UNI TEX PRODUCTS P.LTD, MUMBAI V. DCIT 2(3)(4), MUMBAI

ITA 5923/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0719 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R.KAVITHA
• Assessee Lawyers: FURTHER ALLOWING
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI , BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & . ,#$#% SHRI G.MANJUNATHA, ACCOUNTANT MEMBER . 5923 / /2018(. 2015-16 ) ITA NO.5923/MUM/2018 (A.Y.2015-16) UNITEX PRODUCTS PVT. LTD., C/O. KALYANIWALLA & MISTRY LLP, ESPLANADE HOUSE, 2 ND FLOOR, 29, HAZARIMAL SOMANI MARG, FORT, MUMBAI 400 001 PAN: AAACU0760G ...... - / APPELLANT VS. INCOME TAX OFFICER 2(3)(4), ROOM NO.555, 5 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ..... .// RESPONDENT -0/ APPELLANT BY : SHRI M.M.GOLWALA ./0/ RESPONDENT BY : MS. R. KAVITHA 1/ / DATE OF HEARING : 20/02/2020 234 1/ / DATE OF PRONOUNCEMENT : 12/06/2020 #/ ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI (IN SHORT THE CIT (A)) DATED 24/04/2018 FOR THE ASSESSMENT YEAR 2015-16. 2 ITA NO.5923/MUM/2018(A.Y.2015-16) 2. THE ASSESSEE IN APPEAL HAS ASSAILED THE ORDER O F FIRST APPELLATE AUTHORITY ON TWO COUNTS:- (I) DISALLOWANCE OF ADMINISTRATIVE EXPENSES RS.7 ,57,473/- (II) DISALLOWANCE OF RS.4,20,890/- PAID TO COIMBAT ORE MUNICIPAL CORPORATION. 3. SHRI M.M.GOLWALA APPEARING ON BEHALF OF THE A SSESSEE SUBMITTED THAT ADMINISTRATIVE EXPENSES WERE CLAIMED ON THE BASIS O F FORMULA ACCEPTED BY THE DEPARTMENT IN THE PAST. THE LD. AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE SUBMITTED THAT OUT OF TOTAL ADMINISTRATIVE EXPENDIT URE OF RS.2,63,36,457/-, THE ASSESSEE HAD SUO MOTO DISALLOWED RS.2,50,35,436/-. THE ASSESSEE CLAIMED ADMINISTRATIVE EXPENSES OF RS.13,01,021/-. HOWEVER, THE ASSESSING OFFICER ALLOWED ONLY AUDIT FEE AMOUNTING TO RS.4,56,514/- A ND DISALLOWED REMAINING EXPENDITURE OF RS.12,13,987/-. THE CIT (A) GRANTED PARTIAL RELIEF TO THE ASSESSE ON THE GROUND THAT IN THE PAST ASSESSMENT YEARS ONL Y 1.74% OF THE ADMINISTRATIVE EXPENSES CLAIMED BY THE ASSESSEE WER E ALLOWED. THE CIT (A) HAS ERRED IN APPLYING RATIO OF 1.74% AS WAS IN IMMEDIAT ELY PRECEDING ASSESSMENT YEAR. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSE SSEE REFERRED TO THE TABLE AT PAGE-19 OF THE PAPER BOOK GIVING DETAILS OF ADMINIS TRATIVE EXPENSES ALLOWED IN THE EARLIER ASSESSMENT YEARS. THE LD. AR POINTED TH AT THE RATIO OF EXPENDITURE CLAIMED IN THE PAST IS NOT UNIFORM AND RANGES BETWE EN 33.80 % TO 1.74% DURING AYS 2010-11 TO 2014-15. THE LD. AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT ADMINISTRATIVE EXPENSES SHO ULD BE ALLOWED TO THE ASSESSEE IN LINE WITH COMPUTATION IN PREVIOUS ASSES SMENT YEARS. IN RESPECT OF DISALLOWANCE OF AMOUNT PAID TO COIMB ATORE MUNICIPAL CORPORATION, THE LD.AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE SUBMITTED THAT RS.4,20,890/- WAS PAID TOWARDS REGULARISATION CHARG ES OF BUILDING. IN THE 3 ITA NO.5923/MUM/2018(A.Y.2015-16) RECEIPT ISSUED BY COIMBATORE MUNICIPAL CORPORATION, THE AMOUNT WAS SHOWN AS SERVICE CHARGES, LABOUR WELFARE FUND AND RIGHTS CHARGES. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REFERRED TO THE TRAN SLATED COPY OF RECEIPT ISSUED BY COIMBATORE MUNICIPAL CORPORATION AT PAGE 121 AND THE COPY OF RECEIPT AT PAGE 122 OF THE PAPER BOOK. THE LD.AUTH ORIZED REPRESENTATIVE OF THE ASSESSEE POINTED THAT THE AUTHORITIES BELOW HAV E ERRED IN HOLDING THAT THE AMOUNT PAID WAS IN THE NATURE OF FINE, HENCE NOT AL LOWABLE. THE LD. A.R SUBMITTED THAT THE CHARGES PAID WERE NOT IN THE NAT URE OF ANY PENALTY BUT WERE TOWARDS REGULARIZATION OF THE PART OF BUILDING . 4. ON THE OTHER HAND, MS. R. KAVITHA, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED F OR DISMISSING THE APPEAL OF THE ASSESSEE. THE LD.DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE CHARGES PAID TO COIMBATORE MUNICIPAL CORPORATIO N WERE PENAL IN THE NATURE AND THEREFORE, NOT ALLOWABLE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IN A PPEAL HAS RAISED FOUR GROUNDS. IN GROUND NOS.1 TO 3 OF THE APPEAL, THE A SSESSEE HAS ASSAILED DISALLOWANCE OF ADMINISTRATIVE EXPENSES RS.7,57,473 /-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LEASING AND RENTING OF W AREHOUSE. THE ASSESSEE HAS OFFERED LEASE AND RENTAL INCOME TO TAX UNDER THE HE AD INCOME FROM HOUSE PROPERTY. AFTER SUO MOTO DISALLOWANCE, THE ASSESS EE CLAIMED ADMINISTRATIVE EXPENDITURE OF RS.13,01,021/-. IN ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER ALLOWED AUDIT FEE OF RS.87,034/- AND REJECT ED ASSESSEES REMAINING CLAIM OF RS.12,13,987/- ON THE GROUND THAT THE EXPE NDITURE IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN FIRST APPELLATE PROCEEDINGS, THE CIT (A) GRANTED PART RELIEF TO THE ASSESSEE BY FURTHER ALLOWING 4 ITA NO.5923/MUM/2018(A.Y.2015-16) EXPENDITURE OF RS.4,56,514/-. THE CIT(A) GRANTED PART RELIEF TO THE ASSESSEE ON THE GROUND THAT IN THE EARLIER ASSESSMENT YEARS I.E . 2010-11, 2012-13 AND 2013-14, THE ASSESSEE HAD DISALLOWED 98.26% OF THE TOTAL ADMINISTRATIVE EXPENDITURE AND CLAIMED ONLY 1.74% OF SUCH EXPENSES . THE CIT (A) APPLIED THE SAME RATIO IN THE ASSESSMENT YEAR UNDER APPEAL AND ALLOWED PART RELIEF TO THE ASSESSEE. WE FIND THAT THE FINDINGS OF CIT (A) ARE CONTRARY TO THE FACTS. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS RE FERRED TO THE TABLE (PAGE- 19 OF THE PAPER BOOK) GIVING DETAILS OF THE ADMINIS TRATIVE EXPENSES ALLOWED IN THE PAST. A PERUSAL OF THE TABLE SHOWS THAT FROM A SSESSMENT YEAR 2010-11 TO 2014-15, THE RATIO OF EXPENDITURE IS NOT STATIC. TH E RATIO OF INCOME FROM HOUSE PROPERTY TO TOTAL INCOME RANGES FROM 66.20% TO 98.2 6%. THE RATIO 1.74% IS RELEVANT TO AY 2014-15 ONLY. THE RATIO IS MUCH HIGH ER IN PRECEDING ASSESSMENT YEARS. THE ADMINISTRATIVE EXPENDITURE HAS BEEN APPO RTIONED ACCORDINGLY. THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IS THAT IN THE ASSESSMENT YEAR UNDER APPEAL SUO-MOTU DISALLOWANCE OF THE EXPENDITURE HAS BEEN MADE BY THE ASSESSEE ON THE BASIS OF FORMULA A CCEPTED BY THE DEPARTMENT IN PRECEDING ASSESSMENT YEARS. TAKING I NTO CONSIDERATION ENTIRETY OF FACTS, WE DEEM IT APPROPRIATE TO RESTORE THIS IS SUE BACK TO THE FILE OF ASSESSING OFFICER FOR RE-COMPUTATION OF ALLOWABLE A DMINISTRATIVE EXPENDITURE IN LINE WITH THE FORMULA ACCEPTED BY THE DEPARTMENT IN ASSESSEES CASE IN THE PAST. THE GROUNDS NO.1 TO 3 OF THE APPEAL ARE ALLOW ED FOR STATISTICAL PURPOSES, ACCORDINGLY. 6. IN GROUND NO.4 OF THE APPEAL, THE ASSESSEE HAS A SSAILED DISALLOWANCE OF RS.4,20,890/- PAID TO COIMBATORE MUNICIPAL CORPORAT ION. THE CONTENTION OF THE ASSESSEE IS THAT THIS AMOUNT HAS BEEN PAID AS P ROPERTY TAX/REGULARISATION CHARGES IN RESPECT OF SMALL PORTION OF THE BUILDING . THE ASSESSEE HAS PLACED ON 5 ITA NO.5923/MUM/2018(A.Y.2015-16) RECORD COPY OF THE RECEIPT ISSUED BY COIMBATORE MUN ICIPAL CORPORATION AT PAGES 121 AND 122 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE AMOUNT HAS BEEN CHARGED TOWARDS:- (I) SERVICE CHARGES (DEBRIS) - RS.1,07,000/- (II)RIGHTS CHARGES (L.F) - RS.1,28,400/- (III)LABOUR WELFARE FUND(L.W.F) - RS.1,85,490/- TOTAL: - RS.4,20,890/- THE ABOVE RECEIPT ISSUED BY COIMBATORE MUNICIPAL CO RPORATION IS NOT DISPUTED BY THE DEPARTMENT. THE HEADS OF CHARGES MENTIONED I N THE RECEIPT INDICATE THAT THE AMOUNT PAID BY THE ASSESSEE IS CERTAINLY N OT IN THE NATURE OF PENAL CHARGES. WE DO NOT AGREE WITH THE FINDINGS OF THE AUTHORITIES BELOW THAT THE AMOUNT PAID IS IN THE NATURE OF FINE. ACCORDINGLY, THE FINDINGS OF THE CIT(A) ON THIS ISSUE ARE REVERSED AND THE AMOUNT PAID BY THE ASSESSEE TO COIMBATORE MUNICIPAL CORPORATION IS ALLOWED. THE GROUND NO.4 O F THE APPEAL IS ALLOWED. 7. THE APPEAL OF THE ASSESSEE IS THUS, ALLOWED PAR TLY IN THE TERMS AFORESAID. 8. THIS APPEAL WAS HEARD ON 20/02/2020. AS PER RUL E 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, (ITAT RULES, 1963), THE ORDER WAS REQUIRED TO BE ORDINARILY PRONOUNCED WITHIN A PER IOD OF 90 DAYS FROM THE DATE OF CONCLUSION OF THE HEARING OF APPEAL. THE IN STANT APPEAL WAS HEARD PRIOR TO THE LOCKDOWN DECLARED BY THE HONBLE PRIME MINIS TER ON 24-03-2020 IN VIEW OF COVID-19 PANDEMIC. THE LOCKDOWN WAS FORCED DUE T O EXTRA ORDINARY CIRCUMSTANCES CAUSED BY WORLD WIDE SPREAD OF COVID- 19. THEREAFTER, THE LOCKDOWN WAS EXTENDED FROM TIME TO TIME. THEREFORE , THE PRONOUNCEMENT OF ORDER BEYOND THE PERIOD OF 90 DAYS FROM THE DATE OF HEARING IS NOT UNDER 6 ITA NO.5923/MUM/2018(A.Y.2015-16) ORDINARY CIRCUMSTANCES. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. JSW LTD., ITA NO.6264/MUM/2018 FOR A.Y 201 3-14 DECIDED ON 14/05/2020, UNDER IDENTICAL CIRCUMSTANCES, AFTER CO NSIDERING THE PROVISIONS OF RULE 34(5) OF THE ITAT RULES, 1963, JUDGEMENTS REND ERED BY HONBLE APEX COURT AND THE HONBLE BOMBAY HIGH COURT ON THE ISSU E TIME LIMIT FOR PRONOUNCEMENT OF ORDERS BY THE TRIBUNAL AND THE CIR CUMSTANCES LEADING TO LOCKDOWN HELD:- 10. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE O F THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING P RONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THAT THE ENTI RE COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING A T LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS IN FORCE. WE MUST FACTOR GROUND RE ALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE ORDER. LAW IS NOT BROODING OMNIPOTENCE IN THE SKY. IT IS A PRAGMATIC TOOL OF THE SOCIAL OR DER. THE TENETS OF LAW BEING ENACTED ON THE BASIS OF PRAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED. THE INTERPRETATION SO ASSIGNED BY US IS NOT ONLY INCONS ONANCE WITH THE LETTER AND SPIRIT OF RULE 34(5) BUT IS ALSO A PRAGMATIC APPROACH AT A TI ME WHEN A DISASTER, NOTIFIED UNDER THE DISASTER MANAGEMENT ACT 2005, IS CAUSING UNPREC EDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM. UNDOUBT EDLY, IN THE CASE OF OTTERS CLUB VS DIT [(2017) 392 ITR 244 (BOM)], HONBLE BOMBAY HIGH COURT DID NOT APPROVE AN ORDER BEING PASSED BY THE TRIBUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HONBLE BOMBAY HIGH COURT ITSELF HAS, VID E JUDGMENT DATED 15TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIME- BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY . THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY HONBLE J URISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT ALSO INDICATE THAT THIS PERIO D OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE. IN OUR CONSIDERED VIEW, EVEN WITHOUT THE WORDS ORDINA RILY, IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING W HICH ITA NO. 6103 AND LOCKOUT WAS IN FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIM ITS SET OUT IN RULE 34(5) OF THE APPELLATE TRIBUNAL RULES, 1963. VIEWED THUS, THE EX CEPTION, TO 90-DAY TIME-LIMIT FOR PRONOUNCEMENT OF ORDERS, INHERENT IN RULE 34(5)(C), WITH RESPECT TO THE PRONOUNCEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE. OF COURSE, THERE IS NO, AND THERE CANNOT BE A NY, BAR ON THE DISCRETION OF THE BENCHES TO REFIX THE MATTERS FOR CLARIFICATIONS BEC AUSE OF CONSIDERABLE TIME LAG BETWEEN THE POINT OF TIME WHEN THE HEARING IS CONCL UDED AND THE POINT OF TIME WHEN THE ORDER THEREON IS BEING FINALIZED, BUT THEN, IN OUR CONSIDERED VIEW, NO SUCH EXERCISE WAS REQUIRED TO BE CARRIED OUT ON THE FACTS OF THIS CASE. THUS, IN LIGHT OF ABOVE FACTS AND THE DECISION OF C OORDINATE BENCH, THE PRESENT ORDER IS PRONOUNCED BEYOND THE PERIOD OF 90 DAYS. 7 ITA NO.5923/MUM/2018(A.Y.2015-16) 9. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. OR DER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) R ULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD. ORDER PRONOUNCED ON FRIDAY THE 12 TH DAY OF JUNE, 2020. SD/- SD/- (G.MANJUNATHA) (VIKAS AW ASTHY) #$ / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 6'/ DATED 12/06/2020 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. - / THE APPELLANT , 2. ./ / THE RESPONDENT. 3. 7/ ( )/ THE CIT(A)- 4. 7/ CIT 5. 89 ./' , . . . , / DR, ITAT, MUMBAI 6. 9:; <= / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI