ITO WD 19(3)(4), MUMBAI V. SATISH PRAKASH ROHRA, MUMBAI

ITA 3337/MUM/2012

• Counselvise Citation: 333719914 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 08-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2012
• Court: TRIBUNAL
• Department Lawyers: S K JANGRE
• Assessee Lawyers: NIYATI D MEHTA
• Keywords: Business expenditure; Tax effect

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 3337 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 0 7 - 08 ) ITO WARD - 19(3)(4), 3 RD FLOOR PIRAMAL CHAMBER, R.NO. 304, LALBAUG, MUMBAI - 400012 VS. SHRI SATISH PRAKASH ROHRA, 16, SEA VIEW PALACE, 48, PALLI HILL, BANDRA (W), MUMBAI - 50 ./ ./ PAN/GIR NO. : A A CPR 1725 P ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 3667 /MUM/201 2 ( / ASSESSMENT YEAR :200 7 - 08 ) SHRI SATISH PRAKASH ROHRA, 16, SEA VIEW PALACE, 48, PALLI HILL, BANDRA (W), MUMBAI - 50 VS. ITO WARD - 19(3)(4), 3 RD FLOOR PIRAMAL CHAMBER, R.NO.304, LALBAUG, MUMBAI - 400012 ./ ./ PAN/GIR NO. : AACPR 1725 P ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI S.K.JANGRE /ASSESSEE BY : MS. NIYATI D. MEHTA / DATE OF HEARING : 30 /0 6 / 2015 / DATE OF PRONOUNCEMENT 29/07 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR S 200 7 - 08. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION. THE RETURN OF INCOME WAS FIL ED AT LOSS OF RS. 13.43 LAKHS. ITA NO. 3337&3667 /1 2 2 DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO DISALLOWED ASSESSEES CLAIM OF INTEREST AMOUNTING TO RS.4,53, 292/ - . THE AO ALSO DISALLOWED OTHER BUSINESS EXPENDITURE OF RS. 2.50 LAKHS. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 2.50 LACS . THE AO ALSO CAPITALIZED ALL OTHER ROUTINE EXPENSES INCURRED BY ASSESSEE WHICH WAS RESTRICTED BY CIT(A) TO THE LEGAL AND BROKERAGE EXPENSES. AGAINST THIS ORDER OF CIT(A), ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. 3 . W ITH REGARD TO DISALLOWANCE OF RS. 2,50,000/ - , WE FOUND THAT THE ASSESSEE HAD DEBI TED TOTAL EXPENSES OF RS.17,83, 190/ - OUT OF WHICH INTEREST DEBITED WAS RS.9 ,96,819/ - . THE AO HAS DISALLOWED RS. 2,50,000/ - OUT OF THE OTHER EXPENSES OF RS. 7,86,371/ - , WHICH WA S CONFIRMED BY THE CIT(A). W E FOUND THAT DURING THE YEAR UNDER REFERENCE, THE ASSESSEE INCURRED VARIOUS ADMINISTRATIVE EXPENSES TO THE TUNE OF RS. 7,86,371 (EXCLUDING THE INTEREST EXPENSE). THE ASSESSING OFFICER DISALLOW ED RS.250, 000 OUT OF SUCH EXPENSES D EBITED TO THE PROFIT AND LOSS ACCOUNT. HE DISALLOWED RS.250, 000 PURELY ON AN ESTIMATE BASIS WITHOUT APPRECIATING THE SUBMISSION DATED 25.08.2009, BEING DETAILS OF MAJOR EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT . DETAILS OF LEGAL FEES PAID, BROKERAGE PAID , MOTOR CAR EXPENSES, MOTOR CAR INSURANCE AND INTEREST EXPENSES WERE ALSO SUBMITTED TO THE ASSESSING OFFICER . SINCE SOME OF THE EXPENDITURE WERE NOT VERIFIABLE THE AO MADE ADHOC DISALLOWANCE OF RS. 2,50,000/ - WHICH APPEARS TO BE AT HIGH SIDE . KEEPING IN VIE W THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF RS. 10% OF SUCH EXPENSES WHICH AMOUNTS TO RS. 0.78 LAKHS . ITA NO. 3337&3667 /1 2 3 4 . WE ALSO FOUND THAT IN ADDITION TO THE DISALLOWANCE MADE U/S. 36(1)(II I ) AMOUNTING TO RS. 4,40,392/ - AND DISAL LOWANCE OF RS. 2,50,000/ - , THE AO HAS RECOMPUTED THE CLOSING WORK IN PROGRESS AS ON 31 - 3 - 2007 BY CAPITALIZING ALL THE ROUTINE EXPENSES. 5 . FROM THE RECORD WE FOUND THAT D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED RS. 7,86, 371/ - ON ACCOUNT OF VARIOUS ADMINISTRATIVE EXPENSES, LEGAL EXPENSES, BROKERAGE ETC. AFTER DISALLOWING RS.2.50 LACS, THE AO DIRECTED FOR CAPITALIZATION OF BALANCE EXPENSES ON THE PLEA THAT ASSESSEE HAD NOT STARTED ITS BUSINESS. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED TH E CAPITALIZATION OF LEGAL EXPENSES OF RS. 84,668/ - AND BROKERAGE OF RS. 2,00,506/ - AND ALLOWED THE BALANCE EXPENSES AS BUSINESS EXPENSES. 6 . SINCE THE ASSESSEE HAS ALREADY STARTED ITS BUSINESS , BY PURCHASING LAND FOR ITS CONSTRUCTION BUSINESS T HE EXPENSES S O INCURRED ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND REVENUE IN NATURE, ARE REQUIRED TO BE ALLOWED. THE CIT(A) ALLOWED OTHER ROUTINE EXPENSES BUT CAPITALIZED LEGAL AND BROKERAGE EXPENSES . BOTH LEGAL EXPENSES AND BROKERAGE EXPENSES INCURRE D WERE ALSO REVENUE IN NATURE, THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE AOS ACTION FOR DISALLOWING THE SAME. ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE BALANCE OF EXPENDITURE SO INCURRED AS REVENUE EXPENSES. ITA NO. 3337&3667 /1 2 4 7 . IT IS PERTINENT TO MENTION HERE THAT TAX EFFECT IN THE APPEAL FILED BY THE REVENUE IS LESS THAN RS. 3 LAKHS, THEREFORE, AS PER CBDT INSTRUCTION NO. .3 OF 2011 DATED 09 - 02 - 2011 , NO APPEAL COULD BE FILED BY THE REVENUE. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS APP EAL OF THE ASSESSEE IS ALLOWED IN PART . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 29/07 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 29/07 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//