TATA INTERNATIONAL DLT P.LTD, MUMBAI V. ADDL CIT RG 7(3), MUMBAI

ITA 3982/MUM/2012

• Counselvise Citation: 398219914 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Revenue expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 3982/MUM/2012 ASSESSMENT YEAR: 2007-08 TATA INTERNATIONAL DLT PRIVATE LIMITED. STERLING CENTRE, 3 RD FLOOR DR. ANNIE BESANT ROAD,WORLI, MUMBAI-400 018 PAN :AACCT 2953 Q VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 7(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJIT SHAH RESPONDENT BY : SHRI SHISHIR SRIVASTAVA DATE OF HEARING : 19.08.2013 DATE OF PRONOUNCEMENT : 25.09.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT(A)-13, MUMBAI DATED 13.12.2011 FOR THE ASSES SMENT YEAR 2007-08. 2. IN GROUND NO. 1.1, THE ASSESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOU NT OF SERVICE CHARGES PAID OF RS.7,61,200/- BY THE ASSESSEE. 2.1 BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF IMPORT, MANUFACTURING AND SALE OF TRAILER WHILE DECLARING A TOTAL INCOME OF RS.64,17,061/- HAD DEBITED IN THE P & L ACCOUNT, AN AMOUNT OF RS.7 ,61,200/- ON ACCOUNT OF SERVICE CHARGES PAID ON BEHALF OF THE ASSESSEE TO M/S. MULL A & MULLA & CRAIGIE BLUNT & CAROE IN RESPECT OF SURVEY OF LAND AT PUNE BY THE SAID AD VOCATE HIM. HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3), THE AO DISALLOWED THE EXPENDITURE AND ADDED THE ITA NO. 3982/MUM/2012 TATA INTERNATIONAL DLT PRIVATE LIMITED. ASSESSMENT YEAR: 2007-08 2 SAME TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO THE AO, DEBIT TO THE REVENUE ACCOUNT IS INCORRECT AND UNJUSTIFIED AS THE SERVICE PERTAINS TO THE PREVIOUS ASSESSMENT YEAR 2006-07. ALSO, THE EXPENDITURE DOES NOT QUALIFY TO BUSINESS EXPENDITURE U/S 30 TO 37 OF THE ACT. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED ORDER, THE ASS ESSEE IS IN APPEAL BEFORE US. 2.2 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT IS OBSERVED THAT THE COMPANY HAS PAID LEGAL FEES RS.7, 61,200/- TO M/S. MULLA & MULLA & CRAIGIE SOLICITORS AS PER THE BILL NO. 1412 DATED 1 9.09.2006 IN CONNECTION WITH PROPOSAL FOR LEASING PIECE OF LAND FOR THE COMPANY S PROPOSED FACTORY PREMISES AT PUNE. THE DEAL ULTIMATELY HAS FAILED AND THE PIECE OF LAND HAS NOT BEEN LEASED. IT IS AN ADMITTED FACT THAT THE ASSESSEE FOLLOWS MERCANTI LE SYSTEM OF ACCOUNTING. THE PERUSAL OF THE AUDITED ACCOUNTS DOES NOT SHOW THE S AME AS PREVIOUS PERIOD EXPENSES. CONSIDERING THE FACTS IN TOTO, WE FIND MERITS IN TH E CONTENTION OF THE LD.AR THAT THE LEGAL SERVICES IS A CONTINUOUS PROCESS WHICH MA Y START FROM EARLIER YEAR BUT THE LIABILITY CRYSTALLIZES ONLY WHEN THE BILL IS RECEIV ED ON COMPLETION OF PARTICULAR ASSIGNMENT. ALSO, THE IMPUGNED LEGAL EXPENDITURE IN CURRED BY THE ASSESSEE, IN OUR VIEW IS IN THE NORMAL COURSE OF BUSINESS FOR EXPANS ION OR DIVERSIFICATION WHICH IS FULLY ALLOWABLE AS REVENUE EXPENDITURE. IN VIEW OF THAT M ATTER, WE DELETE THE IMPUGNED ADDITION OF RS.7,61,200/- CONFIRMED BY THE LD.CIT(A ). GROUND NO 1.1 IS ALLOWED. 3. GROUND NO. 1.2, 2 & 3 ARE RESPECTIVELY NOT PRESS ED AND GENERAL IN NATURE, THE SAME DO NOT REQUIRE ANY ADJUDICATION. 4. IN THE RESULT, THE APPEAL FIELD BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.09.2013. *SRIVASTAVA ITA NO. 3982/MUM/2012 TATA INTERNATIONAL DLT PRIVATE LIMITED. ASSESSMENT YEAR: 2007-08 3 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.