SANJAY B. RAMBHIA, MUMBAI V. ITO 11(3)(2), MUMBAI

ITA 5621/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6249 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: VIJAY KUMAR BIYANI
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

1 ITA 5621/M/10, SANJAY B. RAMBHIA IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER ITA NO. 5621/MUM/2010 ASSESSMENT YEAR 2006-07 SANJAY B. RAMBHIA, 19, MAHADEV DARSHAN, OPP. JUVAN VIKAS HOSPITAL, ANDHERI (EAST), MUMBAI 400 069. PAN AABPR3659 M VS. INCOME TAX OFFICER 11(3)(2), AAYAKAR BHAWAN, CHURCHGATE, MUMBAI 20. APPELLANT RESPONDENT APPELLANT BY SHRI VIJAYKUMAR BIY ANI RESPONDENT BY SHRI SURENDRA KUMAR ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) -2, MUMBAI DATED 2.5.10 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME WHICH HAS BEEN PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE ME RELATES TO THE ADDITION OF ` 40,906/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) BY WAY OF DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE AGAINST THE INCOME FROM PROFESSIONAL FEES AND REMUNERATION RECEIVED FROM PARTNERSHIP FIRM. 2. THE ASSESSEE IN THE PRESENT CASE IS A CHART ERED ACCOUNTANT BY PROFESSION. HE IS A PARTNER IN THE FIRMS OF SAMPAT & MEHTA, SAMPAT MEHT A & ASSOCIATES AND PANKAJ THAKKAR & CO. DURING THE YEAR UNDER CONSIDERATION, HE RECEI VED PROFESSIONAL FEES OF ` 50,000/- FROM M/S DORSCH CONSULT (INDIA) P. LTD. AND REMUNER ATION AS A PARTNER FROM THE FIRM OF SAMPAT & MEHTA AMOUNTING TO ` 3,23,263/-. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION ON 31.10.2006 DECLARING TOTAL INCOME ` 3,18,134/-, THE ASSESSEE HAD CLAIMED VARIOUS EXPENSES AGGREGATING TO ` 40,906/- AGAINST THE PROFESSIONAL FEES AND 2 ITA 5621/M/10, SANJAY B. RAMBHIA REMUNERATION RECEIVED FROM PARTNERSHIP FIRM AND THE NET AMOUNT OF ` 3,32,357/- WAS SHOWN UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPO N BY THE A.O. TO JUSTIFY HIS CLAIM FOR DEDUCTION ON ACCOUNT OF THE SAID EXPENSES. IT WAS EXPLAINED BY THE ASSESSEE THAT HE WAS NOT BEING PAID ANY CONVEYANCE EXPENSES BY THE PARTN ERSHIP FIRM AND THEREFORE SUCH EXPENSES AMOUNTING TO ` 9,515/- WERE INCURRED BY HIM IN HIS INDIVIDUAL CAP ACITY. IT WAS SUBMITTED THAT, SIMILARLY EXPENSES OF ` 7,111/- INCURRED FOR TELEPHONE CONNECTION INSTALLE D AT HIS RESIDENCE AND USED FOR PROFESSION WERE INCUR RED BY THE ASSESSEE. IT WAS SUBMITTED THAT OFFICE EXPENSES OF ` 7750/- AND EXPENSES ON BOOKS AND PERIODICALS AMOUN TING TO ` 4080/- WERE ALSO INCURRED BY THE ASSESSEE IN RELATI ON TO HIS PROFESSION AS A CHARTERED ACCOUNTANT. IT WAS FURTHER SUBMITTED THAT A LAPTOP OWNED BY HIM WAS ALSO USED FOR THE PROFESSIONAL WORK AND EXPENSES INCURRED ON MAINTENA NCE THEREOF AMOUNTING TO ` 4600/- AS WELL AS DEPRECIATION AMOUNTING TO ` 5350/- WERE CLAIMED AS DEDUCTION. IT WAS POINTED OUT THAT PROFESSIONAL TAX OF ` 2500/- PAID BY THE ASSESSEE WAS ALSO CLAIMED AS EXPENDITURE BEING INCURRED IN RELATION TO THE PROFE SSIONAL INCOME EARNED BY THE ASSESSEE. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCE PTABLE BY THE A.O. ON THE GROUND THAT THE EXPENSES CLAIMED TO BE INCURRED BY THE ASSESSEE HAD NO DIRECT RELATION TO THE INCOME DECLARED BY HIM UNDER THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION IN THIS REGARD, HE NOTED THAT A SUM OF ` 50,000/- WAS RECEIVED BY THE ASSESSEE AS PROFESSIO NAL FEES DURING THE YEAR UNDER CONSIDERATION FOR THE SE RVICES WHICH HAD ACTUALLY BEEN RENDERED IN THE EARLIER YEAR. HE ALSO FOUND THAT T HE EXPENSES INCURRED BY THE ASSESSEE WERE NOT DIRECTLY RELATED TO THE REMUNERATION RECEI VED BY HIM AS A PARTNER FROM THE FIRM OF M/S SAMPAT & MEHTA. HE, THEREFORE, DISALLOWED T HE EXPENSES OF ` 40,906/- CLAIMED BY THE ASSESSEE AND ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3) BY AN ORDER DATED 2 2.10.08. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) DISPUTING THEREIN THE DISALLOWANCE OF ` 40,906/- MADE BY THE A.O. ON ACCOUNT OF VARIOUS EXPENSES. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. C IT(A) CONFIRMED THE DISALLOWANCE OF ` 3 ITA 5621/M/10, SANJAY B. RAMBHIA 40,906/- MADE BY THE A.O. OUT OF VARIOUS EXPENSES B Y OBSERVING THAT THE PROFESSIONAL SERVICES HAVING BEEN ADMITTEDLY RENDERED BY THE ASS ESSEE IN THE EARLIER YEARS, THERE WAS OBVIOUSLY NO RELATION BETWEEN THE SAID EXPENSES INC URRED DURING THE YEAR UNDER CONSIDERATION AND THE INCOME OF ` 50,000/- RECEIVED BY THE ASSESSEE FOR THE PROFESS IONAL SERVICES RENDERED IN THE EARLIER YEARS. AS REGARDS THE OTHER INCOME RECEIVED BY THE ASSESSEE IN THE FORM OF REMUNERATION FROM PARTNERSH IP FIRM, THE LD. CIT(A) HELD THAT THE SAID INCOME WAS IN THE NATURE OF SALARY WHICH WAS B ROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME ONLY BECAUSE OF DEEMING PROVISION. HE ALSO HELD THAT THE ASSESSEE WAS CARRYING ON HIS PROFESSION IN THE CAPA CITY AS A PARTNER OF PARTNERSHIP FIRM AND NOT IN HIS INDIVIDUAL CAPACITY. HE HELD THAT TH ERE WAS THUS NO PROFESSION CARRIED ON BY THE ASSESSEE IN HIS INDIVIDUAL NAME AND IN THE ABSE NCE OF THE SAME, THERE WAS NO QUESTION OF ALLOWABILITY OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. THE LD. CIT(A) THUS CONFIRMED THE DISALLOWANCE OF ` 40,906/- MADE BY THE A.O. BY HIS IMPUGNED ORDER AND AGGRIEVED BY THE SAME, THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDE S AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTLY HELD BY THE LD. CIT(A), THE P ROFESSION OF CHARTERED ACCOUNTANCY WAS BEING CARRIED ON BY THE ASSESSEE IN THE YEAR UN DER CONSIDERATION AS A PARTNER OF THE PARTNERSHIP FIRM AND THERE BEING NO SUCH PROFESSION CARRIED ON BY HIM IN THE INDIVIDUAL CAPACITY, NO DEDUCTION ON ACCOUNT OF ANY EXPENDITUR E CLAIMED TO BE INCURRED FOR PROFESSIONAL IN THE INDIVIDUAL CAPACITY COULD JUSTI FIABLY BE MADE. THE INCOME RECEIVED BY THE ASSESSEE FROM THE PARTNERSHIP FIRM IN THE FORM OF REMUNERATION WAS ACTUALLY IN THE NATURE OF SALARY AND ALTHOUGH THE SAME WAS LIABLE T O BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS ITS BUSINESS INCOME AS PER THE RELEVANT PROVISIONS, THE CLAIM OF THE ASSESSEE FOR DEDUCTION FOR EXPENSES AGAINST THE SAID INCOME WAS NOT TENABLE ESPECIALLY WHEN THE ASSESSEE WAS NOT REQUIRED TO INCUR ANY SUCH EXPENSE S AS PER THE TERMS AND CONDITIONS OF THE PARTNERSHIP FIRM. EVEN THE PROFESSIONAL INCOME OF ` 50,000/- RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IN HIS INDIVIDU AL CAPACITY WAS ADMITTEDLY IN RELATION 4 ITA 5621/M/10, SANJAY B. RAMBHIA TO THE SERVICES ACTUALLY RENDERED BY HIM IN THE EAR LIER YEARS AND THE EXPENSES CLAIMED TO BE INCURRED IN THE YEAR UNDER CONSIDERATION HAD NO NEXUS WHATSOEVER WITH THE SAID INCOME. THE ONLY EXPENDITURE WHICH CAN BE REGARDED AS DEDUCTIBLE IN THE HANDS OF THE ASSESSEE IS PROFESSIONAL TAX OF ` 2500/- PAID BY HIM IN THE YEAR UNDER CONSIDERATION WHICH HE WAS LIABLE TO PAY EVEN AS A PARTNER OF THE PARTNERSHIP FIRM. I, THEREFORE, MODIFY THE IMPUGNED ORDER OF LD. CIT(A) BY SUSTAINING THE DISALLOWANCE OF ` 40,906/- MADE BY THE A.O. TO EXTENT OF ` 38,906/- AND ALLOW THIS APPEAL OF THE ASSESSEE PAR TLY. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2010. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER MUMBAI, DATED 30 TH NOVEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 33 - MUMBAI 4. THE CIT- -23, MUMBAI 5. THE DR BENCH, SMC 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 5 ITA 5621/M/10, SANJAY B. RAMBHIA DATE INITIALS 1. DRAFT DICTATED 29.11.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 30.11.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.