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December 2011

Telephone installed at the residence of the partners — Bills paid by the firm — CENVAT credit on such telephone service availed — Claimed that the telephone is used for business purpose — Credit held admissible.

By Puloma Dalal, Jayesh Gogri
Chartered Accountants
Reading Time 1 mins
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Facts:

The Commissioner (Appeals) denied the availment of credit on telephone installed at the premises of one of the partners of the firm and ordered imposition of interest and penalty thereon. The telephone was installed for business purposes and was used to contact overseas customers since the appellants exported the goods produced by them. The appellants claimed that the Income-tax Department had also allowed such telephone expenses. The Revenue claimed that the appellants failed to declare the premises where the telephone was installed as their office, to the Department.

Held:

The contention of the appellant that the service tax was used by the assessee for the purposes of business was held to be valid and thus, the CENVAT credit claimed on such telephone expenses was not objectionable. The Department could not produce any contrary evidence that the telephone was not used for business purpose or that they had undertaken any investigation to prove that the phone was used for purposes other than business. The credit was allowed.

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