SHRI JATIN HARISH SHAH, MUMBAI V. ACIT-17(2), MUMBAI

ITA 4228/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4067 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 18-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Business income; Depreciation; Business expenditure; Transactions in derivatives; Set aside
• Section: 143(3); 37(1); 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4228 /MUM/ 201 8 (ASSESSMENT YEAR 20 12 - 1 3 ) SHRI JATIN HARISH SHAH 1 ST FLOOR, DCOR HOUSE SHERIFF DEVJI STREET CRAWFORD MARKET MUMBAI - 400 003. PAN : AADPS09 77R V S . ACIT 17(2) MUMBAI ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY MS. MRUGAKSHI JOSHI DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 10.6 . 201 9 DATE OF PRONOUNCEMENT 16 . 8 . 201 9 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 23.4.2018 AND PERTAINS TO A.Y.2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER : - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW: 1. THE LEARNED CIT(A) ERRED IN DENYING DEDUCTION OF BUSINESS EXPENSES AGGREG ATING TO RS, 2,76,061/ - (I.E. BEING 80% OF THE PROFESSIONAL TAX, DEPRECIATION AND MOTOR CAR EXPENSES) AGAINST BUSINESS INCOME, I.E. THE SALARY AND INTEREST INCOME EARNED FROM PARTNERSHIP FIRM. 2. WITHOUT PREJUDICE THE LEARNED CIT(A) FAILED TO TAKE INTO C ONSIDERATION THAT THE APPELLANT IS ALSO ENGAGED IN THE BUSINESS OF F&O TRADING AND THE BUSINESS EXPENSES AGGREGATING TO RS. 2,76,061/ - , IS ALLOWABLE AGAINST SUCH BUSINESS INCOME. 3. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE PRINCIPLES OF CONSISTENCY W HEREIN SIMILAR ADDITIONS DEDUCTIONS HAVE BEEN CLAIMED IN EARLIER YEARS AND THE SAME HAS BEEN ACCEPTED : - (I) ASST. ORDER U/S. 143(3) FOR AY. 2006 - 07, WHEREIN 20% HAS BEEN DISALLOWED AS BEING PERSONAL IN NATURE (II) ASST. ORDER U/S. 143(3) FOR AY. 20 07 - 08, WHEREIN NO ADDITION WAS MADE SHRI JATIN HARISH SHAH 2 (III) CIT(A)'S ORDER FOR AY 2010 - 11, WHEREBY A SIMILAR ADDITION WAS MADE AND THE SAME WAS DELETED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER : - THE ASSESSING OFFICER NOTED THAT I T IS SEEN FROM THE RETURN OF INC OME THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS & PROFESSION, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. EXPENSES CLAIMED UNDER VARIOUS HEADS : - THAT T HE ASSESSEE HAS MADE A CLAIM OF RS.2,7 6,061/ - ON ACCOUNT OF PROFESSION TAX AND MOTOR CAR EXPENSES INCLUDING DEPRECIATION THREREOF AS FOLLOWS - EXPENSE HEAD AMT. CLAIMED (RS.) PROFESSION TAX 10,000 DEPRECIATION 2,96,708 MOTOR CAR EXPENSES 35,868 TOTAL EXPENSES 3,42,576 LESS: L/5 TH OF ABOVE - PERSONAL USE 66,515 TOTAL 2,76,061 TH AT TH E SAME HAS BEEN REDUCED OUT OF THE SALARY AND INTEREST RECEIVED FROM THE FIRM. THAT I N THIS RESPECT, THERE IS NO DOUBT OR SECOND OPINION THAT ALL THE EXPENSES, ALLOWABLE U/S. 37(1) WAS ALREADY CLAIMED IN THE FIRM'S A UDITED ACCOUNT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, VIDE ORDER SHEET NOTING DATED 23.01.2015, THE AR WAS ASKED TO SHOW - CAUSE WHY THE EXPENSES CLAIMED AGAINST BUSINESS INCOME SHOULD NOT BE DISALLOWED. 4. IN RESPONSE, VIDE LETTER DATED 30.01.2015, THE ASSESSEE'S REPRESENTATIVE HAS SUBMITTED THAT - 'IN THIS CONNECTION WE SUBMIT THAT WHILE GOING THROUGH THE PROFIT & LOSS ACCOUNT SUBMITTED BY OUR CLIENT, IT IS EVIDENT THAT THE ONLY EX PENSES CLAIMED BY OUR CLIENT ARE SERVICE CHARGES, TELEPH ONE EXPENSES AND AUDIT FEES. ALL OF THESE ARE INCURRED FULLY AND EXCLUSIVELY IN RELATION TO EARNING BUSINESS INCOMES. OVER & ABOVE THE EXPENSES WHICH ARE INCURRED IN EARNING F & O INCOME, OUR CLIENT IS ALSO A WORKING PARTNER IN THE FIRM M/S. HARISH EXPORTE R AND EARNS REMUNERATION AND INTEREST OF MORE THAN RS.28 LACS. SINCE OUR CLIENT HAS NOT CLAIMED ANY OTHER EXPENSE IN THE PROFIT & LOSS ACCOUNT AND ALSO THE EXPENSES OF RS.3,42,576/ - (OUT OF WHICH RS.66,515/ - BEING 20% OF MOTOR CAR EXP ENSES AND SHRI JATIN HARISH SHAH 3 DEPRECIATION IS CONSIDERED AS PERSONAL EXPENSES) REPRESENT ONLY MOTOR CAR EXPENSES DEPRECIATION ON MOTOR CAR EXPENSES DEPRECIATION PROFESSION TAX, OUT OF WHICH DEPRECIATION AMOUNTING TO RS.2,96,708/ - IS THE BIGGEST FACTOR. OUT OF SAI D EXPENSES ALSO A PART THEREOF HAS ALREADY BEEN DISALLOWED AS PERSONAL EXPENSES. ALSO DEPRECIATION IS AN ALLOWABLE CHARGE AND NOT THE EXPOSE AND NEEDS TO BE ALLOWED FULLY . THE MOTOR CAR EXPENSES AND PROFES SION TAX HAVE BEEN INCURRED IN P ROFESSION TAX TO THE STATE GOVERNME NT, IF ONE IS ENGAGED IN ANY BUSINESS IN THE STATE OF MAHARASHTRA. THE SAID EXPENSES ARE OVER AND ABOVE THE EXPENSES WHICH HAVE BEEN INCURRED BY THE FIRM AND CLAIMED AS EXPENSES. IN VIEW OF THE FOREGOING, NO DISALLOWANCE SHOULD BE MADE AND EXPENSES AS CLAI MED BE ALLOWED FULLY AS BUSINESS EXPENSES, HAVING BEEN INCURRED AND EXCLUSIVELY IN RELATION TO EARNING BUSINESS INCOMES.' THE ASSESSING OFFICER DID NOT FIND E XPLANATION SUBMITTED TO BE TENABLE AS PER SEC. 37(1) OF THE I.T ACT, 1961. HE DISMISSED THE ASSES SEES PLEA AND RS.2,76,061/ - WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE . 6. UPON ASSESSEE S APPEAL LEARNED CIT(A) CONFIRMED THE SAME HOLDING AS UNDER : - 5. THE HEADS OF INCOME IN THIS CASE ARE PROFIT AND GAINS OF BUSINESS AND PRO FESSION, CAPITAL GAIN AND INCOME FROM OTHER SOURCES. THIS CLAIM IS AGAINST PROFIT AND GAINS OF BUSINESS AND PROFESSION PORTION. THE PROFIT AND GAINS OF BUSINESS AND PROFESSION IN THE CASE IS SALARY AND INTERES T RECEIVED FROM FIRM. 6. DEDUCTION OF THE NATU RE ASSESSEE HAS CLAIMED CANNOT BE MADE AGAINST INTEREST AND SALARY RECEIVED FROM A FIRM. THE EARNING THIS INCOME EXPENSES ARE CLAIMED IN ACCOUNTS OF THE FIRM ITSELF. THIS SUM IS INTEREST AND SALARY IS A DEDUCTION IN HAND OF FIRM WHICH ACCRUES TO PARTNER WI TH NO ASSOCIATED EXPENSES. THE CLAIM IS PATENTLY INCORRECT. HENCE THE GROUND IS DISMISSED. 7. THE APPELLANT PRODUCED DECISION OF CIT(APPEALS) IN CASE OF ASSESSEE ITSELF FOR A.Y. 2010 - 11. ALL RELEVANT INFORMATION WAS NOT BEFORE CIT(APPEALS) TO MAKE THE DEC ISION, NOTABLY CHARACTER OF INCOME. HENCE THE DECISION CANNOT BE BLINDLY FOLLOWED BY ASSESSING OFFICER. THE DE CISION IN PARAGRAPH 6 ABOVE CONSIDERS ADDITIONAL FACTS AND HENCE A DIFFERENT DECISION . 7. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I NOTE THAT THE ASSESSEE IN THIS CASE IS AN INDIVIDUAL EARNING INCOME FROM BUSINESS, CAPITAL GAIN AND INCOME FROM OTHER SOURCES. ASSESSEE HAS RECEIVED INCOME FROM SHRI JATIN HARISH SHAH 4 PARTNERSHIP FIRM AS SALARY FROM PARTNERSHIP FIRM AND HE HAS ALSO RECEIVED INTEREST ON CAPITAL IN THE PARTNERSHIP FIRM. ASSESSEE HAS ALSO CLAIMED TO BE ENGAGED IN F&O BUSINESS. WITHOUT REFERRING TO THE ASSESSEES EXPLANATION ASSESSING OFFICER HAS OBSERVED THAT IMPUGNED EXPEND ITURES HAVE ALREADY BEEN CLAIMED BY THE PARTNERSHIP FIRM. THEREAFTER ASSESSING OFFICER REPRODUCED THE ASSESSEES SUBMISSION AS ABOVE IN WHICH IT WAS CLEARLY STATED THAT THESE EXPENSES HAVE NOT BEEN CLAIMED IN THE PARTNERSHIP FIRM. HENCE I FIND THAT THE ASS ESSING OFFICER HAS NOT AT ALL GIVEN ANY FINDING THEREAFTER AND DISALLOWED THE EXPENDITURE. LEARNED CIT(A) ALSO HAS MISDIRECTED HIMSELF BY ONLY GOING INTO THE THEORETICAL ASPECT AND WITHOUT ANY REBUTTAL OF THE ASSESSEES CLAIM THAT THE EXPENDITURE S WERE NOT CLAIMED IN PARTNE RSHIP FIRM. ACCORDINGLY, IN MY CONSIDERED OPINION ASSESSEE HAS EARNED INCOME FROM BUSINESS AND THESE EXPENDITURES DESERVE TO BE ALLOWED AGAINST THOSE INCOME. 9. IN THE BACKGROUND OF AFORESAID DISCUSSION, I SET ASIDE THE ORDERS OF AUTHOR ITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 16 . 8 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 16 / 8 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSIST ANT REGISTRAR ) PS ITAT, MUMBAI