2019 (7) TMI 605 - HC - Income Tax

High Court affirms Tribunal decision on company expenses, rejects Revenue's appeal

The High Court upheld the Tribunal's decision to allow the appellant's appeal regarding the disallowance of telephone and motor car expenses. Relying on ... Disallowance of expenses - telephone expenses - personal use by directors - motor car expenses and depreciation - personal use - reliance on precedent - Sayaji Iron and Engineering Company v. CIT - appellate tribunal's deletion of additionTelephone expenses - personal use by directors - disallowance of expenses - reliance on precedent - Sayaji Iron and Engineering Company v. CIT - Deletion by the Appellate Tribunal of the disallowance made on account of telephone expenses was upheld. - HELD THAT: - The Tribunal accepted the view recorded by the first appellate authority that personal use of telephone by company directors was inevitable, the expenditure had not been authorised by the AGM nor shown as a perquisite in the hands of the company, and therefore followed this Court's decision in Sayaji Iron and Engineering Company (253 ITR 749) to delete the disallowance. The High Court examined the materials, noted the Tribunal's reliance on the said precedent, and found no error of law in the Tribunal's conclusion.The Tribunal's deletion of the telephone-expenses disallowance is sustained.Motor car expenses and depreciation - personal use - disallowance of expenses - reliance on precedent - Sayaji Iron and Engineering Company v. CIT - appellate tribunal's deletion of addition - Deletion by the Appellate Tribunal of the disallowance made on account of motor car expenses and depreciation was upheld. - HELD THAT: - The Tribunal noted that the assessing officer had disallowed a portion of car expenses and depreciation while the CIT(A) had confirmed an addition of one-sixth; however, relying on this Court's decision in Sayaji Iron and Engineering Company (253 ITR 749) the Tribunal deleted the disallowance. The High Court, after hearing learned counsel and perusing the record, held that the Tribunal did not commit any error of law in following the precedent and terminating the addition.The Tribunal's deletion of the motor car expenses and depreciation disallowance is sustained.Final Conclusion: The Revenue's Tax Appeal is dismissed; the Appellate Tribunal's deletions of the additions in respect of telephone expenses and motor car expenses/depreciation are upheld as not vitiated by any error of law. Issues:1. Disallowance of telephone expenses2. Disallowance of motor car expenses and depreciationAnalysis:1. The first issue pertains to the disallowance of Rs. 32,224 made on account of telephone expenses. The Tribunal, in its findings, noted that the personal use of telephone by the company's Directors was imperative and that the expenditure was not authorized by the Annual General Meeting (AGM) nor shown as a perquisite in the hands of the appellant. The Tribunal relied on the decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron and Engineering Company vs. CIT (253 ITR 749) to delete the disallowance upheld by the CIT(A). Consequently, the Tribunal allowed the ground of appeal of the assessee, citing the precedent set by the Gujarat High Court.2. The second issue concerns the disallowance of Rs. 16,875 made on account of motor car expenses and depreciation. The Assessing Officer (AO) initially disallowed Rs. 25,312, which was later reduced by the CIT(A) to Rs. 16,875. However, the Tribunal, once again relying on the decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron and Engineering Company vs. CIT (253 ITR 749), held that no disallowance on account of personal use could be made in the case of a company. Consequently, the Tribunal deleted the disallowance upheld by the CIT(A) based on the precedent set by the Gujarat High Court.In the final judgment, the High Court, after hearing the senior standing counsel for the Revenue and examining the records, concluded that no error, let alone an error of law, was committed by the Tribunal in its order. The Court held that none of the questions proposed by the Revenue could be considered substantial questions of law in the present Tax Appeal. As a result, the appeal by the Revenue was dismissed.