Ansuya Ramchandra Padir, Raigad V. Assistant Commissioner of Income-tax, Panvel

ITA 1717/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9467 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Revision of order; Business expenditure; Capital expenditure
• Section: 143(3); 148; 37; 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1717/PUN/2015 / ASSESSMENT YEAR : 2008-09 ANSUYA RAMCHANDRA PADIR, PURUSHARTH AUTO SERVICE, SION-PANVEL EXPRESS HIGHWAY, KALAMBOLI - 410218. PAN : AAUPP3407G. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, PANVEL CIRCLE, PANVEL. . / RESPONDENT ASSESSEE BY : NONE. REVENUE BY : SHRI MUKESH JHA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, THANE DT.27.11.2015 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL AND IS STATED TO BE RUNNING A RETAIL OUTLET OF DIESEL AND PETROL IN THE NAME AND STYLE O F M/S. / DATE OF HEARING : 04.12.2017 / DATE OF PRONOUNCEMENT: 12.01.2018 2 PURUSHARTH AUTO SERVICES. ASSESSEE FILED HER RETURN OF INCOME FOR A.Y 2008-09 ON 29.09.2008 DECLARING TOTAL INCOME OF RS.59,09,270/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 30.12.2013 AND THE TOTAL INCOME WAS DETERM INED AT RS.59,74,300/-. THEREAFTER LD.CIT-II INVOKED THE PROVISION S OF SEC.263 OF THE ACT VIDE ORDER DT.22.03.2013 AS HE WAS OF THE VIEW THERE WAS LOSS OF REVENUE DUE TO ALLOWANCE FOR CLAIM OF TH E ASSESSEE IN RESPECT OF TENANT SETTLEMENT CLAIM AT RS.5,5 0,000/-. HE ACCORDINGLY SET ASIDE THE ORDER PASSED BY THE AO U /S 143(3) OF THE ACT AND DIRECTED THE AO TO PASS A FRESH ASSESSM ENT ORDER AFTER CONSIDERING THE DIRECTIONS MENTIONED THEREIN. AO THEREAFTER PASSED ORDER ON 30.12.2013 WHEREIN HE NOTICE D THAT ASSESSEE HAD CLAIMED RS.5,50,000/- AS TENANT SETTLEMENT EXPENSES. AO NOTICED THAT THE AFORESAID SUM WAS PAID T O THE TENANT FOR VACATING THE PREMISES THAT WAS IN OCCUPATION BY THE TENANT. HE WAS OF THE VIEW THAT SINCE THE BUSINESS OF THE ASSESSEE WAS BUYING AND SELLING OF PETROL AND DIESEL ON R ETAIL BASIS AND IT WAS NOT THAT OF EVICTING TENANT, THE EXPEN SES INCURRED BY THE ASSESSEE TO EVICT THE TENANT FROM ITS PREMISES CANNOT BE CONSIDERED TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY DISALLOWED THE EXPENSES. AGGRIEVED BY THE ORDER OF AO, A SSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDE R OF AO BY OBSERVING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO, SUBMISSIONS OF THE LD. LD.AR AND MATERIAL P LACED ON 3 RECORD. FROM THE FACTS OF THE CASE, IT IS SEEN THAT THE APPELLANT IS AN OWNER OF PETROL PUMP. DURING THE YEAR, AN AMOUNT OF RS.5,50,000/- CLAIMED TO HAD BEEN PAID TO TENANT, U NDER GRAB OF TENANT SETTLEMENT EXPENSES, FOR VACATING THE PLOT. AS PER DETAILS SUBMITTED, IT IS SEEN THAT THE APPELLANT HAD ALLOWE D A PORTION OF PLOT TO A TENANT TO BE USED FOR HOTEL PURPOSES. THE APPELLANT, SUBSEQUENTLY DECIDED TO EXPEND HIS BUSINESS OF SELL ING OF PETROL AND PETROLEUM PRODUCT, THEREFORE REQUESTED THE TENA NT TO VACATE THE PORTION OF PLOT OCCUPIED BY HIM. FOR PEACEFUL V ACATION OF THE PLOT AND TO COMPENSATE THE TENANT, THE APPELLANT CL AIMED TO HAVE PAID THE ABOVE AMOUNT. THE APPELLANT HOWEVER, FAILE D TO FURNISH SUPPORTING DOCUMENTARY EVIDENCES, CONFIRMATIONS, BA NK STATEMENTS, NAME ADDRESS OF PARTY ETC TO SUPPORT HI S ABOVE CLAIM. 5.1 IN VIEW OF THE ABOVE FACTS, DURING THE COURSE O F APPELLATE PROCEEDINGS, THE LD. LD.AR WAS REQUIRED TO FURNISH NAME AND ADDRESS OF THE PARTY TO WHOM THE ABOVE AMOUNT WAS P AID ALONG WITH CORROBORATIVE SUPPORTING DOCUMENTS SUCH AS COP Y OF TENANT SETTLEMENT/AGREEMENT FOR PAYMENT OF ABOVE COMPENSAT ION, CONFIRMATION, BANK STATEMENT REFLECTING CREDIT OF S AID AMOUNT, COPY OF LEDGER ACCOUNTS ETC. IN COMPLIANCE, THE LD. AR COULD NOT FURNISH THE ABOVE DOCUMENTS FOR THE REASON BEST KNO WN TO HIM. THE LD. AR ALSO FAILED TO PRODUCE THE PARTY FOR EXA MINATION IN PERSON TO ASCERTAIN THE NATURE AND PURPOSE OF ABOVE PAYMENT, IF ANY, ALONG WITH ITS GENUINENESS AND BUSINESS LINK. HE HAS MERELY REITERATED THE FACT THAT THE PAYMENTS HAVE B EEN MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THEREFORE, THE SAME MAY BE ALLOWED AS PER PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT, 1961. HE HAS ALSO RELIED UPON THE R ULING OF VARIOUS COURTS, AS STATED ABOVE. 5.2 I HAVE CAREFULLY CONSIDERED THE CONTENTS OF T HE ABOVE RULINGS AND NOTICED THAT IN ALL THOSE CASES, THOSE ASSESSES WERE HAVING THE NECESSARY CORROBORATIVE DOCUMENTS, IN THEIR PO SSESSION, ALONG WITH PROOF OF PAYMENTS AND CONFIRMATION FROM THE RECIPIENT, IN SUPPORT OF THEIR CLAIMS. ON THE OTHER HAND, THE LD. AR OF THE APPELLANT COULD NOT PRODUCE ANY CREDIBLE DOCUMENTS WHICH COULD PROVE THE CLAIM OF THE APPELLANT, WITH REGARD TO PA YMENT OF RS.5,50,000/- TO THE TENANT FOR VACATING THE PLOT, OCCUPIED BY HIM. MOREOVER, THE PAYMENT , IF AT ALL ACCEPTED, H AS BEEN MADE FOR VACATING THE PLOT, IS OF ENDURING BENEFIT, THER EFORE, THE SAME IS IN THE NATURE OF CAPITAL EXPENDITURE, HENCE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. 5.3 SECONDLY, IN THE ABSENCE OF REQUIRED DETAIL S, THE NATURE AND PURPOSE OF SAID TRANSACTION AND ITS BUSINESS NE EDS, IF ANY, CANNOT BE ASCERTAINED. KEEPING IN VIEW THE ABOVE DI SCUSSION, IN MY CONCERNED OPINION, THE SAID AMOUNT OF RS. 5,50,0 00/- IS RIGHTLY ASSESSED, IN THE HANDS OF THE APPELLANT. AL L THE GROUNDS OF APPEAL, RAISED AS ABOVE ARE DISMISSED ACCORDINGLY. 3. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 4 1. THE LEARNED CIT(A) ERRED IN DISMISSING AN APPEA L ON THE GROUND OF LACK OF EVIDENCE WITHOUT APPRECIATING THA T : A) THE LEARNED AO DID NOT DOUBT THE EXPENDITURE INCURR ED AND PAYMENT MADE. B) THE LEARNED CIT IN ORDER U/S 263 DIRECTED THE AO TO GIVE OPPORTUNITY TO THE ASSESSEE TO PROVE THE NATURE OF EXPENSES AND ITS RELATEDNESS TO THE BUSINESS. 2. THE LEARNED CIT(A) FAILED TO ADJUDICATE THE GROU NDS TAKEN AND FAILED TO APPRECIATE THE CASE LAWS RELIED. 4. THE CASE FILE REVEALS THAT THOUGH THE NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE BUT NONE APPEARED ON BEHALF OF A SSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. WE THEREFORE PROCEED TO DECIDE THE ISSUE EX-PARTE QUA THE ASSESSEE ON THE BASIS OF MATERIAL ON RECORD AND AFTER HEARING THE REVENUE. 5. BEFORE US LD.D.R. SUBMITTED THAT IN THE ORDER PASSED B Y AO, IT HAS BEEN STATED THAT THE ORDER WAS PASSED U/S 148 R.W.S. 143(3) OF THE ACT. HE SUBMITTED THAT THE MENTIONING OF SEC TION OF PASSING THE ORDER U/S 148 R.W.S. 143(3) OF THE ACT IS WRO NG AND ACTUALLY IT IS PASSED PURSUANT TO THE DIRECTIONS OF LD.CIT -II U/S 263 OF THE ACT. 6. BEFORE US, LD.D.R. TOOK US THROUGH THE FINDINGS OF THE AO AND SUPPORTED THE ORDER OF AO AND LD.CIT(A). 7. WE HAVE HEARD THE LD.D.R. AND PERUSED THE MATERIAL ON RECORD. THE STATEMENT OF FACTS AS FILED BY THE ASSESSEE BEFORE LD.CIT(A) REVEALS THAT SHE IS RUNNING OF RETAIL OUTLET OF DIES EL AND PETROL IN THE NAME AND STYLE OF PURUSHARTH AUTO SERVICE AT 5 KALAMBOLI. IN THE PAST SHE HAD ALLOWED A PERSON TO USE A PORTION OF PLOT AREA FOR HOTEL PURPOSE AS SHE WAS UNDER THE BELIE F THAT THE CUSTOMERS WHO CAME FOR FUELING THE VEHICLES PREFERS TO TAKE A HALT FOR TEA, SNACKS ETC AND BY ALLOWING THE HOTEL FACILITY, ASSESSEE HAD TRIED TO IMPROVE THE SERVICE BY GIVING MOR E BENEFIT TO THE CUSTOMERS. AFTER FEW YEARS, THE SAID PERSON S TOPPED OPERATING THE RESTAURANT AND DID NOT BOTHER TO GIVE B ACK THE POSSESSION TO THE ASSESSEE. AS THE AREA LET OUT TO T HE TENANT FOR OPERATING RESTAURANT WAS INCIDENTAL TO THE BUSINESS OF R ETAIL OUTLET AND IN ORDER TO REMOVE THE ENCROACHMENT, ASSES SEE PAID THE COMPENSATION TO THE TENANT THROUGH CHEQUES. IN T HE ORIGINAL ASSESSMENT PROCEEDINGS THE EXPENDITURE WAS ALLOWED BY T HE AO BUT IN THE REVISIONARY PROCEEDINGS, LD.CIT-II WAS OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TO EVICT THE TENANT FROM ITS PREMISES WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THEREFORE DIRECTED THE AO TO R EFRAME THE ASSESSMENT ORDER. AO IN THE CONSEQUENTIAL PROCEED INGS DISALLOWED THE EXPENSES. IN THE PRESENT CASE, THE RUNNIN G OF DIESEL AND PETROL RETAIL OUTLET BY THE ASSESSEE AND THE T ENANT WAS EARLIER OPERATING RESTAURANT ADJACENT TO THE PETROL OUT LET IS NOT IN DISPUTE. THE TENANT HAS STOPPED OPERATING THE RESTAUR ANT AND FOR IMPROVING AND EXTENDING THE RETAIL OUTLET, THE PAYMENT MADE BY THE ASSESSEE AS COMPENSATION TO THE TENANT THROUG H CHEQUES IS ALSO NOT IN DISPUTE. IT IS A FACT THAT THE AMOUNT PAID BY THE ASSESSEE WAS NOT FOR ACQUISITION OF ANY NEW ASSET BUT WA S FOR THE SMOOTH FUNCTIONING OF THE EXISTING BUSINESS. THE ASSESSEE S CONTENTION THAT THE NON-OPERATION OF THE RESTAURANT WA S CAUSING 6 OBSTACLE TO THE BUSINESS OF THE ASSESSEE IS NOT FOUND TO BE FALSE. FURTHER IT IS NOT A CASE OF THE REVENUE THAT BY INCURRIN G EXPENDITURE A NEW ASSET HAS BEEN CREATED. IT IS A SET TLED LAW THAT IN ASCERTAINING WHETHER THE EXPENDITURE HAS BEEN LA ID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, WHAT IS TO BE BORNE IN MIND IS THAT IT IS INCURRED ON ACCOUNT OF COMMERC IAL EXPEDIENCY OF THE ASSESSEE. WHAT IS COMMERCIAL EXPEDIENC Y IS TO BE LOOKED FROM THE VIEW OF A BUSINESSMAN AND THAT THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR VIEW P OINT BUT THAT OF A PRUDENT BUSINESSMAN. 8. WE FURTHER FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NAVSARI COTTON AND SILK MILLS LIMITED (1982) 1 35 ITR 546 (GUJ) HAS INTER-ALIA HELD THAT WHEN THE EXPENDIT URE HAS BEEN INCURRED FOR INCREASING EFFICIENCY IN WORKING OR FOR REMOVING INEFFICIENCY IN WORKING OR WHERE EXPENDITURE IS INCURRED IN SUCH AS A WISE, PRUDENT, PRAGMATIC AND ETHICAL MAN OF THE WORLD OF BUSINESS WOULD CONSCIENTIOUSLY INCUR WITH AN EYE ON PROMO TING ITS BUSINESS PROSPECTS, THEN THE EXPENDITURE IS TO BE C ONSIDERED AS FOR THE PURPOSE OF BUSINESS. IN THE PRESENT CASE T HE CONTENTION OF THE ASSESSEE THAT THE COMPENSATION PAID TO GET THE TENANT VACATED AS HE WAS NOT OPERATING THE RESTAURAN T AND THE PREMISES OF THE RESTAURANT WHICH WAS LAYING IN DORMANT CONDITION WAS CAUSING HURDLE TO THE EXISTING BUSINESS IS NO T FOUND TO BE UNTRUE. IN SUCH A SITUATION, THE AMOUNT PA ID BY THE ASSESSEE TO THE TENANT TO GET HIM EVICTED, HAD A LIVE LIN K WITH THE BUSINESS OF THE ASSESSEE. CONSIDERING THE TOTALITY OF T HE 7 AFORESAID FACTS AND IN VIEW OF THE TESTS LAID DOWN BY THE AFORESAID DECISION OF HONBLE GUJARAT HIGH COURT, WE ARE OF THE VIEW THAT THE AMOUNT PAID BY THE ASSESSEE FOR GETTING THE TENANT EVICTED WAS AN EXPENDITURE INCURRED BY THE ASSESSEE DURING TH E COURSE OF BUSINESS AND THEREFORE WAS ALLOWABLE AS BUSINESS EXPENDITURE. WE THEREFORE DIRECT THE AO TO ALLOW THE SA ME. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 12 TH DAY OF JANUARY, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH JANUARY, 2018. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, THANE. PR.CIT-2, THANE. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.