RTS Power Corporation Ltd., , Kolkata V. ITO, Ward - 4(1), Kolkata

ITA 2200/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9382 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 16-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2200/KOL/2018 (ASSESSMENT YEAR-2013-14) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 23.08.2018 PASSED BY CIT(A)-2, KOLKATA FOR AY 2013-14 U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). 2. THE LD.AR SUBMITS THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING GROUND NO.2 AND PRAYED TO DISMISS THE SAME AS NOT PRESSED. HENCE, GROUND NO.2 RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 3. GROUND NO.1 IS RELATING TO CONFIRMATION OF ADDITIONS MADE ON ACCOUNT OF CLUB EXPENSES, GENERAL EXPENSES AND MISCELLANEOUS EXPENSES. 4. HEARD BOTH PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE LD.AR PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF MARCOPOLO PRODUCTS PVT.LTD. REPORTED IN 70 TAXMANN.COM 320 [2016] RTS POWER CORPORATION LTD., 56 NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA-700001. PAN- AABCR2618B VS ITO, WARD-4(1), P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700069. (APPELLANT) (RESPONDENT) APPELLANT BY SH. HARSH VARDHAN BHARDWAJ, FCA RESPONDENT BY SH. RADHEY SHYAM, CIT DR DATE OF HEARING 09.04.2019 DATE OF PRONOUNCEMENT 03 .07 .2019 ITA NO.2200/KOL/2018 (ASSESSMENT YEAR-2013-14) PAGE | 2 [KOL. TRIB.] REGARDING CLUB EXPENSES AND ARGUED THE CLUB EXPENSES IS AN ALLOWABLE EXPENDITURE AS IT HAD SPENT SUCH EXPENSES WITH BUYERS IN ORDER TO SMOOTH EFFICIENCY RUNNING BUSINESS OF THE ASSESSEE. WE FIND THIS TRIBUNAL IN THE CASE OF MARCOPOLO PRODUCTS PVT.LTD. (SUPRA) WHILE DECIDING SIMILAR ISSUE ON IDENTICAL FACTS PLACED RELIANCE IN THE ORDER OF MUMBAI BENCHES OF ITAT IN THE CASE OF BANK OF AMERICA SECURITIES (INDIA) PVT.LTD. REPORTED IN 128 ITD 386 [MUM. TRIB.] HELD THE PAYMENT TOWARDS ENTRY FEES IN CLUB IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AS IT ONLY FACILITATES SMOOTH AND EFFICIENT RUNNING BUSINESS OF ENTERPRISE WHICH DOES NOT ADD TO THE PROFIT EARNING APPARATUS OF A BUSINESS ENTERPRISE AND DELETED THE ADDITION MADE BY THE AO. THE RELEVANT PORTION WHICH IS REPRODUCED HEREUNDER FOR BETTER UNDERSTANDING:- 19. THE MUMBAI 'B' BENCH OF ITAT IN THE CASE OF DY. CIT V. BANK OF AMERICA SECURITIES (INDIA) (P.) LTD. [2011] 128 ITD 386, THE FACTS INVOLVED THEREIN WAS THAT THE ASSESSEE HAS MADE PAYMENT OF ENTRANCE FEE TO A CLUB NAMELY BOMBAY GYMKHANA AMOUNTING TO RS. 16 LACS. THE AO DISALLOWED RS. 16 LACS AS CAPITAL OUTLAY AND ADDED TO THE INCOME OF THE ASSESSEE. THE CIT(A) DELETED THE ADDITION OF RS. 16 LACS MADE BY THE AO BEING ENTRANCE FEE TO BOMBAY GYMKHANA 111I THE RELEVANT PORTIONS OF TRIBUNAL'S ORDER AS FOLLOWS: '8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE IN AS MUCH AS IT HAS BEEN RIGHTLY OBSERVED BY THE LEARNED CIT (A) THE AO HAS NOT DISPUTED THE FACT THAT THE EXPENDITURE OF CLUB MEMBERSHIP FEES RS. 16 LACS HAS BEEN INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. FURTHER VIE FIND NO MERIT IN THE PLEA OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE DECISION IN ALEMBIC CHEMICAL WORKS CO. LTD. (SUPRA), IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. IN FACT, THEIR LORDSHIPS REFERRED TO VARIOUS DECISIONS PARTICULARLY THE DECISION IN THE CASE OF CITY OF LONDON CONTRACT CORPORATION V. STYLES (1987) 2 TAX CASES 239 WHEREIN BROAD AREA OF DISTINCTION IS POINTED OUT. IT IS HELD IN THAT CASE THAT THE OUTLAY ON THE 'ACQUISITION OF THE CONCERN' WOULD BE CAPITAL WHILE AN OUTLAY IN 'CARRYING ON THE CONCERN' IS REVENUE. THE COURT FURTHER REFERRED TO THE FOLLOWING OBSERVATIONS IN THE CASE OF ASSAM BENGAL CEMENT CO. LTD. V. CIT(A) 27 ITR 34 (SC) : TC 16R.841 : 'IF THE EXPENDITURE IS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE ITA NO.2200/KOL/2018 (ASSESSMENT YEAR-2013-14) PAGE | 3 BUSINESS IT IS PROPERLY ATTRIBUTABLE TO CAPITAL AND IS OF THE NATURE OF CAPITAL EXPENDITURE. IF, ON THE OTHER HAND, IT IS MADE NOT FOR THE PURPOSE OF BRINGING INTO EXISTENCE ANY SUCH ASSET OR ADVANTAGE BUT FOR RUNNING THE BUSINESS OF WORKING IT WITH A VIEW TO PRODUCE THE PROFITS, IT IS A REVENUE EXPENDITURE. THE AIM AND OBJECT OF THE EXPENDITURE WOULD DETERMINE THE CHARACTER OF THE EXPENDITURE WHETHER IT IS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE.' 13. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL IN THE ASSESSEE'S OWN CASE AND FOR THE REASONS AS MENTIONED IN PARA 5.3 IN THE CASE OF SAMTEL COLOR LTD. (SUPRA), WE ARE OF THE VIEW THAT ADMISSION FEES PAID TOWARDS CORPORATE MEMBERSHIP OF THE CLUB IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NOT TOWARDS CAPITAL ACCOUNT AS IT ONLY FACILITATES SMOOTH AND EFFICIENT RUNNING OF A BUSINESS ENTERPRISE AND DOES NOT ADD TO THE PROFIT EARNING APPARATUS OF A BUSINESS ENTERPRISE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LEARNED CIT (A) IN DELETING THE DISALLOWANCE OF RS. 16 LACS MADE BY THE AO. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED.' 20. IN THE PRESENT CASE, THE ASSESSEE CONTENDED THAT THE EXPENDITURE PAID TO CLUB AND DID NOT BRING INTO EXISTENCE AN ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS OF ASSESSEE TO TREAT THE SAME AS CAPITAL EXPENDITURE. THE CLUB EXPENDITURE, IT ONLY FACILITATES SMOOTH AND EFFICIENT RUNNING OF A BUSINESS OF THE ASSESSEE. THEREFORE, WE HOLD THAT THE RATIO OF THE AFORESAID CASE LAW IS APPLICABLE TO THE PRESENT CASE AND THE M EXPENDITURE PAID FOR STAFF IS AN ALLOWABLE EXPENDITURE. 5. IN VIEW OF THE AFORE-MENTIONED DISCUSSION BY THE CO-ORDINATE BENCH, WE DELETE THE ADDITION CONFIRMED BY THE CIT(A) IN THE IMPUGNED ORDER. 6. REGARDING GENERAL AND MISCELLANEOUS EXPENSES, WE FIND THAT THE AO FOR NOT SUBMITTING VARIOUS DETAILS DISALLOWED 10% OF SUCH EXPENDITURE ON THE BASIS OF ESTIMATION. THE CIT(A) CONFIRMED THE SAME. BEFORE US, THE LD.AR SUBMITS THAT THE AO FAILED TO POINT OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS AND THE DISALLOWANCE MADE ON THE BASIS OF ESTIMATION IS NOT MAINTAINABLE. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. AR. IN OUR OPINION, THE PRIMARY ONUS TO SUPPORT AND SUBSTANTIATE HIS CLAIM FOR THE EXPENSES INCURRED IS ON THE ASSESSEE AND HE HAS TO ESTABLISH THE BUSINESS EXPEDIENCY OF ITA NO.2200/KOL/2018 (ASSESSMENT YEAR-2013-14) PAGE | 4 THE EXPENSES INCURRED BY PROVIDING THE RELEVANT SUPPORTING BILLS AND VOUCHERS. IN THE PRESENT CASE, THIS PRIMARY ONUS WAS NOT DISCHARGED BY THE ASSESSEE AND THE AO, THEREFORE, WAS FULLY JUSTIFIED IN MAKING THE DISALLOWANCE OUT OF THE RELEVANT EXPENSES FOR UNVERIFIABLE ELEMENT. SINCE THE DISALLOWANCE SO MADE TO THE EXTENT OF 10% IS QUITE FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN CONFIRMING THE SAME. THUS, THE GROUND NO. 1(B) AND (C) RAISED BY THE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.07.2019. SD/- SD/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER DATE:- 03.07.2019 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- RTS POWER CORPORATION LTD., 56 NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA-700001. 2. RESPONDENT- ITO, WARD-4(1), P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700069. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA