MOTIRAM TOLARAM, MUMBAI V. DCIT CEN CIR 31, MUMBAI

ITA 3053/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88098 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 3053/MUM/2013 (ASSESSMENT YEAR: 2010-11) M/S. MOTIRAM TOLARAM VS. DCIT, CENTRAL CIRCLE-31 'LAALASIS', PLOT NO. 219 11TH ROAD, CHEMBUR MUMBAI 400071 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN - AABFM5203G APPELLANT RESPONDENT APPELLANT BY: SHRI J.P. BAIRAGRA RESPONDENT BY: SHRI PAVAN KUMAR BEERLA DATE OF HEARING: 03.02.2015 DATE OF PRONOUNCEMENT: 03.02.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE FIRM IS DIRECTED AGAINS T THE ORDER PASSED BY THE CIT(A)-40, MUMBAI AND IT PERTAINS TO AY 2010-11 . 2. THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER : - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,40,351/- UNDER SECTION 40A(2) OUT OF THE BUSINESS CENTRE CHARGES OF RS.3,40,351/- PAID TO M/S. KUKREJA SERVICES PVT. LTD. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. ASSESSEE IS ADMITTEDLY ENGAGED IN THE BUSINESS OF REAL ESTAT E DEVELOPMENT AND CIVIL CONSTRUCTION. IN RESPECT OF PREVIOUS YEAR RELEVANT TO A.Y. 2010-11 ASSESSEE DECLARED LOSS OF RS.39,60,991/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE MADE P AYMENT TO THE TUNE OF RS.3,40,351/- TOWARDS BUSINESS CENTRE CHARGES TO M/ S. KUKREJA SERVICES PVT. LTD., A PERSON SPECIFIED UNDER SECTION 40A(2)( B) OF THE ACT. UNDER THESE CIRCUMSTANCES THE AO WAS OF THE OPINION THAT THE PA YMENT MADE BY THE ASSESSEE IS EXCESSIVE. IN HIS OPINION RS.1 LAKH WOU LD BE THE REQUIRED ITA NO. 3053/MUM/2013 M/S. MOTIRAM TOLARAM 2 EXPENDITURE FOR UTILISATION OF BUSINESS CENTRE AND ADMINISTRATIVE CHARGES. THE CASE OF THE ASSESSEE, ON THE OTHER HAND, WAS TH AT SIMILAR PAYMENTS WERE MADE IN THE EARLIER ASSESSMENT YEARS ALSO. IN FACT IN A.Y. 2007-08 BUSINESS CENTRE CHARGES TO THE TUNE OF RS.16 LAKHS AND ADMIN ISTRATIVE CHARGES TO THE TUNE RS.4 LAKHS WERE PAID. SIMILARLY FOR A.Y. 2008- 09 ALSO RS.9,44,000/- WAS PAID AS BUSINESS CENTRE CHARGES AND RS.2,36,000 /- UNDER THE HEAD ADMINISTRATIVE CHARGES. NO DOUBT, THERE WAS INCREAS E IN THE CORRESPONDING AMOUNTS OF EXPENDITURE COMPARED TO THE EXPENDITURE INCURRED IN A.Y. 2005- 06 AND A.Y. 2006-07. THE CASE OF THE ASSESSEE WAS T HAT IT IS REASONABLE IN THE CIRCUMSTANCES OF THE CASE. 4. IN THE OPINION OF THE AO EXPENSES BEYOND RS.1 LAKH DESERVE TO BE CONSIDERED AS EXCESSIVE AND HENCE BY APPLYING THE P ROVISIONS OF SECTION 40A(2)(B) HE RESTRICTED THE ALLOWABLE EXPENDITURE T O RS.1 LAKH AND THE BALANCE WAS DISALLOWED NOT ONLY FOR THE YEAR UNDER CONSIDERATION BUT ALSO FOR THE IMMEDIATELY PRECEDING YEARS. 5. ON AN APPEAL FILED BY THE ASSESSEE-FIRM THE LEARNED CIT(A) NOTICED THAT THE FACTS AND CIRCUMSTANCES ARE IDENTICAL AS COMPAR ED TO THE IMMEDIATELY PRECEDING YEAR. HE ALSO REFERRED TO THE APPELLATE O RDER FOR 2009-10 PASSED BY HIS PREDECESSOR TO HOLD THAT PAYMENTS MADE IN EXCES S OF RS.1 LAKH SHOULD BE TREATED AS UNREASONABLE WITHIN THE MEANING OF SE CTION 40A(2)(B) OF THE ACT. HE HAS ALSO REFERRED TO THE APPELLATE ORDER FO R A.Y. 2008-09 TO HIGHLIGHT THAT UNDER SIMILAR CIRCUMSTANCES EXPENDITURE TO THE EXTENT OF RS.1 LAKH WAS ONLY HELD TO BE REASONABLE. 6. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. IT IS NOT IN DISPUTE THAT THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN A .Y. 2008-09 AND A.Y. 2009-10. THE LEARNED COUNSEL FOR THE ASSESSEE PLACE D BEFORE US COPIES OF THE ORDERS OF THE ITAT B BENCH, MUMBAI IN ASSESSEES OWN CASE FOR THE AFOREMENTIONED ASSESSMENT YEARS (ITA NO. 3683/MUM/2 012 DATED 24.12. 2013 AND ITA NO. 6773/MUM/2012 DATED 10.10.2014) WH EREIN THE TRIBUNAL EXHAUSTIVELY DISCUSSED THE MATTER TO HOLD THAT THER E IS NO BASIS FOR RESTRICTING THE ALLOWABILITY OF EXPENDITURE TO RS.1 LAKH AND IN FACT ALLOWED THE CLAIM OF DEDUCTION IN TOTO. IT IS ALSO NOT IN D ISPUTE THAT COMPARED TO THE ITA NO. 3053/MUM/2013 M/S. MOTIRAM TOLARAM 3 EXPENDITURE CLAIMED IN THE IMMEDIATELY PRECEDING YE AR THE EXPENDITURE INCURRED IN THIS YEAR WAS MUCH LESS. IT IS THEREFOR E SUBMITTED THAT NO CASE WAS MADE OUT BY THE DEPARTMENT TO RESTRICT THE ALLO WABILITY OF EXPENDITURE TO RS.1 LAKH. 7. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDER PASSED BY THE AO AS WELL AS THE CIT(A). HE, HOWEVER , DID NOT DENY THE FACT THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, UNDER SIMILAR CIRCUMSTANCES, HIGHER EXPENDITURE WAS ACCEPTED BY T HE TRIBUNAL AS REASONABLE FOR THE DETAILED REASONS GIVEN THEREIN. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS PASSED BY THE ITAT (SUPRA). WE ARE OF THE VIEW THAT THE EXPENDITURE CLAIMED IN THIS YEAR IS VERY REASONABLE AND HENCE THE AO WA S NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 40A(2)(B) OF THE ACT IN THE INSTANT CASE. WE, THEREFORE, DIRECT THE AO TO ALLOW THE CLAIM OF DEDU CTION OF RS.3,40,351/-. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FIR M IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY, 2015. SD/- SD/- (SANJAY ARORA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 3 RD FEBRUARY, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 40, MUMBAI 4. THE CIT CENTRAL-II, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.