DCIT CIR 6(1), MUMBAI V. ALPEX INTERNATIONAL P.LTD, MUMBAI

ITA 4845/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3593 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RONAK G DOSHI
• Assessee Lawyers: MORYA PRATAP
• Keywords: Business expenditure; Tax effect; Revised return
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 5009/MUM/2013 ASSESSMENT YEAR: 2008-09 ALPEX INTERNATIONAL PVT. LTD. (NOW KNOWN AS PIRAMAL ESTATES PVT. LTD.), PIRAMAL TOWER, CANPATRAO KADAM MARG, LOWER PAREL, MUMBAI- 400013. PAN :- AACCA7777K VS. THE ACIT, RANGE 6(1), MUMBAI, ROOM NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. (APPELLANT) (RESPONDENT) & ITA NO. 4845/MUM/2013 ASSESSMENT YEAR: 2008-09 THE DCIT, CIRCLE, RANGE 6(1), ROOM NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. VS. ALPEX INTERNATIONAL PVT. LTD. PIRAMAL TOWER, ANNEXE, 4 TH FLOOR, GANAPATRAI KADAM MARG, LOWER PAREL, MUMBAI- 400013. PAN :- AACCA7777K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. RONAK G. DOSHI. RESPONDENT BY : SHRI. MORYA PRATAP DATE OF HEARING: 3 0/05/2016 DATE OF PRONOUNCEMENT: 31/05/20 16 O R D E R PER RAM LAL NEGI, JM 2 ITA NO. 4845 & 5009/MUM/2013 ASSESSMENT YEAR: 2008-09 THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST ORDER DT. 30/03/2013 PASSED BY THE LD. CIT( APPEALS) MUMBAI, FOR THE ASST. YEAR 2008-09. ITA NO. 5009/MUM/2013 (AY 2008-09) 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT BEING ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF BULK DRUGS AND INTERME DIATES AS WELL AS SERVICE CENTRE BUSINESS, FILED ITS RETURN OF INCOME ON 29.0 9.2008 DECLARING TOTAL LOSS OF RS. 1,37,94,310/-. THE REVISED RETURN WAS SUBSEQUEN TLY FILED DECLARING TOTAL INCOME OF RS. 2,64,37,058/-. AFTER SCRUTINY THE AO PASSED THE ASSESSMENT ORDER U/S 143(3) DETERMINING THE TOTAL INCOME OF RS . 2,87,84,010/- MAKING CERTAIN DISALLOWANCES. AGAINST THE SAID ASSESSMENT ORDER THE ASSESSEE FILED FIRST APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE. HOWEVE R, UPHELD THE CERTAIN DISALLOWANCES MADE BY THE AO INCLUDING THE MISCELLA NEOUS EXPENDITURE AMOUNTING TO RS. 4,68,871/- AN AD-HOC BASIS @ 10% O F THE TOTAL EXPENSES. 3. AGGRIEVED BY THE IMPUGNED ORDER PASSED BY THE LD . CIT(A). THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN D ISALLOWING THE MISCELLANEOUS EXPENDITURE AMOUNTING TO RS. 4,68,871 /- ON AD-HOC BASIS AT THE RATE OF 10% OF THE TOTAL EXPENSE.. 2. THE APPELLANT PRAYS IT BE HELD THAT THE AFORESAI D EXPENSES ARE FOR THE PURPOSE OF BUSINESS AND HENCE ALLOWABLE IN ITS ENTIRETY U/S 37(1) OF THE ACT. 3 ITA NO. 4845 & 5009/MUM/2013 ASSESSMENT YEAR: 2008-09 4. BEFORE US THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE (AR) SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY UPHELD THE DISALLOW ANCE OF RS. 4,68,871/- MADE BY THE AO OUT OF RS. 46,88,715/- CLAIMED BY TH E ASSESSEE AS BUSINESS EXPENSES UNDER THE HEAD OTHER EXPENSES, @ 10% OF TH E TOTAL EXPENSES ON AD- HOC. THE LD. AR INVITED OUR ATTENTION TO DETAILS OF MISCELLANEOUS EXPENDITURE REFLECTED IN THE IMPUGNED ORDER PASSED BY THE ASSES SEE HAS BEEN INCURRED EXCLUSIVELY FOR PURPOSE OF BUSINESS, THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ACTION OF THE AO. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE (DR) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO PRODUCE COMPL ETE DETAILS OF THE EXPENDITURES OF MISCELLANEOUS EXPENSES DURING THE A SSESSMENT PROCEEDING OR EVEN DURING THE APPELLATE PROCEEDINGS, THE LD. CIT( A), HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF MISCELLANEOUS EXPENDITURE @10% OF T HE TOTAL EXPENSES. 6. WE NOTICE THAT OUT OF THE TOTAL EXPENSES CLAIMED , THE ASSESSEE HAS PAID SERVICE TAX OF RS. 30,76,923/-. HENCE, IT IS INCOR RECT TO HOLD THAT THE SAID AMOUNT WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS . THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ASSESSEE IS ENTITLED TO CLAIM RS. 30,76,923/- AS BUSINESS EXPENDITURE. THE LD. CIT(A) HAS WRONGLY CONFIRMED T HE AD-HOC DISALLOWANCE @ 10% ON THE AMOUNT PAID BY THE ASSESSEE TOWARDS SERV ICE TAX. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE A O TO EXCLUDE THE SERVICE TAX OF RS. 30,76,923/- FROM THE TOTAL AMOUNT CLAIMED BY THE ASSESSEE AS MISCELLANEOUS EXPENDITURE UNDER THE HEAD OTHER EXPE NSES TO RECOMPUTED THE AD-HOC DISALLOWANCE @ 10% ON THE REMAINING AMOUNTS. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE FOR T HE A.Y. 2008-09 IS PARTLY ALLOWED. 4 ITA NO. 4845 & 5009/MUM/2013 ASSESSMENT YEAR: 2008-09 ITA NO. 4845/MUM/2013 (AY 2008-09) 2. THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER O N FOLLOWING EFFECTIVE GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTERE ST EXPENSES OF RS. 18,78,077/- U/S 36(10(III) OF THE I.T.ACT, 1961 HOL DING THAT THE ENTIRE INTEREST FREE ADVANCES GIVEN FROM THE AVAILABLE OWN FUNDS I.E. SHARE CAPITAL. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN L AW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSE E IS A LOSS MAKING CONCERN AND ITS SHARE CAPITAL WAS ALREADY FULLY INV ESTED WHICH IMPLIES THAT OWN FUNDS WERE NOT AVAILABLE WITH THE ASSESSEE, THEREFORE, THE RATIO OF FACTS OF M/S. RELIANCE UTIL ITIES & POWER LTD. IS NOT APPLICABLE TO THE FACTS OF THE CASE. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN L AW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT INTEREST FREE OWN FU NDS WERE NOT AVAILABLE FOR THE PURPOSE OF GIVING ADVANCES. 4. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 3 AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TAX EFFECT IN THIS CASE IS BELOW 10,00,000/- AS THE DISALLOWAN CE OF INTEREST U/S36(1)(III) OF THE ACT CLAIMED BY THE ASSESSEE IS RS. 18,78,077/-. HENCE, AS PER THE CBDT 5 ITA NO. 4845 & 5009/MUM/2013 ASSESSMENT YEAR: 2008-09 CIRCULAR NO. 21 OF 2015, DATED 10/12/2015, THE PRES ENT APPEAL IS NOT MAINTAINABLE. 4. THE LD. DR FAIRLY ADMITTED THAT THE TAX EFFECT I N DEPARTMENTS APPEAL IS BELOW 10 LAKHS, FURTHER, THE ISSUE RAISED IN APPEAL DOES NOT FALL UNDER ANY OF THE EXCEPTIONS SPECIFIED IN PARA 8 OF THE CIRCULAR. SINCE, IT HAS BEEN SPECIFICALLY CLARIFIED IN THE CIRCULAR AFORESAID THAT THE INSTRU CTION WILL APPLY RETROSPECTIVELY TO ALL THE PENDING APPEALS; THE PRESENT APPEAL FILE D BY THE REVENUE IS NOT MAINTAINABLE. WE, THEREFORE, DISMISS THE SAME IN LIMINE . ORDER PRONOUNCED IN THE OPEN COUR T 31 ST MAY, 2016. SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 31/05/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA 6 ITA NO. 4845 & 5009/MUM/2013 ASSESSMENT YEAR: 2008-09 SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATION SHEETS ARE ATTACHED YES SR.PS/PS 2 DRAFT DICTATED ON 31.05.16 SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR 31.05.16 SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 7 ORDER PRONOUNCEMENT ON SR.PS/PS 8 FILE SENT TO THE BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER