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Income Tax Appellate Tribunal, DELHI BENCHES : “D” NEW DELHI
Before: SHRI J.SUDHAKAR REDDY, AM & SHRI KULDIP SINGH, JM
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
This is an appeal filed by the assessee against the order dt. 12.9.2013 of Ld.CIT(A)-XXVIII, New Delhi for Assessment Year 2010-11.
1.1. There is a delay of 21 days in filing this appeal. After considering the reasons for the delay, which is supported by an application as well as an affidavit, we are of the considered opinion that the assessee was prevented from sufficient and reasonable cause from filing the appeal within the stipulated time. Thus we condone the delay of 21 days and admit the appeal.
Facts in brief:- The assessee is an Advocate by profession and derived income from business or profession, income from house property, income from capital gain and income from other sources. The AO completed the assessment u/s 143 of the Income Tax Act 1961 (the Act) determining the total income at R$s.1,83,46,610/-. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority granted part relief. Further aggrieved, the assessee is before us on the following grounds.
“1. The Ld.CIT(A) has erred in law and on facts in confirming an Adhoc disallowance of 1/10th of the total expenditure on car insurance, driver’s salary and interest on car loan amounting to Rs.867,459/- made by Ld.AO u/s 38(2) of the Act.
2. The Ld.CIT(A) has erred in law and on facts in confirming an adhoc disallowance of 1/10th of the total depreciation claimed by the appellant as opposed to 1/20th of the total depreciation voluntarily offered for disallowance by the appellant u/s 38(2) of the Act.
3. The Ld.CIT(A) has erred in law in confirming the disallowance of unrealized fees amounting to Rs.3,18,723/- which was regarded as irrecoverable and written off in the books of accounts by the appellant.
4. The Ld.CIT(A) has erred in law and on facts in not allowing the credit of tax deducted at source amounting to Rs.6,760/- duly deducted and deposited to the credit of the appellant by the clients of the appellant.
5. The appellant craves leave to add, alter any of the grounds of appeal before or at the time of hearing.”
We have heard Ms. Rishpal Bedi, Ld.Sr.D.R. on behalf of the Revenue and Shri Gaurav Lodha, the Ld.Counsel for the assessee.
On ground no.1 we find that the AO at page 1 para 3 held as follows: “Accordingly 1/10th of expenses in the nature of insurance on car which comes to Rs.16,044/- (1,60,440 x 1/10th), 1/10th expense in the nature of driver salary which comes to Rs.14,350/- and 1/10th expense in the nature of interest on car loan which comes to Rs.56,352/- (5,63,519 x 1/10th) is hereby disallowed u/s 38(2) of the Act and added back to the total income of the assessee. Penalty proceedings u/s 271(1)(c ) of the Act has been initiated separately for concealing the particulars of income and furnishing inaccurate particulars of income.”
4.1. S.38(2) of the Act reads as follows. 2) Where any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deductions under sub- clause (ii) of clause (a) and clause (c) of section 30, clauses (i) and (ii) of section 31 and 3 clause (ii) of sub- section (1)] of section 32 shall be restricted to a fair proportionate part thereof which the AO may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession.”
4.2. Disallowance in this case can be restricted to Sub Clause (i) and (ii) of S.31 of the Act which deals with issues relating to amount paid on current repairs of plant, machinery and furniture and S.31(ii) with respect to premium paid in respect of insurance against risk of damage or destruction of plant, machinery & furniture.
Sec.32(1)(ii) of the Act is with regard to depreciation. Thus drivers salary and interest on car loan cannot be disallowed u/s 38(2) of the Act. Thus these two disallowances are deleted. The only disallowance is of car insurance. As the assessee himself has disallowed 1/10th of the car running and maintenance expenses, on the ground that there was certain personal use, on the same analogy, the disallowance of 10% of car insurance, has to be upheld. In the result ground no.1 is allowed in part.
On ground no.2 after hearing rival contentions, consistent with the view taken in ground no.1, we uphold the disallowances of 1/10th of total depreciation claimed by the assessee. The finding of the First Appellate Authority, in our view is justified and reasonable and we uphold the same.
Ground no.3 is on the issue of disallowance of unrealized fee. We are of the considered opinion that the addition has wrongly been made. Certain professional fees could not be collected by the assessee, as “M/s Bellary Steels Ltd.” had denied payment of a few bills to the assessee and as “Nari Hira” had partly disallowed the bills raised by the assessee and subsequently they had a settlement, where the assessee had accepted certain disallowances. The AO disallowed the claim on the ground that it was a unilateral act on the part of the assessee. The Ld.CIT(A) confirmed the same. In our view the claim of the assessee has to be allowed, as a debt or part thereof has been written off as irrevocably in the accounts of the assessee in the Previous Year. The law on bad debts has been amended w.e.f. 1.4.1989. Write off of debts in the books of the assessee as irrevocable is sufficient for claiming deduction. Even otherwise on facts, under the real income theory, the income which cannot be realized on the facts and circumstances of the case cannot be subject to tax as income. Thus we delete this addition and allow ground no.3 of the assessee.
Ground no.4 is against the denial of the credit of TDS of Rs.6,760/-. Ld.CIT(A) confirmed the order of the AO on the ground that u/s 199 of the Act, the AO is not empowered to determine the year of assessability of income, but it only mandates the year in which the credit is to be given on the basis of the certificates furnished. The Ld.Counsel for the assessee relied on the decision of the Hyderabad B Bench of the Tribunal in the case of M/s NCC Mytas vs. ACIT in ITA 812/Hyd/2013 dt. 13th September. The Tribunal held as follows.
Therefore considering the contention of the learned authorised representative for the assessee in the context of the ratio laid down as aforesaid, we are of the view that the revenue authorities were not justified in disallowing a part of TDS on the ground that it does not relate to the turnover disclosed for the impugned assessment year. We hold that income relating to such TDS having already been offered to tax in the earlier assessment years and since the assessee has not claimed corresponding TDS in those assessment years, no disallowance of the TDS claimed can be done. So far as the CIT (A) relying on rule 37BA of IT Rules is concerned, we are of the view that in the first place the said rule is not applicable to the assessment year under dispute as it has been inserted into the statute by IT (Sixth Amendment) Rules 2009 with effect from 1-4-2009. Even if we go by the aforesaid rule, the Assessing Officer was required to give credit to the TDS in the corresponding assessment years wherein the income was so offered which also would have resulted in refund to the assessee. In aforesaid view of the matter, we hold that no disallowance of TDS can be made in the given facts and circumstances of the case and the assessee is entitled to claim credit for the entire TDS amount of Rs.55,22,932/ - in the impugned assessment year. Accordingly, we set aside the order passed by the CIT (A) by allowing the ground raised by the assessee.
7.1. Respectfully following this decision, we allow this ground of the asssessee and direct the AO to grant credit of TDS of Rs.6,760/-.
In the result assessee’s appeal is allowed in part.
Order pronounced in the Open Court on 15th December,2015.