AKSHAYE KHANNA, MUMBAI V. ITO 16(1)(1), MUMBAI

ITA 6496/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3318 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 13-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R KAVITHA
• Assessee Lawyers: AJAY SEKHRI
• Keywords: Business income; Depreciation
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6496/MUM/2018 ( ASSESSMENT YEAR: 2014-15 ) AKSHAYE KHANNA 12-A, SUMANGAL, 13 B.G.KHER MARG MALABAR HILL MUMBAI-400 006 VS. ITO-16(1)(1) ROOM NO.439A, 4 TH FLOOR AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AA GPK4677B ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY MS. R.KAVITHA, DR ASSESSEE BY SHRI AJAY SEKHRI, AR DATE OF HEARING 20 /02 /2020 DATE OF PRONOUNCEME NT 04 /03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, MUM BAI, DATED 21/09/2018 AND IT PERTAINS TO THE A.Y 2014-15. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD COMMISSIONER OF INCOME TAX (APPEALS) -4 [HEREINAFTE R REFERRED TO AS 'LD C1T (A)'] ERRED IN CONFIRMING THE ACTION OF LD AO I N DISALLOWING A SUM OFGA.15,78,830/- _ON ACCOUNT OF EXPENDITURE ON MOTO R CAR, REPAIR & MAINTENANCE, INTEREST ON CAR LOAN AND DEPRECIATION ON MOTOR CAR. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD COMMISSIONER OF INCOME TAX (APPEALS) -4 [HEREINAFTE R REFERRED TO AS 'LD CIT (A)'] ERRED IN CONFIRMING THE ACTION OF LD AO I N DISALLOWING A SUM OF RS.13,97,559/- ON ACCOUNT OF EXPENDITURE PERTAINING TO SPEED BOAT AND DEPRECIATION ON SPEED BOAT AND BOAT TRAILER. 3. THAT THE ORDER OF LD.AO IS BAD IN LAW AND ON FA CTS. ITA NO.6496/MUM/2018 AKSHAYE KHANNA 2 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE FOREGOING GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FILM ACTOR, FILED HIS RETURN OF INCOME FOR AY 2014-15 ON 26/07/ 2014, DECLARING TOTAL LOSS OF RS.29,54,260/-. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD . AO NOTED THAT THE ASSESSEE HAS CLAIMED VARIOUS EXPENDITURE AMOUNT ING TO RS.55,90,975/-, BUT NO RECEIPTS FROM BUSINESS HAS B EEN OFFERED TO TAX. THE LD. AO, FURTHER NOTED THAT OUT OF TOTAL EX PENDITURE DEBITED INTO THE PROFIT AND LOSS ACCOUNT AMOUNTING TO RS.55 ,19,975/-, A SUM OF RS.18,11,252/- HAS BEEN SUO-MOTO DISALLOWED, AS PERSONAL EXPENSES. THEREFORE, HE CALLED UPON THE ASSESSE TO EXPLAIN AS TO WHY, TOTAL EXPENDITURE DEBITED UNDER VARIOUS HEADS OF EXPENSES SHALL NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE HAS STATED THAT ALTHOUGH, THERE IS NO RECEIPTS FROM BUSINESS OR PRO FESSION FOR THE YEAR UNDER CONSIDERATION, BUT HE HAD INCURRED VARIO US EXPENSES IN ORDER TO MAINTAIN ITS OFFICE AND OTHER BUSINESS EST ABLISHMENTS, THEREFORE, IT IS INCORRECT TO SAY THAT EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS IS PERSONAL IN NATURE AND IT CA NNOT BE ALLOWED AS DEDUCTION. THE LD. AO AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF THE FACT THAT T HE ASSESSEE HAS NOT RECEIVED ANY INCOME FROM PROFESSION, HAS DISALL OWED TOTAL EXPENDITURE CLAIMED UNDER VARIOUS HEADS OF EXPENSES , INCLUDING MOTOR CAR EXPENSES, DEPRECIATION ON MOTOR CAR AND SPEED BOAT, REPAIRS AND MAINTENANCE EXPENSES AND OTHER EXPENSE. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), IT WAS SUBMITTED THAT THE LD. AO WAS INCORRECT IN DISA LLOWED TOTAL ITA NO.6496/MUM/2018 AKSHAYE KHANNA 3 EXPENDITURE CLAIMED UNDER VARIOUS HEADS OF EXPENSES , WHICH ARE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, WITHOUT APPRECIATING THE FACT THAT WHETHER OR NOT ANY INCOM E IS GENERATED FROM THE PROFESSION, BUT CERTAIN EXPENDITURE NECESS ARILY HAVE TO BE INCURRED TO MAINTAIN THE BUSINESS OR PROFESSION OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT ALTHOUGH, THERE IS NO RECEIPT FROM THE BUSINESS FOR THE YEAR UNDER CONSIDERATION, BUT THE ASSESSEE EARNED SUBSTANTIAL PROFESSIONAL RECEIPTS IN PRECEDI NG FINANCIAL YEAR AND IN SUBSEQUENT FINANCIAL YEAR. THEREFORE, IT IS INCORRECT TO DISALLOW VARIOUS EXPENDITURE INCURRED FOR THE PURPOSE OF BUS INESS ONLY FOR THE REASON THAT THERE IS NO BUSINESS RECEIPTS FOR THE Y EAR UNDER CONSIDERATION. THE LD.CIT(A) AFTER CONSIDERING RELE VANT SUBMISSIONS OF THE ASSESSEE AND ALSO, BY FOLLOWING HIS PREDECES SOR LD.CIT(A) ORDER, OBSERVED THAT ALTHOUGH, THE ASSESSEE CLAIMS TO HAVE INVOLVED IN PROFESSION, BUT NO EVIDENCE HAS BEEN FURNISHED T O PROVE THAT IN FACT, HE IS INVOLVED IN ANY PROFESSIONAL ACTIVITY O F FILM PRODUCTION, SCRIPT WRITING OR PREPARATION FOR ACTING ETC. THERE FORE, HE OPINED THAT THERE IS NO ERROR IN FINDINGS RECORDED BY THE LD. AO IN DISALLOWANCES OF TOTAL EXPENDITURE CLAIMED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND ACCORDINGLY, REJECTED GROUND TAKEN B Y THE ASSESSEE. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE IS I N APPEAL BEFORE US. 5. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT THE LD.CIT(A) WAS ERRED IN NOT APPRECIATING CO RRECT FACTS, WHILE CONFIRMING ADDITIONS MADE BY THE LD. AO TOWARDS DIS ALLOWANCES OF TOTAL EXPENDITURE DEBITED INTO PROFIT AND LOSS ACCO UNT UNDER VARIOUS HEADS OF EXPENSES, EVEN THOUGH THE ASSESSEE HAS FIL ED NECESSARY EVIDENCES TO PROVE THAT THE ASSESSEE IS INVOLVED IN THE PROFESSION OF ITA NO.6496/MUM/2018 AKSHAYE KHANNA 4 FILM PRODUCTION AND ACTING AND THE EXPENDITURE DEBI TED UNDER VARIOUS HEADS OF EXPENSES HAVE TO BE NECESSARILY INCURRED F OR THE PURPOSE OF BUSINESS OR PROFESSION OF THE ASSESSEE. THE LD. AR, FURTHER SUBMITTED THAT IT IS A RECURRING ISSUE, WHERE THE L D. AO HAS MADE SIMILAR DISALLOWANCES IN EARLIER YEARS AND THE MATT ER HAS REACHED TO THE TRIBUNAL. THE TRIBUNAL AFTER CONSIDERING NECESS ARY FACTS HAS HELD THAT THE ASSESEE IS ENGAGED IN THE PROFESSION OF FI LM PRODUCTION AND ACTING AND EXPENDITURE INCURRED UNDER VARIOUS HEADS OF EXPENSES, INCLUDING DEPRECIATION ON MOTOR CAR AND SPEED BOAT IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF PROFESSI ON OF THE ASSESSEE. FURTHER, THE TRIBUNAL AFTER CONSIDERING F ACT THAT THE ASSESSEE HAS MADE SUO-MOTO DISALLOWANCES OF CERTAIN EXPENSES HAS DELETED ADDITIONS MADE BY THE LD. AO TOWARDS VA RIOUS EXPENSES. THE LD. AR, FURTHER SUBMITTED THAT A SIMI LAR ADDITION HAS BEEN MADE BY THE LD. AO FOR AY 2013-14, WHERE THE L D. AO HAS MADE 25% DISALLOWANCES OF CERTAIN EXPENSES, BUT THE LD. CIT(A) HAS RESTRICTED SUCH DISALLOWANCES TO 20% OF SAID EX PENSES. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE SUO -MOTO DISALLOWANCES OF 30% OF CERTAIN EXPENSES AND 100% O F CERTAIN EXPENSES DEPENDING UPON THE FACTS AND NATURE OF EXP ENSES. THEREFORE, FURTHER DISALLOWANCES TOWARDS OTHER EXPE NSES IS INCORRECT. 6. THE LD. DR, ON THE OTHER HAND, SUPPORTING ORDER OF THE LD.CIT(A) SUBMITTED THAT THE LD. AO, AS WELL AS THE LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THE ASSE SSEE HAS FAILED TO FILE NECESSARY EVIDENCES TO PROVE THAT HE IS INVOLV ED IN THE PROFESSION OF FILM PRODUCTION AND ACTING AND ALSO T O PROVE THAT EXPENDITURE DEBITED UNDER VARIOUS HEADS OF EXPENSES ARE WHOLLY ITA NO.6496/MUM/2018 AKSHAYE KHANNA 5 INCURRED FOR THE PURPOSE OF PROFESSION. THEREFORE, THERE IS NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE FACT WITH REGARD TO NO PROFESSIONAL RECEIPTS FOR THE YEA R UNDER CONSIDERATION, FROM THE PROFESSION OF FILM ACTING A ND FILM PRODUCTION IS NOT DISPUTED FOR THE ASSESSEE. BUT, THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES WAS THAT WHETHER OR NO T ANY RECEIPTS FROM PROFESSION, BUT HE NEEDS TO INCURS CERTAIN EXP ENSES TO KEEP ITS PROFESSION ALIVE. ALTHOUGH, THE ASSESSEE HAS DEBITE D VARIOUS EXPENDITURE TO THE PROFIT AND LOSS ACCOUNT, BUT DEP ENDING UPON NATURE OF EXPENSES, HE HAS MADE SUO-MOTO DISALLOWAN CES OF 30% & 100% ON CERTAIN EXPENSES. THE LD. AO HAS DISALLOWED 100% EXPENDITURE DEBITED UNDER VARIOUS HEAD OF EXPENSES, ONLY ON THE GROUND THAT THERE IS NO BUSINESS RECEIPTS FOR THE Y EAR UNDER CONSIDERATION. IT IS AN ADMITTED AND SETTLED POSITI ON OF LAW THAT ANY EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND DEBITED INTO PROFIT AND LOSS ACCOUNT HAVE TO BE NECESSARILY ALLOWED, IRRESPECTIVE OF THE FACT THAT WHETHER, THE RE IS RECEIPT OF INCOME OR NOT FROM THE PROFESSION. THIS PRINCIPLE H AS BEEN LAID DOWN BY THE HONBLE SUPREME COURT, IN THE CASE OF CIT VS RAJENDRA PRASAD MODY (1978) 115 ITR 519. BUT, FACT REMAINS THAT WHETHER, EXPENDITURE INCURRED BY THE ASSESSEE UNDER VARIOUS HEADS OF EXPENSES ARE NECESSARILY HAVE TO BE INCURRED FOR TH E PURPOSE OF BUSINESS OR NOT HAS TO BE SEEN IN THE GIVEN FACTS O F THE CASE, MORE PARTICULARLY, WHEN THERE IS NO PROFESSIONAL RECEIPT S FOR THE YEAR UNDER CONSIDERATION. ADMITTEDLY, FOR THE YEAR UNDER CONSI DERATION, THERE IS NO PROFESSIONAL RECEIPTS FROM HIS PROFESSION. THE A SSESSEE HAS ITA NO.6496/MUM/2018 AKSHAYE KHANNA 6 EARNED PROFESSIONAL INCOME FROM PRECEDING, AS WELL AS SUBSEQUENT FINANCIAL YEAR. FURTHER, THE ASSESSEE ON ITS OWN MA DE SUO-MOTO DISALLOWANCES OF CERTAIN EXPENSES CONSIDERING THE N ATURE AND TYPE OF EXPENSES AND ACCORDINGLY, MADE DISALLOWANCES OF AN AMOUNT OF RS.18,11,252/- OUT OF TOTAL EXPENDITURE INCURRED FO R THE PURPOSE OF PROFESSION OF RS.54,61,636/- AND SUCH PERCENTAGE OF DISALLOWANCES VARIOUS FROM 30% TO 100%. IN PRECEDING FINANCIAL YE AR RELEVANT TO AY 2012-13, THE LD. AO HAS MADE SIMILAR DISALLOWANC ES. HOWEVER, THE MATTER REACHED TO THE TRIBUNAL, THE TRIBUNAL HA S DELETED ADDITIONS MADE BY THE LD. AO TOWARDS EXPENSES BY OB SERVING THAT THE ASSESSE HAS BEEN USING SPEED BOAT AND OTHER MOT OR VEHICLES FOR THE PURPOSE OF HIS PROFESSION AND ACCORDINGLY, NECE SSARY EXPENDITURE INCURRED FOR MAINTENANCE OF VEHICLES AN D MOTOR BOAT, INCLUDING DEPRECIATION NEEDS TO BE ALLOWED. FURTHER , LD.AO HAS MADE SIMILAR DISALLOWANCES OF 25% OF VARIOUS EXPENDITU RE FOR AY 20103- 14 AND THE LD.CIT(A) HAS RESTRICTED SUCH DISALLOWAN CES TO 20% OF TOTAL EXPENSES AND THE REVENUE HAS ACCEPTED THE FIN DINGS OF LD.CIT(A). FOR THE YEAR UNDER CONSIDERATION, THE AS SESEE HIMSELF HAS MADE SUO-MOTO DISALLOWANCES OF 30% TO 100% OF C ERTAIN EXPENSES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT WHEN, THE LD. AO HAS MADE 25% DISALLOWANCES OF EXPENSES IN P RECEDING YEAR, WAS ERRED IN DISALLOWED 100% EXPENSES FOR THE YEAR UNDER CONSIDERATION, WITHOUT THERE BEING ANY CHANGE IN F ACTS FOR THE IMPUGNED ASSESSMENT YEAR. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT SUO-MOTO DISALLOWANCES MADE BY THE ASSESS EE TOWARDS CERTAIN EXPENSES IS IN ACCORDANCE WITH THE FINDINGS OF THE TRIBUNAL FOR AY 2012-13 AND ACCORDINGLY, THERE IS NO REASON FOR THE LD. AO TO DEVIATE AND MADE 100% DISALLOWANCES OF EXPENSES W ITHOUT THERE BEING ANY CHANGE IN FACTS AND CIRCUMSTANCES FOR THE IMPUGNED ITA NO.6496/MUM/2018 AKSHAYE KHANNA 7 ASSESSMENT YEAR. HENCE, CONSIDERING THE FACTS AND C IRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO- ORDINATE BENCH IN EARLIER YEARS, WE DIRECT THE LD. AO TO DELETE ADDIT IONS MADE TOWARDS DISALLOWANCES OF EXPENDITURE, OVER AND ABOVE SUO-MO TO DISALLOWANCES MADE BY THE ASSESEE IN HIS STATEMENT OF TOTAL INCOME. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 /03/ 2020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//