S.P. CORPORATION, MUMBAI V. ASST CIT RG 16(1), MUMBAI

ITA 4940/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9531 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 17-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Assessee Lawyers: YASMIN DASTUR
• Keywords: Gift; Business expenditure; Cost of acquisition

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN, JM & HONBLE SH. R AMIT KOCHAR , AM ./ I.T.A. NO . 4940 /MU M/201 7 ( / ASSESSMENT YEAR: 20 12 - 13 ) IN THE MATTER OF: M/S. S.P. CORPORATION STERLING THEATRE BASEMENT, 65, MURZBAN ROAD, FORT MUMBAI 400 001 / VS. ASST. COMMISSIONER OF INCOME TAX, RANGE 11(1) ROOM NO. 439 AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 ./ ./ PAN NO. AAAFS 1086 L ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. YASMIN DASTUR, AR / RESPONDENTBY : SHRI AJAY PRATAP SINGH, DR / DATE OF HEARING : 27.06 .2019 / DATE OF PRONOUNCEMENT : 27.06.2019 / O R D E R SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT A PPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 4 , MUMBAI, 2 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE DATED 10.04.17 FOR AY 2012 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE APPELLANT FIRM'S CLAIM OF CONSIDERING THE MUNICIPAL RATEABLE VALUE AS THE ANNUAL LETTING VALUE OF THE HOUSE PROPERTY AND INSTEAD, CONS IDERING 10% OF THE ORIGINAL COST OF ACQUISITION AS THE ANNUAL LETTING VALUE. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF 20% OF THE BUSINESS PROMOTION EXPENSES CLAIMED BY THE APPELLANT BY CONCLUDING THAT THE EXPENDITURE WAS PERSONAL IN NATURE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE DISALLOWANCE IS UNWARRANTED AND REQUIRES TO BE DELETED. 3) WITHOUT PREJUDICE TO THE ABOVE GROUND AND IN ANY EVENT, THE APPELLANT SU BMITS THAT THE ABOVE DISALLOWANCE IS GROSSLY EXCESSIVE AND ARBITRARY, AND THE SAME REQUIRES TO BE REDUCED SUBSTANTIALLY. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEND THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. 3 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE GROUND NO. 1 2 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OF FICER IN REJECTING THE ASSESSEE FIRM'S CLAIM OF CONSIDERING THE MUNICIPAL RATEABLE VALUE AS THE ANNUAL LETTING VALUE OF THE HOUSE PROPERTY AN D INSTEAD, CONSIDERING 10% OF THE ORIGINAL COST OF ACQUISITION AS THE ANNUAL LETTING VALUE. 3 . AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED BEFORE US THAT THIS GROUND ARE SQUARELY COVERED BY THE ORDER OF COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 1865/MUM/2009 FOR AY 2005 - 06 IN ASSESSEES OWN CASE, WHEREIN THE IDENTICAL GROUNDS RAISED IN THE PRESENT APPEAL HAVE ALREADY BEEN DECIDED ON MERITS. 4 . ON THE OTHER HAND, LD. DR FAIRLY AGREED TO THE CONTENTION OF LD. AR THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 5 . WE HAVE HEARD BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD , JUDGMENT CITED BY THE PARTIES AS 4 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE IDENTICAL GROUND HAS ALREADY BEEN DEC IDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 1865/MUM/2009 FOR AY 2005 - 06 IN ASSESSEES OWN CASE. THE OPERATIVE PORTION OF THE ORDER OF ITAT IS CONTAINED IN PARA NO. 24 , WHICH ARE REPRODUCED BELOW: - 24. IN THE CASE ON HAND BEFORE US, THE ASSESSING O FFICER MISERABLY FAILED TO MAKE ANY ENQUIRES IN RESPECT OF THE PROPERTY I.E HOW MUCH IS THE STANDARD RENT, HOW MUCH IS THE FAIR RENT, HOW MUCH IS THE MUNICIPAL RATEABLE VALUE AT THAT POINT OF TIME. THE ASSESSING OFFICER ALSO DID NOT BRING ON RECORD ANY COM PARABLE INSTANCES OF MARKET RENT OF THE PROPERTY AND THEREFORE IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TIP TOP TYPOGRAPHY (SUPRA), THE ASSESSING OFFICER WITHOUT UNDER TAKING THE EXERCISE CONTEMPLATED BY THE RENT CONTR OL LEGISLATION FOR FIXING OF STANDARD RENT IS NOT JUSTIFIED IN APPLYING ANY OTHER FORMULA OR METHOD TO DETERMINE THE ALV AT 10% OF THE COST OF ACQUISITION. HENCE THE METHOD ADOPTED BY THE ASSESSING OFFICER I.E. 10% OF THE COST OF THE ACQUISITION AS ALV IS AGAINST THE PRINCIPLE LAID DOWN BY THE JURISDICTIONAL HIGH COURT. HENCE, THE SAME IS SET - ASIDE. AS THE ASSESSING OFFICER FAILED TO DETERMINE THE STANDARD RENT AND NO PROPER ENQUIRES WERE MADE TO DETERMINE THE ALV AS PER THE RENT CONTROL ACT, WE FEEL 5 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE IT APP ROPRIATE TO RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DETERMINE THE STANDARD RENT AS PER THE RENT CONTROL ACT AND FAIR RENT BY CONDUCTING ENQUIRIES TO ASSESS THE ALV OF THE PROPERTY DENOVO KEEPING IN VIEW THE GUIDELINES SET OUT BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TIP TOP TYPOGRAPHY (SUPRA). THUS, WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION. ALL CONTENTIONS ARE LEFT OPEN. THE ASSESSING OFFICER SHALL PROVIDE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE AND TO FURNISH FRESH EVIDENCES AND SUBMISSIONS IN SUPPORT OF ITS CONTENTIONS. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 6 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND ORDER OF ITAT AS MENTIONED ABOVE , WE FIND THAT IDENTICAL ISSUES HAVE ALREA DY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 1865/MUM/2009 FOR AY 2005 - 06 IN ASSESSEES OWN CASE . T HEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF ITAT AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY AND JUDICIAL DISCIPLINE , WE APPLY THE SAME FINDINGS 6 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE WHICH ARE APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE. THEREFORE, WE ORDER ACCORDINGLY. GROUND NO. 2 7 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF 20% OF THE BUSINESS PROMOTION E XPENSES CLAIMED BY THE ASSESSEE BY CONCLUDING THAT THE EXPENDITURE WAS PERSONAL IN NATURE. HAVING REGARD TO T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE DISALLOWANCE IS UNWARRANTED AND REQUIRES TO BE DELETED. 8 . AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED BEFORE US THAT THIS GROUND ARE SQUARELY COVERED BY THE OR DER OF COORDINATE BENCH OF HONBLE ITAT IN ITA NO. 1865/MUM/2009 FOR AY 2005 - 06 IN ASSESSEES OWN CASE, WHEREIN THE IDENTICAL GROUNDS RAISED IN THE PRESENT APPEAL HAVE ALREADY BEEN DECIDED ON MERITS. 7 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE 9 . ON THE OTHER HAND, LD. DR FAIRLY AGREED TO THE CONT ENTION OF LD. AR THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 10 . WE HAVE HEARD BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT T HE IDENTICAL GROUND HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 1865/MUM/2009 FOR AY 2005 - 06 IN ASSESSEES OWN CASE. THE OPERATIVE PORTION OF THE ORDER OF ITAT IS CONTAINED IN PARA NO. 33 TO 36 , WHICH ARE REPRODUCED BELOW: - 33. BRI EFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THAT THE ASSESSEE DEBITED .2,07,123/ - TOWARDS BUSINESS PROMOTION EXPENSES. ON EXAMINING THE VOUCHERS AND BILLS, ASSESSING OFFICER NOTICED THAT THERE WERE PERSONA L CREDIT CARD PAYMENT OF MR. NOEL TATA AND THEREFORE THE ENTIRE EXPENDITURE DEBITED OF .2,07,123/ - WAS TREATED AS PERSONAL EXPENDITURE OF MR. NOEL TATA AND IS DISALLOWED. ON APPEAL THE LD. CIT(A) RESTRICTED THE SAID DISALLOWANCE TO 20% OBSERVING THAT THE NATURE OF EXPENSES ARE SUCH THAT PERSONAL ELEMENT CANNOT BE RULED OUT. 8 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE 34. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, THE ASSESSING OFFICER HAS NOT GONE INTO THE DETAILS OF EXPENDITURE IN ORDER TO VERIFY WHETHER THE EXPENDITURE PERTAINS TO THE BUSINESS OF THE ASSESSEE OR NOT. HE ALSO SUBMITTED THAT THE EXPENDITURE WAS DISALLOWED WITHOUT GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO OFFER ITS EXPLANATIONS AND REBUTTAL TO A.OS CONTENTIONS. REFERRING TO LETTER DATED 27.03.2006, LD. COUNSEL SUBM ITS THAT THE DETAILS OF BUSINESS PROMOTION OF .2,07,123/ - WERE GIVEN AND ON PERUSAL OF THE ANNEXURES IT WILL BE NOTICED THAT THE AMOUNTS WERE INCURRED MAINLY FOR ENTERTAINING CLIENTS IN THE HOTELS AND FOR PROVIDING GIFTS TO VARIOUS PERSONS [CLIENTS/CUSTOM ERS]. IT IS SUBMITTED THAT ONE HAS TO APPRECIATE THAT EVEN EXPENDITURE OF .2,07,123/ - IS INSIGNIFICANT COMPARED TO THE GROSS RECEIPTS OF THE ASSESSEE FIRM FOR THE BUSINESS WHICH IS ABOUT .3.5 CRORES AND THE TYPE OF BUSINESS [ENTERTAINMENT BUSINESS] THE A SSESSEE IS IN VIZ., THEATRE, RESTAURANT, RUNNING OF EXCURSION BOATS, ETC., IT IS SUBMITTED THAT EXPENSES TOWARDS ENTERTAINMENT OF CLIENTS IN HOTELS AND PROVISIONS OF GIFTS ARE A VERY INTEGRAL PART OF THE BUSINESS ACTIVITY AND A NORMAL BUSINESS PRACTICE WIT HOUT WHICH IT WILL BE EXTREMELY DIFFICULT TO CARRY ON THE BUSINESS. IT IS SUBMITTED THAT THE EXPENDITURE HAS BEEN INCURRED ON THE EXISTING CUSTOMERS AND CLIENTS TO MAINTAIN RELATIONS AND ON THE PROSPECTIVE 9 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE CLIENTS/CUSTOMERS TO GET ADDITIONAL BUSINESS. THER EFORE, IT IS SUBMITTED THAT THESE EXPENDITURES HAVE TO BE INCURRED BY SOME PERSON BELONGING TO THE ASSESSEE FIRM. IN THIS CASE IT HAS BEEN INCURRED BY MR. NOEL TATA, WHO IS THE AUTHORIZED SIGNATORY FOR THE CHEQUES AND TAKES PART IN THE OPERATIONS OF THE AS SESSEES BUSINESS. 35. IT IS ALSO SUBMITTED THAT MR. NOEL TATA USES ONE CREDIT CARD EXCLUSIVELY FOR THE BUSINESS EXPENDITURE OF THE ASSESSEE. IT IS ONLY THIS AMOUNT WHICH HAS BEEN DEBITED TO THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THE USE OF MR. NOEL TATA CREDIT CARD IS ONLY A MODE OF SETTLEMENT OF BILLS PERTAINED TO THE ASSESSEE. IT IS ALSO SUBMITTED THAT MR. NOEL TATA FOR HIS PERSONAL USE, USES ANOTHER TWO CREDIT CARDS WHICH ARE PAID FROM HIS PERSONAL SAVINGS ACCOUNT AND DEBITED TO HIS DRAWINGS AND REFLEC TED IN HIS INCOME TAX RETURNS. DURING THE RELEVANT YEAR MR. NOEL TATA PAID AN AMOUNT OF .12.76 LAKHS FROM HIS TWO CREDIT CARDS AND DEBITED TO HIS DRAWINGS. A CERTIFICATE FROM MR. NOEL TATA CONFIRMING THE SAID AMOUNT OF .12.76 LAKHS IS ATTACHED IN THE PAP ER BOOK AT PAGE NO.197. IT IS SUBMITTED THAT THE AMOUNT OF .2.07 LAKHS WHICH IS UNDER CONSIDERATION IS INSIGNIFICANT COMPARED TO .12.76 LAKHS. THUS, WHEREVER THE CREDIT CARD HAS BEEN USED FOR THE PURPOSE OF PERSONAL EXPENDITURE OF MR. NOEL TATA IT HAS BE EN 10 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE DEBITED AND PAID FROM HIS PERSONAL ACCOUNT. THEREFORE, IN VIEW OF THE ABOVE SUBMISSIONS IT WAS CONTENDED THAT EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS RESTAURANT BILLS, GIFT ITEMS AND SETTLED BY MR. NOEL TATA IS A FULLY ALLOWABLE EXPENDITURE AND THE DISALLOWANCE IS NOT JUSTIFIED. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 36. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY REASON GIVEN BY THE ASSESSING OFFICER FOR TREATING THE BUSIN ESS PROMOTION EXPENSES AS PERSONAL EXPENSES OF MR. NOEL TATA IS THAT THE PAYMENTS WERE MADE THROUGH HIS PERSONAL CREDIT CARD. ASSESSING OFFICER TREATED THE EXPENDITURE AS PERSONAL EXPENDITURE OF MR. NOEL TATA AND THE LD.CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE RESTRICTED THE DISALLOWANCE TO 20% AS ACCORDING TO HIM THERE MAY BE SOME PERSONAL ELEMENT IN THE EXPENDITURE INCURRED. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEREVER THE EXPENDITURE INCURRED BY MR. NOEL TATA FOR THE ASSESSEE FIRM IT HAS BEEN DEBITED ONLY TO ASSESSEE FIRM AND WHEREVER MR. NOEL TATA INCURRED ON HIS PERSONAL CREDIT CARDS IT HAS BEEN DEBITED TO HIS ACCOUNT AND REFLECTED IN HIS INCOME TAX RETURNS. IT IS ALSO SUBMITTED THAT THE EXPENDITURE TOWARDS BUSINESS PROMOTIO NS WHEN COMPARED TO THE INCOME RENDERED BY THE ASSESSEE FROM BUSINESS IS 11 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE INSIGNIFICANT AND IT IS A CUSTOMARY PRACTICE THAT THE ASSESSEE WHICH IS IN THE ENTERTAINMENT BUSINESS HAS TO INCUR CERTAIN EXPENDITURE FOR THE CUSTOMERS/CLIENTS TO KEEP GOOD RELATIONS . WE FIND CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE. IN THE CIRCUMSTANCES, ACCEPTING THE SUBMISSIONS OF THE ASSESSEE WE DELETE THE DISALLOWANCE MADE TOWARDS BUSINESS PROMOTION. GROUND NO.4 IS ALLOWED. 11 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND ORDER OF ITAT AS MENTIONED ABOVE , WE FIND THAT IDENTICAL ISSUES HAVE ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 1865/MUM/2009 FOR AY 2005 - 06 IN ASSES SEES OWN CASE . T HEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF ITAT AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY AND JUDICIAL DISCIPLINE , WE APPLY THE SAME FINDINGS WHICH ARE APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE. THER EFORE, WE ORDER ACCORDINGLY. GROUND NO.3 12. IN VIEW OF OUR DECISION ON GROUND NO. 1 & 2, THIS GROUND RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS. 12 I.T.A. NO. 4940 /MUM/201 7 M/S. S.P. CORPORATION STERLING THEATRE 13 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY A LLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE , 2019. SD/ - SD/ - (RAMIT KOCHAR ) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 27 . 06 .201 9 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI