DCIT-4, Kanpur V. M/s. Ujala Merchant & Traders Ltd., Kanpur

ITA 391/LKW/2011

• Counselvise Citation: 39123714 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K GARG; P K KAPOOR
• Keywords: Rule of consistency; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 391/LKW/2011 ASSESSMENT YEAR: 2006 - 07 DY. CIT - 4 KANPUR V. M/S UJALA MERCHANT & TRADER S LTD. 24/147 - B, BIRHANA ROAD KANPUR PAN: AAACU1775B (APP ELL ANT) (RESPONDENT) C.O. NO.26/LKW/2011 [IN ITA NO. 391/LKW/2011] ASSESSMENT YEAR: 2006 - 07 M/S UJALA MERCHANT & TRADERS LTD. 24/147 - B, BIRHANA ROAD KANPUR V. DY. CIT - 4 KANPUR PAN: AAACU17 75B ( CROSS OBJECTOR ) (RESPONDENT) DEPARTMENT BY: SHRI. AMIT NIGAM, D.R. ASSESSEE BY: SHRI. S. K. GARG, ADVOCATE & SHRI. P. K. KAPOOR, C.A. DATE OF HEARING: 17 0 7 2014 DATE OF PRONOUNCEMENT: 07 0 8 2014 O R D E R PER SUNIL KUMAR YADAV: THIS APP EAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE IN RESPECT OF LOAN OF RS.26.50 LAKHS WITHOUT APPRECIATING THE FACTS BROUGHT OUT BY THE ASSESSING OFFICER IN HER ORDER AND ALSO WITHOUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER TO REBUT THE CLAIM OF THE ASSESSEE. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : 2 . THE ASSESSEE HAS ALSO FILED CR O SS OBJECTION IN SUPPORT OF THE ORDER OF THE LD. CIT(A) RAISING VARIOUS LEGAL GROUNDS. 3 . THE FACTS IN BRIEF BORNE OUT FRO M THE RECORD ARE THAT THE ASSESSEE HAS PAID A SUM OF RS.26.25 LAKHS TO MRS VEENA VAISH AND SHRI. SAURABH VAISH AS RENT IN RESPECT OF PROPERTY SITUATED AT A - 15/9, VASANT VIHAR, NEW DELHI. THIS PROPERTY WAS CLAIMED TO HAVE BEEN USED BY THE ASSESSEE FOR BUSI NESS PURPOSES FOR THE PAST SO MANY YEARS. IN EARLIER YEARS RENT WAS ALLOWED BUT IN THIS YEAR THE ASSESSING OFFICER DISALLOWED THE RENT HAVING TAKEN NOTE OF CERTAIN THINGS LIKE NO PROOF THAT THE PROPERTY COULD BE USED FOR COMMERCIAL PURPOSES, ELECTRICITY C ONNECTION IN THE RECORDS OF DELHI ELECTRICITY SUPPLY UNDERTAKING AS DOMESTIC, NON - MAINTENANCE OF BOOKS OF ACCOUNT OF THE BRANCH AND INQUIRIES MADE BY THE INSPECTOR. THE ASSESSEE HAS CONTENDED BEFORE THE ASSESSING OFFICER THAT THE PROPERTY WAS USED AS GUES T HOUSE FOR STAY OF THE EMPLOYEES OF THE ASSESSEE WHILE THEY ARE ON DELHI TOUR. THE SAME FACTS WERE VERIFIED BY THE INSPECTOR WHO HA D VISITED THE AFORESAID PROPERTY. THIS ARRANGEMENT WAS MADE TO REDUCE THE EXPENSES OF THE COMPANY IN A SUBSTANTIAL WAY, AS THE STAFF HAS OTHERWISE TO STAY IN THE HOTEL. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE PAYMENT OF RENT, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE EXPENDITUR E WAS ACCEPTED BY THE ASSESSING OFFICER IN EARLIER YEARS. THEREFORE, FOLLOWING THE RULE OF CONSISTENCY, THIS SHOULD BE ALLOWED IN THIS YEAR ALSO. THE LD. CIT(A) RE - EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE AND BEING CONVINCED WITH IT , HE ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE ADDITION MADE IN THIS REGARD. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF CONVENIENCE: - NON - MAINTENANCE OF ACCOUNT BOOKS AT THE BRANCHES OFFICE (IN DELHI) DEFI NITELY RAISES PRESUMPTION AGAIN ST THE ASSESSEE AS REGARDS MAINTAINING A FUNCTIONAL BRANCH OFFICE IN THE IMPUGNED PREMISE. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : THE FACT REMAINS THAT NO FINANCIAL STATEMENTS WERE PRODUCED BEFORE THE AO OR BEFORE THE UNDERSIGNED TO PROVE THAT ANY SORT OF BOOKS OR ACCOUNTS WERE MAINTAINED AT THE SO CALLED BRANCH OFFICE AT DELHI. THE LD. A.R. ALSO DID NOT SUBMIT THE NAMES OF THE OFFICE EMPLOYEES AND THEIR DUTIES AT THE SO CALLED BRANCH OFFICE AT DELHI. THUS, IT IS NOT MERELY A QUES TION OF VIOLATION OF PROVISION OF COMPANY LAW BUT A QUESTION OF FACTS PER SE, I.E. WHETHER THERE WAS ANY WORKING OFFICE OPERATING FROM THE SAID PREM ISE. FURTHER, I FAIL T O UNDERSTAND THE NEED FOR SUCH AN OFFICE IN DELHI, WHEN NONE OF THE BUSINESS ACTIVITY OF THE APPELLANT COMPANY REVOLVES IN AND AROUND DELHI. THE APPELLANT IS A CHIEF PROMOTER OF SALE FOR .U.K. CEMENT LTD FOR GUJARAT REGION, IN THE LETTER HEAD OF THE APPELLANT COMPANY, IT SHOWS ONLY 2 ADDRESSES, ONE IS KALPANA PLAZA, KANPUR AND THE OTHER ASH RAM ROAD, AHMEDABAD. THERE IS NO MENTION OF OFFICE AT DELHI, 7.1 FURTHER, IT IS AN ADMITTED FACT THAT THE IMPUGNED PREMISES ARE FULLY RESIDENTIAL AND THAT ELECTRICITY CONNECTION IS ALSO 'DOMESTIC'. MOREOVER, IN THE INSPECTOR'S R EPORT IT HAD BEEN CLEARLY ME NTIO NED THAT THERE WAS NO BUSINESS SIGNBOARD ON THE GATE OF THE ABOVE PREMISE. ON ENQUIRY, IT WAS ALSO REVEALED THAT IT WAS FUNCTIONING AS A GUEST HOUSE AND THE ONLY EMPLOYEES WORKING IN THERE WERE CARE - TAKER, SECURITY GUARDS, COOK, SAFAIWALA, MALI/DOMESTI C SERVANT AND DRIVER. THERE IS NO MENTION OF ANY EMPLOYEES WHO COULD BE CALLED AS OFFICE STAFF. 7.2 AS REGARD THE CONTENTION OF THE APPELLANT THAT THIS EXPENDITURE WAS ACCEPTED BY THE A.O, IN EARLIER YEARS, IT HAS TO BE STATED THAT IN EARLIER YEARS THE A.O HAD MADE ENQUIRIES WITH RESPECT TO THE FACTUM OF PAYMENT TO THE LANDLORDS; HOWEVER, THE PURPOSE FOR WHICH IT IS USED WAS NEVER ENQUIRED. DURING THE INSTANT ASSESSMENT PROCEEDINGS, THE A.O HAS GATHERED NEW MATERIAL FACTS AND THEREFORE, 'PRINCIPLE OF CONSIS TENCY' WOULD HAVE NO APPLI CATION TO THE FACT OF THE INSTANT CASE AND IN CAS E EVERY YEAR IS INDEPENDENT AND CLAIM FOR EXPENDITURE MUST BE SUBSTANTIATED FOR EVERY YEAR. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : 7.3 HOWEVER, THE APPELLANT COMPANY'S ARGUMENTS WITH RESPECT TO THIS PRO PERTY BEING USED AS A TRANSIT HOUSE/GUEST HOUSE HAS SOME MERITS. IT IS AN ADMITTED FACT THAT THE IMPUGNED PROPERTY HAD BEEN TAKEN ON LEASE BY THE APPELLANT COMPANY FOR WHICH RENT WAS BEING PAID BY THE ASSESSEE. IT IS ALSO SEEN FROM THE RECORDS THAT WHEN TH E INSPECTOR OF THE DEPARTMENT VISITED THE SAID PROPERTY, THE CARE TAKER OF THE HOUSE HAD STATED THAT ALL THE EMPLOYEES WORKING THERE WERE ON THE PAY ROLL OF THE APPELLANT , THE CARE TAKER HAD ALSO STATED THAT THE SAID HOUSE WAS USED AS A GUEST HOUSE. THE A SSESSING OFF ICER NOWHERE IN THE ASSESSMENT ORDER HAS REBUFFED THIS ASPECT OF THE MATTER. IN FACT, WHILE DISALLOWING CERTAIN EXPENDITURE INCURRED ON THE MAINTENANCE OF THIS PROPERTY, THE A.O HIMSELF HAS STATED IN THE ASSESSMENT ORDER 'EXPENSES IN RESPECT OF VASANT VIHAR GUEST HO U SE . IN LIGHT OF THESE, FACTS, IT CAN BE SAFELY CONCLUDED THAT THE IMPUGNED PREMISE WAS BASICALLY BEING RUN AS A TRANSIT HOUSE/GUEST HOUSE BY THE APPELLANT COMPANY. IN THE I.T. ACT, THERE IS NO PROVISION WHICH SPECIFICALLY DENIES THE CLAIM OF EXPENDITURE INCURRED ON MAINTENANCE OF A GUEST HOUSE. THE FACTUM OF PAYMENT OF RENT HAS NOT BEEN DOUBTED BY THE A.O. FURTHER, FROM THE INSPECTOR'S REPORT, IT IS ALSO CLEAR THAT THE SAID PROPERTY WAS USED ONLY AS A GUEST HOUSE AND NOT AS Q RESIDEN CE OR SPECIAL HOUSE FOR THE DIRECTOR(S) OF THE COMPANY. THUS, EVEN IF THE IMPUGNED PROPERTY WAS USED BY THE COMPANY AS A GUEST HOUSE/ TRANSIT HOUSE AND NOT AS ITS BRANCH OFFICE, THE DEDUCTION ON ACCOUNT OF PAYMENT OF RENT CANNOT BE DENIED AS IT HAS BEEN IN CURRED FOR THE PURPOSE OF ITS BUSINESS. THE ADDITION MADE ON THIS ACCOUNT IS, THEREFORE, DELETED. 4 . AGGRIEVED , THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 5 . THE LD. COUNSEL FOR THE A SSESSEE, BESIDES PLACING RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS SUBMITTED THAT ADMITTEDLY THE PROPERTY WAS USED AS A TRANSIT HOUSE FOR THE EMPLOYEES OF THE ASSESSEE. THIS ARRANGEMENT WAS MADE TO REDUCE THE EXPENSES OF THE COMPANY IN A SUBSTANTIAL WAY, AS THE STAFF HAS OTHERWISE TO STAY IN THE HOTEL. THEREFORE, PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : THE EXPENDITURE INCURRED TOWARDS RENT O F THIS PROPERTY SHOULD BE ALLOWED AS REVENUE EXPENDITURE. 6 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL O F THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT UNDISPUTEDLY THE PROPERTY WAS USED AS A TRANSIT HOUSE FOR THE STAY OF THE EMPLOYEES OF THE ASSESSEE - COMPANY, WHO WERE ON TOUR TO DELHI FOR VARIOUS PURPOSES. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSE SSEE THAT THIS ARRANGEMENT WAS MADE TO REDUCE THE EXPENSES OF THE COMPANY IN A SUBSTANTIAL WAY, AS THE STAFF HAS OTHERWISE TO STAY IN THE HOTEL , CANNOT BE DISCARDED IN THE LIGHT OF THE TARIFF OF THE HOTELS IN DELHI. MOREOVER, IT IS FOR THE BUSINESSMAN TO DECIDE AS TO HOW HE HAS TO MAKE ARRANGEMENT FOR STAY OF HIS EMPLOYEES WHEN THEY ARE ON BUSINESS TRIP. THE ASSESSING OFFICER CANNOT STEP INTO THE SHOES OF THE BUSINESSMAN. THEREFORE, WE DO NOT FIND ANY MERIT IN THIS ADDITION. SINCE THE REVENUE HAS NOT PO INTED OUT ANY DEFECT IN THE ORDER OF THE LD. CIT(A), WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISM I SS THE APPEAL OF THE REVENUE IN THIS REGARD. 7 . THOUGH THE CROSS OBJECTION HAS BEEN FILED RAISING VARIOUS LEGAL OBJECTIONS WITH REGARD TO THE ASSESSMENT, BUT WHEN WE DID NOT FIND ANY MERIT IN THE REVENUE S APPEAL, THE CROSS OBJECTION WAS NOT ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE DISMISS THE SAME. 8 . IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7.8.2014. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH AUGUST , 2014 JJ: 3007 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )