Revenue appealed against ITAT decision deleting additions for security, stock valuation, and car expenses. Bench found no error in Tribunal's findings and no substantial questions of law arose.
No substantial question of law arose; appeal dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
ITA No. 312 of 2010
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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
ITA No. 312 of 2010
Date of Decision: 8.2.2011
Commissioner of Income Tax, Faridabad
....Appellant.
Versus
M/s Lakhani Rubber Udyog (P) Ltd.
...Respondent.
CORAM:HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.
PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel, for the revenue.
AJAY KUMAR MITTAL, J.
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that the expenditure was incurred wholly and exclusively for the purposes of business?
II. Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting the addition of Rs.40,57,491/- made by the Assessing Officer on account of late deposit of employees' contribution to PF and FPF disregarding the fact that the payments were made beyond the due dates and were, therefore, not allowable u/s 36(1)(va) and were to be treated as Income u/s 2(24)(x) of the Income Tax Act, 1961, in contravention of the decision in the case of CIT vs. Pamwi Tissues Limited 215 CTR 150 (Bom.)?
III. Whether, on the facts and in the circumstances of the case, the the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting the addition of Rs.7,30,934/- made by the Assessing Officer on account of late deposit of employer's contribution to EPF as without appreciating the fact that payments were not made by the assessee within the prescribed “due dates” by which the assessee was required to make payments, in contravention of the decision in the case of CIT vs. Pamwi Tissues Limited 215 CTR 150 (Bom.)”
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case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT(A) in deleting the addition of Rs.13,51,846/- made by the Assessing Officer on account of under valuation of stock even when the entry tax levied was includable in the closing stock of the assessee as per the provisions of section 145A of the Income Tax Act, 1961?
V. Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT (A) in deleting the addition of Rs.1,41,018/- made by the Assessing Officer on account of car expenses even though the assessee, having failed to discharge the onus that the expenditure was incurred wholly and exclusively for the purpose of business and the assessee had itself offered 1/10th of such expenses to be treated as income on account of personal use of Cars and is contrary to the decision of Hon'ble Madras High Court in the cases of CIT vs. Chitram and Co. (P) Ltd. 191 ITR 96 and CIT vs. Madura Coats Ltd. 263 ITR 241?”
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appeal against the said assessment before the Commissioner of Income Tax (Appeals) [in short “the CIT (A)”] who vide order dated 24.4.2007 while partly allowing the appeal had given a relief of Rs.65,14,865/-. Against the order of the CIT(A), the revenue filed an appeal before the Tribunal and the Tribunal vide order dated 19.6.2009 dismissed the appeal. Hence, the present appeal by the revenue.
- (A) Security Expenses:
The Tribunal while discussing the issue of security expenses, in para 3.2 had recorded as under:-
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ITA No. 312 of 2010
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assessment year 1995-96, wherein similar expenditure was incurred and the Board resolution was passed sanctioning such expenditure and it was ruled out to be business expenditure and was, therefore, allowed. On the similar facts and circumstances of the case, the expenditure of Rs.2,33,576/- is also treated to be business expenditure and is, thus, allowed u/s 37(1) of the I.T. Act and disallowance is accordingly, deleted.”
It was held that the expenditure on account of security was
paid to Haryana Government, Police Department for providing security to the working directors of the company and this could not involve element of personal nature or the expenditure could not be said to be of capital nature but was an expenditure wholly and exclusively incurred for the business purposes.
(B) Undervaluation of Stock:-
The Tribunal while holding that there was no undervaluation of closing stock, observed as under:-
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additions made are erroneous and hence, bad in law. It has nothing to do with the entry of goods in the State and LADT Act has been declared unconstitutional and held ultra vires by the Hon'ble Supreme Court in the case of Jindal Stainless Ltd. & Anr. v. State of Haryana and Ors. in appeal (Civil) 3453 of 2002 dated 13.04.2006 and the matter has been referred back to the Punjab and Haryana High Court for disposal.
Further, the disallowance on account of personal use of car was also deleted by holding that there was no element of personal
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nature in such expenses and it could only be added in the hands of the directors alone. The relevant finding in this regard recorded in para 8.2 by the Tribunal is as under:-
(AJAY KUMAR MITTAL) JUDGE
February 8, 2011 (ADARSH KUMAR GOEL) gbs JUDGE
3 issues framed by the court
Whether the addition for security expenses was rightly deleted as being wholly and exclusively for business purposes.
Whether the addition for undervaluation of stock was rightly deleted given the invalidity of entry tax.
Whether the addition for car expenses was rightly deleted as personal use disallowance should be in hands of directors.
Colour shows how this judgement treated each authority
Commissioner of Income Tax v. Alom Extrusions Ltd.Referred¶29
Commissioner of Income Tax v. Alom Extrusions Ltd. (2009) 319 ITR 306
CIT vs. Pamwi Tissues LimitedReferred¶18
CIT vs. Pamwi Tissues Limited 215 CTR 150 (Bom.)
CIT vs. Chitram and Co. (P) Ltd.Referred¶25
CIT vs. Chitram and Co. (P) Ltd. 191 ITR 96
CIT vs. Madura Coats Ltd.Referred¶25
CIT vs. Madura Coats Ltd. 263 ITR 241
Jindal Stainless Ltd. & Anr. v. State of Haryana and Ors.Referred¶48
Jindal Stainless Ltd. & Anr. v. State of Haryana and Ors. in appeal (Civil) 3453 of 2002
3 provisions across 1 enactments
Commissioner of Income Tax, Faridabad
M/s Lakhani Rubber Udyog (P) Ltd.
Adarsh Kumar Goel
Ajay Kumar Mittal
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
