Income Tax Appellate Tribunal - Delhi
Jindal Poly Films Ltd., Bulandshahr vs Assessee on 17 October, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'D': NEW DELHI
BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER &
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
ITA no. 162/Del/2009
Assessment Year : 2004-05
M/s. Jindal Poly Films Ltd. Asst. Commissioner of Income Tax
19th K.M. Hapur, Circle - Bulandshahr,
Bulandshahr Road, Vs.
Gulaothi, Bulandshahr
(Appellant) (Respondent)
Appellant by : Shri Rupesh Jain, Advocate
Respondent by : Shri B.K. Gupta, Sr. DR
ORDER
PER: C.L. SETHI, J.M. The assessee is in appeal against the order dated 17.10.2008 passed by the ld. CIT(A) in the matter of an assessment made by the AO u/s. 143 of the Income Tax Act, 1961 (the Act") for the A.Y. 2004-05.
2. The various grounds of appeal raised by the assessee are directed against the CIT(A)'s order in upholding the following ad-hoc disallowances made by the AO:-
(i) Rs. 4,63,260/- being 10% of the lodging expenses of Rs. 46,32,607/-, which included in foreign tour expenses.
(ii) Rs. 4,90,363/- being 10% of the vehicle upkeep expenses of Rs. 49,03,634/-.
(iii) Rs. 21,807/- being 10% of depreciation allowances on vehicle.
ITA no. 162/Del/2009
3. The assessee company is a public limited company engaged in the business of manufacturing polyester films, chips of all kinds and polyester yarn etc. The assessee has filed its return of income on 29.10.2004 declaring total income at Rs. 24,41,19,961/-. The assessee company also declared book profit of Rs. 77,73,30,507/- u/s. 115JB of the Act. The assessment was then completed u/s. 143(3) on 29.12.2006 determining the total income at Rs. 24,50,95,400/-. Since the tax payable on book profit u/s. 115 JB was found to be less than the tax payable on total income determined by the AO under the normal provisions of the Act, the assessed total income was taken into consideration for determining the tax payable by the assessee. In the assessment, the AO made the following disallowances:-
(i) Foreign tour expenses amounting to Rs. 4,63,260/-
being 10% of lodging expenses of Rs. 46,32,607/- included under the head 'foreign tour expenses' claimed at Rs. 77,62,408/-.
(ii) Vehicle expenses amounting to Rs. 4,90,363/- being 10% of Rs. 49,03,634/- incurred under the said head as last year.
(iii) Rs. 21,807/- being 10% of depreciation of Rs.
2,18,070/- on vehicles on alleged ground of personal use by the directors.
4. The aforesaid three disallowances has been made by the AO by observing and discussion the matter as under:- Page 2 of 6
ITA no. 162/Del/2009 "3.2 FOREIGN TOUR EXPENSES:
Assessee has claimed foreign tour expenses at Rs. 77,62,408/- which includes Rs. 29,96,898/- and Rs. 1,32,903/- towards Air Fair and Visa expenses, rest of the expenses pertains to lodging expenses which were not found fully vouched. In absence of complete voucher 10% of the rest of the expenses worked out at Rs. 46,32,607/- i.e. Rs. 4,63,260/- are disallowed for non- business purposes like earlier years.
(Addition Rs. 4,63,260/-) 3.3 Vehicle Upkeep:
It is noticed that an amount of Rs.
49,03,634/- has been spent on vehicle upkeep. The assessee failed to prove that all the expenditure were incurred for the business purposes. After discussion an amount of Rs. 4,90,363/- worked out @ 10% is disallowed like last years.
(Addition Rs. 4,90,363/-) 3.4 Depreciation:
The company has various types of vehicle, some are goods carrier and some are for company's authorities. The assessee has claimed total depreciation on vehicle pertain to its all units at Rs. 2,18,070/- (26643+86738+71896+32793). During the course of hearing personal use of the vehicles by the directors not denied. Therefore, after discussions 10% of the depreciation so claimed, worked out at Rs. 21,807/- is disallowed for personal use of the vehicles by the Directors.
(Addition of Rs. 21,807/-)"
5. On an appeal, the CIT(A) confirmed the addition for the ground that the expenses were not found fully vouched.
6. Hence, the assessee is in appeal before us.
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ITA no. 162/Del/2009
7. We have heard both the parties and have carefully gone through the orders of the authorities below.
8. In so far disallowance of Rs. 4,63,460/- out of foreign tour expenses, we find that the AO has made a general remark that except air fare and visa expenses, rest of the expenses pertains to lodging expenses, which were not found fully vouched. It is not the case of the AO that these expenses were not vouched at all. The AO has not pointed out any specific item, which were not fully vouched and which could not be considered to be expenditure of business in nature. The disallowance has been made by the AO purely on assumptions and presumptions. The AO should have at least pointed out certain items of expenses, which were of doubtful nature, but the AO has not pointed out anything to that effect in the assessment order. We are, therefore, not inclined to uphold the order of the CIT(A) in confirming the disallowances.
9. Similarly, the disallowance out of vehicle upkeep has also been made by the AO on presumptions as would be clear from his own discussions and observation made in the assessment order. Depreciation has also been disallowed on the similar basis. We, therefore, do not find any reason to uphold the order of the CIT(A) in confirming the disallowance of expenses out of vehicle upkeep expenses and disallowance on depreciation. We, therefore, delete the disallowance made by the AO.
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ITA no. 162/Del/2009
10. In the result, all these three disallowances made by the AO and further confirmed by the CIT(A), are deleted.
11. In the course of hearing, the assessee raised one additional ground, which reads as under:-
"That the CIT(A) erred on facts and in law in not expunging the observations of the assessing officer that the appellant had during the relevant previous year entered into "international transactions" having total value of Rs. 21,82,98,365 and it was, in terms of section 92D of the Act, required to maintain documentation prescribed in Rule 10D(2) of the Income Tax Rules in respect of the aforesaid transactions"
12. With regard to the AO's observation that the assessee had entered into international transaction having total value of Rs. 21,82,98,365/-, and as such it was, in terms of section 92 D of the Act, required to maintain documentation prescribed in Rule 10D(2) of the Income Tax Rules in respect of the aforesaid transaction, the CIT(A) has held as under:-
"5.1 I have gone through the various submissions of the appellant in this regard, I find it premature to give any comments on the various submissions made by the appellant, as the appellant should raise these points before the AO during the proceedings for levy of penalties under those sections. As such, these grounds of appeal are dismissed."
13. After hearing both the parties, we find that this issue raised by the assessee is pre-mature, which would be only considered in the course of proceedings for levy of penalty for not maintaining documentation prescribed in Rule 10D(2) of Income Tax Rules. The assessee shall be at liberty to raise any objection or contention against the aforesaid Page 5 of 6 ITA no. 162/Del/2009 observation of the AO in the course of any proceedings for levy of penalty under the relevant section, and therefore, the additional ground taken by the assessee in- this appeal is not maintainable. We, therefore, reject the assessee's request for admitting the additional ground with the above observation.
14. In the result, the appeal filed by the assessee is partly allowed in the manner as indicated above.
15. This decision is pronounced in the open court on 19th February, 2010.
Sd/- Sd/-
(SHAMIM YAHYA ) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 19th February, 2010
*Nitasha
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, New Delhi.
By Order
Deputy Registrar
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