INDUSTRIAL X RAY & ALLIED RADIOGRAPHERS (I) P.LTD, MUMBAI V. DCIT 8(2), MUMBAI

CO 187/MUM/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8129 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 08-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Business expenditure; Period of limitation; Corroborative evidences; Time period of passing order; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.6779/MUM/2010 (ASSESSMENT YEAR: 2006-07) DCIT RANGE 8(2), ROOM NO. 216A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 VS. INDUSTRIAL X-RAY & ALLIED RADIOGRAPHERS (INDIA) PVT. LTD., 102, 1 ST FLOOR, FAIZAN APARTMENTS, SV ROAD, JOGESHWARI (W) MUMBAI-400012 PAN: AAACI 1419 A (APPELLANT) (RESPONDENT) C.O. NO187/MUM/2011 ( ARISING OUT OF ITA NO. 6779/MUM/2010) INDUSTRIAL X-RAY & ALLIED RADIOGRAPHERS (INDIA) PVT. LTD., 102, 1 ST FLOOR, FAIZAN APARTMENTS, SV ROAD, JOGESHWARI (W) MUMBAI-400012 PAN: AAACI 1419 A VS. DCIT RANGE 8(2), ROOM NO. 216A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY: SHRI MANOJ KUMAR, DR ASSESSEE BY: SHRI NITESH JOSHI DATE OF HEARING: 10/12/2012 DATE OF PRONOUNCEMENT: 14/12/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE REVENUE APPEAL AGAINST THE ORDERS OF THE CIT (A)- 17 MUMBAI, DATED 28.06.2010 AND THE CROSS OBJECTION FILED BY ASSESSEE. 2. WE HAVE HEARD THE LEARNED DR AND THE LEARNED COUNSE L IN DETAIL. ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 2 OF 11 ITA NO. 6779/MUM/2010 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING DISALLOWANC E OF RS.64,29,5701- U1S.41(1) OF THE I.T. ACT, WITHOUT APPRECIATING THE FACT THAT THE AMOUNT WAS RECEIVED IN THE COURSE OF TRADING TRANSACTION AND EVEN THOUGH IT WA S NOT TAXABLE IN THE YEAR OF RECEIPT, THE AMOUNT HAD CHAN GED ITS CHARACTER AND HAD BECOME THE ASSESSEE'S OWN MON EY BECAUSE OF LIMITATION AND HENCE LIABLE TO BE ASSESS ED AS THE ASSESSEE'S INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN NOT APPRECIATING THA T IN THE CASE OF CIT VS. T.V. SUNDARAN IYENGAR & SONS LTD. (222 ITR 344 ), THE HON'BLE SUPREME COURT HAS LAID DOWN THAT IF THE AMOUNT IS RECEIVED IN THE COURSE OF TRADING TRANSACTION EVEN THOUGH IT IS NOT TAXABLE IN THE YE AR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE AMOUNT CHANGES IT CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEE'S OWN MONEY BECAUSE OF LIMITATION OR BY AN Y OTHER STATUTORY OR CONTRACTUAL RIGHT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, HE ID.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT IN THE CASE OF M/S. SOLID CONTAINERS LTD. V S. DCIT & LTRS. (308 ITR 417 ), HON'BLE BOMBAY HIGH COURT HAS HELD THAT THE AMOUNT WHICH INITIALLY DIDNT FALL WITHIN THE SCOPE OF THE PROVISIONS RENDERING IT LIABLE TO TAX SUBSEQUENTLY, HAD BECOME THE ASSESSEE'S INCOME BEIN G PART OF THE TRADING OF THE ASSESSEE. SIMILAR VIEW I S ALSO TAKEN BY HON'BLE MADRAS HIGH COURT IN THE CASE OF C IT VS. ARIES ADV. LTD. (255 ITR 510). 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT-(A) ERRED IN NOT APPRECIATING TH AT IN THE CASE OF TATTER SAN'S (7 ITR 316), HON'BLE JUSTI CE ATKINSON POINTED OUT THAT IF A COMMON SENSE VIEW OF THE MATTER IS TAKEN, THE 'A' BECAUSE OF THE TRANSACTION BECOMES RICHER BY THE AMOUNT, WHICH REMAINED WITH T HE ASSESSEE FOR A LONG TIME (PERIOD) UNCLAIMED BY THE CUSTOMER (TRADE PARTY). BY LAPSE OF TIME, THE CLAIM OF DEPOSIT BECAME TIME BARRED AND THE AMOUNT ATTAINED A TOTALLY DIFFERENT QUALITY AND BECAME A DEFINITE TRA DE SURPLUS. ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 3 OF 11 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS NOT BEEN ABLE TO APPRECIA TE THAT IN THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF INDO NIPPON CHEMICALS LTD., AS UPHELD BY SUPREME COURT (281 ITR 275) (SC), THE HON'BLE HIGH COURT HAS EXPL ICITLY ACKNOWLEDGED THE FACT THAT THE DECISION DOES NOT DE AL WITH THE NEW PROVISION OF SECTION 145A OF THE INCOM E TAX ACT, 1961. AS SUCH, THE CIT(A)'S RELIANCE ON THE AB OVE DECISION IS MISPLACED AND ERRONEOUS.' 4. THE ISSUE IN THE ABOVE GROUNDS IS WITH REFERENCE TO THE ADDITION OF AN AMOUNT OF ` .64,29,570 UNDER SECTION 41(1). IN THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS RECEIVED AN AMOUNT OF ` . ` .64,29,570 IN EARLIER YEARS WHICH WAS SHOWN IN THE DETAILS OF SUNDRY CREDITORS. ON INQUIRY WHY THE AMO UNT SHOULD NOT BE TAXED UNDER SECTION 41(1) OF THE IT ACT, IT WAS SUBMITTED BY ASSESSEE THAT IT HAS RECEIVED AN AMOUNT OF ` .64,29,570 IN FINANCIAL YEAR 1999-2000 AS A MOBILIZATION ADVANCE AGAINST TH E CONTRACT OVERSEAS. DUE TO CERTAIN UNRESOLVED DIFFERENCES THE CONTRACT COULD NOT BE PURSUED AND ADVANCE WAS NOT RETURNED. AO NOT ED THAT THE LIMITATION PERIOD WAS OVER AND THE AMOUNT WAS NOT L EGALLY PAYABLE TO M/S HI-TECH TRADING CO. OMAN AND ACCORDINGLY HE BROUGHT THE AMOUNT TO TAX AS CESSATION OF LIABILITY. 5. IN THE APPELLATE PROCEEDINGS ASSESSEE SUBMITTED THA T IT HAS EXECUTED A CONTRACT WITH M/S HI-TECH TRADING CO, OM AN WHICH WAS COMPLETED IN 1998-99 AND THE PAYMENT WAS RECEIVED T HROUGH ITS SISTER CONCERN M/S X-RAY ACCESSORIES MFS. CO. WHICH HAD SUPPLIED THE MATERIAL TO THE PARTY. ASSESSEE ACCORDINGLY DEB ITED THE AMOUNT ON 31.3.2000. THE RECEIPTS WERE CREDITED TOWARDS AD VANCE INSTEAD OF SALES. IT WAS ADMITTED THAT THE AMOUNT WAS ASSES SABLE IN 1999- 2000 TO 2000-01 BUT NOT IN THE RELEVANT ASSESSMENT YEAR. THE MATTER WAS REMANDED TO AO AND AFTER CONSIDERING THE REMAND REPORT, THE CIT (A) DELETED THE SAME STATING AS UND ER: 7.3 AO IN THE REPORT HAS NOTED THAT FROM THE STATE MENT OF BANK ACCOUNT OF M/S X-RAY ACCESSORIES ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 4 OF 11 MANUFACTURING CO. AN ASSOCIATES CONCERN OF THE APPELLANT, A SUM OF ` .75,01,065/- HAD BEEN CREDITED ON 15.04.1999 AS INWARD REMITTANCE. FROM THE LEDGER ACCOUNT OF THE CONCERN, IT WAS SEEN THAT ` .65,66,686/- HAVE BEEN TRANSFERRED TO THE APPELLANTS ACCOUNT FO R THE REASON THAT THE AMOUNT WAS RECEIVED ON APPELLANTS BEHALF FROM M/S HI-TECH TRADING, OMAN. THE SAME WAS CREDITED TO THE ACCOUNT OF M/S HI-TECH TRADING, OMA N AS ON 31.3.2000 IN THE APPELLANTS BOOKS WHICH HAD CONTINUED FROM 2000 TO 2006 AS CURRENT LIABILITY. T HIS WAS CONFIRMED BY M/S HI-TECH INSPECTION SERVICES LL C, OMAN VIDE THEIR LETTER DATED 30.11.2009. THOUGH THE WORK WAS DONE IN OR AROUND 1996-97, THE SALES REMAINED TO BE ACCOUNTED. HOWEVER, THE SUM WAS NOT TAXABLE IN THE RELEVANT ASSESSMENT YEAR . 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EXAMINI NG THE REMAND REPORT BY AO, WE DO NOT SEE ANY REASON TO IN TERFERE WITH THE ORDER OF THE CIT (A). THE SAME AO WHO MADE ADDITION HAS GIVEN THE FOLLOWING REMAND REPORT TO THE CIT (A) VIDE HIS LET TER DATED 12.05.2010 IN PARA 7.1 AS UNDER: 7.1 AN AMOUNT OF ` 64,29,570 OUT OF THE SUNDRY CREDITORS HAS BEEN TREATED AS LIABILITIES NO LONGE R PAYABLE AND ACCORDINGLY, THE SAME WAS TREATED AS INCOME OF ASSESSEE UNDER SECTION 41(1) OF THE INC OME TAX ACT, 1961 IN THE ASSESSMENT ORDER, AS NO DETAIL S WERE MADE AVAILABLE. THE ASSESSEE COMPANY HAS NOW FILED STATEMENT OF BANK ACCOUNT OF M/S. X-RAY ACCESSORIES MFG. COMPANY, AN ASSOCIATE CONCERN OF ASSESSEE WHERE A CREDIT FOR INWARD REMITTANCE OF ` .75,01,065 IS APPEARING ON 15-4-1999. ASSESSEE HAS FILED LEDGER ACCOUNT OF M/S X-RAY ACCESSORIES MFG. COMPANY. FROM THE LEDGER ACCOUNT, IT IS SEEN THAT A N AMOUNT OF ` .65,66,686 HAS BEEN TRANSFERRED TO THE ASSESSEE COMPANYS ACCOUNT ON 31.3.2000 FOR THE REASON THAT THE SAME WAS RECEIVED BY THEM ON ASSESSEES BEHALF FROM HI-TECH TRADING, OMAN. THE SAME HAS BEEN SHOWN AS CREDIT TO THE ACCOUNT OF HI- TECH TRADING COMPANY AS ON 31-3-2000 BY ASSESSEE IN ITS BOOKS OF ACCOUNT. THIS CREDIT CONTINUED IN THE BOOK S OF ACCOUNT FROM 2000 TO 2006 AS A CURRENT LIABILITY. T HE ABOVE FACT IS CONFIRMED BY HI-TECH INSPECTIN SERVICES LLC, OMAN VIDE THEIR LETTER DATED 30-11- 2009 CERTIFYING THAT THE WORK WAS COMPLETED DURING 1996-97 OR THEREABOUT. FROM THE LEDGER ACCOUNT AND OTHER DOCUMENTS NOW FURNISHED, IT IS OBSERVED THAT THE ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 5 OF 11 CREDIT IS APPEARING FROM 2000 OR THEREABOUT. ASSESS EE HAS ALSO FURNISHED SOME CIRCUMSTANTIAL EVIDENCES IN SUPPORT OF THE FACT THAT THE WORK WAS DONE IN OR AR OUND 1996-97. HI-TECH INSPECTION SERVICES LLC, OMAN HAS ALSO CONFIRMED THIS FACT. HOWEVER, THE SALES REMAINED TO BE ACCOUNTED IN THAT YEAR. ON THE BASIS OF THE EVIDENCES NOW SUBMITTED, IT APPEARS THAT THE AM OUNT IS NOT TAXABLE IN THE ASSESSMENT YEAR 2006-07. 7. IN VIEW OF THE CLEAR FINDINGS OF AO THAT THE AMOUNT IS NOT TAXABLE IN THE RELEVANT YEAR, WE DO NOT SEE ANY REA SON TO CONSIDER THE ADDITIONS ON THE BASIS OF LEGAL PRINCIPLES AS R AISED BY THE REVENUE IN GROUND NOS. 2 TO 4. THE LEARNED DR HIMSE LF ADMITTED THAT GROUND NO.5 DOES NOT ARISE AS AO HAS NOT INVOK ED THE PROVISIONS OF SECTION 145A AND TO THAT EXTENT THE G ROUND IS MISPLACED AND ERRONEOUS. IN VIEW OF THIS, THERE IS NO MERIT IN REVENUE GROUNDS AND ACCORDINGLY THEY ARE REJECTED. C.O. NO. NO187/MUM/2011 8. ASSESSEE HAS RAISED THE CROSS OBJECTION CONTESTING THE SAME ISSUE IN ITS GROUND NOS. 1 & 2 AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (A)-17 MUMBAI HEREINAFTER REFERRED TO AS THE CIT (APPEALS) , ERRED IN HOLDING A SUM OF ` .13,66,000/- AS CAPITAL IN NATURE. YOUR RESPONDENTS SUBMIT THAT, ON THE FACTS AND IN T HE CIRCUMSTANCES OF THEIR CASE, AMOUNT PAID FOR BUYING WOOD AND OTHER MATERIAL THROUGH MR.JAYANTILAL MISTR Y FOR MAKING THE PREMISES SUITABLE FOR OFFICE USE IS A RE VENUE EXPENDITURE ALLOWABLE IN COMPUTING THE TOTAL INCOME . 2. THE CIT (APPEALS) ERRED IN CONFIRMING THE ADDITI ON OF ` .2 LAC OUT OF ` .2.50 LACS AS MADE BY AO OUT OF BUSINESS DEVELOPMENT EXPENDITURE. YOUR RESPONDENTS SUBMIT THAT, ON THE FACTS AND IN T HE CIRCUMSTANCES OF THEIR CASE, NO ADDITION IN RESPECT OF THE AMOUNT OF ` .2,50,000/- REIMBURSED TOWARDS BUSINESS DEVELOPMENT EXPENDITURE IS CALLED FOR 9. THE ISSUE IN GROUND NO.1 IS WITH REFERENCE TO TREAT MENT OF EXPENDITURE AS CAPITAL IN NATURE BY AO AND CONFIRME D BY THE CIT (A) WITH THE DIRECTION TO ALLOW DEPRECIATION. IT WAS CO NTENTION OF THE ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 6 OF 11 LEARNED COUNSEL THAT EXPENDITURE WAS INCURRED TOWAR DS REPAIRS OF THE EXISTING PREMISES AND THE CIT (A) ERRED IN TREA TING THE SAME AS CAPITAL EXPENDITURE TOWARDS FURNITURE WHICH IS NOT FACTUALLY CORRECT. WHILE ADMITTING THAT CORRESPONDING SUPPORTING VOUCH ERS ARE NOT FURNISHED/COULD NOT BE FURNISHED, THE LEARNED COUNS EL REFERRED TO THE LETTER DATED 31.03.2006 IN SUPPORT OF THE CLAIM THAT THE EXPENDITURE IS REVENUE IN NATURE. 10. WE HAVE CONSIDERED THE ARGUMENTS AND PERUSED THE RE MAND REPORT OF AO WHICH HAS PLACED ON RECORD BY ASSESSEE IN THE FORM OF PAPER BOOK. EXCEPT A LETTER ADDRESSED TO THE MANAGI NG DIRECTOR ESTIMATING THE EXPENDITURE AT ` .13,66,000, THERE IS NO NOTHING ON RECORD TO EXAMINE FOR WHAT PURPOSE THE AMOUNTS WERE SPENT. THE LETTER DT. 31.03.06 HAS THE FOLLOWING NARRATION: ALL CORRESPONDING SUPPORTING VOUCHERS ARE ALSO BEI NG HANDED OVER, WHICH COVERS CASH MEMOS, BILLS, PAYMEN T MADE AGAINST VOUCHERS AS WELL MY SUPERVISION CHARGE S. EXPENSES COVERS COST OF MATERIALS, WAGES PAID, TRANSPORTATION AND OTHER EXPENSES. AS REQUIRED BY YOU, I AM NOW SUBMITTING, ON ROUGH ESTIMATE BASIS, ITEM-WISE EXPENSES ON VARIOUS WORK DONE AT B6, PUSHPA KUNJ SOCIETY, GORWA, BARODA:- NO PARTICULARS AMOUNT 1 CHANGING PLUMBING LINES 1,23,000 2 CHANGING ELECTRIC INSTALLATION 87,000 3 RE-PLASTERING 2,95,000 4 REPAINTING FROM INSIDE & OUTSIDE PREMISES 2,81,000 5 ADAPTING ONE ROOM TO MAKE IT FIT FOR KITCHEN 53,000 6 ADAPTING ONE ROOM TO MAKE IT FIT FOR STORE ROOM 61,000 7 ADAPTING ONE ROOM TO MAKE IT FIT FOR CLASS ROOM 82,000 8 CHANGE FALSE CEILING 1,73,000 9 CHANGING PARTITIONS 41,000 10 CHANGING INTERIOR DECORATION 1,70,000 13,66,000 EXCEPT THIS LETTER, THERE IS NO EVIDENCE WITH ASSES SEE ABOUT THE NATURE OF THE WORK DONE. IN ORDER TO ALLOW THE SAME AS REVENUE ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 7 OF 11 EXPENDITURE, IT IS REQUIRED TO BE ESTABLISHED THAT THE SAID EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. SINCE TH E LETTER DATED 31.03.2006 IS ONLY AN ESTIMATE, THAT TOO ON THE LAS T DAY OF THE YEAR, WE DO NOT SEE ANY REASON TO ALLOW THE SAME AS REVEN UE EXPENDITURE IN THE ABSENCE OF ANY PROPER VOUCHERS AND DETAILED JUSTIFICATION UNDER SECTION 37(1). EVEN BEFORE AO IN THE REMAND P ROCEEDINGS, ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF CLAIM. THEREFORE, THE EXPENDITURE CANNOT BE ALLOWED AS REV ENUE EXPENDITURE IN THE ABSENCE OF PROPER VOUCHERS AND T HE NATURE OF WORK WITH VERIFIABLE EVIDENCE. 11. THE LEARNED COUNSEL REQUESTED FOR RESTORING THE ISS UE TO AO FOR PROPER EXAMINATION. AS ALREADY ADMITTED THERE A RE NO OTHER EVIDENCES IN SUPPORT OF THE CLAIM. JUST BECAUSE A L ETTER WAS FILED WHICH WAS CONSIDERED BY AO AND THE CIT (A), WE ARE OF THE OPINION THAT THERE IS NO NEED TO RESTORE THE ISSUE AGAIN FO R EXAMINATION BY AO WHETHER THE EXPENDITURE IS CAPITAL IN NATURE OR REVENUE IN NATURE. WE ARE NOT CONCERNED WITH THE ISSUE OF EXPE NDITURE BEING ALLOWED AS CAPITAL EXPENDITURE IN THE ABSENCE OF VO UCHERS, WHICH AO HAS TREATED AS CAPITAL EXPENDITURE WHEREAS THE L D. CIT (A) ALLOWED DEPRECIATION ALSO ON THE ABOVE AMOUNT. SINC E THERE IS NO SPECIFIC GROUND RAISED BY THE REVENUE OBJECTING TO THE ABOVE DIRECTION, WE ARE NOT INTERFERING WITH THE ORDER OF THE CIT (A) BUT ON THE BASIS OF THE ROUGH ESTIMATE, ASSESSEES CONTENT ION THAT THIS SHOULD BE TREATED AS REVENUE EXPENDITURE CANNOT BE CONSIDERED. THEREFORE, GROUND NO.1 IN THE CROSS OBJECTION STAND S REJECTED. 12. GROUND NO.2 IS WITH REFERENCE TO ADDITION OF ` 2.00 LAKHS OUT OF THE BUSINESS DEVELOPMENT EXPENDITURE. THE FACTS RELATING TO THE ABOVE ADDITION ARE LIKE THIS. AO IN THE ABSENCE OF ANY JUSTIFICATION FOR CLAIM OF BUSINESS DEVELOPMENT EXPENSES OF ` .7,30,551 DISALLOWED ENTIRE AMOUNT IN THE ORDER UNDER SECTION 143(3). AS SESSEE FURNISHED CERTAIN DETAILS BEFORE THE CIT (A) AND THE MATTER W AS REMANDED TO ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 8 OF 11 AO. AFTER EXAMINATION OF THE DETAILS, AO REPORTED T O THE CIT (A) AS UNDER: 5.1 IN THE ASSESSMENT ORDER AN AMOUNT OF ` .7,30,551/- BEING AMOUNT DEBITED TO PROFIT & LOSS A/C UNDER THE HEAD BUSINESS DEVELOPMENT EXPENSES WAS TREATED AS NON-BUSINESS EXPENDITURE, IN THE ABSENCE OF ANY DET AILS. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE COMP ANY HAS FILED THE SUPPORTING EVIDENCES. THE SAID DETAIL S HAVE BEEN EXAMINED AND IT IS FOUND THAT THE SAME COMPRIS ES OF FOLLOWING: 1) SALES PROMOTION EXPENSES - ` .4,71,435 2) CONFERENCE & SEMINAR EXPENSES - ` .2,17,000 3) GIFTS - ` . 42,116 = ` `` ` .7,30,551 ======== 5.2 THE ASSESSEE COMPANY HAS SUBMITTED BEFORE YOUR GOODSELF THAT ASSESSEE HAS CONSIDERED THE ABOVE EXPENSES FOR THE PURPOSE OF FBT AND THE SAME IS VER IFIED FROM THE FBT COMPUTATION AND FOUND TO BE CORRECT. A S REGARDS THE EVIDENCES OF INCURRING THE ABOVE EXPENS ES, THE ASSESSEE COMPANY HAS NOT FURNISHED ANY PROOF IN RESPECT OF ` .2,50,000/- STATED TO HAVE BEEN REIMBURSED IN MR. RAJAGOPALAN K.G. 5.3 IN VIEW OF THE ABOVE, THE DISALLOWANCE MAY BE RESTRICTED TO ` .2,00,000/- AS AGAINST ` .7,30,551/- CONSIDERING THAT THE EXPENDITURE OF ` .2,50,000/- HAS ALREADY BEEN SUBJECTED TO FBT @ 20% AND FRINGE BENE FIT TAX HAS BEEN PAID ON THE SAME. 13. CONSIDERING THE ABOVE REPORT THE LEARNED CIT (A) CO NFIRMED THE DISALLOWANCE TO THE EXTENT OF ` .2.00 LAKHS STATING AS UNDER: 5.2 AO AFTER VERIFYING THE SUPPORTING EVIDENCES HA S POINTED OUT THAT NO PROOF HAD BEEN FURNISHED FOR A SUM OF ` .2,50,000 REIMBURSED TO MS. RAJAGOPALAN K.G. HOWEVER, THE SAME HAD BEEN SUBJECT TO FRINGE BENEFI T TAX @ 20%. 5.3 THE SUBMISSION AND REPORT HAS BEEN CONSIDERED. THE APPELLANT HAS EXPLAINED THE CLAIM EXCEPT A SUM OF ` .2,50,000 NOTED BY AO. CONSIDERING THE FACT THAT TH E SAME WAS SUBJECTED TO FBT ADDITION IS RESTRICTED TO ` .2 LAKHS AND BALANCE IS DELETED . ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 9 OF 11 14. IT WAS THE CONTENTION THAT ASSESSEE DID INCUR THIS EXPENDITURE AND THEREFORE, IT SHOULD BE ALLOWED IN FULL. IT WAS FURTHER CONTENTION THAT SINCE THE AMOUNT WAS COVERED BY THE FBT AND AS SESSEE PAID THE TAXES UNDER THE FBT, GENUINENESS OF THE AMOUNT CANNOT BE DOUBTED AND ACCORDINGLY THE SAME SHOULD BE ALLOWED. IN SUPPORT THE LEARNED COUNSEL FILED THE ORDER OF THE ITAT H BENCH IN THE CASE OF HANSRAJ MATHURADAS VS. INCOME TAX OFFICER IN ITA NO.2397/MUM/2010 DATED 16.09.2011 FOR THE PROPOSITI ON THAT ONCE THE AMOUNTS ARE TREATED ARE COVERED BY THE FBT , THERE IS NO NEED FOR DISALLOWING THE AMOUNTS AGAIN. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE ORDER OF THE C IT (A). AS SEEN FROM THE FBT ORDER FILED BEFORE US, WE NOTICE THAT ASSESSEES COMPUTATION OF FBT WAS ACCEPTED BY AO AS SUCH. IT W AS ASSESSEE WHO CONSIDERED THE AMOUNT OF ` .2,50,000 STATED TO BE REIMBURSEMENT TO ONE MR. RAJAGOPALAN K.G AS PART OF FBT. AO IN ASSESSMENT ORDER HAS DISALLOWED THE ENTIRE BUSINESS EXPENDITURE IN THE ABSENCE OF ANY DETAILS FROM ASSESSEE. IN THE RE MAND PROCEEDINGS, HE HAS ACCEPTED BALANCE OF EXPENDITURE EXCEPT THE AMOUNT STATED TO BE REIMBURSEMENT TO SHRI RAJAGOPAL AN K.G AT ` .2,50,000, IN THE ABSENCE OF ANY EVIDENCE SUPPORTIN G THE CLAIM AS BUSINESS EXPENDITURE. SINCE 20% OF THE ABOVE AMOUNT I.E. ` .50,000 WAS ALREADY DISALLOWED AND FBT WAS PAID, AO REPORTE D THAT THE BALANCE ` .2.00 LAKHS CAN BE DISALLOWED UNDER THE PROVISIONS OF SECTION 37(1) WHICH CONTENTION WAS ACCEPTED BY THE CIT (A) AND RESTRICTED THE DISALLOWANCES ONLY TO ` .2.00 LAKHS. THERE IS NO MERIT IN THE LEARNED COUNSELS ARGUMENT THAT JUST BECAUSE AN AMOUNT WAS COVERED BY THE PROVISIONS OF FBT, THE SAME NEED TO BE ALLOWED UNDER SECTION 37(1). 16. THE LEARNED COUNSEL RELIED ON THE DECISION OF ITAT MUMBAI H BENCH IN THE CASE OF HANSRAJ MATHURADAS VS. INC OME TAX OFFICER IN ITA NO.2397/MUM/2010 DATED 16.09.2011. THE FACTS IN THE ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 10 OF 11 ABOVE SAID CASE ARE THAT ASSESSEE CLAIMED A SUM OF ` .24,088 ON ACCOUNT OF CONVEYANCE EXPENSES AND A SUM OF ` .86,120 ON ACCOUNT OF TELEPHONE EXPENSES. IN THE ABSENCE OF ANY RECORD MAINTAINED BY ASSESSEE IN THE FORM OF LOG BOOK OR CALL REGISTER A O DISALLOWED AMOUNT OF 20% OUT OF THE ABOVE EXPENDITURE. IT WAS CONTENDED BEFORE THE CIT (A) THAT THE CONVEYANCE EXPENSES AND TELEPHONE EXPENSES WERE ALREADY SUBJECTED TO FBT AND SINCE TH E FBT WAS ALREADY PAID ON THE SAID EXPENSES, DISALLOWANCE OF THE SAID EXPENSES FOR PERSONAL ELEMENT WAS NOT PERMISSIBLE. THE LEARNED CIT (A), HOWEVER, DID NOT AGREE BUT THE ITAT AGREED WIT H THE CONTENTION. IT WAS HELD IN OUR OPINION ONCE FRINGE BENEFIT TAX IS LEVIED ON SUCH EXPENSES AS HAS BEEN DONE IN THE PRESENT CASE, IT F OLLOWS THAT THE SAME ARE TREATED AS FRINGE BENEFITS PROVIDED BY ASS ESSEE AS EMPLOYER TO ITS EMPLOYEE AND THE SAME HAVE TO BE AP PROPRIATELY ALLOWED AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY INCURRED BY ASSESSEE FOR THE PURPOSE OF ITS BUSINESS . 17. AS CAN BE SEEN FROM THE ABOVE FACTS, THERE IS NO DI SPUTE WITH REFERENCE TO INCURRING OF EXPENDITURE ON CONVEYANCE AND TELEPHONE AND AO DISALLOWED 20% OF THE ABOVE AMOUNT TOWARDS P ERSONAL IN NATURE, THE SAME EXTENT CONSIDERED UNDER THE FBT. H AVING BEEN CONSIDERED IN THE FBT, THE COORDINATE BENCH WAS OF THE OPINION THAT THE BALANCE EXPENSES ARE TO BE CONSIDERED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE FACTS OF THE CASE ARE DIFFERENT IN THE SENSE, THERE IS NO DISPUTE ABOUT E XPENDITURE BEING INCURRED FOR THE PURPOSE OF BUSINESS. BUT THE ISSUE IN THIS CASE IS WHETHER THE EXPENDITURE CLAIMED WAS FOR THE PURPOSE OF BUSINESS OR NOT UNDER SECTION 37(1). SINCE ASSESSEE FAILED TO F URNISH ANY EVIDENCE IN SUPPORT OF THE CLAIM EVEN IN THE REMAND PROCEEDINGS, AO IS FAIR ENOUGH TO REQUEST THE CIT (A) TO RESTRIC T THE AMOUNT TO THE EXTENT ON ` .2.00 LAKHS AS AN AMOUNT OF ` .50,000 WAS ALREADY STAND CONSIDERED UNDER THE FBT PROVISIONS. THE OTHER WAY COULD HAVE BEEN TO DISALLOW ` .2,50,000 UNDER SECTION 37(1) IN INCOME TAX ITA NO.6779 OF 2010 & CO 187 OF 2011 INDUSTRIAL X-R AY & ALLIED RADIOGRAPHERS INDIA PVT LTD MUMBAI PAGE 11 OF 11 PROCEEDINGS AND GIVE CORRESPONDING RELIEF IN THE FB T PROCEEDINGS. INSTEAD OF MODIFYING THE FBT PROCEEDINGS, THE AUTHO RITIES WERE FAIR ENOUGH TO RESTRICT THE DISALLOWANCE TO ` .2.00 LAKHS I.E. BALANCE OF THE AMOUNT. JUST BECAUSE AN AMOUNT WAS SUBJECTED TO FBT BY ASSESSEE, IT DOES NOT ATTRIBUTE ANY JUSTIFICATION T O CLAIM THE ENTIRE AMOUNT AS BUSINESS EXPENDITURE. AO IN OUR OPINION H AS A DUTY TO EXAMINE UNDER THE PROVISIONS OF SECTION 37(1), WHET HER A PARTICULAR EXPENDITURE CLAIMED IS WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS OR NOT. IN VIEW OF THIS, WE ARE OF THE OPI NION THAT THERE IS NO JUSTIFICATION IN MAKING THE CLAIM BY ASSESSEE IN THE ABSENCE OF ANY EVIDENCE IN SUPPORT OF THE CLAIM. ACCORDINGLY, THIS GROUND IS REJECTED. 18. IN THE RESULT BOTH THE REVENUE APPEAL AND THE CROSS OBJECTION FILED BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DECEMBER, 2012. SD/- SD/- ( D.K.AGARWAL ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 14 TH DECEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI