INTERCON REAL ESTATE DEVELOPERS P. LTD, MUMBAI V. DCIT (OSD) 2(2), MUMBAI

ITA 3129/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6632 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 03-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: S V SHANBHAG
• Keywords: Unexplained cash credit; Depreciation; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 37(1); 68; 37

Judgement Text

, VKBZ VKBZ VKBZ VKBZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3129/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEAR-2008-09 INTERCON REAL ESTATE DEVELOPERS PVT. LTD., 3 RD FLOOR, ARARAT BUILDING, NAGINDAS MASTER ROAD, FORT, MUMBAI-400023 VS DCIT (OSD) 2(2) MUMBAI. PAN: AABCI2136B ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI S.V.SHANBHAG + * / REVENUE BY : SHRI ASHOK SURI ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 03-04-2014 -.# + ), / DATE OF PRONOUNCEMENT : 23-04-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.01.03.2012 OF THE CIT(A)-5 ,MUMBAI, ASSESSEE HAD RAISED FOLLOWING GROUNDS OF APPEAL: 1) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN CONFIRMING THE ADDITION OF RS. 1,70,00,000/- BEING UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 WITHOUT TAKING INTO CONSIDERATION VARIOUS EVIDENCES FURNISHED TO T HE AO AS WELL AS THE LD. CIT(A). 2) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN CONFIRMING THE EVENT EXPENSES OF RS. 21,31,656/- INCURRED FOR A FASHION SHOW DISALLOWED BY LD. AO U/S 37(1) AND TREATED AS BRAND DEVELOPMENT EXPENDITURE IN THE N ATURE OF INTANGIBLE ASSET ON WHICH DEPRECIATION WAS ALLOWED. 3) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, SUPPLEMEN T, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESSES OF OPERA TING A RETAIL OUT LET FOR SALE OF FASHION GARMENTS,RUNNING SPA,PARLOUR AND RESTAURANT,FILED I TS RETURN OF INCOME ON 30.09. 2008,DECLARING LOSS OF RS.50.07 LAKHS.ASSESSING OFFICER (AO)FINALI SED THE ASSESSMENT ON 24.12.2010,U/S.143(3) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS.1,73,22,660/-. 2. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE-COMPANY HAD RECEIVED A SUM OF RS.1,70, 00,000/-AS UNSECURED LOAN FROM TANISHA BUS INESS PVT. LTD.(TBPL)KOLKATA.HE DIRECTED THE ASSESSEE TO PROVIDE DETAILS ABOUT THE TRANSACTI ON AND TO PROVE CREDITWORTHINESS OF THE CREDITOR. AS PER THE AO,ASSESSEE PRODUCED A PHOTOSTAT COPY OF THE CONFIRMATION LETTER FROM THE CREDITOR. THEREAFTER,A NOTICE U/S.133(6) WAS ISSUED TO TBPL,O N 10.12.2010 AND IT WAS DIRECTED TO PROVIDE THE DETAILS LIKE PAN NO.,PROOF OF RETURN OF INCOME, EVIDENCES WITH REGARD TO TRANSACTIONS WITH THE ASSESSEE FOR F.Y.2007-08.AO DID NOT GET ANY REPLY F ROM THE CREDITOR.HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE,ASKING IT AS TO WHY THIS AMO UNT SHOULD NOT BE TREATED AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT.AFTER CONSIDERING THE R EPLY OF THE ASSESSEE,HE HELD THAT THE ASSESSEE HAD FAILED TO PROVIDE ANY EXPLANATION WITH REGARD T O THE CREDITWORTHINESS OF TBPL,THAT 2 ITA NO.3129/MUM/2012 INTERCON REAL ESTATE DEVELOPER S PVT. LTD. GENUINENESS OF THE TRANSACTION WAS ALSO NOT PROVED BY THE ASSESSEE .FINALLY,HE MADE AN ADDITION OF RS.1.70 CRORES TO THE INCOME OF THE ASSESSEE ,UNDER SECTION 68 OF THE ACT. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORD ER,HE HELD THAT FURTHER VERIFICATION WAS REQUIRED IN THE MATTER.HE CALLED FOR A REMAND REPOR T FROM THE AO BECAUSE,ASSESSEE HAD PRODUCED ADDITIONAL EVIDENCES.HE HELD THAT THE ASSESSEE HAD SHOWN RECEIPT OF RS.1.70 CRORS FROM TNPL,THAT IT HAD FILED A CONFIRMATION LETTER,THAT AS PER THE AO OUTSTATION CHEQUE HAD BEEN CLEARED ON THE SAME DAY,THAT FINALLY THE MONEY HAD BEEN TRA NSFERRED TO THREE SHAREHOLDERS INCLUDING ONE OF THE DIRECTORS OF THE COMPANY,THAT PURPOSE FOR ADVAN CING LOAN TO THE ASSESSEE BY TNPL WAS NEVER REVEALED,THAT THE ASSESSEE HAD NOT GIVEN ANY EVIDE NCE TO PROVE THE CREDITWORTHINESS OF TNPL. FINLLALY,HE CONFIRMED THE ADDITION MADE BY THE AO. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT THE AO HAD NOT GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE ,THAT IT WAS DIRECTED T O PROVE GENUINENESS AND CREDITWORTHINESS ON 22 ND DEC.2010 AND THE ORDER WAS PASSED ON 24 TH DEC.,THAT ON 27.12.2010 ALL THE NECESSARY DETAILS WERE FILED,THAT CONFIRMATION OF THE CREDITOR WAS ALSO FI LED,THAT AO HAD NOT DOUBTED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE REMAND RE PORT.HE REFERRED TO THE CERTIFICATE ISSUED BY THE BANK OF BARODA AND RELIED UPON PAGE NO.41-44,59,62 OF THE PAPER BOOK.DEPARTMENTAL REPRESEN - TATIVE SUPPORTED THE ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT ASSESSEE HAD PRODUCED CERTAIN EVIDENCES BEFORE THE FAA,BUT W ERE NOT PROPERLY SCRUTINISED BY THE AO WHILE FURNISHING THE REMAND REPORT.WE ARE OF THE OP INION,THAT SAME NEEDS FURTHER VERIFICATION, SO, IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK TH E MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE ,WHO WILL EXTEND FULL COOPERATION TO THE AO.GROUND NO.1 IS PA RTLY ALLOWED IN FAVOUR OF THE ASSESSEE . 3. NEXT GROUND OF APPEAL IS ABOUT EVENT EXPENSES OF RS . 21,31,656/-INCURRED FOR A FASHION SHOW. DURING THE COURSE OF ASSESSMENT PROCEEDINGS,AO FOUN D THAT;UNDER THE HEAD BUSINESS PROMOTION EXPENSES IN SCHEDULE 9 OF PROFIT AND LOSS ACCOUNT;A SSESSEE HAD DEBITED RS.21.31 LAKHS.HE ASKED THE ASSESSEE TO PROVIDE NECESSARY DETAILS.AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE HE HELD THAT THE ASSESSEE HAD INCURRED THESE EXPENSES ON DEVELOPMENT OF THE BRAND NAME OF RUDRA. HE WAS OF THE OPINION THAT THE EXPENSE WAS DIRECTLY BRINGING ENDURING ADVANTAGE TO ASSESSEE. SO,HE ASKED THE ASSESSEE AS TO WHY THE AMOUNT SHOUL D NOT BE TREATED AS BRAND DEVELOPMENT EXPENDITURE.HE HELD THAT IN REALITY EXPENDITURE INC URRED BY THE ASSESSEE WAS OF CAPITAL NATURE,THAT BRAND NAME WAS AN INTANGIBLE ASSET,THAT SAME COULD NOT BE ALLOWED AS REVENUE EXPENDITURE.HE DISALLOWED THE EXPENDITURE U/S.37(1)OF THE ACT,BUT ALLOWED DEPRECIATION @25%. 3.1. IN THE APPELLATE PROCEEDINGS,IT WAS ARGUED THAT THE ASSESSEE HAD CLAIMED THE EVENT EXPENSES WERE INCURRED AS A PART OF ADVERTISEMENT EXPENDITUR E CAMPAIGN FOR THE PROMOTION OF SPA AND PARLOUR ACTIVITIES,THAT A FASHION SHOW WAS ORGANISE D AT HOTEL TAJ MAHAL,COLABA,MUMBAI ON 11.08. 2007,THAT THE EXPENDITURE WAS PART AND PARCEL OF TH E REGULAR BUSINESS ACTIVITY OF THE ASSESSEE AND HAD DIRECT NEXUS WITH THE BUSINESS,THAT EXPENDITURE INCURRED RESULTED IN INCREASED REVENUE.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND TH E ASSESSMENT ORDER,FAA HELD THAT THE EVENT EXPENSES WERE BASICALLY FOR DEVELOPMENT OF BRAND NA ME RUDRA WHICH APPELLANT ITSELF HAD ADMITTED IN ITS EXPLANATION,THAT IT SAME WAS INCUR RED FOR ENDURING ADVANTAGE TO THE ASSESSEE ,THAT THE AO WAS JUSTIFIED IN HOLDING THE EXPENDITURE AS CAPITAL AND TREATING IT AS AN INTANGIBLE ASSET. FINALLY,HE UPHELD THE ORDER OF THE AO. 3.2. BEFORE US,AR SUBMITTED THAT THE EXPENDITURE INCURRE D BY THE ASSESSEESHOULD HAVE BEEN ALLOWED U/S. 37 OF THE ACT,THAT IT WAS INCURRED FOR RUNNING THE BUSINESS,THAT A FASHION SHOW WAS ORGANIZED BY THE ASSESSEE FOR PROMOTING ITS BUSINE SS.HE REFERRED TO AS 26 AND ARGUED THAT 3 ITA NO.3129/MUM/2012 INTERCON REAL ESTATE DEVELOPER S PVT. LTD. EXPENDITURE INCURRED ON ADVERTISING AND PROMOTIONAL ACTIVITIES SHOULD BE TREATED REVENUE EXPENDITURE.DR SUPPORTED THE ORDER OF THE FAA. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE HAD INCURRED THE EXPENDITURE FOR ORGANISING A FASHI ON SHOW IN AUGUST 2007,THAT AO HAD TREATED THE EXPENDITURE OF CAPITAL NATURE.WE ARE OF THE OPI NION THAT FASHION SHOW WAS AN EVENT OF ADVERTISING THE BUSINESS OF THE ASSESSEE AND SAME C OULD NOT BE TREATED AS CAPITAL EXPENDITURE. IT HAD DIRECT RELATION WITH THE BUSINESS OF THE ASSESS EE. WE HAVE PERUSED THE AS 26. IT MANDATES THAT PROMOTIONAL EXPENDITURE HAVE TO BE TREATED AS REVEN UE EXPENDITURE.THEREFORE, IN OUR OPINION EXPENDITURE INCURRED BY THE ASSESSEE FOR PROMOTING ITS BUSINESS HAS TO BE ALLOWED U/S.37 OF THE ACT.AS THE EXPENDITURE WAS INCURRED FOR RUNNING THE BUSINESS AND NO PERMANENT ASSET WAS ACQUIRED BY THE ASSESSEE,SO REVERSING THE ORDER OF THE FAA,WE DECIDE GROUND NO.2 IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL F ILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 1)2 '() + 0 3 4 + ) 56. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL,2014 . 0 + -.# 7 8' 23 &6 ,201 4 . + / 9 SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8' /DATE:23.04 . 2014. SK 0 0 0 0 + ++ + &): &): &): &): ; :#) ; :#) ; :#) ; :#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR I BENCH, ITAT, MUMBAI / :>/ &)' , . . . 6. GUARD FILE/ / 1 ':) ':) ':) ':) &) &)&) &) //TRUE COPY// 0' / BY ORDER, ? / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI