TMI Blog2011 (1) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the order of the learned Assessing Officer; 2. That the learned Commissioner of Income-tax (Appeals) erred in upholding the learned Assessing Officer s order reducing the asses see s claim of depreciation on barge by Rs. 10,000 on the ground that the said barge was sold by it for Rs. 2 lakhs instead of Rs. 1 lakh as claimed by it. The ground of appeal No. 1, regarding erroneously returned the rental income from Agra building and the Assessing Officer has taken the annual letting value at Rs. 7,54,657. During the assessment years the assessee has shown the rent received from the Agra building amounting to Rs. 7,24,567. The Assessing Officer after disallowing the part of municipal taxes of the Agra building assessed the rental income as income from house property. The assessee challenged the disallowance of municipal taxes as well as other disallowance made by the Assessing Officer before the Commissioner of Income-tax (Appeals). The assessee also raised the additional ground by amending the grounds of appeal before the Commissioner of Income-tax (Appeals) regarding the annual letting value of the Agra build ing. The Commissioner of Income-tax (Appeals) dismissed the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that the Assessing Officer has not discussed about the issue of municipal taxes on account of sub-letting of the property by the tenants. Even the sub-tenants has directly deposited the municipal taxes has also not been taken into consideration. It appears, that these facts were not pointed out by the assessee before the Assessing Officer. The assessee itself has admit ted the annual letting value without explaining these facts. As pointed out by the learned authorised representative for the assessee that the issue regarding the annual letting value of the Agra building has been consi dered and decided by this Tribunal in the assessee s own case for the assessment year 2003-04 in the appeal filed by the Revenue in I. T. A. No. 1227/Mum/2008 vide order dated July 13, 2009. This Tribunal has held that the building in question is covered under the Bombay Municipal Rent Control Act and cannot arrive at fair market value which is above the standard rent payable as per the Rent Control Act. Having regard to the facts and circumstances of the case and in the interest of justice, we set aside this issue to the file of the Assessing Officer for verification and examination of facts wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had to be written off as the same could not be recovered from them. 4(a). That although the assessee claimed the sum of Rs. 5,00,000 in its profit and loss account as civil work expenses , on the facts and in the circumstances of the case, such claim should have been allowed as trading loss incidental to its business. 5. That both the Assessing Officer and Commissioner of Income tax (Appeals) erred in disallowing the club fee of Rs. 18,100 paid by the assessee to Mackinnon club. The ground of appeal No. 1 regarding the disallowance of tug hire charges. The assessee entered into an agreement to sub-contract M/s. Sto vec Industries Ltd. for transportation of heavy plant and machinery. The machineries were to be imported by sea from Germany to Mumbai and were further transported from Mumbai to Cuddalore, Chennai by tug. The contract period was from June 26, 1999 to June 30, 2000. The assessee hired tug from its sister company ABC and Sons at Rs. 2 lakhs per month for 34 months. Since transportation under the sub-contract for transportation of machinery from Mumbai to Cuddalore was not finally executed, the asses see claimed the expenses for hire of the truck at Rs. 68 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire work was to be completed by June 30, 2000 and no additional grace period of 90 days was allowed. The assessee was liable to be paid the penalty in case it does not complete the work by June 30, 2000. When the assessee has not at all exe cuted the contract and consequently there was no question of allowing the grace period then the claim of the assessee for three months is without any basis. He has relied upon the orders of the lower authorities. We have considered the rival contentions and relevant record. So far as the contention of the learned authorised representative regarding the tug hire charges should have been allowed for 13 months instead of 12 months is concerned, we find force in the contention of the learned authorised representative. When contract period was from June 23, 1999 to June 30, 2000 which is more than 12 months and since the hire charges are accrued between the parties at the rate of Rs. 2 lakhs per month then the charges for the months and part thereof shall be allowed as per the rate agreed between the parties. The rate of hire charges as well as the period of cont ract are not disputed by the parties, therefore, we find that the claim of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised representative for the assessee has submitted that the assessee claimed various payments to Shipping Corporation of India, Chennai Port Trust and payment by green channel. The total of such payments was amounting to Rs. 60,96,165. The assessee recovered from M/s. Stovec Industries Ltd. to the extent of Rs. 47,32,543. Thus, the amount which was not recovered back is to the extent of Rs.13,63,622. The learned authorised representative for the assessee has submitted that the assessee is ready to furnish all the necessary details of the expendi ture along with the supporting evidence showing the payments thereof. He has pleaded that the evidence may be admitted as an additional evidence by this Tribunal or the matter may be restored to the record of the lower authorities for verification and examination of the evidence and decide the issue in accordance with law. The learned authorised representative has submitted that the assessee filed only a sample bill before the Commis sioner of Income-tax (Appeals) along with the written submissions and the assessee was not given any opportunity to produce the entire evidence. Since, the Assessing Officer disallowed the claim on lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of justice and fair play it is necessary to verify and examine the evidence at the level of the lower authorities. Therefore, we set aside this issue to the record of the Assessing Officer to verify and examine the relevant evidence on this issue to be produced by the assessee and thereafter, decide this issue as per law. The ground of appeal No. 2 is allowed for statistical purposes. The ground of appeal No. 3 regarding disallowance of 50 percent of expenses of Diwali gifts. During the year the assessee claimed a sum Rs.1,68,358 on account of expenses being Diwali gift. The Assessing Officer observed that certain vouchers were missing and the maximum payments were made in cash and not supported by the proper evidence. Accordingly, the Assessing Officer has disallowed 50 percent of the expenses on account of Diwali gifts amounting to Rs. 84,179 by treating it as non-business expenses. On appeal, the Commissioner of Income-tax (Appeals) confirmed the disallowance made by the Assessing Officer on similar grounds. We have heard the learned authorised representative as well as the learned Departmental representative. It is undisputed fact that the assessee did not produce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct the same from their payment to avoid the delay for transportation of the goods. Accordingly, bank guarantee was furnished by the GIPCL and the amount was debited from the payment due to ABC and Sons. Consequently, M/s. ABC and Sons deducted the said amount from the assessee. Apart from this, the bank guarantee of demand draft of Rs. 2 lakhs was also drawn in favour of the executive engineer, R and D, Baroda. The said expenses was related to the damage of the bridge, etc. Therefore, the assessee debited the same to the civil work expenses. The Assessing Officer also noted that the payment of Rs. 5 lakhs was made during the financial year 1997-98, whereas the assessee has claimed the expenses for the financial year 2001-02. Thus, the payments did not pertain to the previous year relevant to the year under consideration and prior period items. Accordingly, the Assessing Officer disallowed the same and added back to the total income of the assessee. Moreover, as regard the payment of Rs. 2 lakhs, not only the executive engineer, Baroda denied the said payment but the assessee also failed to provide any evidence in support of its claim. On appeal, the Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal is regarding disallowance of club fee of Rs.18,100 paid by the assessee to Mackinnon club. During the assessment proceedings, the Assessing Officer disallowed an amount of Rs. 18,100 paid towards club fee by the assessee on the ground that the expenditure is for personal entertainment of executive officer of the assessee-company and not incurred wholly and exclusively for the purpose of business of the assessee. On appeal, the Commissioner of Income-tax (Appeals) has confirmed the disallowance made by the Assessing Officer. Before us, the learned authorised representative submitted that the club fee expenditure are admissible business expenditure because the assessee has incurred this expenditure for promotion of the business of the assessee. He has relied upon the decision of the jurisdictional High Court in the case of Otis Elevator Co. (India) Ltd. v. CIT reported in [1992] 195 ITR 682 (Bom). On the other hand, the learned Departmental representative relied upon the orders of the lower authorities. We have considered the rival contentions and relevant record. The assessee paid Rs. 10,000 to Mackinnon club towards fees for utilisation of the club facilities by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if it receives taxes/money from the occupiers as per section 146 of the Bombay Municipal Corporation Act, it raised the bills and issues receipts in the name of owner only. (6) On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in allowing higher rate of depreciation at 40 percent on the tractors/trailers without appreciating the fact that higher rate is allowable only if the assessee carries on the business of running them on hire. The ground of appeal No. 1 to 5 pertain to the computation of income from Agra building. We have heard the learned Departmental representative as well as the learned authorised representative and considered the relevant record. At the out set, we note that this issues was considered and adjudicated upon by this Tribunal in I. T. A. No. 1227/Mum/2008 dated July 13, 2009 in assessee s own case for the assessment year 2003-04 wherein this Tribunal has decided the issue in paragraph 4.1 as under : 4.1 the undisputed fact is that the Agra building in question is covered under the Bombay Rent Control Act and the assessee is prohibited by law in charging more than the standard rent permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher rate of depreciation at 40 percent on the truck and trailer. He has further submitted that in the subsequent Circular No. 652 dated June 14, 1993 ([1993] 202 ITR (St.) 55), it has been clarified that the higher rate of depreciation will also be permissible on the motor lorries used for the assessee s business of transportation of goods on hire. We have considered the rival contentions and relevant record. It is undisputed fact that the assessee is in the business of transportation of the goods on hire basis. Therefore, in view of Circular No. 652 dated June 14, 1993 it has been clarified that higher rate of depreciation will be admissible on the motor lorries used by the assessee for the business of transportation of goods on hire. The relevant portion of Circular No. 652 dated June 14, 1993 is reproduced as under (page 652 of 202 ITR (St.)) : Under sub-item 2(ii) of Item No. III of Appendix I to the Incometax Rules, 1962, higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire. A question has been raised as to whether, for deriving the benefit of higher depreciation, motor lorries must be hired ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the sister concern and the assessee was having its own tugs. Thus the hiring of tug from sister concern does not fall under the legitimate business needs of the assessee. Apart from this the benefit derived by the assessee as a result of hiring the tugs is nil. There is no contract in hand to justify hiring of the tug and the assessee paid huge hiring charges only because they are its sister concern. The assessee was having its own tugs and the hired tugs were not used for any transportation therefore the Assessing Officer disallowed the entire hire charges of Rs. 24 lakhs under section 40A(2)(b). On appeal, the Commissioner of Income-tax (Appeals) has confirmed the action of the Assessing Officer in disallowing the tug hire charges on the similar reasoning. Before us, the learned authorised representative for the assessee has submitted that the assessee had to keep tug as stand by and ready as it was difficult to hire tug at last movement. He has further submitted that the tug owned by the assessee was not in a transportation condition due to the accident. As regards, the applicability of the provisions of section 40A(2)(b), the learned authorised representative has submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t record. The Assessing Officer has disallowed 25 percent of the total claim of telephone expenses on the ground of personal use of the telephone at the house of the executives as well as other places. Accordingly, the Assessing Officer disallowed Rs. 1,69,378 being 25 percent of the total telephone expenses. On appeal, the Commissioner of Income-tax (Appeals) found that total reimbursement of telephone expenses to its executive by the assessee is Rs.96,449 and 25 percent of which of which comes out to Rs. 24,112. Accordingly, disallowance was restricted to the sum of Rs. 24,112. Before us the learned authorised representative has submitted that the expenditure reimbursed by the assessee to its executive cannot be disallowed because the same should be treated as perquisites and the addition may be made in the hands of the respective employees of the assessee. He has relied upon the decision of the hon ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. v. CIT reported in [2002] 253 ITR 749 (Guj). On the other hand, the learned Departmental representative has relied upon the order of the Commissioner of Income-tax (Appeals). After hearing both the parties, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal No. 4 is partly allowed. I. T. A. No. 1269//Mum/2008 The Revenue has raised the following grounds in this appeal as under : 1a. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in computing house property income from Agra property at Rs. 5,103 as against the income computed by the Assessing Officer ; 1b. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in bifurcating the rateable value of the building owned by the assessee into legal and illegal occupiers when the suits filed in the courts against them is still pending ; 1c. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in taking the annual rateable value of the small portion of building whose occupiers are actually paying the rent to the assessee is contrary to his own decision in holding that the tax on income from house property is the inherent capacity of the building to yield income and not the actual rent received ; 1d. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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