M/s. NSR Farms (P) Ltd., New Delhi V. ITO, New Delhi

ITA 4243/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53387 (ITAT-DELHI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-12-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: K NAGPAL ADVS
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI B.C. MEENA ITA NO. 4618/DEL/2011 ASSESSME NT YEAR: 2005-06 ITA NO.4243/DEL/2011 ASSESSMENT YEAR: 2 008-09 NSR FARMS (P) LTD., VS. INCOME-TAX OFFICER, C/O M/S. RRA TAXINDIA WARD 13(1), D-28, SOUTH EX.PART-I, NEW DELHI. NEW DELHI. NEW DELHI. (PAN: AAAN3068J) (APPELLANT) (RESPONDENT) ITA NO. 2804/DEL/2011 ASSESSMENT YEAR: 2006-07 ITA NO. 2805/DEL/2011 ASSESSMENT YEAR: 2007-08 NSR FARMS (P) LTD., VS. DCIT, C/O M/S. RRA TAXINDIA WARD 13(1), D-28, SOUTH EX.PART-I, NEW DELHI. NEW DELHI. NEW DELHI. (PAN: AAAN3068J) (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI TARUN KUMAR & K. NAGPAL, ADVS. RESPONDENT BY: SHRI RS NEGI, SR. DR DATE OF HEARING : 21.12.2011 DATE OF PRONOUNCEMENT : 23.12.2011 ORDER PER BENCH: THE PRESENT FOUR APPEALS ARE DIRECTED AT THE INSTA NCE OF THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(APPEALS) DATED 14.06.2011, 30.01.2011, 30.01.2011 AND 31.05.2011 PASSED FOR AS SESSMENT YEARS 2005- 06, 2008-09, 2006-07 AND 2007-08, RESPECTIVELY. 2 2. THE GROUNDS OF APPEALS TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES, THEY ARE DESCRIPTI VE AND ARGUMENTATIVE IN NATURE. THE ONE OF THE ISSUES INVOLVED IN ALL THE Y EARS RELATES TO QUANTIFICATION OF EXPENSES ALLOWABLE TO THE ASSESSE E FOR MAINTAINING ITS CORPORATE STATUS. IN ASSESSMENT YEAR 2005-06, IT HA S PLEADED THAT LEARNED CIT(APPEALS) HAS ERRED IN UPHOLDING THE ACTION OF T HE ASSESSING OFFICER FOR NOT ALLOWING THE EXPENDITURE OF RS.42,43,878 DEBITE D BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. HE CONFIRMED THE DISALLOWA NCE TO THE EXTENT OF RS.33,84,832. ON THE SIMILAR LINES, THE ASSESSEE HA S RAISED ITS GRIEVANCE IN OTHER ASSESSMENT YEAR. IN ASSESSMENT YEARS 2006-07 AND 2007-08 IT HAS CHALLENGED CHARGEABILITY OF INTEREST UNDER SEC. 234 B, C AND D OF THE ACT. 3. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. FOR THE FACILITY OF REFERENC E, WE ARE TAKING FACTS MAINLY FROM ASSESSMENT YEAR 2005-06. IT EMERGES OUT FROM T HE RECORD THAT ASSESSEE HAS FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 31.10.2005 DECLARING AN INCOME OF RS.27,59,199. THE BUSINESS O F THE ASSESSEE WAS PURCHASE AND SALE OF LANDS AND ALSO AGRICULTURAL FA RMING. THE BUSINESS OF THE PURCHASE AND SALE OF LAND HAS BEEN DISCONTINUED BY THE ASSESSEE AND THERE IS NO SCOPE OF REVIVAL OF SUCH BUSINESS. THERE IS NO D ISPUTE QUA THIS POSITION IN 3 ALL THE ASSESSMENT YEARS. ASSESSING OFFICER FOUND T HAT IT HAS INCOME IN ASSESSMENT YEAR 2005-06 UNDER THE FOLLOWING HEADS: A. SALE OF AGRICULTURAL PRODUCE RS.45,500 B. INTEREST RECEIVED BANKS RS.9,39,684 C. INTEREST RECEIVED OTHERS RS.50,02,429 D. DIVIDEND RECEIVED RS.12,29,185 E. PROFIT ON SALE OF AGRICULTURAL LAND RS.14,58,7 50 RS.86,75,498 4. CONSIDERING THE DISCONTINUATION OF BUSINESS, LEA RNED ASSESSING OFFICER ALLOWED EXPENSES OF RS.1 LAC ON AN ESTIMATE BASIS FOR MAINTAINING THE CORPORATE STATUS OF THE ASSESSEE. 5. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS ). LEARNED FIRST APPELLATE AUTHORITY HAS UPHELD THE VIEW OF THE ASSE SSING OFFICER IN PRINCIPLE. SHE HAS GRANTED PARTIAL RELIEF IN ASSESS MENT YEAR 2005-06 BUT IN OTHER YEARS, THE EXPENSES ALLOWED BY THE ASSESSING OFFICER AT RS.1 LAC HAS BEEN UPHELD. THE FINDING OF THE LEARNED FIRST APPEL LATE AUTHORITY ON THIS ISSUE READS AS UNDER: 4.1 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A UTHORIZED REPRESENTATIVE OF THE APPELLANT COMPANY AND GONE TH ROUGH THE 4 ASSESSMENT ORDER AND FACTS OF THE CASE. THE PRIMARY BUSINESS OF THE APPELLANT COMPANY WAS PURCHASED AND SALE OF LANDS. HOWEVER, THIS BUSINESS WAS CARRIED ON UP TO THE F.Y. RELEVANT TO THE A.Y. 2004-05, AFTER WHICH AS OBSERVED THE A.O., THE COMPANY HAS B EEN EARNING ONLY PASSIVE INCOME BY WAY OF INTEREST, DIVIDEND ETC. T HERE IS ALSO SOME INCOME ARISING FROM SALE OF AGRICULTURAL PRODUCE AN D PROFIT ON SALE OF FIXED ASSETS. THE APPELLANT FILED ITS RETURN OF INC OME UP TO ASSESSMENT YEAR 2008-09 AFTER WHICH NO RETURN OF INCOME HAVE B EEN RECEIVED TILL DATE AND THE RETURN FILED SUBSEQUENT TO A.Y. 2004-0 5 REFLECT ONLY PASSIVE INCOME. THE AFOREMENTIONED FACTS PROVE THAT THE BUSINESS OF THE APPELLANT COMPANY CLOSED DOWN AFTER A.Y. 2004-0 5. THE JUDGMENTS RELIED UPON BY THE APPELLANT TO SUPPORT I TS CLAIM FOR EXPENSES ARE NOT APPLICABLE TO THE APPELLANTS CASE BECAUSE IN THE CASE OF M/S. MOKUL FINANCE PVT. LTD., 110 TTJ 445, THE B USINESS OF THE ASSESSEE HAD NOT ALTOGETHER BEEN ABANDONED AND WAS MERELY GOING THROUGH A PERIOD OF INACTIVITY. IN THE CASE OF M/S. NAKODAR BUS SERVICES PVT. LTD. VS.CIT 179 ITR 506 THE ONLY ISSU E WAS ALLOWABILITY OF EXPENDITURE ON SALARY FOR EARNING OF INTEREST IN COME WHEREAS THE APPELLANT HAS CLAIMED A NUMBER OF EXPENSES IN ITS P & L ACCOUNT. SIMILARLY IN THE CASE OF CIT VS. RAMPUR TIMBER & TU RNERY COMPANY LTD. 129 ITR 58 EXPENSES OF THE COMPANY WERE ALLOWE D BECAUSE IT WAS FOUND TO BE ENGAGED IN REDUCTION OF ITS LIABILI TY AND PROFITABLE DISPOSAL OF ITS STOCK, WHILE THE APPELLANT COMPANY HAS BEEN EARNING ONLY MOSTLY PASSIVE INTEREST AND DIVIDEND INCOME AF TER A.Y. 2004-05. THERE IS ANOTHER DISTINGUISHING FEATURE OF THE APPE LLANTS CASE, NAMELY, THE GENUINENESS OF THE EXPENSES CLAIMED IN THE INSTANT CASE WOULD NOT BE ESTABLISHED WHEREAS IN THE CASES RELIE D UPON BY THE 5 APPELLANT, THE GENUINENESS OF THE EXPENSES WAS NOT IN DOUBT AND THE ONLY ISSUE WAS WHETHER, KEEPING IN VIEW THE FACT TH AT NO BUSINESS WAS CARRIED ON DURING THE YEAR, THE EXPENSES CLAIMED WE RE TO BE ALLOWED. IN THE CASE OF THE APPELLANT, IN THE ABSENCE OF BIL LS AND VOUCHERS FOR EXPENSES, THEIR GENUINENESS COULD NOT BE VERIFIED. FURTHER, SUBSTANTIAL CLAIM OF DIRECTORS TRAVELLING EXPENSES, TELEPHONE EXPENSES, SECURITY EXPENSES, SALARIES AND WAGES, ETC., MADE DURING THE YEAR DO NOT SEEM TO HAVE ANY NEXUS WITH THE INCOME ON ACCOUNT OF INT EREST, DIVIDEND ETC. EARNED BY THE APPELLANT DURING THE YEAR. THERE FORE, IN THE LIGHT OF FACTS OF THE CASE AND THE JUDGMENTS OF HONBLE COUR TS DISCUSSED ABOVE, ONLY MINIMAL EXPENSES REQUIRED TO KEEP THE C OMPANY AFLOAT CAN BE ALLOWED AGAINST THE INCOME. IN MY VIEW, THE APPELLANT MAY BE ALLOWED FINANCIAL EXPENSES CLAIMED TO THE TUNE OF R S.4,47,586 BESIDES DEPRECIATION OF RS.3,61,460 (SINCE THE APPELLANT WA S HAVING AN OFFICE FLAT AMONG ITS FIXED ASSETS DURING THE YEAR) AND A FURTHER AMOUNT OF RS.50,000 BEING OTHER EXPENSES REQUIRED TO KEEP THE COMPANY AFLOAT. GROUND NO.3 IS PARTLY ALLOWED AND GROUND NO.4 OF TH E APPEAL IS ALLOWED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING, DREW OUR ATTENTION TOWARDS THE WRITTEN SUBMISSIONS FILED BEF ORE THE LEARNED CIT(APPEALS). ON THE STRENGTH OF DECISIONS IN THE C ASES OF CIT VS. RAMPUR TIMBER AND TURNKEY CO. LTD. 129 ITR 58(ALL.), CIT V S. GANGA PROPERTIES LTD. 199 ITR 94 (CAL.), NAKODAR BUS SERVICE PVT. LT D. VS. CIT 179 ITR 506 ( P & H) AND CIT VS. ADMINISTRATOR GENERAL OF MADRA S FOR THE ESTATE OF MRS. 6 IDA L. CHAMBERS 234 ITR 351 (MAD.), IT WAS SUBMITT ED NECESSARY EXPENSES ON GENERAL ADMINISTRATION AND LEGAL COMPLIANCE FOR MAINTAINING THE STATUS OF THE ASSESSEE AS A COMPANY ARE TO BE ALLOWED TO THE ASSESSEE. HE FURTHER CONTENDED THAT IN THE CASE OF NAKODAR BUS SERVICE P VT. LTD., DEDUCTION IN RESPECT OF SALARY PAID TO THE EMPLOYEES WAS ALLOWED . 7. WE HAVE CONFRONTED THE LEARNED COUNSEL FOR THE A SSESSEE TO DEMONSTRATE WHICH ARE THE ESSENTIAL EXPENSES RELATA BLE TO MAINTAIN THE CORPORATE STATUS OF THE ASSESSEE. HE TOOK US THROUG H THE BALANCE SHEET BUT WAS UNABLE TO IDENTIFY THE EXACT NATURE OF THE EXPE NSES. IN ASSESSMENT YEAR 2005-06, ASSESSEE HAS DEBITED ADMINISTRATIVE EXPENS ES AT RS.21,72,541. THE BREAK UP OF THESE EXPENSES ARE AVAILABLE ON PAGE 12 OF THE PAPER BOOK. IT CONTAINS TRAVELLING EXPENSES OF THE DIRECTOR AT RS. 10,43,251. THE ASSESSEE WAS UNABLE TO DEMONSTRATE THE PURPOSE OF THESE EXPE NSES. SIMILARLY, LEGAL AND PROFESSIONAL EXPENSES OF RS.3,01,620, AGAIN IT IS NOT DISCERNIBLE ON WHAT LITIGATION THESE EXPENSES WERE INCURRED. THE DETAIL S OF BILLS AND VOUCHERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. THU S, TAKING INTO CONSIDERATION THE FINDING OF THE ASSESSING OFFICER, WHICH HAS BEEN FURTHER UPHELD BY THE LEARNED CIT(APPEALS) IN ALL THESE AS SESSMENT YEAR, WE DO NOT SEE ANY REASON TO INTERFERE IN THE DISCRETION EXERC ISED BY THE ASSESSING OFFICER FOR ESTIMATING THE EXPENSES ON REASONABLE G ROUND FOR MAINTAINING THE 7 CORPORATE STATUS OF THE ASSESSEE. THE DISCRETION OF THE ASSESSING OFFICER HAS BEEN FURTHER UPHELD BY THE LEARNED CIT(APPEALS). TH E OPINION OF TWO OFFICERS COULD BE INTERFERE IF IT IS DEMONSTRATED O N THE RECORD THAT SUCH OPINION IS BASED ON UNREALISTIC FACTS OR IRRELEVANT MATERIAL. NO SUCH CIRCUMSTANCES WERE BROUGHT TO OUR NOTICE. WE DO NOT FIND ANY MERIT IN FIRST FOLD OF GRIEVANCE RAISED BY THE ASSESSEE. 8. AS FAR AS CHARGEABILITY OF INTEREST UNDER SECTIO N 234B, C AND D IS CONCERNED, IN ASSESSMENT YEARS 2006-07 AND 2007-08, IT IS CONSEQUENTIAL IN NATURE. 9. IN VIEW OF THE ABOVE DISCUSSION, ALL THE FOUR AP PEALS OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.12.2011 SD/- SD/- ( B.C. MEENA ) ( RAJ PAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23/12/2011 MOHAN LAL 8 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR