Income Tax Appellate Tribunal - Mumbai
Total Lubricants India Ltd ( Now Known As ... vs Addl Cit 8(3), Mumbai on 20 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "H" MUMBAI
BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND
SHRI N.K. PRADHAN (ACCOUNTANT MEMBER)
ITA No. 1271/MUM/2013
Assessment Year: 2008-09
Total Oil India Pvt. Ltd. ACIT-8(3)
3rd floor, The Leela Galleia, Vs. Mumbai
Andheri Kurla Road, Andheri
(E)
Mumbai-400059.
PAN No. AAACE1877C
Appellant Respondent
ITA No. 336/MUM/2015
Assessment Year: 2008-09
Total Oil India Pvt. Ltd. DCIT-8(3)
3rd floor, The Leela Galleia, Vs. Mumbai
Andheri Kurla Road, Andheri
(E)
Mumbai-400059.
PAN No. AAACE1877C
Appellant Respondent
Assessee by : Mr. Niraj Sheth, AR
Revenue by : Mr. M.C. Omi Ningshen, DR
Date of Hearing : 27/11/2017
Date of pronouncement : 20/12/2017
ORDER
PER N.K. PRADHAN, A.M.
The captioned appeals for the assessment year 2008-09 are directed against the order of the Commissioner of Income Tax (Appeals)-18, Mumbai and arise out of the assessment completed u/s 143(3) and 271(1)(c) of the Income Tax Act 1961, (the 'Act'). As Total Oil India Pvt. Ltd 2 ITA No. 1271/Mum/2013 & 336/Mum/2015 common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake of convenience.
ITA No. 1271/MUM/2013Assessment Year: 2008-09
2. The 1st ground raised in this appeal by the assessee is against the order of the Ld. CIT(A) confirming the disallowance of Rs.8,42,189/- of EDP expenses considering the same as capital expenditure.
2.1 During the course of assessment proceedings, the assessee submitted before the AO that it has debited Rs.8,42,189/- as EDP expenses and included it in 'Miscellaneous Expenses'. The AO following the judgment of the Hon'ble Rajasthan High Court in the case of CIT vs. Arawali Constructions (P) Ltd. 259 ITR 30 (Raj) disallowed the said EDP expenses of Rs.8,42,189/-.
2.2 In appeal, the Ld. CIT(A) agreed with the findings of the AO and dismissed the appeal of the assessee.
2.3 Before us, the Ld. counsel of the assessee relies on the judgment of the Hon'ble Bombay High Court in the case of CIT v. Raychem RPG Ltd. (2012) 346 ITR 138 (Bom).
On the other hand, the Ld. DR relies on the order of Ld. CIT(A).
2.4 In the case of Raychem RPG Ltd. (supra), the Hon'ble Bombay High Court has held that the assessee in that case was manufacturing telecommunication and power cable. Software was not a part of profit making apparatus of the assessee. Therefore, it held the expenditure as revenue expenditure.
Total Oil India Pvt. Ltd 3 ITA No. 1271/Mum/2013 & 336/Mum/2015 In the instant case, the assessee-company is engaged in the business of manufacturing, trading and marketing of industrial and automatic lubricants. EDP expenses is not a part of profit making apparatus of the assessee-company. Following the decision of the Hon'ble Bombay High Court in Raychem RPG Ltd., we direct the AO to treat the EDP expenses of Rs.8,42,189/- as revenue expenditure. Thus the 1st ground of appeal is allowed.
3. The 2nd ground raised by the assessee is against the order of the Ld. CIT(A) confirming the disallowance of advertisement expenses of Rs.1,03,16,514/-.
3.1 During the course of assessment proceeding the assessee submitted before the AO that it has paid Rs.1,03,13,614/- to M/s Veena Screen Prints in respect of advertisement. The AO disallowed the above claim on the reason that the assessee could not file the agreement with the said party and also could not explain that the same was incurred for business purpose.
3.2 In appeal, the Ld. CIT(A) upheld the addition of Rs.1,03,16,614/- made by the AO. He further found that out of total expenditure of Rs.32,28,07,483/-, the amount of Rs.10,47,17,975/- is expenditure incurred more than Rs.10,00,000/- on each item. He held the same as capital expenditure and added back to the taxable income.
3.3 Before us, the Ld. counsel of the assessee submits that the Ld. CIT(A) has ignored the fact that the agreement as referred to by the AO in the assessment order was never asked for to be produced and the said disallowance has been made without asking for any further details/explanation in the course of assessment. It is also stated by him Total Oil India Pvt. Ltd 4 ITA No. 1271/Mum/2013 & 336/Mum/2015 that the Ld. CIT(A) overlooked the fact that the assessee-company's earlier name was M/s Total Finaelf India Ltd. and the invoices were pertaining to the assessee-company only. It is further stated by him that the Ld. CIT(A) has erred in enhancing the disallowance of advertisement expenses of Rs.10,47,17,975/- on ad-hoc basis without getting into the details.
On the other hand, the Ld. DR relies on the order of the Ld. CIT(A).
3.4 We have heard the rival submissions and perused the relevant materials on record. We are of the considered view that whether there should be disallowance of advertisement expenses or not requires verification at the level of AO from the primary documents. It cannot be decided at an abstract level treating it as capital expenditure or revenue expenditure. One has to delve into micro details from bills/vouchers.
4. The 3rd ground raised by the assessee in this appeal is against the order of the Ld. CIT(A) confirming the disallowance by the AO of travelling and conveyance expenses of Rs.1,46,71,804/-.
4.1 During the course of assessment proceedings, the AO observed that the assessee could not file further details of these expenses. Therefore, he disallowed the claim of travelling and conveyance expenses of Rs.1,46,71,804/-.
4.2 In appeal, the Ld. CIT(A) confirmed the above disallowance on the ground that the assessee failed to produce before the AO the related bills/vouchers. Also as held by the Ld. CIT(A), the assessee Total Oil India Pvt. Ltd 5 ITA No. 1271/Mum/2013 & 336/Mum/2015 failed to prove that the said expenditure was incurred wholly and exclusively for business purposes.
4.3 Before us, the Ld. counsel the assessee submits that the Ld. CIT(A) has ignored the fact that the said disallowance is made without asking for any further details/explanation in the course of assessment.
On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).
4.4 We have heard the rival submissions and perused the relevant materials on record. We are of the considered view that whether the expenditure incurred by the assessee for travelling and conveyance is wholly and exclusively for the business purpose or not has not been examined either by the AO or the Ld. CIT(A). It requires verification at the level of the AO from bills/vouchers.
5. The 4th ground raised by the assessee in this appeal is against the order of the Ld. CIT(A) confirming the disallowance of interest on housing loan of Rs.2,85,376/- considering the same as non-business expenditure.
5.1 During the course of assessment proceedings the AO found that the assessee has paid Rs.2,85,376/- to HDFC Housing Finance Ltd. and claimed it as paid on behalf of its employees. The AO disallowed as it was not related to assessee's business activity.
5.2 In appeal, the Ld. CIT(A) agreed with the reasons given by the AO and confirmed the same.
Total Oil India Pvt. Ltd 6 ITA No. 1271/Mum/2013 & 336/Mum/2015 5.3 Before us, the Ld. counsel of the assessee submits that the Ld. CIT(A) ignored the fact that the said disallowance is made without asking for any further details/explanation in the course of assessment.
On the other hand, the Ld. DR relies on the order of the Ld. CIT(A).
5.4 We have heard the rival submissions and perused the relevant materials on record. We are of the considered view that this aspect is required to be verified at the level of the AO from the details to be filed by the assessee.
6. In view of the above, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a fresh order keeping in mind our observation at para 3.4, 4.4 and 5.4 hereinbefore, after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO.
7. In the result, the appeal is partly allowed.
ITA No. 336/MUM/2015Assessment Year: 2008-09
8. The ground raised by the assessee in this appeal is against the order of the Ld. CIT(A) confirming penalty of Rs.49,86,946/- on account of disallowance of travelling and conveyance expenses of Rs.1,46,71,804/- as not incurred wholly and exclusively for the purpose of its business.
8.1 The above addition made by the AO and upheld by the Ld. CIT(A) has been set aside by us as per para 4.4 and 6 hereinbefore. Therefore, the penalty imposed by the AO on the said addition does not survive as Total Oil India Pvt. Ltd 7 ITA No. 1271/Mum/2013 & 336/Mum/2015 held in K.C. Builders vs. ACIT (2004) 265 ITR 562, 569 (SC). Therefore, the penalty is cancelled.
9. In the result, the appeal is allowed.
10. To sum up the appeal filed by the assessee in ITA No.1271/Mum/2013 is partly allowed whereas in ITA No. 336/Mum/2015 is fully allowed Order pronounced in the open Court on 20/12/2017.
Sd/- Sd/-
(SAKTIJIT DEY) (N.K. PRADHAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 20/12/2017
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai