TOTAL LUBRICANTS INDIA LTD ( NOW KNOWN AS TOTAL DIL INDIA P.LTD), MUMBAI V. ADDL CIT 8(3), MUMBAI

ITA 1271/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7974 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 15-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1271 /MUM/201 3 ASSESSMENT YEAR: 2008 - 09 TOTAL OIL INDIA PVT. LTD. 3 RD FLOOR, THE LEELA GALLEIA, ANDHERI KURLA ROAD, ANDHERI (E) MUMBAI - 400059. VS. ACIT - 8(3) MUMBAI PAN NO. AAACE1877C APPELLANT RESPONDENT ITA NO. 336/MUM/2015 ASSESSMENT YEAR: 200 8 - 09 TOTAL OIL INDIA PVT. LTD. 3 RD FLOOR, THE LEELA GALLEIA, ANDHERI KURLA ROAD, ANDHERI (E) MUMBAI - 400059. VS. D CIT - 8(3) MUMBAI PAN NO. AAACE 1877C APPELLANT RESPONDENT ASSESSEE BY : MR. NIRAJ SHETH , AR REVENUE BY : MR. M.C. OMI NINGSHEN, DR DATE OF HEARING : 27/11 /2017 DATE OF PRONOUNCEMENT : 20/12/2017 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED APPE ALS FOR THE ASSESSMENT YEAR 2008 - 09 ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS) - 18 , MUMBAI AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) AND 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). AS TOTAL OIL INDIA PVT. LTD ITA NO. 1271/MUM/2013 & 336/MUM/2015 2 COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE T HEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1271/MUM/2013 ASSESSMENT YEAR: 2008 - 09 2. THE 1 ST GROUND RAISED IN THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.8,42,189/ - OF EDP EXPENSES CONSIDERING THE SAME AS CAPITAL EXPENDITURE. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT HAS DEBITED RS.8,42,189/ - AS EDP EXPENSES AND INCLUDED IT IN MISCELLANEOUS EXPENSES. THE AO FOLLOW ING THE JUDGMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ARAWALI CONSTRUCTIONS (P) LTD. 259 ITR 30 (RAJ) DISALLOWED THE SAI D EDP EXPENSES OF RS.8,42,189/ - . 2.2 IN APPEAL, THE LD. CIT(A) AGREED WITH THE FINDINGS OF THE AO AND DISMISSED T HE APPEAL OF THE ASSESSEE. 2.3 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. RAYCHEM RPG LTD . (2012) 346 ITR 138 (BOM). ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF LD. C IT(A). 2.4 IN THE CASE OF RAYCHEM RPG LTD . (SUPRA) , THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE ASSESSEE IN THAT CASE WAS MANUFACTURING TELECOMMUNICATION AND POWER CABLE. SOFTWARE WAS NOT A PART OF PROFIT MAKING APPARATUS OF THE ASSESSEE. THEREFORE , I T HELD THE EXPENDITURE AS R EVENUE EXPENDITURE. TOTAL OIL INDIA PVT. LTD ITA NO. 1271/MUM/2013 & 336/MUM/2015 3 IN THE INSTANT CASE , THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND MARKETING OF INDUSTRIAL AND AUTOMATIC LUBRICANTS. EDP EXPENSES IS NOT A PART OF PROFIT MAKING APPARATUS OF THE ASSESSEE - COMPANY. FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN RAYCHEM RPG LTD . , WE DIRECT THE AO TO TREAT THE EDP EXPENSES OF RS.8,42,189/ - AS REVENUE EXPENDITURE. THUS THE 1 ST GROUND OF APPEAL IS ALLOWED. 3. THE 2ND GROUND RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF ADVERTISEMENT EXPENSES OF RS.1,03,16,514/ - . 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT HAS PAID RS.1,03,13 ,614/ - TO M/S VEENA SCREEN PRINTS IN RESPECT OF ADVERTISEMENT. THE AO DISALLOWED THE ABOVE CLAIM ON THE REASON THAT THE ASSESSEE COULD NOT FILE THE AGREEMENT WITH THE SAID PARTY AND ALSO COULD NOT EXPLAIN THAT THE SAME WAS INCURRED FOR BUSINESS PURPOSE. 3. 2 IN APPEAL, THE LD. CIT(A) UPHELD THE ADDITION OF RS.1,03,16,614/ - MADE BY THE AO. HE FURTHER FOUND THAT OUT OF TOTAL EXPENDITURE OF RS.32,28,07,483/ - , THE AMOUNT OF RS.10,47,17,975/ - IS EXPENDITURE INCURRED MORE THAN RS.10,00,000/ - ON EACH ITEM. HE HELD THE SAME AS CAPITAL EXPENDITURE AND ADDED BACK TO THE TAXA BLE INCOME. 3.3 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) HAS IGNORED THE FACT THAT THE AGREEMENT AS REFERRED TO BY THE AO IN THE ASSESSMENT ORDER WAS NEVER ASKED FOR TO BE PRODUCED AND THE SAID DISALLOWANCE HAS BEEN MADE WITHOUT ASKING FOR ANY FURTHER DETAILS/EXPLANATION IN THE COURSE OF ASSESSMENT. IT IS ALSO STATED BY HIM TOTAL OIL INDIA PVT. LTD ITA NO. 1271/MUM/2013 & 336/MUM/2015 4 THAT THE LD. CIT(A) OVERLOOKED THE FACT THAT THE ASSESSEE - COMPANYS EARLIER NAME WAS M/S TOTAL FIN AELF INDIA LTD. AND THE INVOICES WERE PERTAINING TO THE ASSESSEE - COMPANY ONLY. IT IS FURTHER STATED BY HIM THAT THE LD. CIT(A) HAS ERRED IN ENHANCING THE DISALLOWANCE OF ADVERTISEMENT EXPENSES OF RS.10,47,17,975/ - ON AD - HOC BASIS WITHOUT GETTING INTO THE D ETAILS. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT WHETHER THERE SHOULD BE DISALLOWANCE OF ADVERTISEMENT E XPENSES OR NOT REQUIRE S VERIFICATION AT THE LEVEL OF AO FROM THE PRIMARY DOCUMENTS. IT CANNOT BE DECIDED AT AN ABSTRACT LEVEL TREATING IT AS CAPITAL EXPENDITURE OR R EVENUE EXPENDITURE. ONE HAS TO DELVE INTO MICRO DETAILS FROM BILLS/VOUCHERS. 4. THE 3 RD GR OUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE BY THE AO OF TRAVELLING AND CONVEYANCE EXPENSES OF RS.1,46,71,804/ - . 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO OBSERVED THAT THE AS SESSEE COULD NOT FILE FURTHER DETAILS OF THESE EXPENSES. THEREFORE, HE DISALLOWED THE CLAIM OF TRAVELLING AND CONVEYANCE EXPENSES OF RS.1,46,71,804/ - . 4.2 IN APPEAL, THE LD. CIT(A) CONFIRMED THE ABOVE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE FAILED TO PRODUCE BEFORE THE AO THE RELATED BILLS/VOUCHERS. ALSO AS HELD BY THE LD. CIT(A) , THE ASSESSEE TOTAL OIL INDIA PVT. LTD ITA NO. 1271/MUM/2013 & 336/MUM/2015 5 FAILED TO PROVE THAT THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 4.3 BEFORE US, THE LD. COUNSEL THE ASSESSEE SUBMITS THAT TH E LD. CIT(A) HAS IGNORED THE FACT THAT THE SAID DISALLOWANCE IS MADE WITHOUT ASKING FOR ANY FURTHER DETAILS/EXPLANATION IN THE COURSE OF ASSESSMENT. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 4.4 WE HAVE HEARD THE RIVAL S UBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE FOR TRAVELLING AND CONVEYANCE IS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE OR NOT HAS NOT BEEN EXAMINED EITHER BY THE AO OR THE LD. CIT(A). IT REQUIRES VERIFICATION AT THE LEVEL OF THE AO FROM BILLS/VOUCHERS. 5. THE 4 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST ON HOUSING LOAN OF RS.2,85,376/ - CONSIDERING THE SAME AS NON - BUSINESS EXPENDITURE. 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAS PAID RS.2,85,376/ - TO HD FC HOUSING FINANCE LTD. AND CLAIMED IT AS PAID ON BEHALF OF ITS EMPLOYEES. THE AO DISALLOWED AS IT WAS NOT RELATED TO ASSESSEES BUSINESS ACTIVITY. 5.2 IN APPEAL, THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE SAME. TOTAL OIL INDIA PVT. LTD ITA NO. 1271/MUM/2013 & 336/MUM/2015 6 5.3 BEFORE US , THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) IGNORED THE FACT THAT THE SAID DISALLOWANCE IS MADE WITHOUT ASKING FOR ANY FURTHER DETAILS/EXPLANATION IN THE COURSE OF ASSESSMENT. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THIS ASPECT IS REQUIRED TO BE VERIFIED AT THE LEVEL OF THE AO FROM THE DETAILS TO BE FILED BY THE ASSESSEE. 6. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ORDER KEEPING IN MIND OUR OBSERVATION AT PARA 3.4, 4.4 AND 5.4 HEREINBEFORE, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. W E DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO. 336/MUM/2015 ASSESSMENT YEAR: 2008 - 09 8. THE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING PENALTY OF RS.49,86,946/ - ON ACCOUNT OF DISALLOWANCE OF TRAVELLING AND CONVEYANCE EXPENSES OF RS.1,46,71,804/ - AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. 8.1 THE ABOVE ADDITION MADE BY THE AO AND UPHELD BY THE LD. CIT(A) HAS BEEN SET ASIDE BY US AS PER PARA 4.4 AND 6 HEREINBEFORE. THEREFORE, THE PENALTY IMPOSED BY THE AO ON THE SAID ADDITION DOES NOT SURVIVE AS TOTAL OIL INDIA PVT. LTD ITA NO. 1271/MUM/2013 & 336/MUM/2015 7 HELD IN K.C. BUILDERS VS. AC IT (2004) 265 ITR 562, 569 (SC). THEREFORE, THE PENALTY IS CANCELLED. 9. IN THE RESULT, THE APPEAL IS ALLOWED. 10. TO SUM UP THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1271/MUM/2013 IS PARTLY ALLOWED WHEREAS IN ITA NO. 336/MUM/2015 IS FULLY ALLOWED ORDER PRONOUNCED IN THE OPE N COURT ON 20/12/2017. SD/ - SD/ - ( SA K TIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 20/12/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI