Income Tax Appellate Tribunal - Ahmedabad
Saurashtra Samachar Pvt. Ltd. vs Income Tax Officer on 27 December, 1996
ORDER
Nathu Ram, A.M.
1. These are assessee's appeals directed against the orders of the CIT(A) in the asst. yrs. 1984-85 and 1985-86.
2. The only ground raised is against confirming the disallowance made out of car expenses. This is the case of a company. In the asst. yr. 1984-85. The AO made a disallowance of Rs. 9,910 being 20 per cent of the car expenses as in the past. 20 per cent of the depreciation was also disallowed at Rs. 990. Similarly, in the asst. yr. 1985-86 the AO made a disallowance of car expenses at Rs. 8,333 being 20 per cent of the car expenses of Rs. 41,669 being attributable to the personal use of the car by the directors as in earlier year. On appeal the first appellate authority sustained the disallowance so made the same being as per the past set pattern.
3. The learned counsel for the assessee has made a submission that this is the case of a company and the car owned by it was used by the directors for the purpose of business. He further submitted that there is nothing on record to establish that the car was used for the purpose other than business or for personal use of the directors. He further contended that even if the car was partly used by directors for personal use there could be no disallowance in the case of the company out of the car expenses and only action the Revenue could take is to assess the value of such perquisite in the hands of the directors. In support, he has cited the Tribunal decision in the case of Pritam Hotel Pvt. Ltd. vs. ITO (1983) 17 TTJ (Bom) 550 wherein for similar reasons the Tribunal held the view that although any expenditure relating to personal use may constitute perquisite in the hands of directors it will be an allowable expenditure as far as the company is concerned. The Tribunal placed reliance on its earlier decision dt. 20th, February, 1981, in the case of Ramanlal Pvt. Ltd. vs. ITO (ITA Nos. 1018 and 2237/Bom/1980) [reported at (1981) 12 TTJ (Bom) 54].
4. The learned Departmental Representative, on the other hand, made a submission that it is not disputed that the car was used by directors for personal use and similar disallowance has been made in earlier year. The first appellate to authority was fully justified in upholding the disallowance made having regard to the past history of the case and the disallowance made being reasonable.
4.1 The learned counsel for the assessee in rejoinder submitted that the principles of res judicata are not applicable to the tax matters and issue involved has to be decided on merits independently having regard to the facts and Tribunal decisions on the issue.
5. We have considered the facts and rival submissions. It is evident from the facts given that this is the case of a company and the company owned a car for use of its directors for business purposes. We do not have before us the orders of the earlier year wherein part of the car expenses were disallowed by the Revenue and in the absence thereof we are not in a position to appreciate as to how far the car was earlier used by the directors for personal purposes. So far as the current assessment year in concerned, no material is brought on record to show that the car was partly used by the directors for their personal purposes.
Moreover, the doctrine of res judicata does not apply to tax matters. Anyhow, even if the car was used partly for personal use of the directors, the expenses relating to personal use would constitute perquisite in the hands of directors. But so far as the company is concerned, the expenses incurred are fully allowable. This view is fully supported by the decisions of the Tribunal cited supra. In this view of the matter, we see no justification in disallowing 20 per cent of the car expenses and depreciation in the hands of the assessee company and the same is cancelled.
6. In the result, the assessee's appeal is allowed for both the years.