Income Tax Appellate Tribunal - Pune
Tata Ficosa Automotive Systems Ltd., ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench A , Pune
Before Shri Shailendra Kumar, JM and Shri G.S. Pannu, AM
ITA No. 1279/PN/2009 Asstt. Year 2006-07
Asstt. CIT Cir. 7, Pune Appellant
v.
....
Tata Ficosa Automotive Systems Respondent
Ltd.,
S.No. 235,245
Hinjewadi, Mulshi
Pune-411 057.
PAN AAACT 5755 A
Appellant by : Shri Abhay Damle
Department by : Shri J.D. Onkar
ORDER
Per Shailendra Kumar Yadav, JM
This is an appeal filed by the Revenue against the order of CIT(A)-III Pune dated 11-8-2009 for the A.Y. 2006-07.
2. The first issue is with regards to reduction of disallowance to 5% in respect of traveling, miscellaneous and cell phone expenses. The Assessing Officer has made the disallowances of Rs. 7,69,946/-, Rs. 30,000/- and Rs. 90,000/- out of traveling expenses, miscellaneous expenses and cellular phone expenses after observing that they are not related to business and certain personal element is also involved in the said expenses. On appeal, the CIT(A) restricted the disallowance to 5% of the expenses which has been challenged before us by the Revenue.
3. After hearing both the parties and perusing the material on record, we find that this Bench of the Tribunal had an occasion to deal with similar issue in the appeal filed by this very assessee 2 ITA No 1279/PN/2009 Tata Ficosa Automotive A.Y. 2006-07 in ITA No. 1422/PN/2009 dated 12-7-2010 for same assessment year i.e. 2006-07 wherein the Tribunal has confirmed the decision of the CIT(A) in restricting the claim to 5% of the expenses. For the sake of completeness the observations and findings of the Tribunal are reproduced as under:
"Relevant facts and the decision of the revenue are narrated in para 4 of the impugned order. For the sake of convenience, the same are produced as under.
"4. The second, third and fourth grounds of appeal are against disallowances of Rs.7,69,946, Rs.30,000 and Rs.90,000 out of traveling expenses, miscellaneous expenses and cellular phone expenses.
4.1. The aforesaid disallowances have been made by the Assessing Officer after observing that expenditure not related to business including some site seeing expenses were also included in the traveling expenses and certain personal expenses are included in miscellaneous expenses as well as cellular phone expenses.
4.2 Agitating against the action of the Assessing Officer, the appellant submitted that the expenses are incurred on traveling by the employees of the appellant company purely out of business expediency and wholly and exclusively for the purposes of its business. Similarly, the expenses incurred on communication are wholly and exclusively for the purposes of its business to facilitate the employees to work in different time zones and facilitate its joint venture company, vendors and customers to stay in touch constantly and as an effective expense control measures. The appellant submitted that same issues came up for consideration in the case of the appellant company for A.Y. 2003-04 before the CIT(A) wherein full relief was allowed to the appellant company.
4.3 I have carefully considered the appellant's submission and I am not inclined to accept it. It is seen from the assessment order that certain vouchers relating to expenses debited under these heads were not produced by the assessee company and therefore, the expenses could not be properly verified by the Assessing Officer. The appellant company has also not refuted the observation made by the Assessing Officer on the basis of voucher no.T500315 dated 29.6.2005 that the expenditure debited through this
3 ITA No 1279/PN/2009 Tata Ficosa Automotive A.Y. 2006-07 voucher had an element of non-business expenditure. As the Assessing Officer could not properly verify the expenses on account of assessee's failure to produce the vouchers, in my opinion, the Assessing Officer is justified in making part disallowances out of these expenses. However, the disallowance made @ 10% of the expenses debited under this head appears to be on higher side and the same is reduced to 5% only. To this extent relief is allowed to the appellant."
3. From the above, the disallowance of an adhoc sums of expenditure out of the traveling, miscellaneous expenses and communication to the extent of Rs. 3,84,973/-, Rs.15,000/- and Rs. 45,000/- respectively, has been the bone of contention. While the AO made the said disallowance applying the sweeping rate of 10% of the claims made by the assessee in the accounts, the CIT(A) restricted the same to 5 % of the claims. In this regard, Ld Counsel argued stating that this being the company, where there is internal audit system, there cannot be personal element and relied on the Gujrat High Court's judgment in the case of M/s Sayali . On the other hand, the Ld DR mentioned that the said judgment is totally distinguishable. Further, he stated that in the present case, the assessee failed to provide the basic data ie name and addresses of the persons involved and the third party evidences for substantiating the claims. We find that the assessee has not refuted the observation made by the Assessing Officer with evidences at least before in connection with the discrepancy relating to the voucher no.T500315 dated 29.6.2005 that the expenditure debited through this voucher had an element of non-business expenditure. We have also analyzed the factual matrix relevant for the cited Gujrat high Court Judgment and find that the same is distinguishable.
4. We have heard the parties and perused the orders of the revenue as well as the citations relied upon by the parties. From the facts of the instant case, it is evident the self made vouchers are the only evidences to support the claims of the assessee and there is lack of third party evidences in respect of expenditure on accounts of traveling vehicle, Guest entertainment, Postage, Telephone. It is also not the case of the assessee the vehicles and telephones are available for use by the directors for personal use and there exists written terms and conditions in this regard authorizing for such personal use. In any case, the case law 4 ITA No 1279/PN/2009 Tata Ficosa Automotive A.Y. 2006-07 in the case of Sayaji Iron and Engineering Co (253 ITR 749) is known for the following conclusion and the same read as under.
"Once the directors of the assessee company were entitled to use the vehicle of the company for their personal use as per the terms and conditions of their appointment it cannot be said that the assessee company incurred expenditure for the personal use by the directors and therefore, disallowance of part of the expenditure incurred by the company for the maintenance of the vehicles was not justified. "
5. Thus, considering the above, we find the above citation has no relevance to the facts of the case. In these circumstances of no third party evidences, no log books and non discharge of onus by the assessee in demonstrating the genuineness of the expenditure, we are of the opinion that the Gujarat High Court judgment has no application and AO decision to resort to adhoc estimations is in order. Further, we find the CIT(A) is reasonable in reducing the addition to Rs 30,000/-. Therefore, we find there is no need for interference in the order of the CIT(A) on this issue. Accordingly, ground 2 of the appeal of the assessee is dismissed."
4. In view of the above, we do not find any infirmity in the order of the CIT(A) in restricting the disallowance to 5% of the expenses.
5. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open Court on 30th March 2011.
Sd/- sd/-
(G.S. Pannu) (Shailendra Kumar Yadav
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 30th March 2011
Ankam
5 ITA No 1279/PN/2009
Tata Ficosa Automotive
A.Y. 2006-07
Copy of the order is forwarded to :
1. The Assessee
2. The Department
3. The CIT--IV Pune
4. The CIT(A)- III Pune
4. The D.R. "A" Bench, Pune
5. Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Pune