OFFSHORE INFRASTRUCTURE LTD, MUMBAI V. ADDL CIT RG 10(3), MUMBAI

ITA 1740/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3980 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROUMUAN PAITE DT OF HEARING ND
• Assessee Lawyers: DEEPAK H PADACHH
• Keywords: Business expenditure; Question of law; Initiation of penalty proceedings; Corroborative evidences; Capital expenditure
• Section: 234B; 133(6); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , ,, , ' ' ' ' # # # # , . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI SANJAY ARORA SANJAY ARORA SANJAY ARORA SANJAY ARORA, AM , AM , AM , AM & & & & SHRI SHRI SHRI SHRI VIJAY VIJAY VIJAY VIJAY PAL RAO, JM PAL RAO, JM PAL RAO, JM PAL RAO, JM ./ I.T I.TI.T I.T.A. NO. .A. NO. .A. NO. .A. NO.1740/MUM/2012 1740/MUM/2012 1740/MUM/2012 1740/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR:2009-10) OFFSHORE INFRASTRUCTURE LTD. 22, UDYOG KSHETRA, MULUND LINK ROAD, MULUND MUMBAI-400080 % % % % / VS. ADDL. CIT RG 10(3) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 ' ./ ( ./ PAN/GIR NO. :AAACO1012F ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') , , , , / APPELLANT BY : SHRI DEEPAK H. PADACHH *+') *+') *+') *+') - -- - , , , , /RESPONDENT BY : SHRI ROUMUAN PAITE % % % % - -- - . . . . / DT. OF HEARING : 2 ND JULY 2013 /& /& /& /& - -- -. . . . / DT.OFPRONOUNCEMENT: 24 TH JULY 2013 0 / O R D E R PER : # , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.1.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 1 .A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF 22,60,504/- MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING ENTRANCE FEES AND SUBSCRIPTION FOR CLUB MEMBERSHIP OF THE BOMBAY PRESIDENCY AND GOLF CLUB ON THE PLEA OF NON- RECURRING EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 79,092/- MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF DIFFERENCE ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 2 IN CLOSING BALANCE IN THE ACCOUNT OF M/S. JINDAL SA W LTD. DUE TO DISPUTE IN RESPECT OF QUANTITY AND RATE DIFFERENCE PENDING FOR SETTLEMENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. AO ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF ` 71,750/- TO THE INCOME OF THE APPELLANT BY WAY OF D ISALLOWING CERTAIN ADVERTISEMENT EXPENSES IN SOUVENIRS ON THE PLEA THAT THERE SAID IS IN THE NATURE OF DONATION. 4. THE ID. CIT(A) ERRED IN HOLDING THAT LE OF INTER EST U/S. 234B AND 234C ARE CONSEQUENTIAL. THE APPELLANT DENIES ITS LI ABILITY FOR SUCH PENALTY. 5. THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) IS PRE-MATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY. 3. GROUND NO. 1 IS REGARDING DISALLOWANCE OF ENTRAN CE FEES AND SUBSCRIPTION FOR CLUB MEMBERSHIP. THE ASSESSEE HAS INCURRED EXPENDITURE BEING CLUB ENTRANCE FEES OF ` 22,60,504/-. THE AO A SKED THE ASSESSEE TO SUBMIT THE DETAILS OF EXPENDITURE AND ALSO TO SHOW CAUSE AS TO WHY ENTRANCE FEES SHOULD NOT BE TREATED AS CAPITAL EXPE NSES. THE ASSESSEE EXPLAINED THAT THE ASSESSEE COMPANY HAD MADE PAYMEN T OF ENTRANCE FEE FOR CLUB MEMBERSHIP FOR BOMBAY PRESIDENCY AND GOLF CLUB IN THE NAME OF MR. VISHAL SACHDEV AND MR. SHAILESH SACHDEV DIRECTO RS OF THE COMPANY TO PROMOTE ITS BUSINESS INTERESTS AND TO MAINTAIN HIGH PROFILE CONTACTS. IT WAS ALSO CONTENDED THAT THE ASSESSEE HAS NOT ACQUIRED A NY ASSET AND HENCE, THE ADVANTAGE IS IN COMMERCIAL SENSE AND NOT IN THE CAPITAL FIELD. THE AO DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE A ND HELD THAT IT IS NON- RECURRING EXPENDITURE AND HAS RESULTED IN AN ENDURI NG BENEFIT TO THE ASSESSEE. ACCORDINGLY THE AO DISALLOWED THE ENTRANC E FEE FOR CLUB ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 3 MEMBERSHIP FEES AMOUNTING TO ` 22,60,504/- AS CAPIT AL EXPENDITURE. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE M ADE BY THE AO. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT THE EXPENDITURE HAS BEEN INCURRED TO BUILD UP BETTER CO NTACTS WITH THE CLIENTS AND CUSTOMERS AND THEREBY TO IMPROVE BUSINESS PROSP ECTS. THE CLUB HAS BEEN USED BY THE ASSESSEE FOR CONFERENCE AND MEETIN GS WITH CLIENTS, SUPPLIERS BUSINESS ASSOCIATES ETC. THEREFORE THE CL UB PROVIDED THE DIRECTORS THE PLACE MEETING AND ENTERTAINING CLIENT S, SUPPLIERS BUSINESS ASSOCIATES ETC. WHICH IS IN THE BUSINESS INTERESTS OF THE ASSESSEE. THE ASSESSEE HAS NOT ACQUIRED ANY ASSET BY MAKING THE P AYMENT OF ENTRANCE FEE OF CLUB. THE EXPENDITURE IS IN THE NATURE OF AN ADVANTAGE OF COMMERCIAL SENSE AND HAS BEEN INCURRED FOR RUNNING THE BUSINESS OF THE ASSESSEE MORE PROFITABLE, THEREFORE, IT CANNOT BE T REATED AS CAPITAL IN NATURE. HE HAS RELIED UPON THE FOLLOWING DECISIONS: DY. CIT VS. BANK OF AMERICA SECURITIES (INDIA) P. L TD. [2011] 128 LTD 386 (MUM) ACIT VS. TATA SERVICES LTD. ITA NO.19951M12010 DATE D 14-10- 2011 OTIS ELEVATORS CO. (INDIA) LTD. VS. CIT [1992] 195 ITR 682 (BORN) CIT VS. SAMTEL COLOR LTD. [2010] 326 ITR 425 (DELHI ) GUJARAT STATE EXPORT CORP. LTD. VS. CIT [1994] 209 ITR 649 (GUJ) 5. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER HAS RELIED UPON THE DECISION OF HONBLE KERALA HIGH COURT IN CASE O F FRAMTONE CONNECTOR ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 4 PVT. LTD. VS CIT 294 ITR 559 AND THE CIT(A) HAS MAD E OUT A DISTINCTION FROM THE DECISION OF HONBLE JURISDICTION HIGH COUR T IN CASE OF OTIS ELEVATOR CO. (INDIA) LTD. VS CIT 196 ITR 682 BECAUSE THE MEM BERSHIP IN THE CASE OF THE ASSESSEE IS IN THE NAME OF THE DIRECTORS AND NOT IN THE NAME OF THE ASSESSEE COMPANY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS MADE OUT A CAS E THAT THE CLUB MEMBERSHIP HAS BEEN TAKEN FOR THE PURPOSE OF THE BU SINESS OF THE ASSESSEE AS THE DIRECTORS OF THE ASSESSEE COMPANY C ONDUCT MEETING/CONFERENCE WITH THE CLIENTS, SUPPLIERS AND BUSINESS ASSOCIATES. THE AUTHORITIES BELOW HAVE DISALLOWED THE EXPENDITU RE ONLY ON THE GROUND THAT THE SAME IS CAPITAL IN NATURE AND IT HAS NOT B EEN DISPUTED THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF TH E BUSINESS OF THE ASSESSEE. THEREFORE THE QUESTION BEFORE US IS WHETH ER THE EXPENDITURE IS REVENUE IN NATURE OR CAPITAL. IN THE CASE OF OTIS E LEVATOR CO. (INDIA) LTD. VS CIT (SUPRA). THE HONBLE JURISDICTION HIGH COURT HA S HELD AS UNDER: MR. MISTRY, LEARNED COUNSEL FOR THE ASSESSEE, CONT ENDED THAT THE QUESTION OF LAW RAISED BY THE SECOND QUESTION WAS C ONCLUDED BY THE DECISION OF THIS COURT IN CIT V. INDOKEM PRIVAT E LTD. [1981] 132 ITR 125. DR. BALASUBRAMANIAN, LEARNED COUNSEL FOR T HE REVENUE, HOWEVER, CONTESTED THIS SUBMISSION AND MAINTAINED T HAT THE MEMBERSHIPS OF CLUBS WERE NOT INTENDED FOR THE BENE FIT OF THE ASSESSEE COMPANYS BUSINESS BUT ACTUALLY WERE THE R ESPECTIVE OBLIGATIONS OF THE EMPLOYEES WHICH HAD BEEN MET BY THE ASSESSEE EMPLOYER AND, CONSEQUENTLY, THEY WERE PERQUISITES W ITHIN THE MEANING OF SECTION 40(A)(V) AND THAT THEY OUGHT TO BE DISALLOWED AS PROVIDED THEREUNDER AND THAT THE INCOME-TAX OFFI CER WAS RIGHT IN DISALLOWING THESE ITEMS OF EXPENDITURE. AS WE LO OK AT THIS ISSUE, IT APPEARS TO US THAT THE FACTUAL FINDINGS OF THE A PPELLATE ASSISTANT COMMISSIONER WHICH WERE CLEAR ON THE POINT HAVE NOT BEEN DISTURBED BY THE TRIBUNAL. THE APPELLATE ASSISTANT COMMISSIONER ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 5 CATEGORICALLY FOUND THAT THE PAYMENTS OF CLUB FEES WERE MADE WITH A VIEW TO ENABLE THE ASSESSEE TO IMPROVE ITS BUSINE SS RELATIONS AND PROSPECTS. THE TRIBUNAL, WITHOUT RECORDING A CO NTRARY FINDING ON THIS CRUCIAL ASPECT OF THE MATTER, RESTORED THE ORDER OF THE INCOME-TAX OFFICER. IN OUR JUDGMENT, CONSIDERING CL EAR FINDING GIVEN BY THE APPELLATE ASSISTANT COMMISSIONER, WITH OUT CONTRARY FINDING THERETO BY THE TRIBUNAL, WE MUST ACCEPT THE FACTS AS FOUND BY THE APPELLATE ASSISTANT COMMISSIONER. CONSEQUENT LY, THE PAYMENTS MUST BE ALLOWED AS BUSINESS EXPENDITURE NO T FALLING WITHIN MISCHIEF OF SECTION 40(A)(V). THE HOUSE RENT PAYMENT BEING A CASH AMOUNT PAID WOULD BE COVERED BY THE RATIO OF THE DECISION IN INDOKEM [1981] 132 ITR 125 (BORN). WE, THEREFORE , ANSWER QUESTION NO. 2 IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 7. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE DEL HI HIGH COURT IN THE RECENT DECISION IN THE CASE OF CIT VS SAMTEL COLOR LTD. (SUPRA) AS UNDER: 10. HAVING HEARD LEARNED COUNSEL FOR THE REVENUE AS WELL AS THE ASSESSEE WE ARE OF THE VIEW THAT THE IMPUGNED JUDGM ENT OF THE TRIBUNAL DESERVES TO BE UPHELD FOR THE FOLLOWING RE ASONS: THE EXPENDITURE INCURRED TOWARDS ADMISSION FEE, ADM ITTEDLY, WAS TOWARDS CORPORATE MEMBERSHIP. AS CORRECTLY HELD BY THE TRIBUNAL, THE NATURE OF THE EXPENDITURE WAS ONE FOR THE BENEFIT OF THE ASSESSEE. THE BUSINESS PURPOSE BASIS ADOPTED FOR ELIGIBILITY OF EXPENDITURE UNDER SECTION 37 OF THE ACT WAS THE CORRECT APPROACH. THIS IS MORE SO IN VIEW OF THE TRIBUNALS FINDINGS THAT IT WAS THE ASSESSEE WHICH NOMINATED THE EMPLOYEE WHO W OULD AVAIL OF THE BENEFIT OF THE CORPORATE MEMBERSHIP GIVEN TO THE ASSESSEE. 11. THE OTHER HURDLE FOR QUALIFICATION OF THE EXPEN DITURE UNDER SECTION 37 OF THE ACT IS THAT EXPENDITURE INCURRED SHOULD NOT BE ON CAPITAL ACCOUNT. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE EXPENDITURE WAS OF A CAPITAL NATURE BASED ON A FALLACIOUS REASONING THAT THE EXPENDITURE WAS OF AN ENDURING N ATURE AND HENCE ON A CAPITAL ACCOUNT. IT IS WELL-SETTLED THAT AN EXPENDITURE WHICH GIVES ENDURING BENEFIT IS BY ITSELF NOT CONCL USIVE AS REGARDS THE NATURE OF THE EXPENDITURE. WE MAY ADD THAT EVEN LUMP SUM PAYMENT, WHICH WAS THE CASE IN THE INSTANT MATTER, IS NOT DECISIVE AS REGARDS THE NATURE OF THE PAYMENT. SEE OBSERVATI ONS IN EMPIRE JUTE CO. LTD. V. CIT [1980) 124 1TR 1 (SC) AS ALSO THE JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN CIT V. J. K. SY NTHETICS LTD. [2008) 309 ITR 371; I. T. R. NOS. 139 OF 1988 AND 202 OF 1 989. THE TRUE TEST FOR QUALIFICATION OF EXPENDITURE UNDER SECTION 37 OF THE ACT IS THAT IT SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSES OF BUSINESS AND THE EXPENDITURE SHOULD NOT BE TOWAR DS CAPITAL ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 6 ACCOUNT. IN THE INSTANT CASE, AS DISCUSSED ABOVE, T HE ADMISSION FEE PAID TOWARDS CORPORATE MEMBERSHIP IS AN EXPENDI TURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND NOT TOWARDS CAPITAL ACCOUNT AS IT ONLY FACILITATES SMOO TH AND EFFICIENT RUNNING OF A BUSINESS ENTERPRISE AND DOES NOT ADD T O THE PROFIT- EARNING APPARATUS OF A BUSINESS ENTERPRISE. 12. TO SUPPORT THE REVENUES CONTENTION THAT THE IM PUGNED EXPENDITURE IS ON CAPITAL ACCOUNT LEARNED COUNSEL, MS. PREM LATA BANSAL HAS CITED THE JUDGMENT OF FRAMATONE CONNECTO R OEN LTD. V. DUTY CIT [2007] 294 ITR 559 (KER) ; [2006] 157 TAXM AN 116. THE SAID JUDGMENT IS BASED ON THE SUPREME COURT JUDGMEN T IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORA TION LTD. V. CIT [1997] 225 ITR 792. THE JUDGMENT OF THE SUPREME COURT ON WHICH THE KERALA HIGH COURT HAS RELIED HEAVILY DEAL T WITH THE ISSUE WITH REGARD TO THE FEE PAID TO THE REGISTRAR OF COM PANIES FOR INCREASE OF AUTHORISED CAPITAL, THAT IS, WHETHER SU CH AN EXPENSE WAS IN THE NATURE OF REVENUE OR CAPITAL EXPENDITURE . THE SUPREME COURT CAME TO THE CONCLUSION THAT SINCE THE FEE WAS PAID TO THE REGISTRAR OF COMPANIES FOR INCREASE IN THE CAPITAL BASE OF THE ASSESSEE IT WAS IN THE NATURE OF CAPITAL EXPENDITUR E. ACCORDING TO US, THE RATIO OF THE AFOREMENTIONED SUPREME COURT J UDGMENT IS NOT APPLICABLE TO THE EXPENSES INCURRED ON AN ADMISSION FEE FOR CORPORATE MEMBERSHIP. WE RESPECTFULLY DISAGREE WITH THE RATIO OF THE JUDGMENT OF THE KERALA HIGH COURT. IN TURN, WE RESPECTFULLY FOLLOW THE RATIO OF THE JUDGMENT OF THE DIVISION BE NCH OF THIS COURT IN CIT V. NESTLE INDIA LTD. [2008] 296 ITR 682 AND THAT OF THE BOMBAY HIGH COURT IN THE CASE OF OTIS ELEVATOR CO. (INDIA) LTD. V. CIT [1992] 195 ITR 682. 8. THE HONBLE DELHI HIGH COURT HAS CONSIDERED ALL THE RELEVANT DECISION ON THE POINT AND THEN DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FOLLOWING THE DECISION OF HONBLE JURISDI CTION HIGH COURT AS WELL AS LATEST DECISION OF HONBLE DELHI HIGH COURT WE D ECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. GROUND NO. 2 IS REGARDING ADDITION ON ACCOUNT OF DIFFERENCE IN CLOSING BALANCES WITH M/S JINDAL SAW LTD. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED ON THE BASIS OF INFORMATI ON RECEIVED U/S 133(6) ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 7 FROM JINDAL SAW LTD. THAT THERE WAS A DIFFERENCE OF ` 79,092/- IN THE CLOSING BALANCE WHICH COULD NOT BE RECONCILED BY THE ASSESS EE AND ACCORDINGLY MADE AN ADDITION OF THE SAID AMOUNT. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSEE ON THE GROUND THA T NO SUPPORTING EVIDENCE HAS BEEN PRODUCED BEFORE IT TO SHOW THAT T HIS AMOUNT WAS NOT ACCOUNTED FOR. 10. BEFORE US THE LD. AR HAS SUBMITTED THAT THE AS SESSEE HAD FILED A STATEMENT OF RECONCILIATION OF BALANCES WITH JINDAL SAW LTD. ALONG WITH LETTER DATED 16.11.2011 AT PAGE NO. 74-77 OF THE PA PER BOOK. HE HAS FURTHER SUBMITTED THAT NO EXCESS DEDUCTION OF EXPEN SES HAS BEEN CLAIMED BY THE ASSESSEE ON ACCOUNT OF THE DIFFERENCE IN BAL ANCES. THUS, THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENSES ON THIS ACCOUNT THEREFORE THE ADDITION IS NOT JUSTIFIED. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BE LOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO MADE THE ADDITION ON THE BASIS OF THE INFORMATION RECEIVED FROM JINDAL SAW LTD. WHICH SHO WS A DIFFERENCE IN CLOSING BALANCE. THE CIT(A) HAS CONFIRMED THE ADDIT ION ON THE GROUND THAT THE ASSESSEE HAS NOT FILED ANY SUPPORTING EVIDENCE. WE FIND THAT THE ASSESSEE HAS FILED THE RECONCILIATION OF BALANCE WI TH JINDAL SAW LTD. FURTHER WHEN THE ASSESSEE HAS EXPLAINED THAT NO EXC ESS DEDUCTION OF EXPENSES HAS BEEN CLAIMED THEN THE DISALLOWANCE CAN NOT BE MADE WITHOUT VERIFY THIS FACT THAT THE ASSESSEE HAS NOT CLAIMED ANY EXCESS ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 8 DEDUCTION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCES WE SET ASIDE THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO VER IFY THE FACTS AND RECONCILIATION PROPERLY AND THEN DECIDE THE SAME AF TER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 12. GROUND NO. 3 IS REGARDING ADVERTISEMENT EXPENSE S. THE ASSESSEE HAS CLAIMED THE PAYMENT OF ` 1,86,989/- UNDER THE H EAD ADVERTISEMENT EXPENSES. THE AO NOTED THAT A PAYMENT OF ` 81,750/- MADE ON ACCOUNT OF DONATION FOR RELIGIOUS AND SOCIAL PURPOSES BUT WERE CLAIMED AS ADVERTISEMENT EXPENSES. THE AO FURTHER NOTED THAT O UT OF THE SAID EXPENSES ` 10,000/- WAS PAID TO MAHARASHTRA NAVNIRM AN SENA WHICH CANNOT BE SAID TO BE DONATION FOR BUSINESS PURPOSES . ACCORDINGLY THE AO DISALLOW THE SAID AMOUNT OF ` 81,750/-. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE TO THE EXTENT OF ` 71,75 0/- BY TAKING NOTE OF THE FACTS THAT THE ASSESSEE ITSELF AS SUO-MOTTO DIS ALLOWED A SUM OF ` 10,000/- IN COMPUTATION OF INCOME. 13. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE AO DISALLOWED THESE EXPENSES BY TREATING THE SAME AS R ELIGIOUS DONATION WHEREAS THESE EXPENSES WERE INCURRED BY THE ASSESSE E ON ADVERTISEMENT AND NOT AS DONATION. THE LD. AR HAS SUBMITTED THAT THESE EXPENSES WERE INCURRED FOR ADVERTISEMENT THROUGH BANNERS, SOUVENI RS, BOOKLETS ETC. AND THEREFORE CANNOT BE CONSIDERED AS DONATION. HE HAS RELIED UPON THE CBDT CIRCULAR NO.200 DATED 28.06.1976 AND CBDT CIRCULAR NO. 203 DATED 16.07.1976 AS WELL AS DECISION OF HONBLE CALCUTTA HIGH COURT IN CASE OF BRITISH ELECTRICAL & PUMPS (P) LTD. VS CIT 106 ITR 620. ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 9 14. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS CAT EGORICALLY POINTED OUT THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE OCC ASION OF DURGA PUJA, GANESH PUJA AND OTHER RELIGIOUS FUNCTIONS WHICH CAN NOT BE TREATED AS THE EXPENSES ON ADVERTISEMENT. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS GIVEN THE DETAILS OF THE EXPENSES IN PARA 5 OF THE ASSESSMENT ORDER AS UNDER: EXPENSE EXPENSE EXPENSE EXPENSE DEBITED DEBITED DEBITED DEBITED DATE DATE DATE DATE PARTICULARS PARTICULARS PARTICULARS PARTICULARS AMOUNT AMOUNT AMOUNT AMOUNT REASON FOR REASON FOR REASON FOR REASON FOR DISALLOWANCE DISALLOWANCE DISALLOWANCE DISALLOWANCE 11 TH APR 08 MAHARASHTRA NAVNIRMAN SENA 10,000 POLITICAL DONATION 5 TH JUL 08 SREE NARAIN MISSION, BHOPAL 1,000 DONATION 29 TH JUL 08 BENGAL ENGINEERING COLLEGE, ALIMONY ASSOCIATION 5,000 DONATION 4 TH SEP 08 DURGA PUJA 10,000 RELIGIOUS DONATIONS 11 TH SEP 08 GANESH PUJA 5,000 RELIGIOUS DONATIONS 11 TH SEP 08 MAHILA MANDAL 1,000 DONATION 17 TH SEP 08 DURGA PUJA 20,000 RELIGIOUS DONATIONS 20 TH SEP 08 VASHI CULTURAL ASSOCIATION 3,500 DONATION 20 TH SEP 08 DURGA PUJA 1,250 RELIGIOUS DONATIONS 3 RD OCT 08 DURGA PUJA 5,000 RELIGIOUS DONATIONS 7 TH OCT 08 DURGA PUJA 5,000 RELIGIOUS DONATIONS 7 TH OCT 08 DURGA PUJA 5,000 RELIGIOUS DONATIONS 9 TH DEC 08 AYAPPA BHAKT SEWA SANGAM 1,000 RELIGIOUS DONATIONS 6 TH JAN 09 NAVRATRA MAHOTSAVA 5,000 RELIGIOUS DONATIONS UNDER HEAD ADVERTISEMENT EXPENSES 31 ST MAR 09 SINDHI CULTURE SOCIETY 4,000 SOCIAL DONATION TOTAL 81,750 ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 10 16. OUT OF THE TOTAL AMOUNT OF ` 81,750/- THE PAYME NT OF ` 10,000/- TO MAHARASHTRA NAVNIRMAN SENA WAS FOUND TO BE SUO-MOTT O DISALLOWED BY THE ASSESSEE AND ACCORDINGLY THE CIT(A) RESTRICTED THE DISALLOWANCE TO ` 71,750/-. THERE IS NO QUARREL ON THE POINT THAT NO DISTINCTION CAN BE MADE BETWEEN THE EXPENDITURE ON ADVERTISEMENT IN SOUVENI RS AND OTHER TYPE OF ADVERTISEMENT INCLUDING NEWSPAPER OR MAGAZINE. THE CBDT HAS MADE IT CLEAR IN ITS CIRCULAR NO. 200 AND 201 (SUPRA). HOWE VER, IN THE CASE IN HAND THE PAYMENTS WERE MADE TO THE VARIOUS RELIGIOUS ORG ANISATION/FUNCTIONS IN WHICH THE ASSESSEE NAME MAY BE APPEARED IN THE BOOK LETS AND SOUVENIRS ISSUED ON THOSE OCCASIONS. THUS THESE SO CALLED SOU VENIRS/BOOKLETS ARE NOT THE PUBLICATION OF ANY INSTITUTION, INDUSTRIAL ORGA NISATION OR OTHER ASSOCIATION OR INSTITUTIONS AS PERMANENT IN NATURE AND RELATED TO THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, WE DO NOT FI ND ANY MERIT IN THE ASSESSEES CONTENTION THAT THE EXPENDITURE INCURRED FOR ADVERTISEMENT IN SOUVENIRS OF ALL THESE PARTIES IS AN ALLOWABLE EXPE NDITURE. THE DECISION RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE IN T HE FACTS OF THE ASSESSEES CASE, THEREFORE WE DO NOT FIND ANY REASO N TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE. 17. GROUND NO. 4 IS REGARDING LEVY OF INTEREST U/S 234B AND 234C. THE INTEREST U/S 234B AND 234C ARE CONSEQUENTIAL IN NAT URE THEREFORE, NO SPECIFIC FINDINGS IS REQUIRED. 18. GROUND NO. 5 IS REGARDING INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C). THIS GROUND OF THE ASSESSEE IS PRE-MATUR E AS IT IS AGAINST THE ITA NO.1740/M/2012 OFFSHORE INFRASTRUCTURES LTD. . 11 INITIATION OF PENALTY PROCEEDINGS. THEREFORE PRIOR TO LEVY OF PENALTY IT CANNOT BE CHALLENGED IN APPEAL ACCORDINGLY DISMISSE D. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF JULY 2013 0 - /& 1 2%3 24 TH - 4 SD/- SD/- ( ) (SANJAY ARORA) ACCOUNTANT MEMBER ( # ) $ (VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 24 TH JULY 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI