GROUP M MEDIA INDIA P.LTD, MUMBAI V. ADDL CIAT RG 7(3), MUMBAI

ITA 312/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9232 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJENDRA SINGH , ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 312/MUM/2011 (ASSESSMENT YEAR: 2005-06) GROUP M MEDIA INDIA PRIVATE LIMITED, COMMERZ, 8 TH FLOOR, INTERNATIONAL BUSINESS PARK, OBEROI GARDEN CITY, OFF. WESTERN EXPRESS HIGHWAY GOREGAON (EAST), MUMBAI-400 063 PAN: AACCM 7365 H VS ADDL. COMMISSIONER OF INCOME-TAX RANGE-7(3), AAYAKAR BHAVAN, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : MRS.. AARTI VISSANJI MR. ARJIT SHAH RESPONDENT BY : MR. MOHIT JAIN DATE OF HEARING :13-12-2012 DATE OF PRONOUNCEMENT :19-12-2012 O R D E R PER VIVEK VARMA, JM: THE INSTANT APPEAL ARISES FROM THE ORDER OF CIT(A) 13, MUM BAI, DATED 12.08.2010, WHEREIN, THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW OUGHT TO H AVE (A). NOT CONFIRMED THE DISALLOWANCE OF RS. 3,01,922 /- OUT OF VEHICLE EXPENSES ON AN AD-HOC BASIS WITHOUT CONSIDERING THE SUBMISSIONS AND DETAILS ON RECORD AND WITHOUT PREJUDICE TO SAME AND IN ALTERNATE , DISALLOWED A MUCH LOWER AMOUNT THAN RS. 3,01,922/- (B) NOT CONFIRMED THE DISALLOWANCE OF RS. 3,17,740/ - OUT OF MISCELLANEOUS EXPENSES ON AN AD-HOC BASIS WITHOUT CONSIDERING THE SUBMISSIONS AND DETAILS ON RECORD AND WITHOUT PREJUDICE TO SAME AND IN ALTERNATE , DISALLOWED A MUCH LOWER AMOUNT THAN RS. 3,17,740/-. (C) NOT CONFIRMED THE DISALLOWANCE OF RS. 1,86,542/ - INCURRED TOWARDS HARDWARE/PARTS PURCHASED FOR COMPUTERS. ACQUIRED ON LEASED BASIS AS CAPITAL EXPENDITURE. (D) NOT CONFIRMED THE DISALLOWANCE OF RS. 1,98,627/ - OUT OF TRAVELING & CONVEYANCE EXPENSES ON AN AD-HOC BASIS WITHOUT CONS IDERING THE GROUP M MEDIA INDIA PRIVATE LIMI TED ITA NO. 312/MUM/2011 2 SUBMISSIONS AND DETAILS ON RECORD AND WITHOUT PREJU DICE TO SAME AND IN ALTERNATE , DISALLOWED A MUCH LOWER AMOUNT THAN RS. 1,98,627/ -. (E) NOT CONFIRMED THE DISALLOWANCE OF RS. 3,28,070/ - OUT OF COMMUNICATION EXPENSES ON AN ADHOC BASIS WITHOUT CONSIDERING THE SUBMISSIONS AND DETAILS ON RECORD AND WITHOUT PREJUDICE TO SAME AND IN ALTERNATE , DISALLOWED A MUCH LOWER AMOUNT THAN RS. 3,28,070/-. 2. THE ABOVE GROUNDS OF APPEAL ARE DISTINCT AND SEP ARATE AND WITHOUT PREJUDICE TO EACH OTHER. 2. GROUND NO. 1(A) PERTAINS TO DISALLOWANCE OF VEHICLE EXPEN SES ON AD-HOC BASIS AT RS.. 3,01,922. 3. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE ASSESSEE HAD DEBITED RS. 1,00,64,078 TOWARDS VEHICLE EXPE NSES. HE CALLED FOR THE DETAILS & JUSTIFICATION FOR THE SAME. THE DETA ILS WERE SUBMITTED BY THE ASSESSEE AND THE ASSESSEE ADMITTED T HAT CERTAIN EXPENSES WERE SELF VOUCHED OR MADE IN CASH. THE AO ALSO NOTICED THAT THE ASSESSEE HAD NOT MAINTAINED ANY LOG BOOK. HE, THERE FORE, ON THE BASIS OF PRECEDING YEARS APPELLATE ORDER, WHERE THE CIT(A ) HAD RESTRICTED THE DISALLOWANCE AT 3% ON THE VEHICLE EXPENSES , DISALLOWED THE VEHICLE EXPENSES AT 3% WHICH CAME TO RS. 3,01,922 OU T OF THE TOTAL OF RS. 1,09,35,658. 4. THE AR POINTED OUT THAT IN THE PRECEDING YEAR, THE ISSUE CAME BEFORE THE ITAT, WHEREIN THE COORDINATE BENCH IN THE AS SESSEE OWN CASE IN ITA NO. 3073/MUM/2007 HAD DELETED THE ADDITION W HICH WAS SUSTAINED BY THE CIT(A) (PARAS 4-9). 5. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENC H IN THE ASSESSEES OWN CASE, WE THEREFORE, SET ASIDE THE OR DER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE MADE BY HIM. ASSESSEE GETS A RELIEF OF RS. 3,01,922 AS THE GROUND NO.1(A) IS ALLOWED. 6. GROUND NO. 1(B) PERTAINS TO DISALLOWANCE OF RS. 3,17,740 O N ACCOUNT OF MISCELLANEOUS EXPENSES ON AD-HOC BASIS. GROUP M MEDIA INDIA PRIVATE LIMI TED ITA NO. 312/MUM/2011 3 7. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED RS. 63,54,798 TOWARDS MISCELLANEOUS E XPENSES, WHICH WERE EXPLAINED BY THE ASSESSEE THAT THE EXPENSES WERE ROUTINE BUSINESS EXPENSES AND WERE THROUGH CASH VOUCHERS. THE AO NOTICED CERTAIN DISCREPANCIES AND ON THE BASIS OF THE SAME, THE A O MADE AN AD-HOC DISALLOWANCE AT 5% AND ADDED BACK RS. 3,17,740. O N APPEAL, THE CIT(A) SUSTAINED THE DISALLOWANCE. 8. BEFORE US THE AR POINTED OUT THAT THIS WAS ALSO AN IS SUE BEFORE THE ITAT IN THE PRECEDING YEAR IN ITS OWN CASE AND THE COORDINATE BENCH HAD RESTRICTED THE DISALLOWANCE TO RS. 1,00,000. 9. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENC H IN THE ASSESSEE OWN CASE IN ITA NO. 3073/M/2007, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TOWARDS MISCELLANEOUS EXPENSES AT RS. 1,00,000. THE GROUND OF APPEAL IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO. 1(C) PERTAINS TO DISALLOWANCE OF RS. 1,86,542 INCURRED TOWARDS HARDWARE/PARTS PURCHASED FOR COMPUTE RS, ACQUIRED ON LEASE BASIS, AS CAPITAL EXPENSES. 12. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NO TICED EXPENSES AT RS. 97,06,904/- TOWARDS REPAIRS & MAINTEN ANCE. UNDER THIS HEAD THERE WERE EXPENSES DEBITED AT RS. 1,86,542 T OWARDS HARDWARE EXPENSES. THE AO, THEREFORE, APPLIED THE CASE OF ARAVALI CONSTRUCTIONS CO. PVT. LTD. 259 ITR 30, WHEREIN HONBLE RA JASTHAN HIGH COURT HELD THAT EXPENSES RELATING TO ACQUISITION OF HA RDWARE ARE CAPITAL IN NATURE AND THUS CANNOT BE ALLOWED. THE AO, THE REFORE, DISALLOWED RS. 1,86,542, HOLDING THE COMPUTER EQUIPMENTS AND GROUP M MEDIA INDIA PRIVATE LIMI TED ITA NO. 312/MUM/2011 4 PERIPHIRALS TO BE CAPITAL IN NATURE AND ALLOWED DEPRECIATION AS PER LAW. THE CIT(A), SUSTAINED THE ADDITION. 13. BEFORE US, THE AR SUBMITTED THAT THE ASSESSEE HAD ACQUIRED COMPUTERS AND ITS PERIPHERALS ON LEASED BASIS AND ANY RE PAIRS THEREON WOULD NOT AMOUNT TO AN EXPENSE OF ENDURING NATURE OR O F CAPITAL NATURE, SO FAR AS THE ASSESSEE IS CONCERNED. HE, THEREFO RE, PLEADED THAT THE EXPENSE WAS RIGHTLY CLAIMED AS REVENUE. 14. THE DR RELIED ON THE DECISIONS OF THE REVENUE AUTHORITIES. 15. WE HAVE EXAMINED THE EXPENSES WHICH HAVE BEEN BOR NE BY THE ASSESSEE FOR UPKEEP OF ITS COMPUTER FUNCTIONS. WE ALSO FIND THAT THE COMPUTER SYSTEMS HAD BEEN ACQUIRED BY THE ASSESSEE O N LEASED BASIS. SINCE THE EXPENSES HAVE BEEN BORNE BY THE ASSESSEE FO R THE UPKEEP, MAINTENANCE AND UPGRADATION OF THE LEASED ASSETS. THESE EXPENSES MAY BE CAPITAL IF THE ASSET BELONGED TO THE ASSESSEE. S INCE THE COMPUTER AND ITS PERIPHERALS WERE TAKEN BY THE ASSESSE E ON LEASE, THESE EXPENSES WOULD BE HELD TO BE REVENUE IN NATURE IN THE HANDS OF THE ASSESSEE AND ON THESE FACTS ALSO, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE FACTS IN THE CASE OF ARAVALI CONSTR UCTIONS (SUPRA), THUS, THE RATIO OF ARAVALI CONSTRUCTIONS CANNOT BE APPLIED ON THE FACTS OF THE ASSESSEE. 16. IN THE RESULT, WE SET ASIDE THE ORDER OF THE CIT(A) O N THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 1,86,542. GROUND NO. 1(C) IS ALLOWED. 17. GROUND NO. 1(D) IS ON ACCOUNT OF DISALLOWANCE OF RS. 1,98 ,627 ON TRAVELING AND CONVEYANCE EXPENSES. GROUP M MEDIA INDIA PRIVATE LIMI TED ITA NO. 312/MUM/2011 5 18. THE AO NOTICED THAT THE ASSESSEE HAD DEBITED RS. 2,75,80,438 UNDER THE HEAD TRAVELING AND CONVEYANCE AND OUT OF THIS AGGREGATE , THE AO FOUND THAT CAR HIRE CHARGES AND CONVEYANCE EXPENSE S AT RS. 35,03,385 & RS. 31,17,488 (AGGREGATING TO RS. 66,20,873) RES PECTIVELY WOULD UNDENIABLY MAY INVOLVE SOME PERSONAL AND NON BUSINE SS ELEMENT AND, THEREFORE, SHOW CAUSED THE ASSESSEE WHY 5% OUT OF THESE EXPENSES BE NOT DISALLOWED. THE AO, ULTIMATELY RESTRICTED T HE DISALLOWANCE AT 3%, WHICH CAME TO RS. 1,98,627 OUT OF RS. 6 6,20,873. THIS WAS SUSTAINED BY THE CIT(A). 19. THE AR POINTED OUT THAT THE STATUS OF THE ASSESSE E IS THAT OF A COMPANY & IF ONCE IT IS ACCEPTED THAT THE EXPENSES HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS, PERSONAL ELEMENT GETS ELIMINA TED, BECAUSE THE COMPANY ITSELF IS A SEPARATE JURIDICIAL PERSON, WHO WOU LD HAVE INCURRED THE EXPENSES FOR ITS EMPLOYEE. THEREFORE, AN EX PENSE IN THE HANDS OF THE COMPANY CANNOT GET RELATED TO THE PERSO NAL OR NON BUSINESS PURPOSE. 20. THE DR RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 21. WE HAVE HEARD THE ARGUMENTS AND ARE OF THE VIEW T HAT THE EXPENSES HAS BEEN INCURRED BY THE ASSESSEE COMPANY A ND ONCE THE EXPENSES IS INCURRED BY THE COMPANY IF CANNOT BE HELD THAT THERE CO ULD BE SOME PERSONAL OR NON BUSINESS ELEMENT EXISTS. FOR M AKING A DISALLOWANCE A VERY HEAVY BURDEN IS COST ON THE AO TO P ROVE IT OTHERWISE, WHICH IN THIS CASE HAS NOT BEEN DONE. IN THE PRESENT CASE, THE REVENUE AUTHORITIES HAVE SIMPLY MADE AN ADHOC DISALLO WANCE. IN OUR OPINION, THE REVENUE AUTHORITIES HAVE ERRED IN MAKING ANY DISALLOWANCE WITHOUT ANY COGENT REASON AND WE FIND THAT T HE ASSESSEE IS SQUARELY COVERED BY THE DECISIONS OF SAYAJI IRON & EN GN. CO. PVT. LTD. VS. CIT, REPORTED IN 253 ITR 749 (GUJ) AND CIT VS. S SP (P) LTD., REPORTED IN 202 TAXMAN 386. GROUP M MEDIA INDIA PRIVATE LIMI TED ITA NO. 312/MUM/2011 6 22. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON TH IS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 9,98,627. 23. THE GROUND NO. 1(D) IS ALLOWED. 24. GROUND NO. 1(E) PERTAINS TO DISALLOWANCE OF RS. 3,28,070 ON ACCOUNT OF COMMUNICATION EXPENSES. 25. THE AO DISALLOWED THE EXPENSES ON AD-HOC BASIS AT 3 %, AS THE EXPENSES WERE INCURRED ON THE MOBILE BILLS OF DIRECTORS. THE AO HELD THAT SOME EXPENSES HAD TO BE TREATED AS INCURRED AS PERSONAL EXPENSES AND NON BUSINESS. THE CIT(A) SUSTAINED THE ADDITION. 26. BEFORE US, THE AR POINTED OUT THAT THE STATUS OF T HE ASSESSEE IS THAT OF A COMPANY & IF ONCE IT IS ACCEPTED THAT THE EXPE NSES HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS, PERSONAL ELEMENT GET S ELIMINATED, BECAUSE THE COMPANY ITSELF IS A SEPARATE JUDICI AL PERSON, WHO WOULD HAVE INCURRED THE EXPENSES FOR ITS EMPLOYEE. THEREFORE, AN EXPENSE IN THE HANDS OF THE COMPANY CANNOT GET RELATED TO THE PERSONAL OR NON BUSINESS PURPOSE. 27. THE DR RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 28. WE HAVE HEARD THE ARGUMENTS AND ARE OF THE VIEW T HAT THE EXPENSES HAS BEEN INCURRED BY THE ASSESSEE COMPANY A ND ONCE THE EXPENSES IS INCURRED BY THE COMPANY IF CANNOT BE HELD THAT THERE CO ULD BE SOME PERSONAL OR NON BUSINESS ELEMENT EXISTS. FOR M AKING A DISALLOWANCE A VERY HEAVY BURDEN IS COST ON THE AO TO P ROVE IT OTHERWISE, WHICH IN THIS CASE HAS NOT BEEN DONE. IN THE PRESENT CASE, THE REVENUE AUTHORITIES HAVE SIMPLY MADE AN ADHOC DISALLO WANCE. IN OUR OPINION, THE REVENUE AUTHORITIES HAVE ERRED IN MAKING ANY GROUP M MEDIA INDIA PRIVATE LIMI TED ITA NO. 312/MUM/2011 7 DISALLOWANCE WITHOUT ANY COGENT REASON AND WE FIND THAT T HE ASSESSEE IS SQUARELY COVERED BY THE DECISIONS OF SAYAJI IRON & EN GN. CO. PVT. LTD. VS. CIT, REPORTED IN 253 ITR 749 (GUJ) AND CIT VS. S SP (P) LTD., REPORTED IN 202 TAXMAN 386. 29. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON TH IS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 3,28,070. 30. THUS GROUND NO. 1(E) IS TREATED AS ALLOWED. 31. IN THE RESULT, THE APPEAL IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2012. SD/- SD/- (RAJENDRA SINGH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : 19 TH DECEMBER, 2012 COPY TO: 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT (A)-13, MUMBAI. 4) THE CIT 7, MUMBAI 5) THE DR, G BENCH MUMBAI BY ORDER / / TRUE COPY / / ASST. REGISTRAR, ITAT, MUMBAI *CHAVAN