AMBIENCE BUSINESS SERVICES P.LTD, MUMBAI V. ITO 6(1)(3), MUMBAI

ITA 5509/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78802 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJA B SINGH
• Keywords: Business income; Business expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . , !'# $% &'() , $* +, $ # BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI N.K . BILLAIYA, AM ./I.T.A. NO.5509/MUM/2012 ( - - - - / ASSESSMENT YEAR : 2008-09 M/S. AMBIENCE BUSINESS SERVICES PVT. LTD., C/O R.K. KHANNA & ASSOCIATES 402, REGENT CHAMBERS, NARIMAN POINT, MUMBAI-400 021 THE ITO 6(1)-3, AAYAKAR BHAVAN, MUMBAI-400 020 ,. $* ./ /0 ./PAN/GIR NO. : AAACA 9528L ( .1 /APPELLANT ) .. ( 23.1 / RESPONDENT ) .1 4 $ / APPELLANT BY : ` SHRI RAJA B. SINGH 23.1 5 4 $ /RESPONDENT BY : SHRI GANESH BARE 5 6* / DATE OF HEARING :23.4.2014 7- 5 6* / DATE OF PRONOUNCEMENT :30.4.2014 +$8 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-14, MUMBAI DT. 10.05.2012 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED 6 SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 & 2 ARE GENERAL IN NATURE AND NEED NO SEPARAT E ADJUDICATION. GROUND NO. 3 RELATES TO PART RELIEF GIVEN BY THE LD . CIT(A) IN RESPECT OF DISALLOWANCE OF ENTERTAINMENT EXPENSES. ITA NO.5509/M/2012 2 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED ENTER TAINMENT EXPENSES AT RS. 5,28,422/- AS AGAINST BUSINESS RECEIPTS OF RS. 26.25 LAKHS. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF ENTERTAI NMENT EXPENDITURES. IT WAS EXPLAINED THAT EXPENSES HAVE BEEN INCURRED TO E XTEND HOSPITALITY AND ENTERTAIN THE COMPANYS PRESENT AND POTENTIAL CLIEN TS, BUSINESS ASSOCIATES AT DIFFERENT OCCASIONS. THIS EXPLANATION OF THE AS SESSEE WAS NOT FOUND TO BE SATISFACTORY. THE AO DISALLOWED 60% OF THE EXPE NSES CLAIMED AND MADE AN ADDITION OF RS. 3,17,053/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND EXPLAINED THE FACTS IN RELATION TO THE CLAIM OF E XPENDITURE UNDER THE HEAD ENTERTAINING EXPENSES. AFTER CONSIDERING THE FACTS AND THE CIRCUMSTANCES, THE LD. CIT(A) DIRECTED THE AO TO RESTRICT THE DISA LLOWANCE TO 30%. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEF ORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSE E HAS HIVED OFF ADVERTISEMENT BUSINESS 8 YEARS AGO AND NOT DURING T HE CURRENT YEAR AS ALLEGED BY THE REVENUE AUTHORITIES. THE LD. COUN SEL PRAYED THAT THE CLAIM OF THE EXPENDITURE SHOULD BE CONSIDERED ON TR UE FACTS OF THE CASE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. THE LD. CIT(A) AT PARA-9.3 OF HIS ORDER HAS OBSERVED TH AT THE ASSESSEE HAS KEPT AND FURNISHED THE DETAILS OF ENTERTAINMENT EXP ENSES. THE LD. CIT(A) ITA NO.5509/M/2012 3 FURTHER OBSERVED THAT HE HAS PERUSED THE DETAILS O F THE ENTERTAINMENT EXPENSES AND THE COPIES OF THE BILLS IN SUPPORT OF THE EXPENSES. NEITHER THE AO NOR THE LD. CIT(A) HAS POINTED OUT ANY DEFEC T IN THE DETAILS/BILLS/VOUCHERS PRESENTED BEFORE THEM IN SUP PORT OF THE CLAIM. FURTHER IT IS INCORRECT TO SAY THAT THE ASSESSEE HA S HIVED OFF ITS ADVERTISEMENT BUSINESS DURING THE CURRENT YEAR AS P OINTED OUT BY THE LD. COUNSEL. THE SAID BUSINESS HAS BEEN HIVED OFF SOME 8 YEARS AGO. THE FINDINGS OF THE LD. CIT(A) APPEAR TO BE ON THE WR ONG APPRECIATION OF FACT THEREFORE SUCH FINDINGS CANNOT BE UPHELD. CON SIDERING THE FACTS IN TOTALITY, WE DIRECT THE AO TO DELETE THE ENTIRE ADD ITION MADE ON ACCOUNT OF ENTERTAINMENT EXPENSES. GROUND NO. 3 IS ACCORDINGLY ALLOWED. 8. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF RS. 1,65,671/- BEING WRITE OFF OF DEPOSITS WITH MTNL. 9. THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 2,69,02 3/-. THE SAID EXPENSES ARE WRITE OFF OF TELEPHONE DEPOSITS. THE WRITE OFF OF TELEPHONE DEPOSITS WAS ON ACCOUNT OF ADJUSTMENT OF THE OUTST ANDING TELEPHONE BILLS AGAINST THE TELEPHONE DEPOSITS. . THE AO WAS OF TH E OPINION THAT THE ASSESSEE MUST HAVE CLAIMED TELEPHONE BILLS AS EXPEN DITURE IN THE YEAR WHEN IT WAS INCURRED HENCE ON ACCOUNT OF THE OUTST ANDING BILLS, THE ASSESSEE IS NOT ENTITLED TO ADJUST THE LIABILITY AG AINST THE TELEPHONE DEPOSIT BY WAY OF WRITING OFF THE SAME. THE AO DISALLOWED RS. 1,90,918/-. 10. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT ON HIVING OFF OF ADVERTISEMENT BUSINESS, THE ASSESSEE SURRENDERED EX CESS TELEPHONE CONNECTIONS AND ON SURRENDER OF THESE LINES MTNL RE FUNDED THE SURRENDER VALUE OF DEPOSIT AFTER DEDUCTING VALUES OF UNPAID BILLS. THE BALANCE AMOUNT OF DEPOSIT HAS BEEN WRITTEN OFF BY THE ASSES SEE. ITA NO.5509/M/2012 4 10.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSIO NS, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE ITSELF HAS DISALLOWED RS . 78,105/- REPRESENTING THE DEDUCTION CLAIMED IN EARLIER YEARS. MEANING TH EREBY THAT THE NET AMOUNT OF RS. 1,65,671/- WAS NOT RECOVERED FROM MTN L. THE LD. CIT(A) WAS OF THE OPINION THAT IT IS A CAPITAL IN N ATURE THEREFORE DISALLOWANCE TO THE EXTENT OF RS. 1,65,671/- IS JUS TIFIED. IN RESPECT OF THE BALANCE AMOUNT OF RS. 25,000/-, THE LD. CIT(A) DIRE CTED THE AO TO VERIFY WHETHER THE SAME WAS ALLOWED AS EXPENDITURE IN EARL IER YEARS AND ACCORDINGLY GRANT DEDUCTION TO THE ASSESSEE. 11. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. EDELWEISS CAPITAL LTD. IN ITA NO. 3971/M/09 AND POINTED OUT THAT THE TRIBUNAL HAS ALLOWED THE WRITE OFF OF DEPO SITS AS BUSINESS EXPENDITURE. A SIMILAR VIEW WAS TAKEN BY THE TRIBU NAL IN THE CASE OF CIBA INDIA LTD. 38 TAXMANN.COM 189. 12. THE LD. DR RELIED UPON THE FINDINGS OF THE AO. 13. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. IT IS NOT IN DISPUTE THAT THE DEPOSITS WERE GIVEN TO MTNL IN THE ORDINARY COURSE OF BUSINESS. FURTHER, THE LD. CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE ITSELF HAS DISALLOWED RS. 78,000/- WHICH W AS CLAIMED BY IT BEING OUTSTANDING AMOUNT OF TELEPHONE BILLS ADJUSTED BY M TNL FROM THE REFUND. RELIANCE ON THE DECISION OF THE CO ORDINAT E BENCH OF THE TRIBUNAL (SUPRA) IS WELL FOUNDED AS THE DEPOSITS WE RE GIVEN IN THE ORDINARY COURSE OF BUSINESS, THE WRITE OFF DESERVES TO BE ALLOWED AS ITA NO.5509/M/2012 5 BUSINESS EXPENDITURE. WE, ACCORDINGLY DIRECT THE A O TO DELETE THE ADDITION OF RS. 1,65,671/-. GROUND NO. 4 IS ACCORD INGLY ALLOWED. 14. GROUND NO. 5 RELATES TO THE DISALLOWANCE OF DED UCTION OF SOCIETY CHARGES OF RS. 83,996/-. 15. THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED S OCIETY MAINTENANCE CHARGES AT RS. 2,36,474/-, REPAIR TO RENTED PREMIS ES AT RS. 88,750/- AND INSURANCE AT RS. 3,842/- AGAINST THE HOUSE PROPERTY INCOME. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM U/S. 24 OF THE ACT. THE AO WAS OF THE OPINION THAT SUCH EXPENSES ARE NOT ALLOWABLE U/S. 2 4 OF THE ACT AND DISALLOWED THE TOTAL CLAIM AT RS. 3,26,046/-. 16. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED ITS CLAIM BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT ONLY THOSE DEDUCTIONS ARE ALLOWABLE WHICH ARE PERMITTED BY SEC . 23 AND 24 OF THE ACT. 17. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ST RONGLY RELIED UPON THE DECISION OF THE TRIBUNAL IN ITA NO. 1653/M/09 A ND ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF R.J. W OOD PVT. LTD. 334 ITR 358. 18. THE LD. DR RELIED UPON THE FINDINGS OF THE AUTH ORITIES BELOW. 19. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES IN THE LIGHT OF THE DECISIONS RELIED UPON BY THE ASSESSEE. WE FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF R.J. WOOD PVT. LTD (SUPRA) HAS HELD THAT THE MAINTENANCE AND OTHER CHARGES PAID BY THE ASSES SEE WERE DEDUCTIBLE ITA NO.5509/M/2012 6 FROM THE RENT WHILE COMPUTING THE ANNUAL LETTING VALUE. THIS DECISION HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE CASE OF SH RI SAIF ALI KHAN IN ITA NO. 1653/M/09. THE TRIBUNAL AT PARA-19 OF ITS ORDER HAS HELD THAT IN THE ABSENCE OF ANY CONTRARY DECISION ON RECORD BY T HE REVENUE, THE SOCIETY CHARGES PAID BY THE ASSESSEE IN RESPECT OF THE LET OUT PROPERTY ARE ALLOWABLE WHILE COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY. DRAWING SUPPORT FROM THESE DECISION, WE DIRECT THE AO TO ALLOW THE CLAIM OF SOCIETY CHARGES BY THE ASSESSEE. GROUND NO. 5 I S ACCORDINGLY ALLOWED. 20. GROUND NO. 6 RELATES TO THE DISALLOWANCE OF DE DUCTION OF MUNICIPAL TAXES. THE MUNICIPAL TAXES ARE ALLOWABL E DEDUCTION WHILE COMPUTING THE ANNUAL LETTING OUT VALUE. WE, THERE FORE, RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH AFTER VERIFYING THE PAYMENT OF MUNICIPAL TAXES BY T HE ASSESSEE AND IF FOUND CORRECT, PAYMENT OF MUNICIPAL TAXES ARE TO BE ALLOWED IN THE LIGHT OF THE PROVISIONS OF SEC. 23 AND 24 OF THE ACT. TH IS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2014 . +$8 5 - *$ 9 :+ ; 30.4.2014 5 < SD/- SD/- (D. MANMOHAN ) (N. K. BILLAIYA ) !'# / VICE PRESIDENT $* +, / ACCOUNTANT MEMBER MUMBAI; :+ DATED 30.4.2014 . . ./ RJ , SR. PS ITA NO.5509/M/2012 7 +$8 +$8 +$8 +$8 5 55 5 26& 26& 26& 26& =$&-6 =$&-6 =$&-6 =$&-6 / COPY OF THE ORDER FORWARDED TO : 1. .1 / THE APPELLANT 2. 23.1 / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5. &?< 26 , , / DR, ITAT, MUMBAI 6. < @ / GUARD FILE. +$8 +$8 +$8 +$8 / BY ORDER, 3&6 26 //TRUE COPY// ! !! ! / / / / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI