STUP CONSULTANTS P. LTD, MUMBAI V. ADDL CIT(A) SP. RG. 32, MUMBAI

ITA 4749/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2232 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 15-12-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 18-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K ATRI
• Assessee Lawyers: MAHESH MATHUR
• Keywords: Business expenditure; Opportunity of being heard
• Section: 37(1); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI R.V. EASWAR, SR. VICE PRESIDENT & SHRI R.K.PANDA, AM I.T.A. NO. 4749/MUM/2008 (ASSESSMENT YEAR 1998-99) M/S. STUP CONSULTANTS PVT. LTD. 1004, RAHEJA CHAMBERS, NARIMAN POINT, MUMBAI-400 021 PAN: AABCS1945E VS. ADDL. CIT(A), SPL. RANGE -32 MUMBAI APPELLANT RESPONDENT APPELLANT BY : SHRI MAHESH MATHUR RESPONDENT BY : SHRI A.K. ATRI ORDER DATE OF HEARING: 27.04.2010 DATE OF ORDER: 07.05.2010 PER R.K.PANDA, AM , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 17 TH MARCH, 2008 OF THE CIT(A)-XXXII, MUMBAI RELATING TO ASSESSMENT YEAR 1998-99. 2. GROUNDS OF APPEAL NOS. 1 AND 4 BEING GENERAL IN NAT URE ARE DISMISSED. 3. GROUNDS OF APPEAL NO. 2 BY THE ASSESSEE READS AS UN DER: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE BY THE ASSESSING OFFICER OF DEDUCTION U/S. 80HHB OF RS.10, 00,000 AND U/S. 80 O OF RS.25,10,995 (RS.28,25,687 RS.3,14,692) B Y DISTURBING ALLOCATION OF EXPENSES AGAINST FOREIGN INCOME WITHO UT OBTAINING REMAND REPORT AS CALLED FOR BY HIS PREDECESSOR NOR EXAMINING BOOKS NOR VERIFYING COST/TIME SHEET RECORDS AND BY NOT CO NSIDERING THE FACTS IN PROPER PROSPECTIVE AND CALCULATIONS SUBMIT TED AS PER THE GUIDELINES OF THE HON. ITAT IN THE ASSESSEES CASE IN THE EARLIER YEARS, WHICH WERE FOLLOWED BY THE DEPARTMENT CONSISTENTLY IN THE PAST. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE, ENGAGED IN THE BUSINESS OF CIVIL ENGINEERING CONSULTANCY, FILED ITS RETURN OF INCOME DECLARING INCOME OF RS.93,44,210 AFTER AVAILING DEDUCTIONS U/S. 80-O/80 HHB OF RS.25 LAKHS ON ESTIMATED BASIS. IT WAS SUBMITTED ALONG WITH RETUR N OF INCOME THAT THE ITA NO. 4749/MUM/2008 M/S. STUP CONSULTANTS PVT. LTD. ======================= 2 COMPUTATION OF DEDUCTION U/S. 80-O/80HHB WILL BE SU BMITTED AT THE TIME OF REGULAR ASSESSMENT. THE ASSESSING OFFICER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN THE CLAIM OF DEDUCTION U/S. 80-O/ 80HHB AND TO GIVE THE BREAK UP OF EXPENSES INCURRED FOR EARNING FOREIGN PROFESSIONAL FEES. THE ASSESSEE FILED DETAILS OF W ORKING OF COMPUTATION OF DEDUCTION U/S. 80-O/80HHB CLAIMING DEDUCTION U/S. 8 0-O AT RS.26,96,962 AND DEDUCTION U/. 80HHB AT RS.10 LAKHS. FROM THE VARIO US DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT THE SALA RY TOWARDS INDIAN PROJECT IS 33% WHEREAS TOWARDS FOREIGN JOB IT IS JUST 6.1% WHI CH IS RIDICULOUSLY LOW. HE FURTHER NOTED THAT THE SAME RATIO HAS BEEN APPLIED FOR DETERMINING THE OTHER EXPENSES FOR ALLOCATION TO FOREIGN JOB. HE NOTED T HAT THE ASSESSEE HAS SHOWN HUGE EXPENDITURE ON POSTAGE, TELEPHONE, TELEX, FAX AND COMPUTER CHARGES AGAINST INDIAN JOB AND MANY EXPENSES HAVE NOT BEEN ALLOCATE D AT ALL AGAINST FOREIGN JOB. HE FURTHER NOTED THAT THERE IS NO SOLID BASE FOR SU CH LOW APPORTIONMENT AGAINST FOREIGN JOBS. ON BEING CONFRONTED BY THE ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT THE WORKING HAS BEEN ARRIVED AT B Y TAKING INTO ACCOUNT THE ORDER OF THE CIT(A) FOR THE A.Y. 1981-82 WHICH HAS BEEN UPHELD BY THE ITAT. 5. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE. HE NOTED THAT THE TRIBUNAL HAS GIVEN ITS DECISION FOR THE A.Y. 1981-82 ON THE BASIS OF THE FACTS EXISTING AT THAT POINT OF TIME. ACCORDING TO THE ASSESSING OFFICER EACH EAR IS AN INDEPENDENT UNIT AND THERE I S NO RES JUDICATA IN THE INCOME- TAX PROCEEDINGS. FURTHER IN THAT YEAR, THE ASSESSE E EARNED RS.35,08,904 ON 113 INDIAN JOBS WHEREAS THE ASSESSEE EARNED RS.49,56,03 8 ON 29 FOREIGN CONTRACTS. ON THE BASIS OF THAT DATA THE CIT(A) HAD GIVEN HIS OPINION THAT A CONSULTANCY FIRM EARNS MORE ON FOREIGN JOBS. FURTHER THE CIT(A) ALS O BELIEVED THAT TIME SHEETS ARE MAINTAINED PROPERLY BY THE ASSESSEE. FURTHER THE T HEN ASSESSING OFFICER DID NOT MAKE NECESSARY ENQUIRIES AS DIRECTED BY THE CIT(A) FOR WHICH THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE. HOWEVER, DURING THE IMPUGNED ASSESSMENT YEAR, THE TIME SHEETS PRODUCED BY THE AS SESSEE SHOW THAT THERE CANNOT BE ANY VERIFICATION THAT A PARTICULAR EMPLOY EE HAS BEEN ASSIGNED FOREIGN JOB OR INDIAN JOB. ACCORDING TO THE ASSESSING OFFI CER THE WORKING OF SALARIES PERTAINING TO FOREIGN JOB IS ONLY SELF-SERVING STA TEMENT OF THE ASSESSEE. THE ITA NO. 4749/MUM/2008 M/S. STUP CONSULTANTS PVT. LTD. ======================= 3 ASSESSING OFFICER CAME TO THE CONCLUSION THAT IT IS DIFFICULT TO APPORTION THE EXPENSES ESPECIALLY WHEN THE NATURE OF ACTIVITIES O F FOREIGN AND INDIAN JOB IS THE SAME. THE ASSESSING OFFICER ACCORDINGLY RESTRICTED THE DEDUCTION U/S. 80- O/80HHB TO RS.3,14,692. 6. IN APPEAL, THE CIT(A) UPHELD THE ACTION OF THE ASSE SSING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN AP PEAL BEFORE US. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. BEFORE DECIDING T HE ISSUE ON MERIT IT IS WORTH MENTIONING THAT THE PREDECESSOR CIT(A) HAD CALLED F OR A REMAND REPORT FROM THE ASSESSING OFFICER VIDE LETTER DATED 27 TH JULY, 2003. HOWEVER, IN ABSENCE OF SUCH REMAND REPORT, THE CIT(A) HAS PASSED THE ORDER. WE FIND PARA 6.3 OF THE ORDER OF THE CIT(A) READS AS UNDER: 6.3 THE DETAILED SUBMISSION OF THE APPELLANT WAS F ORWARDED BY MY PREDECESSOR TO THE AO VIDE LETTER DATED 27.07.20 03. THE AO WAS REQUIRED TO VERIFY THE FACTUAL OBJECTIONS RAISED BY THE APPELLANT AND ALSO GIVE COMMENTS ON MERITS OF THESE ARGUMENTS. H OWEVER, EVEN AFTER A LONG PERIOD OF ABOUT 5 YEARS AND A NUMBER O F REMINDERS, THE AO HAS NOT SENT THE REQUISITE REMAND REPORT. VIDE LETTER DATED 07.03.2008, THE AO SOUGHT FURTHER TIME. STILL, THE REPORT OF THE AO HAS NOT BEEN RECEIVED SO FAR. IN VIEW OF THIS, THE REFORE, IT WAS DECIDED TO ADJUDICATE THE ISSUE ON MERITS AND ON THE BASIS OF SUBMISSIONS OF THE APPELLANT AS WELL AS ARGUMENTS OF THE AO AS PER THE ASSESSMENT ORDER. 8. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE HAD FU RNISHED VARIOUS DETAILS AND SUBMISSIONS ON THE BASIS OF WHICH THE PREDECESS OR CIT(A) HAD CALLED FOR A REMAND REPORT. SINCE THE ASSESSING OFFICER HAD SOU GHT FURTHER TIME TO SEND THE REMAND REPORT, THEREFORE, IN OUR OPINION, THE LEARN ED CIT(A) SHOULD HAVE WAITED FOR SOME MORE TIME FOR OBTAINING THE REMAND REPORT OR AT LEAST GIVEN A FINAL DATE TO THE ASSESSING OFFICER AND THEREAFTER HE SHOULD H AVE PASSED THE ORDER. SINCE IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT BOTH THE ASSESSING OFFICER AND THE CIT(A) HAVE PASSED THE ORDER WITHOU T UNDERSTANDING THE IMPLICATIONS AND SINCE THE ORDER HAS BEEN PASSED BY THE CIT(A) WITHOUT RECEIVING THE REMAND REPORT FROM THE ASSESSING OFFICER ALTHOU GH IT HAS BEEN CALLED FOR BY HIS PREDECESSOR TO VERIFY THE FACTUAL OBJECTIONS R AISED BY THE ASSESSEE AND GIVE ITA NO. 4749/MUM/2008 M/S. STUP CONSULTANTS PVT. LTD. ======================= 4 COMMENTS ON MERITS OF HIS ARGUMENTS, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER PASSED BY THE CIT(A) IS NOT PROPER IN ABSENCE OF THE REMAND REPORT. CONSIDERING THE TOTALITY OF THE FAC TS OF THE CASE, WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E CIT(A) WITH A DIRECTION TO ADJUDICATE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER OBTAINING THE REMAND REPORT FROM THE ASSESSING OFFICER. THE CIT( A) SHALL ALSO GIVE PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWE D FOR STATISTICAL PURPOSES. 9. GROUNDS OF APPEAL NO. 3 BY THE ASSESSEE READS AS UN DER: THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE BY THE ASSESSING OFFICER OF RS.31,875 INSTEAD OF RS.6,875 BY DISALLOWING BUSINESS EXPENDITURE OF RS.25,000 ACCOUNTED UNDER D ONATION ACCOUNT. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSING OFFICER IN THE ASSESSMENT DISALLOWED AN AMOUNT OF RS.31,875 UNDER THE HEAD DONATION. BEFORE CIT(A) IT WAS SUBMITTED THAT AN AMOUNT OF RS.20,000 WAS PAID TO THE SECRETARY, INDIAN ROAD CONGRESS AS CONTRIBUTION FOR THEIR OFFI CE BUILDING AND AN AMOUNT OF RS.5,000 TO THE DEPARTMENT OF APPLIED MECHANICS, BE NGAL ENGINEERING COLLEGE, HOWRAH FOR SPONSORSHIP FOR ORGANISING A TECHNICAL S EMINAR. THE BALANCE AMOUNT OF RS.6,875 HAS BEEN DONATED TO DIFFERENT RELIGIOUS ORGANISATIONS AND TRUSTS. WE FIND THE CIT(A) REJECTED THE CONTENTION OF THE ASSE SSEE THAT THE AMOUNT OF RS.25,000 IS ALLOWABLE AS BUSINESS EXPENDITURE U/S. 37(1) OF THE I.T. ACT, 1961 ON THE GROUND THAT THE ASSESSEE COULD NOT ELABORATE AS TO HOW THE BUSINESS OF THE ASSESSEE HAS BENEFITED FROM DONATIONS TO BUILDING F UND OF IRC OR DONATION FOR SEMINAR CONDUCTED BY BENGAL ENGINEERING COLLEGE. S INCE THE ASSESSEE FAILED TO EXPLAIN AS TO HOW THE EXPENDITURE WAS INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS, HE DIRECTED THE ASSESSING OFFICER TO GRANT DEDUCTION U/S. 80G OF THE ACT IN RESPECT OF THE VARIOUS DONATIONS AGGREGATING TO RS.31,875 UPON FULFILLING THE CONDITIONS PRESCRIBED U/S. 80G OF TH E ACT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. UNLESS AND UNTIL THE ASSESSEE PROVES THAT THE EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THE SAME CANNOT BE ALLOWED AS DEDUCTI ON U/S. 37(1) OF THE ACT. SINCE IN THE INSTANT CASE, THE ASSESSEE FAILED TO DISCHAR GE THE ONUS CAST ON IT EVEN ITA NO. 4749/MUM/2008 M/S. STUP CONSULTANTS PVT. LTD. ======================= 5 BEFORE US AND SINCE THE CIT(A) HAS DIRECTED THE ASS ESSING OFFICER TO ALLOW BENEFIT OF DEDUCTION U/S. 80G OF THE ACT IN CASE THE ASSESS EE FULFILS THE CONDITIONS LAID DOWN IN THAT SECTION, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY UPHOLD THE SAME. THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 7 TH MAY, 2010 SD/- (R.V. EASWAR) SR. VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 7 TH MAY, 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XXXII, MUMBAI 4. THE CIT-3, MUMBAI 5. THE DR E BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES, MUMBAI TPRAO