COREL TRADERS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER-1(1)(2), MUMBAI

ITA 6086/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8394 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 24-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMNATH WAJALE ITA NO M A Y
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 6086 /MUM/201 8 ( / ASSESSMENT YEAR: 20 14 - 1 5 ) COREL TRADERS PVT. LTD. 37, PRABHAT BUILDING, 6 TH FLOO R, 28 - B, CHURCHGATE, MUMBAI - 400020 . / VS. ITO 1(1)(2) ROOM NO.529, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AADCR4263J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 06 / 01 / 20 20 /DATE OF PRONOUNCEMENT: 15 / 01 / 2020 / O R D E R PER AMARJIT SING H, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 15 . 05 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 14 - 1 5 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS: - 1 . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN LAW ON FACTS REJECTING THAT THE APPELLATE COMPANY IS NOT CARRYING ON ANY BUSINESS AND THAT, THERE IS NO BUSINESS INCOME DURING THE YEAR. THE APPELLAN T PRAYS THAT, AS IT IS CARRYING ON REGULAR BUSINESS THE COMMISSION INCOME EARNED BE TREATED AS BUSINESS INCOME ONLY. ASSESSEE B Y : SHRI DHIRENDRA M. SHAH (AR) REVENUE BY: SHRI SOMNATH WAJALE ITA NO. 6086 / M/201 8 A.Y.20 14 - 1 5 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.4,07,060/ - BEING THE EXPENDITURE DISALLOWANCE OUT OF THE TRAVELLING EXPENSES, WHICH SHOULD BE ALLOWED IN FULL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE FOLLOWING DISALLOWANCE WHICH SHOULD BE DELETED. 1. CAR EXPENSES RS. 22,907/ - 2. REPAIRS AND MAINTENANCE RS. 44,722/ - 3. MOTORCAR REPAIRS RS. 1,53,560/ - 4. MOTOR CAR REPAIRS RS. 28,001/ - 5. SUNSH INE HOUSING & INFRA RS.2,34,960/ - 6. REPAIRS RS. 25,500/ - 4. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR ALTER ANY OR ALL THE GROUNDS OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 30 . 09 .20 14 DECLARING LOSS OF UNABSORBED DEPRECIATION OF RS.6,26,391 / - FOR THE A.Y. 2014 - 15 . THE RETURN WAS PROCESSED U/S 143(1) OF THE I. T. ACT 1961 . THEREAFTER, CASE WAS SELECTED FOR SCRUTINY UNDER CASS. THE NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE HAS EARNED THE INCOME BY WAY OF COMMISSION, INTEREST , DIVIDEND AND CAPITAL GAIN. DURING THE ASSESSMENT, THE ASSESSEE CLAIMED THE EXPENSES AS UNDER: - SR. NO. EXPENDITURE HEAD EXPENSES CLAIMED TOTAL EXPENSES DISALLOWED 1 TRAVELLING & CONVEYANCE 4,07,060 4,07,060 2 CAR EXPENSES 91,627 22,907 3 REPAIR & MAINTENANCE 9,23,904 4,86,743 4 INSURANCE CHARGES 1,20,230 30,057 5 BUSINESS DEVELOPMENT EXPENSES 8,39,398 8,39,389 6 DEPR ECIATION ON CARS 9,41,088 2,35,272 33,23,298 20,21,428 ITA NO. 6086 / M/201 8 A.Y.20 14 - 1 5 3 THE AO DISALLOWED THE WHOLE CLAIM OF THE TRAVELLING & CONVEYANCE AND BUSINESS DEVELOPMENT EXPENSES AND REMAINING CLAIM WAS DISALLOWED TO THE EXTENT OF 25% AND ALSO DISALLOWED THE REPAIR AND MAINTEN ANCE TO THE EXTENT OF 4,86,743/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 13,95,037/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . 4 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. ALL THE ISSUES ARE IN CONNECTION WITH THE DISALLOWANCE OF EXPENSES MENTIONED IN THE ASSESSMENT ORDER. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE AO HAS DECLINED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THIS FACT THAT THE ASSESSEE WAS NOT DOING THE BUSINESS OF COMMISSION ETC. THE COMMISSION INCOME HAS NOT BEEN REFLECTED AS BUSINESS IN THE MEMORANDUM OF ASSOCIATIO N OF COMPANY . THE CONTENTION OF THE ASSESSEE IS THAT THE AO H AS ACCEPTED THE COMMISSION INCOME AS BUSINESS IN THE EARLIER YEAR ALSO. IN SUPPORT OF THIS CONTENTION, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION MUMBAI BENCH I N THE CASE OF RAMKISHIN T EXT ILE P. LTD. VS. ITO IN ITA. NO.3960/M/2009 DATED 07.01.2011. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE REVENUE HAS REFUTED THE SAID CONTENTION. THE ASSESSEE CLAIM ED THE EXPENSES IN SUM OF RS. 33,23,298/ - ON ACCOUN T OF TRAVELLING & CONVEYANCE, CAR EXPENSES, REPAIR AND MAINTENANCE, INSURANCE CHARGES, BUSINESS DEVELOPMENT EXPENSES DEPRECIATION ON CARS. HOWEVER, THE CLAIM OF THE ASSESSEE WAS DECLINED BY AO ON THE BASIS OF THIS FACT THAT THE ASSESSEE WAS NOT DOING THE B USINESS. THE COPY OF EARLIER ASSESSMENT ORDER FOR THE A.Y. 2011 - 12 LIES AT PAGE NO.41 TO 58 WHICH SPEAKS THAT THE COMMISSION INCOME WAS TREATED AS BUSINESS INCOME AND THE CLAIM OF ITA NO. 6086 / M/201 8 A.Y.20 14 - 1 5 4 EXPENSES WAS ALSO ALLOWED. THE COPY OF MEMORANDUM AND ARTICLE OF ASSOCIATION IS ALSO ON THE FILE WHICH LIES AT PAGE NO. 59 TO 79 OF THE PAPER BOOK WHICH SPEAKS ABOUT THE DETAIL OBJECT OF THE COMPANIES. ANCILLARY OBJECT HAS ALSO BEEN MENTIONED IN THE CLAUSE - B AND OTHER OBJECT HAS ALSO MENTIONED IN THE CLAUSE - C. ANYHOW THE ASSESSEE WAS EARNING THE COMMISSION INCOME SO IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT DOING THE BUSINESS SPECIFICALLY IN THE CIRCUMSTANCES, WHEN THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED IN THE EARLIER YEAR ALSO . SO FAR AS THE AD HOC DISALLOWANCE OF CLAIM OF THE EXPENSES IS CONCERNED, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE ORDER PASSED BY THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF RAMKISHIN TEXTILE P. LTD. (SUPRA) WHICH IS HEREBY REPRODUCED AS UNDER.: - 7. WE HAVE HEARD THE RIVA L CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN RESPECT OF TRANSPORT, OCTROI AND FREIGHT CHARGES, TELEPHONE EXPENSES AND MISCELLANEOUS EXPENSES, THE AO HAS MADE ADHOC DISALLOWANCE IN THE ABSENCE OF FULLY SUPPORTING VOUCHERS AND ALSO CONSI DERING THE PERSONAL ELEMENT IN RESPECT OF TELEPHONE EXPENSES. ON APPEAL, THE CIT (A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE SE E MERITS IN PLEA OF THE ASSESSEE TO THE EFFECT THAT NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF PERSONAL USE OF THESE FACILITIES AS IT IS A CASE OF COMPANY AS HELD IN THE CASE OF SAYAJI IRON & ENGG. CO. 253 ITR 749 (GUJ), WHEREIN, IT WAS HELD THAT NO DISAL LOWANCE ON ACCOUNT OF PERSONAL USE OF THE VEHICLES/TELEPHONE BY THE DIRECTORS/OFFICIAL COULD BE MADE IN THE HANDS OF A COMPANY. WE, THEREFORE, HOLD THAT THE DISALLOWANCE MADE BY THE AO OUGHT TO HAVE BEEN DELETED BY THE CIT (A).. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE AO TO DELETE THE ADHOC DISALLOWANCE. 5. THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACTS OF THE CASE RELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE, THEREFORE, TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMST ANCES O F THE CASE AND ALSO RELYING UPON THE CASE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. ITA NO. 6086 / M/201 8 A.Y.20 14 - 1 5 5 253 ITR 749 (GUJ) . THE CLAIM OF THE EXPENSES IS HEREBY ALLOWED. ACCORDINGLY, ALL THE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENU E. 5 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 15 /01/2020 SD/ - S D / - / - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 15 /01/2020 V IJAY PAL SINGH/ SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE R ESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI