ASST CIT 16(2), MUMBAI V. GOLDEN HOMELAND AGENCIES, MUMBAI

ITA 2737/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87994 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 24-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2013
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Assessee Lawyers: NITISH JOSHI
• Keywords: Maximum Marginal Rate; Corroborative evidences; Tax effect; Commercial expediency; Capital expenditure

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 2737/M/2013 ( / ASSESSMENT YEAR : 2009 - 2010 ) ACIT - 16(2), MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007. / VS. GOLDEN HOMELAND AGENCIES, 28 HANUMAN SHARAN, 6 TH FLOOR, BOMANJI PETIT ROAD, MUMBAI 400 026. ./ PAN : AAAFG2778F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI R.N. DSOUZA, DR / RESPONDENT BY : NITISH JOSHI / DATE OF HEARING : 11.12.2014 / DATE OF PRONOUNCEMENT : 14 .01.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 8.4.2013 IS AGAINST THE ORDER OF THE CIT (A) - 27, MUMBAI DATED 28.1.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 10,83,421/ - UNDER THE REPAIRS AND MAINTENANCE AS CAPITAL EXPENDITURE WITHOUT THE FACT THAT THE ASSESSEE HAD NOT FURNISHED ANY SUPPORTING EVIDENCE OF CLAIM. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN ALLOWING SUB - BROKERAGE OF RS. 13 LAKHS PAID TO HUF OF WORKING PARTNERS. 2. REVENUE RAISED THE ABOVE GROUNDS AGAINST THE RELIEF GRANTED BY THE CI T (A) IN RESPECT OF (I) ADDITION OF RS. 10.83 LAKHS CLAIMED TO HAVE BEEN SPENT ON REPAIRS AND MAINTENANCE, WHICH THE ASSESSING OFFICER TREATED AS CAPITAL EXPENDITURE AND (II) THE ADDITION OF RS. 13 LAKHS CLAIMED TO HAVE BEEN PAID TOWARDS SUB - BROKERAGE TO T HE HUF OF WORKING PARTNERS. IT IS THE CLAIM OF THE ASSESSING OFFICER THAT THE SUB - BROKERAGE PAYMENT COULD NOT HAVE BEEN PAID TO THE HUF MEMBERS WHO ARE ALSO THE 2 PARTNERS OF THE FIRM. IN CONNECTION WITH THE RELIEF GRANTED BY THE CIT (A) IN RESPECT OF THE AMOUNT OF RS. 10,83,421/ - , LD DR BROUGHT OUR ATTENTION TO THE PARA 3.2 OF THE IMPUGNED ORDER AND MENTIONED THAT APART FROM TWO OTHER PAYMENTS PAID TO THE VENDORS TOWARDS AMC EXPENSES OF THE OFFICE COMPUTERS, ASSESSEE MADE THE PAYMENT OF RS. 9.26 LAKHS TO O NE M/S. MEDISIGNZ. LD DR MENTIONED THAT THE ASSESSEE IS A BROKER FOR P R O V I D I N G ACCOMMODATIONS TO VARIOUS CUSTOMERS. IT IS UNUSUAL THAT THE SAID EXPENDITURE WAS CLAIMED BY THE ASSESSEE AND CLAIMED SAME AGAINST THE BROKERAGE INCOME EARNED BY THE ASSESSEE. NORMALLY THIS KIND OF EXPENDITURE HAS TO BE INCURRED BY THE OWNER OF THE PREMISES BEFORE THE SAME IS LEASED OUT TO THE TENANTS. HOWEVER, THERE IS NO DISPUTE ABOUT THE BONAFIDES OF EXPENDITURE OF RS. 9.26 LAKHS WHICH WAS PAID BY THE ASSESSEE BY WAY OF CHEQUE INVOLV ING BANKING CHANNELS. 3. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE DETAILS OF THE REPAIRS AND EXPENDITURE AND DEMONSTRATED THE PREMISES WISE EXPENSES INCURRED BY THE ASSESSEE AND SUBMITTED THAT THE CUSTOMERS ARE OF HIGH E ND GROUP AND THERE IS A COMMERCIAL EXPEDIENCY IN INCURRING SUCH EXPENDITURE AGAINST THE BROKERAGE INCOME EARNED BY HIM. HE ALSO BROUGHT OUR ATTENTION TO THE DETAILS OF CHEQUE PAYMENT MADE TO M/S. MEDISIGNZ AND SUBMITTED THAT NO CASH PAYMENTS ARE INVOLVED IN THESE TRANSACTIONS, THEREFORE, THE CLAIM OF THE ASSESSEE IS RIGHTLY ALLOWED BY THE CIT (A). FURTHER, HE MENTIONED THAT SIMILAR PAYMENTS WERE ALSO MADE IN THE EARLIER YEARS AND LATER YEARS AND CIT (A) GRANTED RELIEF AND THE DECISION OF THE CIT (A) WAS A CCEPTED BY THE REVENUE ON MERITS AND NOT BECAUSE OF LOW TAX EFFECT. ASSESSEE COMMUNICATED THE SAME TO THE BENCH MENTIONING THE TAX EFFECT WORKED OUT TO RS. 6,18,912/ - FOR THE AY 2008 - 2009. 4. AFTER HEARING BOTH THE PARTIES ON THIS ISSUE AND ON PERUSAL OF THE PAPERS FILED BEFORE US, WE FIND THE PAYMENTS ARE MADE BY WAY OF CHEQUE TO M/S. MEDISIGNZ AND CLIENT WISE DETAILS ARE ALSO PLACED ON RECORD. SIMILAR ADDITION WAS MADE IN THE EARLIER YEARS AND THE DEPARTM ENT ACCEPTED THE CIT (A)S ORDER GRANTING RELIEF TO THE ASSESSEE. ON PERUSAL OF THE CONTENTS OF PARA 3.2.1 OF THE IMPUGNED ORDER, WE FIND THE CIT (A) GRANTED RELIEF AFTER APPRECIATING THE FACT THAT THE SAID EXPENDITURE OF RS. 9.26 LAKHS WAS INCURRED OUT O F COMMERCIAL EXPEDIENCY AND THE SAME APPEARS TO BE 3 REASONABLE. CONSIDERING THE QUANTUM OF CLIENT WISE EXPENDITURE, WE ARE OF THE OPINION THAT THE CLAIM OF THE ASSESSEE IS ERRONEOUSLY HELD BY THE ASSESSING OFFICER AS CAPITAL EXPENDITURE. IN OUR OPINION, C ONSIDERING THE FACTS OF THE CASE AND THE DETAILS PLACED BEFORE US, ORDER OF THE CIT (A) ON THIS ISSUE IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT (A). 5. REGARDING THE SECOND ISSUE RELATIN G TO THE ADDITION OF RS. 13 LAKHS OF SUB - BROKERAGE PAID TO THE HUF OF WORKING PARTNERS, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE CIT (A) THE AY 2008 - 2009 (PARA 3.6) AND MENTIONED THAT SIMILAR PAYMENTS WERE MADE O N THE SUB - BROKERAGE TO THE HUF MEMBERS OF THE WORKING PARTNERS VIZ TRILOK KUMAR SHAH HUF AND JAYUESH T SHAH HUF AND THE CLAIM OF THE ASSESSEE WAS FOUND ALLOWABLE IN THE AY 2008 - 2009 AND THE SAME WAS ACCEPTED BY THE REVENUE AS INFORMED BY THE ASSESSEE TO US . FURTHER, AFTER HEARING BOTH THE PARTIES ON THIS ISSUE, WE HAVE PERUSED THE ORDER OF THE CIT (A) (PARA 3.6), WHERE THE CIT (A) REFERRED TO THE FACT OF SUCH PAYMENTS MADE IN THE EARLIER ASSESSMENT YEARS TO THE MEMBERS OF THE FROM AY 2004 - 05 TO 2009 - 2010 A LONG WITH THE DETAILS OF TDS MADE THEREON. CIT (A) ALSO BROUGHT ON TO THE RECORD THE FACT OF FILING OF RETURN BY THE SAID HUF MEMBERS AND PAYING TAXES AT THE MAXIMUM MARGINAL RATE. AFTER CONSIDERING ALL THE FACTS, THE CIT (A) GAVE CONCLUSION IN PARA 3.6. 1 OF HIS ORDER WHERE HE MENTIONED THAT THE FACTS ARE IDENTICAL TO THE ONES PERTAINING TO THE AY 2008 - 2009. NO DISTINGUISHING FACTS ARE BROUGHT OUT BY THE REVENUE BEFORE US AS TO HOW THE ORDER OF THE CIT (A) IS NOT SUSTAINABLE IN THIS YEAR. FOR THE PURPOS E OF COMPLETENESS OF THIS ORDER, WE REPRODUCE THE SAID PARA 3.6.1 OF THE IMPUGNED ORDER AND THE SAME READS AS UNDER: 3.6.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. I NOTE THAT THE AFORESAID FACTS ARE BORNE ON THE RECORDS OF THE APPELLANT AND THAT OF THE RESPECTIVE HUFS. THERE IS NO FACT FINDING BY THE ASSESSING OFFICER IN ANY OF THE YEARS THAT HUFS ARE NOT IN THE BUSINESS OF PROVIDING SUCH SERVICES. LEGALLY SPEAKING INDIVIDUAL AND HUF ARE TWO DIFFERENT ENTITIES AND ARE ALLOWED TO CARRY ON THE BUSINESS, MAY BE SIMILAR TO EACH OTHER. KARTA OF THE HUF MANAGES THE AFFAIRS OF THE HUF AS ITS HEAD AND HE DOES NOT CEASE TO BE THE KARTA ONCE HE JOINS A FIRM AS PARTNER IN HIS INDIVIDUAL CAPACITY. THE KARTA IS PERFECTLY ENTITLED TO CAR RY OUT THE DUAL ROLES. SECONDLY, IT NOT ALWAYS REQUIRED THAT THE KARTA DOES ALL THE WORK ON BEHALF OF HUF. THE KARTA MANAGES THE AFFAIRS AS A HEAD AND THE OTHER MEMBERS OF THE HUF OR THE PERSONS EMPLOYED BY THE HUF MAY CARRY OUT THE DAY TO DAY BUSINESS O F THE HUF AND THEREFORE, IT IS NOT IN THE FITNESS OF THINGS AS ASSUME THAT IT IS THE KARTA OF HUF WHO DOES ALL THE WORK AND THEREBY CONCLUDE THAT ONCE THE KARTA OF HUF IS A PARTNER IN HIS INDIVIDUAL CAPACITY, HE CANNOT PROVIDE SERVICES OTHERWISE. IT IS 4 NOT ED THAT AS IN THE EARLIER YEARS, SERVICES RENDERED WERE INTRODUCING THE CLIENT, HOLDING THE MANDATE IN THE NAME OF THE APPELLANT TILL A CUSTOMER IS FOUND AND FOR DOING NECESSARY DOCUMENTATION ETC. THE FACTS AND CIRCUMSTANCES INVOLVED AT PRESENT ARE SIMILA R TO THAT OF THE AY 2008 - 2009. FURTHER, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PAYMENTS MADE ARE EXCESSIVE IN RELATION TO THE SERVICES RENDERED. THEREFORE, CONSIDERING THE OVERALL FACTS, I AM OF THE OPINION THAT THERE IS NO CASE FOR DISALLO WING THE SUB - BROKERAGE PAID TO THE HUFS OF THE WORKING PARTNERS AS HELD IN MAY APPEAL ORDER FOR THE AY 2008 - 2009. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. APPELLANT SUCCEEDS ON THIS GROUND. 6. CONSIDERING THE ABOVE SETTLED POSITION, WE FIND THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE ON THIS ISSUE. ACCORDING LY, ON THE SECOND ISSUE, WE UPHE LD THAT ORD ER OF THE CIT (A). ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNC ED IN THE OPEN COURT ON 1 4 T H JANUARY, 2015. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 4 .1.2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI