TaxTMI 
TaxTMI 
2010 (7) TMI 156
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....re deleted by the CIT(A). Both these appeals are decided by the Tribunal vide its impugned order dated 29th June, 2005. As mentioned above, the Department now feels aggrieved by the order of the ITAT whereby various additions made by the Assessing Officer are deleted by the ITAT. The grievance of the Department is in respect of the following deletions: - 2. New Vehicle and Handling charges:- The assessee had claimed deductions on account of purported expenses incurred under the head "new vehicle and handling charges", to the tune of Rs.67,90,438.70p. These handling charges included postage and envelope expenses, expenses incurred on petrol and spare parts, handling charges and pre-delivery inspection expenses, warranty expenses and the miscellaneous expenses. The main grievance of the Department relates to the storage charges given by the assessee to its sister concern, M/s. Gautam Auto Ltd. for parking of its auto-rickshaws. The grievance also relates to the claim of petrol expenses. 3. In so far as the storage charges are concerned, the case of the assessee was that it is dealing with auto-rickshaws manufactured by M/s. Bajaj Auto Ltd. As a dealer it was having number of au....
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....for utilizing these plots for storage purposes. However, these amounts were paid not by GMPL but M/s. Gautam Auto Ltd. Because of this reason, the CIT(A) also disallowed the expenditure. The question before the ITAT was also whether the disallowance upheld by CIT (A) was proper because of the aforesaid reasons. The ITAT came to the conclusion that when the premises were in fact utilized by the assessee and it had parked its autorickshaws there and also made the payments, it was entitled to deductions. According to the ITAT, payment of charges to M/s. Gautam Auto Ltd. and not GMPL was an internal arrangement between the GMPL and M/s. Gautam Auto Ltd. and at best could give rise to the question that the amounts paid by the assessee should be assessed in the hands of GMPL or M/s. Gautam Auto. This aspect has been discussed further by ITAT in the following extact: "...Thus, as the matter stands before us, the ld. CIT(A) has upheld the disallowance on two short grounds, viz., (1) M/s. Gautam Auto Limited had no locus standi in the matter; and (2) and disallowance could be made under the provisions of section 40A(2)(b) as being excessive or unreasonable. We do not see much force in th....
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....hire charges of Bijwasan plot. M/s. Gautam Auto Limited was also being regularly assessed to tax. During the course of hearing before us, the ld. Authorized Representative of the assessee pointed out that M/s. Gautam Auto Limited was liable to pay taxes at the same rate as the assessee, if not higher. There is no case made out by the Department that any tax avoidance has been attempted by these arrangements. We, therefore, see no justification to uphold the addition made by the ld. Assessing Officer and sustained by the ld. CIT(A) . The same is directed to be deleted and this ground of the assessee is allowed......" 5. We are quite in agreement with the aforesaid approach of the Tribunal and are of the opinion that the Tribunal rightly directed the Assessing Officer to delete the addition and allow the expenditure claimed. 6. In so far as the expenses incurred on account of petrol is concerned, the Assessing Officer has observed that the assessee incurred heavy petrol expenses. It is also observed by the Assessing Officer that normally the initial petrol which is put into any vehicle is also charged from the buyer and further that the payments for petrol has been made to sist....
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....y back in the year 1979 had put at rest this controversy in the case of Madhav Prasad Jatia vs. CIT [1979] 118 ITR 200. In that case the Court was concerned with Section 10(2) of the Income Tax Act, 1922 which is pare materia to Section 36 (1) (iii) of the Income Tax Act, 1961. The court was of the view that three conditions are required to be satisfied in order to enable the assessee to claim deductions in respect of the borrowed capital, namely, (a) that money (capital) must have been borrowed by the assessee, (b) that it must have been borrowed for the purposes of business, and (c) that the assessee must have paid interest on the said amount and claimed it as a deduction. Indubitably, all the three conditions stand satisfied in the present case. Merely because the assessee had its own ample resources at its disposal cannot negate the deduction in respect of the interest paid on borrowed funds. It has been held by the Bombay High Court in Commissioner of Income-Tax, Bombay City II vs. Bombay Samachar Ltd., Bombay [1969] 74 ITR 723 that the fact that an assessee had ample resources at its disposal and need not have borrowed is not a relevant matter for consideration. The relevant ....
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....ding of fact that a part of the borrowings had been diverted by the assessee to its non- business purposes is in our opinion not a finding of fact, but was an inference drawn by the Tribunal on the basis that the interest paid on the capital borrowed was not in law an allowable deduction from the profit, in case the profit minus depreciation was in excess of the withdrawals made by the partners and in such a case, the withdrawals should be deemed to be in part from the capital account and would mean that the original borrowing was utilized for other purposes and not for business purposes. The finding of the Tribunal in this behalf is purely an inference in law. It ignores the law laid down by the Supreme Court in Madhav Prasad Jatia v. CIT [1979] 118 ITR 200 and in the Bombay High Court case CIT v. Bombay Samachar Ltd. [1969] 74 ITR 723, that once the three conditions laid down there are satisfied, the deduction under section 36(1)(iii) must be given. Again, the contention that the correct amount of debit balance to the account of the partners should be taken as Rs.1,73,643 instead of Rs.1,93,049 as calculated by the Income-tax Officer is again a figure arrived at as a matter of la....
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....d at that the money which was borrowed from the bank is utilized by the assessee for its own business purposes and that the money has not been given to the relatives of the partners, this condition stands satisfied and in such an eventuality the question of establishing the nexus or the business expediency does not arise at all. 12. To the same effect is the judgment of the Supreme Court in the case of Motor General Finance Ltd. vs. Commissioner of Income-Tax [2004] 267 ITR 381. 13. In view of the aforesaid provisions of law, no substantial question of law arises. 14. The Department has also grievance in respect of certain receipts not declared by the assessee's. The Assessing Officer had observed that the assessee firm's account was credited by way of incentive credit notes aggregating to Rs.42,66,200/-, vehicle charges of Rs.12,31,740/- and warranty claim amounting to Rs.11,69,422/- by M/s. Bajaj Auto Ltd. These amounts were not declared as income by the assessee. He, therefore, added these amounts to the income of the assessee for the year in question. 15. Before the CIT(A), the assessee submitted that these amounts were either credited to the P&L account or reduced ....
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.... Ltd. and these payments were made by account payee cheque. The CIT(A), however, rejected the explanation and confirmed the additions to the extent of Rs.20,80,800/- and deleted the balance additions made by the AO. 17. The Revenue accepted the order of the CIT(A) in respect of these entries. However, the assessee challenged the order of the CIT(A) whereby addition to the extent of Rs.20,80,800/- was sustained. The Tribunal also deleted that addition as well thereby allowing the appeal of the assessee in respect of this item giving the following justification: "...Thus in effect, we are left with the only objection of the Assessing Officer and the Id. CIT(A) that the payments made by the assessee to M/s. Gautam Motors (P.) Limited and Sheo (sic. Shiv) Shakti Cement Industries Limited did not have direct nexus with the incentive credits received by the assessee from M/s. Bajaj Auto Limited, M/s. Maharashtra Scooters Limited. That in our opinion is besides the point. The fact of the matter is that incentive credits received by the assessee were duly account for in the books of account of the assessee the basis of which annual income statement has been prepared. An income charge....
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....Mar‟00 1038 17,83,161 Total: 11675 20,83,758 21. It is manifest that while the discounts and commissions claimed for the period of eleven months, i.e., April, 1999 to February, 2000 ranges between Rs.16,000/- to Rs.35,000/-, in the last month of the financial year, i.e., March, 2000, the discount and commission claimed was abnormally high, i.e., to the tune of Rs.17,83,161/-. The assessing officer, after examining the issue, observed that there was no link between the number of vehicles sold by the assessee and the expenditure on discount and commission claimed by it. She also observed that the assessee had subsequently filed another set of information, i.e., on 13.01.2003, as per which total of Rs.13,67,743/- had been paid to commission agents by the assessee. On this basis, she observed that assessee had filed contradictory sets of information on different dates, inasmuch as initially the claim made was on the premise that the aforesaid discounts and commissions were given to the customers, namely, those who had purchased the vehicles, whereas, afterwards, it was sought to contend that the amount was paid to commission agents. There was no documentary evid....
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.... discount/commission to boost the sales. Moreover, the payment of discounts were made in cash separately, which could have been reduced from bills or paid by cheques. On the basis of this reasoning, CIT (Appeals) upheld the order of the assessing officer. The Tribunal, in further appeal by the assessee, has, however, allowed this deduction. In the opinion of the Tribunal, the CIT (Appeals) erred in refusing to entertain fresh evidence sought to be furnished by the assessee in accordance with provisions of Rule 46A. It is, inter alia, stated that the assessing officer sought for voluminous information, i.e., complete names and addresses of more than 4,000 buyers without allowing the assessee adequate opportunity. Since the assessee had furnished invoice numbers and amount of discount allowed in every case and thus the basic details were available with the assessing officer, for the purpose of verification she could have picked up certain invoices. She, however, insisted all the addresses to be furnished to her and the compilation of this information required substantial time, which was not allowed to the assessee by the assessing officer, the CIT (Appeals) should have accepted the a....