MARRIOTT PROPERTIES & DEVEOPERS P.LTD, MUMBAI V. DCIT 10(2)(2), MUMBAI

ITA 3085/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0939 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 28-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Corroborative evidences

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 3085/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) M/S. MARRIOTT PROPERTIES AND DEVELOPERS PVT. LTD. 108, 7 BUNGALOW, SHIVAM APARTMENTS, J. P. ROAD, VERSOVA, ANDHERI (W), MUMBAI - 400 053 / VS. DCIT - 10(2)(2), MUMBAI ./ ./ PAN/GIR NO. AAFCM 8465 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 11.10.2017 / DATE OF PRONOUNCEMENT : 01.01.2018 / O R D E R PER SHAMIM YAHYA , A. M.: T HIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) D ATED 09.2.2017 AND PERTAINS TO THE ASSESSMENT YEAR 2012 - 13. 2. T HE GROUNDS OF APPEAL READ AS UNDER : 1. THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING ASSESSING OFFICERS VIEW OF DISALLOWING DIRECTORS REMUNERATION OF RS.10,00,000/ - DEBITED TO PROFIT & LOSS ACCOUNT WITHOUT ANY VALID FINDINGS AND REASONING ONLY ON PERSONAL NOTIONS AND SURMISES. 2 ITA NO. 3085/MUM/2017 (A.Y. 2012 - 13) M/S. MARRIOTT PROPERTIES AND DEVELOPERS PVT. LTD. VS. DCIT 2. THE LEARNED CIT(AP PEALS) ERRED IN DISALLOWING THE CLAIM OF ASSESSEE COMPANY TO SET OFF BROUGHT FORWARD BUSINESS LOSS AGGREGATING TO RS.1,25,574/ - PERTAINING TO A.YS. 2009 - 10 AND 2010 - 11 WITHOUT ANY VALID FINDINGS AND REASONING ONLY ON PERSONAL NOTIONS AND SURMISES. 3. THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING THE ASSESSING OFFICERS VIEW IN INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) AND LEVYING INTEREST U/S. 234B. APROPOS GROUND NO.1 3. DURING THE COURSE OF SCRUTINY PROCEEDING U/S. 143(3), THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY. THE RECEIPT CREDITED TO PROFIT & LOSS ACCOUNT WERE ON ACCOUNT OF HOUSE PROPERTY INCOME, CAPITAL GAINS, ACCRUED INTEREST AND MISCELLANEOUS INCOME. THE ASSESSING OFFICER FURTHER NOTED THAT THOUGH THERE WAS NO BUSINESS ACTIVITY AT ALL, HOWEVER, THE DIRECTORS CLAIM OF REMUNERATION WERE INCREASED FROM RS.5,00,000/ - TO RS.10,00,000/ - . ON BEING ASKED TO EXPLAIN, IT WAS SUBMITTED BY THE ASSESSEE COMPANY THAT TH E COMPANY REQUIRED TO MAINTAIN BOOKS OF ACCOUNT, AUDITS AND OTHER PROFESSIONAL ACTIVITIES, WHICH REQUIRE CERTAIN EXPENSES TO BE INCURRED. THE ASSESSING OFFICER HAS POINTED OUT THAT THE INTEREST CREDITED WAS RECEIVED FROM M/S. KANNAV ASSOCIATES AND ANY EXPE NDITURE AGAINST THE SAID INTEREST SHOULD BE ALLOWABLE, ONCE IT IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST. THE ASSESSING OFFICER HAD ALLOWED THE INCIDENTAL EXPENDITURE WHICH THE COMPANY HAS CLAIMED SUCH AS AUDIT FEES, ACCOUN TING CHARGES, PROFESSIONAL CHARGES, ROC FEES ETC. FINALLY, THE ASSESSING OFFICER CONCLUDED THAT THE CLAIM OF REMUNERATION OF DIRECTOR IS 3 ITA NO. 3085/MUM/2017 (A.Y. 2012 - 13) M/S. MARRIOTT PROPERTIES AND DEVELOPERS PVT. LTD. VS. DCIT INADMISSIBLE AND DISALLOWED THE SAME. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE ME. 4. U PON ASSESSEE'S APPEAL , TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. HE HELD AS UNDER : 5.1 I HAVE CAREFULLY CONSIDERED THE ARGUMENTS AND SUBMISSION OF THE AR OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND DECISION O F THE ITAT FOR A.Y.2010 - 11. IT IS UNDISPUTED FACT THAT DURING THE COURSE OF RELEVANT PREVIOUS YEAR, NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT BY THE APPELLANT COMPANY. THE RECEIPTS ARE FROM 'LET OUT OF COMMERCIAL PROPERTY', 'INTEREST ON ACCOUNT OF LENDING OF MONEY' AND 'GAIN ON SALE OF SHOP'. THOUGH, THERE IS NO BUSINESS ACTIVITY, HOWEVER, THE APPELLANT HAS INCREASED THE CLAIM FROM RS.5,00,000 / - TO RS.10,00,000/ - ON ACCOUNT OF REMUNERATION PAID TO THE DIRECTORS. THE CLAIM OF REMUNERATION HAS TO BE EXAMINED FROM THE RECEIPT UNDER REFERENCE I.E. HOUSE PROPERTY INCOME, INCOME FROM OTHER SOURCES AND CAPITAL GAIN. NONE OF THIS ACTIVITY REQUIRES THE ACTIVE INVOLVEMENT OF DIRECTORS AND CLAIM OF REMUNERATION FROM SUCH RECEIPTS HAS TO BE EXAMINED FROM THE PROVISIONS UNDER THE ACT, WHICH ALLOWS THE EXPENDITURE FROM SUCH RECEIPTS. THE AO HAS RIGHTLY POINTED OUT THAT AGAINST INCOME FROM OTHER SOURCES, THE EXPENDITURE HAS TO BE ALLOWED U/S.57(III), IF THE SAME IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF EARNING THAT INCOME, WHICH IS NOT THE CASE HERE. 5.2 THE APPELLANT HAS ALSO MADE BALD AND GENERAL STATEMENT THAT THE DIRECTORS WERE INVOLVED IN EXPLORING THE BUSINESS OPPORTUNITIES. SUCH GENERAL STATEMENT IS DEVOID OF ANY SUPPORTING EVIDENCE. THUS, THIS CANNOT BE TAKEN AS A BASIS FOR ALLOWANCE OF REMUNERATION. THE APPELLANT HAS ALSO REFERRED THE DECISION OF THE HON'BLE ITAT FOR A.Y. 2010 - 1 1 . THE HON'BLE TRIBUNAL IN THIS DECISION HAS STIPULATED THAT THE EXPENSES LIKE PROFESSIONAL CHARGES, LEGAL EXPENSES, STAMP DUTY, ROC EXPENSES ARE TO BE ALLOWED AS FOR THE EXISTENCE OF THE COMPANY, SUCH EXPENSES ARE NECESSARY EVEN THOUGH, NO BUSINESS IS BEING CARRIED OUT. IN FACT, THE AO HAS EXACTLY DONE THE SAME. HE HAS ALLOWED THE EXPENSES LIKE AUDIT FEE, ACCOUNTING CHARGES, PROFESSIONAL CHARGES, ROC FEES AND OTHER EXPENSES WHICH IS NECESSARY FOR THE EXISTENCE OF THE COMPANY. THUS, THE RELIANCE OF THE APPELLANT ON THE DECISION OF THE ITAT FOR A.Y. 201 0 - 11 DOES NOT HELP THE CAUSE OF THE APPELLANT. CON SIDERING THE FACTS AND CI RCUMSTANCES OF THE CASE IN TOTALITY, THE DISALLOWANCE MADE BY THE A.O. IS UPHELD AND THE APPEAL FILED BY THE APPELLANT COMPANY IS DISMISSED. 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4 ITA NO. 3085/MUM/2017 (A.Y. 2012 - 13) M/S. MARRIOTT PROPERTIES AND DEVELOPERS PVT. LTD. VS. DCIT 6. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. 7. I FIND THAT ASSESSEE HAS PAID DIRECTORS REMUNERATION. ASSESSEE S SUBMISSION IS THAT THOUGH THERE HA S NOT BEEN ANY SUBSTANTIAL BUSINESS ACTIVITY , THE ASSESSEE'S DIRE CTORS HAVE BEEN BUSY IN EXPLORING BUSINESS AVENUES. THE ASSESSING OFFICER HAS REJECTED THIS AS HE HELD THAT THE ASSESSEE HAS NOT TAKEN UP ANY CONSTRUCTION PROJECT IN 2012 - 13. HENCE, T HIS PLEA HAS BEEN REJECTED BY THE ASSESSING OFFICER AND , ACCORDINGLY , HE HAS MADE A DISALLOWANCE OF THE DIRECTORS REMUNERATION. I FIND THAT THE ASSESSEE IS A CORPORATE ENTITY. NO CASE HAS BEEN MADE OUT THAT THE REMUNERATION PAID IS NOT IN ACCORDANCE WITH COMPANYS ACT OR IS IN VIOLATION OF THE PROVISIONS OF MANAGERIAL REMUNERA TION AS MANDATED IN THE COMPANIES ACT. NO CASE HAS BEEN MADE OUT THAT NECESSARY PROCEDURE AS PER CORPORATE LAWS FOR INCREASE IN REMUNERATION HAS NOT BEEN FOLLOWED. AS EXPOUNDED BY THE HONBLE APEX COURT, THE R EVENUE SHOULD NOT S I T INTO THE ISSUE OF THE BUS INESSMAN AND DECIDE WHAT SHOULD BE APPROPRIATE FOR THE BUSINESS. ACCORDINGLY , I FIND THAT THERE IS NO BASIS FOR THE DISALLOWANCE AND THE SAME IS ONLY BASED ON SURMISE WHICH IS NOT SUSTAINABLE. ACCORDINGLY , I S ET ASIDE THE ORDER'S OF AUTHORITIES BELOW AND D ECIDE THE ISSUE IN F AVOUR OF ASSESSEE. APROPOS GROUND N O. 2 8. ON THIS ISSUE , THE ASSESSING OFFICER HAS GIVEN FOLLOWING FINDING : 5. IT IS OBSERVED FROM THE COMPUTATION OF TOTAL INCOME THAT THE ASSESSEE COMPANY HAS SET OFF BROUGHT FORWARD BUSINESS LOSS AGG REGATING TO RS.1,25,574/ - 5 ITA NO. 3085/MUM/2017 (A.Y. 2012 - 13) M/S. MARRIOTT PROPERTIES AND DEVELOPERS PVT. LTD. VS. DCIT PERTAINING TO A.YS. 2009 - 10 AND 2010 - 11. HOWEVER, IT IS NOTICED FROM THE ASSESSMENT ORDER FOR A.Y. 2010 - 11 THAT THE TOTAL INCOME WAS ASSESSED AT RS.1,32,300/ - . AS SUCH, THERE IS NO BUSINESS LOSS AVAILABLE FOR SET OFF IN THE YEAR U NDER CONSIDERATION. HENCE, THE SET - OFF OF BROUGHT FORWARD BUSINESS LOSS CLAIMED BY THE ASSESSEE COMPANY AGAINST THE TAXABLE INCOME CANNOT BE ALLOWED AND IS, THEREFORE, REJECTED. 9. N O COGENT SUBMISSION ON THE PART OF THE ASSESSEE COUNT ERING THE ABOVE HAS BEEN SUBMITTED. ACCORDINGLY , I DO NOT FIND ANY MERIT ON THIS ISSUE RAISED BY THE ASSESSEE. ACCORDINGLY , THE SAME STANDS DISMISSED. 10. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.01.2018 SD/ - (S HAM IM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 01.01.2018 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI