OMEGA SECURITIES & TRADING COMPANY PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 13(1)(2), MUMBAI

ITA 142/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3333 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R SINDHU
• Assessee Lawyers: RAVIKANTH PATHAK
• Section: 143(1)

Judgement Text

P A G E | 1 ITA NO. 142/MUM/2018 A.Y. 2012 - 13 OMEGA SECURITIES & TRADING CO. PVT. LTD. VS. ITO - 13(1)(2) IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI G.MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 142/MUM/2018 (ASSESSMENT YEAR: 2012 - 13 ) OMEGA SECURITIES & TRADING CO. PVT. LTD. 15, ANJU SHOPPIG CENTRE, TILAK ROAD SANTACRUZ, MUMBAI - 400 054 VS. ITO - 13(1)(2) AAYAKAR BHAVAN, MUMBAI - 20 PAN AAACO0714G (APPELLANT) (RESPONDENT) APPELLANT BY: MR. RAVIKANTH PATHAK , A.R RESPONDENT BY: SHRI R. SINDHU, D.R DATE OF HEARING: 05 .02.2019 DATE OF PRONOUNCEMENT: 1 3 .02.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 21, MUMBAI , DATED 24.08.2017 WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143( 3 ) OF THE INCOME TAX ACT, 1961 (FOR SHORT IT ACT) , DATED 26.03.2015. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) H AS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : 1. HONBLE COMMISSIONER OF INCOME TAX (APPEAL) - 21 [HEREINAFTER REFERRED AS CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,80,000/ - BEING RENT EXPENSES INCURRED BY THE APPELLANT. THE APPELLANT SUBMITS THAT THE RENT EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE FOR THE BUSINESS PURPOSES AND THE SAME IS ALLOWABLE Y/S 30 OF THE P A G E | 2 ITA NO. 142/MUM/2018 A.Y. 2012 - 13 OMEGA SECURITIES & TRADING CO. PVT. LTD. VS. ITO - 13(1)(2) INCOME TAX ACT, 1961 (ACT); HENCE, THE DISALLOWANCE MADE BY THE ASSESSEE AND CONFIRMED BY THE CIT(A) SHALL BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND DELETE THE ABOVE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF DEALING IN SECURITIES AND COMMODITIES HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2012 - 13 ON 28.09.2012 , DECLARING LOSS AT ( - ) RS.8,65,535/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE IT ACT . SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. THE ISSUE INVOLVED IN THE PRESENT APPEAL LIES IN A NARROW COMPASS. THE ASSESSEE IN ITS RETURN OF INCOME HAD CLAIMED RENT EXPENSES OF RS. 1,80,000/ - . ON A QUERY RAISED BY THE A.O , IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD DURING THE YEAR UNDER CONSIDERATION CONDUCTED ITS BUSINESS FROM A PROPERTY WHICH WAS TAKEN ON LEASE FRO M ITS DIRECTORS VIZ. SHRI ANIL HURKAT (HUF) AND SMT. VINIATA HURKAT. IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD PAID A LEASE RENT AGGREGATING TO RS. 3,60,000/ - I.E. RS. 1,80,000/ - EACH TO THE AFOREMENTIONED DIRECTORS WHO OWNED THE PROPERTY UNDER CONSIDER ATION. IT WAS THE CLAIM OF THE ASSESSEE THAT AS FROM THE SAID PREMISES IT WAS ALSO DOING THE BUSINESS OF BROKING FOR KOTEX SECURITIES , HENCE 50% OF THE RENT WAS REIMBURSED TO THE ASSESSEE BY THE SAID CONCERN. IT WAS AVERRED BY THE LD. A.R THAT IT HAD CLAIM ED ONLY THE BALANCE AMOUNT OF RS.1,80,000/ - AS AN EXPENSE ON ACCOUNT OF RENT IN ITS BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION . HOWEVER, THE A.O DID NOT FIND FAVOUR WITH THE AFORESAID CLAIM OF THE ASSESSEE FOR CERTAIN REASONS (I) . THAT THE LEAVE AND LICENSE AGREEMENT S WERE EXECUTED ON A PLAIN PIECE OF PAPER AND WERE NOT REGISTERED; AND (II). THAT CONTRARY TO LEAVE AND LICENSE AGREEMENTS WHICH ENVISAGED MONTHLY PAYMENT OF LEASE RENT THE AMOUNTS WERE SIMPLY BEING CREDITED IN THE LOAN ACCOUNTS OF THE RESPECTIVE P A G E | 3 ITA NO. 142/MUM/2018 A.Y. 2012 - 13 OMEGA SECURITIES & TRADING CO. PVT. LTD. VS. ITO - 13(1)(2) LICENSORS. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O DISALLOWED THE CLAIM OF RENT EXPENSES SO RAISED BY THE ASSESSEE . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER NECESSARY DELIBER ATIONS WAS NOT PERSUADED TO SUBSCRIBE TO THE CONTENTION S ADVANCED BY THE ASSESSEE AND DISMISSED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SH ORT A.R) FOR THE ASSESSEE SUBMITTED THAT THE LOWER AUTHORITIES BY MISCONCEIVING THE FACTS OF THE CASE HAD ERRONEOUSLY DISALLOWED THE ASSESSE S CLAIM TOWARDS RENT EXPENSES OF RS.1,80,000/ - (OUT OF RS.3,60,000/ - ) WHICH WAS PAID FOR THE PROPERTY THAT WAS TA KEN ON LEAVE AND LICENSE BASIS FROM ITS DIRECTORS VIZ. SHRI ANIL HURKAT (HUF) & SMT. VINITA HURKAT. ON A SPECIFIC DIRECTION BY THE TRIBUNAL FOR PRODUCTION OF DOCUMENTARY EVIDENCE SUPPORTING THE FACT THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS CARRYING ON ITS BUSINESS FROM THE AFOREMENTIONED PROPERTY , THE LD. A.R HAD IN COMPLIANCE THEREIN PLACED ON RECORD THE R EGISTRATION C ERTIFICATE OF E STABLISHMENT ISSUED UNDER T HE BOMBAY SHOPS & ESTABLISHMENT ACT, 1948 WHICH REVEALED THAT THE POSTAL ADDRESS OF THE ASSESSEE AS PER THE SAID CERTIFICATE W AS 15 , ANJU SHOPPING CENTRE, TILAK ROAD SANTACRUZ (W) 400054 (I.E. THE PROPERTY UNDER CONSIDERATION) . APART THEREFROM, THE COPIES OF THE TELEPHONE BILLS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION ALSO RE VEALED THE AFORESAID ADDRESS OF THE PROPERTY AS ITS BILLING ADDRESS . 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS THE CONTENTION OF THE LD. D.R THAT AS THE LEAVE & LICENSE AGRE EMENT S ENTERED INTO BY THE ASSESSEE WITH ITS DIRECTORS W ERE ON PLAIN PIECE OF PAPERS WHICH DID NOT P A G E | 4 ITA NO. 142/MUM/2018 A.Y. 2012 - 13 OMEGA SECURITIES & TRADING CO. PVT. LTD. VS. ITO - 13(1)(2) EVEN BEAR THE REQUISITE STAMP DUTY AND WERE UNREGISTERED, HENCE THE CLAIM OF THE ASSESSEE OF HAVING TAKEN THE AFOREMENTIONED PROPERTY ON RENT DID NOT INSPIRE ANY CONFIDENCE. APART THEREFROM, IT WAS SUBMITTED BY THE LD. D.R THAT THERE WERE NO MONTHLY PAYMENTS OF THE RENT AMOUNT AS PRESCRIBED IN THE LEAVE AND LICENSE AGREEMENT S AND THE SAME WAS SIMPLY CREDITED IN THE LOAN ACCOUNT S OF THE RESPE CTIVE LICENSORS . 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, AS OBSERVED BY THE LOWER AUTHORITIES THE LEAVE AND LICENSE AGREEMENT S WHICH WERE EXECUTED ON PLAIN PIECE OF PAPER S AND WERE FOUND TO BE UNREGISTERED WOULD NOT INSPIRE MUCH OF CONFIDENCE. HOWEVER, ON A PERUSAL OF THE DOCUMENTS WHICH WERE PRODUCED BY THE LD. A.R AS PER THE DIRECTIONS OF THE TRIBUNAL TO SUBSTANTIATE THE FACT THAT THE ASSESSEE COMPAN Y DURING THE YEAR UNDER CONSIDERATION WAS CARRYING ON ITS BUSINESS FROM THE AFOREMENTIONED PROPERTY THEREIN SUBSTANTIALLY PROVES THE AFORESAID CLAIM OF THE ASSESSEE . WE FIND THAT THE ADDRESS OF THE ASSESSEE IN THE RE GISTRATION C ERTIFICATE OF E STABLISHMENT ISSUED UNDER T HE BOMBAY SHOP S AND ESTABLISHMENT ACT, 1948, AS WELL AS DISCERNIBLE FROM A PERUSAL OF THE TELEPHONE BILLS THEREIN SUBSTANTIALLY ADVANCES THE CLAIM OF THE ASSESSEE THAT DURING THE YEAR UNDER CONSIDERATION IT WAS IN OCCUPATION OF THE AFORE SAID PROPERTY FOR CARRYING ON ITS AFORESAID BUSINESS. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS FIND OURSELVES TO BE IN AGREEMENT WITH THE CLAIM OF THE ASSESSEE THAT IT HAD DURING THE YEAR TAKEN THE AFORESAID PROPERTY ON LEAVE AND LICENSE BASIS FROM ITS DIRECTORS VIZ. SHRI ANIL HURKAT (HUF) AND SMT. VINITA HURKAT . IT WOULD ALSO RELEVANT TO POINT OUT THAT THE AFORESAID CLAIM OF THE ASSESSEE IS FURTHER SUPPORTED FROM A PERUSAL OF THE RETURN OF INCOME OF ONE OF TH E DIRECTOR I.E SMT. ANIL HURKAT (HUF) WHEREIN THE SAID RENTAL INCOME RECEIVED FROM THE ASSESSEE FORMS PART OF ITS RETURNED INCOME FOR THE YEAR UNDER CONSIDERATION . WE P A G E | 5 ITA NO. 142/MUM/2018 A.Y. 2012 - 13 OMEGA SECURITIES & TRADING CO. PVT. LTD. VS. ITO - 13(1)(2) THUS IN TERMS OF OUR AFORESAID OBSERVATIONS DELETE THE DISALLOWANCE OF RS.1,80,000/ - MADE BY THE A.O AND SET ASIDE THE ORDER OF THE CIT(A) TO THE SAID EFFECT. 8. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN COURT ON 1 3 . 02.2019 S D / - S D / - ( G. MANJUNATHA ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 1 3 . 0 2 . 2 0 1 9 PS. ROHIT / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI