Narendre Kumar Chopra, Delhi V. ACIT, New Delhi

ITA 3130/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8408 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 31-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P V GUPTA
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 40A(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO.3130/DEL./2016 (ASSESSMENT YEAR : 2012-13) NARENDRE KUMAR CHOPRA VS. ACIT C-73, PREET VIHAR, CIRCLE- 59(1) DELHI-92 NEW DELHI NEW DELHI PAN : AAHPC8163H (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. C.S.ANAND, CA REVENUE BY : SHRI P.V.GUPTA, SR. DR DATE OF HEARING : 11.04.2019 DATE OF ORDER : .04.2019 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 27.04.2015 PASSED BY THE LD. CIT (APPEALS)-19 , NEW DELHI FOR ASSESSMENT YEAR 2012-13 ON THE FOLLOW ING GROUNDS READS AS UNDER :- 1. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE LD. A.O. S ACTION TO TREAT CERTAIN REVENUE EXPENSES AS CAPITAL EXPENDITURE, TO THE EXTENT OF RS. 9,74,956/-. ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 2 2. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 87,560/- MADE BY THE LD. A.O. U/S 14A. 3.THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 4,37,450/- MADE BY THE LD. A.O. U/S 40A(3). 4. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE LD. CIT(A) HAS ERRED IN NOT FULLY ALLOWING THE EXPE NSES INCURRED / CLAIMED UNDER THE HEAD FESTIVAL EXPENSES . 5. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW , THE LD. CIT(A) HAS ERRED IN NOT FULLY ALLOWING THE EXPE NSES INCURRED / CLAIMED UNDER THE HEAD OFFICE DCOR & OT HER EXPENSES, OFFICE FURNISHING EXPENSES, ENTERTAINMENT EXPENSES, HOSPITALITY EXPENSES AND BUSINESS MARKETING EXPENSES. THE LD. CIT(A) HAD FAILED TO APPRECIATE THAT IN THE IMMEDIATELY PRECEDING YEAR, NO DISALLOWANCE WAS MAD E OUT OF OFFICE DCOR & OTHER EXPENSES, OFFICE FURNISHING EXPENSES, AND BUSINESS MARKETING EXPENSES. 6. THAT ON THE FACTS OF THE CASE AND UNDER THE LAW, THE LD. CIT(A) HAS ERRED IN NOT FULLY ALLOWING THE EXPENSES INCURRED / CLAIMED UNDER THE HEAD TELEPHON E AND CELLULAR EXPENSES. 2. IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESS EE NOT PRESSING THE GROUND NO. 2, 4, 5 AND 6 BEFORE TRIBUN AL AND IS ONLY ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 3 AGITATING THE GROUNDS MENTIONED THEREIN ABOVE. THE ENDORSEMENT WAS MADE BY THE LD. AR FOR THE ASSESSEE COURT FILE IN THIS REGARD. 2. WE WILL FIRST CONSIDER THE 1 ST GROUND RAISED BEFORE US WHICH IS WITH RESPECT TO CERTAIN EXPENDITURE INCURRED & C LAIMED AS REVENUE EXPENDITURE BY THE ASSESSEE, HOWEVER, LD A O TREATED IT AS CAPITAL EXPENDITURE. LD. AR SUBMITTED THAT THE EXPE NDITURE WERE INCURRED BY THE ASSESSEE ON POP, ELECTRIC WIRING, M ARBLE FLOORING, FALSE CEILING, GATE AND GRILL. IT WAS SUBMITTED BY THE LD. AR THAT EXPENDITURE INCURRED BY THE ASSESSEE WERE IN THE NA TURE OF REPAIR AND RENOVATION OF THE EXISTING WORK AND NO NEW CAPI TAL ASSET CAME INTO EXISTENCE ON ACCOUNT OF THEIR EXPENDITURE. IT WAS FURTHER SUBMITTED THAT THE PREMISES IN WHICH THE WORK WAS D ONE IS LEASED PREMISES AND THIS REPAIR AND RENOVATION OF THE PREM ISES WAS NECESSARY WITH A VIEW TO CATER TO THE NEEDS OF THE HIGH-PROFILE CLIENT TO WHOM THE ASSESSEE WAS PROVIDING THE LEGAL /PARALEGAL SERVICES. IT WAS SUBMITTED THAT THERE EXPENDITURE W ERE NOT IN THE NATURE OF CAPITAL EXPENDITURE AND WERE IN THE NATU RE OF REVENUE EXPENDITURE. 3. ON THE OTHER HAND THE LD. DR FOR REVENUE SUB MITTED THAT THE CASE OF THE ASSESSEE FALLS UNDER THE EXPLANATION TO SECTION 37 OF THE ACT AND THEREFORE THE EXPENDITURE INCURRED BY THE A SSESSEE IS ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 4 REQUIRED TO BE CONSIDERED AS CAPITAL IN NATURE RATH ER THAN REVENUE NATURE. 4. WE HAVE HEARD THE RIVAL CONTENTION OF THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUD GMENTS RELIED UPON BY THE PARTIES BEFORE US. 5. THE EXPENDITURE INCURRED BY THE ASSESSEE ARE PRI MARILY IN THE NATURE OF RENOVATION OF THE EXISTING PREMISES WHICH IS APPARENT FROM THE NATURE OF THE HEAD OF EXPENSES UNDER WHICH THE EXPENDITURES WERE INCURRED NAMELY PLASTER OF PARIS , FALSE CEILING, FIXATION OF GATE, PUTTING MARBLE SLABS ETC. BY INCU RRING SUCH EXPENSES, NO NEW CAPITAL ASSETS CAME INTO EXISTENCE RATHER THE ASSESSEE WOULD BE ABLE TO USE THE EXISTING ASSETS MORE EFFECTIVELY & COMMERCIALLY ( I.E LEASED PREMISES & OFFICE). FU RTHER THE EXPENDITURE INCURRED BY THE ASSESSEE WAS WHOLLY AN D EXCLUSIVELY FOR DOING WITH BUSINESS / PROFESSION OF RENDERING O F LEGAL SERVICES FOR WHICH ASSESSEE HAD RENOVATED / REPAIRED THE EXI STING OFFICE KEEPING IN MIND THE REQUIREMENT OF CLIENTS OF ASSES SEE , HENCE THESE EXPENSES ARE REQUIRED TO BE TREATED AS REVENU E NATURE RATHER THAN CAPITAL NATURE. HENCE CONSIDERING THE TOTALITY OF CIRCUMSTANCE AND LEGAL SUBMISSIONS RAISED BEFORE US BY THE ASSES SEE, THE GROUND ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 5 NO1 RAISED BY THE ASSESSEE IS REQUIRED TO BE ALLOWE D AND THEREFORE WE ALLOW GROUND NO. 1 OF THE ASSESSEE APPEAL. 6. THE GROUND NO. 3 OF THE ASSESSEE APPEAL PERTA INS TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE CIT(A) FOR RS. 4,37,450 ON ACCOUNT OF VIOLATION OF SECTION 40A(3) . IN THIS REGARD IT WAS SUBMITTED BY THE AR THAT THE EXPENDITURE WAS INCURRED BY THE ASSESSEE A WEEK PRIOR TO THE FESTIV AL OF THE DIWALI , FOR THE PURCHASE OF MOBILE HAND SETS SLATED TO BE G IVEN TO EMPLOYESS AND ASSOCIACTES ON THE OCCASION OF DIWALI , FURTHER THERE WAS ON GOING SCHEME GIVEN BY THE AGENT, AND THERE WAS NO BANK WORKING DAY PRIOR TO DIWALI SO AS TO ENABLE THE AS SESSEE TO PAY THE AMOUNT BY CHEQUE OR BY RTGS. FURTHER IT WAS SUBMITT ED THAT FOR BUYING THE MOBILE PHONE ON THE FESTIVAL SEASON THE ASSESSEE OR ANY OTHER PERSON WERE REQUIRED TO PAY THE AMOUNT IN CA SH SO AS TO ENABLE THE ASSESSEE TO HAVE EARLY DELIVERY OF THE A PPARATUS. IN THESE FACTS THE EXPENDITURE WERE INCURRED IN CASH. IT WAS THE CASE OF ASSESSEE THOUGH THE AMOUNT WAS INCURRED BY THE ASSE SSEE WAS MORE THAN 20,000 BUT ON ACCOUNT OF ABOVE NECESSITY EXPENDITURE WAS INCURRED IN CASH. 7. ON THE OTHER HAND THE DR HAD SUBMITTED THAT THERE IS A VIOLATION OF SECTION 40 A (3) OF THE ACT AND THEREF ORE THE ASSESSEE IS ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 6 NOT ENTITLED TO ANY DEDUCTION. THE PURPOSES OF INTR ODUCTION OF THIS PROVISION IS TO CURB THE EXPENDITURE MADE IN CA SH, BEYOND THE CEILING LIMIT. 8. WE HAVE HEARD THE RIVAL CONTENTION OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JU DGMENTS RELIED UPON BY THE PARTIES BEFORE US. UNDOUBTEDLY PURCHASE S WERE MADE THROUGH THE AGENT, AS THE PURCHASE ARE LIKELY TO GE T MORE DISCOUNT TO THE BUYER, IF PURCHASED FROM THE AGENT . IN THE PR ESENT CASE, THE PURCHASES WERE MADE IN CASH THROUGH BILLS / VOUCHER S AND DETAILS WERE ALSO SUBMITTED TO THE AUTHORITIES. THE AUTHORI TIES HAVE NOT DOUBTED VERACITY, LEGALITY OR GENUINENESS OF THE BI LLS RECEIVED BY THE ASSESSEE ON A/C OF PURCHASE OF MARBLE. IT IS AL SO NOT DISPUTED THAT THE BILLS WERE RECEIVED DURING THE FESTIVAL SE ASON AND CONSIDERING THE HUMAN PROBABILITIES AND LIKELIHOOD OF PURCHASING THE APPARATUS IN CASH ON ACCOUNT OF FESTIVAL PRESSU RE, WE DO NOT FIND ANY INFIRMITIES IN THE CONDUCT OF THE ASSESSEE HOWEVER CONSIDERING THE FACT THAT ASSESSEE BEING LARGE COMP ANY, AND IS SUPPOSED TO KNOW THE LAW AND IS ALSO EXPECTED TO AR RANGE ITS AFFAIR, IN ADVANCE, IN AN ANTICIPATION OF THE FESTIVAL, HEN CE IT IS NOT EXPECTED FROM THE ASSESSEE TO INCUR THE EXPENDITURE IN CASH AT THE 11 TH HOURS OF THE FESTIVAL. HOWEVER CONSIDERING THAT TH E ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 7 GENUINENESS OF THE INVOICES HAVE NOT BEEN CHALLENGE D BY THE REVENUE AND ALSO THE FACT THAT THE INVOICES WERE RA ISED PRIOR TO THE FESTIVAL SEASON. WE FEEL THAT THIS ISSUE OF INCURRI NG THE EXPENDITURE IN CASH IS REQUIRED TO BE PARTLY ALLOWED AND ACCORD INGLY WE RESTRICT THE DISALLOWANCE TO AN AMOUNT OF RS. 1 LAKH ONLY ON LUMP SUM BASIS AND HENCE THE ASSESSEE GETS THE RELIEF OF RS . 3,37,450/-. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH APRIL, 2019. SD/- SD/- (B.R.R.KUMAR) (LAL IET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 12 /04/ 2019 BR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. DATE OF DICTATION DICTATE ON DRAGON DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS ITA NO.3130/DEL./2016 (NARENDRE KUMAR CHOPRA) 8 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER