Income Tax Appellate Tribunal - Chandigarh
Assistant Commissioner Of Income Tax vs Oswal Spinning & Weaving Mills Ltd.; ... on 10 June, 1994
Equivalent citations: (1995)51TTJ(CHD)152
ORDER
J. KATHURIA, A.M. :
These cross appeals - one by the Revenue and the other by the assessee - relate to asst. yr. 1986-87.
2. We shall first take up the Revenues appeal (ITA No. 1320/Chd/89). The only effective ground in this appeal is against the deletion of disallowance of Rs. 4,292 on account of licence fee (Rs. 1,000) and production fees (Rs. 3,290). The Assessing Officer made the disallowance because these expenses related to earlier years. The learned CIT(A), however, deleted the disallowance on the ground that the liability with regard to these expenses was settled during the year relevant to asst. yr. 1986-87.
3. The learned Departmental Representative submitted that the assessee was maintaining its books of account on mercantile basis and hence the expenditure pertaining to earlier years could not be considered as a charge on the profits for the year under consideration.
4. Shri Hari Om Arora, the learned counsel for the assessee, strongly supported the impugned order.
5. After carefully considering the submissions of the parties, we uphold the order of the learned CIT(A) because the liability of the expenditure claimed was settled in the year under consideration.
6. In the result, the appeal is dismissed.
7. Now we come to assessees appeal (ITA No. 1339/Chandi/89). Ground No. 1 is against the confirmation of disallowance of Rs. 3,000 out of telephone expenses. The assessee claimed telephone expenses at Rs. 2,07,805 -wrongly mentioned at Rs. 2,15,751 by the learned CIT(A). The Assessing Officer disallowed an amount of Rs. 5,000 on the ground that the directors would have made some personal calls also. The learned CIT(A), however, reduced the disallowances to Rs. 3,000.
8. Shri Arora submitted that in the case of the directors of a public limited company in which public are substantially interested, there could be no element of personal use of the telephone by the directors. The learned Departmental Representative relied on the impugned order. We accept the proposition of the learned counsel for the assessee that in the case of a public limited company, there could be no element of personal user of the telephone by the directors. In the case of ITO vs. Ashoka Betelnut Co. (P) Ltd. (1985) 21 TTJ (Mad)(TM) 465 : (1984) 10 ITD 788 (Mad)(TM), the Madras Bench of the ITAT held that there could be no disallowance in the hands of the company in respect of the alleged use of cars by the directors for personal purposes. Following the ratio of that decision, we hold that in the case of the public limited company in which the public are substantially interested, there would be no question of any personal user of the telephone by the directors. The disallowance of Rs. 3,000 upheld by the learned CIT(A) is, therefore, deleted.
9. The only other effective ground is against the confirmation of disallowance of Rs. 9,158. Brief facts in this regard are these. The assessee had done spinning work for Sadhoushi Woollen Mills in the immediately preceding year and the raw material received was 1915.7 kg. The yarn produced and delivered to the said party was 1590.4 kg. The waste came to 325.3 kg. M/s. Sadhoushi Woollen Mills did not accept the excessive wastage and accepted it only to the extent of 10% which came to 119.57 kg. The remaining wastage of 133.8 kg. was taken by the assessee and the amount of Rs. 9,158 which was receivable by the assessee as fabrication charges from M/s. Sadhoushi Woollen Mills, was written off. The assessee claimed that since the amount had been written off in the year under consideration, this may be allowed as a liability in the year under consideration. Since the assessee had not produced any documentary evidence or even the confirmation from M/s. Sadhoushi Woollen Mills, the Assessing Officer negatived the assessees claim.
10. Shri Arora submitted that differences had appeared between the assessee and M/s. Sadhoushi Woollen Mills and in the year under consideration, the assessee retained the balance wastage of 191.5 kg. which was sold for Rs. 2,963.67. It was, therefore, submitted that the learned CIT(A) had not properly appraised the facts and that the assessee was entitled to a relief of Rs. 6,194 and not Rs. 9,158 which had been wrongly mentioned in the ground of appeal.
It was also submitted that if for any reason this relief of Rs. 6,194 was not admissible to the assessee in the year under consideration but was admissible in the immediately preceding year, then appeal for that year was also pending before the Tribunal and a suitable relief may be allowed in that year.
11. The learned Departmental Representative relied on the orders of the authorities below and submitted that in the absence of any documentary evidence or the confirmation from M/s. Sadhoushi Woollen Mills, the assessees claim had been rightly rejected.
12. We have carefully considered the rival submissions as also the facts on record. Because of the differences and disputes between the parties, the firms letter could not be produced by the assessee from that party. The Assessing Officer could have easily found out from the other party whether the facts narrated by the assessee were correct or not. This was, however, not done. The books of the assessee cannot be disbelieved for want of a confirmation or in the absence of any documentary evidence. The assessee has given all the facts and has shown the sale of 191.5 kg. of waste. Since the matter has been settled by the assessee in the year under consideration, the relief was admissible in the year under consideration only. Now that the claim has been restricted to Rs. 6,194, the Assessing Officer is directed to allow this claim of the assessee which had been written off in the year under consideration. This ground is, therefore, partly allowed.
13. In the result, the appeal is partly allowed.