GREWAL EXPORT P.LTD, NAVI MUMBAI V. DCIT 10(3), MUMBAI

ITA 1580/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0922 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHARDR
• Assessee Lawyers: ASHOK PURI
• Keywords: Depreciation; Business expenditure; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -G BENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./1580/MUM/2016, /ASSESSMENT YEAR: 2011-12 GREWAL EXPORT PVT. LTD. 901 & 902, GREAT EASTERN SUMMIT A PLOT NO.56, SECTOR 15, CBD BELAPUR, NAVI MUMBAI-400 614. PAN:AABCG 0544 P VS. DCIT-10 (3) AAYAKAR BHAVAN, INCOME TAX OFFICE, QUEENS ROAD MUMBAI. ( /APPELLANT) ( / RESPONDENT) / REVENUE BY: SHRI V. VIDHYADHAR-DR /ASSESSEE BY: SHRI ASHOK PURI / DATE OF HEARING: 16/11/2017 / DATE OF PRONOUNCEMENT: 05/01/2018 , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 29/1/2016 OF CIT(A)-24, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY-ENGAGED IN THE BUS INESS OF EXPORTING OF ENGINEERING, ELECTRONIC AND INDUSTRIAL PRODUCTS-FILED ITS RETURN OF INCOME ON 28/09/2011,DECLARING INCOME OF RS.95.36 LAKHS.THE ASSESSING OFFICER(AO)COMPLETE D ASSESSMENT U/S. 143(3) OF THE ACT,ON 21/11/2013,DETERMINING ITS INCOME AT RS.98.26 LAKHS . 2. FIRST GROUND OF APPEAL IS ABOUT TREATING THE INTERE ST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS.BEFOR E US,THE AUTHORISED REPRESENTATIVE (AR) FAIRLY CONCEDED THAT THE TRIBUNAL HAD DECIDED THE I DENTICAL ISSUE AGAINST THE ASSESSEE,WHILE ADJUDICATING THE APPEAL FOR THE AY.S. 2009-10 AND 2 010-11(ITA/2987/ MUM/2913, DTD. 12. 09.2014 AND ITA/7087/MUM/2013,DTD.08. 07.2015). RES PECTFULLY, FOLLOWING THE ABOVE ORDERS THE TRIBUNAL,WE DISMISS GROUND NO.1. 3. SECOND GROUND DEALS WITH DISALLOWANCE MADE BY THE A O,U/S.14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD EARNED EXEMPT INCOME OF RS.1.54 CRORES,THAT IT HAD MADE A DISALLOWANCE OF RS.2.88 L AKHS ON ITS OWN,THAT IT HAD CLAIMED TOTAL EXPENDITURE OF RS.5.77 LAKHS IN THE P&L ACCOUNT.INV OKING THE PROVISIONS OF RULE 8D(2) OF THE INCOME TAX RULES,1962(RULES) R.W.S.14A OF THE A CT.THE AO MADE TOTAL DISALLOWANCE OF RS.8.01LAKHS.AFTER CONSIDERING THE SUO-MOTU DISALLO WANCE MADE BY THE ASSESSEE ,HE RESTRICTED THE DISALLOWANCE TO RS.5.77 CRORES. 1580/M/16(11-12) GREWAL EXPORT P.LTD. 2 3.1. IN THE APPELLATE PROCEEDINGS,BEFORE THE FIRST APPEL LATE AUTHORITY (FAA),THE ASSESSEE MADE DETAILED SUBMISSIONS AND RELIED UPON CERTAIN C ASE LAWS. HE REFERRED TO THE ORDER OF THE TRIBUNAL FOR AY.2009-10 (SUPRA), WHEREIN THE TRIBUN AL HAD HELD THAT DISALLOWANCE MADE BY THE AO WAS TO BE RESTRICTED TO 1/4 TH OF THE EXPENDITURE. HE FURTHER HELD THAT THE AO HA D DISALLOWED THE ENTIRE EXPENDITURE DEBITED TO P&L AC COUNT TO RS.5.77 LAKHS THAT HE WAS NOT JUSTIFIED IN DISALLOWING THE SAME, THAT THE ASSESSE E HAD MADE ADVANCE OF SHARE APPLICATION MONEY OF RS.12.03 CRORES THAT HAD BEEN INCLUDED BY THE ASSESSEE IN THE INVESTMENT, THAT THE SHARES HAD NOT BEEN ALLOTTED, THAT THE SAME HAD TO BE EXCLUDED FROM AVERAGE INVESTMENT. ACCORDINGLY, HE DIRECTED THE AO TO RECOMPUTED THE D ISALLOWANCE. 3.2. BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) STATE D THAT AO HAD NOT EXPRESSED DISSATISFACTION WITH CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE , THAT ASSESSEE ON ITS OWN HAD MADE DISALLOWANCE OF RS.2.88 LAKHS , THAT THE T RIBUNAL HAD RESTRICTED THE DISALLOWANCE TO 1/4 TH OF DISALLOWANCE OF EARLIER YEAR. THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 3.3. WE FIND THAT THE AO HAD DISALLOWED THE ENTIRE EXPEN DITURE APPEARING IN THE P&L ACCOUNT INVOKING PROVISION OF SECTION 14A, THAT THE EXPENDI TURE INCLUDED DEPRECIATION OF RS.51,113/-, THAT DISALLOWANCE OF DEPRECIATION SHOULD NOT HAVE BEEN MADE. FOLLOWING THE ORDER OF THE TRIBUNAL FOR EARLIER YEAR WE DIRECT AO TO RESTRICT THE DISALLOWANCE TO 25% OF THE EXPENDITURE DISALLOWED BY THE ASSESSEE I.E. RS.2.88 LAKHS.SECO ND GROUND OF APPEAL IS PARTLY ALLOWED. 4. LAST GROUND OF APPEAL IS ABOUT DISALLOWANCE TOWARD FOREIGN TRAVELLING EXPENSES. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE H AD DEBITED RS.4.78 LAKHS TO P&L ACCOUNT UNDER THE HEAD TOUR AND TRAVELLING EXPENSE S. ON ENQUIRY IT WAS FOUND THAT THE EXPENDITURE WAS INCURRED ON ACCOUNT OF TRAVELLING O F THE DIRECTOR AND HIS WIFE. HE HELD THAT TRAVELLING WAS MORE OF PERSONAL NATURE. HE ASKED TH E ASSESSEE TO EXPLAIN AS TO WHY TRAVELLING EXPENSES SHOULD NOT BE DISALLOWED IN VIEW OF THE FA CT THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY DIRECTOR/WIFE. AS PER AO THE ASSESSEE DID NOT FU RNISH ANY VALID REASON EXCEPT THE REASON THAT DIRECTORS WERE STAYING IN DUBAI AND WERE VISIT ING INDIA .HE HELD THAT TOUR AND TRAVELLING EXPENSE OF DIRECTOR AND MEMBERS OF HIS FAMILY SHOUL D NOT HAVE BEEN SHOWN AS BUSINESS EXPENDITURE.FINALLY, HE MADE DISALLOWANCE OF RS.4.7 8 LAKHS. 4.1. IN THE APPELLATE PROCEEDINGS, THE FAA HELD THAT THE AO HAD DISALLOWED ENTIRE EXPENDITURE DEBITED TO P&L ACCOUNT .HE DIRECTED THE AO MAKE A P ARTIAL DISALLOWANCE IN RESPECT OF THE EXPENSES TOWARDS FOREIGN TRAVELLING WHICH AROSE ON ACCOUNT OF DIRECTORS WIFE ACCOMPANYING 1580/M/16(11-12) GREWAL EXPORT P.LTD. 3 HIM, THAT HE SHOULD EXCLUDE THE EXPENDITURE WHICH W ERE DIRECTLY RELATABLE TO STATUTORY BOARD MEETING OF THE ASSESSEE COMPANY FOR WHICH THE DIRE CTORS HAD TO VISIT INDIA. 4.2. BEFORE US THE AR STATED THAT THE DIRECTORS WERE NON RESIDENT OF THE COMPANY, THAT THEY WERE REQUIRED TO TRAVEL TO INDIA TO ATTEND STATUTOR Y BOARD MEETING HELD AS PER THE COMPANIES ACT, THAT THE EXPENDITURE WHICH COULD BE DISALLOWED UNDER TRAVEL EXPENDITURE COULD NOT EXCEED RS.1.90 LAKHS AFTER CONSIDERING VARIOUS EXPE NSES AND DISALLOWANCE MADE U/S. 14A OF THE ACT. THE DR RELIED ON THE ORDER OF AO AND FAA. 4.3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL BEFORE US. WE FIND THAT THE AO HAD NOT CONSIDERED THE FACT THAT DIRECTORS HAD TO A TTEND BOARD MEETINGS FROM TIME TO TIME. HE HAS ALSO MADE DISALLOWANCE U/S. 14A OF THE ACT. THE REFORE, IN OUR OPINION THE ADDITION SHOULD BE RESTRICTED TO RS.1.90 LAKHS AS SUGGESTED BY AR. GROUND NO. 3 ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT APPEAL FIELD BY ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH JANUARY, 2018. 05 , 2018 SD/- SD/- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 05 .01.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.