2016 (6) TMI 477 - AT - Income Tax

Disallowance on account of insurance premium on two new vehicles - Held that - In our considered opinion the insurance claim of the assessee is not in respect of already existing assets but is in respect of purchase of two new motor vehicles. As per the Motor Vehicle Act no vehicle is allowed to ply on the road without the insurance cover. Therefore without the first insurance it cannot be said that the vehicle has been put to use. Therefore the first insurance premium paid would go to increase the cost of the vehicle and therefore the same has been treated as capital expenditure. Addition u/s 41 - Held that - We have carefully considered the orders of the authorities below. We find that the additions have been made by the A.O only because he found no transaction done in the accounts of the impugned creditors. In our considered opinion this cannot be a sufficient cause for holding that there is a remission or cessation of liability. Since there is no categorical finding by the A.O that there is a remission or cessation of liability we decline to interfere with the findings of the ld. CIT(A) Disallowance u/s. 40(a)(ia) - Held that - D.R. could not controvert the factual findings made by the ld. CIT(A) nor the ld. D.R. could point out any factual error in the findings of the ld. CIT(A). Since this is a case of reimbursement of expenditure we decline to interfere with the findings of the ld. CIT(A). For the sake of completion of the adjudication we find that no additions on this account have been made in earlier assessment years nor any addition is made in subsequent assessment year. Therefore on identical set of facts when the law is the same rule of consistency prohibits such action of the A.O. We draw support from the decision of the Hon ble Supreme Court given in the case of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME Court Expenditure in relation to Trade Mark Registration - revenue v/s capital expenditure - Held that - The assessee reiterated what has been stated before the lower authorities. At the very outset we have to state that the expenditure in question has not been incurred for acquisition of any capital asset as such. The expenditure has been incurred for carrying out the business activities of the assessee as registration of the trade mark is essential so as to secure that the competitors do not infringe the rights of the assessee. Further it is also an undisputed fact that the impugned payments have not been made to the Government but to professionals in their capacity as advisors.

Summary

Issues:
1. Valuation of closing stock
2. Disallowance of insurance premium on new vehicles
3. Addition of unproved creditors
4. Disallowance of expenses without TDS deduction
5. Disallowance of expenses related to Trade Mark Registration

Valuation of Closing Stock:
The appeal and Cross Objection were against the same order of the ld. CIT(A)-XVI, Ahmedabad for A.Y. 2007-08. The Tribunal referred to previous decisions in favor of the assessee, indicating no change in facts. The Tribunal dismissed the appeal, citing no reason to interfere with the findings of the ld. CIT(A).

Disallowance of Insurance Premium on New Vehicles:
The A.O treated insurance premium on new vehicles as capital expenditure, allowing depreciation. However, the ld. CIT(A) deleted this disallowance, considering it as an admissible item of expenditure. The Tribunal disagreed, stating the premium increased the vehicle's cost, thus capital expenditure. The Tribunal allowed the appeal, setting aside the ld. CIT(A)'s findings.

Addition of Unproved Creditors:
The A.O treated certain creditors as income under section 41(1) due to no payments or transactions in past years. The ld. CIT(A) deleted the addition, stating no cessation of liability. The Tribunal upheld this decision, as there was no evidence of remission or cessation of liability.

Disallowance of Expenses without TDS Deduction:
The A.O disallowed expenses under section 40(a)(ia) for not deducting TDS on dealer expenses reimbursement. The ld. CIT(A) deleted the disallowance, considering it as reimbursement of employee expenses. The Tribunal upheld the ld. CIT(A)'s findings, emphasizing the reimbursement nature of the expenses.

Disallowance of Trade Mark Registration Expenses:
The A.O treated Trade Mark Registration expenses as capital expenditure, while the assessee claimed it as revenue expenditure. The ld. CIT(A) allowed the claim, considering the expenditure essential for business activities. The Tribunal dismissed the appeal, agreeing that the expenditure was revenue in nature.

In conclusion, the Tribunal partly allowed the Revenue's appeal, upholding certain disallowances and deletions made by the authorities. The Cross Objection of the assessee was dismissed as not pressed.