ACIT circle-32 (1), V. Francis Wacziang,

ITA 1340/DEL/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2683 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 10-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARCHANA S AWASTHI SENIOR
• Keywords: Gift; Business income; Business expenditure; Residential status

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) SHRI R.P. TOLANI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1340/DEL./2008 (ASSESSMENT YEAR : 2003-04) ACIT, CIRCLE 32 (1), VS. SHRI FRANCIS WACZIARG, NEW DELHI. A 58, NIZAMMUDDIN EAST, NEW DELHI 110 013. (PAN : AAEPW9332M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANAT KAPOOR, ADVOCATE REVENUE BY : MS. ARCHANA S. AWASTHI, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : IN THIS CASE, THE ASSESSEE HAS FILED AN APPEAL BEI NG ITA NO.1340/DEL/2008 AGAINST THE ORDER OF CIT (APPEALS) -XXVI, NEW DELHI DATED 18.01.2008. THE ITAT DECIDED THE APPEAL OF T HE REVENUE IN ITA NO.1340/DEL/2008 AND CROSS OBJECTION NO.47/DEL/2010 IN ITA NO.1340/DEL/2008 OF THE ASSESSEE ON 23.04.2010. AG AINST WHICH, THE REVENUE HAD GONE IN APPEAL TO HON'BLE DELHI HIGH COURT. TH E HON'BLE HIGH COURT HAD FINALIZED THE APPEAL NO.338/2011 ON 08.11.2011. AS PER THIS DECISION OF HON'BLE DELHI HIGH COURT, THE ISSUE REGARDING DISAL LOWANCE OF RS.1,89,201/- ON ACCOUNT OF BUSINESS DEVELOPMENT EXPENSES INCURRE D ON PRODUCING OPERA. ITA NO.1340/DEL./2008 2 THE ISSUE WAS RESTORED TO THE ITAT. THE RELEVANT P ARA OF THE HON'BLE HIGH COURT IS PARA 24 WHICH READ AS UNDER :- 24. THE ORDER OF THE TRIBUNAL IS NOT CLEAR AND IN FACT CONTRARY TO THE FINDINGS OF THE CIT (APPEALS) AS IT HAS BEEN HE LD THAT THEY WERE IN AGREEMENT WITH CIT (APPEALS) AND IT IS FURT HER STATED THAT WE ARE NOT INCLINED TO INTERFERE. THIS ASPEC T REQUIRES FRESH CONSIDERATION AND DECISION BY THE TRIBUNAL. ACCORD INGLY, THE AFORESAID QUESTION IS PARTLY ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE AND AN ORDER OF REMIT IS P ASSED. PARTIES WILL APPEAR BEFORE THE ADDITIONAL REGISTRAR ON 30 TH NOVEMBER, 2011, WHEN A DATE OF HEARING SHALL BE GIVEN. 2. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEE IS A FRENCH NATIONAL, NOW INDIAN CITIZEN AND RESIDENT OF INDIA FOR MORE THAN 35 YEARS. HE IS ASSESSED TO INCOME-TAX IN INDIA FOR INCOME EARNE D UNDER VARIOUS HEADS. FOR THE YEAR UNDER CONSIDERATION, THE SOURCE OF INCOME INCLUDES INCOME FROM SALARIES AS A DIRECTOR OF COMPANY, INCOME FROM PROV IDING CONSULTANCY, INCOME FROM HOTEL BUSINESS AND INCOME FROM INTEREST AND DIVIDEND. THE ASSESSEE IS EARNING INCOME FROM HOTEL BUSINESS AND FOUR PROPERTIES ARE BEING RUN AS HOTELS. HE IS THE OWNER OF PROPERTY AT MATH ERAN, PONDICHERRY AND RAMGARH. THE OTHER PROPERTY AT RAMGARH IS TAKEN ON LEASE FROM NAINITAL ZILA PARISHAD. HE MANAGES THE PROPERTY AT MATHERAN HIMS ELF AND THE PROPERTY AT PONDICHERRY AND RAMGARH IS BEING MANAGED BY NEEMRAN A HOTELS PVT. LTD. ON REVENUE SHARING BASIS. THE ASSESSEE ALSO PROVIDED CONSULTANCY SERVICES TO M/S. FIND TECHNOLOGIES (P) LTD AND M/S. CIC ET. DU RING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS DEBITED RS.1,89,201/- T OWARDS THE EXPENSES ITA NO.1340/DEL./2008 3 INCURRED ON PRODUCING OPERA FAKIR OF BANARAS. BE FORE THE ASSESSING OFFICER, IN THE REPLY DATED 20.09.2005, THE ASSESSE E HAS SUBMITTED AN EXPLANATION BEFORE THE ASSESSING OFFICER WHICH READ AS UNDER :- (B) REPLY TO POINT NO.(IV): DURING THE YEAR UNDER CONSIDERATION, ONLY ONE OPERA WAS ORGANIZED IN MUMB AI NAMELY 'THE FAKIR OF BANARAS' BY DELHI SYMPHONY SOCIETY. T HE SAME WAS PRODUCE BY THE ASSESSEE. MOST OF THE EXPENSES W ERE INCURRED BY DELHI SYMPHONY SOCIETY (THE SOCIETY), 2 , HUMANYUN ROAD, NEW DELHI-110 003 IN ORGANIZING THE OPERA. THE SOCIETY HAS GOT DONATIONS/CONTRIBUTIONS DIRECTL Y FROM VARIOUS DONORS/SPONSORS. THE ASSESSEE IS TABULATING THE DETAILS OF PRODUCTION COST WHICH SHALL BE GIVEN IN NEXT HEARIN G. THE ASSESSEE HAS HOWEVER CHARGED RS.1,89,201/- TO ITS P ROFIT & LOSS ACCOUNT FOR EXPENSES INCURRED ON PRODUCING 'THE FAK IR OF BANARAS. THE AMOUNT IS DEBITED TO THE ACCOUNTING H EAD 'BUSINESS DEVELOPMENT EXPENSES' IN THE PROFIT & LOSS ACCOUNT. THE COPY OF BUSINESS DEVELOPMENT ACCOUNT (TOTAL EXPENSES INCURR ED RS.220,627.83) IS ENCLOSED. THERE IS NO INCOME EARN ED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ON PRO DUCING OPERA. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE HO LDING THAT IT WAS TO PROMOTE HIS DAUGHTER MS. PRIYA WACZIARG BEING CAPIT AL IN NATURE AND ASSESSEE COULD NOT FILE THE BALANCE SHEET OF THE DELHI SYMPH ONY SOCIETY. THE AUDITED BALANCE SHEET OF THE ASSESSEE FOR RELEVANT PERIOD D ID NOT MENTION OPERA PRODUCTION AS ONE OF THE BUSINESS OF THE ASSESSEE. THE CIT (A) UPHELD THE ADDITION BY HOLDING AS UNDER :- AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLA NT AND THE ASSESSMENT ORDER, IT IS SEEN THAT THE EXPENSES INCU RRED ON PRODUCING THE OPERA, 'THE FAKIR OF BANARAS' WHICH O RGANIZED BY DELHI SYMPHONY SOCIETY ON THE APPELLANT'S PREMIS ES. THE APPELLANT HAS CLAIMED IT TO BE A BUSINESS EXPENDITU RE AS THE SAME HAS BEEN STATEDLY INCURRED ON ACCOUNT OF BUSINESS E XPEDIENCY. IT ITA NO.1340/DEL./2008 4 IS ALSO SEEN THAT THE APPELLANT HAS NOT SHOWN ANY I NCOME FROM THE SALE OF TICKETS FOR THE OPERA WHICH WAS STATED TO HAVE BEEN STAGED TWICE IN THE FINANCIAL YEAR. IT HAS ALSO BEE N STATED THAT THE STAGING OF OPERA IN THEIR PREMISES BOOSTED THE INCO ME OF THE APPELLANT'S BUSINESS IN THE SUBSEQUENT YEARS. THERE FORE, IT HAS BEEN STATED THAT THE EXPENSES OF RS.1,89,201/- INCU RRED IN CONNECTION WITH THE STAGING OF THE OPERA WAS REVENU E IN NATURE. AFTER EXAMINING THE ISSUE IN ITS TOTALITY AND THE R ELATED FACTS AND CIRCUMSTANCES IT IS SEEN THAT THE APPELLANT HAS NOT BEEN ABLE TO CO-RELATE THE INCREASE IN BUSINESS INCOME WITH THE STAGING OF THE OPERA AND INCURRING OF THE EXPENSES THEREON WITH AN Y FACTS AND FIGURES. THESE SUBMISSIONS OF THE APPELLANT ARE VE RY GENERAL IN NATURE AND THE AO HAS GIVEN A FINDING IN THE ASSESS MENT ORDER THAT IT WAS ORGANIZED WITH A VIEW TO PROMOTE THE CA REER OF THE APPELLANT'S DAUGHTER WHO IS A SOPRANO. UNDER THESE CIRCUMSTANCES THE ALLOWING OF THIS EXPENDITURE AS R EVENUE EXPENDITURE DOES NOT SEEM JUSTIFIED. FURTHER THE AO HAS OBSERVED THAT THE BALANCE SHEET OF DELHI SYMPHONY S OCIETY WAS NOT TILED BY THE APPELLANT FOR NECESSARY VERIFICATI ON. IN ADDITION THE AO HAS CORRECTLY POINTED OUT THAT THE BUSINESS OF THE ASSESSEE DOES NOT ENVISAGE THE STAGING OF OPERA PRO DUCTIONS ETC. KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THIS EXPENDITURE OF RS.1,89,201/- HAS BEEN RIG HTLY DISALLOWED BY THE AO AND IS ACCORDINGLY UPHELD. HO WEVER, IT IS HELD THAT THE 80% DISALLOWANCE MADE BY THE AO SEPAR ATELY IN THIS REGARD WILL BE DELETED AS THE SAME EXPENDITURE CANNOT BE DISALLOWED TWICE. THE ITAT HAS DEALT WITH THE ISSUE AS UNDER :- 7. WE HAVE HEARD BOTH SIDES. THE CIT(A) HAS DISCUS SED THIS ISSUE IN PARA 10 OF HIS ORDER. ALL THESE EXPENSES W ERE INCURRED ON PRODUCING THE FAKIR OF BANARAS WHICH WAS A SHO W ORGANIZED BY DELHI SYMPHONY SOCIETY. THE REASONING GIVEN BY THE ASSESSING OFFICER TO MAKE DISALLOWANCE ARE STRA NGE. MERELY BECAUSE THE ASSESSEES DAUGHTER PARTICIPATED IN THE SHOW, DOES NOT WARRANT DISALLOWANCE, AS IT IS VERY COMMON FOR THE FAMILY MEMBERS OF THE ASSESSEE TO ASSIST THE FAMILY BUSINE SS OF THE ASSESSEE. MOREOVER, THE ASSESSING OFFICER WANTED TH E PRODUCTION OF THE BALANCE-SHEET OF DELHI SYMPHONY SOCIETY, ON WHICH THE ASSESSEE HAD NO CONTROL. THE ASSESSEE HAD ONLY INCU RRED SOME EXPENSES LIKE PRINTING OF INVITATIONS ETC. WHICH IS TOTALLY ITA NO.1340/DEL./2008 5 INSIGNIFICANT COMPARING TO THE TOTAL EXPENDITURE IN CURRED FOR CONDUCTING THE SHOW. ALL THESE EXPENSES ARE INCURR ED FOR THE PURPOSE OF BUSINESS AS RIGHTLY POINTED OUT BY THE C IT(A). WE AGREE WITH HIM AND DECLINE TO INTERFERE. FROM THESE, IT IS CLEAR THAT CIT (A) HAS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HE HAS ALLOWED ONLY THE DISALLO WANCES MADE SEPARATELY UP TO THE 80% OF THE AMOUNT ON ACCOUNT OF DISALLOWA NCE TWICE. THUS, THERE WAS A CONTRADICTION IN THE FINDINGS OF THE ITAT AS OBSERVED BY HON'BLE HIGH COURT IN PARA 4 OF ITS ORDER WHEN THE ISSUE IS REMI TTED TO ITAT BACK. 3. NOW, WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AFTER HEARING BOTH THE SIDES, WE NOTE THAT THE FOLLOWING FACTS EMERGE FROM THE RECORDS AVAILABLE. DURING THE YEAR, ONE OPERA WAS ORGANIZED IN MUMBAI NAMELY THE FAKIR OF BANARAS BY DELHI SYMPHONY SOCIETY. ASSESSEE HAS D EBITED RS.1,89,201/- TO ITS PROFIT AND LOSS ACCOUNT TOWARDS THE PRODUCTION OF THE OPERA IN THE NAME OF THE FAKIR OF BANARAS. THIS EXPENDITURE WAS DEBIT ED TO THE ACCOUNTING HEAD BUSINESS DEVELOPMENT EXPENSES IN PROFIT AND LOSS ACCOUNT. THERE IS NO INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ON THE PRODUCTION OF OPERA THE FAKIR OF BANARAS. FROM THE RECORDS, WE FIND THAT THE ASSESSEE HAS NOWHERE ABLE TO JUSTIFY THE CLAIM OF THIS EXPENDITURE AS BUSINESS EXPENDITURE. ON THE ENQUIRY FROM THE BENC H, THE LD. AR WAS ASKED TO SHOW ANY BUSINESS CONNECTION BETWEEN THE EXPENDI TURE INCURRED FOR THE PRODUCTION OF THE FAKIR OF BANARAS AND THE BUSINE SS OF THE ASSESSEE. IN ABSENCE OF ANY BUSINESS CONNECTION OF THIS EXPENDIT URE TO THE BUSINESS CARRIED ITA NO.1340/DEL./2008 6 OUT BY THE ASSESSEE, IN OUR CONSIDERED VIEW, SUCH E XPENDITURE CANNOT BE ALLOWED. MOREOVER, THE DAUGHTER OF THE ASSESSEE PA RTICIPATED IN THE SHOW WHICH SHOWS THAT IT WAS FOR THE FULFILLMENT OF THE PERSONAL AMBITION OF THE FAMILY MEMBER AND IT HAS NOTHING TO DO WITH THE BUS INESS CARRIED OUT BY THE ASSESSEE DURING THE YEAR. THE DETAILS OF THE NATUR E OF THE EXPENDITURE INCURRED FOR THE FAKIR OF BANARAS IS AVAILABLE AT PAGE 91 OF THE PAPER BOOK WHICH IS AS UNDER :- NATURE OF EXPENSES PAID AMOUNT (RS.) EDITING 19,900 PHOTOGRAPHY, VIDEO RECORDING, CASSETTES ETC. 27,0 68 CAMERA HIRING CHARGES 31,500 EXPENSES INCURRED ON TRAVEL, TAXI ETC. FOR CLIENTS 14,640 PRINTING/STATIONERY 34,759 GIFTS, TIPS TO MUSICIANS, ARTISTS ETC. 27,549 TRANSLATORS FEES 10,900 HOTEL EXPENSES 11,847 TELEPHONE, PREMIER AND OTHER EXPENSES 11,038 TOTAL : 1,89,201 THESE DETAILS OF EXPENSES NEGATE THE ASSESSEES CON TENTION THAT THIS EXPENDITURE WAS INCURRED ON THE INVITATION CARDS WH ERE THE ASSESSEES NAME WAS PRINTED AND IT HELPED HIS BUSINESS. NO SUCH FA CTS EMERGE FROM THESE ITA NO.1340/DEL./2008 7 DETAILS. THESE DETAILS GO AGAINST THE ASSESSEES C LAIM. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE FIND TH AT IT APPROPRIATE TO SUSTAIN THIS ADDITION AS NON-BUSINESS EXPENDITURE NOT RELAT ED TO ANY BUSINESS CARRIED OUT BY THE ASSESSEE. 4. IN THE RESULT, THIS GROUND IS THUS DISPOSED OFF IN THE ABOVE TERMS. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF APRIL, 2013. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF APRIL, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.