpose of assessee. So, interest on overdraft for the same should be allowed as business expenditure. It is not in dispute that assessee is using the said vehicle in question for business purpose. Once, it is used for business purpose, the overdraft for purchase of same were also fall in the law of business purpose. Under the facts and circumstances of the case, interest on overdraft deserves to be allowed and we direct Assessing Officer accordingly.

5.1 Ld. Authorized Representative opposed the order of CIT(A) on the ground that purchase of the vehicle in question not in dispute and same is being used for business of assessee, therefore, depreciation thereon should be allowed. On the other hand, ld. Departmental Representative supported the order of authorities below.

5.2 After going through rival submissions and material on record, I find that it is not disputed that assessee has purchased a vehicle in question. There is nothing on record that assessee has other vehicle to be used for its business purpose as Government Approved Valuer. So, vehicle is bound to be used in the business of assessee, therefore, assessee is entitled for depreciation thereon. However, element of personal use cannot be over-ruled, so, taking all facts and circumstances into consideration, disallowance of depreciation upto 10% is sustained on account of personal use and rest is directed to be deleted.

Sl. ITA No. A.Y. Assessee Ground 1 Ground 2 No. (Addition (Addition of of Rs.) on Rs.) on A.Y. 07-08 & Ors. 5 appeals [Anil M. Waghadkar. vs. ITO] Page 8 account of account of interest on depreciation overdraft 1 1804/M/16 2008- Anil M. 1,16,943/- 2,01,736/- 09 Waghadkar 2 1811/M/16 2009- Anil M. 2,31,338/- 1,71,475/- 10 Waghadkar 3 1809/M/16 2007- Prafulla M. 1,09,306/- 08 Waghadkar 4 1810/M/16 2008- Prafulla M. 1,16,943/- 1,00,000/- 09 Waghadkar (Misc. Exp.) 5 1808/M/16 2009- Prafulla M. 1,37,588/- 1,23,543/- 10 Waghadkar

Pronounced in the open Court on this the 27th day of June, 2016.