BALAJI SHIPPING & LOGISTICS LTD, MUMBAI V. ITO 6(1)(1), MUMBAI

ITA 1073/MUM/2011

• Counselvise Citation: 107319914 RSA 2011
• Duration Of Justice: 4 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2011
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA , ACCOUNTANT MEMB ER . / ITA NO. 1073 / MUM/ 201 1 ( / ASSESSMENT YEAR : 200 7 - 0 8 ) M/S. BALAJI SHIPPING & LOGISTICS LTD., 203, ELPHINSTONE HOUSE, 2 ND FLOOR, 17, MURZBAN STREET, FORT, MUMBAI - 400 001. .. / APPELLANT V/S ITO - 6( 1 ) ( 1 ) AAYAKAR BHAVAN, MUMBAI - .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AACCB5903E APPELLANT BY : SHRI J.P. BAIRAGRA (AR) REVENUE BY : SHRI M. RAJAN , (DR) / DATE OF HEARING 06 .0 8 .201 5 / DATE OF ORDER 09 .09.2015 / ORDER . . , / PER R.C. SHARMA , A .M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 27.12.2010 , PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 14 , MUMBAI, AGAINST THE ASSESSMENT ORDER DATED 30.12.2009 PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2007 - 08 . THE ASSESSEE HAS R AISED FOLLOWING GROUNDS OF APPEAL : - BALAJI SHIPPING & LOGISTICS 2 THE GROUND OR GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.25,04,210/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING EXPENSES INCURRED UNDER THE HEAD PRE - OPE RATIVE EXPENSES. B)THE LD. CIT(A) FAILED TO APPRECIATE THAT THE NATURE OF THESE EXPENSES WAS REVENUE AND ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS CARRIED OUT BY THE APPELLANT. C)IN REACHING TO THE CONCLUSION AND CONFIRMING SUCH AD DITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF ~ 20,37,162/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING CERTAIN EXPENSES, REIMBURSED TO M / S. CARGOWAYS INDIA PVT. LTD., INVOKING THE PROVISIONS OF SECTION 40A(2)(B). B) T HE LD. CIT(A) FAILED TO APPRECIATE THAT THESE EXPENSES WERE INCURRED BY M/ S. CARGOWAYS INDIA PVT.LTD. ON BEHALF OF THE APPELLANT AND THE SAME WERE REIMBURSED TO THEM BY THE APPELLANT AND AS SUCH THERE IS NO QUESTION OF ANY EXCESS OR UNREASONABLE PAYMENT BE CAUSE REIMBURSEMENT PERTAINED TO THE EXPENSES ACTUALLY INCURRED BY M/S. CARGOWAYS INDIA PVT.LTD. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUCH ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WH ILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.12,66,643/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING CERTAIN EXPENSES REIMBURSED TO M/S. CARGOWAYS INDIA PVT. LTD. ON THE PLEA OF VARIATION IN BOOKS OF ACCOUNT. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT: - (I) THESE EXPENSES WERE INCURRED BY M/S. CARGOWAYS INDIA PVT. LTD. ON BEHALF OF THE APPELLANT AND THE SAME WERE REIMBURSED TO THEM BY THE APPELLANT AND AS SUCH THERE IS NO VARIATION IN THE BOOKS OF ACCOUNT NOR THERE IS ANY EXCESS OR UNREASONABLE PAYMENT BECAUSE REIMBURSEMENT PERTAINED TO THE EXPENSES ACTUALLY INCURRE D BY M/S. CARGOWAYS INDIA PVT.LTD., AND BALAJI SHIPPING & LOGISTICS 3 (II) THE PAYMENTS ARE NOT COVERED BY THE PROVISIONS OF SECTION 40(A)(IA). C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUCH ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPL ES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 2. GROUND NO.1 DEALS WITH THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.25,04,210/ - MADE BY THE AO UNDER THE HEAD PRE - OPERATI VE EXPENSES. 3. THE BRIEF FACTS CULLED OUT FROM THE ORDER OF THE AUTHORITIES BELOW ARE THAT DURING THE YEAR THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF INTERNATIONAL SHIPPING & CLEARING & FORWARDING, TO CONSTRUCT, DEVELOP, ACQUIRE, OWN AND MANA GE CONTAINER FREIGHT STATION, C ONTAINER YARD. T HE AO NOTICED THAT THE ASSESSEE COMPANY TRANSFERRED A SUM OF RS.25,04,210/ - TO PRE - OPERATIVE EXPENSES IN PROFIT AND LOSS ACCOUNT. BUT IN THE COMPUTATION SHEET FILED ALONG WITH RETURN OF INCOME (ENCLOSED THAT P APER BOOK PAGE 4 - 5), THE ASSESSEE CLAIMED THIS AMOUNT BY WAY OF DEDUCTION FROM THE AMOUNT OF PROFITS. IN THE ASSESSMENT ORDER , THE ASSESSING OFFICER DISALLOWED THIS AMOUNT ON THE GROUND THAT THE ASSESSEE HAD ITSELF TREATED THESE EXPENSES AS PRE - OPERATIVE EXPENSES AND THEREFORE THESE WERE DISALLOWABLE IN NATURE. WHILE DOING S O , THE ASSESSING OFFICER DID NOT ACCEPT THE DETAIL ED SUBMISSIONS OF THE ASSESSEE CONTENDING THAT THESE EXPENSES WERE REVENUE IN NATURE AND THEREFORE THESE WERE CLAIMED IN THE RETURN OF INCOME, AS THESE WERE ALLOWABLE EXPENSES. BEING AGGRIEVED , THE ASSESSEE CONTESTED THE MATTER BEFORE THE LD. CIT(A) AND SUBMITTED IN DETAIL ONCE AGAIN THE ARGUMENT THAT THE IMPUGNED EXPENSES ARE REVENUE IN NATURE AND HAVE BEEN INCURRED FOR THE PURPOSE OF TH E BUSINESS OF THE ASSESSEE AND PERTAIN TO THE YEAR UNDER CONSIDERATION. BALAJI SHIPPING & LOGISTICS 4 THE ASSESSEE ALSO SUBMITTED A CHART, COPY OF WHICH IS ENCLOSED IN THE PAPER BOOK, SHOW ING THE BREAKUP AND NATURE OF THESE EXPENSES BUT LD. CIT(A) WAS ALSO NOT SATISFIED AND THE DISALL OWANCE MADE BY THE AO WAS CONFIRMED. 4. BEFORE US, THE LD. AR HAS TAKEN US, THROUGH THE DETAILS SHOWN ING NATURE OF THE IMPUGNED EXPENSES AND RELIED UPON VARIOUS JUDGMENTS IN SUPPORT OF HIS CONTENTION THAT THE ALLOWANCE OF THE EXPENDITURE DOES NOT DEPEND U PON THE MANNER THE ASSESSEE MAKES ENTRIES IN HIS BOOKS OF ACCOUNT, BUT ON THE BASIS OF PROVISIONS OF LAW RELATING TO THE CLAIM. THE ASSESSEE RELIED UPON THE LAND MARK JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD. VS. CIT(CEN TRAL), 82 ITR 363 AND EMPIRE JUTE CO. LTD. VS. CIT 124 I TR 151. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE IMPUGNED EXPENSES BEING PRE - OPERATIVE EXPENSES, THESE WERE DISALLOWABLE IN NATURE AND LD. CIT(A ) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH THE SIDES . W E FIND THAT THE IMPUGNED EXPENSES ARE ROUTINE EXPENSES INCURRED IN THE COURSE OF THE BUSINESS . T HESE ARE OSTENSIBLY REVENUE NATURE EX PENSES AND THEREFORE THESE EXPENSES ARE ALLOWABLE IN NATURE, AS ADMITTEDLY THESE HAVE BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS TO THE ASSESSEE. THE ONLY POINT OF DISPUTE WAS THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE TREATED THESE EXPENSES AS P RE - OPERATIVE EXPENSES BUT IN THE COMPUTATION SH EET THE ASSESSEE CLAIMED DEDUCTION OF THESE EXPENSES. IN THIS REGARD , WE RELY UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD. BALAJI SHIPPING & LOGISTICS 5 (SUPRA) WHEREIN HONBLE APEX COURT HELD THAT WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS; NOR CAN THE EXISTENCE OR ABSENCE IN HIS BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. IN VIEW OF THE GIVEN FACTS AND WELL SETTLED POSITION OF LAW , WE HOLD THAT THESE EXPENSES ARE ALLOWABLE TO THE ASSESSEE AND THEREFORE, DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELETED . G ROUND NO.1 OF THE ASSESSEE IS ALLOWED. 6. IN GROUNDS NO.2 & 3, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.20 , 37 , 162/ - MADE BY THE AO BY DISALLOWING CERTAIN EXPENSES, REIMBURSED TO M/S. CARGOWAYS INDIA PVT. LTD., INVOKING THE PROVISIONS OF SECTIO N 40A(2)(B) OF THE INCOME TAX ACT, 1961. THE AO HAS DEALT WITH THIS ISSUE IN PARA 5 TO 7 OF THE ASSESSMENT ORDER , WHEREAS LD. CIT(A) HAS DEALT WITH THIS ISSUE IN PARA 7 & 8 OF THE APPELLATE ORDER. IN THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE EXPE NSES OF THE ASSESSEE INCLUDED PAYMENTS TO M/S. CARGOWAYS INDIA PVT. LTD. THE AO NOTICED CERTAIN DISCREPANCIES IN THE COPIES OF ACCOUNT SUBMITTED WITH REGARD TO THE SAID PARTY AND ACCORDINGLY DISALLOWANCE WAS MADE FOR RS.20,37,162/ - ON ACCOUNT OF PAYMENTS C OVERED BY SECTION 40A(2)(B) FOR RS.12,66,643/ - ON ACCOUNT OF SOME VARIATION IN THE BOOKS OF ACCOUNT. 7. BEFORE US, BOTH THE PARTIES MADE DETAIL ED ARGUMENTS . I T IS SEEN BY US THAT IN ADDITION TO THE REASONING GIVEN BY THE AO , T HE LD. CIT(A) HAS FURTHER H ELD THAT THE ASSESSEE HAS DEFAULTED IN TERMS OF PROVISION OF SECTION 40(A)(IA) BY NOT DEDUCTING TDS T AND THEREFORE FOR THESE REASONS ALSO THESE EXPENSES ARE NOT ALLOWABLE. IN ADDITION TO THE ABOVE THE LD. CIT(A) HAS ALSO GIVEN SOME OBSERVATIONS WITH REGA RD TO BALAJI SHIPPING & LOGISTICS 6 SOME ALLEGED VARIATION IN THE BOOKS OF ACCOUNT . WE HAVE OBSERVED THAT THE AO AND LD. CIT(A) ARE NOT FACTUALLY CORRECT. AS PER AS PROVISIONS OF SECTION 40(A)(IA) ARE CONCERNED , SAME IS CONCERNED WITH DISALLOWANCE OF EXPENSES ON THE PLEA OF NON - DEDUC TION OF TAX AT SOURCE . AS FAR AS VARIATION S IN THE ACCOUNTS ARE CONCERN ED , WE HAVE OBSERVED THAT THE SE ISSUES HAVE NOT BEEN APPRECIATED IN THE RIGHT CONTEXT. THE ASSESSEE HAS NOT BEEN GIVEN PROPER OPPORTUNITY TO EXPLAIN ITS CASE. BOTH THE LOWER AUTHORITIES DID NOT CONSIDER IT APPROPRIATE TO CROSS VERIFY THE FACTS AND FIGURES WITH THE CONCERN ED PART Y I.E., M/S. CARGOWAYS INDIA PVT. LTD. D ISALLOWANCE HAS BEEN MADE AND CONFIRMED BY THE LD. CIT(A) BY MAKING PRESUMPTIONS AND SURMISES . IN OUR VIEW IT IS NOT JUSTI FIED, THEREFORE, WE FIND IT APPROPRIATE TO SEND GROUNDS NO.2 & 3 BACK TO THE FILE OF AO TO RE - EXAMINE ALL THE FACTS AND FIGURES INVOLVED IN THIS CASE AND IN CASE SOME DOUBTS ARE OBSERVED, THE CROSS VERIFICATION SHOULD BE MADE WIT H THE SAID PARTY. NEEDLESS TO AD D THE ASSESSEE SHOULD ALSO BE GIVE N OPPORTUNITY OF HEARING . THUS, G ROUNDS NO.2 & 3 ARE ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT O N DAY OF 9 TH AUGUST, 20 15. SD/ - SD/ - ( JOGINDER SINGH ) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 09 .0 9 .2015 PATEL BALAJI SHIPPING & LOGISTICS 7 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE ; (2) / THE REVENUE; (3) ( ) / THE CIT(A ) ; (4) / THE CIT, MUMBAI CITY CONCERNED ; (5) , , / THE DR, ITAT, MUMBAI ; (6) / GUARD F ILE . / TRUE COPY / BY ORDER / / (DY./ASSTT. REGISTRAR) , / IT AT, MUMBAI , / / 19997 98 2000 01 / / / / / / /