N JAMNADAS & CO., MUMBAI V. JCIT (OSD) CEN CIR 39, MUMBAI

ITA 4413/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70775 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: MRS USHA DALAL
• Keywords: Gift
• Section: 143(3); 37

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , ,, , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 4413/MUM./2012 ( &) * !+* / ASSESSMENT YEAR : 200910 ) M/S. N. JAMNADAS & CO. 16, BANK STREET, FORT MUMBAI 400 001 .. ,- / APPELLANT ) V/S DY. COMMISSIONER OF OFFICER CENTRAL CIRCLE39, MUMBAI .... ./,- / RESPONDENT , ./ PERMANENT ACCOUNT NUMBER AACFN8427G &) *1# 2 3 / ASSESSEE BY : MRS. USHA DALAL ! 2 3 / REVENUE BY : MR. O.P. SINGH )! 2 # / DATE OF HEARING 01.08.2013 $ 4+ 2 # / DATE OF ORDER 14.08.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 5 5 5 5 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE CHA LLENGING THE IMPUGNED ORDER DATED 30 TH APRIL 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXXXI, MUMBAI, FOR THE ASSESSMENT YEAR 20 0910, FOR THE QUANTUM PROCEEDINGS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). M/S. N. JAMNADAS & CO. 2 2. IN GROUND NO.1 TO 6, THE ASSESSEE HAS CHALLENGED TH E DISALLOWANCE OF GIFT EXPENSES, CHANDLA EXPENSES, DIWALI EXPENSES AN D BUSINESS PROMOTION EXPENSES. 3. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING ACTIVITIES OF AIR AND SEA C ARGO APPROVED BY THE INTERNATIONAL AIR TRANSPORT ASSOCIATION AND CUSTOM HOUSE AGENTS ASSOCIATION. IT ALSO ACTS AS AGENTS FOR CONSOLIDATION AND FREIGH T FORWARDING AND BROKERAGE. THE ASSESSEE HAS CLAIMED BUSINESS PROMOTION, ENTERT AINMENT, CHANDLA AND GIFT EXPENDITURE AMOUNTING TO ` 4,03,767, IN ITS BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE GR OUND THAT SIMILAR DISALLOWANCES WERE ALSO MADE IN THE EARLIER ASSESSM ENT YEARS ALSO AND THERE BEING NO MATERIAL CHANGE IN THE FACTS AND CIRCUMSTA NCES, THEREFORE, THESE EXPENDITURES ARE BEING DISALLOWED FOR THIS YEAR ALS O. 4. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSE SSEE SUBMITTED AND STATED AS UNDER: THE ASSESSING OFFICER HAS DISALLOWED GIFT EXPENSES AND BUSINESS PROMOTION AMOUNTING TO ` 4,03,767. AS PER CUSTOM AND AS PART OF MAINTAINING BUSINESS RELATIONS THE COMPANY LIKE OTHER COMPANIES DISTRIBU TES GIFT AMONGST CUSTOMERS AND ASSOCIATES ON AUSPICIOUS OCCASION AND AT THE TIME OF FESTIVALS LIKE DIWALI. THESE ARE DONE PURELY AS PART OF MAINT AINING GOOD BUSINESS RELATIONS AND AS PART OF BUSINESS PROMOTIONS DEPEND ING UPON THE NATURE OF BUSINESS AND STATUS OF PERSONS TO WHOM GIFT IS BEIN G MADE. THE GIFT ARTICLES ARE SELECTED AND PRESENTED. FULL DETAILS OF THESE E XPENSES HAVE BEEN FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AO HAS NOT DOUBTED GENUINENESS OF THE SAID EXPENSES BUT HAD DISALLOWED ON THE GROUND THAT THE ABOVE EXPENSES IS NOT APPARENTLY INCURRED WHOLLY AN D EXCLUSIVELY FOR THE BUSINESS PURPOSES AS WELL AS THESE EXPENSES ARE NOT FULLY VERIFIABLE AND THE ELEMENT OF PERSONAL EXPENDITURE IN THESE EXPENSES C ANNOT BE RULED OUT. WE SUBMIT THAT EACH YEAR COMPANY INCURS EXPENSE ON ACC OUNT OF GIVING GIFTS TO CUSTOMERS AND BUSINESS ASSOCIATES AS IN CUSTOMARY I N INDIA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO ATTEMPT WAS MA DE OR NO FURTHER INFORMATION WAS CALLED FOR BY THE ASSESSING OFFICER IN ORDER TO VERIFY ANY PARTICULAR ITEMS OF GIFT EXPENSES NOR WAS ANY QUER Y WAS PUT TO THE APPELLANT WITH REGARD TO THESE EXPENSES. WE ARE ENDORSING HER EWITH A CHART OF THE GIFT EXPENSES INCURRED BY THE COMPANY IN THE PAST YEARS. YOUR HONOUR WILL OBSERVE FROM THE CHART OF THE GIFT EXPENSES FOR A V ERY MINOR PERCENTAGE OF THE TOTAL INCOME OF THE APPELLANT. THESE EXPENSES A RE GENUINE AND BONAFIDE AND ARE INCURRED FOR THE BUSINESS PURPOSES AND ARE CLEARLY ALLOWABLE IN ACCORDANCE WITH THE PROVISION OF SECTION 37 OF THE INCOME TAX ACT. THE LD. CIT(A) CENTRAL VIII, MUMBAI IN AN EARLIER C ASE OF THE APPELLANT ON SIMILAR DISALLOWANCE HAS SUBSTANTIALLY ALLOWED THE EXPENSES IN RELATION TO GIFT M/S. N. JAMNADAS & CO. 3 EXPENSES IN FAVOUR OF THE APPELLANT FOR A. V. 2005- 06. COPY OF THE SAID APPELLATE ORDER IS SUBMITTED AND FORMS PART OF ANNE XUREA. 5. THE LEARNED COMMISSIONER (APPEALS), FOLLOWING HIS E ARLIER DECISION FOR THE ASSESSMENT YEAR 200607, ALLOWED THE RELIEF OF ` 3,00,000 AND RESTRICTED THE DISALLOWANCE OF ` 1,03,767. 6. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT NO SP ECIFIC DISCREPANCY HAS BEEN FOUND EITHER IN THE NATURE OF EXPENDITURE OR FOR ANY UNVERIFIABILITY OF ANY OF THESE EXPENSES. HE ALSO SUBMITTED A CHART WHERE SIMILAR ADDITIONS WHICH WERE MADE, HAVE BEEN DELETED BY THE LEARNED C OMMISSIONER (APPEALS) RIGHT FROM THE A.YS 200405 TO 200708. HE, THUS, S UBMITTED THAT NO DISALLOWANCE SHOULD BE MADE IN THIS YEAR ALSO. ALTE RNATIVELY, HE SUBMITTED THAT THE DISALLOWANCE SO SUSTAINED IS TOO EXCESSIVE . 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT SUBSTANTIAL RELIEF HAS ALREADY BEEN GIVEN TO THE ASSESSEE AND NO FURTHER ALLOWANCE SHOULD BE GRANTED. 8. AFTER CAREFULLY CONSIDERING THE MATERIAL PLACED ON RECORD AND THE RIVAL CONTENTIONS, WE FIND THAT THE DISALLOWANCE OF THESE EXPENSES ARE RECURRING IN NATURE AND IN THE EARLIER YEARS, THESE DISALLOWANCE S HAVE BEEN ALLOWED BY THE LEARNED COMMISSIONER (APPEALS). HOWEVER, LOOKIN G TO THE NATURE OF EXPENSES, WHICH ARE NOT OPEN TO FULL VERIFICATION, WE ARE OF THE OPINION THAT THE DISALLOWANCE OF 10% OF THE EXPENDITURE DEBITED UNDER THE HEADS WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE DIRECT TH E A.O. TO DISALLOW 10% OF ` 4,03,767. CONSEQUENTLY, GROUND NO.1 TO 6 ARE TREATE D AS PARTLY ALLOWED. 9. IN GROUND NO.7, THE ASSESSEE HAS CHALLENGED THE ADD ITION OF ` 11,45,548, BEING 25% OF THE TOTAL ADDITION OF ` 45,82,191 ON ADHOC BASIS. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS COLLECTED CERTAIN FEES OR SERVICE CHARGES FROM ITS CLIENTS. A PORTION OF THIS AMOUNT WAS SPENT FOR MAKING PAYMENTS TO PORT EMPLOYEES, DOCKS STAFF AND OTHER SUCH PAYMENTS WHICH OTHERWISE NOT SANCTIONED AS PER LAW. THESE PA YMENTS ARE NEITHER CREDITED NOR DEBITED TO THE PROFIT & LOSS ACCOUNT A ND DO NOT APPEAR IN THE M/S. N. JAMNADAS & CO. 4 PROFIT & LOSS ACCOUNT BUT ARE ROUTED THROUGH THE BA LANCE SHEET. THE ASSESSEE HAS SUBMITTED THE DETAILS OF THESE EXPENSES. IN THE EARLIER YEARS, THE AMOUNT WAS DISALLOWED UNDER EXPLANATION TO SECTION 37 OF T HE ACT. THE DISALLOWANCE MADE IN THE EARLIER YEARS HAS BEEN CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, THE ASSESSING OFFICER HAS G IVEN A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN WHY THE SAME MAY NOT BE DISALLOWED. THE ASSESSEE HAD SUBMITTED THE SAME REASONING AS IN THE EARLIER YEARS. THUS, FOLLOWING THE ORDERS OF THE EARLIER YEARS, THE ASSE SSING OFFICER HAS MADE THE DISALLOWANCE OF ` 45,82,191 AND ADDED BACK TO THE TAXABLE INCOME. 10. THE LEARNED COMMISSIONER (APPEALS), FOLLOWING EARLI ER YEARS DECISION OF THE TRIBUNAL, HAS RESTRICTED THE DISALLOWANCE OF 25%. 11. BEFORE US, BOTH THE PARTIES ADMITTED THAT THIS ISSU E STANDS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 200708. 12. IN VIEW OF THE ABOVE AND FOLLOWING THE PRECEDENCE O F THE EARLIER YEAR, WHEREIN THE TRIBUNAL HAS RESTRICTED THE DISALLOWANC E TO 25% OF THESE EXPENSES, WE DIRECT THE ASSESSING OFFICER TO RESTRI CT THE DISALLOWANCE TO 25%. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R PASSED BY THE LEARNED COMMISSIONER (APPEALS) WHICH IS BASED ON EARLIER YE ARS TRIBUNAL ORDER. CONSEQUENTLY, GROUND NO.7, RAISED BY THE ASSESSEE I S TREATED AS DISMISSED. 13. 1 #6 &) *1# 2 '$ !# 7 ) # 89: 14. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS PART LY ALLOWED. $ 2 + ; <)6 14 TH AUGUST 2013 2 = : ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST 2013 SD/- SANJAY ARORA ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, < << < ) )) ) DATED: 14 TH AUGUST 2013 M/S. N. JAMNADAS & CO. 5 $ 2 .&#'> ?>+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) ! / THE REVENUE; (3) @ () / THE CIT(A); (4) @ / THE CIT, MUMBAI CITY CONCERNED; (5) >!C= .&#&) , , / THE DR, ITAT, MUMBAI; (6) =D* E / GUARD FILE. /># .&# / TRUE COPY $) / BY ORDER . . FG / PRADEEP J. CHOWDHURY !1H &) F! / SR. PRIVATE SECRETARY I / 8 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI