Rotomac Globals (P) Ltd. vs Commissioner of Income Tax

Heard Sri S.K. Garg, senior advocate assisted by Sri Rahul Shukla, learned Counsel for the appellant and Sri D.D. Chopra, learned Counsel for the respondent.

Both these appeals have been filed by the assessee against the different orders of the Tribunal dated 22-7-2008 and 21-1-2008 for the assessment years 2000-01 and 2002-03.

3.The brief facts of the cases are that the assessee company is engaged in the manufacturing and sale of writing instruments under the brand name of Rotomac and located at Kanpur. The learned Counsel for the appellant stated that the affairs of the appellant company hereinafter known as assessee were being managed by the board of directors as per the Companies Act. Being a whole-time director, he is operating from his residence as a matter of necessity. The payment was made to the director pertaining to the telephone, electricity, and traveling expenses etc., as per the details given in the assessment orders, apart from the above monthly remuneration. He further submitted that as per Section 17(2) of the Income Tax Act, it falls under the "perquisites" and the same is allowable expenditure, which may be considered in the hands of the beneficiary.

However, the assessing officer has disallowed the said expenses for both the assessment years under consideration. The first appellate authority has disallowed the expenses pertaining to the electricity and telephone. However, the matter pertaining to the traveling expenses was restored to the assessing officer.

In second appeal, the Tribunal by the impugned order (has) given the relief of rupees one lac for each assessment year under consideration by mentioning that this amount has already been considered as perquisites in the hands of the director. He finally made a request that the entire expenses may kindly be allowed by modifying both the orders of the Tribunal.

On the other hand, the learned Counsel for the opposite party Sri D.D. Chopra has relied on the order of the Tribunal. He has stated that rupees one lakh for each assessment year under consideration was treated as "perquisites value" in the hands of the director. So, the consequential relief was given in the hands of the assessee company. He further submitted that similar additions were considered in the hands of the director Sri Vikram Kothari where the addition of rupees one lakh for each assessment year under consideration was upheld for the earlier assessment years, which was accepted by the assessee. However, when the similar relief was given to the assessee for the assessment years under consideration then the assessee has filed these appeals.

Further submission of the respondents counsel is that the Tribunal observed that the expenses were claimed on estimated basis pertaining to the electricity, telephone, watchman at residence and at farmhouse. The details of the expenses incurred through credit card were not on record. The residential premises might have been used for the business purpose partly, so the part of the bills was attributed only to the business purpose. He submitted that the issue boils down to the fair estimation of the "perquisites value".

We have heard the learned Counsel for the parties at length and gone through the material available on record, from which it appears that the house was partly used for the purpose of business. The issue boils down to the fair estimation of the "perquisites value" for the expenses incurred. So the partial relief of rupees one lakh was given by the Tribunal for each assessment year under consideration by following its earlier decisions which were accepted by the assessee.

For both the assessment years under consideration, the facts and circumstances are identical where on the basis of the estimate, the partial relief was given to the assessee. It is a question of fact. Needless to mention that the Tribunal is a final fact-finding authority as per the ratio laid down in the case of Kamala Ganapathy Subramaniam and Another Vs. Controller of Estate Duty,

In the instant case, the addition was sustained merely on estimate basis. The estimation has no scientific investigation, it is merely a guesswork as per the ratio laid down in the case of The Commissioner of Income Tax Vs. Balaji Wire Pvt. Ltd., On estimate basis, no interference is desirable as per the ratio laid down in the case of Zora Singh v. CIT (2008) 296 ITR 104 (P&H).

From the above, it is evident that no substantial question of law is emerging from the impugned order of Tribunal. Hence both the appeals are dismissed at the admission stage.