TMI Blog2015 (3) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... as not pointed out any defect in the correctness of diesel account maintained by the appellant. Therefore, the 2% disallowance out of entire expenditure of ₹ 76,82,51,447/- was not justified. - Decided in favour of assessee. Disallowance of maintenance and repairs expenses - Held that:- The expenses incurred on maintenance and repairs were wholly and exclusively for business purposes and were in the nature of current repairs, which are allowable as revenue expenditure. Hence, the treating of the expenses of ₹ 52,90,624/- as capital expenditure is not justified.- Decided in favour of assessee. Disallowance of hire charges paid for AC, Crain, DG Sets, Photocopy machine, tanker and taxi hire charges - no expenditure has been incurred in the previous year on the basis of hire charges - Held that:- The reason applied by the Assessing Officer for disallowance is not sustainable. The Assessing Officer has not brought any material on record to prove that the expenses were not genuine. The disallowance made without bringing any evidence on record contrary to the evidences submitted by the appellant was not justified. These expenses have been incurred for genuine business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y JJ. For the Appellant : Smt. Parwinder Kaur, Sr. DR For the Respondent : Sh. R.S. Singhvi, CA ORDER Per I.C. Sudhir, JM : The Revenue has impugned the first appellate order on the following grounds: i. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 29,73,740/- made by the Assessing Officer on account of notional Interest charged on interest free security deposit given to various group companies? ii. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the disallowances of ₹ 1,53,65,028/- made by the Assessing Officer on account of disallowance out of Diesel expenses when the assessee in spite of repeated requests did not produce the original bills and vouchers before the Assessing Officer and only produced the same before the Ld CIT(A). iii. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the disallowances of ₹ 52,90,624/- made by the Assessing Officer on account of disallowance of capital expenditure included in Misc. contract expenses after entertaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following additions/disallowances: Sl. No. Nature of disallowance Amount (Rs. ) 1. Disallowance of ROC fees ₹ 6,00,000/- 2. Charging of notional interest on security deposit ₹ 29,73,740/- 3. Disallowance out of diesel expenses ₹ 1,53,65,028/- 4. Capitalization of expenses ₹ 52,90,624/- 5. Disallowance out of hire charges ₹ 9,54,678/- 6. Disallowance of interest paid on TDS ₹ 23,934/- 7. Disallowance of prior period expenses ₹ 1,01,549/- 8. Disallowance of ESI etc. ₹ 59,553/- 9. Disallowance out of Event expenses and Consultancy charges ₹ 13,80,790/- 10. Disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries (I.) Ltd., (2002) 257 ITR 762 (MP) (v) CIT Vs. Bansware Fabrics Ltd., (2004) 267 ITR 398 (Raj.) 5.3 Learned AR submitted further that during the year the assessee had received interest free security deposits of ₹ 12 crores and no interest was paid on such deposits, therefore, it cannot be said that the assessee was paying interest on security deposits received whereas no interest was charged from the deposits. 5.4 Having gone through the decisions cited above, we find that the ratio laid down therein is that liability to tax can arise only when there is income and no tax can be charged on notional income on accrual. 5.5 Considering the above facts in its totality and that during the year the assessee had received interest free security deposit of ₹ 12 crores and no interest was paid on such deposits, we are of the view that the learned CIT(A) has rightly deleted the addition, after discussing the above stated unrebutted facts. For ready reference, finding of the learned CIT(A) is being reproduced hereunder: I have considered the submission of the appellant and observation of the Assessing Officer. It is seen that during the year appellant has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant when no real income has accrued the same cannot be taxed on notional basis. Considering the facts of the case and various judicial pronouncements relied upon by the appellant, I am of the considered opinion that no notional interest on security deposit can be charge. Hence, the addition made by the Assessing Officer of ₹ 29,73,740/- is deleted. 5.6 As discussed above, we find that the first appellate order on the issue is comprehensive and reasoned one to which we fully concur with. The same is accordingly upheld. The ground no. 1 is accordingly rejected. Grounds nos. 2, 3, 4, 7 8 6 These grounds pertained to disallowance made out of diesel expense, contract expenses treating the same as capital expenditure, hire charges paid, event expenses, consultancy charges and legal as well as professional expenses made by the A.O. Finding of the A.O. that details have not been furnished was contended before the learned CIT(A) by the assessee as contrary to his own observation in the assessment year. The assessee contended that the Assessing Officer has made ad-hoc disallowance on the wrong premises. The assessee filed comparative chart of expenses for the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was contended that while making the disallowance in question, the A.O. has not pointed out any defect in the books of account which have been duly audited. It was contended that the assessee had enclosed the copy of the ledger account of the expenses at page 27 to 115 of the paper book. Thus, the very basis for making the ad-hoc addition is misconceived based on conjecture surmises. 6.5 Regarding the disallowance made towards miscellaneous contract expenses under the head repair and maintenance expenses , we find that the A.O. had segregated certain item of expenditure from the details of repairs and maintenance filed before him at page no. 7 of the assessment order. The A.O. made the addition of ₹ 52,90,624/- (net of depreciation) incurred on renovation of existing asset by holding it to be of capital in nature . The contention of the assessee against this action of the A.O. remained that ledger account of expenses was enclosed. The observations of the Assessing Officer are misconceived, without appreciating the facts as pointed out hereinabove against the disallowance made on account of power and fuel expenses. It was contended that the disallowance made by holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.8 Regarding legal and professional expenses disallowance, we find that the Assessing Officer has made this disallowance of ₹ 25,15,644/- being 10% of ₹ 2,51,56,444/-. The same was objected by the assessee with this contention that despite the details were furnished during the assessment proceedings, the Assessing Officer has made ad-hoc disallowance with the contrary observation that documentary evidences were not furnished. It was contended that all the payments have been made by crossed cheques duly authorized and vouched expended wholly and exclusively for the purpose of business activities. Considering the submissions and dealing with the issue in detail, the learned CIT(A) has deleted the above ad-hoc disallowances taking support of the decisions in the cases of (i) Friends Clearing Agency P. Ltd. Vs. CIT, (2011) 332 ITR 269 (Del); (ii) Widex India (P) Ltd. Vs. Dy. CIT, (2012) 66 DTR 57 (Del.)(Trib.); (iii) Thard Hardware Co. Assistant Commissioner of Income Tax, (2004) 266 ITR (AT) (GAU.); and (iv) CIT Vs. S.S.P. (P.) Ltd., (2011) 202 Taxmann.com 386 (P H) (HC). 6.9 For a ready reference, the findings of the learned CIT(A) on the disallowances in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fixing of railing in stair cases. The nature of the expense suggests that by incurring these expenses no enduring advantage has been derived and no new asset has been created by incurring these expenses. These expenses have been incurred to maintain the building and fix certain items for smooth working of the business of the appellant. Therefore, the expenses incurred on maintenance and repairs were wholly and exclusively for business purposes and were in the nature of current repairs, which are allowable as revenue expenditure. Hence, the treating of the expenses of ₹ 52,90,624/- as capital expenditure is not justified. The Assessing Officer has also disallowed ₹ 9,54,768/- out of hire charges paid for AC, Crain, DG Sets, Photocopy machine, tanker and taxi hire charges. The argument of the Assessing Officer is that no expenditure has been incurred in the previous year on the basis of hire charges. However, the appellant has submitted that the hire charges in A.Y. 2008-09 were grouped under miscellaneous expenses and same were at ₹ 17,67,169/-. Therefore, the reason applied by the Assessing Officer for disallowance is not sustainable. The Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of interest paid on account of TDS of ₹ 23,934/-. 7.1 The learned AR placed reliance on the assessment order whereas the first appellate order has been referred by the learned AR on the issue. 7.2 We find that the learned CIT(A) has dealt with the issue in para nos. 9, 9.1 and 9.2 with the following findings: I have considered the submission of the appellant and observation of the Assessing Officer. It is seen that the payment of interest pertains to delayed payment of service tax and unclaimed salary and bonus payable to Punjab Welfare Commissioner. It is noticed that no payment relates to interest on delayed payment of TDS. Since, the interest of payment relates to delayed payment of service tax and unclaimed bonus and salary, the same is allowable as revenue expenditure. Hence, the addition made by the Assessing Officer is deleted. 7.3 The findings of the learned CIT(A) are that no payment relates to interest on delayed payment of TDS has been made and the interest payment actually relates to delayed payments of service tax and unclaimed bonus and salary. Hence, it is allowable as revenue expenditure, has not been rebutted by the revenue be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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