KASYAP SWEETNERS LTD, MUMBAI V. DCIT CIR 6(2), MUMBAI

ITA 1224/MUM/2010

• Counselvise Citation: 122419914 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOPAL BOHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 1224/MUM/2010 ASSESSMENT YEAR- 2006-07 M/S. KASYAP SWEETNERS LTD., PARAGAON CENTER, I WING, 3 RD FLOOR, P.B. MARG,WORLI, MUMBAI-400 013 PAN-AABCK 3538M VS. THE DCIT, CIRCLE 6(2), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GOPAL BOHRA RESPONDENT BY: SHRI PAVAN VED O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 21.10.2009 PASSED BY THE LD. CIT(A)-12 FOR TH E ASSESSMENT YEAR 2006-07. 2. THE ONLY GROUND RAISED BY THE ASSESSEE RELATES T O DISALLOWANCE U/S. 40A(2)(B) OF RS. 28,32,000/- IN RESPECT OF REN T PAID. 3. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE MUTATIS MUTANDIS SIMILAR TO THOSE DECIDED BY THE TRIBUNAL IN ASSESS MENT YEARS 2003-04 & 2005-06 IN ASSESSEES OWN CASE IN I TA NOS. 1248/M/06 & 298/M/08 WHEREIN IT HAS BEEN HELD AS FOLLOWS: THE LOWER AUTHORITIES HAVE NOT GIVEN ANY FINDING T HAT THE RENT PAID BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE IN COM PARISON TO THE FAIR MARKET RENT PREVAILING IN THE AREA. THEREFORE, WHE N THE DISALLOWANCE IS NOT BASED ON THE EXCESSIVENESS OF THE RENT IN COMPA RISON TO THE FAIR ITA NO. 1224/M/2010 2 MARKET RENT THEN THE FAIR MARKET RENT ADOPTED BY T HE LOWER AUTHORITIES IS BEYOND THE SCOPE OF PROVISIONS OF SEC. 40A(2)(A). EV EN OTHERWISE, WHILE COMPUTING THE REASONABLE RENT ON THE INVESTMENTS BE ING THE COST OF THE PROPERTY, THE LOWER AUTHORITIES HAVE FAILED TO CONS IDER THE RESIDENTIAL ACCOMMODATION TO DIRECTOR WOULD FALL UNDER PERQUISI TE AND ALSO TAXABLE IN THE HANDS OF THE DIRECTOR. FURTHER, THE LANDLORD OF THE PROPERTY HAS OFFERED THE RENTAL INCOME TO TAX AND THE SAME WAS ASSESSED AS PER THE ASSESSMENT ORDER FILED BY THE LD AR THEN IT CANNOT BE A REVENUE LOSS WITH RESPECT TO THE RENT PAID BY THE ASSESSEE. AS REGARDS THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE IS CONCERNED, THOUGH THE LOWER AUTHORITIES HAVE NOT GO NE INTO THIS ASPECT; HOWEVER, IT IS SETTLED PROPOSITION OF LAW THAT THE TAX AUTHORITIES CANNOT STEP INTO THE SHOE OF THE BUSINESSMAN FOR TAKING B USINESS DECISION. WHEN THE RENT IS PAID FOR PROVIDING THE RESIDENTIAL ACCO MMODATION TO THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY THEN THE LEGITIMATE NEEDS HAS TO BE CONSIDERED BY TAKING INTO ACCOUNT THE ROLE OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND NOT THE SALARY DRAWN B Y THE MANAGING DIRECTOR. THE LOWER AUTHORITIES HAVE NOT GIVEN ANY FINDINGS THAT THE RENT PAID FOR THE ACCOMMODATION PROVIDED TO THE MANAGING DIRECTOR IS NOT CONSONANCE WITH THE SERVICES AND THE ROLE OF THE MA NAGING DIRECTOR IN THE BUSINESS OF THE ASSESSEE COMPANY. THEREFORE, IN VIE W OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT T HE DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS NOT JUSTIFIED AND THE S AME IS LIABLE TO BE REJECTED. ACCORDINGLY, WE SET ASIDE THE ORDER OF T HE LOWER AUTHORITIES QUA THIS ISSUE. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE A RE ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE DECISION IN ASSES SEES OWN CASE WE DELETE THE DISALLOWANCE OF RS. 28,32,000/- MADE BY THE AO U/S. 40A(2)(B) IN RESPECT OF RENT PAID. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011 SD/- SD/- (J. SUDHAKAR REDDY) (ASHA VI JAYARAGHAVAN) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED 15 TH JULY, 2011 RJ ITA NO. 1224/M/2010 3 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 1224/M/2010 4 DATE INITIALS 1. DRAFT DICTATED ON: 12.7 .2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 13.07.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: