CREATION, MUMBAI V. ITO 12(3)(4), MUMBAI

ITA 574/MUM/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1187 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Section: 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 574/M/2010 ASSESSMENT YEAR: 2005-06 M/S CREATION, APPELLANT 4, PAREKH VORA CHAMBERS, 66, NAGINDAS MASTER ROAD, FORT, MUMBAI 400 001. (PAN AAAFCO639D) VS. INCOME TAX OFFICER, 12(3)(4), RESPONDENT MUMBAI. APPELLANT BY : MR. VIJAY MEHTA RESPONDENT BY : MR. S.K. SINGH O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDERS OF CIT(A)-23, MUMBAI, PASSED ON 07.10.2009 F OR THE ASSESSMENT YEAR 2005-06 WHEREIN THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER DISALLOWANCE OF ELECTRICITY EXPEN SE AMOUNTING TO RS. 1,53,527/- AND REPAIRS AND MAINTEN ANCE EXPENSE AMOUNTING TO RS. 3,948/- PAID FOR THE OFFIC ES USED BY THE FIRM FOR CARRY ON ITS BUSINESS ACTIVITIES. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE L EARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSIN G OFFICER DISALLOWING RS. 36,523/- OUT OF GENERAL EXPENSES. 2. BRIEFLY THE FACTS RELATING TO GROUND NO. 1 ARE T HAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE ASSESSEE CARRIED OUT ITS BUSINESS ACTIVITIES FROM ITS OWN OF FICE AND ALSO FROM THE PART AREA/PORTION OF OFFICE OWNED BY ITS SISTER CONCERN. HE FURTHER NOTICED THAT THE ASSESSEE PAID ELECTRICITY CHARGES OF RS. 1,53,527/- FOR THE OFFICES, WHICH WERE USED BY THE OTHER SISTER CONCERN OF THE ASSESSEE. THE AO DISALLOWED THE SAID AMOUNT OF THE ELECTRICITY EXPENSES, WHICH HAS BEEN CONFIRMED BY T HE CIT(A). ITA NO. 574/M/10 M/S CREATION 2 3. THE LEARNED AR SUBMITTED THAT AS PER THE UNDERST ANDING AMONG VARIOUS SISTER CONCERNS OF THE ASSESSEES GRO UP COMPANIES, OFFICE EXPENSES WERE BORNE BY DIFFERENT SISTER CONC ERNS AS PER THEIR MUTUAL AGREEMENT. THE LEARNED AR SUBMITTED THAT THE FOLLOWING DETAILS AND RELEVANT EXPENSES BORNE BY SISTER CONCE RNS:- SR.NO. OFFICE NO. FLOOR ELECTRICITY BILL REPAIRS & MAINTENANCE (SOCIETY CHARGES) 1. 1 1 ST ASIAN DISPLAYS ASIAN DISPLAYS 2. 2 1 ST ASIAN DISPLAYS ASIAN DISPLAYS 3. 3 1 ST ASIAN DISPLAYS ASIAN DISPLAYS 4. 4A 1 ST CREATION CREATION 5. 4B 1 ST CREATION CREATIVE ADVERTISING SERVICES 6. 6 1 ST CRAYON ESTATE PRIVATE LIMITED CRAYON ESTATE PRIVATE LIMITED 7. 7 1 ST CREATION ASIAN DISPLAYS 8. 7A 1 ST ASIAN DISPLAYS ASIAN DISPLAYS 9 8 1 ST VORA PATEL ADVERTISING PRIVATE LIMITED VORA PATEL ADVERTISING PRIVATE LIMITED 10 14 2 ND CREATION CREATION 4. THE LEARNED AR FURTHER SUBMITTED THAT THERE ARE ABOUT 15 ACTIVE COMPANIES OF THE GROUP OPERATING FROM THE AB OVE PREMISES AND ALL THE ABOVE PREMISES HAVE BEEN USED INTERCHAN GEABLY BY THE GROUP COMPANIES. HE SUBMITTED THAT ALL THE ABOVE PR EMISES ARE BEING USED FOR COMMERCIAL PURPOSES AND THERE IS NO RESIDENTIAL USE. AS PER THE MUTUAL UNDERSTANDING AMONGST THE SISTER CONCERNS, THE PAYMENTS FOR THE ELECTRICITY BILL AND REPAIRS AND M AINTENANCE CHARGES ARE BEING MADE BY DIFFERENT ENTITIES OF THE GROUP. THE SAID UNDERSTANDING IS BEING FOLLOWED CONSISTENTLY FOR TH E PAST 15 YEARS. THE LEARNED AR SUBMITTED THAT THE INCOME-TAX DEPART MENT HAS NEVER DOUBTED OR DISPUTED THE ABOVE UNDERSTANDING I N PAST 15 YEARS IN THE CASE OF ANY ENTITIES AND ALL SISTER CO NCERNS ARE HAVING POSITIVE INCOME FOR AY 2005-06 AND THEY ARE PAYING TAX. 5. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT THE FACTS POINTED OUT BY THE LEARNED AR IS SUBJECT TO VERIFIC ATION. ITA NO. 574/M/10 M/S CREATION 3 6. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. I FIND THAT FACTS POINTED OUT B Y THE LEARNED AR IS SUBJECT TO VERIFICATION. IT IS TRUE THAT THE BUR DEN IS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENSES CLAIMED WER E INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. SINCE THE FACTS ARE SUBJECT TO VERIFICATION, I REMIT THIS MATTER BA CK TO THE FILE OF THE AO WITH A DIRECTION TO CONSIDER THE FACTS POINTED O UT BY THE LEARNED AR AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH L AW AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. BRIEF FACTS RELATING TO GROUND NO. 2 ARE THAT DU RING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ENTIR E EXPENSES REPRESENTED THE PAYMENTS MADE BY SHRI PARESH T. VOR A, ONE OF THE PARTNER OF THE ASSESSEE FIRM THROUGH HIS CREDIT CAR D TO CITIBANK. FOR RENEWAL OF CREDIT CARD, RECREATION CLUB HOUSE E XPENSES, RESTAURANT EXPENSES, ETC. FROM THE DETAILS FILED BY THE ASSESSEE, THE TOTAL AMOUNT OF RS. 46,409/- FOUND DEBITED BUT THE ASSESSEE HAS FURNISHED THE COPIES OF BILLS OF RS. 18,242/- O NLY. THE ASSESSEE DID NOT FURNISH BILLS IN SUPPORT OF THE BALANCE AMO UNT OF RS. 28,167/-. THE AO DISALLOWED RS. 36,523/- OUT RS. 46 ,409/- AND THE CIT(A) RESTRICTED THE SAME TO 10% FROM 25% DISALLOW ED BY THE AO AS REGARDS THE DISALLOWANCE OUT OF RS. 18,242/-. 8. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. I FIND THAT THE CIT(A) AFTER CO NSIDERING THE ASSESSEES SUBMISSIONS AND AFTER A DETAILED DISCUSS ION HAS DECIDED THE ISSUE. THE ASSESSEE HAS FAILED TO POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF THE CIT(A) AND, THEREFOR E, I CONFIRM THE ORDER OF CIT(A) ON THIS COUNT. ITA NO. 574/M/10 M/S CREATION 4 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.07.2010. SD/- (A.L. GEHLOT) ACCOUNTANT MEMB ER DATED: 13 TH JULY, 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, SMC BEN CH, I.T.A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTALS 1. DRAFT DICTATED ON 13.07.2010 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 13.07.2010 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS 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 ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER