2019 (7) TMI 605 - HC - Income Tax

Disallowance of telephone expenses - Disallowance of motor car expenses and depreciation - personal use by director - ITAT deleted the addition - HELD THAT - The Tribunal has placed reliance on the decision of this Court in the case of Sayaji Iron and Engineering and Company 2001 (7) TMI 70 - GUJARAT HIGH COURT wherein it was held that no disallowance on account of personal use can be made in the case of company. No error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. None of the questions proposed by the Revenue could be termed as the substantial questions of law involved in the present Tax Appeal.

Summary

Issues:
1. Disallowance of telephone expenses
2. Disallowance of motor car expenses and depreciation

Analysis:
1. The first issue pertains to the disallowance of ?32,224 made on account of telephone expenses. The Tribunal, in its findings, noted that the personal use of telephone by the company's Directors was imperative and that the expenditure was not authorized by the Annual General Meeting (AGM) nor shown as a perquisite in the hands of the appellant. The Tribunal relied on the decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron and Engineering Company vs. CIT (253 ITR 749) to delete the disallowance upheld by the CIT(A). Consequently, the Tribunal allowed the ground of appeal of the assessee, citing the precedent set by the Gujarat High Court.

2. The second issue concerns the disallowance of ?16,875 made on account of motor car expenses and depreciation. The Assessing Officer (AO) initially disallowed ?25,312, which was later reduced by the CIT(A) to ?16,875. However, the Tribunal, once again relying on the decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron and Engineering Company vs. CIT (253 ITR 749), held that no disallowance on account of personal use could be made in the case of a company. Consequently, the Tribunal deleted the disallowance upheld by the CIT(A) based on the precedent set by the Gujarat High Court.

In the final judgment, the High Court, after hearing the senior standing counsel for the Revenue and examining the records, concluded that no error, let alone an error of law, was committed by the Tribunal in its order. The Court held that none of the questions proposed by the Revenue could be considered substantial questions of law in the present Tax Appeal. As a result, the appeal by the Revenue was dismissed.