M/s. Rasna Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 199/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89519 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 20-05-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 23-01-2012
• Court: TRIBUNAL
• Assessee Lawyers: ITA NO AHD
• Keywords: Business expenditure

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.D. AGARWAL,VICEP PRESIDENT AND SHRI S.S. GODARA, JUDICIAL MEMBER) 1. I.T.A.NO. 199/AHD/2012(BY ASSESSEE) - 2. I.T.A. NO.460/AHD/2012 (BY RE VENUE) / ASSESSMENT YEAR: 2000-01 1. RASANA PRIVATE LTD., RASANA HOUSE, OPP. SEARS TOWER, GULBAI TEKRA, AHMEDABAD-380 006. PAN AABCR 5577P 2. A.C.I.T.,CIR.5,AHMEDABAD. VS 1. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, AHMEDAAD. 2.RASANA PVT.LTD. / (APPELLANT) / (RESPONDENT) REVENUE BY : MR. M.K. SINGH, SR. D.R. ASSESSEE(S) BY : NONE. / DATE OF HEARING: 20/05/2015 / DATE OF PRONOUNCEMENT: 12/ 6/2015 / O R D E R ITA NO.199 & 460AHD/2012 ASSESSMENT YEAR: 2000-01 2 PER SHRI S.S. GODARA JUDICIAL MEMBER. THESE CROSS APPEALS FILED BY ASSESSEE AND THE REVE NUE FOR THE ASSESSMENT YEAR 2000-01 ARISE AGAINST ORDER OF THE CIT (A)-XI, AHMEDABAD IN APPEAL NO.CIT(A)-XI/1044/CIR.5/09-10 D ECIDED ON 7-12- 2011, IN PROCEEDINGS U/S.143(3) R.W.S. 254 OF THE A CT IN SHORT THE ACT. 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE CHALLE NGES LOWER APPELLATE ORDER UPHOLDING DISALLOWANCE OF RS.80,000 /- ON ACCOUNT OF CLUB ENTRANCE FEE PAID. THE REVENUES PLEADINGS ASS AIL THE CIT(A)S ORDER DIRECTING ASSESSING OFFICER TO VERIFY ACTUAL EXPENDITURE INCURRED ON PROVISION MADE BY IT OFRS.1,07,38,769/-IN THE SU BSEQUENT ASSESSMENT YEAR UNDER THE HEAD LIABILITIES FOR DAM AGED GOODS. 3. THE ASSESSEE HAS MOVED AN ADJOURNMENT PETITION D ATED 15-5- 2015. THERE IS NOBODY TO REPRESENT ITS AUTHORISED R EPRESENTATIVE. IN THESE CIRCUMSTANCES WE REJECT THE ASSESSEES PETITI ON AND PROCEED TO DECIDE THE APPEAL ON MERITS. IT IS PROCEEDED EX-PAR TE IN THE REVENUES APPEAL. 4. BOTH CASE FILES REVEAL THAT PRESENT IS SECOND RO UND OF LITIGATION UPTO THE TRIBUNAL. THE ASSESSEE HAD CLAIMED IMPUGNE D SUM OF RS.80,000/- AS EXPENDITURE INCURRED TO OBTAIN MEMBE RSHIP OF RAJPATH CLUB LTD., IN THE NAME OF ITS DIRECTOR SHRI PIRUZ A REEZ KHAMBATTA. ITS CASE THROUGHOUT IS THAT THIS IMPUGNED SUM OF RS.80, 000/- HAS BEEN INCURRED IN ORDER TO FOSTER COMPANYS BUSINESS. A C O-ORDINATE BENCH IN EARLIER ROUND OF LITIGATION IN ITA NO.4003/AHD/2003 DATED 28-03-2010 HAD REMITTED BACK THE ISSUE TO THE ASSESSING AUTHOR ITY WITH FOLLOWING OBSERVATION:- BY THE USE OF SAID CORPORATE MEMBERSHIP WHAT ADVAN TAGES OR BENEFITS IN MATERIAL TERMS HAVE INURED TO THE ASSES SEE OVER A PERIOD OF TIME. AS PER THE ESTABLISHED BUSINESS PRA CTICE OF THE CLUBS, THESE CORPORATE MEMBERSHIPS ARE TO THE DIREC TORS OF THE COMPANY AND THE AMOUNT PAID BY THE COMPANY WILL BE TREATED AS ITA NO.199 & 460AHD/2012 ASSESSMENT YEAR: 2000-01 3 BUSINESS EXPENDITURE AND THIS PAYMENT WILL BE TREAT ED AS PERQUISITE IN THE HANDS OF THE DIRECTORS. 5. IN CONSEQUENTIAL PROCEEDINGS, ASSESSING OFFICER SOUGHT FOR NECESSARY EVIDENCE TO PROVE ADVANTAGES OR BENEFITS OCCURRED T O THE ASSESSEE AS A CONSEQUENCE TO THE CLUB MEMBERSHIP IN QUESTION. TH E ASSESSEE RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF GUJARAT STATE EXPORT CORPORATION V/S. CIT 209 ITR 649 (GUJ.) HOLDING THA T SUCH ENTRANCE FEES PAID TO A CLUB DOES NOT GIVE RISE TO ACQUISITION OF AN E NDURING BENEFIT. THEIR LORDSHIP HELD THAT THE SAME IS INCURRED FOR RUNNING BUSINESS OR FOR PROVIDING SMOOTH CONDUCT OF THE BUSINESS. THE ASSESSING OFFI CER QUOTED ASSESSEES ALLEGED FAILURE IN PRODUCING ANY EVIDENCE AND REITE RATED IMPUGNED DISALLOWANCE OF RS.80,000/-. THE CIT (A) HAS AFFIRM ED THE ASSESSING OFFICERS ACTION. 6. WE HAVE HEARD THE REVENUE AND PERUSED THE CASE F ILE. THERE IS NO FACTUAL DISPUTE THAT THE ASSESSEE HAS PAID IMPUGNED MEMBERSHIP IN THE NAME OF ITS AFORESAID DIRECTOR TO THE RAJPATH CLUB. THIS IS NOT THE REVENUES CASE THAT THE ASSESSEES DIRECTOR OR ITS EMPLOYEES HAVE BEEN AVAILING THE VERY FACILITIES FOR THEMSELVES. NO SUCH MATERIAL IS QUO TED. THE HONBLE JURISDICTIONAL HIGH COURT HAS ALLOWED A SIMILAR CLAIM AS INCURRED FOR FOSTERING NEW RELATIONS IN ITS RESPECTIVE FIELD. THE REVENUE STRONGLY INSISTS THAT THE ASSESSEE OUGHT TO HAVE LEAD SOME MATERIAL EVIDENCE. WE ARE OF THE OPI NION THAT FOSTERING OF NEW BUSINESS RELATIONSHIP CANNOT BE IN A TANGIBLE FORM AND IT IS ONLY AN INFERENCE TO BE DRAWN AS PER FACTS OF EACH CASE. THEREFORE, WE D RAW SUPPORT FROM THE HONBLE JURISDICTIONAL HIGH COURTS DECISION AND AL LOW THE ASSESSEES GROUND. ASSESSEES APPEAL ITA NO.199/AHD/2015 SUCCEEDS. 7. THIS LEAVES US WITH THE REVENUES APPEAL ITA 460 /AHD/2012. IT CHALLENGES THE CIT (A)S REMAND ORDER AS PER ITS PL EADINGS NARRATED HEREINABOVE. SECTION 251(1)OF THE ACT ELABORATES P OWERS OF COMMISSIONER OF INCOME TAX(APPEALS) IN APPEAL PROCEEDINGS. WE NOTIC E THAT THE CRUCIAL EXPRESSION OR HE MAY SET ASIDE STAND OMITTED BY T HE FINANCE ACT,2001 W.E.F. 1-6-2001. THEREFORE, CIT (A)S REMAND ORDER IN PRIN CIPLE DESERVES TO BE REVERSED ON THIS SCORE ALONE. AT THE SAME TIME, WE FIND THAT CIT(A) HAS ITA NO.199 & 460AHD/2012 ASSESSMENT YEAR: 2000-01 4 DIRECTED ASSESSING OFFICER TO VERIFY THE ASSESSEES ACTUAL EXPENDITURE INCURRED ON THE IMPUGNED PROVISION OF DAMAGED GOODS AS UNDER :- 3.3. IT IS SEEN THAT DURING THE UNDER CONSIDERATIO N, APPELLANT HAS MADE PROVISION FOR DAMAGED GOODS OF RS.1,07,38,769/- UNDER THE HEAD PROVISION FOR DAMAG ED GOODS LIABILITY. IN VIEW OF THE DECISION OF HONBLE ITAT FOR A.Y. 2005-06 AND IN VIEW OF DECISION TAKEN BY ME FO R A.Y. 2008-09, THE A.O. IS DIRECTED TO VERIFY THE EXPENDI TURE INCURRED IN THE SUBSEQUENT YEAR BY THE APPELLANT AG AINST THE SAD PROVISION OF RS.1,07,38,769/-. IF EXPENDITURE I S EQUAL TO OR MORE THAN THE SAID AMOUNT, THE A.O. SHALL DELETE THE ENTIRE DISALLOWANCE. IF THE ACTUAL EXPENDITURE IS L ESS THAN THE SAID SUM, DISALLOWANCE TO THE EXTENT OF SHORTFA LL WILL SURVIVE AND BALANCE DISALLOWANCE WILL BE DELETED. T HUS, SUBJECT TO VERIFICATION, THESE GROUNDS OF APPEAL AR E ALLOWED. 8. ADMITTEDLY, AFTER THE AMENDMENT OF FINANCE ACT, 200 1,W.E.F. 01- 06-2001, THE CIT(A) HAS NO POWER TO SET ASIDE THE M ATTER BACK TO THE FILE OF THE ASSESSING OFFICER. HOWEVER, IN THIS CAS E, THE CIT (A) HAS SET ASIDE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF ACTUAL EXPENDITURE. WE HOLD THAT THE CIT (A) EXC EEDED HIS JURISDICTION AND THEREFORE, HIS ACT OF SETTING ASIDE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER IS LIABLE TO BE QUASHED AND ACCOR DINGLY QUASHED. THUS, THE REVENUES GROUND IS ALLOWED TO THIS EXTENT. AT THE SAME TIME, IT IS A SETTLED LAW THAT PROVISION FOR DAMAGE GOODS IS TO B E ALLOWED PROVIDED THE PROVISION IS REASONABLE. THAT THE CIT (A) HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE EXPENDITURE INCURRED IN THE S UBSEQUENT YEARS AGAINST THE SAID PROVISION OF RS.1,07,38,769/-, KEE PING IN VIEW THE DECISION OF ITAT FOR ASSESSMENT YEAR 2005-06. IT HA S NOT BEEN BROUGHT TO OUR KNOWLEDGE BY THE REVENUE THAT THE ABOVE DECI SION OF ITAT HAS BEEN REVERSED OR MODIFIED BY THE HIGHER AUTHORITIES . IN VIEW OF ABOVE, THE DIRECTION OF THE CIT (A) ON MERIT IS JUSTIFIED. WE, THEREFORE, HOLD THAT THE ABOVE DIRECTION OF THE CIT (A) SHOULD NOW BE TREAED AS DIRECTION BY THE ITAT. THUS, THE NET EFFECT IS THAT THE REVENUES GROUND ITA NO.199 & 460AHD/2012 ASSESSMENT YEAR: 2000-01 5 IS ALLOWED FOR STATISTICAL PURPOSES BUT THE ASSESSI NG OFFICER IS DIRECTED TO CARRY OUT THE SAME EXERCISE AS DIRECTED BY THE CIT (A) BUT THE SAME DIRECTION IS TO BE NOW READ AS DIRECTION BY ITAT. 9. THE REVENUES APPEAL ITA NO.460/AHD/12 IS ALLOWE D FOR STATISTICAL PURPOSE. 10. TO SUM UP THE ASSESSEES APPEAL ITA 199/AHD/201 2 IS ALLOWED AND THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 12/6/15 AT AHME DABAD. SD/- SD/- (G. D. AGARWAL) (S.S. GODARA) VICE PRESIDENT JUDICIAL MEMBER. AHMEDABAD. DATED 12/06/2015 ITA NO.199 & 460AHD/2012 ASSESSMENT YEAR: 2000-01 6 ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-XI, AHMEDABAD. 5. !'# $$ , / DR, ITAT, 6. #% & / GUARD FILE. # / $ %& (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- : 22-5-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER; 22-5-2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. 9-6- 2015- 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 12-62015. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 12-6 -2015 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER