1989-VIL-88-ITAT-DEL
Equivalent Citation: TTJ 035, 602,
Income Tax Appellate Tribunal DELHI
Date: 20.09.1989
USHA RECTIFIER CORPORATION (I) PVT. LTD.
Vs
INSPECTING ASSISTANT COMMISSIONER.
BENCH
Member(s) : V. P. ELHENCE., J. KATHURIA.
JUDGMENT
This is an assessee’s appeal arising out of CIT(A),New Delhi’s order dt.22nd Jan., 1986, and relates to asst. yr. 1980-81. This appeal was filed late and was marked by the Registry as time-barred by eight days. The assessee has explained the delay and the delay has been condoned.
2. The first ground of appeal is against the disallowance of Rs. 1,44,419 out of total claim under s. 80J amounting to Rs. 2,35,677.
3. The assessee-company was carrying on the business of manufacture of selenium along with other business activities. It had set up an independent silicon manufacturing unit and, for the year under consideration, it claimed deduction under s. 80J for Rs. 2,35,677. The IAC (Asst) was of the opinion that it was quite possible that part of of the internal funds of the aforesaid unit came from the borrowed funds of the main branch and that there was no evidence to show that the internal funds coming to silicon unit consisted only of share capital or resources from the main unit. He, therefore, held that rational basis for working out the deduction under s. 80J would be to "apportion the capital employed of the silicon unit between the capital employed and the total capital of the main unit." The working of deduction under s. 80J is embodied at page 4 of the assessment order. The learned CIT(A) confirmed the IAC assessment’s order.
4. Shri C.S. Aggarwal, the learned counsel for the assessee, submitted that, on identical grounds, disallowance under s. 80J was made for the asst. yr. 1979-80 and, in fact the CIT(A), in his impugned order, had rejected the assessee’s appeal on this point for the reasons mentioned by him in his order for the asst. yr. 1979-80. For the asst. yr. 1979-80, the assessee had preferred an appeal to the Tribunal and the Tribunal vide its order dt.5th April, 1989in ITA No. 2194/Del/86 Usha Rectifier Corpn. (I)(P) Ltd. IAC (1989) 34 TTJ (Del) 209 : (1989) 30 ITR 1 (Del) upheld the assessee’s contention. We are in agreement with the Tribunal’s decision. Respectfully following the same, we hold that the assessee was entitled to deduction of Rs. 2,36,677 as against the claim of Rs. 91,258 allowed by the lower authorities. We accordingly.
5. The next ground is against the disallowance of claim of bad debt amounting to Rs. 9,300 due from the Punjab Sate Electricity Board. The IAC (Assessment) noted that the amount of Rs. 9,300 was due from the Punjab State Electricity Board since March, 1973. This was written off after 6 years on the ground that the Board did not extend the delivery period in spite of a number of reminders. The ITO, therefore, disallowed the claim as time-barred. The CIT(A) was of the view that the bad debt in question had not been proved to be relating to this year. Nothing had been brought on record before him to show that anything happened during the previous year relevant to asst. yr. 1980-81 which made the debt bad. He, therefore, upheld the disallowance of Rs. 9,300.
6. Shri Aggarwal submitted that the assessee had supplied certain goods to the Punjab State Electricity Board and the Board required the assessee to carry out certain repair work. The assessee found that the expenses involved on the repair and rectification were more than the claim of Rs. 9,300. In that view of the matter, the assessee-company wrote off the aforesaid amount of Rs. 9,300. It was urged that this claim may be allowed in full. He also relief upon Bombay High Court decision in the case of Jethabhai Hirji and Jethabhai Ramdas vs. CIT (1978) CTR (Bom) 415 : (1979) 120 ITR 792 (Bom). The learned Departmental Representative relied upon the orders of the authorities below.
7. We have carefully considered the rival submission. As to when a debt becomes bad, depends upon the circumstances and material brought on record. There is no general rule or universal test which will apply to all cases in all circumstances as held by the Bombay High Court in the case of Jethabhai Hirjiand Jethabhai Ramdas. The assessee has not produced any evidence by way of correspondence, etc., to substantiate its claim that the repair were to be carried out by it and that repair expenses would have exceeded the amount to be carried out by it and that repair expenses would have exceeded the amount to the recovered from the Punjab State Electricity Board. We, therefore, do not find any merit in the submissions of the learned counsel for the assessee in this regard which stand unsubstantiated. The debt in question is old and nothing has been brought on record to show that anything happened during the year relevant to asst. yr. 1980-81 to make the debt bad. We, therefore, confirm the disallowance of Rs. 9,300.
8. It was submitted by the learned counsel for the assessee that, in case the Tribunal was not inclined to accept the validity of the assessee’s claim in this regard for the asst. yr. 1980-81, then a direction may be given to the IAC (Asst) to examine the allowability of this bad debt in the year in which the debt became bad, as contemplated by s. 155(6) of the IT Act. We wish to make it clear that no such ground was taken by the assessee before the CIT(A) or even before us. We do not consider such a direction to be necessary for the disposal of this ground. The assessee may, if so advised, approach the AO in this regard.
9. The next ground is against the disallowance of bad debts amounting to Rs. 1,795. A sum of Rs. 1,341 was due to the assessee from Beas Satluj Project from July, 1973. Similarly, a sum of Rs. 454 was due to the assessee from Telephun Ken (I) Ltd. since September, 1972. These debts were disallowed on the ground that these were time-barred. The learned CIT(A) found that nothing had been brought on record to shown that these debts had become bad during the year relevant to asst. yr. 1980-81.
10. The learned counsel for the assessee submitted that were business debts and had become had and the same may be allowed as a deduction. The learned Departmental Representative supported the orders of the authorities below.
11. We have carefully considered the submissions made on both the sides. We find that the lower authorities have given cogent and valid reasons for disallowing the bad debt in the year under reference. We, therefore, confirm the disallowance of Rs. 1,795.
12. The next ground is against the disallowance of Rs. 4,960 out of depreciation on car. The IAC (Asst) made the disallowance because the car did not and registered in the name of the assessee-company. The action of the IAC (Asst) was confirmed by the CIT(A).
13. Shri Aggarwal submitted that Car No. APU 9000 was purchased for Rs. 31,000 in the previous year relevant to asst. yr. 1980-81. It was purchased with the funds of the assessee-company, but in the name of one of the employees. Registration had been applied for, but had not been granted before the close of the accounting period. Relying on the decision of the Calcutta High Court in the case of CIT vs. Salkia Transport Associates (1983) 33 CTR (Cal) 198 : (1983) 143 ITR 39 (Cal), it was submitted that the provisions of the Motor Vehicles Act do not prevent a person from becoming an owner of a motor vehicle without registration.
14. The learned Departmental Representative relied upon the orders of the authorities below.
15. We have carefully examined the facts on record. It is an undisputed fact that the funds for the purchase of the aforesaid car were provided by the assessee-company. The car was purchased in the name of an employee of the assessee-company. As held by the Calcutta High Court in the case of Salkia Transport Associates, registration is not an essential pre-requisite for the acquisition of ownership of a motor vehicle, but is an obligation cast upon the owner of a vehicle for the purpose of running a vehicle in any public place. In that view of the matter, we hold that the assessee, being the owner of the car, was entitled to depreciation. We hold accordingly.
16. The next ground is against the disallowance of Rs. 24,851 out of the total expenditure of Rs. 59,702 under the head "Sales Promotion Expenses". The IAC (Asst) treated the entire sum of Rs. 59,702, which was the aggregate of sales promotion expenses debited to various units of the assessee-company and, after allowing a basic deduction of Rs. 5,000, made a disallowance of Rs. 54,702. The CIT(A), following his order for the asst. yr. 1979-80 in the assessee’s own case, restricted the disallowance to 50 per cent on the ground that expenses incurred on the employees should not be taken in account in computing the disallowance under s. 37(2A). It as pointed out by Shri Aggarwal that the expenses were on the staff members as well and in respect of stationery items, and gift items, which could not be treated as entertainment expenses. The learned Departmental Representative supported the order of the CIT(A).
17. We have considered the rival submissions. We have also perused the details of the expenses filed before us. We find that, for the asst. yr. 1979-80, the assessee had challenged in its appeal the disallowance confirmed by the CIT(A) in this regard and the Tribunal vide its order reported in (1989) 34 TTJ (Del) 209 : (1989) 30 ITD 1 (Del), held that no interference in the order of the CIT(A) was required. From the details filed by the assessee of sales promotion expenses, the CIT(A) has already allowed 50 per cent of such expenses to the assessee. The order of the CIT(A) in this regard is fair and reasonable. We, therefore, do not find any warrant for interference in the order of the CIT(A). This ground, therefore, fails.
18. The last ground is against the disallowance of Rs. 8,375 out of the total telephone expenditure of Rs. 41,875. The IAC (Assessment) found that telephone expenses in respect of residential telephone of the Managing Director, Shri Vinay Rai, amounted to Rs. 41,875. He disallowed 1/5th of such expenses amounting to Rs. 8,375. The learned CIT(A) found that some disallowance out of telephone expenses was made in the asst. yr. 1979-80 and the same was accepted by the assessee. He, therefore, confirmed the disallowance of Rs. 8,375 on account of personal use of telephone.
19. Shri Aggarwal, submitted that the telephone had been provided at the residence of the Managing Director for business purposes and so far as the assessee-company was concerned, the entire expenses were for business purposes, even if the Managing Director may have used some calls for personal purposes also. Reliance in this regard was placed o the ratio of the Tribunal’s decision dt.5th Sept., 1984in the case of ITO vs. Ashoka Betemut Co. (P) Ltd. (1985) 21 TTJ (Mad) 465 (TM : (1984) 10 Ltd 788 (Mad) (TM. The learned Departmental Representative supported the orders of the authorities below.
20. We have carefully considered the facts on record. The provision of a telephone at the residence of the Managing Director of the company was for business purposes of the company. It the Managing Director used some of the calls for personal purposes, that would not make the expenditure incurred by the company being not for the purpose of its business. At best, the expenditure referable to the personal user of the telephone by the managing Director may constitute extra remuneration to the Managing Director. But so far as the company is concerned, the entire amount will be allowable as business expenditure. Following the ration of the Tribunal’s decision in the case of Ashoka Betelnut Co. (P) Ltd., we direct the deletion of disallowance of Rs. 8,375.
21. In the result, the appeal is partly allowed.
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