M/s. Globe Ecologistics Ltd., Ahmedabad V. The ACIT,Circle-4, Ahmedabad

ITA 2184/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9588 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADITYA SHUKLA
• Assessee Lawyers: VINIT MOONDA
• Keywords: Revenue expenditure; Capital expenditure
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2184/AHD/2013 ( / ASSESSMENT YEAR : 2010-11) M/S GLOBE ECO LOGISTICS LTD. 62, NEWYORK TOWER-A, THALTEJ CICLE, S.G. HIGHWAY, AHMEDABAD. / VS. ACIT, CIRCLE-4 AHMEDABAD. ./ ./ PAN/GIR NO. : AAACG 3938 J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VINIT MOONDA, A.R. / RESPONDENT BY : SHRI ADITYA SHUKLA, SR.D.R. / DATE OF HEARING 05/01/2017 / DATE OF PRONOUNCEMENT 10/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDABAD, DATED 22/07/2013 FOR THE ASSESSMENT YEAR (AY) 2010-11 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: (I) IN HIS ORDER DATED 22.07.2013, THE LD.CIT(A) HAS ERRED IN LAW BY CONFIRMING AN ADDITION OF RS.5724/- U/S.14A WITHOUT IDENTIFYING THE FACTS OF THE CASE AND REAL NATURE OF TRANSACTIONS INVOLVED. (II) IN HIS ORDER DATED 22/07/2013, THE LD.CIT(A) HAS ERRED IN LAW BY CONFIRMING AN ADDITION OF RS.3.00 LACS OUT OF CLUB ITA NO.2184/AHD/2013 M/S. GLOBE ECO LOGISTICS LTD. VS. ACIT ASST.YEAR 2010-11 - 2 - MEMBERSHIP EXPENSE MADE BY THE A.O. THE LD.CIT(A) HAS REJECTED THE CLAIM OF RS.3.00 LACS PAID TO SEVEN LEISURE PVT.LTD, ON THE GROUND THAT THE MEMBERSHIP FEES WAS PAID BY THE COMPANY BUT THE MEMBERSHIP WAS TAKEN IN NAME OF DIRECTORS OF THE COMPANY. (III) ANY OTHER GROUND OF APPEAL SHALL BE SUBMITTED AT THE TIME OF HEARING. 2. THE FACTS OF THE CASE ARE ON VERIFICATION OF BALANCE SHEET, IT WAS NOTICED THAT THE ASSESSEE COMPANY HAS MADE INVESTMENT IN SHARES AND OTHERS OF RS.85,000/-. THE ASSESSEE WAS NOT ABLE TO JUSTIFY THAT THE INVESTMENT MADE IN SHARES WAS FROM HIS OWN FUND OR FROM THE FUNDS ON WHICH NO INTEREST PAYMENT IS MADE BY THE ASSESSEE. THEREFORE, PROVISION OF SECTION 14A WAS APPLICABLE IN THE CASE OF ASSESSEE. SINCE, THE ASSESSEE HAS NOT OFFERED DISALLOWANCE WORKED OUT UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. THEREAFTER, SHOW CAUSE NOTICE WAS FOUND, WHICH WAS DULY COMPLIED WITH AND ASSESSEES REPLY COULD NOT CONVINCE THE A.O. HENCE, THE DISALLOWANCE OF EXPENDITURE AS PER RULE 8D IS WORKED OUT AS UNDER: 1. EXPENDITURE DIRECTLY RELATED TO EXEMPTED INCOME. NIL 2. THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. NIL 3. INVESTMENT AS ON 31.03.2009 IN MUTUAL FUND/SHARES FROM WHERE EXEMPTED INCOME GENERATED. RS.85,000/- 4. TOTAL INVESTMENT AS ON 31.03.2010 IN MUTUAL FUND/SHARES FROM WHERE EXEMPTED INCOME GENERATED. RS.85,000/- ITA NO.2184/AHD/2013 M/S. GLOBE ECO LOGISTICS LTD. VS. ACIT ASST.YEAR 2010-11 - 3 - 5. AVERAGE INVESTMENT AS ON 31.03.2010 IN MUTUAL FUND/SHARES FROM WHERE EXEMPTED INCOME GENERATED (B) RS.85,000/- 6. TOTAL INVESTMENT AS ON 31.03.2010 IN CURRENT ASSET RS.83,64,43,310/- 7. TOTAL INVESTMENT AS ON 31.03.2010 IN CURRENT ASSET RS.1,15,83,26,946/- 8. AVERAGE INVESTMENT AS ON 31.03.2010 IN CURRENT ASSET. RS.99,73,85,128/- 9. INTEREST EXPENSES (A) RS.6,21,77,355/- 10. DISALLOWANCE OF INTEREST RS.5,299/- 11. DISALLOWANCE OF INTEREST AXB/C RS.5,299/- 12. (III) AN AMOUNT EQUAL TO ONE-HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. RS.425/- 13. TOTAL DISALLOWANCE RS.5724/- ACCORDINGLY AN AMOUNT OF RS.5724/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD TAKEN CORPORATE CLUB MEMBERSHIP OF KARNAVATI CLUB LTD. AND PAID AMOUNT OF RS.17,86,953/- AND OF SEVEN LEISURE PVT. LTD. OF RS.3,00,000/-. THE AMOUNT PAID TO THESE CLUBS ARE FOR ENTRY FEES FOR MEMBERSHIP WHICH IS PAYABLE ONCE IN LIFE TIME. DUE TO THIS PAYMENT AS ASSET WAS CREATED WHICH WILL GIVE BENEFITS TO THE ASSESSEE FOR MORE THAN ONE YEAR. SINCE, THIS WAS AN EXPENDITURE OF CAPITAL NATURE; THE AMOUNT COULD NOT BE ALLOWED AS REVENUE EXPENDITURE AND WHEN ASSESSEE WAS ITA NO.2184/AHD/2013 M/S. GLOBE ECO LOGISTICS LTD. VS. ACIT ASST.YEAR 2010-11 - 4 - ASKED FOR THE QUARRY, WAS NOT SATISFACTORY. HENCE, AN AMOUNT OF RS.20,86,953/- WAS ALSO ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGAINST THE SAID ASSESSMENT ORDER, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A), WHO GAVE BENEFIT TO THE ASSESSEE BY FOLLOWING OBSERVATION: SINCE THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT IT IS HELD THAT THE PAYMENT FOR TAKING THE MEMBERSHIP OF THE CLUB IN THE NAME OF THE COMPANY IS REVENUE EXPENDITURE. IT IS HOWEVER NOTED FROM THE DETAILS FURNISHED BY THE APPELLANT THAT THE MEMBERSHIP OF SEVEN LEISURE PRIVATE LIMITED CLUB IS NOT IN THE NAME OF THE APPELLANT COMPANY. THE PAYMENT HAS BEEN MADE IN THE NAMES OF THE DIRECTORS OF THE COMPANY AND THEREFORE, THE MEMBERSHIP DOES NOT BELONG TO THE APPELLANT COMPANY. THEREFORE, OF THE EXPENDITURE OF RS.3 LAC CANNOT BE TREATED AS THAT FOR THE PURPOSE OF BUSINESS AND THE DISALLOWANCE MADE BY THE AO TO THAT EXTENT IS UPHELD. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER UNDOUBTEDLY, THE PAYMENT HAS BEEN MADE BY THE ASSESSEES COMPANY BUT MEMBERSHIP OF SEVEN LEISURE PRIVATE LIMITED CLUB FOR RS.3 LAC, THE RECEIPT AND MEMBERSHIP WAS ISSUED IN THE NAME OF THE ONE OF THE DIRECTOR. WHEN WE SPECIFICALLY ASKED FROM THE A.R. OF THE ASSESSEE THAT IF SAME RECEIPT CAN BE RECTIFIED OR NOT? HE WAS UNABLE TO RECTIFY HIS OMISSION WITH REGARD TO RECEIPT OF THE MEMBERSHIP IN THE NAME OF THE COMPANY. 5. WE ARE OF THE CONSIDERED OPINION THAT IN THESE CIRCUMSTANCES, LD.CIT(A) HAS RIGHTLY REJECTED CLAIM OF RS.3 LAC PAID TO SEVEN LEISURE PRIVATE LIMITED CLUB. ON THE FIRST GROUND OF APPEAL HAS NOT BEEN PRESSED BY THE APPELLANT BECAUSE OF SMALLNESS OF AMOUNT. ITA NO.2184/AHD/2013 M/S. GLOBE ECO LOGISTICS LTD. VS. ACIT ASST.YEAR 2010-11 - 5 - 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE/APPELLANT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10/01/2017 SD/- SD/- . . ( ) ( ) (N. K. BILLAIYA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 10/01/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-VIII, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY