NORTHPOINT CENTRE OF LEARNING, MUMBAI V. ITO 15(1)(4), MUMBAI

ITA 347/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92803 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K DHONDIALDR
• Assessee Lawyers: MRUGAKSHI K JOSHI
• Keywords: Earning of tax free income; Wrong claim; Commercial expediency
• Section: 14A; 37(1)

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI ,!' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.347/MUM/2015 ASSESSMENT YEAR: 2010-11 M/S. NORTHPOINT CENTRE OF LEARNING, 15 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT, MUMBAI-400021 / VS. INCOME TAX OFFICER-15(1)(4), MUMBAI. / ASSESSEE / REVENUE P.A. NO. AAAJN0298D $%& / ASSESSEE BY MS. MRUGAKSHI K. JOSHI $%& / REVENUE BY SHRI A.K.DHONDIAL-DR / DATE OF HEARING 10/06/2015 & / DATE OF ORDER: 11/06/2015 &/ O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY IMPUGNED ORDER DATED 22/10/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE AD-HOC DISALLOWAN CE AT THE RATE OF 5% OF THE TOTAL EXPENDITURE ALTHOUGH THE EX PENDITURE WAS INCURRED SOLELY FOR THE PURPOSE OF BUSINESS AND FURTHER CONFIRMING THE AD-HOC DISALLOWANCE U/S 14A AMOUNTIN G TO ITA NO.347/MUM/2015 M/S. NORTHPOINT CENTRE OF LEARNING 2 RS.3,41,763/- MADE TOWARDS ESTIMATED EXPENSES WHICH HAS NOT BEEN INCURRED FOR EARNING TAX FREE DIVIDEND INC OME. 2. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE, MS. MRUGUKASHI K. JOSHI, ADVANCED HER ARGUMENTS, WHICH ARE IDENTICAL TO THE GROUND RAISED . ON THE OTHER HAND, SHRI A.K. DHONDIAL, LD. DR, DEFENDED TH E CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ASSESSEE IS A TRAINING INSTITUTE IN AD VERTISING FOR POST GRADUATE RESIDENTIAL STUDENTS, DECLARED INCOME OF RS.1890/- IN ITS RETURN FILED ON 07/10/2010. THE A SSESSEE CLAIMED RS.10,49,800/- TO HAVE BEEN INCURRED FOR PR INTING AND STATIONARY, TELEPHONE AND TRAVELLING EXPENSES F OR BUSINESS PURPOSES. THE ASSESSING OFFICER SUSPECTED THE GENUINENESS OF THESE EXPENDITURE BY HOLDING THAT TH ERE WAS ELEMENT OF PERSONAL USE, THUS, HE MADE DISALLOWANCE AT THE RATE OF 10% OF SUCH EXPENDITURE. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE DISALLOWA NCE WAS RESTRICTED TO 5% OF THE CLAIMED EXPENSES INCURRED U NDER VARIOUS HEADS, THUS, PART RELIEF WAS GRANTED TO THE ASSESSEE AGAINST WHICH, THE AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN ITA NO.347/MUM/2015 M/S. NORTHPOINT CENTRE OF LEARNING 3 JUXTAPOSITION AND ANALYZED, I FIND THAT AD-HOC DISA LLOWANCE WAS MADE BY THE ASSESSING OFFICER BY SUSPECTING THA T THERE IS A ELEMENT OF PERSONAL USE. HOWEVER, THE LD. ASSESS ING OFFICER HAS NOT PINPOINTED THAT WHICH EXPENSES ARE OF PERSO NAL IN NATURE. THE ASSESSEE ALSO PRODUCED THE COPY OF THE STATEMENT OF ACCOUNT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE GENUINENESS OF THE EXPENSES WAS ALSO NOT P ROVED. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND ALSO BEFORE THIS TRIBUNAL, THE ASSESSEE PRODUCED THE COP Y OF THE LEDGER ACCOUNT OF VARIOUS HEADS OF EXPENSES BY CLAI MING THAT SUCH EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. ALL THE EXPENSES WERE INCURR ED AGAINST BILLS AND FOR COMMERCIAL EXPEDIENCY, THUS, NO DISAL LOWANCE IS EXPECTED TO BE MADE U/S 37(1) OF THE ACT. THE ASSES SEE IS A INSTITUTION, THUS, NO AD-HOC ADDITION IS PERMITTED UNLESS AND UNTIL IT IS PROVED OTHERWISE. THERE IS NO RECORDIN G OF SATISFACTION BY THE ASSESSING OFFICER THAT THE ASSE SSEE MADE A BOGUS CLAIM. THERE ARE NO BORROWED FUNDS ALSO, THU S, TO PUT AN END TO LITIGATION, THE DISALLOWANCE IS RESTRICTE D TO 2% AGAINST 5% SUSTAINED BY THE LD. COMMISSIONER OF INC OME TAX (APPEALS). IT IS MADE CLEAR THAT THE OBSERVATION M ADE BY THE BENCH IS PECULIAR TO THE FACTS AVAILABLE TO THE IMP UGNED ASSESSMENT YEAR AND MAY NOT BE QUOTED FOR FURTHER R EFERENCE. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED 3. THE NEXT GROUND PERTAINS TO AD-HOC DISALLOWANCE OF RS.3,41,763/- MADE TOWARDS ESTIMATED EXPENSES, WHIC H AS PER THE ASSESSEE WERE NOT INCURRED ON EARNING TAX F REE DIVIDEND INCOME. THE CRUX OF ARGUMENT ADVANCED ON B EHALF OF ITA NO.347/MUM/2015 M/S. NORTHPOINT CENTRE OF LEARNING 4 THE ASSESSEE IS IDENTICAL TO THE GROUND RAISED BY C ONTENDING THAT RULE-8D OF THE RULES CANNOT IPSO-FACTO, BE APP LIED TO THE FACTS OF THE PRESENT APPEAL. THE LD. DR DEFENDED T HE ADDITION. 3.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE O BSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY TH E LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND AN ALYZED, I AM OF THE VIEW THAT RULE-8D OF THE RULES CAN BE APP LIED, IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE COR RECTNESS OF THE CLAIM OF THE ASSESSEE WITH RESPECT TO THE EXPEN DITURE INCURRED IN RELATION TO EXEMPT INCOME. EVEN IF, TH E ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED IN RESPECT TO EXEMPT INCOME, THE ASSESSING OFFICER IS SUPPOSED TO FOLLOW THE MANDATE OF RULE-8D. SECTION 14A IS CALLED FOR WHEN THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM O F THE ASSESSEE HAVING INCURRED NO EXPENDITURE OR SOME AMO UNT EXPENDITURE IN RELATION TO EXEMPT INCOME. THEREFORE , FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE, 328 ITR 81 (BOM), WHEREIN, IT WAS HELD THA T THE DISALLOWANCE HAS TO BE ON REASONABLE BASIS, THEREFO RE, TO PUT AN END TO THE LITIGATION, I DIRECT THE LD. ASSESSIN G OFFICER TO REDUCE THE DISALLOWANCE TO RS.1 LAKH IN PLACE OF RS.3,41,763/- SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THUS, THIS GROUND IS PARTLY ALLOWED . ITA NO.347/MUM/2015 M/S. NORTHPOINT CENTRE OF LEARNING 5 FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE 2015. SD/- (JOGINDER SINGH) !' / JUDICIAL MEMBER MUMBAI; DATED : 11/06/2015 F{X~{T? P.S / ! &$)!*+,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( '#$ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -./ ' , ) '#$ ' 1 , / DR, ITAT, MUMBAI 6. /2 3$ / GUARD FILE. & / BY ORDER, (-# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI