PRINCESS VICTGORIA MARY GYMKHANA & GYMNASIUM, MUMBAI V. ITO WD 12(3)(3), MUMBAI

ITA 3415/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7596 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 25-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YESHWANT U CHAVAN
• Assessee Lawyers: FAROOKH IRANI
• Keywords: Assessment record; TDS; Set aside
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUM BAI BEFORE SHRI T R SOOD, ACCOUNTANT MEMBER AND SHRI V DURGA RAO, JUDICIAL MEMBER ITA NO 3415/MUM/2009 (ASSESSMENT YEAR: 2005-06) PRINCESS VICTORIA MARY GYMKHANA & GYMNASIUM, 174, MAHARASHI KARVE ROAD, COOPERAGE, MUMBAI -400 021 PAN: AAAP 1395 E VS. INCOME TAX OFFICER WARD 12(3)(3), MUMBAI APPELLANT RESPONDENT ASSESSEE BY: SHRI FAROOKH IRANI REVENUE BY: SHRI YESHWANT U CHAVAN ORDER PER T R SOOD, ACCOUNTANT MEMBER THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED U/ S 263 BY CIT XII MUMBAI. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT UPON EXAMINATION OF THE ASSESSMENT RECORDS LEARNED COMMISSIONER NOTICED THAT ASSESSING OFFICER HAD ALLOWED PRO-RATA EXPENSES OF RS 1,15,817/- ON ACCOUNT OF VARIOUS EXP ENSES LIKE SALARY, PF, POSTAGE AND TELEPHONE, CONVEYANCE, ADVERTISEMENT ETC AGAINST TH E ASSESSEES INTEREST AND OTHER INCOME, WHICH WAS RETURNED AS TAXABLE. ACCORDINGLY , A SHOW CAUSE NOTICE WAS ISSUED AND IN RESPONSE TO THE NOTICE IT WAS SUBMITTED THAT WHOLE OF THE ADMINISTRATIVE STAFF WAS INVOLVED IN VARIOUS FORMALITIES LIKE DEALING WITH T HE BANK, KEEPING ACCOUNTS, COLLECTING TDS CERTIFICATES AND BANK RECONCILIATION STATEMENT ETC AND IT IS VERY DIFFICULT TO IDENTITY A PARTICULAR EMPLOYEE WHO WAS DEALING WITH THE PARTIC ULAR HEAD OF INCOME. THE LEARNED COMMISSIONER WAS NOT SATISFIED WITH THE SUBMISSIONS AND OBSERVED VIDE PARAS 4 & 5 AS UNDER:- 4. THE MATTER HAS BEEN DULY CONSIDERED. BY NO STR ETCH OF IMAGINATION EXPENDITURE FOR EARNING INTEREST INCOME COULD BE AS HIGH AS 16.83% OF THE INTEREST ITA 3424/MUM/2009 M/S PANKAJ PARIKH & CO 2 INCOME. UNDER THESE CIRCUMSTANCES THERE WAS NO JUS TIFICATION FOR ALLOWING THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE ON PRO-R ATA BASIS AGAINST THE INTEREST INCOME. THE ORDER OF THE ASSESSING OFFICER IS ACCO RDINGLY ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. 5. THE ASSESSMENT ORDER IS THEREFORE SET ASIDE WITH THE DIRECTION TO THE ASSESSING OFFICER TO DETERMINE THE EXPENDITURE THAT HAS BEEN INCURRED EXCLUSIVELY FOR EARNING THE INTEREST INCOME, EXCLUDING ANY EXPE NDITURE WHICH HAS PRIMARILY BEEN INCURRED FOR THE PURPOSES OF RUNNING THE CLUB AND ALLOW ONLY SUCH AMOUNT AS HAS BEEN SO INCURRED. 3. BEFORE US, LEARNED COUNSEL OF THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER AND EMPHASISED THAT IT IS VERY DIFFICULT TO PIN-POINT WHICH PEON HAD GONE TO BANK TO OBTAIN THE FORM OR W HICH CLERK OBTAINED TDS CERTIFICATE. HE POINTED OUT THAT EVEN AFTER THE REVISION ORDER I N THE FRESH ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT BEEN ABLE TO IDENTIFY A P ARTICULAR EXPENDITURE, WHICH WAS RELATED TO INCOMES WHICH WERE RETURNED BY ASSESSEE ITSELF AS TAXABLE, FOR EXAMPLE, INTEREST INCOME OR THE INCOMES WHICH WERE DETERMINE D BY THE ASSESSING OFFICER LIKE ROYALTY AND COMPENSATION FOR SHORTFALL FROM CATERS. THE ONLY WAY WAS TO MAKE A PROPORTIONATE DISALLOWANCE AND DISALLOWED 50% OF THE EXPENSES WHICH IS AGAIN A PARTICULAR PROPORTION OF AMOUNT. THEN HE REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL COMPANY LTD VS CIT 243 ITR 82 WHEREIN IT WAS HELD THAT EVERY LOAN OF REVENUE AS A CONSEQUENCE OF AN O RDER OF THE ASSESSING OFFICER CANNOT BE TREATED PRE-JUDICIAL TO THE INTEREST OF REVENUE. IT WAS FURTHER HELD THAT IF ASSESSING OFFICER HAS TAKEN A PARTICULAR VIEW AND SUCH VIEW W AS LEGALLY POSSIBLE THEN SUCH ASSESSMENT ORDER CANNOT BE CALLED ERRONEOUS AND PRE -JUDICIAL TO THE INTEREST OF REVENUE. HE ALSO RELIED ON THE DECISION OF HONBLE SUPREME C OURT IN CASE OF CIT VS MAX INDIA LTD 295 ITR 282. 4. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED ON THE ORDER OF COMMISSIONER. ITA 3424/MUM/2009 M/S PANKAJ PARIKH & CO 3 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFULL Y, WE FIND THAT ASSESSEE HAD RETURNED INCOME FROM INTEREST ON FIXED DEPOSIT FROM COMPANIES AND BANK AND INTEREST ON SAVING BANK ACCOUNT AS TAXABLE AND NOT COVERED BY T HE CONCEPT OF MUTUALITY AS ASSESSEE IS A CLUB. ASSESSING OFFICER FURTHER ADDED RECEIPT FROM ROYALTIES AND COMPENSATION FOR SHORTFALL FROM CATERS AS ALSO NOT COVERED BY CONCEP T OF MUTUALITY AND ADDED THESE TWO ITEMS TO THE INCOME OF THE ASSESSEE. AFTERWARDS TH E PROPORTIONATE EXPENSES AMOUNTING TO RS 1,15,817/- WERE ALLOWED IN PROPORTION OF TAXA BLE RECEIPTS TO TOTAL RECEIPTS. LEARNED COMMISSIONER IN THE REVERSIONARY ORDER IS OF THE VI EW THAT ONLY SPECIFIC EXPENSES SHOULD HAVE BEEN ALLOWED AGAINST ITS TAXABLE INCOME BUT WE AGREE WITH THE SUBMISSION OF LEARNED COUNSEL OF THE ASSESSEE THAT IT IS VERY DIF FICULT TO PINPOINT WHICH OF THE EXPENSES IS RELATED TO EARNING OF TAXABLE INCOME. FOR EXAMP LE THE MONEY RECEIVED ON ACCOUNT OF MEMBERSHIP FEE WILL BE DEALT BY SAME PERSON WHO HAS DEALT WITH THE INTEREST ON DEPOSITS, THEREFORE, ONLY PROPORTIONATE OF EXPENSES COULD HAV E BEEN ALLOCATED AND ASSESSING OFFICER HAS DONE THAT. THIS MEANS THIS ONE IS ONE OF THE POSSIBLE VIEWS WHICH WAS TAKEN BY THE ASSESSING OFFICER. HONBLE SUPREME COURT IN CASE OF MAX INDIA LTD (SUPRA) OBSERVED AS UNDER:- 6. RESPECTFULLY FOLLOWING DECISION, WE ARE OF THE V IEW THAT SINCE ASSESSING OFFICER HAS TAKEN-UP ONE OF THE POSSIBLE VIEW WHILE ALLOWING PR OPORTIONATE EXPENSES, THE ORDER CANNOT BE CALLED ERRONEOUS OR PRE-JUDICIAL TO THE I NTEREST OF REVENUE. THIS IS FURTHER SO BECAUSE TOTAL EXPENSES ALLOWED BY THE ASSESSING OFF ICER ARE ONLY RS 1,15,817/- AND SUPERVISORY POWERS PROVIDED U/S 263 CANNOT BE USED FOR THE PURPOSE OF DEALING WITH SMALL LOSSES OF REVENUE. IN THESE CIRCUMSTANCES, WE QUASHED THE ORDER PASSED U/S 263. 7. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED ON 23RD DAY OF FEBRUARY, 2010. SD/- (V DURGA RAO) JUDICIAL MEMBER SD/- (T R SOOD) ACCOUNTANT MEMBER MUMBAI, DATE: 23RD FEBRUARY, 2010 ITA 3424/MUM/2009 M/S PANKAJ PARIKH & CO 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT XII, MUMBAI. 4) THE ADDL CIT- RG 12(3) OR CONCERNED ., MUMBAI. 5) THE DR C BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* ITAT, MUMBAI ITA 3424/MUM/2009 M/S PANKAJ PARIKH & CO 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 18.02.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 18.02.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER