2009 (1) TMI 862 - AT - Income Tax

Summary

Issues Involved:
1. Withdrawal of cross-objection by the assessee.
2. Deletion of addition for personal use of vehicles.
3. Deletion of addition for personal use of telephone.
4. Deletion of addition for acquiring ISO certificate.
5. Maintainability of the appeal based on tax effect.

Summary:

1. Withdrawal of Cross-Objection by the Assessee:
At the outset of appellate proceedings, the learned Authorised Representative for the assessee submitted that he does not press the cross-objection filed by the assessee and the same should be dismissed as 'withdrawn'. The learned Departmental Representative for the Revenue did not raise any objection against this submission. Accordingly, the cross-objection filed by the assessee is dismissed as 'withdrawn'.

2. Deletion of Addition for Personal Use of Vehicles:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 1,50,000 in respect of personal use of vehicles, referencing the judgment of Hon'ble Madras High Court in the case of CIT vs. Chitram & Co. (P) Ltd. (1991) 91 CTR (Mad) 7: (1991) 191 ITR 96 (Mad). The Tribunal, however, upheld the CIT(A)'s decision, citing precedents such as Sayaji Iron & Engg. Co. vs. CIT (2002) 172 CTR (Guj) 339: (2002) 253 ITR 749 (Guj) and Dy. CIT vs. Haryana Oxygen Ltd. (2001) 73 TTJ (Del) 575: (2001) 76 ITD 32 (Del), which established that no disallowance on account of personal use could be made in the hands of the assessee company.

3. Deletion of Addition for Personal Use of Telephone:
The Revenue also argued that the CIT(A) erred in deleting the addition of Rs. 1,50,000 in respect of personal use of telephone, referencing the judgment of Hon'ble Madras High Court in the case of CIT vs. Madura Coats Ltd. (2003) 263 ITR 241 (Mad). The Tribunal found that the CIT(A) was justified in deleting the disallowance, referencing similar cases where no such disallowance was made in the case of companies, such as Midland International Ltd. vs. Dy. CIT (2007) 112 TTJ (Del) 210: (2007) 109 ITD 198 (Del).

4. Deletion of Addition for Acquiring ISO Certificate:
The Revenue challenged the deletion of the addition of Rs. 1,51,606 in respect of acquiring an ISO certificate, arguing that it resulted in a benefit of enduring nature to the assessee company. The Tribunal upheld the CIT(A)'s decision, referencing the case of Asstt. CIT vs. Tirupati Microtech (P) Ltd. (2007) 111 TTJ (Jd) 149, which held that the expenditure for obtaining ISO certification is revenue in nature as it does not enhance the fixed capital of the company but rather creates a positive image for the smooth conduct of business.

5. Maintainability of the Appeal Based on Tax Effect:
The learned Authorised Representative for the assessee submitted that the present appeal filed by the Revenue is not maintainable as the tax effect involved is less than Rs. 2 lakhs, as per CBDT Instruction No. 2 of 2005, dt. 24th Oct., 2005. The Tribunal found no merits in the Revenue's contention that the appeal should be maintained due to substantial questions of law of recurring nature, as the disallowances were routine ad hoc disallowances. Consequently, the appeal by the Revenue was dismissed as not maintainable.

Conclusion:
In the result, the appeal by the Revenue as well as the cross-objection, ITA No. 1406 of 2008 and C.O. No. 140 of 2008, are dismissed.