ASHVINKUMAR K. KAPADIA, MUMBAI V. ASST CIT 14(3), MUMBAI

ITA 4732/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3488 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-06-2013
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRANDR
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A; 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.4732/MUM/2013 ASSESSMENT YEAR: 2007-08 SHRI ASHVINKUMAR K. KAPADIA, BLOCK-8, DEVKARAN MANSION, 2 ND FLOOR, 32, VITHALDAS ROAD, MUMBAI-400002 / VS. ACIT-14(3), 6 TH FLOOR,EARNEST HOUSE, NARIMAN POINT, MUMBAI-400021 ( '#$ % /ASSESSEE) ( & / REVENUE) PAN. NO. AADPK1116A ' &( ) % * / DATE OF HEARING : 07/07/2016 ) % * / DATE OF ORDER: 07/07/2016 '#$ % ! / ASSESSEE BY SHRI MANDAR VAIDYA & ! / REVENUE BY SHRI A.RAMCHANDRAN-DR ITA NO.4732/MUM/2013 ASHWINKUMAR K. KAPADIA 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 05/04/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE FIRST GROUND RAISED IN THE PRESENT APPEAL, PERTAINS TO CONFIRMING THE DISALLOWANCE OF RS.7,64,907/-, CONSI DERING THE SAME AS NOT BEING INCURRED FOR BUSINESS PURPOSES OF THE ASSESSEE. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI MANDAR VAIDYA, CONTENDED THAT THE EXPENDITURE WAS INCURRED FOR BUSINESS PURPOSES, THEREFORE, IT IS AN ALLOWABLE EXPENDITURE. ON THE OTHER HAND, THE LD. DR, SHRI A. RAMACHANDRAN, STRONGLY DEFENDED THE ADDITION BY CON TENDING THAT IT WAS NOT INCURRED FOR BUSINESS PURPOSES, THE REFORE, IT WAS RIGHTLY DENIED. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , AND THE BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN COMMISSI ON BUSINESS OF THE LAST MANY YEARS AND IS A BROKER FOR MAFATLAL INDUSTRIES LTD. THE ASSESSEE IS ALSO AN INVESTOR IN SHARES AND OTHER SECURITIES, THE ASSESSEE, DECLARED INCOME OF RS.19, 45,902/- AND THE ASSESSMENT WAS COMPLETED ON 08/12/2009 ASSE SSING THE TOTAL INCOME AT RS.28,42,818/- U/S 143(3) OF TH E ACT. WHILE DOING SO, THE LD. ASSESSING OFFICER MADE DISA LLOWANCE OF RS.7,64,907/- OUT OF RS.14,11,181/-. 2.2. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEF ORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), WHEREIN, T HE STAND ITA NO.4732/MUM/2013 ASHWINKUMAR K. KAPADIA 3 TAKEN IN THE ASSESSMENT ORDER WAS AFFIRMED. THE ASS ESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL, WE FIND THAT T HE ASSESSEE EARNED COMMISSION INCOME OF RS.10,50,021/- AND INTE REST INCOME OF RS.4,04,245/- (TOTAL RS.14,45,266/-) FROM ITS PROPRIETARY CONCERN NAMELY M/S ASHWINKUMAR RAMNIKLA L. THE PROPRIETARY CONCERN RECEIVED COMMISSION FROM M/ S MAFATLAL INDUSTRIES PVT. LTD. AND OFFERED AS BUSINE SS INCOME AND AGAINST THIS INCOME, THE ASSESSEE CLAIMED EXPEN DITURE AMOUNTING TO RS.14,11,181/-. SINCE, THE ASSESSEE OF FERED COMMISSION INCOME AND INTEREST INCOME ONLY, THE CLA IMED EXPENSES WERE FOUND UNREASONABLE. THE LD. ASSESSIN G OFFICER ASKED THE ASSESSEE TO EXPLAIN ITS JUSTIFICATION FOR SUCH EXPENSES. THE EXPLANATION CLAIMED THAT HE WAS A GUA RANTOR BROKER FOR THE TERRITORY OF ANDHRA PRADESH FOR ALL TEXTILE PRODUCTS MANUFACTURED BY M/S MAFATLAL INDUSTRIES LT D. AND THE ASSESSEE WAS RESPONSIBLE FOR FIXING DEALERS NET WORK. THE LD. ASSESSING OFFICER AS WELL AS THE LD. COMMISSION ER OF INCOME TAX (APPEAL) WERE NOT SATISFIED WITH THE EXP LANATION. THE CLAIMED EXPENSES INCLUDES SALARY EXPENSES, TRAV ELLING EXPENSES, CONVEYANCE EXPENSES, DEPRECIATION EXPENSE S, ENTERTAINMENT EXPENSES, ELECTRICITY EXPENSES AND OT HER MISCELLANEOUS EXPENSES. WE ARE SATISFIED WITH THE O BSERVATION MADE IN THE IMPUGNED ORDER AS WELL AS THE ASSERTION MADE BY THE LD. DR THAT THE CLAIMED EXPENSES ARE ABNORMALLY HIGH IN COMPARISON TO QUANTUM AND THAT TO WITHOUT ANY JUSTI FICATION. THE ASSESSEE DID NOT FURNISH THE NECESSARY EVIDENCE AS TO THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IN RELATION TO THE CLAIMED EXPENSES EXCEPT CERTAIN LETTERS. HOW FOREIGN TRAVE L EXPENSES ITA NO.4732/MUM/2013 ASHWINKUMAR K. KAPADIA 4 CAN BE CO-RELATED WITH THE COMMISSION INCOME/INTERE ST INCOME. EVEN OTHERWISE, AS PER SECTION 37 OF THE A CT, SUCH EXPENSES NEEDS TO BE INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSES OF BUSINESS AND THE ASSESSEE HAS TO ESTABL ISH THE SAME. CONSIDERING THE TOTALITY OF FACTS AND IN THE ABSENCE OF GENUINENESS OF THE CLAIM, 50% OF THE EXPENSES WERE RIGHTLY DISALLOWED, THUS, WE FIND NO INFIRMITY IN THE CONCL USION OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) SO FAR AS, THE IMPUGNED GROUND IS CONCERNED. HIS STAND IS AFFIRMED . 3. THE NEXT GROUND PERTAINS TO CONFIRMING THE ACTI ON U/S 14A OF THE ACT BY CLAIMING THAT NO EXPENSES WER E INCURRED BY THE ASSESSEE TO EARN THE EXEMPT INCOME, THUS, SE CTION 14A OF THE ACT IS NOT APPLICABLE. THE EXEMPT INCOME WAS CLAIMED TO BE RS5,97,527/-. ON THE OTHER HAND, THE LD. DR DEFE NDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ASSESSEE CLAIMED TO HAVE EARNED EXEMPT INCOME OF RS.5,97,527/- AND LONG TERM CAPITAL GAIN OF RS.80,7 7,152/- BY CLAIMING THE SAME AS EXEMPT U/S 10(38) OF THE ACT. THE LD. ASSESSING OFFICER AS WELL AS THE LD. DR ARE OF THE VIEW THAT EARNING OF SUCH TAX EXEMPTED ACTIVITY NECESSARILY R EQUIRES EXPENDITURE, THUS, THE LD. ASSESSING OFFICER WAS RI GHT IN COMPUTING DISALLOWANCE U/S 14A OF THE ACT R.W.R. 8D OF THE RULES THE UNDISPUTED FACT IS THAT ASSESSEE EARNED S UBSTANTIAL INCOME WHICH INCLUDES LONG TERM CAPITAL GAINS AMOUN TING TO RS.80,77,152/- FROM SALE OF SHARES, EXEMPT PPF INTE REST OF RS.1,34,159/- AND DIVIDEND ON SHARES AMOUNTING TO ITA NO.4732/MUM/2013 ASHWINKUMAR K. KAPADIA 5 RS.5,97,527/-. THE SUB AND SUBSTANCE OF THE ARGUMEN T BEFORE US IS THAT THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS UNREASONABLY HIGH. THE LD. COMMISSIONER OF INCOME T AX (APPEAL), IN PRINCIPLE, UPHELD THE DISALLOWANCE. T HE LD. ASSESSING OFFICER HAS ALSO MENTIONED THE SUBMISSION S OF THE ASSESSEE IN THE ASSESSMENT ORDER BY CALCULATING THE EXPENDITURE TO THE TUNE OF RS.1,21,999/-. CONSIDERI NG THE TOTALITY OF FACTS AND THE SUBMISSION, WE REDUCE THE DISALLOWANCE UPTO 50% OF THE DISALLOWANCE SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/07/2016. SD/- SD/- ( JASON P. BOAZ ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER ' ( MUMBAI; + DATED : 07/07/2016 F{X~{T? P.S / /. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE RESPONDENT. 3. 1 1 ' 2% ( , ) / THE CIT, MUMBAI. 4. 1 1 ' 2% / CIT(A)- , MUMBAI, 5. 4&5 /%' , 1 ,* ,' 6 , ' ( / DR, ITAT, MUMBAI ITA NO.4732/MUM/2013 ASHWINKUMAR K. KAPADIA 6 6. 7# 8( / GUARD FILE. ! / BY ORDER, 04% /% //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI