Dr. Tara Chand, New Delhi V. ITO, New Delhi

ITA 1238/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61693 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 13-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MEEL
• Assessee Lawyers: K C JAIN
• Keywords: Capital expenditure
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI H BENC H BEFORE SHRI A.N. PAHUJA, AM AND SHRI C.M. GARG, JM ITA NO.1238 & 1239/DEL./2012 ASSESSMENT YEARS:2005-06 & 2006-07 DR. TARA CHAND C/O K.C. JAIN (ADVOCATE) 124, HANS BHAWAN, 1, BAHADUR SHAH ZAFAR MARG, NEW DELHI VS. INCOME TAX OFFICER, WARD 32(1), C.R. BUILDING, NEW DELHI [PAN AAAPC 0373 L] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI K.C. JAIN, ADVOCATE REVENUE BY SHRI PRADEEP KUMAR MEEL, SR. DR DATE OF HEARING 14-05-2012 DATE OF PRONOUNCEMENT 18-05-2012 O R D E R PER BENCH :- THESE TWO APPEALS FILED ON 13.03.2012 BY THE ASSESS EE AGAINST TWO SEPARATE ORDERS DATED 23.12.2011 OF THE CIT(A)- XXVI, DELHI FOR THE AYS 2005-06 & 2006-07, RAISE THE FOLLOWING SIMILAR GROU NDS:- 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF EXPENSES CLAIMED BY THE APPELLANT OUT OF ROYALTY INCOME ON T HE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LD. CIT(A) ERRED IN OBSERVING IN PARA 6 THAT MOST OF THE EXPENSES HAVE BEEN CLAIMED ON ESTIMATED BASIS. AS A MATTER O F FACT, THE EXPENSES INCURRED ON RENT, TELEPHONE AND ELECTRICIT Y WERE ACTUAL EXPENSES AND AS SUCH THE OBSERVATION OF THE CIT(A) WAS MISCONCEIVED ON THE FACTS OF THE CASE. 4. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE CON TEXT IN WHICH THE PROVISIONS OF SECTION 80QQB OF THE ACT WERE BROUGHT TO THE NOTICE OF THE LEARNED CIT(A). ITA NOS.1238&1239/DEL./2012 2 2. SINCE SIMILAR ISSUES WERE INVOLVED, THESE APPEA LS WERE HEARD SIMULTANEOUSLY FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER. 3. FACTS, IN BRIEF, AS PER RELEVANT ORDERS FOR THE AYS 2005-06 AND 2006-07 ARE THAT RETURNS DECLARING INCOME OF ` ` 4,33,390/- EACH FOR THE AYS 2005-06 & 2006-07 WERE FILED ON 03.04.2009 BY THE ASSESSEE BEYOND THE TIME STIPULATED UNDER THE RELEVANT PROVISIONS OF THE INC OME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT).ACCORDINGLY, THE ASSESSING OFFICER (A.O. IN SHORT) ISSUED A NOTICE U/S 148 OF THE ACT ON 20 TH APRIL, 2009 TO REGULARIZE THE RETURNS. SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE AO NOTICED THAT THE ASSESSEE REFLECTED ROYALTY INCOME OF ` ` 2,52,367/- IN THE AY 2005-06 AND ` ` 2 ,92,127/- IN THE AY 2006-07.UNDER THE HEAD INCOME FROM OTHER SOURCES. AGAINST THIS INCOME, THE ASSESSEE CLAIMED EXPENDITU RE OF ` `1,17,900 IN THE AY 2005-06 AND ` `98,000/- IN THE AY 2006-07. ACCORDING TO THE AO , THE ASSESSEE CLAIMED ESTIMATED EXPENDITURE ON HOUSE RENT, CAR EX PENSES, BOOKS & PERIODICALS, TYPING AND PHOTOCOPY, TELEPHONE, ELECTRICITY , SECR ETARIAL CHARGES, PRINTING & STATIONERY AND ENTERTAINMENT . SINCE THE ASSESSEE D ID NOT SUBSTANTIATE THAT THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVEL Y IN MAKING OR EARNING ROYALTY INCOME, THE AO ALLOWED EXPENSES OF ONLY 20% OF THE ROYALTY INCOME AND DISALLOWED THE REMAINING EXPENSES IN THESE TWO ASSE SSMENT YEARS. 4. ON APPEAL, THE LEARNED CIT(A) WHILE REFERRING T O PROVISIONS OF SECTION 80QQB OF THE ACT UPHELD THE DISALLOWANCE MA DE BY THE AO ON THE GROUND THAT THE ASSESSEE DID NOT FULFILL CONDITIONS STIPULATED UNDER SEC. 80QQB(3) OF THE ACT ,PRESCRIBED FORM 10CCD HAVING NOT BEEN F ILED. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSE E WHILE RELYING UPON THE DECISION DATED 4.7.1984 OF THE ITAT IN THE CASE O F SHRI RISHI KUMAR JAIN IN ITA NO.425/DEL./1984 FOR THE AY 1980-81 REITERATED HIS SUBMISSIONS BEFORE THE LD. ITA NOS.1238&1239/DEL./2012 3 CIT(A). THE LD. AR VEHEMENTLY ARGUED THAT THE ENTIR E EXPENDITURE WAS ALLOWABLE. TO A QUERY BY THE BENCH, THE LD AR CLARIFIED THAT T HE ASSESSEE DID NOT MAKE ANY CLAIM U/S 80QQB OF THE ACT NOR THE PROVISIONS OF SA ID SECTION WERE APPLICABLE IN THE CASE OF THE ASSESSEE. THE SAID PROVISIONS WERE REFERRED ONLY TO BUTTRESS THEIR CASE .ON THE OTHER HAND, THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY AND AS IS EVIDENT FROM THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION , THE ASSESSEE NEVER CLAIMED ANY DEDUCTION U/S 80QQB OF THE ACT NOR THE AO EXAM INED THE CLAIM IN THE LIGHT OF SAID PROVISIONS. THE ASSESSEE, A RETIRED DEAN, S T. STEPHENS COLLEGE, DELHI, RETURNED ROYALTY INCOME RECEIVED FROM MC GRAW-HILL EDUCATION(I) P LTD., UNDER THE HEAD INCOME FROM OTHER SOURCES AND CLAIMED DED UCTION OF AFORESAID EXPENDITURE IN THESE TWO ASSESSMENT YEARS. THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE ASSESSEE MAINTAINED ANY BOOKS OR BILLS/ VOUCHERS FOR THE INCOME AND EXPENSES CLAIMED BY HIM AGAINST THE SAID ROYALTY INCOME. THE AO RESTRICTED THE CLAIM OF EXPENSES TO 20% OF THE ROYA LTY INCOME, WITHOUT REFERRING TO THE RELEVANT PROVISIONS OF THE ACT AND DISALLOWED THE REMAINING AMOUNT. THE LD. CIT(A) UPHELD THE DISALLOWANCE MERELY ON THE GROUND THAT THE ASSESSEE DID NOT FULFILL THE CONDITIONS STIPULATED U/S 80QQB OF THE ACT ,EVEN WHEN THE ASSESSEE NEVER MADE ANY SUCH CLAIM U/S 80QQB OF THE ACT. ADMITTEDLY, ROYALTY INCOME HAS BEEN RETURNED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE RELEVANT PROVISIONS GOVERNING THE ALLOWANCE OF EXPENDITURE INCURRED FOR MAKING OR EARNING SUCH INCOME IS SEC.57(III) OF THE ACT, WHIC H READS AS UNDER: THE INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM O THER SOURCES' SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAM ELY:- (III) ANY OTHER EXPENDITURE (NOT BEING IN THE NATUR E OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. ITA NOS.1238&1239/DEL./2012 4 6.1 IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES', SECTION 57(III) PROVIDES THAT DEDUCTION I S TO BE MADE IN RESPECT OF EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. THE ISSUE FOR OUR C ONSIDERATION, THEREFORE, IS AS TO WHETHER THE EXPENSES OF THE TYPE INCURRED BY THE ASSESSEE TOWARDS HOUSE RENT, CAR EXPENSES, BOOKS & PERIODICALS, TYPING AND PHOTOCOPY, TELEPHONE, ELECTRICITY , SECRETARIAL CHARGES, PRINTING AND STA TIONERY AND ENTERTAINMENT, CAN BE SAID TO HAVE BEEN INCURRED SOLELY FOR THE PURPOSE O F EARNING THE ROYALTY INCOME. IT IS TRUE THAT THE CONNECTION BETWEEN THE EXPENDITURE AND THE EARNING OF INCOME NEED NOT BE DIRECT AND IT MAY BE INDIRECT. BUT, SI NCE THE EXPENDITURE MUST HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING THAT INCOM E, THERE SHOULD BE SOME NEXUS BETWEEN THE EXPENDITURE AND THE EARNING OF TH E INCOME. THE REQUIREMENT UNDER SECTION 57(III) THAT THE EXPENDITURE SHOULD H AVE BEEN INCURRED 'FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME' SHOWS THA T THE OBJECT OF SPENDING OR THE END OR AIM OR THE INTENTION OF SUCH SPENDING WA S FOR EARNING THE ROYALTY INCOME. IN THE INSTANT CASE, THE LD. CIT(A) DID NOT APPROACH THE ISSUE FROM THIS ANGLE NOR EXAMINED THE APPLICABILITY OF PROVISIONS OF SEC. 57(III) OF THE ACT. THE APPROACH OF THE LD. CIT(A) IN RELYING UPON PROVISIO NS OF SEC. 80QQB OF THE ACT, WHICH EVEN WERE NOT INVOKED BY THE ASSESSEE OR THE AO WHILE INDISPUTABLY, THE CASE OF THE ASSESSEE DOES NOT FALL UNDER THE SAID P ROVISION ,IS NOT IN ACCORDANCE WITH LAW. IN VIEW OF THE FOREGOING , ESPECIALLY WH EN THE LD. CIT(A) HAVE NOT RECORDED ANY FINDINGS AS TO THE APPLICABILITY OF P ROVISIONS OF SEC. 57(III) OF THE ACT TO THE EXPENDITURE CLAIMED BY THE ASSESSEE, WE CON SIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTO RE THE MATTER TO HIS FILE FOR DECIDING THE ISSUE RAISED IN THESE GROUNDS BEFORE US, AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AND OF COURSE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES, BRINGIN G OUT CLEARLY AS TO WHETHER OR NOT THE AFORESAID EXPENDITURE WAS INCURRED WHOLLY AND E XCLUSIVELY FOR MAKING OR EARNING ROYALTY INCOME. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6 ) OF THE ACT. WITH ITA NOS.1238&1239/DEL./2012 5 THESE OBSERVATIONS, GROUND NOS.1 TO 4 IN THESE TWO APPEALS ARE DISPOSED OF. 7. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE U S. 8. IN RESULT, BOTH THESE APPEALS ARE ALLOWED BUT F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (C.M. GARG) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. INCOME TAX OFFICER, WARD 32(1), C.R. BUILDING, N EW DELHI 3. CIT CONCERNED 4. CIT (APPEALS)-XXVI, DELHI-92 5. THE DR, ITAT,H BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI