M/s Jwel India Jewellers Pvt. Ltd., Kolkata V. I.T.O, Wd -9(3), Kolkata, Kolkata

ITA 2439/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83085 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 09-10-2013
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU ADD L
• Keywords: Business expenditure

Judgement Text

, SMC(C) , IN THE INCOME TAX APPELLATE TRIBUNAL SMC(C) BENCH : KOLKATA () BEFORE , ) [BEFORE SHRI MAHAVIR SINGH, JM] / I.T.A NO.2439/KOL/2013 !'/ ASSESSMENT YEAR: 2009-10 M/S. JEWEL INDIA JEWELLERS PVT. LTD. VS. INCOME-TA X OFFICER, WD-9(3), KOLKATA (PAN: AABCJ0455E) ($% /APPELLANT ) (&'$%/ RESPONDENT ) DATE OF HEARING: 21.08.2014 DATE OF PRONOUNCEMENT: 02.09.2014 FOR THE APPELLANT: SHRI SUNIL SURANA, ADVOCATE FOR THE RESPONDENT: SHRI DAVID Z. CHAWNGTHU, ADD L. CIT, SR. DR () / ORDER THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-VIII, KOLKATA IN APPEAL NO. 67/CIT(A)-VIII/KOL/11-12 DATED 16.08.2013. ASSESSM ENT WAS FRAMED BY ITO, WARD-9(3), KOLKATA U/S. 143(1) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2009-10 VIDE HIS ORDER DATED 29.07 .2011. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENSES AT RS.1,69,891/- BY HOLDIN G THAT THE SAME AS NOT FOR THE PURPOSES OF BUSINESS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS: 2.FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,69,891/- BEING THE EXPENSES INCURRED FOR BUSINESS PURPOSES AND WERE AL LOWABLE AS SUCH. 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE DISALLOWANCE OF THE EXPENSES OF RS.1,69,891/- WAS NOT JUSTIFIED. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME ON 02.10.2009, INCOME MAINLY COMPRISES OF SHARE OF PRO FIT FROM PARTNERSHIP FIRM, INTEREST ON DEPOSITS IN THE FORM OF TRADING OF STOCK OF GOLD ET C. DURING THE RELEVANT YEAR THERE IS NO BUSINESS TRANSACTIONS BUT INCURRED ADMINISTRATIVE OVERHEAD EXPENSES LIKE SALARY, TELEPHONE 2 ITA NO.2439/K/2013 JEWEL INDIA JEWELLERS PVT. LTD. AY 09-10 EXPENSES, TRADE LICENCE FEE, PROFESSIONAL TAX, PRIN TING & STATIONERY, CONVEYANCE, ELECTRICITY, GENERAL CHARGES, BANK CHARGES, FILING FEE, DIRECTOR S REMUNERATION, LEGAL CHARGES, PROFESSIONAL CHARGES AND AUDIT FEE. THE AO DISALLOWED THE SAME BY OBSERVING THAT THERE IS NO SALE, PURCHASE MADE BY THE ASSESSEE COMPANY DURING LAST FOUR YEARS , PROBABLY SINCE INCORPORATION. ACCORDING TO AO ASSESSEE-COMPANY EARNS INTEREST INCOME ON INV ESTMENT ON ACCOUNT OF DEPOSIT OF GOLD. ACCORDING TO HIM, THERE IS NO BUSINESS, HENCE, HE D ISALLOWED THE ENTIRE EXPENSES OF RS.2,69,152/-. AGGRIEVED, ASSESSEE PREFERRED APPEA L BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER: THEREFORE, IT IS HELD THAT THE ACTIVITY OF THE ASS ESSEE COMPANY IS NOT IN THE NATURE OF BUSINESS. IT IS NOTHING BUT AN INVESTMENT, HENCE I T IS HELD THAT THE AO HAS RIGHTLY DISALLOWED THE BUSINESS EXPENDITURE AFTER ALLOWING STATUTORY EXPENDITURE SUCH AS AUDIT FEES, FILING FEES OF RS.1500/- AND BANK CHARGE. M ERE MENTION OF BUSINESS ACTIVITY IN THE MEMORANDUM OF ASSOCIATION BY ASSESSEE IS NOT DE TERMINATIVE OF NATURE OF ACTIVITY BEING ACTUALLY CARRIED OUT BY THE ASSESSEE. THE AC TUAL ACTIVITY BEING CARRIED OUT BY AN ASSESSEE IS DETERMINATIVE OF THE HEAD OF INCOME UND ER WHICH THE INCOME IS ASSESSABLE. ACCORDINGLY, IT IS HELD THAT THE A.O. HAS RIGHTLY T AXED THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THE FACTS AND CIRC UMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO OF RS.1,69,891/- IS CON FIRMED AND GR. NO. 2 OF THE APPEAL IS DISMISSED. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FILED COPY OF THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V GANGA PROPERTIES LTD(199 3)199ITR94(CAL), WHEREIN THE RATIO LAID DOWN HONBLE CALCUTTA HIGH COURT READS AS UNDER: 7. IN OUR VIEW, A LIMITED COMPANY, EVEN IF IT DOES NOT CARRY ON BUSINESS BUT IT DERIVES INCOME FROM OTHER SOURCES HAS TO MAINTAIN ITS ESTABLISHMENT FOR COMPLYING WITH STATUTORY OBLIGATIONS SO LONG IT IS IN OPERATI ON AND ITS NAME IS NOT STRUCK OFF THE REGISTER OR UNLESS THE COMPANY IS DISSOLVED WHICH M EANS CESSATION OF ALL CORPORATE ACTIVITIES OF THE COMPANY FOR ALL PRACTICAL PURPOSE S. SO LONG AS IT IS IN OPERATION, IT HAS TO MAINTAIN ITS STATUS AS A COMPANY AND IT HAS TO D ISCHARGE CERTAIN LEGAL OBLIGATIONS AND, FOR THAT PURPOSE, IT IS NECESSARY TO APPOINT C LERICAL STAFF AND SECRETARY OR ACCOUNTANT AND INCUR INCIDENTAL EXPENSES. IN THIS B ACKGROUND, THE CONCLUSION OF THE TRIBUNAL THAT THE EXPENSES INCURRED WHERE WHOLLY AN D EXCLUSIVELY FOR THE ACTIVITIES TO EARN INCOME IS PRE-EMINENTLY A REASONABLE CONCLUSIO N. WE HAVE CONSIDERED A SIMILAR CASE IN INCOME-TAX REFERENCE NO. 360 OF 1979 (CIT V . NEW SAVAN SUGAR AND GUR REFINING CO. LTD.), WHERE THE JUDGMENT WAS DELIVERE D ON APRIL 18, 1989. IN THE PRESENT CASE ALSO I AM OF THE VIEW THAT ASSE SSEES EXPENSES ARE VERY MEAGRE EXPENSES JUST 3 ITA NO.2439/K/2013 JEWEL INDIA JEWELLERS PVT. LTD. AY 09-10 TO MAINTAIN ESTABLISHMENT AND FOR COMPLYING STATUTO RY OBLIGATIONS. THE ASSESSEE BEING A PRIVATE LTD. COMPANY, EVEN IF IT DOES NOT CARRY ON BUSINESS DURING THESE YEARS BUT IT DERIVES INCOME FROM OTHER SOURCES AND IT HAS TO MAINTAIN ITS ESTAB LISHMENT AND ALSO COMPLY WITH STATUTORY OBLIGATIONS AND FOR THIS, IT HAS TO INCUR EXPENSES. IN TERMS OF THE ABOVE AND RESPECTFULLY FOLLOWING THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GANGA PROPERTIES, SUPRA, I ALLOW THE EXPENSES. APPEAL OF ASSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 6. ORDER PRONOUNCED IN OPEN COURT ON 02.09.2014. SD/- , (MAHAVIR SINGH) JUDICIAL MEMBER DATED: 2ND SEPTEMBER, 2014 *+ ,- . JD.(SR.P.S.) () / &0 1(0!2- COPY OF THE ORDER FORWARDED TO: 1 . $% / APPELLANT M/S. JEWEL INDIA JEWELLERS PVT. LTD., 3 9, MANOHAR DAS STREET, KOLKATA-700 007 2 &'$% / RESPONDENT ITO, WARD-9(3), KOLKATA 3 . ) ( )/ THE CIT(A), KOLKATA 4. 5. ) / CIT KOLKATA 089 & / DR, KOLKATA BENCHES, KOLKATA '0 &/ TRUE COPY, ():/ BY ORDER, - /ASSTT. REGISTRAR .