2013 (11) TMI 1519 - AT - Income Tax

Disallowance of expenditure incurred towards retainership fee paid - Held that - authorities below have relied on their respective decisions taken in the earlier years on the same ground for the purpose of not allowing and allowing the deduction. The appeal of the assessee for the immediately preceding assessment year, i.e., 2004-05 came up for decision before the Tribunal. Vide order in Deputy CIT v. Philips Carbon Black Ltd. 2011 (5) TMI 489 - ITAT, KOLKATA , the Tribunal has accepted the assessee's claim on this issue by following the earlier order of the Tribunal. Respectfully following the precedent, we uphold the impugned order in granting the deduction in respect of retainership fee paid. Disallowance of deduction in respect of guest house expenses - Held that - Tribunal was pleased to grant deduction in respect of guest house expenses vide its aforestated order for the assessment year 2004-05. In the absence of any distinguishing feature having been brought to our notice by the learned Departmental representative, we uphold the impugned order in allowing deduction of the guest house expenses. This ground fails. Disallowance of belated payment of provident fund, employees' State insurance, sales tax and other statutory liabilities - Held that - amendment to the first proviso and the omission of the second proviso to section 43B by the Finance Act, 2003 to be retrospective - the amount of employees' provident fund deposited before the due date cannot be disallowed under section 43B of the Act. Disallowance of Aircraft flying rights charges - Held that - assessee adduced necessary material to indicate that the aircraft was taken on hire for its business purposes. The Assessing Officer is not competent to decide the business expediency of incurring any expenditure. Be that as it may, it is observed that the Assessing Officer did not deny that log book of the aircraft was not furnished but only that the purpose for which the journeys were undertaken or the names of the persons who undertook the travel was not specified in the log book. It is in such circumstances, that he held 25 per cent. of the expenditure was for non-business purpose. - there can be no disallowance of expenses by considering the personal use of the assets by the directors. It has further been held that this disallowance cannot be sustained by treating the expenditure as for non-business purpose. The Delhi Bench of the Tribunal in Deputy CIT v. Haryana Oxygen Ltd. 1999 (12) TMI 107 - ITAT DELHI-D has also taken similar view. Under these circumstances, we are therefore of the considered opinion that the learned was justified in deleting this addition - Decided against Revenue.

Summary

Issues:
1. Deletion of addition on account of expenditure towards retainership fee.
2. Allowing deduction in respect of guest house expenses.
3. Deletion of addition on account of belated payment of statutory liabilities.
4. Deletion of addition under the head "Aircraft flying rights charges".

Deletion of Addition on Account of Expenditure towards Retainership Fee:
The appeal involved the deletion of addition on account of expenditure incurred towards retainership fee paid to a specific company. The Tribunal upheld the impugned order in granting the deduction based on the precedent set in an earlier order, where the Tribunal accepted the assessee's claim on the same issue. The decision was made following the precedent, and the ground was not allowed.

Allowing Deduction in Respect of Guest House Expenses:
The second ground was against the allowing of deduction in respect of guest house expenses. The Tribunal upheld the impugned order in allowing the deduction of guest house expenses, similar to the first ground, based on the precedent set in an earlier order for the assessment year 2004-05. The absence of any distinguishing feature led to the failure of this ground.

Deletion of Addition on Account of Belated Payment of Statutory Liabilities:
The appeal addressed the deletion of addition on account of belated payment of provident fund, employees' State insurance, sales tax, and other statutory liabilities. The Tribunal considered relevant precedents, including judgments by the Supreme Court and High Courts, to support the decision. It was held that the view taken by the learned authority required no modification, and this ground was not allowed.

Deletion of Addition under the Head "Aircraft Flying Rights Charges":
The final ground involved the deletion of addition under the head "Aircraft flying rights charges." The Tribunal examined the explanation provided by the assessee regarding the exclusive flying rights of an aircraft obtained for business purposes. It was noted that the Assessing Officer could not decide the business expediency of incurring such expenditure. The Tribunal referred to legal precedents stating that there can be no disallowance of expenditure on account of personal use by the directors of a company. As the assessee provided necessary material indicating business purposes, the deletion of the addition was upheld.

In conclusion, after considering all the grounds, the appeal was dismissed by the Tribunal.