Victoria Capital Ventures Ltd., Ahmedabad V. The Inocme Tax Officer, Ward-2(3)(4), Mumbai

ITA 4750/MUM/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8894 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANILKUMAR BHARADWAJ
• Assessee Lawyers: ANIL R SHAH
• Keywords: Depreciation; Earning of tax free income; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NOS: 4750/MUM/2012 & 2704/MUM/2013 (ASSESSMENT YEARS: 2007-08 & 2009-10) VICTORIA CAPITAL VENTURES LTD., HOUSE OF MANGALDAS GIRDHARDAS, OPP. SIDI SAIYAD MOSQUE, LAL DARWAJA, AHMEDABAD- 380001 V/S INCOME TAX OFFICER 2(3)(4), MUMBAI (APPELLANT) (RESPONDENT) PAN: AAACV3287D APPELLANT BY: SHRI ANIL R. SHAH & KINJAL SHAH, A .R. RESPONDENT BY : SHRI ANIL KUMAR BHARADWAJ, SR. D. R. ( )/ ORDER DATE OF HEARING : 09 -03-201 7 DATE OF PRONOUNCEMENT : 20 -03-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NO. 4750/AHD/2012 & 2704/AHD/2013 ARE TWO SEPAR ATE APPEALS BY THE ASSESSEE PREFERRED AGAINST TWO SEPARATE ORDERS OF T HE LD. CIT(A)-6, MUMBAI DATED 16.03.2012 AND26.02.2012 PERTAINING TO A.YS. 2007-08 & 2009-10. ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 2 2. AS COMMON GRIEVANCE IS INVOLVED IN BOTH THESE APPEA LS, THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE. ITA NO. 4750/MUMBAI/2012 FOR A.Y. 2007-08 3. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE D ISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT WITH REGARD TO PAYMENT OF EXPE NSES THE RELATING TO- (I) LAUNDRY CHARGES RS. 3,08,100/- (II) REPAIR AND SERVICES RS. 77,110/- (III) KIOSK SHIFTING RS. 22,500/- 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS MADE PAYMENT TO SULTANAEMAD K . SHEKH RS. 2,71,053/- UNDER THE HEAD LAUNDRY EXPENSES AND RS . 37,056/- UNDER THE HEAD WASHING EXPENSES. THE A.O. FURTHER NOTICED T HAT THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES UNDER THE HEAD REPAIRS AN D MAINTENANCE OF WHICH RS. 88,110/- IS PAID TO VAM AIR SERVICES TOWA RDS MAINTENANCE OF AIR CONDITIONER AND REPAIRS THEREON. THE A.O. WAS OF TH E FIRM BELIEF THAT SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THES E PAYMENTS, THE IMPUGNED EXPENDITURES ARE LIABLE TO BE DISALLOWED U /S. 40(A)(IA) OF THE ACT. THE A.O. ACCORDINGLY DISALLOWED THESE EXPENDITURES U/S. 40(A)(IA) OF THE ACT. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) BUT WITHOUT ANY SUCCESS. ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 3 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE OUT RIG HTLY STATED THAT THE PAYEES OF THE IMPUGNED EXPENDITURES HAVE SHOWN THE INCOME IN THEIR RESPECTIVE RETURNS OF INCOME AND HAVE PAID TAXES THEREON. THER EFORE, CONSIDERING THE AMENDMENTS BROUGHT IN THE RELEVANT PROVISIONS OF TH E ACT, THE IMPUGNED EXPENDITURES CANNOT BE DISALLOWED. 7. THE LD. D.R. STATED THAT THIS CONTENTION OF THE ASS ESSEE HAS BEEN TAKEN FOR THE FIRST TIME AND, THEREFORE, NEEDS VERIFICATION. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW QUA THE IMPUGNED DISALLOWANCE. 9. IT IS TRUE THAT THE RELEVANT PROVISIONS OF THE ACT HAVE BEEN AMENDED BY WHICH IF THE PAYEES HAVE SHOWN THE INCOME IN THEIR RESPECTIVE RETURNS OF INCOME AND HAVE PAID TAXES THEREON. THE EXPENDITURE S CANNOT BE DISALLOWED IN THE HANDS OF THE ASSESSEE U/S. 40(A)( IA) OF THE ACT. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE DECISION OF T HE HONBLE HIGH COURT OF DELHI IN THE CASE OF ANSAL HOUSING FINANCE & LEA SING CO LTD 354 ITR 180 . WE, THEREFORE, SET ASIDE THIS ISSUE TO THE FILES OF THE A.O. THE ASSESSEE IS DIRECTED TO FURNISH NECESSARY DETAILS RELATING TO T HE INCOME OF THE PAYEES AND THE PAYMENT OF TAXES THEREON TO THE SATISFACTIO N OF THE A.O. THE A.O. IS DIRECTED TO VERIFY THE DETAILS SO FURNISHED BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE FINDINGS GIVEN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF ANSAL HOUSING FINANCE & LEASIN G CO LTD. (SUPRA). ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 4 10. APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 2704/MUM/2013 FOR A.Y. 2009-10 11. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT IN RESPECT OF LAUNDRY CHARGES AND REPAIRS AND MAINTENANCE EXPENSES. 12. THIS GRIEVANCE OF THE ASSESSEE HAS BEEN CONSIDERED AT LENGTH IN ITA NO. 4750/MUMBAI/2012 (SUPRA). FOR OUR DETAILED FINDINGS GIVEN THEREIN, WE RESTORE THIS ISSUE TO THE FILES OF THE A.O. WITH SI MILAR DIRECTION GIVEN IN ITA NO. 4750/MUM/2012. THIS GRIEVANCE OF THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 13. THE SECOND GRIEVANCE RELATES TO THE HOLDING OF T HE EXPENDITURE OF RS. 1,22,454/- INCURRED ON REPLACEMENT OF CROCKERY, CUT LERY, LINEN ETC AS CAPITAL EXPENDITURE ELIGIBLE TO DEPRECIATION. 14. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCE EDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 1,22 ,454/- UNDER THE HEAD CROCKERY, CUTLERY, LINENS AND TOOLS ETC. THE A.O. FOUND THAT IN A.Y. 2007-08 SUCH EXPENSES WERE TREATED AS CAPITAL IN NATURE AND WERE ACCORDINGLY DISALLOWED. THE A.O. TAKING A LEAF OUT OF THE FINDI NGS GIVEN IN A.Y. 2007-08 DISALLOWED RS. 1,22,454/- AS EXPENDITURE OF CAPITAL IN NATURE. ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 5 15. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) AND OBJECTED TO THE DISALLOWANCE MADE BY THE A.O. 16. AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE, T HE LD. CIT(A) OBSERVED AS UNDER:- I HAVE GONE THROUGH THE ORDER OF AO AND SUBMISSION OF APPELLANT. THE APPELLANT'S ACTION OF CLAIMING 1/3 RD DEDUCTION OF AMOUNT CAPITALIZED IS NOT CONSISTENT WITH THE PROVISIONS OF INCOME-TAX ACT. F OR CLAIM OF DEDUCTION OF AMOUNT CAPITALIZED RESULTING INTO BUSINESS ASSETS U SED FOR THE PURPOSE OF BUSINESS, THE INCOME-TAX ACT READ WITH THE INCOME-T AX RULES PROVIDES FOR DEPRECIATION AT THE PRESCRIBED RATES. THE AO'S ACTI ON TO CAPITALIZE THE ALREADY CAPITALIZED AMOUNT BY THE APPELLANT AND FURTHER NOT GRANTING DEPRECIATION ON THE SAME IS NOT PROPER. THE AO IS DIRECTED TO ALLOW DEP RECIATION ON CROCKERY, CUTLERY, LINEN, ETC. AS PER RATE PRESCRIBED IN THE INCOME-TA X RULE AND ENSURE THAT NO DOUBLE ADDITION IS MADE. 17. A PERUSAL OF THE AFOREMENTIONED FINDINGS OF THE FIR ST APPELLATE AUTHORITY SHOWS THAT THE ASSESSEE ITSELF HAD CAPITALIZED THE EXPENDITURE AND HAS CLAIMED 1/3 RD AS DEDUCTION. WE AGREE WITH THE FINDINGS OF THE LD . CIT(A) THAT SUCH ACTION OF THE ASSESSEE IS NOT CONSISTENT WITH THE PROVISIONS OF THE I.T. ACT. SINCE, THE LD. CIT(A) HAS DIRECTED THE A.O. TO ALLOW DEPRECIATION, THEREFORE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). THIS GRIEVANCE IS ACCORDINGLY DISMISSED. 18. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE D ISALLOWANCE OF RS. 15,51,248/- MADE BY THE A.O. U/S. 14A OF THE ACT RE AD WITH RULE 8D. ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 6 19. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. N OTICED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME WHICH IT HAS CLAIMED TO BE EXEMPT FROM TAX. THE A.O. WAS OF THE FIRM BELIEF THAT THE DISALLOWAN CE U/S. 14A READ WITH RULE 8D NEEDS TO BE MADE ON THE CLAIM OF EXEMPT INC OME. THE A.O. ACCORDINGLY COMPUTED THE DISALLOWANCE AS PER RULE 8 D AT RS. 15,51,248/-. 20. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) BUT WITHOUT ANY SUCCESS. 21. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE DISALLOWANCE MADE BY THE A.O. IS EXORBITANT, IF CONSIDERED WITH THE QUANTUM OF EXEMPT INCOME. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 22. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW QUA THE ISSUE. IT IS TRUE THAT THE ASSESSEE HAS EARNED DIVI DEND INCOME AT RS. 1,965/- ONLY. IT IS ALSO TRUE THAT IN THE COMPUTATION OF IN COME FILED ALONG WITH RETURN OF INCOME, THE ASSESSEE HAS NOT MADE DISALLO WANCE OF ANY EXPENDITURE INCURRED FOR EARNING THE INCOME WHICH D OES NOT FORM PART OF TOTAL INCOME. 23. A PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE EXHI BITED AT PAGES 29 TO 39 OF THE PAPER BOOK SHOWS THAT THE ASSESSEES OWN FUN DS ARE AT RS. 3.65 CRORES WHEREAS THE INVESTMENTS ARE SHOWN AT RS. 6.0 8 CRORES. THE ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 7 INVESTMENTS OF THE ASSESSEE IS FURTHER EXPLAINED IN SCHEDULE 5 AND THE SAME READS AS UNDER:- SCHEDULE 5 : INVESTMENTS QUANTITY AMOUNT RUPEES AMOUNT RUPEES QUOTED SHARES : FACE AS AT AS AT AS AT AS AT VALUE 31/03/2009 31/03/2008 31/03/2009 31/03/2008 SHARES / QUOTED TATA MOTORS LTD 1160 244819 0 TATA STEEL LTD 945 247320 0 GOL D BENCHMARK ET 96 146429 0 638568 0 UNQUOTED SHARES: IN SUBSIDIARY COMPANY CH AMANLAL MEHTA & CO.PVT.LTD. 200 2225 2225 24 02! 1 82 24021182 MANGALDAS MEHTA & CO. P. LTD. 250 15468 15468 33158812 33158812 57179994 57179994 M UTUAL FUNDS INCOME SCHEMES R ELIANCE DIVERSIFIED POWER 2171.40 0.00 102000 0 RELIANCE GROWTH 403.40 0.00 102000 0 SUNDARAM PARIBAS SELECT FOCUS 1558.293 0.000 93500 0 TEMPLTON INDIA FLOATING RATE INCOME FUND TEMPLTON INDIA FLOATING RATE INCOME FUND 2 1 1 2841 .756 290856.260 65374.088 0.00 1 7 70933 1000029 3073512 4150000 0 4150000 GRAND TOTAL 6089074 61329994 24. A PERUSAL OF THE AFOREMENTIONED INVESTMENT SCHEDULE OF THE ASSESSEE SHOWS THAT THERE ARE CERTAIN INVESTMENTS FROM WHICH THE INCOME EARNED IS TAXABLE. THEREFORE, IN OUR CONSIDERED OPINION, THE INVESTMENTS IN SUCH ITA NOS. 475 0/AHD/12 & 2704/A/13 . A.YS. 2007-0 8 & 2009-10 8 SHARES/MUTUAL FUNDS SHOULD BE EXCLUDED FOR THE COMP UTATION OF THE DISALLOWANCE AS PER RULE 8D. WE, THEREFORE, SET ASI DE THIS ISSUE TO THE FILES OF THE A.O. WITH A DIRECTION TO RE-COMPUTE THE DISA LLOWANCE AFTER EXCLUDING THOSE INVESTMENTS FROM WHICH THE INCOME IS TAXABLE. NEEDLESS TO MENTION, THAT THE A.O. SHALL GIVE A REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE BEFORE DECIDING THIS ISSUE AFRESH. THIS GR IEVANCE OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 20- 03- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 20/03/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD