DCIT, Central Circle -VII, Kolkata, Kolkata V. M/s.. Prabhukripa Overseas Ltd., Mumbai

ITA 1092/KOL/2011

• Counselvise Citation: 109223514 RSA 2011
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 12-08-2011
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA LD
• Assessee Lawyers: P R KOTHARI FCA LD

Judgement Text

, C , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C , CALCUTTA () BEFORE .., , SHRI C.D. RAO, ACCOUNTANT MEMBER. ! /AND '#'$ 1&', ) SHRI GEORGE MATHAN, JUDICIAL MEMBER !( / ITA NOS.1092 & 1093/KOL/2011 )'# *+/ ASSESSMENT YEARS: 2007-08 & 2008-09 DCIT, CENTRAL CIRCLE-VII, KOLKATA M/S. PRABHUKRIPA OVERSEAS LTD PAN:AAACJ 9076A (&- / APPELLANT ) - ' - - VERSUS -. (/0&-/ RESPONDENT ) &- 1 2 / FOR THE APPELLANT: / SHRI A.K. MAHAPATRA, LD.CIT/DR /0&- 1 2 / FOR THE RESPONDENT: / SHRI P.R. KOTHARI, FCA/LD.AR 3'4 1 /DATE OF HEARING : 02-05-2012 5* 1 /DATE OF PRONOUNCEMENT: 04-05-2012 6 / ORDER '#'$ 1&', ) SHRI GEORGE MATHAN, JUDICIAL MEMBER.: THE APPEAL IN ITA NO.1092/KOL/2011 IS FILED BY TH E REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), CENTR AL-I, KOLKATA IN APPEAL NO.123/CC- VII/CIT(A),C-1/09-10 DATED 26.05.2011 FOR THE ASSES SMENT YEAR 2007-08 AND APPEAL IN ITA NO. 1093/KOL/2011 IS FILED BY THE REVENUE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), CENTRAL-1, KOLKATA IN APPEAL NO.197/CC-VII/CIT(A),C-!/10-11 DATED 26.05.2011 FOR THE ASSESSMENT YEAR 2008-09.. 2. AS THE ISSUES IN BOTH THE REVENUES APPEALS ARE COMMON, THE TWO APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 3. SHRI A.K. MAHAPATRA, LEARNED CIT/DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI P.R. KOTHARI, FCA LEARNED AR REPRESENTED ON BEHALF OF THE ASSESSEE. 4. IN THE REVENUES APPEAL IN ITA NO.1092/KOL/2011 FOR THE ASSESSMENT YEAR 2007-08, THE REVENUE HAS RAISED FOLLOWING GROUNDS :- ITA NOS.1092 &1093/KOL/11-C-GM 2 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF COMPUTATION OF INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY U/S.22 IN RESPECT OF THE COMPANIES FLAT A T 11/12, BUCKLEY COURT, NATHALAL PAREKH MARG, COLABA, CLAIMED TO HAV E BEEN ALLOTTED TO DIRECTOR OF THE COMPANY AS RENT FREE ACCOMMODATI ON. 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF COMPUTATION OF INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY AND COMPUTATION THE ANNUAL VALUE AT RS.96 ,00,000/- ON THE BASIS OF RENT RECEIVED BY THE ASSESSEE COMPANY ON N OTIONAL BASIS U/S.23(A) IN THE ASSESSMENT YEARS 2002-03 & 2003-04 . 3. THE LD. CIT(A) HAS ERRED HOLDING THAT RESIDENTI AL HOUSE GIVEN RENT-FREE FOR THE OCCUPATION OF ONE OF THE DIRECTOR S TO BE USED AS RESIDENCE, SUCH USER OF HOUSE PROPERTY COME UNDER T HE BUSINESS USE AND THEREFORE, THE NOTIONAL INCOME FROM SUCH PROPER TY WOULD NOT BE ASSESSED UNDER SECTION 22 OF THE INCOME TAX ACT, 19 61. 4. THE LD. CIT(A) HAS ERRED HOLDING THAT RESIDENTI AL HOUSE GIVEN RENT-FREE FOR THE OCCUPATION OF ONE OF THE DIRECTOR S TO BE USED AS RESIDENCE, SUCH USER OF HOUSE PROPERTY COME UNDER T HE BUSINESS USE AND THEREFORE, THE NOTIONAL INCOME FROM SUCH PROPER TY WOULD NOT BE ASSESSED UNDER SECTION 22 OF THE INCOME TAX ACT, 19 61 NOTWITHSTANDING OF THE FACT THAT THE VALUE OF RENT FREE ACCOMMODATION HAS NOT BEEN TREATED AS PERQUISITES IN THE HANDS OF DIRECTOR OF THE ASSESSEE COMPANY AND ASSESSEE HAS NOT ALSO CATEGORI CALLY STATED ANYTHING ABOUT EMPLOYER-EMPLOYEE RELATIONSHIP BETWE EN THE ASSESSEE AND DIRECTOR WHO HAS BEEN PROVIDED RENT FREE ACCOMM ODATION. 5. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT DISALLOWANCE OF RS.63,55,795/- INCLUDING DEPRECIATI ON OF RS.42,60,964/- ON FLAT, FURNITURE AND FIXTURE, REPA IR & MAINTENANCE, INSURANCE, ELECTRIC CHARGES, LEGAL AND PROFESSIONAL CHARGES, WATCH & WARD EXPENSES IN CONSEQUENCE TO ITS OBSERVATION HEL D THAT INCOME OF THE FLAT IN QUESTION WOULD NOT BE ASSESSED U/S 22 O F THE I.T ACT,1961. 6. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT DISALLOWANCE OF BUSINESS CONVENTION EXPENSES OF RS. 1,55,000/- 5. IN THE REVENUES APPEAL IN ITA NO.1093/KOL/2011 FOR THE ASSESSMENT YEAR 2008-09 THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF COMPUTATION OF INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY U/S.22 IN RESPECT OF THE COMPANIES FLAT A T 11/12, BUCKLEY COURT, NATHALAL PAREKH MARG, COLABA, CLAIMED TO HAV E BEEN ALLOTTED TO DIRECTOR OF THE COMPANY AS RENT FREE ACCOMMODATI ON. 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF COMPUTATION OF INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY AND COMPUTATION THE ANNUAL VALUE AT RS.96 ,00,000/- ON THE ITA NOS.1092 &1093/KOL/11-C-GM 3 BASIS OF RENT RECEIVED BY THE ASSESSEE COMPANY ON N OTIONAL BASIS U/S.23(A) IN THE ASSESSMENT YEARS 2002-03 & 2003-04 . 3. THE LD. CIT(A) HAS ERRED HOLDING THAT RESIDENTI AL HOUSE GIVEN RENT-FREE FOR THE OCCUPATION OF ONE OF THE DIRECTOR S TO BE USED AS RESIDENCE, SUCH USER OF HOUSE PROPERTY COME UNDER T HE BUSINESS USE AND THEREFORE, THE NOTIONAL INCOME FROM SUCH PROPER TY WOULD NOT BE ASSESSED UNDER SECTION 22 OF THE INCOME TAX ACT, 19 61. 4. THE LD. CIT(A) HAS ERRED HOLDING THAT RESIDENTI AL HOUSE GIVEN RENT-FREE FOR THE OCCUPATION OF ONE OF THE DIRECTOR S TO BE USED AS RESIDENCE, SUCH USER OF HOUSE PROPERTY COME UNDER T HE BUSINESS USE AND THEREFORE, THE NOTIONAL INCOME FROM SUCH PROPER TY WOULD NOT BE ASSESSED UNDER SECTION 22 OF THE INCOME TAX ACT, 19 61 NOTWITHSTANDING OF THE FACT THAT THE VALUE OF RENT FREE ACCOMMODATION HAS NOT BEEN TREATED AS PERQUISITES IN THE HANDS OF DIRECTOR OF THE ASSESSEE COMPANY AND ASSESSEE HAS NOT ALSO CATEGORI CALLY STATED ANYTHING ABOUT EMPLOYER-EMPLOYEE RELATIONSHIP BETWE EN THE ASSESSEE AND DIRECTOR WHO HAS BEEN PROVIDED RENT FREE ACCOMM ODATION. 5. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT DISALLOWANCE OF RS.56,87,854/- INCLUDING DEPRECIATI ON OF RS.40,47,916/- ON FLAT, FURNITURE AND FIXTURE, REPA IR & MAINTENANCE, INSURANCE, ELECTRIC CHARGES, LEGAL AND PROFESSIONAL CHARGES, WATCH & WARD EXPENSES IN CONSEQUENCE TO ITS OBSERVATION HEL D THAT INCOME OF THE FLAT IN QUESTION WOULD NOT BE ASSESSED U/S 22 O F THE I.T ACT,1961. 6. IT WAS SUBMITTED BY THE LEARNED CIT/DR THAT THE ASSESSEE IS A COMPANY. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT, IT WAS NOTICED THAT THE ASSESSEE COMPANY HAD GIVEN A FLAT OWNED BY IT AND SITUATED AT 11/12, BUC KLEY COURT, NATHALAL PAREKH MARG, COLABA, MUMBAI TO MR. R.N. MODI, THE DIRECTOR OF THE ASSESS EE COMPANY AS RENT FREE ACCOMMODATION W.E.F 1-4-2005. IT WAS THE SUBMISSION THAT THE ASS ESSEE COMPANY HAD CLAIMED THE SAME AS BEING USED FOR THE BUSINESS OF THE ASSESSEE. IT WA S THE SUBMISSION THAT NO REMUNERATIONS HAD BEEN PAID TO DIRECTOR, AND CONSEQUENTLY, THE ASSESS ING OFFICER HELD THAT THE DIRECTORS WERE NOT EMPLOYEES OF THE ASSESSEE COMPANY. CONSEQUEN TLY, THE ASSESSING OFFICER HAD TAKEN THE ANNUAL VALUE OF THE SAID FLAT AT RS. 96 LAKH AND AF TER REDUCING DEDUCTION ALLOWABLE U/S. 24 ASSESSED THE HOUSE PROPERTY INCOME AT RS. 67.20 LA KH. 7. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD ALSO DISALLOWED BUSINESS CONVENTION EXPENSES OF RS.1.55 LAKH ON THE GROUND T HAT DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAD PURCHASED GOODS FROM ITS SISTER CONCER N, M/S. HINDUSTHAN COMPOSITS AND EXPORTED IT TO ONLY TWO PARTIES, WHICH DID NOT REQU IRE BUSINESS CONVENTION EXPENSES. ITA NOS.1092 &1093/KOL/11-C-GM 4 8. IT WAS THE SUBMISSIONS THAT ON APPEAL, THE LEARN ED COMMISSIONER OF INCOME-TAX (APPEALS) HAD DELETED THE ADDITION REPRESENTING TH E INCOME FROM HOUSE PROPERTY BY HOLDING THAT THE RESIDENTIAL HOUSE GIVEN RENT FREE FOR THE OCCUPATION OF ONE OF THE DIRECTORS TO BE USED AS RESIDENCE, SUCH USER OF THE HOUSE PROPERTY CAME UNDER THE BUSINESS USE, AND, THEREFORE, THE NOTIONAL INCOME FROM SUCH PROPERTY COULD NOT BE AS SESSED U/S. 22 OF THE INCOME-TAX ACT, 1961. 9. IN REGARD TO THE DISALLOWANCE OF BUSINESS CONVEN TION EXPENSES, IT WAS THE SUBMISSION THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAD DELETED THE DISALLOWANCE BY HOLDING THAT THE DISALLOWANCE WAS MADE ON THE INDIV IDUAL JUDGMENT OF THE ASSESSING OFFICER WITHOUT BRING ANY FACT ON RECORD. IT WAS THE SUBMI SSION THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS LIABLE TO BE REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED. 10. IN REPLY, THE LEARNED AR SUBMITTED THAT THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) HAD HELD THAT THE RENT FREE ACCOMMODATIO N WAS NOT LIABLE TO BE ASSESSEE U/S. 22 OF THE ACT, AS THE SAME WAS USED FOR THE PURPOSE OF BU SINESS OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT I N THE CASE OF CIT VS. VAZIR SULTAN TOBACCO CO. LTD REPORTED IN (1988) 173 ITR 290 (AP ) AS ALSO THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEW INDIA MARITIME AGENCIES (P) LTD REPORTED IN (1994) 207 ITR 392 (MAD) AND CIT VS M.A. SATHAR (P) LTD REPORTED IN (1997) 226 ITR 910(MAD). 11. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD PRO DUCED THE TRUE COPY OF THE RESOLUTION PASSED IN THE BOARD MEETINGS ON 25-2-2005 FOR PROVI DING RENT FREE ACCOMMODATION OF THE ASSESSEES FLAT TO MR. R.N. MODI, THE DIRECTOR OF T HE ASSESSEE COMPANY. IT WAS THE SUBMISSION THAT THE RESOLUTION WAS ALSO NOT DISPUTED. IT WAS THE SUBMISSION THAT AS THE RENT FREE ACCOMMODATION HAD BEEN GIVEN TO THE DIRECTOR OF THE ASSESSEE COMPANY, IN VIEW OF THE DECISIONS REFERRED TO (SUPRA), THE FINDING OF THE L EARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE WAS LIABLE TO BE SUSTAINED. 12. IN REGARD TO THE ISSUE OF DISALLOWANCE OF THE B USINESS CONVENTION EXPENSES, IT WAS SUBMITTED THAT THE EXPENSES WERE WHOLLY AND EXCLUS IVELY INCURRED FOR THE BUSINESS PURPOSE. THERE WAS NO ALLEGATION OF THE ASSESSING OFFICER THAT THE CLAIM OF THE ASSESSEE WAS WRONG. IT ITA NOS.1092 &1093/KOL/11-C-GM 5 WAS THE SUBMISSION THAT ONLY CLAIM OF THE ASSESSING OFFICER WAS THAT THE SAID EXPENSES WERE NOT NECESSARY. IT WAS THE SUBMISSION THAT IT IS T HE BUSINESSMAN, WHO DECIDES WHETHER A PARTICULAR EXPENDITURE IS NECESSARY. IT WOULD BE OPEN FOR THE ASSESSING OFFICER TO DECIDE THE EXPENSES WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR NOT, SUCH FINDING NOT BEING THERE, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS LIABLE TO BE SUSTAINED ON THIS ISSUE. 13. IN REPLY, LEARNED CIT/DR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 38 OF THE ACT WOULD HAVE TO BE CONSIDERED IN SO FAR AS THE RENT FREE ACCOMMODATION WAS PROVIDED TO THE DIRECTOR OF THE ASSESSEE COMPANY. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A P ERUSAL OF THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AS ALSO THE AS SESSING OFFICER CLEARLY SHOW THAT THE ASSESSING OFFICER IS NOT DISPUTING THE FACT OF THE RENT FREE ACCOMMODATION BEING PROVIDED TO THE DIRECTOR OF THE ASSESSEE COMPANY. THE QUESTION IS AS TO WHETHER THE RENT FREE ACCOMMODATION IS FOR THE BUSINESS PURPOSE OF THE A SSESSEE COMPANY OR NOT. THIS HAS BEEN ANSWERED BY THE HONBLE ANDHRA PRADESH HIGH COURT A S ALSO THE HONBLE MADRAS HIGH COURT IN THE CASES OF VAZIR SULTAN TOBACCO CO. LTD, NEW INDIA MARITIME AGENCIES (P) LTD AND M.A. SATHAR (P) LTD REFER TO (SUPRA). CONSEQUENTLY, WE ARE OF THE VIEW THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS RIG HT IN LAW IN HOLDING THAT THE RESIDENTIAL HOUSE GIVEN RENT FREE FOR THE OCCUPATION OF ONE O F THE DIRECTORS TO BE USED AS RESIDENCE, SUCH USE OF THE HOUSE PROPERTY COMES UNDER THE BUSINESS USE AND, THEREFORE, THE NOTIONAL INCOME FROM SUCH PROPERTY CANNOT BE ASSESSED U/S. 22 OF TH E INCOME-TAX ACT. 15. COMING TO THE CLAIM OF THE LEARNED CIT/DR THAT SECTION 38 OF THE ACT WOULD HAVE TO BE CONSIDERED, WE ARE OF THE VIEW THAT SECTION 38 I S APPLICABLE WHERE THE DWELLING HOUSE IS PARTLY USED FOR THE BUSINESS OR NOT EXCLUSIVELY SO USED. IN THE PRESENT CASE, THIS IS NOT SO. THE USE OF THE RESIDENTIAL HOUSE HAS BEEN HELD EARLIER TO BE FOR BUSINESS PURPOSES. CONSEQUENTLY, THE PROVISIONS OF SECTION 38 OF THE ACT WOULD NOT H AVE ANY APPLICATION TO THE FACTS OF THE PRESENT CASE. 16. IN REGARD TO THE ISSUE OF DISALLOWANCE OF THE B USINESS CONVENTION EXPENSES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED COMMISSIO NER OF INCOME-TAX (APPEALS) IS CORRECT, IN SO FAR AS, THE ASSESSING OFFICER HAS NOT QUESTIONED THE GENUINENESS OR THE PURPOSE OF THE SAID ITA NOS.1092 &1093/KOL/11-C-GM 6 EXPENDITURE. THE INDIVIDUAL JUDGMENT OF THE ASSESSI NG OFFICER IS NOT GROUND ENOUGH TO RESTRICT AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDIN G OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) ON THIS ISSUE IS ON THE RIGHT FOOTIN G AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIRCUMSTANCES, BOTH THE APPEALS OF THE REVENUE STAND DISMISSED. 17 IN THE RESULT, BOTH THE APPEALS OF THE REVENUE STAND DISMISSED.. 7 6 3 8 3' 9 7: THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 04-05 -2012 SD/- SD/- [ .., ] [ '#'$ 1&' , ] [ C.D.RAO, ACCOUNTANT MEMBER] [GEORG E MATHAN, JUDICIAL MEMBER] / DATED :04-05-2012 6 1 /)); <;*= - COPY OF THE ORDER FORWARDED TO: 1. /APPLICANT- SHRI PIJUSH MUKHERJEE,DCIT,CC-VII,KOL KATA 2 /0&- / RESPONDENT : M/S. PRABHUKRIPA OVERSEAS LTD, MITTA L TOWERS,C- WING, R.NO.114, MUMBAI-21. 3. )6' / CIT 4. )6' ( )/ CIT(A) 5. >)9 /)' / DR, KOLKATA BENCHES, KOLKATA [ 0; /) / TRUE COPY] 6'3 / BY ORDER . !' /ASSTT. REGISTRAR ** PRADIP PAUL/SPS