Arrow Amenities Pvt. Ltd., Kolkata V. ITO, Wd-7(1), Kolkata, Kolkata

ITA 1385/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1652 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 24-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 18-06-2014
• Court: TRIBUNAL
• Assessee Lawyers: N M BHANSALI
• Keywords: Assessment record; Revenue expenditure; Capital expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM] I.T.A NO. 1385/KOL/20 14 ASSESSMENT YEAR : 2004-0 5 ARROW AMENITIES PVT. LTD. -VS.- I.T.O., WAR D-7(1) KOLKATA KOLKATA [PAN : AAECA 5286 H]] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI N.M.BHA NSALI, ADVOCATE FOR THE RESPONDENT : SHRI SALLONG YADEN, ADDL . CIT DATE OF HEARING : 30.05.2017. DATE OF PRONOUNCEMENT : 02.06.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 27.03.2014 OF C.I.T.(A)-XXXVI, KOLKATA RELATING TO A.Y.2004-05. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ A S FOLLOWS :- 1. THAT THE LD CIT(APPEALS) WAS NOT JUST9IFIED IN C ONFIRMING THE DISALLOWING OF RS.37,21,420/- OUT OF MISC. EXPENSES OF RS.37,26,42 0/-. THE OBSERVATION OF THE LD. CIT(A) FOR DISMISSING THE APPEAL ON THIS GROUND IS WRONG, ARBITRARY AND MISCONCEIVED. 2. THAT THE APPELLANT CRAVES FOR LEAVE TO ALTER, AM END, MODIFY ANY OF THE GROUNDS AND/OR TAKE ADDITIONAL GROUNDS BEFORE OR AT THE TI ME OF HEARING OF THIS APPEAL. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN TH E BUSINESS OF RENDERING TRANSPORT SERVICES AND THE AUTOMOBILE SERVICES. THE ASSESSEE DURING THE PREVIOUS YEAR COMMENCED ITS BUSINESS OF CALL TAXI SERVICES. IN TH E COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.37,26,420/- IN ITS PROFIT AND LOSS ACCOUNT UNDER THE HEAD MISCELLANEOUS EXPENSES AND DEDUCTIBLE WHILE COMPUTING INCOME FROM BUSINESS. ACCORDING TO THE AO THE ASSES SEE WAS REQUESTED TO FURNISH DETAILS AND EVIDENCE OF INCURRING OF MISCELLANEOUS EXPENSES AND JUSTIFY THE QUANTUM OF 2 ITA NO.1385/KOL/2014 ARROW AMENITIES PVT. LTD. A.YR.2004-05 2 EXPENSES WITH REFERENCE TO THE VOLUME OF BUSINESS. ACCORDING TO THE AO THE ASSESSEE HAD NOT FILED ANY EVIDENCE REGARDING INCURRING OF E XPENSES AND ALSO HAD NOT EXPLAINED THE JUSTIFICATION OF THESE EXPENSES WITH REFERENCE TO THE VOLUME OF BUSINESS OF THE ASSESSEE. IN THIS REGARD THE AO ALSO OBSERVED THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD RECEIPTS ONLY TO THE EXTENT OF RS.3,90,183/- FR OM DRIVER RENTAL AND RECRUITMENT RECEIPTS. THE AO ALSO NOTICED THAT IN THE BOOKS OF ACCOUNTS OF THE ASSESEE ONLY A SUM OF RS.7,40,692/- WHICH WAS 1/5 TH TOTAL EXPENSES OF RS.37,26,420/- WAS DEBITED IN TH E PROFIT AND LOSS ACCOUNT WHEREAS IN THE RETURN OF INCOME FI LED THE ENTIRE SUM OF RS.37,26,420/- WAS CLAIMED AS REVENUE EXPENDITURE DEDUCTIBLE WHILE COMPUTING INCOME FROM BUSINESS. THE AO WAS OF THE VIEW THAT A SUM OF RS.5,000/- CAN BE REGARDED AS REASONABLE EXPENSES COMMENSURATE WITH THE VOLUME OF THE BUSINE SS CARRIED OUT BY THE ASSESSEE. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF ASSESSEE FOR DEDUCTION OF RS.37,21,420/-. 4. BEFORE CIT(A) THE ASSESSEE CONTENDED THAT TH E ENTIRE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT WAS SUB MITTED BY THE ASSESSEE THAT THE EXPENSES WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF BUSINESS OF THE ASSESSEE AND SINCE IT WAS THE FIRST YEAR OF THE BUSINESS THE EXP ENDITURE WAS HIGH. THE ASSESSEE ALSO POINTED OUT THAT FOR THE PURPOSE OF ACCOUNTING ENTR IES THE ASSESSEE CONSIDERED 1/5 TH OF THE EXPENDITURE AS ATTRIBUTABLE TO A.Y.2004-05 AND SINCE THE EXPENSES, THOUGH OF REVENUE IN NATURE, WAS SUCH THAT THE BENEFIT OF THO SE EXPENSES WOULD ENURE FOR A PERIOD OF TIME, THE REMAINING 4/5 TH OF THE EXPENSES WAS CLAIMED BY SPREADING IT OVER I N THE SUBSEQUENT ASSESSMENT YEARS. THE ASSESSEE POINTED O UT THAT SUCH ACCOUNTING TREATMENT CANNOT BE THE BASIS TO DISALLOW A REVENUE EXPENDITU RE IN THE PRESENT ASSESSMENT YEAR. 5. THE CIT(A) HOWEVER CONFIRMED THE ORDER OF A O OBSERVING AS FOLLOWS :- APPELLANTS SUBMISSION AND FACTS AVAILABLE ON REC ORD IS CAREFULLY CONSIDERED. ASSESSMENT RECORD WAS CALLED FOR AND VERIFIED. ON V ERIFICATION OF THE ASSESSMENT RECORD IT IS SEEN THAT APPELLANT HAS MERELY GIVEN V ARIOUS BROAD HEADS UNDER WHICH THE EXPENDITURE WAS INCURRED. NO OTHER DETAILS OF E XPENDITURE SUCH AS 3 ITA NO.1385/KOL/2014 ARROW AMENITIES PVT. LTD. A.YR.2004-05 3 BILLS/VOUCHERS OR AT LEAST NAME, ADDRESS AND AMOUNT OF PAYMENT MADE WAS FURNISHED. FROM THE BROAD HEADS GIVEN, IT IS SEEN T HAT MOST OF THE HEADS OF EXPENDITURE ARE IN THE NATURE OF CAPITAL EXPENDITUR E WHICH WAS NOT ALLOWABLE U/S 37 OF THE I.T ACT EVEN OTHERWISE THE APPELLANT HAS NOT DISCHARGED THE ONUS CAST UPON HIM ON THE ASSESSEE TO PROVE THE EXPENDITURE CLAIME D BY IT RELIANCE IS PLACED ON THE DECISION OF CIT VS. MODISTONE LTD. 206 TAXMAN 1 23 (DELHI). IN VIEW OF THE ABOVE IT IS HELD THAT AO HAD CORRECTLY DISALLOWED T HE EXPENDITURE CLAIMED UNDER THE HEAD MISC. EXPENSES. THE APPEAL ON THIS GROUND IS D ISMISSED. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. BEFORE US THE LD. COUNSEL FOR THE ASSESSE POINTED OUT THAT IT WAS NOT CORRECT ON THE PART OF CIT(A) TO HOLD THAT THE ASS ESSEE HAD NOT FURNISHED DETAILS OF BILLS, VOUCHERS AND ADDRESSES OF THE PERSONS TO WHOM PAYME NT WAS MADE. IT WAS ALSO SUBMITTED THAT THE EXPENSES WERE REVENUE EXPENSES A ND WERE DEDUCTIBLE WHILE COMPUTING THE INCOME FROM BUSINESS. THE LD. DR RELI ED ON THE ORDER OF CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE DETAILS OF THE EXPENSES THAT WERE DISALLOWED BY THE AO ARE AS FOLLOWS :- DETAILS OF MISC. EXPENDITURE WRITTEN OFF PARTICULARS TOTAL AMOUNT 1/5 TH WRITTEN OFF BALANCE AS ON 31.03.04 TEL. & TELE.COMMUNICATION TAXI METERS VEHICLE ACCESSORIES PRINTER FOR TAXI METERS ADVANCE AGAINST IVH ADVANCE AGAINST MDT VEHICLE REGISTRATION EXP. ADVANCE DRIVER RECRUITMENT ADVANCE TAXI OPERATIONS 29,160 153,080 86,760 685,436 1,559,020 266,000 348,443 129,099 446,462 5,832 30,616 17,352 137,087 311,804 53,200 69,689 25,820 89,292 23,328 122,464 69,408 548,349 1,247,216 212,800 278,754 103,279 357,170 3,703,460 740,692 2,962,768 4 ITA NO.1385/KOL/2014 ARROW AMENITIES PVT. LTD. A.YR.2004-05 4 8. IN THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO ISSUED A NOTICE DATED 26.10.2005 U/S 142 (1) OF THE ACT IN WHICH HE HAD CALLED FOR C ERTAIN DETAILS. THE DETAILS WITH REGARD TO THE MISCELLANEOUS EXPENSES HAD NOT BEEN CALLED F OR BY THE AO. THE ASSESSEE IN A LETTER DATED 27.09.2006 HAS HOWEVER FURNISHED THE D ETAILS OF THE MISCELLANEOUS EXPENSES AND HAD ALSO EXPLAINED THE ACCOUNTING TREATMENT IN THE BOOKS OF ACCOUNTS WITH REGARD TO THE MISCELLANEOUS EXPENSES AS FOLLOWS :- 6. DETAILS OF MISC. EXPENSES NOT WRITTEN OFF OR RS .29.S5.728/- AND DETAILS OF' MISC. EXPENSES WRITTEN OFF OF RS.7.40,692/-. ONLY 1/5 TH OF' THE TOTAL EXPENDITURE OF RS.3 7,03,460/- WERE WRITTEN OFF DURING THE YEAR AS EXPE NDITURE WAS OF ENDURING NATURE. 11. MISC. EXPENSES OF RS.29.62.76S/- WERE NOT WRIT TEN OFF DURING THE YEAR BECAUSE THE BENEFIT OF THESE EXPENDITURE WERE TO ACCRUE IN LONG TERM. HOWEVER, SINCE THE EXPENDITURE WAS INCURRED DURING THE YEAR FOR THE PU RPOSE OF BUSINESS THE SAME SHOULD BE ALLOWED IN THIS YEAR IRRESPECTIVE OF ITS TREATMENT IN THE ACCOUNTS. 9. AS WE HAVE ALREADY SEEN THAT THE ASSESSEE IS IN THE BUSINESS OF HIRING TAXIS BASED ON THE CALLS RECEIVED AT THE CALL CENTRE AND TRANSF ERRED TO TAXIS AT VARIOUS DESTINATIONS, WHICH IS POPULARLY REFERRED TO CALL TAXI SERVICES. FROM A PERUSAL OF THE MISCELLANEOUS EXPENSES IT APPEARS THAT THE EXPENDITURE LIKE TAXI METERS, PRINTER FOR TAXI METERS, IVH ( TO RECEIVE DATA FROM CALL CENTRE) MDT WHICH RECEIVE S DATA FROM IVH ETC, ARE INCLUDED IN THE MISCELLANEOUS EXPENDITURE. THE BUSINESS MODE L OF THE ASSESSEE IS THAT THE ASSESSEE HIRES CARS OWNED BY THIRD PARTIES AND THE ASSESSEE IS NOT THE OWNER OF THE CARS. THEREFORE THE AFORESAID ACCESSORIES WHICH ARE REQUI RED TO RENDER CALL TAXI SERVICES CANNOT SAID TO BE ITEMS OF CAPITAL EXPENDITURE. THE Y ARE INSTALLED IN THE TAXI OWNED BY A THIRD PARTY. THEREFORE THESE ITEMS OF EXPENSES HAVE TO BE REGARDED AS REVENUE EXPENDITURE. WITH REGARD TO THE FINDINGS OF CIT(A) THAT THE BILLS AND VOUCHERS, NAMES AND ADDRESS OF THE PERSON TO WHOM PAYMENTS WERE MAD E WERE NOT FURNISHED BY THE ASSESEE, WE HAVE ALREADY SEEN THAT THE ASSESSEE WAS NOT CALLED UPON TO FURNISH ALL THESE DETAILS IN THE NOTICE DATED 26.10.2005 ISSUED U/S 1 42 (1) OF THE ACT BY THE AO. NEVERTHELESS IN THE ORDER OF ASSESSMENT THE AO HAS OBSERVED THAT THE EVIDENCE FOR INCURRING THESE EXPENSES WERE NOT FURNISHED. IT WAS THEREFORE NECESSARY FOR THE ASSESSEE 5 ITA NO.1385/KOL/2014 ARROW AMENITIES PVT. LTD. A.YR.2004-05 5 TO HAVE FURNISHED THE NECESSARY EVIDENCE BEFORE THE CIT(A). WE ARE OF THE VIEW THAT THE EXPENSES IN QUESTION CANNOT REGARDED TO BE AS C APITAL EXPENDITURE. NEVERTHELESS ALLOWABILITY OF EXPENSES IN QUESTION U/S 37(1) OF T HE ACT IS ALSO DEPENDENT ON THE CONDITION THAT THESE EXPENSES WERE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. WE THEREFORE SET ASIDE THE ORDER O F CIT(A) AND REMAND THE QUESTION TO THE AO FOR FRESH CONSIDERATION WITH A LIBERTY TO TH E ASSESSEE TO FILE EVIDENCE TO SHOW INCURRING OF THESE EXPENSES BY THE ASSESSEE. WE MAY ALSO ADD THAT THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE IN THE BOOKS OF ACC OUNTS WILL NOT BE DECISIVE IN THE MATTER. WITH THESE OBSERVATIONS, WE ALLOW THE APPE AL OF THE ASSESSEE FOR STATISTICAL PURPOSES. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02.06.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. ARROW AMENITIES PVT. LTD., 2, NAZIR ALIE LANE, F LAT NO.4A, KOLKATA-700019. 2. I.T.O., WARD-7(1), KOLKATA. 3. CIT(A)-XXXVI, KOLKATA 4. C.I.T.-III, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETAR Y HEAD OF OFFICE/ D.D.O., ITAT , KOLKATA BENCH ES 6 ITA NO.1385/KOL/2014 ARROW AMENITIES PVT. LTD. A.YR.2004-05 6