DCIT CIR 7(2), MUMBAI V. SHYAM AHUJA P. LTD, MUMBAI

ITA 6493/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8832 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 23-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K MAHAJAN
• Keywords: Capital asset; Rule of consistency; Revenue expenditure; Capital expenditure
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI P.M. JAGTAP (A.M.) ITA NO. 7024/MUM /2011 ASSESSMENT YEAR : 2003-04 M/S SHYAM AHUJA PVT. LTD., SHREE NIKETAN, SHIVSAGAR ESTATE, 33/34, DR. A.B. ROAD, WORLI, MUMBAI 4000 018. PAN AABCS4675F VS. INCOME TAX OFFICER 7(2)(2), MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 6493/MUM /2011 ASSESSMENT YEAR : 2003-04 INCOME TAX OFFICER 7(2)(2), MUMBAI. VS. M/S SHYAM AHUJA PVT. LTD., SHREE NIKETAN, SHIVSAGAR ESTATE, 33/34, DR. A.B. ROAD, WORLI, MUMBAI 4000 018. PAN AABCS4675F (APPELLANT) (RESPONDENT) ITA NO. 7025/MUM /2011 ASSESSMENT YEAR : 2006-07 M/S SHYAM AHUJA PVT. LTD., SHREE NIKETAN, SHIVSAGAR ESTATE, 33/34, DR. A.B. ROAD, WORLI, MUMBAI 4000 018. PAN AABCS4675F VS. INCOME TAX OFFICER 7(2)(2), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PIYUSH CHHAJED DEPARTMENT BY : SHRI K.K. MAHAJAN DATE OF HEARING 18-9-2012 DATE OF PRONOUNCEMENT 26-9-2012 ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 2 O R D E R PER DINESH KUMAR AGARWAL, J.M. THE CROSS APPEALS IN ITA NO. 7024/MUM/2011 & 6493/MUM/2011 PREFERRED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER DTD. 11-5-2011 PASSED BY THE LD. CIT(A) - 13 MUMBAI FOR THE A.Y. 2003-04. THE APPEAL IN ITA NO. 7025/MU M/2011 PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DTD. 11-5-2011 PASSED BY THE LD. CIT(A) 13, MUMBAI FOR THE A.Y. 2006-07. ALL THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. FOR A.Y. 2003-04 (BY ASSESSEE) 2. BRIEFLY STATED FACTS OF THE CASE FOR THE A.Y. 20 03-04 ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND DEALERS OF CARPETS, FABRICS AND OTHER ITEMS. THE R ETURN OF INCOME WAS FILED DECLARING TOTAL LOSS OF RS. 1.19,55,292/-. D URING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED CERTAIN EXPENSES TO THE P&L ACCOUNT IN CLUDING THE SUNDRY DEBIT BALANCES WRITTEN OFF RS. 2,47,832/- AND ADVAN CES WRITTEN OFF RS. 12,97,991/-. IN RESPONSE TO VARIOUS NOTICES ISSUED CALLING FOR THE DETAILS IN RESPECT OF SUNDRY DEBIT BALANCES WRITTEN OFF, TH E ASSESSEE REITERATED THAT THE ASSESSEE HAS FURNISHED DETAILS OF THE AMOU NT WRITTEN OFF WHEREIN NAMES OF THE PARTIES, PARTICULARS IN RESPECT OF THE AMOUNT WRITTEN OFF ETC. AND THE AMOUNT IN QUESTION IS MENTIONED. IN RESPEC T OF ADVANCES WRITTEN ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 3 OFF OF RS. 12,97,991/- IT HAS BEEN STATED THAT IT I S IN RESPECT OF ADVANCES MADE TO INTENTIA SOUTH ASIA PVT. LTD. FOR PURCHASE OF SOFTWARE, LICENCE AND IMPLEMENTATION AND THE DETAILS OF THE ENTIRE T RANSACTIONS WERE PROVIDED DURING THE COURSE OF THE ORIGINAL ASSESSME NT PROCEEDINGS VIDE LETTER DTD. 24-02-2006 ALONG WITH ENCLOSURES OF 63 PAGES. THE ASSESSEE HAS ALSO FURNISHED THE COPY OF THE SAME. HOWEVER, THE A.O. AFTER CONSIDERING THE ASSESSEES EXPLANATION AND THE DETA ILS FILED OBSERVED THAT THE SAME ARE INCOMPLETE AND NOT LEGIBLE. HE FURTHE R OBSERVED THAT THE ASSESSEE COULD NOT FULLY SUBSTANTIATE THE EXPENSES CLAIMED BY IT AND ACCORDINGLY HE DISALLOWED BOTH THE CLAIMS OF THE AS SESSEE I.,E. SUNDRY BALANCES WRITTEN OFF RS. 2,47,832/- AND ADVANCES WR ITTEN OFF RS. 12,97,991/-. 3. ON APPEAL, ON THE ISSUE OF DISALLOWANCE OF SUNDR Y BALANCES WRITTEN OFF RS. 2,47,832/- THE LD. CIT(A) WHILE RELYING ON THE DECISION IN DIT (INT TAX) VS. OMAN INT. BANK & SAOG (2009) 313 ITR 128 ( BOM) HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE EVEN PRIMA FACIE O NUS, CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON THE ISSUE OF DISAL LOWANCE OF ADVANCES OF RS. 12,97,991/- GIVEN TO INTENTIA SOUTH ASIA PVT . LTD., THE LD. CIT(A) OBSERVED THAT THE APPELLANT HAD TO ABANDON THE SOFT WARE PROJECT DUE TO NON-PROPER IMPLEMENTATION AND QUALITY OF SOFTWARE A ND AVOIDING MAKING THE BALANCE PAYMENT TO SOFTWARE VENDOR, ALLOWED THE CLAIM OF THE ASSESSEE AS BUSINESS LOSS U/S 28 OF THE INCOME TAX ACT, 1961 (THE ACT). ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 4 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO. 7024/MUM/2011 (BY ASSESSEE A.Y. 2003-04) 5. THE SOLE GROUND TAKEN BY THE ASSESSEE IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF DEBIT BALANCES WRITTEN OFF RS. 2,47 ,832/-. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ASSESSEE HAS FILED COMPLETE DETAILS OF SUNDRY B ALANCES WRITTEN OFF AMOUNTING TO RS. 2,47,832/-, THEREFORE, FOLLOWING T HE DECISION OF HONBLE SUPREME COURT IN TRF LTD. VS. CIT (2010) 323 ITR 39 7 (SC), THE CLAIM OF THE ASSESSEE BE ALLOWED. 7. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND THE LD. CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ACCOR DING TO THE RELEVANT PROVISIONS OF SECTION 36(1)(VII), IF AN ASSESSEE WR ITES OFF A DEBT OR PART THEREOF AS IRRECOVERABLE IN THE ACCOUNTS FOR THE PR EVIOUS YEAR, THE SAME CAN BE ALLOWED AS DEDUCTION UNDER SECTION 36(1)(VII ). THE CONTROLLING WORDS/PHRASE IN CLAUSE (VII) IS 'WHICH IS WRITTEN O FF AS IRRECOVERABLE'. NO FURTHER PROOF IS NECESSARY. IN T. R. F. LTD. V. CIT [ 2010] 323 ITR 397 (SC), THE HONBLE SUPREME COURT NOTICED THE DIFFERENCE IN THE LANGUAGE IN SECTION 36(1)(VII) AS IT EXISTED PRIOR TO APRIL 1, 1989 AND AFTER APRIL 1, 1989 AND LAID DOWN (PAGE 398) : ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 5 'THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWE VER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEB ITED AND THE CUSTOMER'S ACCOUNT IS CREDITED, THUS, CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION I S DEDUCTED FROM SUNDRY DEBTORS.' RESPECTFULLY FOLLOWING THE ABOVE DECISION AND IN TH E ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE T O SHOW THAT THE ASSESSEE HAS NOT WRITTEN OFF THE AMOUNT OF RS. 2,47 ,832/- IN ITS BOOKS OF ACCOUNT, WE ARE OF THE VIEW THAT THE DISALLOWANCE S USTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY WE DELETE THE DISALLOWANCE OF RS. 2,47,832/- MADE BY THE A.O. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. ITA NO. 6493/MUM/2011 (BY REVENUE A.Y. 2003-04) 9. THE SOLE GROUND TAKEN BY THE REVENUE IS AGAINST THE DELETION OF DISALLOWANCE OF ADVANCES WRITTEN OFF RS. 12,97,991/ - 10. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS TH E ORDER OF THE A.O. 11. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) ALSO RELIED ON THE F OLLOWING DECISIONS:- 1. CIT VS. RAYCHEM RPF LTD. (2011) 245 CTR (BOM) 51 5 : (2011) 64 DTR 57. ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 6 2. CIT VS. ANJANI KUMAR CO. LTD. (2002) 178 CTR (RA J.) 424 : (2003 259 ITR 114 (RAJ.): (2002) 124 TAXMAN 429 (RAJ). 3. DCIT VS. M/S EDELWEISS CAPITAL LTD. IN ITA NO. 3 971/MUM/2009 FOR A.Y. 2005-06 ORDER DTD. 15-2-2011. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE BE UPHELD. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE HAS GIVEN THE AMOUNT OF ADVANCE OF RS. 12,97,991/- TO M /S INTENTIA SOUTH ASIA PVT. LTD. THE ASSESSEE HAD TO ABANDON THE SOFT WARE PROJECT DUE TO NON-PROPER IMPLEMENTATION AND QUALITY OF SOFTWARE A ND CLAIMED THE LOSS AS BUSINESS LOSS ALLOWABLE U/S 28 OF THE ACT, WHICH WAS DISALLOWED BY THE A.O. ON THE GROUND THAT THE ASSESSEE COULD NOT FULLY SUBSTANTIATE SUCH LOSS. HOWEVER, ON APPEAL THE LD. CIT(A) ALLOW ED THE SAME AS BUSINESS LOSS. 13. IN ANJANI KUMAR CO. LTD. (SUPRA) IT HAS BEEN HE LD THAT IRRECOVERABLE ADVANCE PAYMENT MADE BY ASSESSEE FOR ACQUISITION OF A CAPITAL ASSET WHICH DID NOT MATERIALISE WAS ALLOWAB LE AS BUSINESS LOSS. 14. IN M/S EDELWEISS CAPITAL LTD. (SUPRA) IT HAS BE EN HELD BY THE TRIBUNAL (PARA NO. 8):- .IN THE PRESENT CASE, WE ARE OF THE OPINION THA T EVEN IF THE WEBSITES HAD MATERIALIZED, THE EXPENDITURE COULD NO T HAVE BEEN VIEWED AS CAPITAL EXPENDITURE BECAUSE THE WEBSITE IS PUT U P FOR THE PURPOSES OF ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 7 DAY-TO-DAY RUNNING OF THE BUSINESS AND EVEN IF ONE WERE TO VIEW THAT SOME ENDURING BENEFIT IS OBTAINED BY THE ASSESSEE, THE BENEFIT CANNOT BE SAID TO ACCRUE TO THE ASSESSEE IN THE CAPITAL FIELD . A WEBSITE IS SOMETHING WHERE FULL INFORMATION ABOUT THE ASSESSEES BUSINES S IS GIVEN AND IT HELPS THE ASSESSEES CUSTOMERS IN DEALING WITH IT. A WEBS ITE CONSTANTLY NEEDS UPDATING, OTHERWISE IT MAY BECOME OBSOLETE. IT HELP S IN THE SMOOTH AND EFFICIENT RUNNING OF THE DAY-TO-DAY BUSINESS. THE E XPENDITURE WOULD HAVE BEEN ALLOWABLE AS REVENUE EXPENDITURE; AS A COROLLA RY, WHEN THE WEBSITE DID NOT MATERIALIZE, THE AMOUNTS ADVANCED TO THE CO MPANIES WHO WERE ENGAGED TO DEVELOP THE WEBSITES, WHEN THEY BECAME I RRECOVERABLE, CAN BE WRITTEN OFF AND CLAIMED AS LOSS INCIDENTAL TO THE B USINESS. THE LOSS IS THUS ALLOWABLE AS BUSINESS LOSS IN TERMS OF SECTION 28 OF THE ACT. WE ACCORDINGLY UPHOLD THE ASSESSEES ALTERNATIVE PLEA. IN THE RESULT, THE ULTIMATE DECISION OF THE CIT(A) IS UPHELD, THOUGH N OT AS A VALID CLAIM OF BAD DEBT BUT ON GROUNDS OF BUSINESS LOSS. THE APPEA L OF THE DEPARTMENT IS ACCORDINGLY DISMISSED. 15. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE ABOVE DE CISIONS HOLD THAT THE LOSS CLAIMED BY THE ASSESSEE AT RS. 12,97,991/- IS ALLOWABLE IN TERMS OF SECTION 28 OF THE ACT AND ACCORDINGLY WE DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN ALLOWING THE SAME. THE GROUND TAKEN BY THE REVENUE IS, THEREFORE, REJECTED. ITA NO. 7025/MUM/2011 (BY ASSESSEE A.Y. 2006-07) 16. GROUND NO. 1 IS AGAINST THE SUSTENANCE OF DISAL LOWANCE OF EMPLOYEES CONTRIBUTION TOWARDS P.F., ESIC AND LABOU R WELFARE FUND RS. 5,75,100/-. 17. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A. O. OBSERVED THAT THE ASSESSEE HAS DEPOSITED PAYMENT OF PF RS. 5,66,832/- , ESIC RS. 6060/- AND LABOUR WELFARE OF RS. 2208/- AFTER DUE DATE, TH EREFORE, HE DISALLOWED ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 8 THE ENTIRE AMOUNT OF RS. 5,75,100/- AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) UPHELD THE DIS ALLOWANCE MADE BY THE A.O. 18. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT NOW THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. ALOM EXTRUSION S LTD. (2009) 319 ITR 306 (SC), THEREFORE, THE ISSUE MAY BE DECIDED A CCORDINGLY. 19. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE OR DER OF THE A.O. AND THE LD. CIT(A) 20. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS DEPOSITED THE ENTIRE AMOUNT OF PF, ESIC AND LABOUR WELFARE FUND MUCH BEFORE THE DUE DATE OF FILING OF RETURN. THE ISSUE RELATING TO RETROSPECTIVE OPERATION OF OMISSION OF SECOND PROVISO TO SECTION 43B WAS CONSIDERED BY THE HONBLE SUPREME COURT IN CIT VS. ALOM EXTRUSION S LTD. [2009] 319 ITR 306/185 TAXMAN 416 WHEREIN IT WAS HELD THAT IT IS CURATIVE IN NATURE AND WOULD APPLY RETROSPECTIVELY, WITH EFFECT FROM 1-4-1988. THE HONBLE DELHI HIGH COURT IN CIT VS. AIMIL LTD. (201 0) 321 ITR 508 (DEL) HAS HELD THAT IF THE EMPLOYEES SHARE OF CONTRIBUTI ON IS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN U/S 139(1), THEN N O DISALLOWANCE CAN BE MADE. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS AN D THE CONSISTENT VIEW ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 9 OF THE TRIBUNAL, WE ARE OF THE VIEW THAT THE DISALL OWANCE MADE BY THE AO RS. 5,75,100/- IS NOT SUSTAINABLE IN LAW AND ACCORD INGLY WE DELETE THE SAME. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFOR E, ALLOWED. 21. GROUND NO. 2 IS AGAINST THE SUSTENANCE OF DISAL LOWANCE OF RS. 2,52,352/- ADDED U/S 41(1) OF THE ACT. 22. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O . OBSERVED THAT THE ASSESSEE VIDE LETTER DTD. 24-11-2008 HAS FURNISHED A STATEMENT SHOWING CREDITORS OUTSTANDING FOR MORE THAN TWO YEARS IN RE SPECT OF THE TAJ MAHAL HOTEL (TAJ MAGAZINE) RS. 2,52,352/-. ON BEIN G ASKED IT WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNT OF RS. 2, 52,352/- HAS BEEN WRITTEN BACK IN THE YEAR 2007-08. THE A.O., IN THE ABSENCE OF ANY EVIDENCE, ADDED THE OUTSTANDING CREDIT OF RS. 2,52, 352/- TO THE INCOME OF THE ASSESSEE AS CESSATION OF LIABILITY U/S 41(1) OF THE ACT. ON APPEAL, THE LD. CIT(A) WHILE AGREEING WITH THE VIEWS OF THE A.O ., CONFIRMED THE ADDITION MADE BY THE A.O. 23. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE P&L ACCOUNT FOR THE YEAR ENDED 31-3-200 8 THE ASSESSEE HAS CREDITED EXCESS PROVISION AND UNCLAIMED BALANCES WR ITTEN BACK UNDER THE HEAD OTHER INCOME WHICH INCLUDES THE AMOUNT OF THE TAJ MAHAL HOTEL RS. 2,52,352/- AND IN SUPPORT HE PLACED ON RECORD T HE COPY OF THE RELEVANT PAGES OF THE LEDGER ACCOUNT FOR THE A.Y. 2 008-09 APPEARING AT PAGE 9-10 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT IN THE ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 10 SUBSEQUENT YEARS, THE ASSESSEE HAS ALSO REPAID THE SAID AMOUNT TO THE CREDITOR, THEREFORE, NO ADDITION IS CALLED FOR. 24. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE OR DER OF THE A.O. AND LD. CIT(A). 25. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE AMOUNT DUE TO SUNDRY CREDITOR THE TAJ MAHAL HOTEL (TAJ MAGAZIN E) HAD BEEN ALLOWED IN THE EARLIER ASSESSMENT YEARS IN COMPUTING THE BU SINESS INCOME OF THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE ASSES SEE HAD NOT UNILATERALLY WRITTEN BACK THE ACCOUNT OF THE CREDITOR THE TAJ MA HAL HOTEL (TAJ MAGAZINE) IN ITS P&L ACCOUNT. THE LIABILITY WAS SH OWN IN THE BALANCE SHEET AS ON 31-3-2006 WHICH SHOWS THAT THE LIABILIT Y IS SUBSISTED AND DID NOT CEASE NOR WAS IT REMITTED BY THE CREDITOR. THE LIABILITY WAS ENFORCEABLE IN A COURT OF LAW. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW THAT THE ASSESSEE HAS SHOWN THE ABOVE AMOUNT A S INCOME FOR THE A.Y. 2008-09 AND HAS ALSO MADE THE REPAYMENT OF THE SAID LIABILITY TO THE CREDITOR IN SUBSEQUENT ASSESSMENT YEARS, WHICH WAS NOT CONTROVERTED BY THE REVENUE, WE ARE OF THE VIEW THAT THE AMOUNT IS NOT ASSESSABLE U/S 41(1) OF THE ACT AND ACCORDINGLY WE DELETE THE SAME . THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 11 26. GROUND NO. 3 IS AGAINST THE SUSTENANCE OF DISAL LOWANCE OF GENERAL STORE EXPENSES RS. 1,46,161/-. 27. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASS ESSEE COMPANY CLAIMED GENERAL STORE EXPENSES OF RS. 1,46,161/- SU PPORTED BY BILLS OF GROCERY SUPPLIED BY M/S RAKHANGO GENERAL STORES. I N THE ABSENCE OF ANY EXPEDIENCY OF THIS EXPENSE, THE A.O. DISALLOWED THE SAME. ON APPEAL, THE LD. CIT(A) WHILE AGREEING WITH THE VIEWS OF THE A.O ., UPHELD THE DISALLOWANCE MADE BY THE A.O. 28. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT TH E ABOVE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE FOR THE SUPPLY OF GRO CERY ITEMS AND OTHER GENERAL STORE ITEMS AT USHA KIRAN BUILDING WHICH IS OWNED BY THE APPELLANT COMPANY AND USED BY THE STAFF AND DIRECTO RS OF THE COMPANY AS TRANSIT ACCOMMODATION. IT WAS FURTHER SUBMITTED TH AT THE A.O. OUGHT TO HAVE BEEN APPRECIATED THAT THE DIRECTORS OF THE COM PANY AND STAFF ARE PLACED OUT OF MUMBAI WHO ON FREQUENT TRAVEL TO MUMB AI FROM PLACES SUCH AS BHADHOI, MIRZAPUR, MALLUR, JAIPUR AND USA. IF SUCH PEOPLE ARE ACCOMMODATED IN THE HOTEL, THE EXPENSES WOULD HAVE BEEN MUCH HIGHER AND, THEREFORE, THE COMPANY HAS USED TO PUT THEM IN USHA KIRAN PREMISES. IT WAS FURTHER SUBMITTED THAT OUT OF THE PAYMENT MADE TO GENERAL STORE RS. 1,61,179/-, THE APPELLANT COMPANY HAS MADE CERTAIN RECOVERIES AND, THEREFORE, THE NET AMOUNT WAS CLAIM ED AT RS. 1,46,161/-. ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 12 IT WAS FURTHER SUBMITTED THAT IN THE LAST THREE FIN ANCIAL YEARS I.E. F.Y. 2003-04, 2004-05 AND 2005-06 THE AMOUNT OF GENERAL STORE EXPENSES RS. 1,59,692/-, RS. 1,46,161/- AND RS. 1,61,179/- RESPE CTIVELY HAS BEEN ALLOWED. IT WAS FURTHER SUBMITTED THAT THE SAID PR EMISES IS OWNED BY THE COMPANY, CAPITALISED IN THE BOOKS OF ACCOUNTS AND D EPRECIATION HAS ALSO BEEN ALLOWED. IN THE LIGHT OF THE SAID EXPLANATION SUBMITTED BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE ASSESSEE SUBMITS TH AT THE EXPENSES CLAIMED BY THE ASSESSEE BE ALLOWED. THE RELIANCE W AS ALSO PLACED ON THE DECISION IN GREAVES AND COTTON & CO. LTD. VS. CIT ( 2006) 201 CTR (BOM) 544 : (2005) 279 ITR 42 (BOM) : (2005) 149 TAXMAN 1 80 (BOM). 29. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE OR DER OF THE A.O. AND THE LD. CIT(A). 30. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT ASSESSEE HAS CLAIMED SUCH EXPENSES ON THE GROUND THAT THE SUPPLY OF STORE ITEMS WAS MADE TO THE USHA KIRAN PREMISES OWNED BY THE ASSESS EE COMPANY AND USED BY THE STAFF AND DIRECTORS OF THE ASSESSEES C OMPANY AS A TRANSIT ACCOMMODATION AND AFTER MAKING SOME RECOVERIES FROM THE EMPLOYEES AND DIRECTORS, THE NET AMOUNT OF RS. 1,46,651/- WAS CLAIMED AND THE SIMILAR EXPENSES WERE ALLOWED IN PAST. IN THE ABSEN CE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE TO SHOW TH AT SUCH EXPENSES ITA NO. 7024 & 6493/MUM/2011 & 7025/MUM/2011 13 HAVE NOT BEEN INCURRED FOR BUSINESS PURPOSES OR PER SONAL IN NATURE, WE FOLLOWING THE RULE OF CONSISTENCY, DELETE THE DISAL LOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A). THE GROUND T AKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. 31. IN THE RESULT, ASSESSEES APPEAL FOR A.Y. 2003- 04 AND 2006-07 ARE ALLOWED AND REVENUES APPEAL FOR A.Y. 2003-04 STAND S DISMISSED. ORDER PRONOUNCED ON 26.9.2012. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 26.9.2012 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 6, MUMBAI 4. COMMISSIONER OF INCOME TAX -2, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI