Shri Prafulkumar Manek, Baroda V. The ACIT.,Circle-2(2), Baroda

ITA 1742/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85867 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER ITA NO . 1742 /AHD/2011 A. Y . 2005 - 0 6 SHRI PRAFULKUMAR MANEK, 16 - B, MOHAN KRUPA SOCIETY, MANJALPUR, VADODAR A. PAN:AAXPM 7714Q VS CIT, APPEALS - III, BARODA . (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ROOP CHAND , SR.D.R. . ASSESSEE(S) BY : NONE / DATE OF HEARING : 19 / 0 3 /201 5 / DATE OF PRONOUNCEMENT: 25 / 0 3 /201 5 / O R D E R PER: MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF L EARNED CIT(A) - III, BARODA , DATED 18 . 1 1 .201 0 AND THE GROUND RAISED IS REPRODUCED BELOW: 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF THE EXPENSES AMOUNTING TO RS.2,02,424/ - WITHOUT CONSIDERING THE FACTS THAT THE SAME ARE INCURRED FOR T HE PURPOSE OF BUSINESS. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 1 1 . 12 .200 7 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS IN THE BUSINESS OF MONEY - LENDING AND ALSO DECLARED CAPITAL GAIN. IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD DEBITED VARIOUS EXPENSES TO P&L ACCOUNT AMOUNTING TO RS.2,58,224/ - . THE AO HAS ITA NO. 17 42 /AHD /201 1 SHRI PRAFULKUMAR MANEK FOR A.Y. 2005 - 0 6 - 2 - ASKED TO JUSTIFY THE CLAIM OF EXPENDITURE AGAINST THE INTEREST INCOME. AS PER AO, THE ASSESSEE WAS NOT ABLE TO ESTABLISH THAT THOSE EXPENDITURE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST INCOME. AFTER ALLOWING FEW EXPENDITURE WHICH WERE FOUND TO BE CONNECTED WITH THE INTEREST INCOME THE BALANCE OF RS.2,02,424/ - WAS ADDED IN THE TAXABLE INCOME OF THE ASSESSEE. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE DETAILS OF THE EXPENDITURE SUCH AS TRAVELLING EXPENSES OF RS.22,000/ - , LEGAL FEES RS.32,500/ - TELEPHONE EXPENSES RS.63,637/ - DEPRECIATION RS.51,344/ - , ETC. WERE FURNISHED. LEARNED CIT(A) HAS HELD THAT ALLOWABILITY OF EXPENDITURE U/S.57 OF IT ACT IS MUCH NARROWER AND RE STRICTED THEN THE ALLOWABILITY OF EXPENDITURE U/S.37 OF IT ACT. IN RESULT, THE VIEW TAKEN BY THE AO WAS CONFIRMED. 4. ON THE DATE OF HEARING, NO ONE WAS PRESENT FROM THE S IDE OF THE APPELLANT. A RETURN SUBMISSION OF THE ASSESSEE WAS ALREADY ON RECORD. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE - DEPARTMENT, LEARNED SR.D.R., MR. ROOPCHAND APPEARED AND PLACED RELIANCE ON THE ORDER OF THE AO AND LEARNED CIT(A). LEARNED SR.D .R. HAS ALSO PLEADED THAT THE DETAILS OF EXPENDITURE A S FURNISHED BEFORE LEARNED CIT(A) HAVE CLEARLY ESTABLISHED THAT THE EXPENDITURE WERE PERSONAL IN NATURE AND NOT CONNECTED WITH THE EARNING OF INTEREST INCOME ; THEREFORE , RIGHTLY DISALLOWED. 5. AFTER CA REFULLY PERUSING THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED, WE HAVE NOTED THAT REPAIR, PETROL EXPENSES, TRAVELLING EXPENSES, TELEPHONE EXPENSES, ETC. WERE NOT IN CONNECTION OF ITA NO. 17 42 /AHD /201 1 SHRI PRAFULKUMAR MANEK FOR A.Y. 2005 - 0 6 - 3 - THE EARNING OF THE INTEREST INCOME. IT IS ALSO W ORTH TO MENTION THAT THE ASSESSEE HAD EARNED INTEREST ON FDR OF CENTRAL BANK OF RS.65,700/ - . FURTHER, THE ASSESSEE HAS EARNED INTEREST ON FDR OF THE UNITED WESTERN OF RS.2,75,676/ - . APART FROM THESE TWO AMOUNT OF INTEREST EARNED BY THE ASSESSEE, THERE WAS A SUM OF RS.90,076/ - SHOWN AS NET INTEREST TRANSFER TO PROFIT AND LOSS ACCOUNT STATED TO BE RECEIVED FROM VARIOUS PARTIES. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE SAID EXPENDITURE WERE CONNECTED WITH THE MONEY LENDING BUSINESS WAS NOT FULLY ESTABLISH ED. ALTHOUGH , IN THE PAST , THE REVENUE DEPARTMENT HAS NOT MADE SUCH TYPE OF ADDITION BUT IT IS WORTH TO MENTION HERE THAT EACH ASSESSMENT YEAR IS AN INDEPENDENT ASSESSMENT YEAR ; HENCE , THE TAXABLE INCOME IS TO BE DECIDED ON THE BASIS OF THE FACTS OF THAT V ERY FINANCIAL YEAR S ACCOUNT. WE HAVE PERUSED THE DECISION OF RAJENDRA PRASAD MODI, CITED FROM THE SIDE OF THE ASSESSEE, 115 ITR 519 AND NOTED THAT EVEN IN THAT CASE THE EXPENDITURE DEDUCTIBLE U/S.57(III) WERE REQUIRED TO BE EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INCOME. NATURALLY, THE EXPENDITURE OF ANY NATURE SHOULD NOT BE ALLOWED IF NOT INCURRED FOR THE PURPOSE OF EARNING OF THE INCOME. THE HON BLE COURT HAS THEREFORE, INTERPRETED THE PROVISION OF SECTION 57(III) OF IT ACT AND HE LD THAT A RESTRICTIVE MEANING IS WARRANTED. HOWEVER, SIDE BY SIDE IT HAS ALSO BEEN HELD THAT PRINCIPLE OF COMMERCIAL ACCOUNTING IS TO BE APPLIED WHILE DECIDING THE ADMISSIBILITY OF EXPENDITURE. THUS, UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY HOLD THAT OUT OF THE TELEPHONE AND POSTAGE EXPENDITURE A SUM OF RS.5,000/ - OUT OF PROFESSIONAL FEES ON SUM OF RS.10,000/ - AND OUT OF THE STATION ARY EXPENSES A SUM OF RS.3,000/ - CAN ONLY BE ALLOWED, WHICH ACCORDING TO US IS A FAIR ESTIMATE TO BE HELD AS INCURRED FOR THE PURPOSE OF EARNING OF THE ITA NO. 17 42 /AHD /201 1 SHRI PRAFULKUMAR MANEK FOR A.Y. 2005 - 0 6 - 4 - INTEREST INCOME IN QUESTION. REST OF THE ADDITIONS ARE HEREBY CONFIRMED. RESULTANTLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - S D/ - ( ANIL CHATURVEDI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 25 / 0 3 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . S / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD