CIT vs Gemi Motors India Ltd.

Ajay Kumar Mittal, J.—This appeal u/s 260A of the income tax Act, 1961 (for short ""the Act"") has been filed by the Revenue against the

order dated 20.8.2010, passed by the Income Tax Appellate Tribunal Delhi Bench C, New Delhi (in short ""the Tribunal"") in ITA No.

3050/Del/2008, relating to the assessment year 2002-03. The following substantial questions of law have been claimed for determination of this

Court:

Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting

the addition of Rs. 8,28,512/-made by the Assessing Officer on account of staff welfare expenses disregarding the fact that the expenditure was

not incurred wholly and exclusively for the business purpose?

Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting

the addition of Rs. 3,31,539/-made by the Assessing Officer on account of sales & business promotion expenses even though there was no

evidence to the effect that the amounts debited under this head are wholly and exclusively for business purposes and are not personal in nature as

such it would meet the ends of justice to disallow 10% of the expenditure under this head?

Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting

the addition of Rs. 3,62,175/- made by the Assessing Officer on account of disallowance out of vehicle and telephone expenses even though the

assessee had failed to establish that the same were incurred wholly & exclusively for the business purposes and the possibility of personal use

cannot be ruled out and in contravention of the decision of Hon''ble Madras High Court in the case of Commissioner of Income Tax Vs. Chitram

and Co. Pvt. Ltd., and Commissioner of Income Tax Vs. Madura Coats Ltd.,

The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee filed return for the assessment year

2002-03 on 31.12.2002, declaring income of Rs. 17,97,99,180/-. The assessment was, however, completed on 30.3.2005 vide order passed u/s

143(3) of the Act at an income of Rs. 19,59,12,430/- wherein certain additions and disallowances were made by the assessing officer.

The assessee preferred appeal before the Commissioner of income tax (Appeals) (in short ""CIT(A)""). The assessee was granted relief by the

CIT(A) vide order dated 31.7.2008 of an amount of Rs. 15,28,846/-. The disallowance made by the assessing officer of an amount of Rs.

9,28,512/- on account of staff welfare expenses was restricted to Rs. 1,00,000/- and accordingly, addition of an amount of Rs. 8,28,512/- was

deleted. The CIT(A) restricted disallowance under the head Sales and Business Promotion to Rs. 1,00,000/- and deleted balance disallowance of

Rs. 3,31,539/-. The CIT(A) also deleted the addition of Rs. 3,62,175/- that had been made by the assessing officer after disallowing the

expenditure debited towards Vehicle and Conveyance expenditure and Residential and mobile phone expenses.

Not satisfied with the order of the CIT(A), the Revenue further took the matter in appeal before the Tribunal. The Tribunal vide the order under

appeal upheld the order of the CIT(A). Hence this appeal.

We have heard learned counsel for the appellant-revenue and have perused the record.

In the present appeal, the additions/disallowances on the following three counts are involved:

(a) Expenses amounting to Rs. 8,28,512/- under the head staff welfare expenses.

(b) Allowance of Rs. 3,31,539/- under the head ""sales and business promotion expenses

(c) Deletion of addition of Rs. 3,62,175/- made by the assessing officer on account of personal use of vehicles and telephone expenditure.

Learned counsel for the Revenue fairly accepted that so far as the questions (a) and (c) are concerned, the Tribunal had relied upon its earlier

orders against which were challenged by the Department by filing IT Appeal Nos. 288, 387 and 439 of 2009 (CIT v. G.E. Motors (I) (P.) Ltd.

dated on 25.1.2011 and the said questions were held not to be substantial questions of law. Accordingly, in view of the aforesaid decision of this

Court, the questions (a) and (c) noticed above, are held not to be substantial questions of law.

Adverting to the question at (b) mentioned above, it may be noticed that the CIT(A) while delving thereon passed the following order:

I have considered the facts and the submissions of the Ld. A.R. and also perused the order of the AO and I tend to agree with the contentions of

the appellant that no specific instance of the expenditure was brought out where it was not supported by the necessary evidence.

However, still, if any disallowance has to be made, the disallowance of 10% of total expenditure is on a higher side and the ends of justice would

be served if the disallowance is restricted to 1.00 lac. The balance disallowance of Rs. 3,31,539/- is, therefore, deleted.

A perusal of the aforesaid order shows that the CIT(A) did not agree with the plea raised on behalf of the Revenue regarding ad hoc 10%

disallowance claimed by it on account of sales and business promotion expenses. The CIT(A) on appreciation of material on record, however,

restricted the disallowance to an amount of Rs. 1,00,000/- and deleted the balance amount. This finding of the CIT(A) was affirmed by the

Tribunal on appeal carried by the Revenue.

Learned counsel for the Revenue was unable to point out any illegality or perversity in the findings recorded by the authorities on the aforesaid

issue which may warrant interference by this Court. No substantial question of law, thus, arises in the appeal that may require adjudication by this

Court. In view of the above, the appeal fails and is accordingly dismissed.