Sh. Gurdas Mann, Chandigarh V. DCIT, Chandigarh

ITA 300/CHANDI/2012

• Counselvise Citation: 30021514 RSA 2012
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: TEJ MOHAN SINGH; PRAMOD KUMAR PARIDA
• Keywords: Gift; Depreciation; Business expenditure; Earning of tax free income; Capital expenditure
• Section: 12; 40A(3); 143(3); 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NOS. 300 TO 302/CHD/2012 (ASSESSMENT YEARS : 2006-07 TO 2008-09) SH.GURDAS MANN,, VS. THE D.C.I.T., 2801, OBEROI SKY HIGHTS, CIRCLE 1(1), LOKHANDWALA COMPLEX, CHANDIGARH. ANDHERI (W), MUMBAI. PAN: AFXPM8444A AND ITA NOS. 303 & 304/CHD/2012 (ASSESSMENT YEARS : 2006-07 & 2008-09) SMT.MANJIT MANN,, VS. THE D.C.I.T., 2801, OBEROI SKY HIGHTS, CIRCLE 1(1), LOKHANDWALA COMPLEX, CHANDIGARH. ANDHERI (W), MUMBAI. PAN: AEXPM8447D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAMOD KUMAR PARIDA & SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 30.08.2012 DATE OF PRONOUNCEMENT : 28.09.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THESE FIVE APPEALS FILED BY TWO DIFFERENT ASSESSEES ARE AGAINST SEPARATE ORDERS OF CIT(A) RELATING TO ASSESSMENT YE ARS 2006-07 TO 2008- 09 AGAINST ORDERS PASSED U/S 143(3) OF THE ACT. OUT OF THE FIVE APPEALS, THREE APPEALS FILED BY THE ASSESSEE RELATE TO SHRI GURDAS MANN AND TWO APPEALS ARE FILED MS.MANJIT MANN, WIFE OF SHRI GURD AS MANN. 2. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BE ING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 2 3. THE ASSESSEE HAD MADE A REQUEST FOR TRANSFER OF APPEALS TO MUMBAI WHICH WAS OBJECTED TO BY THE REVENUE. THE ASSESSEE THEREAFTER HAD WITHDRAWN HIS REQUEST FOR TRANSFER OF APPEALS TO MU MBAI AND THE PRESENT APPEALS WERE TAKEN UP FOR HEARING. ITA NO.303/CHD/2012 : 2006-07 : MRS.MANJIT MANN : 4. THE REVISED GROUNDS OF APPEAL FILED BY THE ASSES SEE IN ITA NO.303/CHD/2012 ARE AS UNDER: 1. DISALLOWANCE OF INTEREST- RS. 5,14,802/- . A) THE ID. CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE U/S. 24(B) WITHOUT APPRECIATING THAT THE PURCHAS E OF FLATS WERE MADE JOINTLY, LOAN WAS SANCTION BY UTI BANK IN JOINT NAMES AND INTEREST CERTIFICATE WAS ISSUED IN JOINT NAME; THEREFORE, THE DISALLOWANCE (@50%) U/S. 24(B) IN TH E HANDS OF APPELLANT IS UNJUSTIFIED AND THE CLAIM MAY BE ALLOWED. B) WITHOUT PREJUDICE TO ABOVE, THE REPAYMENT OF PRINCI PAL AND INTEREST HAD BEEN MADE FROM THE JOINT ACCOUNTS AND THE LOANS HAD BEEN SANCTIONED ON BOTH THE FLATS; TH EREFORE, THE APPELLANT HAD RIGHTLY CLAIMED 50% OF INTEREST U /S. 24(B) WHICH SHOULD BE ALLOWED. 2. DISALLOWANCE OF EXPENSES - RS. 35,27,500/- THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE VERY EXPENSES ARE EXCLUSIVELY BUSINESS RELATED ON WHICH VOUCHERS AND BOOKS WERE PRODUCED; THEREFORE, THE DISALLOWANCE ON SURMISES IS NOT JUSTIFIED AND T HE SAME MAY BE DELETED. 3. AD-HOC DISALLOWANCE OF EXPENSES - RS. 10,00,000/ - THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.10,00,000/- WITHOUT APPRECIATING TO TH E BUSINESS 3 NATURE OF CLAIM AND ALLOWING IN PART AND CONFIRMING THE OTHER PART IN THE ABSENCE OF REJECTION OF BOOKS IS NOT JUSTIFI ED. 4. DISALLOWANCE OF DEPRECIATION - RS. 83,902/- THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE OFFICE PREMISES WAS VERY MUCH IN USE DURING THE YEAR AND IN A.Y. 2007-08, THE SAME HAD GONE FOR RE- DEVELOPMENT; THEREFORE, THE DISALLOWANCE IS NOT JUS TIFIED AND THE SAME MAY BE DELETED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A LL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS THE FILM MAKER AND ALSO AN EVENT MANAGER. THE ASSESSEE ALSO RELEA SES MUSIC ALBUM. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD FILED RETURN OF INCOME DECLARING LOSS OF RS.1,06,06,222/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT AGAINST THE RENTAL INCOME OF RS.3,60,000/- THE ASSESSEE HAD CLA IMED INTEREST EXPENDITURE OF RS.10,49,604/- ON ACCOUNT OF INTERES T PAID ON BORROWED CAPITAL TAKEN FROM UTI BANK, UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER HAS REPRODUCED TH E LOAN CERTIFICATE ISSUED BY THE UTI BANK AT PAGES 3 AND 4 OF THE ASSE SSMENT ORDER AND NOTED THAT SIMILAR CERTIFICATE HAD BEEN PRODUCED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS OF SHRI GURDAS MANN. THE AS SESSING OFFICER NOTED THAT DEDUCTION OF RS.20,59,208/- WAS CLAIMED BY BOTH THE HUSBAND AND THE WIFE AS AGAINST ELIGIBLE DEDUCTION OF RS.10 ,29,604/-. THE ASSESSING OFFICER FURTHER NOTED THAT THE LOAN WAS I SSUED TO SHRI GURDAS MANN FOR PURCHASE OF TWO FLATS IN OBEROI SKY HEIGHT S, OSHIWARA, ANDHERI MUMBAI AND THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF INTEREST ON BORROWED LOANS. THE RENTAL INCOME WAS THUS COMPUTED EXCLUDING DEDUCTION OF ANY INTEREST ON BORROWED CAP ITAL. THE CIT 4 (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE HAD NOT PAID ANY INTEREST TO THE BANK FOR THE REASON THAT SHE HAD NOT TAKEN ANY LOAN IN HER OWN NAME. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT BOTH THE HUSBAND AND WIFE HAD PURCHASED TWO FLATS SIDE BY SIDE IN THE SAME SO CIETY. ONE FLAT WAS PURCHASED IN THE NAME OF THE ASSESSEE AND SECOND IN THE NAME OF HER HUSBAND. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY CONCEDED THAT THE TOTAL INTEREST PAID ON THE BORROWED CAPITAL WAS RS.10,29, 604/-. THE LEARNED A.R. FOR THE ASSESSEE DREW OUR ATTENTION TO THE CAP ITAL ACCOUNT OF THE ASSESSEE PLACED AT PAGE 5 OF THE PAPER BOOK UNDER W HICH THE INTEREST ON HOUSING LOAN WAS SHOWN TO BE TOTALING RS.5,14,802/- . THE ASSESSEE POINTED OUT THAT THE FLAT PURCHASE AGREEMENT WAS PL ACED AT PAGES 50 TO 106 OF THE PAPER BOOK AND THE FLAT NO.2801/B, OBERO I SKY HEIGHTS, OSHIWARA, ANDHERI MUMBAI WAS PURCHASED IN THE NAME OF THE ASSESSEE AS IS EVIDENT FROM THE RECITAL OF THE PURCHASE AGREEME NT WITH SPECIAL REFERENCE AT PAGES 51 AND 56 OF THE PAPER BOOK. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT FLAT NO.2802 WAS PURCHASED BY THE HUSBAND OF THE ASSESSEE AS IS APPARENT FROM THE PURCHASE AGREEMENT PLACED IN THE PAPER BOOK OF SHRI GURDAS M ANN AT PAGE 47 ONWARDS OF THE PAPER BOOK UNDER WHICH HE HAD PURCHA SED FLAT NO.2802 IN THE SAID BUILDING. OUR ATTENTION WAS FURTHER DRAWN TO THE INTEREST CERTIFICATE ISSUED BY UTI BANK, REPRODUCED BY THE A SSESSING OFFICER AT PAGES 3 AND 4 OF THE ASSESSMENT ORDER UNDER WHICH T HE FIRST NAME IS OF MR.GURDAS GURDEV MANN AND CO-APPLICANT NAME IS MENT IONED AS THAT OF THE ASSESSEE. THE LANGUAGE OF THE CERTIFICATE CLEA RLY MENTIONED THAT THE LOAN HAD BEEN SANCTIONED FOR THE PURCHASE OF TWO FL ATS. THE LEARNED A.R. FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE HAND S OF SHRI GURDAS MANN 5 AN INTEREST OF RS.5,14,802/- WAS CLAIMED AND WAS AL LOWED BY THE ASSESSING OFFICER. HOWEVER, IN THE HANDS OF THE AS SESSEE BEFORE US THE INTEREST WAS CLAIMED AT RS.10,29,604/- BY AN ERROR. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IN THE COMPUTATION OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, PLACED AT PAGES 1 AND 2 OF THE PAPER BOOK HAD DECLARED INCOME FROM HOUSE PROPERTY. THE ANNUAL RENTAL VALU E OF THE SAID PROPERTY WAS DECLARED AT RS.3,60,000/- AGAINST WHIC H DEDUCTION UNDER SECTION 24(A) OF RS.1,08,000/- WAS CLAIMED. FURTHE R DEDUCTION WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF INTEREST ON B ORROWED LOANS PAID TO UTI BANK OF RS.10,29,604/-. THE COPY OF CAPITAL AC COUNT REFLECTS THE ASSESSEE TO HAVE CLAIMED INTEREST ON HOUSING LOAN O F RS.5,14,802/-. 8. THE ASSESSEE IS THE OWNER OF FLAT NO.2801/B IN O BEROI SKY HEIGHTS, OSHIWARA, ANDHERI MUMBAI AS IS APPARENT FROM THE PE RUSAL OF THE PURCHASE AGREEMENT PLACED AT PAGES 51 TO 106 OF THE PAPER BOOK. THE RENTAL INCOME FROM PROPERTY ADMITTEDLY DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. HOWEVER, T HE DEDUCTION ON ACCOUNT OF INTEREST PAID ON HOUSING LOAN WAS NOT AL LOWED TO THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID LOAN OF RS.1.5 CRORES WAS GRANTED TO SHRI GURDAS MANN I.E. HUSBAND OF THE ASSESSEE AND NO LOAN BEING GRANTED TO THE ASSESSEE, NO INTEREST ON ACCOUNT THEREOF WAS ALLOWABLE IN THE HANDS OF THE ASSESSEE. THE ASSESS ING OFFICER AT PAGES 3 AND 4 OF THE ASSESSMENT ORDER HAS REPRODUCED THE CE RTIFICATE ISSUED BY UTI BANK. THE SAID CERTIFICATE IS ADDRESSED TO SHR I GURDAS GURDEV MANN WITH CO-APPLICANT BEING MRS.MANJIT MANN. AS PER TH E SAID CERTIFICATE, IT IS STATED THAT HOUSING LOAN OF RS.1.50 CRORES FOR T HE PURCHASE OF FLATS NO.2801/A/B/C AND 2802/A/B/C AT 28 TH FLOOR, OBEROI SKY HEIGHTS, OSHIWARA, ANDHERI MUMBAI HAD BEEN GRANTED. IN THE FINANCIAL YEAR 6 1.4.2005 TO 31.3.2006, EMIS PAYABLE ON THE SAID LOA N TOTALED TO RS.16,43,148/- AND THE BREAK-UP OF THE SAID AMOUNT INTO PRINCIPAL AND INTEREST WAS AS UNDER: PRINCIPAL COMPONENT RS. 6,13,544/- INTEREST COMPONENT RS.10,29,604/- 9. THE PERUSAL OF THE COMPUTATION OF INCOME FILED B Y SHRI GURDAS MANN PLACED IN HIS PAPER BOOK AT PAGES 1 AND 2 REFL ECT THAT THE ASSESSEE HAD SHOWN INCOME FROM HOUSE PROPERTY AND CLAIMED IN TEREST PAID ON HOUSING LOAN AT RS.10,39,604/-. THE ASSESSING OFFI CER WHILE COMPLETING THE ASSESSMENT, COMPUTED THE INCOME FROM HOUSE PROP ERTY I.E. FLAT NO.2802 IN OBEROI SKY HEIGHTS, OSHIWARA, ANDHERI MU MBAI AFTER TAKING RENTAL INCOME AT RS.3,60,000/-,, DEDUCTION OF INTER EST ON BORROWED CAPITAL WAS ALLOWED AT RS.5,14,802/-. ADMITTEDLY, THE TOTAL INTEREST PAID BY THE ASSESSEE ALONGWITH HER HUSBAND ON THE BORROW ED LOANS DURING THE YEAR UNDER CONSIDERATION WAS RS.10,39,604/- OUT OF WHICH DEDUCTION OF RS.,5,14,802/- HAS BEEN ALLOWED IN THE HANDS OF SHR I GURDAS MANN. NO DEDUCTION OF THE BALANCE AMOUNT HAS BEEN ALLOWED IN THE HANDS OF THE ASSESSEE OR SHRI GURDAS MANN. 10. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES WHERE THE RENTAL INCOME FROM THE INDIVIDUAL FLATS OWNED BY THE ASSES SEE AND HER HUSBAND SHRI GURDAS MANN HAVE BEEN INCLUDED IN THEIR RESPEC TIVE HANDS, THE DEDUCTION ON ACCOUNT OF THE INTEREST PAID ON BORROW ED CAPITAL UTILIZED FOR THE PURCHASE OF THE SAID FLAT IS TO BE ALLOWED IN THE EQUAL PROPORTION IN THE HANDS OF THE ASSESSEE AND HER HUSBAND SHRI G URDAS MANN. THE UTI BANK IN THEIR CERTIFICATE HAS CLEARLY MENTIONED THE NAME OF THE APPLICANT TO BE SHRI GURDAS MANN AND NAME OF CO-APP LICANT TO BE SMT.MANJIT MANN. THE TOTAL LOAN OF RS.1.50 CRORES HAS BEEN UTILIZED FOR 7 THE PURCHASE OF THE AFORESAID TWO FLATS I.E. FLAT N O.2801 AND 2802 IN OBEROI SKY HEIGHTS, OSHIWARA, ANDHERI MUMBAI, WHICH ADMITTEDLY ARE OWNED BY THE ASSESSEE AND HER HUSBAND SHRI GURDAS M ANN. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES WE FIND MERIT IN THE C LAIM OF THE ASSESSEE IN RELATION TO THE INTEREST PAID ON HOUSING LOAN TOTAL ING RS.5,14,802/-. CONSEQUENTLY, WE DIRECT THE ASSESSING OFFICER TO AL LOW INTEREST PAID ON BORROWED CAPITAL TOTALING RS.5,14,802- AS DEDUCTION WHILE COMPUTING INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSE SSEE. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS ALLOWED. 11. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS.35,27,500-. 12. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE YEAR THE ASSESSEE HAD SHOWN RECEIPT FROM FILMS, MUSIC ALBUM AND OLD FILM INCOME. THE ASSESSEE HAD CLAIMED EXPENDITURE ON ACC OUNT OF PRODUCTION OF FILMS & MUSIC ALBUM AND HAD CLAIMED EXPENDITURE OF RS.35,27,560/-. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD IS I NCORPORATED AT PAGES 6 AND 7 OF THE ASSESSMENT ORDER. THE ASSESSING OFFIC ER WAS OF THE VIEW THAT ONCE THE ASSESSEE IS DEBITING THE EXPENDITURE AGAINST THE INCOME OR RECEIPT OF ANY FILM PRODUCTION OR MUSIC ALBUM, NO FURTHER EXPENDITURE WAS REQUIRED TO BE DEBITED TO THE PROFIT & LOSS ACC OUNT. THE INCOME SHOWN WAS ON ACCOUNT OF ROYALTY OR TELECAST RIGHTS OF THE FILM OR MUSIC ALBUM OF THE ASSESSEE. THE EXPENDITURE BOOKED TOTA LING RS.35,27,560/- ON ACCOUNT OF PROFESSIONAL FEE, PUBLICITY, BUSINESS PROMOTION, DRESS & COSTUME ETC. WERE HELD TO BE NOT IN ANY WAY LINKED TO THE OLD FILM INCOME AND HENCE SAID EXPENDITURE WAS DISALLOWED BY THE ASSESSING OFFICER. 8 13. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSES SING OFFICER IN VIEW OF THE ASSESSEE HAVING FOLLOWED PROJECT COMPLE TION METHOD IN RESPECT OF VARIOUS FILMS AND MUSIC ALBUMS. IT WAS FURTHER OBSERVED BY THE CIT (APPEALS) THAT IN RESPECT OF THE OLD FILMS, NO EXPENDITURE WAS ALLOWABLE. THE CIT (APPEALS) ALSO NOTED THE ASSESS EE TO HAVE MAINTAINED SEPARATE PROFIT & LOSS ACCOUNT FOR HERSE LF TO MEET HER DAY- TO-DAY EXPENSES AND HENCE THE DISALLOWANCE OF EXPEN DITURE WAS UPHELD BY THE CIT (APPEALS). 14. THE LEARNED A.R. FOR THE ASSESSEE BROUGHT TO OU R NOTICE DETAILS OF THE SAID EXPENDITURE PLACED AT PAGE 19 OF THE PAPER BOOK AND POINTED OUT THAT NO DISALLOWANCE OUT OF THE SAID EXPENDITURE WA S MADE EITHER IN THE EARLIER YEARS OR IN THE SUBSEQUENT YEARS. THE SAID EXPENSES WERE CLAIMED TO BE COMMON EXPENSES FOR RUNNING THE BUSINESS. 15. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PERUSAL OF THE PROFIT & LOSS ACCOUNT PLACED AT PAGE 9 OF THE PAPER BOOK REFLECTS THE ASSESSEE TO HAVE FOLLOWED PROJECT COMP LETION METHOD I.E. IT HAS SHOWN THE RECEIPTS AND CORRESPONDING EXPENDITUR E IN RESPECT OF EACH OF ITS VENTURE SEPARATELY AND HAD OVER AND ABOVE TH E SAME CLAIMED EXPENDITURE OF RS.35,27,560/-. THE SCHEDULE OF THE SAID EXPENSES TOTALING RS.35,27,560/- IS PLACED AT PAGE 19 OF THE PAPER BOOK. THE PERUSAL OF THE SAID DETAILS REFLECTS EXPENSES UNDER VARIOUS HEADS LIKE DIWALI EXPENDITURE, PRINTING & STATIONERY, PROFESSI ONAL FEE, CONVEYANCE, CREDIT CARD CHARGES, DEPRECIATION, DRESS & COSTUME, INTEREST ON LOAN OF RS.4,30,059/-, MISC. EXPENSES OF RS.1,82,195/- AND TELEPHONE CHARGES OF RS.3,60,325/-, ETC. THE ASSESSEE HAS FOLLOWED PROJ ECT COMPLETION METHOD IN 9 RESPECT OF ITS FILM BUSINESS, THE MUSIC ALBUM INCOM E AND HAD SHOWN LOSS FROM FILM BUSINESS AND PROFIT FROM MUSIC ALBUM. IN ADDITION TO THE ABOVE SAID INCOME, THE ASSESSEE HAD SHOWN RECEIPTS FROM OLD FILM INCOME I.E. ROYALTY OF ABOUT RS.12 LACS, DOORDARSHAN, TELE CAST RIGHTS OF FILM OF RS.5 LACS, SATELLITE RIGHTS OF MOVIE OF RS.7,50,000 /-. THE ASSESSEE HAD FURTHER CLAIMED COMMON EXPENDITURE OF RS.35,27,560/ -. THE PERUSAL OF THE EXPENDITURE AT PAGE 19 OF THE PAPER BOOK REFLEC TS ITS NATURE. CERTAIN EXPENDITURE NO DOUBT ARE FOR CARRYING ON THE BUSINE SS AND BEING BUSINESS EXPENDITURE ARE TO BE ALLOWED AS AN EXPENDITURE. T HE DETAILS REFLECT THE ASSESSEE TO HAVE BOOKED CERTAIN DAY-TO-DAY EXPENSES WHICH ARE DIRECTLY RELATABLE TO THE BUSINESS BEING CARRIED ON BY THE A SSESSEE. HOWEVER, CERTAIN EXPENSES LIKE DRESS AND COSTUME TOTALING RS .1,08,540/-, PUBLICITY EXPENSES OF RS.1,19,250/-, LODGING AND BOARDING EXP ENSES OF RS.1,16,424/-, SOCIETY MAINTENANCE EXPENSES OF RS.6 2,152/- AND TELECAST EXPENSES OF RS.10,000/- AND TITLE REGISTRATION EXPE NSES OF RS.6500/- CANNOT BE ATTRIBUTED TO THE SAID COMMON EXPENDITURE FOR RUNNING THE BUSINESS. WE FIND NO MERIT IN THE SAME AS THE ASSES SEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLISH ITS CLAIM OF HAVING INCURRED SAID EXPENDITURE FOR BUSINESS PURPOSES. MERELY BEC AUSE THE EXPENSE HAS BEEN MET THROUGH CHEQUE DOES NOT WARRANT ITS ALLOWA NCE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE DI SALLOWANCE IN THE HANDS OF THE ASSESSEE IN VIEW OF THE ABOVE SAID EXP ENDITURE. GROUND NO.2 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 17. THE ISSUE IN GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF RS.10 LACS OUT OF TOTAL EXPENDITURE OF RS.4,14,94,773/-. THE ASSESSEE HAD BOOKED THE ABOVE SAID EXPENDITURE AND THE ASSESSING OFFICER HAD DISALLOWED 3% OF THE EXPENSES BEING NON VERIFIABLE, RESULTING IN ADDITION OF RS.12,44,843/-. THE CIT ( APPEALS) HAD 10 RESTRICTED THE ADDITION TO RS.10 LACS. THE ADDITIO N MADE BY THE ASSESSING OFFICER IS ADHOC ADDITION AS ASSESSEE HAD FURNISHED PARTIAL VOUCHERS AND BILLS RAISED BY PARTIES, WERE NOT MAIN TAINED. THE CIT (APPEALS) HAS ALSO UPHELD THE ADHOC DISALLOWANCE IN THE HANDS OF THE ASSESSEE. IN THE INTEREST OF JUSTICE AND TO PLUG T HE LEAKAGE OF REVENUE WE DEEM IT FIT TO RESTRICT THE DISALLOWANCE AT 1% OF T HE TOTAL EXPENDITURE OF RS.4.14 CRORES. THE DISALLOWANCE IS RESTRICTED TO RS.4,14,947/-. GROUND NO.3 RAISED BY THE ASSESSEE IS THUS PARTLY A LLOWED. 18. THE ISSUE IN GROUND NO.4 IS AGAINST DISALLOWANC E OF DEPRECIATION ON OFFICE PREMISES. THE AUTHORITIES BELOW HAD DISAL LOWED THE SAID DEPRECIATION IN THE HANDS OF THE ASSESSEE AS THE OF FICE WAS NOT BEING UTILIZED FOR BUSINESS PURPOSE, AS THE SAME WAS GIVE N FOR RE-DEVELOPMENT. THE CLAIM OF THE ASSESSEE BEFORE US WAS THAT RE-DEV ELOPMENT AGREEMENT WAS SIGNED ON 18.1.2010 AND RE-DEVELOPMENT HAD STAR TED IN ASSESSMENT YEAR 2009-10. THE ASSESSEE CLAIMS TO HAVE UTILIZED THE OFFICE DURING THE YEAR UNDER CONSIDERATION. CONSEQUENTLY, THE CLAIM O F DEPRECIATION IS TO BE ALLOWED TO THE ASSESSEE. WE DIRECT THE ASSESSIN G OFFICER TO ALLOW THE SAME. GROUND NO.4 RAISED BY THE ASSESSEE IS THUS A LLOWED. 19. THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLO WED. ITA NO.304/CHD/2012 : 2008-09 : MRS.MANJIT MANN : 20. THE REVISED GROUNDS OF APPEAL FILED BY THE ASSE SSEE IN ITA NO.304/CHD/2012 ARE AS UNDER: 1. DISALLOWANCE U/S. 40A(3) - RS. 1.66.7327- . THE ID. ASSESSING OFFICER ERRED IN CONFIRMING THE D ISALLOWANCE U/S. 40A(3) WITHOUT APPRECIATING THAT THE SAME WERE INCU RRED UNDER EXCEPTIONAL CIRCUMSTANCES AS RECIPIENTS HAD INSISTE D ONLY CASH AND THE INDIVIDUAL PAYMENT IN CASH DOES NOT EXCEED MORE THA N RS. 20,000/- ON A 11 SINGLE DAY. THEREFORE, THE DISALLOWANCE IS UNCALLED FOR AND THE SAME MAY BE DELETED. 2. AD-HOC ((O)10%) DISALLOWANCE OF VARIOUS EXPENSE S - RS. 1,35,825/- THE ID. CIT(A) ERRED IN CONFIRMING 10% DISALLOWANCE SUMMARILY WITHOUT APPRECIATING THAT ENTIRE RANGE OF BUSINESS EXPENSES HAD DIRECT BUSINESS NEXUS AND AS SUBSTANTIAL PERSONAL FAMILY W ITHDRAWALS (RS. 26,71,527/-) WERE MADE FOR A SMALL FAMILY OF THREE, NO AD-HOC DISALLOWANCE ON THE ALLEGED PERSONAL ELEMENT IS CAL LED FOR AND THE SAME MAY BE DELETED. 3. AD-HOC DISALLOWANCE TO COVER UP DISCREPANC Y IN BILLS / VOUCHERS RS.75,000/- THE ID. CIT(A) ERRED IN CONFIRMING THE SUMMARY DISA LLOWANCE WITHOUT VERIFYING ANY SPECIFIC DEFECTS IN THE BILLS / VOUCH ERS AND SINCE THE APPELLANT IS SUBJECT TO TAX AUDIT, NO SUMMARY DISAL LOWANCE, TO MEET THE ENDS OF JUSTICE, IS CALLED FOR AND THE SAME MAY BE DELETED. 4. BOOKS OF ACCOUNTS NOT REJECTED, NO SUMMARY DISA LLOWANCE IS CALLED FOR: THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT WHEN BOOKS OF ACCOUNTS WHICH WERE DULY TAX AUDITED, ARE NOT REJECTED, IT I S NOT JUSTIFIED TO RESORT TO VARIOUS KINDS OF AD-HOC DISALLOWANCES. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 21. THE GROUND NO.1 OF APPEAL RAISED BY THE ASSESSE E IS AGAINST DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT UNDER THE SAID SECTION WHERE THE EXPENDITURE IN CASH IS MADE OVER AND ABOV E RS.20,000/- BY WAY OF A SINGLE PAYMENT OR AGGREGATE OF PAYMENTS IN A SINGLE DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR DRAFT, THEN SUCH AMOUNT IS TO BE DISALLOWED IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER VIDE PARA 2 HAD NOTED THE ASSESSEE TO HAVE MADE VAR IOUS CASH PAYMENTS TOTALING RS.1,66,732/- TO VARIOUS PARTIES FOR PURCH ASES ON VARIOUS DATES AND THE SAME WERE DISALLOWED IN VIEW OF THE PROVISI ONS OF SECTION 12 40A(3) OF THE ACT. THE CIT (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 22. THE LEARNED A.R. FOR THE ASSESSEE THOUGH STRESS ED THAT NO PAYMENT WAS MADE IN CASH OVER AND ABOVE RS.20,000/- BUT WAS UNABLE TO MEET THE OBSERVATION OF THE ASSESSING OFFICER IN THIS REGARD . IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE CONFIRM DISALLOWANCE OF RS.1,66,732/-. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS DISMISSED. 23. THE GROUND NO.2 RAISED BY THE ASSESSEE IS IN RE SPECT OF DISALLOWANCE OF VARIOUS EXPENSES TOTALING RS.1,35,8 25/-. THE ASSESSING OFFICER HAD DISALLOWED 20% OF THE EXPENSES I.E. CON VEYANCE, VARIOUS VEHICLES RELATED EXPENSES, LODGING & BOARDI NG, TRAVELING, STAFF WELFARE, TELEPHONE, BUSINESS PROMOTION AND PUBLICIT Y TOTALING RS.13,58,254/-. THE CIT (APPEALS) HAD RESTRICTED T HE DISALLOWANCE TO 10%. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCE S AND MERELY BECAUSE THE ASSESSEE HAD MADE PERSONAL WITHDRAWALS DOES NOT MERIT NO DISALLOWANCE FOR PERSONAL USE OUT OF THE VEHICLE RE LATED EXPENSES AND TELEPHONE EXPENSES. WE FIND NO MERIT IN ANY DISALL OWANCE FOR PERSONAL USE OUT OF CONVEYANCE, LODGING & BOARDING, TRAVELIN G STAFF WELFARE, BUSINESS PROMOTION & PUBLICITY. THUS, THE GROUND NO .2 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 24. GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINST T HE DISALLOWANCE OF RS.75,000/-. THE ASSESSING OFFICER VIDE PARA 5 NOT ED FROM THE BOOKS OF ACCOUNT AND THE BILLS/VOUCHERS, CERTAIN DISCREPANCI ES AND IT WAS NOTICED THAT SOME BILLS/VOUCHERS WERE NOT VERIFIABLE. THE SAID DISCREPANCIES WERE CONFRONTED TO THE ASSESSEE AND AFTER DISCUSSIO N DISALLOWANCE OF RS.75,000/- WAS MADE TO COVER UP THE SAID EXPENSES. THE CONTENTION OF THE ASSESSEE THAT THE VOUCHERS WERE PRODUCED BEFORE THE ASSESSING 13 OFFICER WAS REJECTED BY THE CIT (APPEALS) AS THE AD DITION WAS MADE AFTER DISCUSSION WITH THE ASSESSEE. WE FIND NO MERIT IN THE PRESENT GROUND OF APPEAL RAISED BY THE ASSESSEE WHERE THE SAID ADDITI ON WAS AGREED UPON ON CONFRONTATION DURING THE ASSESSMENT PROCEEDINGS. T HE GROUND NO.3 RAISED BY THE ASSESSEE IS THUS DISMISSED. 25. GROUND NO.4 RAISED BY THE ASSESSEE IS GENERAL A ND ARGUMENTATIVE AND HENCE THE SAME IS DISMISSED. ITA NO.300/CHD/2012 : 2006-07 : SHRI GURDAS MANN : 26. THE REVISED GROUNDS OF APPEAL FILED BY THE ASSE SSEE IN ITA NO.300/CHD/2012 ARE AS UNDER: 1. ADDITION ON ACCOUNT OF ALLEGED NON-ACCOUNTING O F RECEIPT - RS. 3,08,4257- . THE ID. CIT(A) ERRED IN CONFIRMING THE ADDITION WIT HOUT APPRECIATING THAT THE APPELLANT HAD FULLY ACCOUNTED THE SAME AND THE RECONCILIATION TO THAT EXTENT WERE SUBMITTED BEFORE THE LOWER AUTHORI TIES; THEREFORE, THE DOUBLE ADDITION IS UNCALLED FOR AD THE SAME MAY BE DELETED. 2. DISALLOWANCE ON ACCOUNT OF FOREIGN SHOWS - RS. 5,72,970/- THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE EXPENSES INCURRED DURING AND CONSEQUENT TO FOREIGN TOUR WERE EXCLUSIVELY FOR THE PURPOSE INVOLVED AND MERELY ON THE BASIS OF DOUBTS AND SURMISES, NO DISALLOWANCE COULD BE MADE. 3. DISALLOWANCE ON ACCOUNT OF ALLEGED EXCESS LOSS FROM INCOME FROM HOUSEPROPERTY - RS. 5,14,6027- THE ID. CIT(A) ERRED IN CONFIRMING THE LOSS WITHOUT APPRECIATING THAT THE APPELLANT HAD DULY COMPLIED TO THE NORMS OF SEC. 24 (B); SO THE RESULTANT LOSS DECLARED IS GENUINE AND NO DISALLOWANCE THEREO F IS CALLED FOR. 4. DISALLOWANCE OF DEPRECIATION - RS. 80,555 AND R S. 2,40,6307- 14 THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE APPELLANT HAD VERY MUCH USED THE OFFICE PR EMISES DURING THE RELEVANT YEAR; THEREFORE, NO DISALLOWANCE IS CALLED FOR AS THE ASSETS WERE PUT TO USE DURING THE YEAR. 5. AD-HOC DISALLOWANCE ((5)10%) OF VARIOUS EXPENSE S - RS. 3,01,1417- THE ID. CIT(A) ERRED IN GIVING PARTIAL RELIEF ON AD -HOC BASIS WITHOUT APPRECIATING THAT THE APPELLANT BEING AN ACTOR HAD TO CARRY OUT EXTENSIVE TRAVEL AND ON THE FACE OF HIGH PERSONAL W ITHDRAWALS, NO AD-HOC DISALLOWANCE OF EXPENSES IS FURTHER CALLED FOR. 27. THE ISSUE IN GROUND NO.1 IS AGAINST THE ADDITIO N OF RS.3,08,425/-. THE ASSESSING OFFICER NOTED FROM THE DETAILS OF AMO UNT RECEIVED FROM INDIAN SHOWS, THE ASSESSEE HAD SHOWN SUM OF RS.16,5 75/- AS RECEIVED FROM M/S CABLE TELEVIDEOS (I) P. LTD., WHEREAS AS P ER FORM 16A, THE AMOUNT ISSUED WAS RS.3,25,000/-. THE DIFFERENCE OF RS.3,08,425/- WAS TREATED AS INCOME OF THE ASSESSEE. THE CIT (APPEAL S) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE EXPLANATION OF THE ASSESSEE WAS THAT IN THE LEDGER ACCOUNT OF RECEIPT FROM INDIAN SHOWS DIFFERENTIAL SUM OF RS.2,08,425/- WAS CREDITED TO HINDUSTAN TIME SHOW A ND RS.1 LAC WAS SHOWN IN ADVANCE SHOW ACCOUNT. THE EXPLANATION OF THE ASSESSEE BEFORE THE CIT (APPEALS) IS PLACED AT PAGE 43 OF THE PAPER BOOK AND COPY OF THE LEDGER ACCOUNT IS PLACED AT PAGES 30 TO 35. FROM T HE PERUSAL OF THE ABOVE SAID LEDGER ACCOUNT WE FIND MERIT IN THE CLAI M OF THE ASSESSEE AND ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.3,08,425/-. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS ALLOWED. 28. THE GROUND NO.2 RAISED BY THE ASSESSEE IS AGAIN ST DISALLOWANCE OF RS.5,72,970/- BEING FOREIGN TOUR EXPENSES. THE ASS ESSING OFFICER AT PAGE 4 UNDER PARA 4 HAD TABULATED THE DETAILS OF FO REIGN SHOWS PERFORMED BY THE ASSESSEE ALONGWITH DATES OF FOREIGN SHOWS. THE EXPENDITURE 15 BOOKED BY THE ASSESSEE WAS ON DATES WHICH WERE AT V ARIANCE WITH THE DATES OF FOREIGN SHOWS. CONSEQUENT THERETO, DISALLO WANCE OF RS.5,72,970/- WAS MADE IN THE HANDS OF THE ASSESSEE . THE LEARNED A.R. FOR THE ASSESSEE THOUGH VEHEMENTLY ARGUED THAT THE SAID EXPENDITURE WAS ALLOWABLE IN THE HANDS OF THE ASSESSEE BUT WAS UNAB LE TO EXPLAIN THE NATURE OF THE SAID EXPENDITURE AND ALSO THE DATE OF INCURRENCE OF THE SAID EXPENDITURE IN CO-RELATION WITH THE DATES OF FOREIG N SHOWS. IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE AND DISALLOWANCE OF RS.5,72,970/- IS CONFIRMED. GROUND NO.2 RAISED BY THE ASSESSEE IS DISMISSED. 29. GROUND NO.3 RAISED BY THE ASSESSEE IS NOT PRESS ED AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 30. GROUND NO.4 RAISED BY THE ASSESSEE IS SIMILAR T O GROUND NO.4 RAISED BY MRS.MANJIT MANN IN ITA NO.303CHD/2012. F OLLOWING OUR DECISION IN PARAS HEREINABOVE, WE ALLOW THE CLAIM O F THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION BOTH ON OFFICE PREMISES AND ASSETS. GROUND NO.4 RAISED BY THE ASS ESSEE IS THUS ALLOWED. 31. GROUND NOS. 5 AND 6 RAISED IS AGAINST DISALLOWA NCE OF 10% OUT OF TELEPHONE AND VEHICLE EXPENSES AND DEPRECIATION ON VEHICLES. THE ELEMENT OF PERSONAL USE CANNOT BE RULED OUT OUT OF THE SAID EXPENSES. WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN DISALLO WING 1/10 OF THE SAID EXPENSES FOR PERSONAL USE. GROUND NOS. 5 AND 6 ARE THUS DISMISSED. ITA NO.301/CHD/2012 : 2007-08 : SHRI GURDAS MANN : 32. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO.301/CHD/2012 ARE AS UNDER: 16 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CI T) ERRED IN CONFIRMING THE ADDITIONOFRS.4,37,430/-MADE BY AO DI SALLOWANCE U/S 40(A)(IA) OF THE ACT. 2. THE CIT FAILED TO APPRECIATE THAT :- A) THE SAID EXPENSES ARE TOWARDS THE RENT COVER ED U/S194J AND THE INDIVIDUAL PAYMENTS HAVE NOT CROSSE D THE THRESHOLD LIMITS FOR TAX DEDUCTION. B) THE SAID EXPENSES ARE NOT COVERED U/S194C 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS. 4,37,430/- MADE BE DELETED. GROUND II 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CIT) ERRED IN C ONFIRMING THE ADDITION OF RS.4,37,158/ -MADE BY AO DISALLOWANCE CONSIDERING THE SAME AS CAPITAL EXPENDITURE. 2. THE CIT FAILED TO APPRECIATE THAT :- A) THE SAID EXPENSES DID NOT RESULT IN CREATION OF ANY NEW ASSET. B) THE EXPENSES WERE THE REPAIR AND REPLACEMENT WITHOU T ADDING ANY ADDITIONAL UTILITY. 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF REPAIR EXPENSES OF RS.4,37,158/- MADE BE DELETED. GROUND III 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CLT) ERRED IN C ONFIRMING THE ADDITION OF RS.2,18,623/-MADE BY AO DISALLOWANCE U/ S 40A(3) OF THE ACT. 2. THE CIT FAILED TO APPRECIATE THAT :- A) THE ASSESSEE DID NOT HAVE ANY EXPENDITURE COVERED U /S40A(3) B) NO EVIDENCE IS PLACED ON RECORD TO JUSTIFY THE DISA LLOWANCE BY THE AO AND ADDITIONS ARE MADE BASED ON SURMISES AND CONJECTURE . 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF EXPENS ES OF RS.2,18,623/- MADE U/S40A(3) BE DELETED. GROUND IV 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH, (CIT) ERRED IN CONFIRMING THE AID OF RS.8,01,254/- MADE BY AO DISALLOWANCE OUT OF THE FOREIGN TRAVELING EXPENSES. 2. THE CIT FAILED TO APPRECIATE THAT :- 17 A) THE ASSESSEE HAD CLASSIFIED THE EXPENSES RELATING TO FOREIGN TOUR AND FOREIGN TRAVELLING EXPENSES ALL OF WHICH WAS NOT IN CURRED DURING THE VISIT. B) THE AO ERRED IN CO RELATING THE DATE OF EXPENDITURE WITH THE FOREIGN VISIT IGNORING THE SUBMISSIONS. C) NO EVIDENCE IS PLACED ON RECORD TO JUSTIFY THE D ISALLOWANCE BY THE AO AND ADDITIONS ARE MADE BASED ON SURMISES AND CONJECTURE , A. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF EXPENSES OF RS.8,01, 254/- MADE OUT OF FOREIGN TRAVEL BE DELETED. GROUND V 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CIT) ERRED IN CONF IRMING THE AD HOC ADDITION OF RS.2,99,558/-MADE BY AO DISALLOWANC E OUT OF EXPENSES. 2. THE CIT FAILED TO APPRECIATE THAT :- C) THE ASSESSEE IS A PERFORMING ARTIST AND THE EXPENSE S ARE NECESSARY FOR HIS PROFESSION. D) THE ASSESSEE HAD SUFFICIENT DRAWINGS AND EXPENSES C LAIMED AS DRAWINGS TO COVER ALL THE PERSONAL EXPENSES. E) NO EVIDENCE IS PLACED ON RECORD TO JUSTIFY THE DISA LLOWANCE BY THE ASSESSING OFFICER AND ADDITIONS ARE MADE BASED ON S URMISES AND CONJECTURE. 3. THE APPELLANT PRAYS THAT THE AD HOC DISALLOWANCE OF RS.2,99,558/- MADE BE DELETED. 33. THE ISSUE IN GROUND NO.1 IS AGAINST THE DISALLO WANCE OF EXPENSES UNDER SECTION 40A(IA) OF THE ACT. THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE OUT OF CERTAIN PAYMENTS TOTALING RS.4,37,430 /-, WHICH WERE DISALLOWED IN VIEW OF SECTION 40A(IA) OF THE ACT. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER. 34. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POINTE D OUT THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH OF VISHAKHAPATNAM REPORTED IN ACIT VS. MERILYN SHIPPIN G & TRANSPORTS[136 ITD 23(SB)(VISHAKHAPATNAM)] WHEREIN IT WAS HELD AS UNDER: WHERE THE AMOUNTS HAVE BEEN PAID DURING THE YEAR U NDER CONSIDERATION ITSELF AND NOTHING IS PAYABLE AT THE CLOSE OF THE Y EAR, NO DISALLOWANCE WAS WARRANTED UNDER SECTION 40(A)(IA) OF THE ACT FO R NON DEDUCTION OF TAX AT SOURCE OUT OF SUCH AMOUNT PAID DURING THE YE AR. 18 35. FOLLOWING THE ABOVE SAID PARITY OF REASONING, W E DIRECT THE ASSESSING OFFICER TO VERIFY THE STAND OF THE ASSESS EE AND IN CASE THE SAID AMOUNTS HAVE BEEN PAID BY THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION, NO DISALLOWANCE IS WARRANTED OUT OF SAID PAYMENTS IN LINE WITH THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASS ESSEE BY THE ASSESSING OFFICER FOR ADJUDICATING THE ISSUE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 36. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF RS.4,37,158/- OUT OF REPAIR AND MAI NTENANCE EXPENSES. THE ASSESSING OFFICER VIDE PARA 3.1 OF THE ASSESSME NT ORDER HAD NOTED THAT THE ASSESSEE HAD DEBITED SUM OF RS.4,87,255/- UNDER THE HEAD REPAIR & MAINTENANCE. THE ASSESSING OFFICER REQU ISITIONED THE ASSESSEE TO PRODUCE THE BILLS FOR REPAIR AND MAINTE NANCE. THE ASSESSING OFFICER NOTED FROM THE SAID BILLS THAT THE SAME WER E ON ACCOUNT OF ELECTRICAL INSTALLATIONS AND PURCHASE OF NEW FURNIT URE. THE SAID ITEMS AS PER THE ASSESSING OFFICER CONSTITUTED CAPITAL EXPEN DITURE. THE ISSUE WAS CONFRONTED TO THE LEARNED COUNSEL FOR THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS BUT NO REPLY WAS FILED ON THIS ISSUE. THE ASSESSING OFFICER HELD THE SAID EXPENDITURE TO BE CAPITAL IN NATURE, HOWEVER, DEPRECIATION WAS ALLOWED ON THE AFORESAID AMOUNT AND REMAINING S UM OF RS.4,37,158/- WAS ADDED AS INCOME OF THE ASSESSEE. 37. BEFORE THE CIT (APPEALS) THE CONTENTION OF THE ASSESSEE WAS THE HE HAD REPLACED CERTAIN ELECTRIC INSTALLATION AND FURN ITURE DURING THE YEAR AND NO NEW FIXED ASSET HAD COME INTO EXISTENCE. TH E CIT (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER AS THE SA ID ADDITION WAS MADE ON PERUSAL OF THE BILLS BY THE ASSESSING OFFICER. 19 38. THE LEARNED A.R. FOR THE ASSESSEE STRESSED BEFO RE US THAT THE SAID EXPENDITURE WAS ON REPLACEMENT OF ALREADY EXISTING ASSET AND MERITED ALLOWANCE. 39. THE LEARNED D.R. FOR THE REVENUE PALCED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 40. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.4,87,255/- UNDER THE HEAD REPAIR & MAINTENANCE. THE SAID EXPENDITURE WAS C LAIMED TO BE INCURRED ON REPLACEMENT OF ELECTRICITY INSTALLATION AND ALSO FOR THE PURCHASE OF NEW FURNITURE. WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE THAT IT WAS A CASE OF MERE REPLACEMENT AND NOT THE CASE OF COMING INTO EXISTENCE OF NEW FIXED ASSET. THE EXPENDITURE INCU RRED ON PURCHASE OF NEW FURNITURE CANNOT BE HELD TO BE REPLACEMENT AND THE SAME BEING IN THE NATURE OF CAPITAL EXPENDITURE, IS NOT TO BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. FURTHER THE ASSESSEE HAD FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLISH ITS CLAIM OF HAVING REPLACED THE ELECTRIC INSTALLATION OR THE NATURE OF THE ELEC TRIC INSTALLATION SO REPLACED. IN THE ABSENCE OF THE EVIDENCE AND BECAU SE OF THE EXAMINATION BY THE ASSESSING OFFICER OF THE REQUISITE BILLS AND DOCUMENTS IN RESPECT THEREOF, WE FIND NO MERIT IN THE CLAIM OF THE ASSES SEE. UPHOLDING THE ORDER OF CIT (APPEALS) WE DISMISS GROUND NO.2 RAISE D BY THE ASSESSEE. 20 41. GROUND NO.3 RAISED BY THE ASSESSEE AGAINST DIS ALLOWANCE UNDER SECTION 40A(3) OF THE ACT IS IDENTICAL TO GROUND NO .1 RAISED IN ITA NO.304CHD/2012. THE CLAIM OF THE ASSESSEE IS THAT NO SINGLE PAYMENT IN CASH WAS MADE ABOVE RS.20,000/-. HOWEVER, THE ASSE SSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLISH THE SAME. FOLLOWING OUR ORDER IN THE PARAS HEREINABOVE, WE CONFIRM THE ADDITION O F RS.2,18,623/- UNDER SECTION 40A(3) OF THE ACT. GROUND NO. 3 RAISED BY THE ASSESSEE IS DISMISSED. 42. GROUND NO.4 RAISED BY THE ASSESSEE AGAINST DISA LLOWANCE OF FOREIGN TRAVELING EXPENSES IS SIMILAR TO GROUND NO.2 RAISED BY THE ASSESSEE IN ITA NO.300/CHD/2012. FOLLOWING THE SAME WE DISMISS GROUND NO.4 RAISED BY THE ASSESSEE AGAINST DISALLOWANCE OF FORE IGN TRAVELING EXPENSES OF RS.8,01,254/-. 43. GROUND NO.5 RAISED BY THE ASSESSEE IS AGAINST D ISALLOWANCE OF 1/10 TH OUT OF TELEPHONE AND CAR EXPENSES BECAUSE OF PERS ONAL USE BY THE CIT (APPEALS) IN PARA 6.3 OF THE APPELLATE ORDER. THE SAID DISALLOWANCE IS UPHELD IN VIEW OF OUR REASONING IN PARAS HEREINABOV E. THE SAID GROUND NO. 5 IS HEREBY DISMISSED. ITA NO.302/CHD/2012 : 2008-09 : SHRI GURDAS MANN : 44. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO.302/CHD/2012 ARE AS UNDER: GROUND I 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CIT) ERRED IN CONF IRMING THE ADDITION OF RS.3,85,172/-MADE BY AO DISALLOWANCE U/S14A CALCULA TED UNDER RULE 8D. 2. THE CIT FAILED TO APPRECIATE THAT :- A) THE ASSESSEE HAS SHOWN THE NEXUS OF LOANS TO THE BU SINESS. 21 B) THE ASSESSEE HAS NOT USED ANY OF THE FUNDS FOR EARN ING/INVESTING IN THE TAX FREE INCOME. 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF INT EREST RS.3,85,172/- MADE U/S14A BE DELETED. GROUND II 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CIT) ERRED IN CONF IRMING THE ADDITION OF RS.12,44,250/-MADE BY AO DISALLOWANCE OUT OF INTERE ST PAID. 2. THE CIT FAILED TO APPRECIATE THAT :- A) THE ASSESSEE HAS SHOWN THE NEXUS OF LOANS TO THE BU SINESS. B) THE ASSESSEE DID NOT USE ANY OF THE FUNDS FOR ADVAN CING INTEREST FREE LOANS. C) THE INCOME EARNED AND CAPITAL OF THE ASSESSEE IS SU FFICIENT ENOUGH TO COVER THE INTEREST FREE ADVANCES. 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF INT EREST RS. 12,44,2507- MADE U/S14A BE DELETED. GROUND III 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH,(CIT) ERRED IN CONF IRMING THE AD HOC ADDITION OF RS.13,68,392/-MADE BY AO DISALLOWANCE O UT OF EXPENSES. 2. THE CIT FAILED TO APPRECIATE THAT :- D) THE ASSESSEE IS A PERFORMING ARTIST AND THE EXPENSE S ARE NECESSARY FOR HIS PROFESSION. E) THE ASSESSEE HAD SUFFICIENT DRAWINGS AND EXPENSES C LAIMED AS DRAWING TO COVER ALL THE PERSONAL EXPENSES. F) NO EVIDENCE IS PLACED ON RECORD TO JUSTIFY THE DISA LLOWANCE BY THE AO AND ADDITIONS ARE MADE BASED ON SURMISES AND CONJECTURE. 3. THE APPELLANT PRAYS THAT THE AD HOC DISALLOWANCE OF RS.13,68,392/- MADE BE DELETED. GROUND IV 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH, (CIT) ERRED IN CON FIRMING THE AD HOC ADDITION OF RS.50,000/-MADE BY AO DISALLOWANCE OUT OF EXPENSES. 2. THE CIT FAILED TO APPRECIATE THAT :- G) THE ASSESSE'S BOOKS WERE AUDITED, AND THE SUPPOR TING VOUCHERS WERE PRESENTED BEFORE THE AO. H) NO EVIDENCE IS PLACED ON RECORD TO JUSTIFY THE D ISALLOWANCE BY THE ASSESSING OFFICER AND ADDITIONS ARE MADE BASED ON SURMISES AND CONJEC TURE. 22 3. THE APPELLANT PRAYS THAT THE AD HOC DISALLOWANCE OF RS.50,000/- MADE BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 45. THE ISSUE IN GROUND NO.1 IS AGAINST THE DISALLO WANCE UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER HAD INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT BECAUSE OF THE INVESTMENT MA DE BY THE ASSESSEE IN VARIOUS SECURITIES INCLUDING VARIOUS CONCERNS, L IC FD, WITH UTI, ETC. THE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF RULE 8D TO COMPUTE DISALLOWANCE OF RS.3,85,172/- UNDER SECTION 14A OF THE ACT. THE CIT (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFI CER. 46. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE DIVIDEND INCOME EARNED BY THE ASSESSEE WAS NIL AND CONSEQUENTLY THERE WAS NO MERIT IN MAKING THE AFORESAID DISALLOWANCE. 47. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 48. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE YEAR UNDER APPEAL BEFORE US IS ASSESSMENT YEAR 2008 -09 AND THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM THE INSTA NT ASSESSMENT YEAR IN ORDER TO WORK OUT DISALLOWANCE UNDER SECTION 14A OF THE ACT, AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG . CO. LTD. VS. DCIT ITA NO. 626 OF 2010 (234 CTR 1 (BOM)]. 49. IN THE FACTS OF THE PRESENT CASE THE PERUSAL OF THE COMPUTATION OF INCOME FURNISHED AT PAGES 1 AND 2 OF THE PAPER BOOK REFLECTS THE ASSESSEE NOT TO HAVE DECLARED ANY DIVIDEND INCOME I N THE INSTANT ASSESSMENT YEAR. IN THE ABSENCE OF ANY INCOME EARN ED BY THE ASSESSEE, WHICH IS EXEMPT UNDER THE PROVISIONS OF SECTION 14A OF THE ACT, THERE IS NO MERIT IN DISALLOWANCE OF ANY PART OF THE EXPENDI TURE BEING RELATABLE 23 TO SUCH EXEMPT INCOME, WHICH IN THE CASE OF THE ASS ESSEE IS NIL. WE FIND NO MERIT IN THE DISALLOWANCE OF RS.3,85,172/- MADE BY THE ASSESSING OFFICER IN THIS REGARD. WE DIRECT THE ASSESSING OF FICER TO DELETE THE SAME. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS A LLOWED. 50. THE GROUND NO.2 IS AGAINST THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OUT OF INTEREST PAID TOTALING RS.12,44 ,250/- UNDER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. THE A SSESSING OFFICER NOTED THE ASSESSEE TO HAVE ADVANCED INTEREST FREE LOANS T O VARIOUS PERSONS AND ON THE OTHER HAND HAD PAID INTEREST ON THE SECURED LOANS RAISED BY IT. THE ASSESSING OFFICER IN VIEW OF THE RATIO LAID DOW N BY THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. ABHISHEK INDUS TRIES [286 ITR 1(P&H)] COMPUTED PART DISALLOWANCE OUT OF THE INTER EST PAID AMOUNTING TO RS.12,44,250-. THE CIT (APPEALS) CONFIRMED THE SAME. 51. THE PLEA OF THE LEARNED A.R. FOR THE ASSESSEE B EFORE US WAS THAT THE PERUSAL OF THE LIST OF SECURED LOANS RAISED BY THE ASSESSEE AT PAGE 46 OF THE PAPER BOOK REFLECTS THAT THE MAJOR PART OF T HE LOANS, ON WHICH INTEREST WAS PAID, WERE RAISED FOR FINANCING THE VA RIOUS VEHICLES OWNED BY THE ASSESSEE AND INTEREST WAS ALSO PAID ON THE H OUSING LOAN RAISED BY THE ASSESSEE. THE LEARNED A.R. FOR THE ASSESSEE FA IRLY ADMITTED THAT THE SAID ASPECT WAS NOT LOOKED INTO BY THE ASSESSING OF FICER WHILE MAKING THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE AC T. IN THE INTEREST OF JUSTICE, WE DEEM IT FIT TO RESTORE THE ISSUE BACK T O THE FILE OF THE ASSESSING OFFICER TO GIVE FACT FINDING OF THE NATUR E OF THE SECURED LOANS RAISED BY THE ASSESSEE AND IF THE SAME ARE RELATABL E TO A SPECIFIC PURPOSE AND ARE NOT PART OF THE GENERAL POOL OF FUNDS AVAIL ABLE TO THE ASSESSEE, THERE IS NO MERIT IN DISALLOWING ANY PART OF SUCH I NTEREST RELATABLE TO SUCH SECURED LOANS. HOWEVER, THE INTEREST ON SECUR ED LOANS RAISED FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSE SSEE BEING PART OF 24 MIXED POOL OF FUNDS WARRANTS DISALLOWANCE IN VIEW O F THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES (SUPRA). GROUND NO.2 RAISED BY THE ASSESSEE IS THU S ALLOWED FOR STATISTICAL PURPOSES. 52. THE ISSUE IN GROUND NO.3 IS AGAINST THE ADHOC D ISALLOWANCE OUT OF EXPENSES AMOUNTING TO RS.13,68,392/-. THE PERUSAL OF THE ASSESSMENT ORDER REFLECTS THAT VIDE PARA 4 AT PAGE 4 OF THE AS SESSMENT ORDER THE ASSESSING OFFICER HAD CONSIDERED THE UNDER-MENTIONE D EXPENSES INCURRED BY THE ASSESSEE: 1) DIWALI EXPENSES RS. 2,25,575/- 2) FLOWERS,BOUQUETS & GIFT RS. 3,40,713/- 3) LODGING & BOARDING RS. 1,71,709/- 4) REPAIRS & MAINTENANCE RS. 7,49,536/- 5) TELEPHONE RS. 4,15,606/- 6) TRAVELING RS.17,77,703/- 7) VEHICLE MAINTENANCE RS.10,37,770/- 8) BUSINESS PROMOTION RS.4,62,837/- 9) CONVEYANCE RS.6,34,873/- 10) PETROL & PARKING RS.3,74,807/- 11) STAFF WELFARE RS.4,27,961/- 12) PERSONAL DEVELOPMENT EXPENSES RS.2,22,870/- TOTAL : RS.68,41,960/- 53. THE ASSESSING OFFICER HAD DISALLOWED 20% OF THE SAID EXPENDITURE FOR PERSONAL USE BY THE ASSESSEE TOTALING RS.13,68, 392/-. THE CIT (APPEALS) CONFIRMED THE SAID DISALLOWANCE OBSERVING AS PER PARA 5.2 OF THE ASSESSMENT ORDER THAT THE SAID DISALLOWANCE WAS MADE AFTER DISCUSSION WITH THE ASSESSEE. 54. WE FIND NO MERIT IN THE SAID DISALLOWANCE OF TH E CIT (APPEALS) SPECIALLY KEEPING IN MIND THE NATURE OF THE EXPENDI TURE CONSIDERED BY THE ASSESSING OFFICER. THE ELEMENT OF PERSONAL USE OUT OF TELEPHONE 25 EXPENSES, VEHICLE MAINTENANCE AND PETROL & PARKING CANNOT BE DOUBTED, BUT WE FIND NO MERIT IN THE DISALLOWANCE OUT OF THE BALANCE EXPENSES FOR PERSONAL USE. THE CIT (APPEALS) IN THE PRECEDING Y EAR HAD DISALLOWED 1/10 TH OUT OF TELEPHONE AND VEHICLE MAINTENANCE. ACCORDI NGLY, WE DIRECT THE ASSESSING OFFICER TO DISALLOW 10% OUT OF THE EX PENDITURE RELATABLE TO VEHICLE MAINTENANCE, PETROL & PARKING AND TELEPHONE EXPENSES. 55. THE ASSESSING OFFICER HAD FURTHER DISALLOWED RS .50,000/- TO COVER ANY DISCREPANCIES IN THE BILLS AND VOUCHERS MAINTAI NED BY THE ASSESSEE, BEING NOT VERIFIABLE. THE SAID DISALLOWANCE MADE B Y THE ASSESSING OFFICER IS PURELY ADHOC DISALLOWANCE WITHOUT POINTI NG OUT THE NATURE OF THE DISCREPANCIES AND THE HEAD OF THE EXPENDITURE T O WHICH IT RELATES. WE FIND NO MERIT IN THE SAID DISALLOWANCE. THUS GR OUND NO.3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED AND GROUND NO.4 RAIS ED BY THE ASSESSEE IS ALLOWED. 56. IN THE RESULT, ALL THE FIVE APPEALS FILED BY TH E ASSESSEES ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF SEPTEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH SEPTEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH