SAMEER KARWA, MUMBAI V. ITO CIR 16(1)(1), MUMBAI

ITA 1017/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7926 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 24-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 08-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONGATE
• Keywords: Business income; Corroborative evidences
• Section: 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) MR. SAMEER KARWA 74, BLUE HEAVEN, MOUNT PLEASANT ROAD, MUMBAI-400006. PAN:AGKPK2975N . APPELLANT VS INCOME TAX OFFICER CIRCLE 16(1) -1 MUMBAI .RESPONDENT APPELLANT BY : SHRI BHUPENDRA KARKHA NIS RESPONDENT BY : SHRI SONGATE O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13.11.2009 OF THE CIT(A)-MUMBAI FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF AMOUNT OF RS.1,50,000/- OUT OF REPAIRS AND MAINTENANCE EXPENSES AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRAR Y TO THE FACTS OF THE CASE, THE PROVISIONS OF THE INC OME TAX ACT, 1961 AND RULES MADE THEREUNDER ; ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF THE CLAIM OF INTEREST O N UNSECURED LOANS IN EXCESS OF 14% PA AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS O F THE IT ACT, 1961 AND RULES MADE THREUNDER; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF AMOUNT OF RS.1,15,000/- OUT OF EXPENSES CONSIDERING THEM AS EXCESSIVE, PERSONAL AND UNREASONABLE AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS O F THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 196 1 AND RULES MADE THEREUNDER 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT GRANTING DEDUCTI ON U/S 80IB @ 25% OF REVISED BUSINESS PROFITS ASSESSED UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFI CER AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AN D RULES MADE THEREUNDER 3. AT THE TIME OF HEARING, THE LEARNED AR OF THE AS SESSEE STATED THAT THE ASSESSEE DOES NOT WANT TO PRESS GRO UNDS OF APPEAL NO.1 AND THE SAME MAY BE DISMISSED AS NOT PR ESSED FOR WHICH THE LEARNED DR HAS NO OBJECTION. ACCORDIN GLY, WE DISMISS GROUNDS OF APPEAL NO.1 AS NOT PRESSED. 4. GROUNDS OF APPEAL NO.2 IS REGARDING THE DISALLOW ANCE OF INTEREST ON UNSECURED LOANS IN EXCESS OF 14% PER AN NUM. ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 3 4.1 WE HAVE HEARD THE LEARNED AR AS WELL AS THE LEA RNED DR AND CONSIDERED THE RELEVANT RECORD. THE LD. AR HA S SUBMITTED THAT THIS ISSUES HAS BEEN CONSIDERED AND ADJUDICAT ED BY THIS TRIBUNAL IN THE CASE OF FATHER OF THE ASSESSEE IN ITA NO.1016/MUM/2010 (AY 2004-05) ORDER DATED 20.10.201 0. HE SUBMITTED THAT THE FACTS OF BOTH THE CASES ARE I DENTICAL. 4.2 THE LEARNED DR NARRATED THE FACTS OF THE CASE AND RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 4.3 AFTER CONSIDERING THE RIVAL CONTENTIONS AND REL EVANT RECORDS, WE NOTE THAT ON THE IDENTICAL SET OF FACT S, THIS ISSUE HAS BEEN CONSIDERED AND ADJUDICATED UPON BY THIS T RIBUNAL IN THE CASE OF ASSESSEES FATHER IN PARAGRAPHS 7 WHICH IS REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE: 7. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE SEE NO SUBSTANCE IN THIS DIS ALLOWANCE. THE IMPUGNED DISALLOWANCE IS APPARENTLY MADE U/S.40 A(2) BUT THERE IS NO CATEGORICAL FINDINGS ABOUT THE PREVAILI NG INTEREST RATE ON SHORT TERM UNSECURED LOANS BEING CHARGED BY INST ITUTION OTHER THAN BANKING INSTITUTIONS. UNLESS THE AO IS O F THE VIEW THAT THE RATE OF INTEREST SO CHARGED IS EXCESSIVE VIS-- VIS THE PREVAILING MARKET RATE OF INTEREST ON SUCH UNSECURE D LOANS, THE DISALLOWANCE U/S.40A(2) CANNOT BE MADE AT ALL. UNDO UBTEDLY, A REFERENCE HAS BEEN MADE TO THE INTEREST RATE BEING CHARGED BY THE BANK BUT THEN THE LOANS GRANTED BY THE BANK ARE GENERALLY ON UNSECURED BASIS AND THE RATE OF INTEREST CHARGED BY THE BANK AND NON-BANKING INSTITUTIONS IN THIS REGARD DEFERS. THE INTEREST RATE OF 12 TO 14% BEING CHARGED BY THE BANK ON UNSE CURED LOANS DOES NOT BY ITSELF INDICATE OR ESTABLISH THAT THE INTEREST RATE OF 18% ON UNSECURED LOANS WAS EXCESSIVE OR UNREASON ABLE. IN ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 4 THIS VIEW OF THE MATTER, THE DISALLOWANCE IS DEVOID OF ANY LEGAL SUSTAINABLE MERITS AND, ACCORDINGLY, WE DELETE THE SAME. THIS GROUND IS THUS ALLOWED. 4.4. FOLLOWING THE DECISION OF A CO-ORDINATE BENCH OF THIS TRIBUNAL AND TO MAINTAIN THE CONSISTENCY WITH THE O RDERS OF THE TRIBUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE. 4.5 GROUND NO.2 IS ALLOWED. 5. GROUNDS OF APPEAL NO.3 IS REGARDING DISALLOWANCE OF VARIOUS EXPENSES. DURING THE ASSESSMENT PROCEEDIN GS, THE AO NOTICED THAT THE DETAILS OF SOME OF THE EXPENSES ARE NOT PROPERLY VERIFIABLE. THE AO ALSO FOUND THAT THERE IS AN ELEMENT OF PERSONAL USE IN SOME OF THE EXPENSES CL AIMED BY THE ASSESSEE. IN VIEW OF THE DISCREPANCIES, THE AO DISALLOWED PART OF VARIOUS EXPENSES TOTALING TO RS.1,65,000/- 5.1 ON APPEAL, THE CIT(A) HELD THAT IT CANNOT BE SAID THAT ALL THE EXPENSES WERE FOR THE PURPOSES OF BUSINESS AND PERSONAL ELEMENT CANNOT BE RULED OUT. ACCORDINGLY, THE DISALLOWANCE WAS RESTRICTED TO 10% OF THE TOTAL EX PENDITURE WHICH COMES APPROXIMATELY TO RS.1,15,000/-. CONSE QUENTLY, THE CIT(A) GAVE A RELIEF OF RS.50,000/- ON THIS AC COUNT. ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 5 5.2 BEFORE US, THE LEARNED AR HA SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED KEEPIN G IN VIEW THE TOTAL TURNOVER OF THE ASSESSEE. THE TOTAL EXPE NDITURE CLAIMED BY THE ASSESSEE CANNOT BE SAID TO BE EXCESS IVE. HE HAS FURTHER CONTENDED THAT THE EXPENSES WERE INCURR ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE REFORE THE SAME ARE ALLOWABLE. 5.3 ON THE OTHER HAND, THE LEARNED DR SUBMITTED T HAT SINCE THE ASSESSEE FAILED TO PRODUCE ALL THE DETAILS AND VOUCHERS FROM WHICH IT CAN BE VERIFIED AND IN THE ABSENCE OF SUPPORTING EVIDENCE, THE DISALLOWANCE IS JUSTIFIED. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 5.4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WHEN THE ASSESSEE HAS CLAIMED THE EXPENSE S FOR THE PURPOSE OF BUSINESS THEN THE ONUS IS ON THE ASSESSE E TO ESTABLISH THAT THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, BUT WHEN T HE EXPENSES WERE NOT FULLY VOUCHED THEN THE DISALLOWAN CE RESTRICTED BY THE CIT(A) TO 10% OF THE TOTAL EXPE NSES, IN OUR VIEW IS JUST AND PROPER. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) QUA THIS IS SUES. ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 6 5.5 GROUNDS OF APPEAL NO.3 IS DISMISSED. 6. GROUNDS OF APPEAL NO.4 IS REGARDING THE CLAIM OF DEDUCTION U/S 80IB AND DISALLOWED BY THE AUTHORITIE S BELOW. 6.1 WE HAVE HEARD THE LEARNED AR AND THE LEARNED DR AND CONSIDERED THE RELEVANT RECORD. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO ASSESSED THE INCOME OF T HE ASSESSEE AFTER MAKING DISALLOWANCE OF VARIOUS EXPEN SES CLAIMED BY THE ASSESSEE. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IB ON THE SAID INCOME FROM BUSI NESS. HE HAS RELIED UPON THE ORDER OF THE AHMEDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF ITO V/S CHIRAM PLAST, IN I TA NO.2415/AHD/2009 (AY 2006-07) ORDER DATED 23.10.200 9. 6.2 THE LEARNED DR NARRATED THE FACTS OF THE CASE AND RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 6.3 AT THE OUTSET, WE NOTE THAT THE ASSESSEE HAS OF FERED THE INCOME FROM BUSINESS. THE AO DISALLOWED CERTAIN C LAIM OF THE EXPENSES AGAINST THE BUSINESS INCOME, THEREFORE , WHEN THE BUSINESS INCOME HAS BEEN INCREASED DUE TO DISAL LOWANCE OF EXPENSES THEN, IN OUR VIEW, IF THE ASESEEE IS EN TITLED FOR THE ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 7 DEDUCTION U/S 80IB, THE SAME IS ALSO AVAILABLE ON THE INCOME DUE TO DISALLOWANCE OF THE EXPENDITURE AND PARTICU LARLY WHEN THERE IS NO OTHER INCOME OF THE ASESEEE THEN THE IN COME FROM BUSINESS /OR PROFESSION. WE FURTHER NOTE THAT AHM EDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF ITO V/S CHIR AM PLAST (SUPRA) HAVE CONSIDERED AND DECIDED THIS ISSUE IN PARAGRAPHS 5 OF THE SAID ORDER 5. REGARDING GROUND NO.2, WE ARE OF THE CONSIDERED VIEW THAT EVEN IF ADDITION IS SUSTAINED, THEN ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80IB AS IT WOULD BE ONLY THE BUSINESS PROF IT. SECTION 40(1)(IA) INCOME ANY ADDITION PROPOSED BY THE AO BY INVOKING A PROVISIONS FALLING IN CHAPTER (IV) UNDER THE HEAD COMPUTATION OF BUSINESS INCOME, PARTICULARLY BETWEEN SECTION 28 TO 43D, WOULD BE MADE UNDER THE HEAD FROM OTHER SOURCES, UNLESS SPECIFICALLY SO PROVIDED. ACCORDINGLY, THOUGH PROPOSED BY THE AO ON THE GROUND THAT TDS HAS NOT BEEN PAID TO THE ACCOUNT OF THE CENTRAL GOVERNMENT WITHIN TIME IS IN ORDER, BUT ASSESSEE IS ENTITLED T O DEDUCTION U/S 80IB THEREON AS IT WOULD BE ONLY A PA RT OF BUSINESS PROFIT. THE ARGUMENT OF THE LEARNED DR THAT THE ASSESSEE MAY CLAIM BENEFIT AGAIN ON PAYMEN T BASIS IS PREMATURE AND ACADEMIC AS THERE ARE ENOUGH LEGAL RECOURSES OPEN TO PREVENT SUCH CLAIMS. AS A RESULT, WE DO NOT FIND ANY FORCE IN THIS GROUND RAI SED BY THE REVENUE. THE SAME IS DISMISSED 6.4 IN VIEW OF THE ABOVE DECISION OF AHMEDABAD BENC H OF THIS TRIBUNAL, WE SET ASIDE THE ISSUE TO THE RECOR D OF THE AO TO VERIFY AND DECIDE THE AVAILABILITY OF DEDUCTION U/S 80IB AND AS PER LAW. ITA NO. 1017/MUM/2010 (ASSESSMENT YEAR 2004-05) 8 6.5 THE GROUNDS OF APPEAL NO.4 IS ALLOWED FOR STATI STICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH,2011 SD SD (S V MEHROTRA ) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 25 TH MARCH 2011 SRL:15211 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI