Income Tax Appellate Tribunal - Delhi
Citicorp Maruti Finance Limited., New ... vs Department Of Income Tax on 5 November, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'B' NEW DELHI
BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI KULBHARAT, JUDICIAL MEMBER
I.T.A .NO.- 5515/Del/2010
(ASSESSMENT YEAR-2005-06)
DCIT Vs. M/s Citicorp Maruti Finance Ltd.
Circle 3(1), 4th Floor, Jeevan Bharti Building,
New Delhi. 3, Sansad Marg,
New Delhi
PAN-AAACC5029L
(APPELLANT) (RESPONDENT)
I.T.A .NO.5506/Del/2010
(ASSESSMENT YEAR-2005-06)
M/s Citicorp Maruti Finance Ltd. Vs. ACIT
4th Floor, Jeevan Bharti Building, Circle 3(1), 3rd Floor,
3, Sansad Marg, C.R.Building, I.P.Estate,
New Delhi. New Delhi
PAN-AAACC5029L
(APPELLANT) (RESPONDENT)
Appellant by: Sh. C.S.Agarwal, Sr. Adv. &
Sh. R.P.Mall, Adv.
Respondent by: Sh. Aroop Kr Sinha, Sr. DR
Appeal heard on-03.09.2012
Order pronounced on-14.09.2012
ORDER
PER KULBHARAT, JM
These two appeals, one by the revenue and the other by the assessee is filed against the order of Ld. CIT(A), New Delhi-IV for AY 2005-06. 2 I.T.A .NO.5506 & 5515/Del/2010
1. First, we take up the revenue's appeal ITA No. 5515/Del/2010. The revenue has raised following ground of appeal from the order of Ld. CIT(A):-
1. "On the facts and circumstances of the case, the LD. CIT(A) has erred in deleting addition of Rs. 1,89,47,950/- on account of loss on sale of repossessed assets ignoring that such a loss cannot be treated as revenue loss.
2. In the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting addition of Rs.
72,418/- on account of disallowance of extra depreciation on computer peripherals/accessories ignoring that as per the IT Rules 60% depreciation is allowable only on computer and computer software and not on computer peripherals and accessories.
3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
2. Briefly, stated facts are that the assessee filed return of income on 31.10.2005 declaring an income of Rs, 2,96,58,900/-. The assessment u/s 143(3) of the Income Tax Act, 1961 (herein after refer to as the Act) was framed vide order dated 05.11.2008, while framing the assessment order, the Assessing Officer made various disallowance on account of loss on sale of repossessed assets, foreign exchange loss, sales promotion expenses and depreciation on computer peripherals. Against this disallowance, the assessee filed an appeal before Ld. CIT(A), who after considering the submissions of the assessee partly allowed the appeal, thereby deleted the disallowance made on account of repossessed assets, depreciation on computer peripherals and disallowance on foreign exchange loss. However, the disallowance made on account of sale promotion expenses was confirmed by the Ld. CIT(A). 3 I.T.A .NO.5506 & 5515/Del/2010
Ground No. 1 is against the deletion of addition of Rs. 1,89,47,950/- on account of sale of repossessed assets.
3. Ld. DR strongly supported the order of Assessing Officer while Ld. Senior Counsel, Sh. C.S.Aggarwal pointed out that this issue is squarely covered in favour of the assessee by the order of Hon'ble ITAT, in assessee's own case, Ld. Senior Counsel submitted that the Hon'ble Delhi High Court has affirmed the decision of the Ld. CIT(A) as well as the Hon'ble ITAT.
4. We have heard the rival contention perused material available on record and the judgement cited. We find that the issue in controversy has already been decided in favour of the assessee. In this case, the Assessing Officer has disallowed the claim of the assessee in respect of the loss on sale of repossessed assets. The Assessing Officer had disallowed the claim applying the decision of the Hon'ble Allahabad High Court rendered in the case of Motor & General Sales Pvt. Ltd. vs Commissioner of Income Tax 226 ITR 137. The Hon'ble High Court of Delhi in ITA No. 1712/2010 and ITA No. 1714/2010 in assessee's own case, has held that the Ld. CIT(A) as well as the Hon'ble ITAT rightly held that the judgement of Hon'ble Allahabad High Court in Motor and General Sales Pvt. Ltd. (supra) was not applicable to the facts of the case. Since the facts are identical, there is no change into the facts and circumstances. We do not find any infirmity in the order of Ld. CIT(A), hence, this ground of the revenue's appeal is dismissed.
4 I.T.A .NO.5506 & 5515/Del/2010
5. Next ground of the revenue's appeal is against the deletion of addition of Rs. 72,418/- made on account of extra depreciation of computer peripherals/accessories. Ld. Departmental Representative submitted that the order of Assessing Officer is perfectly justified and he submitted that the computer peripherals/accessories included UPS and other items on which extra depreciation is not allowable. On the contrary, Ld. Senior Counsel for the assessee Sh. C.S.Agarwal submitted that the issue is covered by the decision of the Hon'ble ITAT and the decision of Hon'ble Delhi High Court in favour of the assessee.
6. We have heard the rival contentions perused material available on record and the judgement cited.
7. We find that the Hon'ble Delhi High Court in ITA No. 1712/2010 and 1714/2010 has decided this issue in favour of the assessee wherein the Hon'ble High Court has held that this issue is now settled by judgement of the Hon'ble Delhi High Court in the case of CIT vs BSES Yamuna Pvt. Ltd. in ITA NO. 1267/2010 decided on 31-08-2010 holding that on computer peripherals, depreciation at the rate of 60% is allowable.
8. In this view of the matter, we do not find any infirmity in the order of Ld. CIT(A). Respectfully following the decision of the Hon'ble High Court rendered in ITA No. 1712/2010 & ITA NO. 1714/2010 in assessee's own case, this ground of the revenue's appeal is rejected.
5 I.T.A .NO.5506 & 5515/Del/2010
9. In the result, the revenue's appeal is dismissed.
Now, we take up ITA NO. 5506/Del/2010 (Assessee's appeal).
10. The assessee has raised following grounds :-
1. "On the facts and circumstances of the case, the order passed by the Ld. CIT(A)-IV is erroneous, bad in law.
2. On the facts and circumstances of the case, the Ld. CIT(A), has not judicially considered the reply and submissions made by the appellant in the right ernest, which is highly biased and pro revenue.
3. On the facts and circumstances of the case, the Ld. CIT(A), without understanding the working of the business model and the details furnished properly, went on deciding unilaterly that sales agents have not done any work and hence the remuneration is not justified. Where as the Business promotion expenses not only contain payments to retainers but also other actual reimbursements.
4. On the facts and circumstances of the case, the Ld. CIT(A, went wrong in confirming the adhoc disallowance of Rs.
12,97,018, simply because the Assessing Officer has disallowed only 10% of the expenditure, without appreciating that the complete details of business promotion expenses along with the supports were furnished.
5. On the facts and circumstances of the case, the Ld. CIT(A), without going through the details, erred in deciding that the assessee has made only bald assertion which remains unsubstantiated.
6. The Ld. CIT(A) failed to appreciated that since the expenditure incurred wholly and exclusively for the purpose and promotion of the business and are as per the audited annual accounts of the company, it is an admissible deduction under the law.
7. There was no dispute about the nature and quantum of the expenditure either by the Ld. Assessing Officer or by the CIT(A), the Ld. CIT(A) ought to have deleted the adhoc addition made by the Assessing Officer.
8. The appellant craves the leave to add, amends, withdraw, vary, and delete all or any of the grounds as above on or before the date of hearing."
6 I.T.A .NO.5506 & 5515/Del/2010
11. The only effective ground in this appeal is against the confirmation of adhoc disallowance of Rs. 2,97.018/-. Ld. Senior Counsel for the assessee submitted that the assessee company was formed mainly for financing vehicles manufactured by Maruti Pvt. Ltd. He submitted that during the course of the assessment proceedings, the assessee had submitted replies on various issues in addition to oral submission in response to inquiry made at that time. He submitted that at the time of the assessment, the assessee had produced its books of accounts, vouchers and such details as were required by the Assessing Officer. He submitted that the Assessing Officer had made adhoc disallowance @ 10 % which is not permissible under the law. He submitted that the payments were made to various dealers by way of reimbursement of salaries and other expenses and also to valuer for obtaining their valuation report and the such expenditure was incurred during the course of business and for the business purposes. He submitted that the Assessing Officer had asked for the details on 22.10.2008, whereas the assessment order was passed on 31.10.2010. He submitted that in the appeal proceedings, Ld. CIT(A) has noted that sufficient time was not given. He submitted that, interestingly, on the one hand authorities below are recording a finding that no details were furnished and on the other they are making disallowance to the extent of 10% only. He submitted that in this case, books of accounts were not rejected and bills & vouchers produced by the assessee were verified by AO. He submitted that the 7 I.T.A .NO.5506 & 5515/Del/2010 no basis has been given as to how 10% of the expenditure is disallowable. He submitted that it is beyond comprehension as how and on what basis Assessing Officer/CIT(A) could hold that 90% of the expenses are allowable and remaining 10% can not be allowed. He submitted that such expenditure was allowed in earlier years. There is nothing on record as to how the contrary view is now being adopted.
12. In support of the contention that when there is no adverse past history or any other materials such disallowance cannot be made; reliance is placed on the decision of Hon'ble Supreme Court 76 ITR 690, wherein the Hon'ble Supreme Court has held that the power to levy assessment on the basis of best judgement is not an arbitrary power. It is an assessment on the basis of best judgement, in other words, that the assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authority.
13. We have heard the rival contentions perused material available on record and the judgement cited.
14. We find that the Assessing Officer has disallowed the expenses on the basis that the assessee could not submit the details in respect of purpose of payment with evidence. However, the Assessing Officer has not given the reason as to how only 10% expenses are to be disallowed. While confirming the addition, Ld. CIT(A) has observed that the issue which needs consideration is that whether any service was rendered by the sales agents who had been given a certain amount of remuneration. Even after admission of additional 8 I.T.A .NO.5506 & 5515/Del/2010 evidence, he is afraid that no evidence has been given which will satisfy him that the sale agent had indeed rendered any service to justify any remuneration. Thus, it cannot be stated that the money has been utilised for purpose of business. The assessee has only made bald assertion that the agents have rendered in service which remain unsubstantiated. In any case, the Assessing Officer has only disallowed 10% of the expenditure on the sales promotion expenses. In his opinion, this disallowance was reasonable.
15. The contention of the Ld. Senior Counsel for the assessee is that both the authorities had given a finding that no detail in respect of the payment and the rendering of service was furnished. But both of them have not disallowed the entire expenditure and restricted the same at 10%. He submitted that such act of the authorities below is not approved by any law.
16. Since both the authorities below have given a finding of fact that the evidence in support of claim was not furnished by the assessee. We find that neither from the records nor from the finding of the authorities below it is coming out what kind of service was rendered by the agents and dealers. We, are in agreement with the contention of Ld. Sr. Counsel that the assessee cannot be put to an inferior position than the original assessment stage. But it is settled position of law that it is incumbent upon the assessee to demonstrate with supporting evidence that the expenditure as claimed was incurred for business purpose. In the present case, neither the Assessing Officer nor Ld. CIT(A), has given a finding as to how the details filed by the assessee are not complete to arrive at a conclusion that the expenditure as claimed is not allowable. Moreover, the Assessing Officer has not rejected the Books of accounts and invoked provisions of section 144 of the Act for making best judgement assessment. Further, the contention of Ld. DR that the Assessing Officer has restricted the disallowance to 10% after having considered the nature of business being carried out by the assessee and on the basis of best judgement 9 I.T.A .NO.5506 & 5515/Del/2010 can not be accepted in view of the fact that for making best judgement the Assessing Officer has to follow the procedure as prescribed under Act. Since nothing is coming out of the findings of the authorities, why the entire claim of expenditure is not allowable. Therefore, in the interest of justice, this issue is remitted back to the file of Assessing Officer to verify the claim of assessee in respect of service rendered by the agents and the payments made thereof by the assessee. In case, the assessee is able to demonstrate that the expenditure was incurred towards service rendered by the agents/dealers for the business of the assessee. The Assessing Officer would allow the entire claim of the assessee. However, in case, the assessee is unable to substantiate his claim than in that eventuality the disallowance @ 10% as made by the Assessing Officer, would remain confirmed.
17. This ground of the assessee's appeal is allowed for statistical purposes.
18. In the result, the revenue's appeal is dismissed and appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 14.09.2012.
Sd/- Sd/-
(S.V.MEHROTRA) (KULBHARAT)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 14/09/2012
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
10 I.T.A .NO.5506 & 5515/Del/2010