Margadarsi Chit Fund Private Limited, Hyd, Hyderabad V. ACIT, Circle-16(2), Hyderabad, Hyderabad

ITA 1300/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6171 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: V SIVA KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1300/HYD/2015 ASSESSMENT YEAR 2012-2013 MARGADARSI CHIT FUND P. LTD., HYDERABAD 500004 PAN AABCM4751G VS. ACIT, CIRCLE 16(2) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. V. SIVAKUMAR FOR REVENUE : MR. B. KURMI NAIDU DATE OF HEARING : 08.01.2016 DATE OF PRONOUNCEMENT : 14 .01.2016 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-4, HYDERABAD DATED 14.09.2015 ON THE ISSUE OF DISALLOWANCE OF EXPENDITURE RESTRICTED BY THE LD. CIT(A) TO AN AMOUNT OF RS. 5 LAKHS. 2. ASSESSEE IS ENGAGED IN THE CHIT FUND BUSINESS AND OTHER BUSINESS AND FILED INCOME DECLARING AN AM OUNT OF RS.133.03 CRORES. A.O. MADE VARIOUS ADDITIONS IN TER ALIA, WHICH ARE NOT SUBJECT MATTER OF THE PRESENT A PPEAL EXCEPT DISALLOWANCE OF AMOUNT OF RS.14,94,679. A.O. FOUND OUT THAT ASSESSEE COMPANY HAD MADE COLLECTION S ON BEHALF OF ITS SUBSIDIARY COMPANIES. A.O. ASKED TO E XPLAIN 2 ITA.NO.1300/HYD/2015 MARGADARSI CHIT FUND P. LTD., HYDERABAD. WHY THE PROPORTIONATE EXPENSES SHOULD NOT BE DISALL OWED AS EXPENDITURE IS NOT INCURRED IN CONNECTION WITH ASSESSEES BUSINESS. HE DISALLOWED AN AMOUNT OF RS.14,94,679 OUT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE PERTAINING TO THE COLLECTION BUSINESS OF SUBSIDIARY COMPANIES. 2.1. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT A.O. IS NOT JUSTIFIED IN CONSIDERING ALL THE EXPEND ITURE DEBITED IN THE P & L ACCOUNT FOR SUCH DISALLOWANCE. IT WAS SUBMITTED THAT ONLY EXPENSES SUCH AS SALARIES OF CONCERNED STAFF WHO COLLECTED ON BEHALF OF OTHER GR OUP COMPANIES SHOULD HAVE BEEN CONSIDERED FOR PROPORTIO NATE DISALLOWANCE. IT WAS ALSO SUBMITTED BEFORE THE LD. CIT(A) THAT IN THE IMMEDIATELY PRECEDING YEARS THE DISALLO WANCES WERE REDUCED FROM 1 LAKH TO RS.3 LAKHS AND THOSE DISALLOWANCES HAVE BEEN UPHELD BY THE ITAT. 2.2. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) AGREED THAT A VERY SMALL PORTION OF EXPE NSES CAN ACTUALLY BE IMPUTED TO THE COLLECTION OF SUBSCR IPTION FOR OTHER GROUPS, CONSEQUENTLY THE ENTIRE EXPENDITU RE OF RS.158.38 CRORES CANNOT BE ALLOCATED PROPORTIONATEL Y. SINCE SUCH EXPENDITURE CANNOT BE DISCERNED FROM THE P & L ACCOUNT, AN AMOUNT OF RS. 5 LAKHS WAS ROUND-SOMEL Y DISALLOWED AND ASSESSEE WAS GIVEN PARTIAL RELIEF. A SSESSEE IS AGGRIEVED ON THAT. 3 ITA.NO.1300/HYD/2015 MARGADARSI CHIT FUND P. LTD., HYDERABAD. 3. LD. COUNSEL, MR. V. SIVAKUMAR, SUBMITTED THAT THE EXPENDITURE ON STAFF MEMBERS WILL NOT BE THAT MUCH SO AS TO DISALLOW AN AMOUNT OF RS.5 LAKHS PROPORTIO NATELY. IT WILL BE MINISCULE AMOUNT WHICH WILL BE LESS THAN RS.1 LAKH. HE FAIRLY ADMITTED THAT DISALLOWANCE IN EARLI ER YEARS WAS UPHELD BY THE ITAT IN ASSESSEES OWN CASE AND S O THE ISSUE IS ONLY WITH REFERENCE TO QUANTUM OF DISALLOW ANCE AND NOT THE DISALLOWANCE PER SE . 4. LD. D.R. HOWEVER, SUPPORTED THE ORDERS OF THE LD. CIT(A). 5. WE HAVE PERUSED THE RIVAL CONTENTIONS AND ORDERS PLACED ON RECORD. IT IS ADMITTED THAT PROPOR TIONATE DISALLOWANCE IS REQUIRED TO BE MADE EVEN BEFORE THE LD. CIT(A). WE FAIRLY AGREE WITH THE LD. CIT(A) THAT SU CH EXPENDITURE CANNOT BE CLEARLY DISCERNED FROM P & L ACCOUNT, CONSEQUENTLY ONLY ESTIMATION IS REQUIRED. AS SEEN FROM THE EARLIER DISALLOWANCES, THE A.O. DISAL LOWED AN AMOUNT OF RS.7,99,524 IN A.Y. 2009-10 WHICH WAS RESTRICTED TO RS.1 LAKH. IN A.Y. 2011-12, A.O. DISA LLOWED AN AMOUNT OF RS.30,85,014 OUT OF WHICH, LD. CIT(A) RESTRICTED IT TO AN AMOUNT OF RS. 3 LAKHS. THIS YEA RS DISALLOWANCE IS ABOUT RS.14,94,679. CONSIDERING THE SCALE OF DISALLOWANCE IN EARLIER YEARS AND THE OPERATIONS UNDERTAKEN BY THE ASSESSEE, WE ARE OF THE OPINION T HAT AN AMOUNT OF RS.1,50,000 IS JUSTIFIABLE DISALLOWANCE I N THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY, THE DISALLOW ANCE OF EXPENDITURE IS RESTRICTED TO RS.1,50,000 AS AGAI NST RS.5 4 ITA.NO.1300/HYD/2015 MARGADARSI CHIT FUND P. LTD., HYDERABAD. LAKHS ESTIMATED BY THE LD. CIT(A). ASSESSEE GETS PA RTIAL RELIEF ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.01.2016. SD/- SD/- (SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 14 TH JANUARY, 2016 VBP/- COPY TO 1. MARGADARSI CHIT FUND P. LTD., 5 - 10 - 195, FATEH MAIDAN ROAD, HYDERABAD 500 004. 2. ACIT, CIRCLE 16(2), HYDERABAD. 3. CIT(A) - 4 , 3 RD FLOOR, ANNEXE, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004 . 4. PR. CIT - 4 , HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD 6. GUARD FILE