Income Tax Appellate Tribunal - Ahmedabad
Bpc Projects And Infrastructure ... vs Assessee on 7 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD
"A" BENCH
Before: Shri D.K. Tyagi, Judicial Member and
Shri T.R. Meena, Accountant Member
I.T.A. No.3246/Ahd/2010
A.Y. 2007-08
with
I.T.A. No.1192/Ahd/2012
A.Y. 2008-09
BCP Projects & Infrastructure Vs.
Pvt. Ltd.,
14A, Darshak, The Income Tax
Swastik Society, Officer,
Nr. Punjabi Hall Lane, Ward-1(2),
Navrangpura Ahmed ab ad
Ahmedabad-380 009
PAN-AADCA0018L
Appellants Respondents
Department by : Shri Rahul Kumar, Sr. D.R.
Assessee by : Shri S.N. Saporkar, A.R.
Date of hearing : 07.08.2012
Date of pronouncement : 28.09.2012
आदे श/ORDER
PER : D.K. TYAGI, JUDICIAL MEMBER
These are assessee's appeal against the order of ld. CIT(A)-VI, Ahmedabad dated 19.10.2010 and 10.05.2012. Since both the appeals relate to the same assessee and they were heard together, for the sake of convenience they are being disposed of by passing a consolidated order.
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 2 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 I.T.A. No.3246/Ahd/2010
2. Though the assessee has taken five grounds, but the only effective ground is as under:-
"2. The ld. CIT(A)-VI, Ahmedabad has erred in confirming the following disallowance made by the Assessing Officer:-
(a) Disallowance of Rs.13,832/- u/s 35D of the I.T. Act.
(b) Disallowance of Rs.10,908/- u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act.
(c) Disallowance of other bad debts of Rs.5,75,948/-
(d) Disallowance of depreciation of Rs.3,95,389/- on Motor Cars.
(e) Disallowance of Rs.5,21,618/- u/s 40(a)(ia) of the I.T. Act.
(f) Disallowance of Rs.30,252/- on the basis of AIR Data."
3. At the time of hearing ground No.2(a) which is regarding disallowance of Rs.13,832/- u/s 35D of the I.T. Act was not pressed. Accordingly, this ground is dismissed as not pressed.
4. Ground No.2(b) relates to disallowance of Rs.10,908/- u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act. The A.O. has dealt this issue as under:-
"As per audit report, your company has paid EPF amount of Rs.10,908/- after the statutory date. Therefore, your company was requested to explain as to why the same should not be disallowed u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act. In reply, it is however, stated by your company that as the liabilities were paid before the due date of furnishing the return of income hence provisions of section 43B is not applicable and no disallowance should be made. In this regard, it is to mention here that the EPF of Rs.10,908/- paid after the statutory date was the employee's contribution and not the employer's contribution, therefore, disallowance is required to be made u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act and not u/s 43B of the I.T. Act. Please submit your company's explanation in this regard.
In response to the show cause notice, the assessee company submitted its reply vide letter dtd. 13/5/2009 as under;
Secondly, your good office has propose to disallow Rs.10,908/- u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act being EPF. Of employee's I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 3 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 contribution. In this regard it is clarified that in view of the latest decision as appended herewith, claim made may please be allowed.
The assessee company has in fact not submitted any "latest decision" in support of the claim along with reply dtd. 13.5.2009, therefore, decision is made on the merits of the case. Therefore, amount of Rs.10,908/- is disallowed u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act."
In appeal this action of the A.O. was confirmed by ld. CIT(A).
5. However, the issue is now covered by the order of the Tribunal in the case of M/s Gujarat Containers Ltd. vide ITA No.2609/Ahd/2008 wherein following was held:-
"In view of the foregoing and especially when it has not been disputed by the Revenue before us that the aforesaid contributions towards PF & ESI have been paid before the due date of filing of return u/s 139(1) of the Act. In the light of view taken by the Hon'ble Delhi High Court in the case of CIT Vs. M. Electronics, 220 CTR (Del) 635 and the decision of Hon'ble Apex Court in the case of Vinay Cement Ltd. (supra), we have no hesitation in holding that the employees' contribution towards PF, having been made by the assessee within due date of filing of the return for the year under consideration, there is no ground for disallowing the same. Thus, ground no.2 raised in the appeal is allowed."
6. Following the above, the disallowance made by the A.O. of Rs.10,908/-
u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act and sustained by ld. CIT(A) is hereby deleted. This ground of the assessee is allowed.
7. Ground No.2(c) relates to disallowance of other bad debts of Rs.5,75,948/-.
8. The A.O., while disallowing the bad debt claim of assessee of Rs.12,84,007/- u/s 36(1)(vii) r.w.s. 36(2) of the I.T. Act has observed as under:-
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 4 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 "After verification of the reply and details submitted by the assesses company, party-wise discussion is as under:
(a) Inductotherm (1)1 Pvt Ltd. - The assesses company has carried out contract work ofRs.36,61,813/- whereas as per. Annexure-l submitted with the reply the work is shown at Rs.3,91,85,100/-
including previous year's contract work done so far. Therefore, the assesses company stated that bad debts amount of Rs.89,881/- is 0.23% of the turnover. The reply of the assesses company is not acceptable on the ground that the assesses company failed to prove that the said amount has actually become bad for recovery. The assessee's argument that the bad debts is only 0.23% of the turnover is not acceptable as percentage of bad debts written off /s not a condition to be fulfilled for write off bad debts. The assessee company has written off the debt without making any effort for recovery in this case. Furthermore, in case of any dispute regarding measurement of work done by the assessee company with party, the assessee company failed to submit any evidence to substantiate its claim of bad debt
(b) Torrent Pharmaceuticals Ltd. - The assessee company has shown receivable opening balance of Rs.20,36,447.99. During the year, assessee has received an amount of Rs.11,29,757/- on 17.4.2006 and Rs.5,90,250.06 on 5.12.2006. The assessee company has written off. balance amount of Rs.3,16,440.93 on 28.2.2007 without making- any effort for recovery in this case. Furthermore, in case of any regarding measurement of work done by the assessee company with party, assessee company failed to submit any evidence to substantiate its claim of bad.
(c) KHS Machinery Pvt. Ltd. - The assessee company has carried out substantial contract work with this party and received payments on various dates. Thereafter, the assessee company has written off balance amount of Rs.1,51,752.30 on 30.3.2007 as kasar. Thereafter, kasar account has been transferred to bad debts account. Therefore, bad debts have actually not been written off in the books. Furthermore, in case of any dispute regarding measurement of work done by the assessee company with party, the assessee company failed to submit any evidence to substantiate its claim of bad debt.
(d) Intas Pharmaceuticals- Ltd. - The assessee company has shown receivable opening balance of Rs.28,54,519/-. During the year, assessee has received amount of Rs.26,75,059/- on 28.4.2006 and Rs.7,00,000/- on 18.7.2006. The assessee company has a/so carried out contract work of Rs.7,00,000/- during the year under consideration. The assessee company has written off balance amount of Rs.1,44,134/- on 30.3.2007 without any effort for recovery in this I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 5 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 case. Furthermore, in case of any dispute regarding measurement of work done by the assessee company with party, the assessee company failed to submit any evidence to substantiate its claim of bad debt.
(e) Dineshbhai S. Pate - The 'assessee company has shown receivable opening balance of Rs.48,058/-. During the year, the assessee has given advance of Rs.10,000/- on 3.12.2006 and Rs.IO.000/- on 14.1.2007. Thereafter, the assessee company has written off advance amount of Rs.68,058/- on 31.3.2007 on the ground that Shri Dineshbhai did not issue the bill for contract work done by him to the assessee company. The assessee company has however failed to produce any evidence in support of its explanation. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Dineshbhai S. Patel.
(f) Farukh Iron Industries - The assessee company has shown receivable opening balance of Rs.67,5451-. During the year, the assessee has given advance on various dates by cash and cheques and received contract bills on. various dates. Thereafter, the assessee company has written off advance amount of Rs.87,795/- on 31.3.2007 on the ground that the firm did not issue bill of Rs.87,795/- for contract work done by it to the assessee company. The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.87,795/- by the said firm to the assessee company. Further, said/ advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Farooq Iron Industries.
(g) Shankerbhai M. Makwana - The assessee company has shown receivable opening balance of Rs.9,723/-. During the year, the assessee has given advance on various dates by cash and cheques and received contract bills on various dates. Thereafter, the assessee company has written off advance amount of Rs.1,15,427/-on 31.3.2007 on the ground that .Shri Shankerbhai did not issue bill of Rs.1,15,427/-for contract work done by him to the assessee company. The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.1,15,427/- by Shri Shankerbhai to the assessee company. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 6 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 to produce any detail in respect of the work done by Shankerbhai M. Makwana.
(h) Sartanbhai Veljibhai Mavi - The assessee company has shown receivable opening balance, of Rs. 82,3547-. During the year, the assessee has given advance on various dates by cash and received contract bills on various dates. Thereafter, the assessee company has written off advance amount of Rs.59,653/- on 31.3.2007 on the ground that Shri Sartanbhai did not issue bill of Rs.59,653/- for contract work done by him to .the assessee company. The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.59,653/- by Shri Sartanbhai to the assessee company. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Sartanbhai Veljibhai Mavi.
(i) Rupsingbhai D. Mavi - The assessee company has shown receivable opening balance of Rs.76,8207-. During the year, the assessee has given advance on various dates by cash and received contract bills on various dates. Thereafter, the assessee company has written off advance amount of Rs.76,820/- on 31.3.2007 on the ground that Shri Rupsingh did not issue bill of Rs.76,8207- or contract work done by him to the assessee company. The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.76,820/- by Shri Rupsingh to the assessee company. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Rupsingh D. Mavi.
G) Sahjanand Transport - The assessee company has shown receivable opening balance of Rs40,716/-. During the year, the assessee has given advance on various dates by cash and cheques and received contract bills on various dates. Thereafter, the assessee company has written off advance amount of Rs.89,7941- on 31.3 .2007 on the ground that the firm did not issue bill of Rs.89,794/- for contract work done by it to the assessee company." The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.89,794/- by the said firm to the assessee company. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Sahjanand Transport.
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 7 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09
(k) Shree Chamunda Carting - The assessee company has shown receivable opening balance of Rs, 77,852/-. During the year, assessee has given advance of Rs.68,000/- on 19.05.2006 by cheque and received contract bills of Rs.69,300/- on 1.9.2006. Thereafter, the assessee company has written off advance amount of Rs.77,939/- on 31.3.2007 on the ground that the firm did not issue bill of Rs.77,939/- for contract work done, by it to the assessee company. The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.77,939/- by the said firm to the assessee company. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Shree Chamunda Carting.
(l) Shree Muljibhai Atmaram Maheria - The assessee company has shown payable opening balance of Rs.6,542/-. During the year, assessee has given advance on various dates by cheques and received contract bills on various dates. Thereafter, assessee company has written off advance amount of Rs.44,433/- on 31.3.2007 on the ground that Shree Muljibhai did not issue bill of Rs.44,433/- for contract work done by him to the assessee company. The assessee company has however failed to produce any evidence in support of its explanation and has not submitted any reason for not issuing bill of Rs.44,433/- by Shree Mutjibhai to the assessee company. Further, said advance is not the part of the computation of income of the assessee company in the previous year or the year under consideration as the assessee company has failed to produce any detail in respect of the work done by Shree Muljibhai Atmaram Maheria.
(m) Conbox - The assessee company has shown receivable opening balance of Rs.1,,00,000/-. The assessee company has stated that the said advance has been given for job work of cement block. However, the said firm has not carried out the job work up to the standard and quality as required by the assessee company. Therefore, it is requested that said amount of Rs.1,00,000/- may be allowed U/s.37 of the IT.Act on the ground of business expenditure. However, the assessee company has written off the debt without making any effort for recovery in this case and failed to furnish any evidence to substantiate its claim.
In view of the above, it is clear that the conditions laid down in Section 36(2)of the IT. Act for write off the bad debts are not fulfilled in the case of the assessee company during the year under I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 8 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 consideration. Further, in the case of Dhall Enterprises & Engineers Pvt. Ltd v. CIT reported in (2007) 295ITR 481 (Guj), Hon'ble High Court of Gujarat has held that, 'assessee should prove that debts have become bad in the assessment year. Mere debiting the amount is not sufficient. In this case the assessee company has not proved that debts have actually become bad in the year under consideration. Therefore, bad debt claim of Rs.12,84,007/- is disallowed u/s 36(1)(vii) r.w.s. 36(2) of the IT.Act and added to the total income assessee company. Penalty proceedings u/s 271(1)(c ) of the Act are initiated for furnishing inaccurate particulars of income."
9. During the appellate proceedings the amount written off as bad debts of Rs.12,84,007/- was classified by assessee into three categories as under:-
Particulars Amount
Category A 7,02,208 1 to 4 As per Ann. 1 to
letter dt. 13.05.2009
Category B 6,19,919 1 to 8
Category C 1,00,000 One party
BPC Projects & Infrastructure Pvt. Ltd. A.Y.2007-08
Annedure 1: Summarized Position of Bad Debts Category A: Customers
--------------------------------------------------------------------------------
Sr. Total Bad % of
No. Name of the Customer Turnover Debts Turn
Over Reasons
Deduction by the
customers due
difference in
measurements
inve the co. and
certified by
custome
architects.
1. Inductotherm (1) Pvt. Ltd. 39,185,100 89,881 0.23%
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08
with 9
I.T.A. No.1192/Ahd/2012, A.Y. 2008-09
2. Torrent Pharmaceuticals
Ltd. 19,697,761 316,441 1.61% ---------do-------
3. KHS Machinery Pvt. Ltd. 94,384,021 151,752 1.16% ---------do-------
4. Intas Pharmaceuticals Ltd.35,766,207 144,134 0.40% ---------do-------
5. Claris Lifescience
(RMC -Bill) 5,851 ---------do-------
Total 189,033,08 708,059
Category B: Supplier Accounts
Work done any
Paid. TDS also but
not invoiced by
contractor
1. Dineshbhai S. Patel 896,855 68,058
2. Farukh Iron Industries 949,040 87,795 ---------do-------
3. Shankarbhai M. Makwana 724,785 115,427 ---------do-------
4. Sartanbhai Veljibhai Mavi 1,528,308 59,653 ---------do-------
5. Rupsingh D. Mavi 751,804 76,820 ---------do-------
6. Sahajanand Transport 1,141,466 89,794 ---------do-------
7. Shree Chamunda Carting 240,509 77,939 ---------do-------
8. Shree Muljibhai Atmaram
Maheria 1,342,664 44,433 ---------do-------
9. Ikrarbhai Lakhan Chistia 1,706,909 30,417 ---------do------
Credits for Rate
Difference /Qu
Discount, Damage
Goods etc.
10.Raj Decorators (7,610) ---------do------
11.Rasulbhai Ahmedabhai (3,105) ---------do------
12.Surti Pest Control Service (78,987) ---------do------
13. Gujarat Siddhi Cement Ltd. (54,353) ---------do------
14. Shree Construction Co.
(CSE) (29,700) ---------do------
Total 9,282,340 476,581
Category C. Misc. Amounts
Written Off
Advance given for
Job Work of Blocks
Excess Certificate
received
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08
with 10
I.T.A. No.1192/Ahd/2012, A.Y. 2008-09
1. Conbox 100,000 1,00,000
IT Receivable (TDS 06-07) (633)
------------
99,367
Net Bad Debts 1284007"
10. Ld. CIT(A) after taking into consideration above things allowed the claim of the assessee in respect of category A. Thus giving relief to the assessee to the tune of Rs.7,08,059/- and confirmed the action of the A.O. in respect of category B and C by observing as under:-
"As regards debts written off in respect of suppliers and job workers advances, the same do not fulfill the condition required under section 36(2) of I.T. Act because these advances have never been considered in computation of income. Since conditions of section 36(2) is not fulfilled these write-offs do not qualify for deduction as bad debts. Coming to the alternative argument of the appellant that these are business advances and non- recovery qualifies for deduction under section 37 of IT Act, onus to prove that these advances were given for genuine business requirement and the same is clearly not recoverable is on the appellant. Unlike claim of bad debts where the requirement is just writing off, for claim of deduction in respect of advance, the appellant has to establish that how the same was not recovered from these parties. Appellant has not proved beyond doubt that these advances were completely not recoverable. The reason given for write-off is that these parties did not issue bills for contract work done by them. This is not sufficient ground to prove that business advances have become bad. Considering the fact that the appellant has not discharged its onus to establish that the advances given to suppliers etc have become completely non- recoverable or non-adjustable. Mere writing off of these advances cannot prove that these are not recoverable or become bad. Considering this, the addition made by the assessing officer in respect of other had debts is confirmed."
11. After hearing both the parties and perusing the record we find that out of total disallowance of Rs.12,84,007/- ld. CIT(A) has given relief to the I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 11 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 assessee to the tune of Rs.7,08,059/-, thus confirmed the remaining amount of Rs.5,75,948/- on the ground that assessee has failed to discharge its onus to establish that the advances given to suppliers etc. has became completely not recoverable or not adjustable, we feel that assessee be given one more opportunity to discharge this onus and for this purpose the matter is restored back to the file of the A.O. for fresh adjudication after giving opportunity of being heard to the assessee. This ground of the assessee is allowed for statistical purpose.
12. Ground No.2 (d) relates to disallowance on depreciation of motor cars of Rs.3,95,389/-.
13. The A.O. had dealt the issue as under:-
"After considering the above reply, it is noticed that following three cars are not actually owned by the assessee company as discussed below, therefore, depreciation claimed on same are not allowed to the assessee company. Further, the decisions referred by the assessee company are not applicable as facts of the case are different.
Skoda car No.GJ-24-A-8010 The said car is purchased in the name of Prahladbhai S. Patel, director of the company on 7.6.2004 of Rs.12,51,159/-. The "depreciation and other expenditure related to running of said car had been disallowed in A.Y. 2005-06 in the assessment order dtd. 28.12.2007 passed U/s 143(3) of the I.T. Act. The said disallowances of depreciation have been confirmed by Ld. CIT(A) vide order No.CIT(A)-6/Wd.1(2)1202/07-08 dtd.27.1.2009. Considering the fact narrated in said assessment order and order of Ld. CIT(A), the depreciation claimed on the said car of Rs.1,50,139/- is disallowed and added to the total income of the assessee company in this year also.
Sonata car No.GJ-2-AC-8010 The said car is purchased in the name of Konak Caston Product Pvt. Ltd. on 14.12.2004 for Rs.11,10,000/-. Thereafter, the said car I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 12 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 has been shown in the books of company by passing a Journal entry in the books of the company on 15.4.2006 of Rs.8,25,0001-. The Journal entry passed in the name of Babubhai R. Patel, Director of the company. The amount is shown as a loan received from Babubhai R. Patel, Director of the company. Therefore, it is clear that the said car purchased by either Kanak Caston Product Pvt. Ltd. or by Babubhai R. Patel. The actual owner of the car is either Kanak Caston Product Pvt. Ltd. or by Babubhai R. Patel and not the assessee company. The said car is also not transferred in the name of the company. The Journal entry has been passed for the sake of claiming depreciation on the said car. Therefore, depreciation of Rs.1,23,750/- claimed on said car is disallowed and added to the total income of the assessee company.
Opel Vectra GJ-2-AC-5010 The said car is purchased by Shri Babubhai R. Patel, director of the company on 28.12.2004 for Rs.11,00,000/-. Thereafter, the said car has been shown in the books of company by passing a journal entry in the books of the company on 15.4.2006 of Rs.8,10,000/-. The journal entry passed in the name of Babubhai R. Patel, Director of the company. The amount is shown as a loan received from Babubhai R Patel, Director of the company. The actual owner of the car is Babubhai R. Patel and not the assessee company. The said car is also not transferred in the name of the company. The Journal entry has been passed for the sake of claiming depreciation on the said car. Therefore, depreciation of Rs.1,21,500/- claimed on said car is disallowed and added to the total income of the assessee company.
Thus, total depreciation of Rs.3,95,389/-
(Rs.1,50,139+1,23,750+1,21,500) is disallowed and added to the total income of the assessee company."
In appeal, this action of the A.O. was confirmed by ld. CIT(A).
14. At the time of hearing, ld. counsel of the assessee, at the outset, submitted that the issue is now covered by the decision of Hon'ble ITAT in assessee's own case for assessment year 2005-06 in ITA No.1274/Ahd/2009 wherein following was held:-
"We have heard both the parties and gone through the facts of the case as also the decisions relied upon. The relevant provisions of I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 13 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 section 32 of the Act stipulate depreciation in respect of building, machinery, plant or furniture "owned by the assessee" and "used"
for the purposes of the business or profession. Indisputably, the innova car was purchased with the funds of the company and used by the assessee for the purposes of its business. The controversy is in regard to ownership of the car. The contention of the assessee is that car being not registered under the Motor Vehicles Act in the name of the company, by itself is not sufficient to hold the contrary. The factual position as stated by the assessee is not disputed by the Revenue. The contention of the Revenue is that unless the car is registered in the name of the assessee under the Motor Vehicles Act, the assessee would not be entitled to deduction of depreciation allowance in respect thereof. We are of the opinion that the assessee, who had purchased the car for valuable consideration and used the same for its business, cannot be denied the benefit of depreciation on the ground that the transfer was not recorded under the Motor Vehicles Act or that the vehicle stood in the name of a director of the assessee company in the records of the authorities under the Motor Vehicles Act.
The aforesaid view is supported by the decision in the case of CIT Vs. Navdurga Transport Co., 235 ITR 150 (All), wherein the issue was as to whether firm was entitled to depreciation on cars, brought in to the firm for use of business of the firm, even though cars continued to be registered in the name partners. Hon'ble Allahabad High Court held that the Tribunal rightly reached the conclusion that the assessee owned and used the three vehicles within the meaning of s. 32 of the Act. Similar view was taken in the case of CIT Vs. Mohd. Bux Shokat Ali (No.2), 256 ITR 357 (Raj), CIT Vs Fazilka Dabwali TPT Co. Ltd. (2004) 270 ITR 398 (P&H), CIT v. Salkia Transport Associates [1983] 143 ITR 39/13 Taxman 191 (Cal.), CIT v. Nidish Transport Corpn. [1910] 185 ITR 669/[1989] 44 Taxman 351 (Ker.), CIT v. Dilip Singh Sardar Singh Bagga [1993] 201 ITR 995/[1994] 77 Taxman 66 (Bom.), and CIT v. Basti Sugar Mills Co. Ltd. [2002] 257 ITR 88/123 Taxman 693 (Delhi) as also by the ITAT in their decision in the case of The Curious House (P) Ltd. v. ITO (1980) 9 TTJ 348 (Indore) and ITO Vs. Modi Agency, ITA no.198/Gau/1977-78 (Gauhati).
In the light of view taken in the aforesaid decisions, mere non- registration of a vehicle in the name of the company under the Motor Vehicles Act, cannot disentitle the assessee in regard to its claim of depreciation, when the facts on record are undisputed that the assessee company has, in fact, made the investment in purchase of the vehicle and such vehicle is being used for its business. The requirement of section 32 is that the vehicle must be owned by the assessee and not that the assessee must be a I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 14 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 'registered owner' of the same under the Motor Vehicles Act. Therefore, we have no hesitation in vacating the findings of the ld. CIT(A). The AO is directed to allow the claim of the assessee for depreciation and interest on funds borrowed for purchase of car. Consequently, ground nos.3 (a) & (b) relating to disallowance of depreciation on motor car and interest on loan for purchase of car is allowed."
Respectfully following the same, the disallowance on depreciation of motor cars of Rs.3,95,389/- made by the A.O. and sustained by ld. CIT(A) is hereby deleted. This ground of the assessee is allowed.
15. Ground No.2 (e) relates to disallowance of Rs.5,21,618/- u/s 40(a)(ia) of the Act.
16. The A.O., while making this disallowance has observed as under:-
"On verification of submission and other details filed during the course of assessment proceedings, it is found that assessee company has not deducted TDS on following payment/credit of labour charges and transportation charges-
Name of the Total Amount Amount on Amount of Amount on
party debited which TDS TDS which TDS not
deducted deducted
Build Aid 245704 193627 1975 52077
Comn.
Farukh Iron 156370 100000 1020 56370
Industries
Fulsingh 1528231 1431078 14597 97153
Dansingh
Bariya
Narendrasingh 476160 447548 4565 28612
Chunising
Rameshkumar 217462 210685 2149 6777
Singh
RB. 163248 160294 1635 2954
Fabrication
Sartanbhai 684938 655588 6687 29350
Veljibhai Mavi
Shree 248325 0 0 248325
Muljibhai
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08
with 15
I.T.A. No.1192/Ahd/2012, A.Y. 2008-09
Atmaram
Maheria
TOTAL 521618
Above payments made are labour charges and transportation charges paid to contractors. In view of provisions of section 194 C for payments aggregating more than Rs.50,000/- during the financial year TDS has to be done and amount so deducted should have been paid in government account within the prescribed time. In this case payments to all the above parties exceeds Rs.50,000/- and amount on which TDS is not deducted in total amounts to Rs.5,21,618/-. In reply to the show cause notice dtd. IS.4.2009, the assessee company has explained vide letter dtd.13.S.2009 that there is short/excess deduction of IDS on labour charges and transportation charges of Rs.S,21,618/- mentioned above and if the amount of short deduction of TDS is set off against the amount of excess deduction of TDS, there is no short deduction of TDS. Reply of the assessee company is not acceptable as no set off benefit is available in section 194C and 40(a)(ia) of the Act. In view of this, amount of Rs.5,21,618/- is disallowed U/s 40(a)(ia) of the Act and added to the total income of the assessee company."
This action of the A.O. was confirmed by ld. CIT(A). Being aggrieved now the assessee is in appeal before us.
17. At the time of hearing ld. counsel of the assessee submitted that as it is clear from the table prepared by the A.O. that in respect of one party namely Shree Muljibhai Atmaram Maheria tax was deducted at source. In some cases there was short deduction while in some cases it was excess deduction made by the assessee. For short deduction of tax no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. For making this submission the assessee placed reliance on the decision of Hon'ble ITAT, Kolkata in the case of M/s S.K. Tekriwal, reported in 48 SOT 515 (Kol). He therefore, submitted that this disallowance can only be sustained to the extent of Rs.2,48,325/- in the case of Shree Muljibhai Atmaram Maheria in whose case I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 16 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 no TDS was made. Ld. D.R., on the other hand, relied on the order of the lower authorities.
18. After hearing both the parties and perusing the record we find force in the contention of ld. counsel of the assessee that in view of the decision of Hon'ble ITAT, Kolkata in the case of M/s S.K. Tekriwal, reported in 48 SOT 515 (Kol) the provisions of Section 40(a)(ia) of the Act can only be invoked in the event of non-deduction of tax and not for lesser deduction of tax. The relevant portion of the decision reads as under:-
"But in the present case before us, the assessee has deducted tax, although u/s 194C(2) of the At and it is not a case of non- deduction of tax or no deduction of tax as is the import of section 40(a)(ia) of the Act. Even otherwise if it is considered that this particular sum falls under section194I of the Act, it may be considered as tax deducted at a lower rate and it cannot be considered a case of non-deduction or no deduction. Similar view is taken by 'C' Bench of Mumbai ITAT in IT Appeal No.20(Mum.) 2010 in the case of Dy. CIT v. Chandabhoy & Jassobhoy dated 8-7- 2011, wherein it is held that there is no dispute with reference to the deduction of tax u/s 192 of the Act with the fact that the alleged consultants, in their individual assessments declared these payments as salary payments and accepted by revenue as it is. Further, it is held that the assessee had deducted tax u/s 192 of the Act as against the allegation of revenue that the provisions of Section 194J of the Act would be attracted as these consultants are in the capacity of professionals. The Bench held that the provisions of section 40(a)(ia) of the Act will not apply as the said provision can be invoked only in the event of non-deduction of tax but not for lesser deduction of tax. In that case the assessee has deducted tax u/s 192 of the Act as against section 194J of the Act as against the claim of revenue."
As there is no dispute in this case that TDS was not made only in the case of Shree Muljibhai Atmaram Maheria on payment of Rs.2,48,325/- and in respect of other parties there was a case of lesser deduction of tax, therefore, following the decision of Hon'ble ITAT, Kolkata in the case of M/s S.K. Tekriwal (supra) I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 17 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 this disallowance is restricted to Rs.2,48,325/- and rest of the addition is deleted. This ground of the assessee is partly allowed.
19. Ground No.2(f) relates to disallowance of Rs.30,252/- on the basis of AIR Data.
20. The A.O., while making this disallowance has observed as under:-
"In this case, various information related to the contract receipts is available in the Income-tax Application software. A copy of this information retrieved from the computer was also supplied to the assessee company and the assessee was asked to reconcile the same with books of accounts. The assessee produced copy of accounts of the said parties. On verification of the said account, it is found that following contract receipts are not reflected in the books of accounts of the assessee company:
S.No. Dt. of payment Name of Amt. of
payer payment (in
Rs.)
1. 5/10/2006 Ansh 22,844
Developers
Pvt. Ltd.
2. 10/9/2006 Ajay 7,408
Engineers
The assessee was asked vide this office letter dtd. 15.4.2009 as to why the receipts which were not shown in the books of accounts should not be added to the total income of the assessee company. The assessee could not reconcile the above contract receipts, therefore, a sum of Rs.30,252/- (Rs.22,844 + 7,408) is added to the total income of the assessee company. Penalty proceedings u/s 271 (1)(c) is initiated for concealment of particulars of income."
21. Ld. CIT(A) confirmed this action of the A.O. by observing as under:-
"I have considered the facts of the case, assessment order and appellant's submission. It is not in dispute that two entries standing in the name of appellant in AIR database has not tallied with appellant's records. The information in this database is not manually fed but taken electronically and therefore there should not be any variation. Since two entries appear in the database is not reflected in the appellant's accounts, the onus was on the appellant to prove that these do not relate to it. In absence of any I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 18 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 evidence, general submission cannot absolve appellant from the responsibility. Since the reconciliation is not done by the appellant, the addition made by the assessing officer is confirmed."
22. After hearing both the parties and perusing the record we are of the considered opinion that matter requires to be set aside to the file of the A.O. for fresh adjudication after making necessary verification from the account of the concerned parties. We hold accordingly. This ground is allowed for statistical purpose.
23. In the result, the appeal of the assessee is partly allowed for statistical purpose.
I.T.A. No. 1192/Ahd/2012
24. Though the assessee has taken five grounds but the only effective ground is ground No.2 which reads as under:-
"2. The ld. CIT(A)-VI, Ahmedabad has erred in confirming the following disallowance made by the Assessing Officer:-
a. Disallowance U/s 35D of the I.T. Act of Rs.27,000/- b. Disallowance of depreciation on Motor Cars of Rs.3,37,780/- c. Disallowance U/s 40(a)(ia) of the I.T. Act of Rs.1,67,426/- d. Disallowance U/s 40(a)(ia) of the I.T. Act of Rs.1,04,535/-.
25. Ground No.2(a) relating to disallowance u/s 35D of the Act of Rs.27,000/- was not pressed at the time of hearing, accordingly, the same is dismissed as not pressed.
26. Ground No.2(b) relates to disallowance of depreciation on Motor Cars of Rs.3,37,780/-. For the reasons given by us in ITA No.3246/Ahd/2010 this ground is allowed.
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 19 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09
27. Ground No.2(c) relates to disallowance u/s 40(a)(ia) of the Act of Rs.1,67,426/-. This ground is for short deduction of TDS. Similar issue was decided by us in ITA No.3246/Ahd/2010. For the same reasons this ground is allowed.
28. Ground No.2(d) relates to disallowance u/s 40(a)(ia) of the Act of Rs.1,04,535/-. While disallowing this sum the A.O. has observed as under:-
"During the course of assessment proceeding from the details submitted in respect of security charges it was noticed that the assessee had credited the amount on varies dates during the year but has failed to deduct TDS at the time of credit and pay the TDS in the next month. The details are as under:-
Date of credit Name of party Total amount
1/11/2007 Birendra Defence Co. 13408
1/11/2007 Birendra Defence Co. 6061
1/12/2007 Birendra Defence Co. 23461
15/1/2008 Birendra Defence Co. 23966
31/8/2007 Birendra Defence Co. 7431
31/8/2007 Birendra Defence Co. 588
1/12/2007 Birendra Defence Co. 6061
1/12/2007 Birendra Defence Co. 6068
1/1/2008 Birendra Defence Co. 3134
1/2/2008 Birendra Defence Co. 2936
1/10/2008 Birendra Defence Co. 3031
1/11/2007 Birendra Defence Co. 3030
1/12/2007 Birendra Defence Co. 5360
104535
As per the IT Payable (TDS Security) a/c it is seen that the assessee had deducted TDS for all the payments in March only and has paid the same before filing of the return. Therefore, as per provision of 40(a)(ia) the assessee ought to have deducted the TDS at the time of credit or payment and not in the month of march as clearly seen. This was pointed out to the assessee representative during the course of assessment proceeding who admitted that TDS was wrongly deducted in March only and should have deducted regularly and paid and agreed for disallowance addition. The amount of Rs.1,04,535/- is therefore added back to the income u/s 40(a)(ia) of the I.T. Act."
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08 with 20 I.T.A. No.1192/Ahd/2012, A.Y. 2008-09 This action of the A.O. was confirmed by ld. CIT(A).
29. After hearing both the parties and perusing the record we find that there is no dispute about the fact that TDS was paid to the Government account before the due date of filing of return. The law is now settled that if TDS is deposited before due date of filing of return no deduction u/s 40(a)(ia) can be made in view of the decision of Hon'ble Calcutta High Court in the case of CIT vs. Virgin Creators in ITA No.3200/2011 dated 23.11.2001 which has been followed by this Bench of the Tribunal in the case of M/s Alpha Projects Security (P) Ltd. dated 23.3.12 vide ITA No. 2869/Ahd/2011. In view of this, the addition made by the A.O. by invoking the provision of Section 40(a)(ia) and sustained by ld. CIT(A) is hereby deleted. This ground is allowed.
30. The appeal of the assessee is partly allowed.
31. In the combined result, assesseee's appeal in ITA No.3246/Ahd/2010 is partly allowed for statistical purpose and in ITA No.1192/Ahd/2012 is partly allowed.
Order pronounced in open Court on 28 .09.2012
Sd/- Sd/-
(T.R. Meena) (D.K. Tyagi)
Accountant Member Judicial Member
True copy
N.K. Chaudhary, Sr. P.S.
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
4. The Ld. CIT (Appeals)
I.T.A. No.3246/Ahd/2010, A.Y. 2007-08
with 21
I.T.A. No.1192/Ahd/2012, A.Y. 2008-09
5. The DR, Ahmedabad
6. The Guard File
By order
AR, ITAT, Ahmedabad