Bhagyodaya Transport Co., Pune vs Deputy Commissioner of Income-tax,

आयकर अपील य अ धकरण] पुणे यायपीठ “ए” पुणे म IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE MS.

SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM आयकर अपील सं. / ITA No.1961/PUN/2014 नधा रण वष / Assessment Year : 2010-11 Bhagyodaya Transport Co., Near Ellora Palace, Balaji Nagar, Dhankawadi, Pune – 411037.

PAN : AADFB4592K ………. अपीलाथ / Appellant बनाम v/s Asst.Commissioner of Income Tax, Circle – 4, Pune. ………. यथ / Respondent अपीलाथ क ओर से / Appellant by : Smt.

Deepa Khare यथ क ओर से / Respondent by : Shri Anil Kumar Chaware. आदेश / ORDER PER ANIL CHATURVEDI, AM : This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) - II, Pune, dt.31.07.2014 for the assessment year 2010-11.

2.

The relevant facts as culled out from the material on record are as under :- 2.1 Assessee is a partnership firm stated to be engaged as Transport Contractors and Commission Agents.

Assessee filed its सुनवाई क तारख / Date of Hearing : 30.05.2017 घोषणा क तारख / Date of Pronouncement: 07.06.2017 2 return of income for A.Y.

2010-11 on 17.09.2010 declaring total income at Rs.1,95,80,660/-.

The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.15.03.2013 and the total income was determined at Rs.2,49,29,000/-.

Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.31.07.2014 granted partial relief to the assessee.

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds. “1.

The learned CIT(A) erred in law and on facts in confirming disallowance of Rs.24,74,173/- on account of Truck Running Expenses to the extent of 25% of the total expenditure.

The learned CIT(A) erred in confirming the disallowance inspite of having accepted the genuineness of expenditure, and also accepting the fact that due to the nature of business of the appellant, the vouchers or bills cannot be maintained. aintained.” 3.

Before us, at the outset, Ld.A.R. submitted that though the assessee has raised two grounds but the sole controversy is with respect to disallowing 25% of the truck running expenses.

4.

During the course of assessment proceedings, on perusing the details furnished by the assessee, AO noticed that for undertaking trips, assessee paid advance to drivers of the trucks who in turn incurred various expenses during the transit from source to destination.

He also noticed that assessee separately debits expenses on account of truck repairs and maintenance and other related expenses.

He also noticed that truck running expenses debited were the amount advanced to drivers.

The assessee was therefore asked to explain the nature of expenses with necessary supporting and proof of payments.

AO noted that 3 assessee did not satisfactorily answered the questions raised and that the replies given by the assessee were general in nature.

He therefore, after considering the nature of expenses, the expenses being incurred in cash and majority of the expenses being supported by third party bills and supporting documents concluded that 50% of truck running expenses to be unsupported and accordingly disallowed a sum of Rs.53,48,345/- (being 50% of truck expenses debited by assessee).

Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who granted partial relief to assessee by holding as under : “3.4 I have considered the submission made by the appellant and perused material on record.

The only issue contested relates to the disallowance of Rs.

53,48,345/- being 50% of truck running business, The AO during the assessment proceedings found the appellant to have claimed expenses of Rs.

1,06,96,691/- on account of truck running expenses which were not supported by third party bills and the explanation furnished by the appellant and, therefore, disallowed expenditure to the extent of 50% of the total expenditure. penditure.

The appellant firm is seen to be engaged in the business of transportation of goods and mainly transportation- of over dimensional consignments (ODC) i.e. mainly into transportation of products manufactured by plant & machinery manufacturers such as Thermax Group, Walchandnagar Industries etc.

The appellant has claimed the expenses of Rs.

1,06,96,691/ on account of truck running expenses which are relating to running and maintenance of the 35 owned trucks from which the appellant has reflected receipt of Rs.

1,88,31,745/-.

The explanation furnished by the appellant explained the nature of expenditure incurred and in support the appellant has maintained trip sheets in respect of the different trucks owned for which the purchase receipts and expenses have been maintained.

Thus the nature of business carried out by the appellant certainly requires to be taken into consideration while deciding the issue at hand.

The trucks owned by the appellant do transport super ODC consignments for which the appellant has to pay amounts to their drivers which is in addition to the salary and tour allowances, as the drivers have to spend for additional expenses for carrying the consignment properly, safely and in time to the destination.

The nature of expenses are vast and ranges from repair, maintenance, seeking permissions to be obtained from various authorities such as PWD, NHAI, MSRDC etc for passing through tracks and area through which it passes.

The drivers also have to meet the police, RTO, toll naka and pass through them which also becomes a necessity so as to reach the consignment in time more so if they are meant to be exported.

4 3.4.1 The appellant in its submission has elaborately explained the various circumstances including the unforeseen ones which the drivers have to overcome so as to reach its destination at the earliest safely. st safely.

The driver who is in receipt of the advances utilizes the same towards the expenses and for the same the supporting bills/vouchers are not collected.

The appellant thus prepares trip sheets signed by the drivers, which include the salary/wages of the drivers as well as the diesel expenses apart from the other incidental expenses mentioned above are also submitted by the appellant.

Thus the observation of the AO that the diesel expenditure is separately claimed by the appellant is factually not correct.

As a result the running expenses include the same to have been incurred on diesel and salary / wages of the drivers.

The appellant has shown substantial receipts from the transportation business though its owned trucks and overall has shown and disclosed gross profit of more than 30% though the AO has disallowed the expenses on estimated basis which is 50% of the total of such expenses.

The nature of business if considered, the expenses incurred-cannot be doubted as prima facie the appellant in the given set of facts has maintained a record though not detailed one but contains details of each and every expenses incurred by the drivers trip-wise, however, has not kept record of the vouchers, bills etc. though the major part of such expenses incurred includes, expenses on salary to drivers and on diesel.

Section 37(1) provides for deduction of all expenditures laid out or expended wholly and exclusively for the purpose of business or profession, however, in order to claim that an expenditure falls u/s 37(1) the burden of proving the necessary fact in that connection is on the appellant.

The books of account of the appellant is subjected to audit u/s 44AB.

However, there are certain expenses incurred which do not appear to be legally allowable or which is prohibited by law shall not be deemed to have been incurred for the purpose of business and deduction in respect of the same is not allowable though for some expenditure in order to determine the question of estion of reasonableness of the expenditure the test of commercial expediency has to be acknowledged from the point of view of the businessman based on the existing fact.

3.4.1 The Madras High court in the case of CIT Vs Coimbatore Salem Transport (P) Ltd, (1966) 61 ITR 480 (Mad), held that payment of tips which are inevitable in the course of business if assessee has to carry on business is deductible.

The case law relied upon by the appellant, however, do not strictly apply to the facts of the case as in that case the issue of non-production of the supporting in the form of vouchers and bills did not arise as is evident from the fact in the present case.

However, the appellant has spent substantial amount on the expenses which relates to the salary/wages of drivers & on diesel and thus the disallowances made by the AO appear to be on a higher side.

Though for certain expenses vouchers and bills cannot be available and the appellant has to rely on the expenses certified by the drivers.

However, at the same time the onus certainly lies on the appellant to prove the correctness of the expenses aimed and is its bounded duty to satisfy the Assessing Officer that expenses claimed were incurred wholly and exclusively for the business of the appellant.

Therefore, 5 taking into account the entire facts and circumstances of the case it will be fair and reasonable if the disallowance is restricted to 25% of the total expenses incurred on running expenses by the appellant it will meet the end of justice and, therefore, out of the disallowance of Rs.

53,48,345/- the same is upheld to the extent of 50% i.e.

Rs.

24,74,173/- and the remaining amount is liable to be deleted.” 3.5 In view of the above, ground of appeal No.1 raised by the appellant is partly allowed.” Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us.

5.

Before us, Ld.A.R. reiterated the submissions made before AO and Ld.

AO and Ld.CIT(A) and further submitted that the books of accounts of the assessee were audited and no adverse comments were made by the Auditors.

She further submitted that even in earlier years and in subsequent years, no disallowance of expenses have been made.

She therefore submitted that the addition be deleted.

Ld.D.R. on the other hand, supported the order of Ld.CIT(A).

6.

We have heard both the parties and perused the material on record.

The issue in the present case is with respect to disallowance of truck expenses.

AO considering the fact that the expenses have been incurred in cash and not being supported by third party expenses, had disallowed 50% of the expenses.

When the matter was carried before Ld.CIT(A), Ld.CIT(A) has given a finding that considering the nature of business of assessee, the expenses cannot be doubted but however assessee has maintained record of expenses though not detailed one.

He has also given a finding that the disallowance made by the AO appears to be on a higher side.

The aforesaid findings of Ld.CIT(A) has not been 6 controverted by either parties.

However before us, Ld.A.R. has submitted that no such disallowance of expenses have been made by Revenue in the scrutiny proceedings either in earlier year or in subsequent year.

Considering the totality of the aforesaid facts, we are of the view that in the present case, the ends of justice shall be met if the addition is restricted to Rs.10 lacs.

We thus direct so.

In the result, the grounds of assessee are partly allowed.

7.

In the result, the appeal of the assessee is partly allowed.

Order pronounced on 7th day of June, 2017.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) यायक सद!य / JUDICIAL MEMBER लेखा सद!य / ACCOUNTANT MEMBER पुणे Pune; दनांक Dated : 7th June, 2017.

Yamini आदेश क# $त&ल'प अ(े'षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3.

CIT(A)-II, Pune.

CIT-2, Pune.

T-2, Pune. #वभागीय &त&न'ध, आयकर अपीलय अ'धकरण, “ए” / DR, ITAT, “A” Pune; गाड, फाईल / Guard file. आदेशानुसार/ BY ORDER,स // True Copy // // // सहायक रिज12ार/ Assistant Registrar, आयकर अपीलय अ'धकरण ,पुणे / ITAT, Pune.