ITO, New Delhi V. M/s Perfect Mall Management Pvt. Ltd., New Delhi

ITA 3062/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52553 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-08-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 09-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Business income; Business expenditure; Commercial expediency; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.3062/DEL/2011 ASSESSMENT YEAR : 2008-09 INCOME-TAX OFFICER, M/S. PERFECT MALL MANAGEMENT WARD-14(2), NEW DELHI. VS. PVT. LTD., 7, SOUTH P ATEL NAGAR, NEW DELHI. PAN: AACCT3526H (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. PRATIMA KAUSHIK, SR. DR. RESPONDENT BY: SHRI SHAILESH GUPTA, CA. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ONLY GROUND RAISED BY THE REVENUE IN THIS APPEA L IS DIRECTED AGAINST THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS)S ORDER DATED 30.03.2011 IN DELETING THE DISALLOWANCE OF EXPENSES OF RS.9,88,107/- MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 200 8-09. 2. IN THIS CASE, THE ASSESSEE COMPANY FILED ITS RET URN OF INCOME ON 6.10.2008 DECLARING TOTAL INCOME AT RS.18,15,850/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER SEC. 143(2) OF THE ACT, WHICH WA S COMPLIED WITH BY THE ASSESSEE BY ATTENDING BEFORE THE AO AND SUBMITTING VARIOUS DETAILS OR INFORMATION AS CALLED FOR. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS 2 OF MANAGEMENT, MAINTENANCE AND REPAIRS OF MULTIPLEX ES, CINEMA HALLS AND SHOP COMPLEXES. DURING THE YEAR UNDER CONSIDERATION , IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD DEBITED EXPENSES OF RS.9,8 8,107/- IN RESPECT OF TDI CENTRE (JASSOLA). IT WAS NOTED BY THE AO THAT NO C ORRESPONDING RECEIPT FROM THIS MALL WAS SHOWN IN THE PROFIT & LOSS ACCOUNT. T HE AO, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN AS T O WHY EXPENSES DEBITED IN RESPECT OF TDI CENTRE, JASSOLA AMOUNTING TO RS.9,88 ,107/- SHOULD NOT BE DISALLOWED AS CORRESPONDING RECEIPTS WERE NOT REFLE CTED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 30.12.2010. HOWEVER, THE AO STATED THAT THE ASSESSEES REPLY IS NOT ACCE PTABLE. HE, THEREFORE, DISALLOWED THE SUM OF RS.9,88,107/- AS NO BUSINESS RECEIPTS WERE SHOWN FROM THE AFORESAID MALL. THUS, THE ADDITION OF RS. 9,88,107/- WAS MADE IN THE ASSESSMENT. 3. ON AN APPEAL, THE LEARNED CIT(A) DELETED THE ADD ITION BY OBSERVING AS UNDER:- 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE APPELLANT AND PERUSED THE ASSESSMENT ORDER PASSED B Y THE AO. MY FINDINGS AND OBSERVATIONS ARE AS UNDER:- (I) XX XX (II) XX XX (III) XX XX (IV) IN RESPECT OF DISALLOWANCE OF RS.9,88,107/- RELATIN G TO TDI CENTRE (JASSOLA), I FIND THAT THE AO MADE DISALLOWANCE OF RS.9,88,107/- ON THE GROUND THAT TH ERE 3 WERE NO BUSINESS RECEIPT FROM THIS MALL AND HENCE T HE EXPENSES INCURRED WITH REFERENCE TO SUCH MALL CANNO T BE ALLOWED. THE LD. AR SUBMITTED THAT THE EXPENDITURE INCURRED WAS FOR THE PURPOSE OF BUSINESS. HE SUBMI TTED THAT ALTHOUGH NO REVENUE WAS GENERATED DURING THE Y EAR, AS THE MANAGEMENT FEE STARTED COMING FROM NEXT YEAR . ACCORDING TO THE LD. AR, THE REVENUE GENERATION CAN NOT BE A BAROMETER FOR ALLOWANCE OF EXPENDITURE. HE SUBMITTED THAT AS PER SEC 37(1) OF THE INCOME TAX A CT, AN EXPENDITURE IS ALLOWABLE IF EXPENDITURE IS EXPENDED WHOLLY FOR THE PURPOSE OF THE BUSINESS AND EXPENDIT URE INCURRED IS NOT IN NATURE OF CAPITAL EXPENDITURE. HE FURTHER PLEADED THAT THE APPELLANT HAS INCURRED EXPENDITURE FOR THE PURPOSE OF BUSINESS AND EXPENDI TURE INCURRED IS NOT A CAPITAL EXPENDITURE HENCE EXPENDI TURE SHOULD BE ALLOWED AS DEDUCTION. HE FURTHER SUBMITT ED THAT THE WORD `EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS OF WIDE IMPORT AND IS WIDER THAN EXPRESSION FOR THE PURPOSE OF EAR NING PROFIT. THE LD. AR RELYING ON THE JUDICIAL PRONOUNCEMENTS ARGUED THAT THE COMMERCIAL EXPEDIENC Y HAS TO BE SEEN FROM THE POINT OF VIEW OF THE PRUDEN T BUSINESSMAN AND NOT FROM THE POINT OF VIEW OF THE REVENUE. (V) CONSIDERING THE FACTS OF THE CASE, I FIND THAT THE APPELLANT IS NOT THE OWNER OF THE MALL (TDI CENTRE, JASSOLA) BUT IT HAS TAKEN ITS MANAGEMENT. DURING THE YEAR THE APPE LLANT HAS COMMENCED ITS MANAGEMENT AND HAS INCURRED VERY URGENT AND NECESSARY EXPENSES. THE EXPENSES WERE REVENUE IN NATURE AND FOR THE PURPOSE OF BUSINESS W ITH COMMERCIAL EXPEDIENCY. FURTHER, THE APPELLANT HAS STARTED RECEIVING THE MANAGEMENT CHARGES DURING SUBSEQUENT YEARS. UNDER THESE CIRCUMSTANCES, I DO NOT FIND ANY REASON AND JUSTIFICATION FOR MAKING THE DISALLOWANCE OF RS.9,88,107/-. HENCE THE DISALLOWA NCE OF RS.9,88,107/- IS DELETED. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. 4 5. IN THIS CASE, THE AO HAS DISALLOWED EXPENSES INC URRED BY THE ASSESSEE IN RESPECT OF TDI CENTRE, JASSOLA FOR THE REASON TH AT NO CORRESPONDING RECEIPTS WERE SHOWN IN THE PROFIT & LOSS ACCOUNT. NOW, THE AO HAS TRIED TO MAKE OUT A CASE THAT THE DISALLOWANCE WAS MADE FOR THE REASONS THAT THE ASSESSEE HAS FAILED TO PROVE THAT SUCH EXPENSES WER E LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO HA S ALSO TRIED TO MAKE OUT A CASE THAT THE ADDITION HAS BEEN MADE BECAUSE OF NON -GENUINE EXPENSES AS SO APPEARING FROM THE LANGUAGE USED IN THE GROUNDS OF APPEAL. THE CASE MADE OUT BY THE AO IN THE ASSESSMENT ORDER IS LIMITED TO THE ISSUE THAT NO CORRESPONDING RECEIPTS WERE SHOWN BY THE ASSESSEE I N RESPECT OF TDI CENTRE, JASSOLA. THE FACT THAT THE ASSESSEE HAD TAKEN OVER THE MANAGEMENT OF TDI CENTRE, JASSOLA DURING THE YEAR UNDER CONSIDERATION , IS NOT IN DISPUTE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS COMMENCED ITS MANAGEMENT AND HAS INCURRED CERTAIN EXPENSES. THE LEARNED CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS STARTED RECEIVING THE MANAGEMENT CHARG ES DURING THE SUBSEQUENT YEARS. IT IS WELL SETTLED THAT BUSINESS EXPENDITURE INCURRED BY THE ASSESSEE AFTER THE BUSINESS WAS SET UP, SHOULD BE A LLOWED U/S 37(1) OF THE ACT NOTWITHSTANDING THE FACT THAT THE ASSESSEE MIGHT NO T HAVE RECEIVED ANY REVENUE DURING THAT PERIOD. IT IS NOT THE CASE OF THE AO THAT THE EXPENDITURES INCURRED BY THE ASSESSEE ARE OF CAPITAL IN NATURE S O THAT THE SAME ARE NOT 5 ALLOWABLE U/S 37(1) OF THE ACT. IN THIS VIEW OF TH E MATTER, WE, THEREFORE, UPHOLD THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.9,88,107/- MADE BY THE AO ON ACCOUNT OF EXPENSES INCURRED IN RESPECT OF MANAGEMENT OF MALL I.E. TDI CENTRE, JASSOLA. THE O RDER OF THE LEARNED CIT(A) IS THUS, UPHELD ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 7. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 TH AUGUST, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.