ACIT 25(3), MUMBAI V. NILESH M. BHUTA, MUMBAI

ITA 5024/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8199 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , . . , ! BEFORE SHRI JOGINDER SINGH, JM AND SHRI N. K. BILL AIYA, AM ' #$ ./ I.T.A. NO. 5024/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) ASST. CIT-25(3), 308, C-11, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 / VS. NILESH M. BHUTA 401, AGORA BUSINESS PLAZAM, NEAR KORA KENDRA, S. V. ROAD, BORIVALI (W), MUMBAI-400 092 & ./''' ./PAN/GIR NO. AAPPB 2453 H ( #$&( /APPELLANT ) : ( )*&( / RESPONDENT ) #$&( + , / APPELLANT BY : SHRI VIJAY KUMAR BORA )*&( + , / RESPONDENT BY : SHRI RAKESH JOSHI - ./ + 0 1 / DATE OF HEARING : 28.10.2014 234 + 0 1 / DATE OF PRONOUNCEMENT : 31.10.2014 '5 / O R D E R PER N. K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE CIT(A), MUMBAI DATED 30.04.2013 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2009-10. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN ALLOWING THE STAFF WELFARE EXPENSES AND ADMINISTRATIVE EXPENSES TOTALI NG TO RS.14,43,425/- IN THE HANDS OF THE ASSESSEE. 3. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASS ESSING OFFICER (A.O.) NOTICED THAT IN THE PROFIT AND LOSS ACCOUNT OF ASSESSEES PROPRI ETARY CONCERN M/S. MANALI CHEMICALS, STAFF WELFARE EXPENSES OF RS.95,30,638/- IS CLAIMED AGAINST THE CONSULTANCY INCOME OF RS.5,03,03,439/-. THE A.O. FURTHER OBSERVED THAT A SMALL PORTION OF THE PREMISES FROM 2 ITA NO. 502/MUM/2013 (A.Y. 2009-10) ASST. CIT VS. NILESH M. BHUTA WHICH THE ASSESSEE IS RUNNING HIS BUSINESS IS GIVEN ON RENT TO M/S. MANALI CHEMICALS PRIVATE LIMITED (MCPL) AN ASSOCIATED CONCERN. THE A .O. FURTHER OBSERVED THAT THE SAID PRIVATE LIMITED COMPANY AND THE PROPRIETARY CONCERN OF THE ASSESSEE ARE IN THE SIMILAR LINE OF BUSINESS. THE A.O. FURTHER OBSERVED THAT MCPL HA S SHOWN CONSULTANCY INCOME OF RS.57,59,975/- WITHOUT ANY EXPENDITURE UNDER THE HE AD STAFF WELFARE. THE ASSESSEE WAS ASKED TO JUSTIFY THIS. THE ASSESSEE FILED A DETAILE D REPLY GIVING THE NAMES OF THE EMPLOYEES OF MCPL AND THE SALARIES PAID TO THEM. AF TER CONSIDERING THE DETAILED SUBMISSION OF THE ASSESSEE, THE A.O. WAS OF THE OPI NION THAT PART OF THE STAFF MANPOWER AND RESOURCES OF THE ASSESSEE WERE UTILIZED BY MCPL AND WENT ON TO COMPUTE THE PROPORTIONATE DISALLOWANCE ON THE BASIS OF THE CONS ULTANCY INCOME SHOWN BY THE ASSESSEE AND THE SAID MCPL. THE DISALLOWANCE WAS COMPUTED AT RS.9,79,182/- OUT OF THE STAFF WELFARE EXPENSES AND OUT OF ADMINISTRATIVE EXPENSES THE DISALLOWANCE WAS COMPUTED AT RS.4,64,243/-. THUS, THE TOTAL DISALLOWANCE WAS MAD E AT RS.14,43,425/-. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITER ATED ITS CLAIM AS MADE BEFORE THE A.O. 4. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS OF THE OPINION THAT WHEN BOTH THE CONCERNS ARE COVERED IN HIGHEST BRACKET OF TAX, I.E., @ 30%, THERE IS NO LOGIC TO DISALLOW EXPENSES ON ASSUMPTION BASIS BETW EEN THE TWO CONCERNS AND, ACCORDINGLY, DELETED THE ADDITION OF RS.14,43,425/- . 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE A.O. THE LD. COUNSEL FOR THE ASSESS EE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. AT THE OUTSET, IT HAS TO BE UNDERSTOOD THAT MCPL IS A LEGAL PERSON MAINTAINING PROPER BOOKS OF ACCOUNT AND IS S EPARATELY ASSESSED TO TAX. WHEREAS THE ASSESSEE IS A PROPRIETOR OF MANALI CHEMICALS MA INTAINING SEPARATE BOOKS OF ACCOUNT FOR ITS PROPRIETARY CONCERN. MERELY BECAUSE THE PRI VATE LIMITED COMPANY IS ALSO DOING ITS BUSINESS FROM THE SAME PREMISES CANNOT JUSTIFY THE ACTION OF THE A.O. IF THE A.O. WAS OF THE STRONG BELIEF THAT MCPL HAS NOT INCURRED ANY EX PENDITURE TOWARDS EARNING OF ITS CONSULTANCY INCOME, THE NECESSARY ACTION SHOULD HAV E BEEN TAKEN IN THE CASE OF MCPL WHICH IS A LEGAL PERSON AND SEPARATELY ASSESSED TO TAX. IN OUR CONSIDERED OPINION, THE 3 ITA NO. 502/MUM/2013 (A.Y. 2009-10) ASST. CIT VS. NILESH M. BHUTA ACTION OF THE A.O. IS UNWARRANTED AND NOT TENABLE I N LAW. WE, THEREFORE, DISMISS THIS APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . $6 407 . + #$ 6 + 0 ! ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31 ST , 2014 SD/- SD/- (JOGINDER SINGH) (N. K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER - / MUMBAI; 8 DATED : 31.10.2014 ... ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #$&( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. ' ' - 90 ( #$ ) / THE CIT(A) 4. ' ' - 90 / CIT - CONCERNED 5. <.= )0> , ' #$1 #> 4 , - / / DR, ITAT, MUMBAI 6. ?@ A/ / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , - / / ITAT, MUMBAI