PHOTOPHONE COMEL P. LTD, MUMBAI V. ITO 1(2)(4), MUMBAI

ITA 3308/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75363 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 27-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: FAROOKH IRANI
• Keywords: Business income; Depreciation; Capital expenditure

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.3308/MUM/2010 3308/MUM/2010 3308/MUM/2010 3308/MUM/2010 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2005-06) M/S PHOTOPHONE COMEL PVT. LTD., 2G, KAKAD HOUSE, OPP. BOMBAY HOSPITAL, 11, NEW MARINE LINES, MUMBAI-400020 % % % % / VS. THE INCOME TAX OFFICER, WARD 1(2)(4) MUMBAI #' ! ./ ( ./ PAN/GIR NO. :AAACC2496D ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI FAROOKH IRANI # # # # . / . / . / . / / REVENUE BY : SMT. PARMINDER % % % % . .. . -! -! -! -! / DATE OF HEARING : 15 TH JANUARY 2014 01 0101 01& & & & . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 22 ND JANUARY 2014 ' 2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 22.3.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS IN THIS APPEAL: 1. THE CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF THE FOLLOWING EXPENSES AMOUNTING TO ` 3,09,079. EXPENSES EXPENSES EXPENSES EXPENSES ` `` ` TELEPHONE EXPENSES 4,512 RENT 1,80,000 WATER CHARGES 12,508 ITA NO.3308/M/2010 PHOTOPHONE COMEL PVT. LTD. 2 PROPERTY TAX 5,567 DEPRECIATION ON REFRIGERATOR 1,601 MAINTENANCE CHARGES 45,825 REPAIRS AND MAINTENANCE 59,066 TOTAL 3,09,079 2. THE CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF VEHICLE EXPENSES OF ` 1,67,651/-. 3. THE CIT(A) HAS ERRED IN TREATING THE INTEREST IN COME OF ` 17,24,386/- AND MISCELLANEOUS INCOME ` 5,900/- AS I NCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. 3. GROUND NO. 1 REGARDING DISALLOWANCE OF EXPENSES BEING INCURRED IN RESPECT OF OFFICE AT LONAVALA. WE HAVE HEARD THE LD . A.R AS WELL THE LD. D.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. A.R OF THE ASSESSEE HAS POINTED OUT THAT AN IDENTICAL ISSUE HA S BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2001-02 AND 2003-04. HE HAS FURTHER SUBMITTED THAT THE AUTHORITIES BELOW HAVE DISALLOWED THIS EXPENDITURE BY FOLLOWING THE O RDERS OF THE EARLIER YEARS AND PARTICULARLY FOR THE ASSESSMENT YEAR 2003 -04. HE HAS REFERRED PARA 3 OF THE ORDER OF CIT(A) AND SUBMITTED THAT TH E CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2003-04. THUS, TH E LD. A.R HAS SUBMITTED THAT THE ISSUE HAS NOW COVERED THE DECISI ON OF THIS TRIBUNAL IN ASSESSEES OWN CASE. THE LD. D.R HAS NOT DISPUTED T HE FACT THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR S HOWEVER, HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.3308/M/2010 PHOTOPHONE COMEL PVT. LTD. 3 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF RECORD WE NOTE THAT FOR THE ASSESSMENT YEAR 2003-04 THIS TRIBUNAL VIDE ORDER DATED 21.12.2011 IN ITA NO. 852/M/2008 HAS CO NSIDERED AND DECIDED AN IDENTICAL ISSUE IN ASSESSEES OWN CASE I N PARA 7 TO 8.1 AS UNDER: 7 THE ASSESSING OFFICER DISALLOWED THE FOLLOWING E XPENSES: TELEPHONE EXPENSES `. 3,145/- RENT `. 1,80 ,000/- WATER CHARGES `. 12,523/- PROPERTY CHARGES `. 4,926/- DEPRECIATION ON REFRIGERATOR `. 5,651/- MAINTENANCE CHARGES `. 91,792/- REPAIRS & MAINTENANCE `. 2,29,728/- 7.1 THE CIT(A) HAS ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER . 8 WE HAVE HEARD THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 20001-02 ( SUPRA) HAS CONSIDERED THE DECIDED THE ISSUE OF EXPENSES IN RES PECT OF SALE OF BUNGALOW AS REVENUE WHICH WAS TREATED BY THE ASS ESSING OFFICER AS CAPITAL IN NATURE. IN PARAS 15 TO 17, THE TRIBUNAL HAS ADJUDICATED THE SAID ISSUE AS UNDER: 15. GROUND 4 RELATES TO DECISION OF THE CIT (A) IN CONFIRMING DISALLOWANCE OF ` 1,25,628/- SPENT TOWAR DS REPAIRS AND MAINTENANCE EXPENSES. ASSESSING OFFICER TREATED THEM AS CAPITAL EXPENDITURE. 16. AGGRIEVED WITH THE SAME, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT (A) ASSESSEE MENTIONED THAT T HE SAID AMOUNT WAS SPENT FOR ITS GARDEN AT LONAVALA OFFICE VIDE BILL DATED 16.3.2000. THE DETAILS OF EXPENDITURE REVEALE D AMOUNT WAS SPENT ON EXCAVATION OF THE SOIL, LAYING 9 THICK DRY RUBBLE STONE SOILING AND FILLING VOIDS AND REAN SING AND PROVIDING AND LAYING PCC CONCRETE AND MOSAIC FLOORI NG WITH CEMENT PASTE. ASSESSEE MENTIONED THAT NO NEW A SSET HAS COME INTO EXISTENCE. THEREFORE, THE SAME SHOULD BE ALLOWED AS A EVENT EXPENDITURE. CIT (A) EXAMINED TH E DESCRIPTION UNDERTAKEN IN THE GARDEN AND HELD THE EXPENDITURE IS CLEARLY CAPITAL IN NATURE AND ASSET RESULTED ITA NO.3308/M/2010 PHOTOPHONE COMEL PVT. LTD. 4 WILL HAVE ENDURING BENEFIT TO THE ASSESSEE. AFTER A SSET WISE ANALYSIS UNDERTAKEN BY THE CIT (A) PROCEEDED TO TRE AT THE EXPENDITURE OF ` 1,25,628/- CONSISTING OF ` 1,02,02 3 + 23,635/- AS CAPITAL EXPENDITURE. 17. AGGRIEVED WITH THE ABOVE, THE ASSESSEE FILED AN D APPEAL BEFORE US. LD AR ARGUED THAT THE SAID AMOUNT IS REVENUE IN NATURE. THE LD DR RELIED ON THE ORDERS O F THE LOWER AUTHORITIES. WE HAVE HEARD THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS & THE LOWER AUTHORITIES AS WELL AS PAPER BOOKS FILED BEFORE US. WE HAVE EXAMINED THE NATURE OF EXPENDITURE, THE DETAILS OF WHICH ARE, SUBMITTED IN THE TABLE GIVEN BELOW: 1 EXCAVATION SOILS 990 CUFT 3514 2 PROVIDING AND LAYING 9 THICK DRY RUBBLE STONE SOILING AND FILLING VOIDS AND REANSING THE SAME 88,910 3 PROVIDING AND LAYING PCC CONCRETE FOR MIX 1:3:6:990 SF.FT 39,600 4 PROVIDING AND LAYING CHINAR MOSAIC FLOORING WITH CEMENT PAST COMPLETELY 49,999 THE EXPENDITURE OF `.125,628/- OUT OF THE ABOVE EXP ENDITURES WAS TREATED AS CAPITAL BY THE ASSESSING OFFICER IN VIEW OF THE DETAILS GIVEN IN THE TABLE ABOVE. WE FIND THAT THE SAID EXPENDITURE IS UNDISPUTEDLY INCURRED IN CONNECTION WITH MARKING OR MAINTAINING THE GARDEN AT LONAVALA OFFIC E. WE FIND NORMALLY LAYING OF RUBBLE STONE, SOILING, FILLING A ND LAYING OF SOME PIPERS OR CEMENT WORK HERE AND THERE ARE THE D IFFERENT ACTIVITIES OF MAKING OR MAINTAINING OF A GARDEN. TH EREFORE, IN VIEW OF THE NATURE OF DETAILS AVAILABLE ON RECORD A ND ALSO IN VIEW OF THE SMALLNESS OF THE AMOUNTS INVOLVED, WE A RE OF THE CONSIDERED OPINION THAT THE SAID EXPENSES ARE REVEN UE IN NATURE. ACCORDINGLY, GROUND 4 IS ALLOWED . 8.1 IT IS PERTINENT TO NOTE THAT FOR THE AY 2001-0 2 THE ASSESSING OFFICER HAS ACCEPTED THE EXPENDITURE INCU RRED IN RESPECT TO THE BUNGALOW IN QUESTION AT LONAWALA FOR BUSINESS PURPOSES; THOUGH IT WAS DISALLOWED BY THE ASSESSING OFFICER BY TREATING THE SAME AS CAPITAL IN NATURE. ONCE THE EX PENDITURE WAS ACCEPTED BY THE ASSESSING OFFICER AS FOR BUSINESS O F THE ASSESSEE, THEN THE REVENUE CANNOT CHANGE THE STAND IN THE SUBSEQUENT YEAR THAT THE EXPENDITURE ON THE MAINTEN ANCE OF THE SAID BUNGALOW IS NOT FOR THE BUSINESS OF THE ASSESS EE WITHOUT BRINGING OUT ANY NEW FACTS OR CHANGES IN THE CIRCUM STANCES. THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL IN A SSESSEES OWN ITA NO.3308/M/2010 PHOTOPHONE COMEL PVT. LTD. 5 CASE FOR AY 2001-02, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. IT IS CLEAR FROM THE EARLIER ORDER OF THIS TRIBU NAL THAT THIS ISSUE WAS ALSO CONSIDERED AND DECIDED IN FAVOUR OF THE ASSESS EE FOR THE ASSESSMENT YEAR 2001-02. ACCORDINGLY, FOLLOWING THE EARLIER OR DERS OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. 6. GROUND NO. 2 REGARDING DISALLOWANCE OF MOTOR CAR EXPENSES. THE ASSESSING OFFICER DISALLOWED 15% OF THE FUND EXPEND ITURE AND DEPRECIATION ON MOTOR VEHICLE AND 100% OF DRIVERS SALARY ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE VEHICLES WERE USED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES OF THE ASSESSEE. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY T HE A.O ON THE GROUND THAT IN THE ABSENCE OF LOG BOOK THE DISALLOWANCE IS JUSTIFIED. 7. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSING OFFICER DISALLOWED 15% OF FUEL EXPENSES A ND DEPRECIATION AND 100% OF DRIVERS SALARY. HE HAS POINTED OUT THAT FO R THE ASSESSMENT YEAR 2003-04 A SIMILAR DISALLOWANCE WAS MADE BY THE A.O BUT THE CIT(A) HAS DELETED THE DISALLOWANCE IN RESPECT OF THESE EXPENS ES AND CONFIRM THE DISALLOWANCE ON ACCOUNT OF REPAIR AND MAINTENANCE E XPENSES FOR WANT OF BILLS/VOUCHERS. HE HAS FILED THE ORDER OF CIT(A) FO R THE ASSESSMENT YEAR 2003-04 IN SUPPORT OF HIS CONTENTION AND SUBMITTED THAT THE REVENUE HAS ACCEPTED THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2003-04. THUS, THE LD. A.R HAS SUBMITTED THAT ONCE THE CLAIM OF TH E ASSESSEE WAS ACCEPTED FOR THE ASSESSMENT YEAR 2003-04 THE SAME C ANNOT BE DENIED FOR ITA NO.3308/M/2010 PHOTOPHONE COMEL PVT. LTD. 6 THE ASSESSMENT YEAR UNDER CONSIDERATION. ON THE OTH ER HAND, THE LD. D.R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW . 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. FOR THE ASSESSMENT YEA R UNDER CONSIDERATION THE A.O HAS DISALLOWED 15% OF THE MOTOR CAR EXPENSE S WITH RESPECT TO COST OF FUEL AND DEPRECIATION AND 100% OF THE DRIVE RS SALARY. WE NOTE THAT THE CIT(A) FOR THE ASSESSMENT YEAR 2003-04 IN PARA 5 TO 5.4 HAS DISCUSSED THIS ISSUE AND DELETED THE ENTIRE DISALLOWANCE EXCE PT A SUM OF ` 20,500/- ON ACCOUNT OF REPAIR AND MAINTENANCE. THERE IS NO D ISALLOWANCE ON ACCOUNT OF REPAIR AND MAINTENANCE FOR THIS ASSESSME NT YEAR AND THE DISALLOWANCE ON ACCOUNT OF FUEL, DEPRECIATION AND D RIVERS SALARY WAS DELETED FOR THE ASSESSMENT YEAR 2003-04. SINCE THE REVENUE HAS ACCEPTED THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 200 3-04, THEREFORE, WE DO NOT FIND ANY JUSTIFICATION IN DISALLOWING THE MOTOR CAR EXPENDITURE ON ACCOUNT OF FUEL, DEPRECIATION AND DRIVERS SALARY F OR THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, WE DELETE THE ADD ITION MADE BY THE A.O ON MOTOR CAR EXPENSES IN QUESTION. 9. GROUND NO. 3 REGARDING THE INTEREST INCOME AND M ISCELLANEOUS INCOME TREATED BY THE A.O AS INCOME FROM OTHER SOUR CES IN STEAD OF BUSINESS INCOME. WE HAVE HEARD THE LD. A.R AS WELL AS LD. D.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDEN TICAL ISSUE WAS INVOLVED FOR THE ASSESSMENT YEAR 2001-02 AND THE AS SESSEE DID NOT PRESS THIS ISSUE BEFORE THE CIT(A). THE LD. A.R HAS FAIRL Y CONCEDED THAT FOR THE ASSESSMENT YEAR 2001-02 THE ASSESSEE DID NOT PRESS THIS ISSUE AND ITA NO.3308/M/2010 PHOTOPHONE COMEL PVT. LTD. 7 ACCORDINGLY THIS WAS DECIDED AGAINST THE ASSESSEE. SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES FOR THE YEAR UNDER CONSIDERATION THEREFORE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF THE ASSESSEES APPEAL. EVEN OTHERWISE THERE IS AN ENDORSEMENT DATE D 9.7.2013 BY THE ASSESSEE ON THE GROUNDS OF APPEAL FILED ALONGWITH T HE FORM NO. 36 THAT THE ASSESSEE DOES NOT PRESS THIS GROUND. IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE WE DISMISS THE GRO UND NO. 3 OF THE ASSESSEES APPEAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2014 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 22 ND JANUARY 2014 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI