Vishal Chemtrade Pvt. Ltd. , Kota vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 507/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2007-08

M/s. Vishal Chemtrade (P) cuke The ACIT Ltd. , F-31, Chambal Vs. Circle- 1 Industrial Area, Kota Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCV 8455 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri C.M. Birla, jktLo dh vksj ls@ Revenue by : Mrs. Neena Jeph

lquokbZ dh rkjh[k@ Date of Hearing : 10/11/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 16/01/2015

vkns'k@ ORDER PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

CIT(A) -Kota dated 29-03-2012 for the assessment year 2007-08.

2.1 During the course of hearing, the ld. AR has not pressed the

Ground No. 3. Therefore, the same is dismissed being not pressed and

Ground No. 1 and 2 of the assessee are as under for adjudication.

''1. That under the facts and circumstances of the case the ld. CIT(A) erred in confirming disallowance of Transportation Expenses of Rs. 2,79,585/- without considering this fact that overloading expenses paid to RTO authorities cannot be equated to penalty for illegal / unlawful 2 ITA No. 547/JP/2012 M/s. Vishal Chemtrade (P) Ltd. vs. ACIT Circle- 1, Kota .

act and therefore, being not covered with provision of Section 37(1) Explanation 1 it is allowable one.

2. That under the facts and circumstances of the case the ld. CIT(A) erred in confirming disallowance of mobile purchase expenses of Rs. 39,270/- treating it as capital expenditure ignoring this fact that its life being very short it was revenuased expenditure (on replacement cost theory).''

3.1 Brief facts of the case are that the assessee is an authorized dealer

of liquid chemicals manufactured by SVCI, a unit of DCM Shriram

Consolidated Ltd. The supply orders are received from the parties in

terms of number of tankers which are loaded from different destinations.

The loading capacity of the assessee's tanker No RJ 20/G/4435 is 16.2

MT as against the RTO passing capacity of 11.14 MT. As a safety policy

while transporting liquid chemicals, care is taken that tanker is

sufficiently filled as partially filled tankers are prone to accidents. During

some RTO inspection it was found that assessee's tanker was carrying

more tonnage than its registered capacity which is violation of RTO rules.

As a consequence for spot release of tanker the driver of assessee is

required to pay composition fee lest tanker is not impounded. This

composition amount paid to RTO has been allowed to the assessee as

revenue expenditure in earlier years. Following same practice the

assessee had paid a sum of Rs. 2,79,585/- as composition fee as revenue 3 ITA No. 547/JP/2012 M/s. Vishal Chemtrade (P) Ltd. vs. ACIT Circle- 1, Kota .

expenditure. Authorities below however have treated the composition

money as penalty and not allowable u/s 37(1) of the Act.

3.2 The ld. Counsel for the assessee drew our attention to the relevant

RTO rules and contends that the amount paid towards composition fee is

not in the nature of penalty but it is over-utilization of tonnage which is

charged in multiplication as composition fee. It is a common practice in

transportation trade that many a time the liquid tankers are found to be

over-loaded and subjected to RTO compounding fee which is paid to

avoid tanker impounding to avoid loss of business. This expenditure is

incurred in the regular course of business wholly and exclusively for the

purpose of business. The ld. AR placed reliance in the case of Agarwal

Roadlines (P) Ltd. vs. DCIT (2010) 129 TTJ 49 (Ahd.)(U.O.) holding that

overload charges for transportation of goods to RTO is allowable

expenditure as it is compensatory in nature and not penal as alleged by

the AO. Further reliance is placed in the case of Prakash Cotton Mills (P)

Ltd. vs. (1993) 201 ITR 684 (SC) and Western Coal Fields Ltd. vs. ACIT

(2009) 124 TTJ (Nag. 659 wherein this principle is followed.

3.3 The ld. DR is heard on this issue.

3.4 We have heard the rival contentions and perused the materials

available on record. From the perusal of the RTO rules, it emerges that 4 ITA No. 547/JP/2012 M/s. Vishal Chemtrade (P) Ltd. vs. ACIT Circle- 1, Kota .

compounding fee is compensatory in nature as the impounding of truck

would have affected the revenue generating apparatus of the assessee.

Respectfully following the decision of ITAT Ahemdabad Bench in the

case of Agarwal Road Lines (P) Ltd. vs. ACIT (supra) and other cases

cited supra, the Ground No. 1 of the assessee is allowed.

4.1 Apropos second Ground, the assessee purchased two mobile

phones for Rs. 39,270/- as the life of the mobile phones are very short.

The assessee has claimed it as Revenue expenses which was essential for

day to day conduct of its business operation. The AO however, allowed

depreciation thereon. The assessee preferred first appeal before the ld.

CIT(A) who confirmed the addition made by the AO.

4.2 The ld. Counsel for the assessee contends that Mobile Phones are

necessary and revewable tools of communication to carry on its regular

business smoothly and efficiently. Their life is short and become obsolete

in 2-3 year, the purchase thereof amounts to Revenue expenditure.

Therefore, the assessee's claim for allowance of revenue expenditure on

mobile phones is fully justified.

4.3 The ld. DR is heard on this issue.

4.4 We have heard the rival contentions and perused the materials

available on record. We find merit in the arguments of the ld. Counsel for 5 ITA No. 547/JP/2012 M/s. Vishal Chemtrade (P) Ltd. vs. ACIT Circle- 1, Kota .

the assessee. It is a common knowledge that life span of mobile phone is

very short and it is use in day to day carrying of the business is

undisputed. The wear and tear also takes place on mobile phone for which

revenue expenditure is allowable. Thus Ground No. 2 of the assessee is

allowed.

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

Order pronounced in the open court on 16 /01/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 16th January, 2015

*Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- M/s. Vishal Chemtrade (P) Ltd., Kota

2. izR;FkhZ@ The Respondent- The ACIT, Circle- 1, Kota .

3. vk;dj vk;qDr@ CIT,

4. vk;dj vk;qDr¼vihy½@The CIT(A), Kota

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.507/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar