TANSY INVESTMENTS P. LTD, MUMBAI V. ITO 8(3)(3), MUMBAI

ITA 2096/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0553 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 24-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Corroborative evidences; Commercial expediency
• Section: 14A; 56

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./2096/MUM/2013, / ASSESSMENT YEAR: 2009-10 ./I.T.A./762/MUM/2015, / ASSESSMENT YEAR: 2011-12 M/S. TANSY INVESTMENTS PVT.LTD. 1, ANUP, SUN BEAM CHS NEW VERSOVA LINK ROAD, ANDHERI (W) MUMBAI-400 053. PAN:AAACT 4959 N VS. INCOME TAX OFFICER-8(3)(3) 217, 2ND FLOOR, AAYAKAR BHAVAN MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: MS. ANUPAMA SINGLA /ASSESSEE BY: NONE / DATE OF HEARING: 24/04/2017 / DATE OF PRONOUNCEMENT: 24.05.2017 PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 09.01.2013 OF THE CIT(A )-18,MUMBAI,THE ASSESSEE HAS FILED THE APPEALS FOR THE ABOVE MENTIONED TWO ASSESSMENT YEAR S.ASSESSEE-COMPANY,ENGAGED IS THE BUSINESS OF INVESTMENT.DETAILS OF FILING OF RETURNS OF INCOME RETURNED INCOMES, ASSESSED INCOMES, ETC, CAN BE SUMMMARISED AS UNDER :- A.Y. ROI FILED ON RETURNED INCOME ASSESSMENT DT. AS SESSED INCOME 2009-10 25/09/2009 NIL 30.12.2011 RS.95.71 LAKHS 2011-12 30/09/2011 RS.83,69,89,820/- 31.01.2014 RS. 1.48 LAKHS ITA NO.2096/MUM/2013-AY.09-10 : 2. FIRST EFFECTIVE GROUND OF APPEAL(GOA-2) IS ABOUT CO NSIDERING A SUM OF RS.20.59 LAKHS ON ACCOUNT OF INTEREST FROM BANK AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T THE ASSESSEE HAD SHOWN INCOME OF RS. 44.48 LAKHS (RS. 24.28 LAKHS UNDER THE HEAD DIVIDEN D INCOME AND RS. 20.59 LAKHS UNDER THE HEAD INTEREST FROM FEDERAL BANK ON FDR.S), THAT IT HAD CLAIMED EXPENSES UNDER VARIOUS HEADS. HE OBSERVED THAT THE ASSESSEE HAD NOT CARRIED OUT A NY BUSINESS ACTIVITY DURING THE YEAR UNDER APPEAL, THAT IT HAD RECEIVED INTEREST ON THE FDR A ND DIVIDEND ON SHARES,THAT INTEREST INCOME WAS NOT DERIVED FROM INDUSTRIAL UNDERTAKING/BUSINES S,THAT IT HAD NO DIRECT NEXUS WITH DEPOSITS ON WHICH INTEREST WAS EARNED.HE REFERRED TO THE CAS ES OF PANDIAN CHEMICALS (262 ITR 278) AND STERLING FOOD(237 ITR 579) AND CONCLUDED THAT I NTEREST INCOME AND DIVIDEND INCOME HAD TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOU RCES. 2096/13+762/M/15(09-10)&(11-12) M/S. TANSY INVESTMENTS PVT.LTD. 2 2.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE SUBMISSIONS IN T HAT REGARD.AFTER CONSIDERING THE AVAILABLE MATERIAL, THE FAA HELD THAT THE BUSINESS OF THE ASSESSEE WAS INVESTMENT IN SHARES AND NOT TO EARN INTEREST ON FDRS, THAT SECTION 14 O F THE PROVIDED HEADS OF INCOME IN WHICH IT WAS SPECIFICALLY MENTIONED THAT FOR THE PURPOSE OF STARS OF TAXES AND COMPETITION OF INCOME INCOME HAD TO BE CLASSIFIED UNDER DIFFERENT HEADS,T HAT SECTION 56 DEALT WITH INCOME FROM OTHER SOURCES, THAT IT COVERED THE INCOME BY WAY OF INTEREST ON SECURITIES NOT CHARGEABLE TO TAX UNDER THE PROFIT AND GAINS OF THE BUSINESS AND PROF ESSION, THAT ASSESSEE WAS DOING BUSINESS OF INVESTMENT IN SHARES AND NOT CARRYING OUT BUSINESS OF EARNING INTEREST ON FDRS, THAT IT HAD EARNED INTEREST OF RS. 20.59 LAKHS ON FIXED DEPOSIT S WITH FEDERAL BANK AND HAD CLAIMED EXPENSES AGAINST IT,THAT THE INTEREST INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES,THAT THE AO HAD RIGHTLY DECIDED THE I SSUE BY RELYING UPON THE JUDGEMENTS OF THE HONORABLE SUPREME COURT THAT INCOME EARNED FROM DIV IDEND CLAIMED AS EXEMPT WAS ALSO RIGHTLY TREATED UNDER THE HEAD INCOME FROM OTHER SO URCES. FINALLY, HE UPHELD THE ORDER OF THE AO. 2.2. DURING THE COURSE OF HEARING BEFORE US, NONE APPEAR ED ON BEHALF OF THE ASSESSEE, AS STATED EARLIER. THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPO RTED THE ORDER OF THE FAA. AS NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE ASSESS EE WAS IN THE BUSINESS OF EARNING INTERESTS FROM FIXED DEPOSITS, SO, WE DO NOT WANT TO DISTURB THE FINDING OF THE FAA. 3. NEXT GROUND DEALS WITH DISALLOWANCE MADE U/S.36(1)( III) OF THE ACT,AMOUNTING TO RS.23.55 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOU ND THAT THE ASSESSEE HAD PAID INTEREST OF RS.23.55 LAKHS TO THE BANK AGAINST THE LOAN THAT WE RE UTILIZED FOR ADVANCING INTEREST FREE LOANS TO THREE PARTIES.HE DIRECTED THE ASSESSEE AS TO WHY BUSINESS EXPENSES CLAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES SHOULD NOT BE DISALLOWED, AS BUSINESS EXPENSES U/S. 36(1)(III) COULD BE ALLOWED ONLY IF MONEY BORROWED FOR THE PURPOSE O F BUSINESS. 3.1. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE ,T HE AO HELD THAT THE ASSESSEEHAD TAKEN LOAN OF RS.194 LAKHS FROM FEDERAL BANK,THAT IT HAD ADVANCED LOANS OF RS.179 LAKHS TO THREE ENTITIES, THAT THERE WAS DIRECT NEXUS BETWEEN BORRO WED FUNDS AND LOANS ADVANCED TO THREE COMPANIES, THAT THERE WAS NO COMMERCIAL EXPEDIENCY OR COMMERCIAL REASON FOR NOT CHARGING INTEREST, THAT THE ASSESSEE HAD DIVERTED THE BORROW ED FUNDS.FINALLY,HE MADE A DISALLOWANCE OF RS.23,59,890/- U/S. 36(1) OF THE ACT. AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE, THE FAA HELD THAT IT HAD RECEIVED LOAN FROM FEDERAL BAN K AS ON 31.3.2008, THAT IT HAD ADVANCED LOANS TO THREE ENTITIES, THAT IT HAD PAID INTEREST TO THE BANK, THAT IT HAD ADVANCED LOANS TO OTHER 2096/13+762/M/15(09-10)&(11-12) M/S. TANSY INVESTMENTS PVT.LTD. 3 COMPANIES WITHOUT CHARGING ANY INTEREST,THAT THE BO RROWED FUNDS WERE NOT UTILIZED FOR THE BUSINESS PURPOSES. HE REFERRED TO THE CASE OF SOMA SUNDARAM AND BROS (238ITR939) AND M.M. ALI (52ITR165) AND HELD THAT INTEREST PAID BY THE ASSESSEE WAS NOT ALLOWABLE U/S. 36(1)(III) OF THE ACT. 3.2. BEFORE US,NOTHING WAS BROUGHT ON RECORD TO CHALLENG E THE FACTUAL FINDING OF THE FAA. THEREFORE, CONFIRMING HIS ORDER WE DISMISS GROUND N O.3. 4. FOURTH GROUND PERTAINS TO DISALLOWANCE MADE UNDER T HE HEADS SALARY AND CONVEYANCE OF RS.1.02 LAKHS. DURING THE ASSESSMENT PROCEEDINGS, T HE AO NOTICED THAT THE ASSESSEE HAD SHOWN ADMINISTRATIVE EXPENSES RS.1.76 LAKHS INCLUDI NG SALARY (RS.60,000/-) AND CONVEYANCE CHARGES (RS.42,670/-). CONSIDERING THE FACT THAT DU RING EARLIER YEAR THE ASSESSEE HAD NOT CLAIMED SUCH EXPENDITURE AND THE SUPPORTING EVIDENC E WERE NOT FURNISHED THE AO DISALLOWED 50% OF THE EXPENSES(RS.51,335/-) AND ADDED IT BACK TO THE INCOME OF THE ASSESSEE. 4.1. DURING THE APPELLATE PROCEEDINGS, THE FAA OBSERVED THAT THE AO HAD GIVEN SPECIFIC OPPORTUNITY TO THE ASSESSEE TO SUBMIT COMPLETE BILL S AND VOUCHERS TO PROVE THE INCURRING OF EXPENSES FOR BUSINESS PURPOSES, THAT IT DID NOT FIL E REQUIRED DOCUMENTS, THAT BEFORE HIM ALSO NO DOCUMENTARY EVIDENCES WERE FILED TO PROVE THE GE NUINENESS OF THE EXPENSES, THAT THE RESPONSIBILITY WAS ALWAYS ON THE ASSESSEE TO SUBMIT COMPLETE DETAILS.HE REFERRED TO THE CASE OF CALCUTTA AGENCY LIMITED (19ITR91),AND TRANSPORT CORPORATION OF INDIA LIMITED (256ITR701) AND HELD THAT THE ASSESSEE HAD FAILED TO PROVE ITS CLAIM, THAT THE AO WAS JUSTIFIED IN MAKING THE ADDITION. 4.2. BEFORE US,NOTHING WAS BROUGHT ON RECORD TO CHALLEN GE THE FACTUAL FINDING OF THE FAA. THEREFORE, CONFIRMING HIS ORDER WE DISMISS GROUND N O.4. 5. DISALLOWANCE OF DEPRECIATION OF RS.47,256/- IS THE SUBJECT MATTER OF GROUND NO.5. DURING THE ASSESSMENT PROCEEDINGS,THE AO OBSERVED THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR UNDER APPEAL, THA T NO EXPENSES HAD BEEN SHOWN FOR USE OF MOTOR CAR. ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSU ED TO EXPLAIN AS TO WHY THAT DEPRECIATION CLAIMED ON FURNITURE AND OTHER ASSETS SHOULD NOT BE DISALLOWED.AS PER THE AO,THE ASSESSEE DID NOT FILE ANY SPECIFIC REPLY IN THAT REGARD. 5.1. DURING THE APPELLATE PROCEEDINGS,THE FAA OBSERVED T HAT THE AO HAD GIVEN A SPECIFIC OPPORTUNITY TO THE ASSESSEE TO SUBMIT COMPLETE DETA ILS FOR FURNITURE,AC AND MOTOR CAR ON WHICH DEPRECIATION HAD BEEN CLAIMED, THAT NO DOCUME NTARY EVIDENCES WAS FURNISHED BEFORE 2096/13+762/M/15(09-10)&(11-12) M/S. TANSY INVESTMENTS PVT.LTD. 4 HIM TO PROVE THE GENUINENESS OF THE CLAIM, THAT EVE N DURING THE APPELLATE PROCEEDINGS THE ASSESSEE HAD FILED PAPERS WITHOUT ANY EVIDENCE OF U SE OF THE ASSETS FOR THE BUSINESS,THAT IT HAD FAILED TO SUBMIT TO SUBSTANTIATE ITS CLAIM. FINALLY ,HE UPHELD THE ORDER OF THE AO. AS NOTHING HAS BEEN PRODUCED BEFORE US THAT COULD L EAD TO THE CONCLUSION THAT DECISION OF THE AO/FAA IS FACTUALLY LEGALLY INCORRECT, THEREFORE WE DISMISS 5 TH GROUND, RAISED BY THE ASSESSEE. 6. NEXT GROUND IS ABOUT ADDITION MADE U/S.14A OF THE A CT,OF RS.73,705/-. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESS EE HAD RECEIVED DIVIDEND INCOME OF RS. 24.28 LAKHS. HE ISSUED A SHOW CAUSE NOTICE TO IT TO EXPLAIN AS TO WHY THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RUL ES, 1962,SHOULD NOT BE MADE.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE MADE A DISALLOWANCE OF RS. 73,705/-. 6.1. THE FAA AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND THE ASSESSMENT ORDER HELD THAT THE PROVISIONS OF SECTION 14A WERE APPLICABLE FOR THE YEAR UNDER APPEAL, THAT ASSESSEE HAD RECEIVED EXEMPT INCOME. REFERRING TO CASE OF GODREJ AND BOYCE MANUFACTURING COMPANY LTD. (328 ITR 81), THE FAA UPHELD THE AD HOC DISALL OWANCE OF RS. 73, 705/-. THERE IS NOTHING ON RECORD TO PROVE THAT ORDER OF T HE FAA SUFFERS FROM ANY INFIRMITY. SO CONFIRMING THE SAME WE DISMISS SIXTH GROUND. 7. LAST GROUND OF APPEAL DEALS WITH DISALLOWANCE MADE OF RS. 75.64 LAKHS,U/S.41 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THE ASSESSEE HAD SHOWN INTEREST ACCRUED AND YOU AT RS. 1.43 CORRODES, HE ISSUED A DETAILED SHOW CAUSE NOTICE TO FURNISH ALL THE DETAILS WITH DOCUMENTARY EVIDENCES. AFTER CONSIDERING THE S UBMISSION OF THE ASSESSEE THE AO HELD THAT IT HAD FILED ONLY PHOTO COPIES WITHOUT ORIGINA L SIGNATURE OF THE PARTIES, THAT NO ADDRESSES WERE FURNISHED,THAT IN ONE CASE THE CONFIRMATION WA S NOT SIGNED BY THE LENDER AND SAME WAS WITHOUT ANY SUPPORTING EVIDENCE.HOWEVER,HE AGREED T HAT THE AMOUNT OF INTEREST RECEIVABLE SHOWN AT RS. 68.19 LAKHS WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 41 OF THE ACT.HE HELD THAT BALANCE AMOUNT OF RS. 75.64 LAKHS (RS. 1. 43 CRORE (-) RS. 68.19 LAKHS) HAD TO BE TREATED AS CESSATION OF LIABILITY AS PER THE PROVIS IONS SECTION 41 AND HAD TO BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 7.1. THE FAA, AFTER CONSIDERING THE AVAILABLE MATERIAL, HELD THAT THE ASSESSEE HAD SHOWN INTEREST PAYABLE AT RS. 1.43 CRORE ON THE LOANS REC EIVED IN THE EARLIER YEARS, THAT THE AMOUNT WAS CLAIMED AS EXPENSES PAYABLE ON UNSECURED LOANS BUT NOT MADE, THAT IT WAS CLAIMED, THAT IT WAS CLAIMED AS EXPENSES OF THE EARLIER YEARS, IN RE SPONSE TO THE SPECIFIC QUERY OF THE AO,THE 2096/13+762/M/15(09-10)&(11-12) M/S. TANSY INVESTMENTS PVT.LTD. 5 ASSESSEE DID NOT FILE COMPLETE DETAILS WITH CONFIRM ATION,THAT IT HAD SUBMITTED SOME PHOTOCOPIES WITHOUT NAME AND ADDRESS OF THE PARTIES ,THAT THE SO-CALLED CONFIRMATIONS WERE FILED WITHOUT ANY SUPPORTING EVIDENCES,THAT THE ASS ESSEE HAD STOPPED ITS BUSINESS AND LIABILITY IS HAD BEEN SHOWN ON ACCOUNT OF INTEREST PAYABLE FO R THE LAST FOR MANY YEARS WHICH WAS NOT PAID BUT CLAIMED THAT EXPENSES IN THE EARLIER YEARS , THAT NO DOCUMENTARY EVIDENCES HAD BEEN FILED TO PROVE THE GENUINENESS OF THOSE PAPERS, THA T FOR CLAIMING ANY DEDUCTION THE ONUS WAS ON THE ASSESSEE, THAT IT HAD FAILED TO SUBMIT CONFI RMATION OF THE PARTIES, THAT IT HAD FAILED TO DISCHARGE ITS ONUS,THAT ONLY BOOK-ENTRY WAS SHOWN A S LIABILITY, THAT THE PROVISIONS OF SECTION 41 WERE APPLICABLE TO THE FACTS OF THE CASE, THAT T HE AO HAD ALLOWED THE CREDIT OF INTEREST RECEIVABLE, THAT THE AO WERE JUSTIFIED IN MAKING AD DITION OF RS. 75 64 LAKHS. AS NO SUBMISSIONS WERE FILED BEFORE US TO PROVE THA T FINDINGS GIVEN BY THE REVENUE AUTHORITIES WERE CONTRARY TO THE FACTS, SO,WE DECID E THE LAST GROUND OF APPEAL AGAINST THE ASSESSEE. ITA NO.762/MUM/2015(11-12) : 8. FIRST EFFECTIVE GROUND OF APPEAL(GOA 1-3) IS ABOUT DISALLOWANCE OF CERTAIN EXPENSES.THE AO HAD ASSESSED THE INCOME OF THE ASSESSEE AS RS.1. 48 LAKHS AS AGAINST THE RETURNED LOSS OF RS. 1.51 LAKHS.THE FAA CONFIRMED THE ORDER OF THE A O AND HELD THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS DURING THE YEAR,THAT INCOME WAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES.HE HELD THAT AGAINST THE OTHER S OURCES INCOME NO EXPENDITURE COULD BE ALLOWED. AS NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE ORDER OF THE FAA IS SUFFERING FROM ANY LEGAL OR FACTUAL INFIRMITY,SO,CONFIRMING THE SA ME WE DECIDE GOA 103 AGAINST THE ASSSSESS. 9. SECOND EFFECTIVE GROUND OF APPEAL (GOA-4)DEALS WITH DISALLOWANCE OF INTEREST EXPENDITURE U/S.36(1)(III)OF THE ACT.FOLLOWING OUR ORDER FOR TH E EARLIER YEAR,WE DISMISS GROUND NO.4. 10. NEXT GROUND PERTAINS TO DISALLOWANCE OF DEPRECIATIO N OF RS.35,570/-.THE AO AND THE FAA HAVE GIVEN A CATEGORICAL FINDING THAT NO BUSINESS A CTIVITIES WERE CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER APPEAL,THAT DEPRECIATION WAS NOT ALLOWABLE TO IT. NOTHING WAS BROUGHT ON RECORD TO PROVE THAT THE FIN DING OF THE FAA WERE FACTUAL INCORRECT. SO, CONFIRMING THE HIS ORDER,WE DISMISS GROUND NO.5 ,RAISED BY THE ASSESSEE. 2096/13+762/M/15(09-10)&(11-12) M/S. TANSY INVESTMENTS PVT.LTD. 6 11. DISALLOWANCE OF RS.31,207/-U/S.14A OF THE ACT IS TH E SUBJECT MATTER OF NEXT GROUND.AS PRE THE FAA THE ASSESSEE HAD NOT POINTED OUT ANY DISCRE PANCY IN THE COMPUTATION OF DISALLOWANCE MADE U/S.14A.BEFORE US,ALSO NOTHING WAS BROUGHT ON RECORD TO PROVE THAT DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE FAA WAS PERVERSE.UPH OLDING THE ORDER OF THE FAA,WE DECIDE SIXTH GROUND AGAINST THE ASSESSEE. 12 .LAST EFFECTIVE GROUND IS ABOUT COMPUTATION UNDER T HE MAT PROVISIONS VIS A VIS DISALLOWANCE U/S.14A OF THE ACT. THE FAA HAD DECIDE D THE ISSUE AGAINST THE ASSESSEE FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF R B K SHARES BROKING LTD.(37 TAXMAN.COM 128).CONSIDERING THE ABOVE,WE ARE OF THE OPINION TH AT THERE IS NO NEED TO DISTURB THE FINDINGS OF THE FAA. A RESULT APPEALS FILED BY THE ASSESSE E FOR BOTH THE AY.S. STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2017. 24 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 24.05.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.