Sri. D.B. VASWANI, MUMBAI V. ITO 12(3)(2), MUMBAI

ITA 5119/MUM/2005

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71003 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-03-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 25-07-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS JOTHILAKSHMI NAYAK
• Keywords: Business income; Depreciation; Business expenditure
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 5119/MUM/2005 ( % % % % & & & & / ASSESSMENT YEAR: 2002-03 MR. D.B.VASWANI, 121, MAKER CHAMBER VI, NARIMAN POINT, MUMBAI 400021 % % % % / VS. THE ITO 12(3)(2), 1 ST FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI - 400020 ' '# ./ ( ./ PAN/GIR NO. : AAEPV 1833E ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , ' / APPELLANT BY: SHRI. VIMAL PUNMIYA *+') - , ' / RESPONDENT BY : MRS. JOTHILAKSHMI NAYAK % - .# / DATE OF HEARING : 28/08/2013 / & - .# / DATE OF PRONOUNCEMENT : 28/08/2013 '0 / O R D E R PER I.P.BANSAL,J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)XII, MUMBAI DATED 10/05/2005 FO R ASSESSMENT YEAR 2002- 03 GROUND OF APPEAL READS AS UNDER: 1.THE LEARNED CIT(A) ERRED IN DISALLOWING BUSINESS LOSS OF RS.7,60,006/- 2. IT IS THE CLAIM OF THE ASSESSEE THAT IT IS IN TH E BUSINESS OF PROPERTY BROKER AND FOR THAT PURPOSE THE ASSESSEE HAS TO INCUR VA RIOUS EXPENDITURE WHICH ALLOWABLE UNDER SECTION 37(1) OF THE INCOME TAX AC T,1961 (THE ACT). THE ./ I.T.A. NO. 5119/MUM/2005 ( % % % % & & & & / ASSESSMENT YEAR: 2002-03 2 COMPUTATION OF INCOME UNDER THE HEAD BUSINESS AS PE R RETURN OF INCOME SUBMITTED BY THE ASSESSEE IS AS UNDER: ASSESSMENT YEAR 2002-2003 - STATEMENT OF INCOME FRO M BUSIENSS. BUSINESS INCOME NIL LESS: EXPENSES COMPUTER MAINTENANCE CHARGES 3,050 CONVEYANCE 26,849 DEPRECIATION 191,508 ELECTRICITY CHARGES 1,912 ENTERTAINMENT EXPENDITURE 13,107 MOTOR CAR PETROL EXPENSES 80,560 MOTOR CAR REPAIRS & MAINTENANCE 10,068 PRINTING & STATIONERY 17,545 PROFESSIONAL FEES PAID 83,000 SALARIES 315,721 TELEPHONE EXPENSES 16,686 760,006 760,006 ======= 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY. ACCORDING TO AO ASSESSEE COULD NOT CLAIM THE AFOREMENTIONED EXPENDITURE OF RS.7,6 0,006/- AS THE SAME HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS. THE MAI N SOURCE OF INCOME OF THE ASSESSEE WAS FROM HOUSE PROPERTY, INCOME FROM CAPI TAL GAIN AND INTEREST INCOME FROM BANK FROM SAVINGS AND FIXED DEPOSITS. THEREFO RE, AO DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE. 3. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A). IT WAS SUBMITTED THAT THESE EXPENDITURE HAVE BEEN INCURRED FOR THE P URPOSE OF BUSINESS THOUGH THE BUSINESS WAS DORMANT DURING THE YEAR. THE EX PENDITURE IS FIXED EXPENDITURE WHICH IS REQUIRED TO BE INCURRED BY THE ASSESSEE DESPITE THERE BEING NO BUSINESS RECEIPT. AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE LD. CIT(A) HAS RETURNED A FINDING THAT THE MAIN SOURCE OF INC OME OF THE ASSESSEE IS FROM PROPERTY, WHICH IS A SUM OF RS.48,09,780/-; CAPITA L GAIN AT RS.6,30,745/-; AND ./ I.T.A. NO. 5119/MUM/2005 ( % % % % & & & & / ASSESSMENT YEAR: 2002-03 3 FROM OTHER SOURCE AT RS.1,62,345/-. THERE IS NO BU SINESS RECEIPT AT ALL. THE NATURE OF EXPENDITURE IS ENTERTAINMENT WHICH IS, I N THE NATURE OF CLUB BILLS, CAR EXPENSES, PETROL EXPENSES, TELEPHONE EXPENSES AND E LECTRICITY. HE FOUND THAT MOST OF THESE BILLS WERE RELATING TO ASSESSEES RES IDENCE AS WELL AS PERSONAL EXPENDITURE. THE ELECTRICITY BILLS WERE OF RESIDEN CE OF THE ASSESSEE. THUS, LD. CIT(A) HAS ARRIVED AT A CONCLUSION THAT ALL THESE E XPENDITURE ARE PERSONAL EXPENDITURE OF THE ASSESSEE AND LD. CIT(A) HAS SUST AINED THE DISALLOWANCE. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT FOR A.Y 2001-02 SIMILAR DISALLOWANCE WAS MADE BY THE AO WHEN ASSESS EE CLAIMED EXPENDITURE OF RS.8,99,920/- AND THE DISALLOWANCE WAS SUSTAINED BY LD. CIT(A). THE TRIBUNAL HAS ALLOWED THE BUSINESS EXPENDITURE OF RS.2.00 LA CS. THUS IT WAS PLEADED BY LD. AR THAT THE SAME ORDER MAY BE FOLLOWED. RELEVA NT OBSERVATIONS OF THE TRIBUNAL ARE REPRODUCED BELOW: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY AND FIND THAT DETAILS OF BUSINESS INCOME FOR THE LAST YEAR ARE AS UNDER: ANALYSIS OF LAST THREE YEAS BUSINESS INC OME IS AS UNDER: ASSESSMENT YEAR INCOME RECEIVED EXPENSES INCURRED NET RESULT . 2001-2002 NIL 8,99,920 (8,99,920) 2000-2001 2,64,000 5,8 9,162 (3,52,1 2) 1999-2000 2,33,251 7,29,312 (4,96,061) FROM THE ABOVE, IT IS CLEAR THAT ASSESSEE HAD SOME BUSINESS RECEIPTS ALSO IN A.YRS. 1999 -2000 AND 2000-01. IT IS NOT CLEAR AS TO HOW MUCH BUSINESS RECEIPTS ARE THERE IN THE LATER YEAR. IF ASSESSEE WAS PRACTICALLY HAV ING NO BUSINESS RECEIPTS, PERHAPS, THERE WAS NO NEED TO MAINTAIN THE OFFICE. APPARENT LY VERY HIGH AMOUNT OF EXPENSES HAVE BEEN CLAIMED JUST TO SET OFF THE RENTAL INCOME , THE DETAILS OF WHICH ARE AS UNDER: STATEMENT OF OF INCOME FROM BU SLESS. BUSINESS INCOME NIL LESS: EXPENSES BANK CHARGES 2,635 ./ I.T.A. NO. 5119/MUM/2005 ( % % % % & & & & / ASSESSMENT YEAR: 2002-03 4 BROKERAGE PAID 59,642 COMPUTER MAINTENANCE CHARGES 12, 000 CONVEYANCE 24,531 DEPRECIATION 173,756 ELECTRICITY CHARGES 19,681 ENTERTAINMENT EXPENSES 21,805 MOTOR CAR PETROL EXPENSES 72,050 MOTOR CAR REPAIRS & MAINTENANCE 1 8,283 PRINTING & STATIONERY 18,560 PROFESSION TAX 1,500 PROFESSIONAL FEES PAID 25,500 REPAIRS & MAINTENANCE CHARGES 8 8,600 SALARIES 300,556 TELEPHONE EXPENSES 60,821 899,920 899,920 IN THE ABOVE LIST, FOR EXAMPLE CONVEYANCE EXPENSES ARE CLAIMED AT RS.24,531/-. WHERE THERE IS NO BUSINESS WHERE IS THE NEED FOR IN CURRING CONVEYANCE EXPENSES. SIMILARLY, SALARY HAS BEEN CLAIMED AT RS.3,00,556/- AND PROFESSIONAL CHARGES AT RS.25,500/-. IN THE ABSENCE OF BUSINESS THERE IS N O JUSTIFICATION FOR SUCH EXPENSES. HOWEVER, AT THE SAME TIME IF THE ASSESSEE WAS HAVIN G PROPERTY BUSINESS, THEN THERE MAY BE SOME REQUIREMENT TO MAINTAIN MINIMUM O FFICE ESTABLISHMENT. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANCES O F THE CASE AND ALSO THE FACT THAT SOME EXPENDITURE MAY BE OF PERSONAL NATURE, WE PROP OSED THAT ONLY A SUM OF RS.2 LAKHS SHOULD BE ALLOWED AS BUSINESS EXPENSES. THIS PROPOSAL WAS AGREED BY THE LD. COUNSEL OF THE ASSESSEE. THEREFORE, WE SET AS IE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW BUSINESS EXPENDITURE AT RS.2 LAKHS. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY AO AND LD. CIT(A). SHE SUBMITTED THAT THE FACTS OF THE PRESEN T YEAR ARE DIFFERENT AS ALL THE EXPENDITURE INCURRED BY THE ASSESSEE ARE PERSONAL E XPENDITURE. NO BUSINESS HAS BEEN CARRIED OUT BY THE ASSESSEE. THUS SHE PLEADED THAT ORDER PASSED BY LD. CIT(A) SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. LD. AR HAS NOT BEEN ABLE TO DISLOCATE THE FINDING RETURNED BY LD. ./ I.T.A. NO. 5119/MUM/2005 ( % % % % & & & & / ASSESSMENT YEAR: 2002-03 5 CIT(A). SIMPLY ON THE BASIS OF EARLIER ORDER OF TH E TRIBUNAL LD. AR IS SEEKING ALLOWANCE OF RS.2.00 LACS AS EXPENDITURE. THERE W AS NO BUSINESS RECEIPT IN THE PRECEDING YEAR AND ALSO IN THE IMPUGNED YEAR. THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE ALSO DOES NOT REVEAL THAT THEY HAVE BEEN INCURRED BY THE ASSESSEE IN RESPECT OF HIS ACTIVITY OF PROPERTY BRO KER. THERE BEING COMPLETE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD THAT ALL THESE EXPENDITURE HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS, THE CLAIM OF THE ASSESSEE CANNOT BE ENTERTAINED. IN VIEW OF ABOVE DISCUSSIONS THE APPE AL FILED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2013 . '0 - & #' 1 2%3 28/08/2013 - 4 SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 2% DATED 28/08/2013 '0 '0 '0 '0 - -- - *.56 *.56 *.56 *.56 7'6&. 7'6&. 7'6&. 7'6&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 *.% , , / DR, ITAT, MUMBAI 6. 4: ; / GUARD FILE. '0% '0% '0% '0% / BY ORDER, +6. *. //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . .VM , SR. PS