S.F. ENGINEER, MUMBAI V. JCIT 12(2), MUMBAI

ITA 6595/MUM/2009

• Counselvise Citation: 659519914 RSA 2009
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 12-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUBAL
• Keywords: Depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.6595/MUM /2009 (ASSESSMENT YEAR: 2006-07) S.F. ENGINEER, NOSHIRWAN MANSION, HENRY ROAD, COLABA MUMBAI -400 039 ....... APPELLANT VS JOINT COMMISSIONER OF INCOME TAX, RANGE 12(2), MUMBAI -400 039 ..... RESPONDENT PAN: AAMFS 9673 B APPELLANT BY: SHRI DEEPAK TRALSHAWALA RESPONDENT BY: SHRI M.R. KUBAL O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-23, MUMBAI DATED 29.10.2009 FOR THE A.Y. 2006-07. GROUND NO.1 READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) XII, MUMBAI ERRED IN HOLDING THAT C REDIT FOR TDS OF RS 3,75,280/- IN RESPECT OF INCOME TAXED IN AY 2005-06 WILL NOT BE ALLOWED IN A.Y. 2006-07 INSPITE OF THE FACT THAT THE PARTY HAS DEDUCTED THE TAX IN AY 2006 -07 AND THE APPELLANT HAD ALREADY OFFERED THE INCOME ON WHI CH TDS OF RS 3,75,280/- IS DEDUCTED ON CASH BASIS IN A.Y. 2005- 06. ITA 6595/MUM/2009 S.F. ENGINEER 2 2. WE HAVE HEARD THE PARTIES. THE ASSESSEE IS ENGA GED IN THE BUSINESS OF PROJECT CO-ORDINATION AND DEVELOPMENT O F THE PROPERTY. THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF THE AC COUNTING. THE ASSESSEE HAS SHOWN PROJECT COORDINATION FEES OF RS 7,46,73,089/- BUT CLAIM OF TDS CREDIT ON THE PROJECT COORDINATION FEE S OF RS 8,13,62,565/-. THE A.O., THEREFORE, RESTRICTED THE CREDIT TO THE EXTENT OF THE AMOUNT DECLARED IN THE A.Y. 2006-07. THE SUB MISSION OF THE LD. COUNSEL IS THAT THE SUITABLE DIRECTIONS MAY BE GIVE N TO THE A.O. TO ALLOW THE CREDIT IN THE A.Y. 2005-06, PERTAINING TO THOSE RECEIPTS/INCOME WHICH IS DECLARED IN THE PRECEDING YEAR. WE ARE UNABLE TO ACCEPT THE PLEA OF THE LD. COUNSEL FOR IS SUING SUCH DIRECTIONS. AS PER PROVISIONS OF SEC. 199 OF THE AC T THE A.O. GAVE THE CREDIT TO THE ASSESSEE AND TO THAT EXTENT THE ASSES SEE HAS NOT GRIEVANCE. WE ARE NOT DEALING THE APPEAL FOR THE A .Y. 2005-06, HENCE IT IS BEYOND OUR JURISDICTION TO DECIDE THE ISSUE I N THE A.Y. 2005-06, WHICH IS NOT BEFORE US. WE DO NOT FIND ANY MERIT I N THE GROUND TAKEN BY THE ASSESSEE. WE, ACCORDINGLY, DISMISS GROUND NO.1 3. GROUND NO.2 READS AS UNDER:- 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) XII, MUMBAI ERRED IN HOLDIN G THAT INSPITE OF THE FACT THAT THE APPELLANT IS LIABLE FO R AND HAS PAID FBT ON 20% OF MOTOR CAR EXPENSES OF RS 4,02,28 6/- AND DEPRECIATION OF RS 5,00,602/-, THE DISALLOWANCE OF 1/3 RD OF MOTOR CAR EXPENSES AND DEPRECIATION AGGREGATING TO RS 3,00,963/- IS JUSTIFIED. WITHOUT PREJUDICE TO THE ABOVE CONTENTION IT IS SUB MITTED THAT FBT ON MOTOR CAR EXPENSES AND DEPRECIATION CONSIDERED AS FRINGE BENEFIT SHOULD BE CONSIDERED A S DISALLOWANCE WHILE CONSIDERING THE DISALLOWANCE OF 1/3RD ITA 6595/MUM/2009 S.F. ENGINEER 3 OF MOTOR CAR EXPENSES AND DEPRECIATION AND ACCORDIN GLY THE DISALLOWANCE SHOULD BE RESTRICTED. 4. WE HAVE HEARD THE PARTIES. THE ONLY GRIEVANCE O F THE ASSESSEE IS THAT THE A.O. MADE THE 1/3 RD DISALLOWANCE OF MOTOR-CAR EXPENSES AND DEPRECIATION AGGREGATING TO RS 3,00,963/- AND THAT ALSO INCLUDES EXPENDITURE ON WHICH FRINGE BENEFIT TAX IS PAID. T HE LD. COUNSEL ARGUES THAT ONCE THE FBT IS PAID ON A PARTICULAR EX PENDITURE THEN THAT EXPENDITURE CANNOT BE THE SUBJECT MATTER OF FURTHER DISALLOWANCE AS FBT IS PAID ON THE SERVICES AND PRIVILEGES PROVIDED TO THE EMPLOYEES AS WELL AS PARTNERS. THE CONTENTIONS OF THE ASSESS EE IS THAT OUT OF THE TOTAL EXPENDITURE 20% IS SUBJECTED TO THE FRINGE BE NEFIT TAX FBT AND HENCE, PRACTICE OF DISALLOWING 1/3 RD OF THE MOTOR-CAR EXPENSES IS DISALLOWED. THE A.O. MADE DISALLOWANCE AT THE 1/3 RD OF THE EXPENDITURE. THE LD. COUNSEL ARGUED THAT AT LEAST THE FRINGE BENEFIT TAX INCLUDED IN THE SAID EXPENDITURE MAY BE REDUCED AND 1/3 RD DISALLOWANCE IS AT A HIGHER SIDE THE SAME MAY BE RE DUCED. WE HAVE ALSO HEARD THE LD. D.R. IN OUR OPINION, IF WE REST RICT THE DISALLOWANCE TO 25% AFTER REDUCING THE FBT FROM THE GROSS EXPEND ITURE AND DEPRECIATION THAT WOULD MEET THE ENDS OF THE JUSTIC E. WE ACCORDINGLY DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE TO 20% AFTER EXCLUDING FBT ON THE SAID EXPENDITURE. ACCORDINGLY, GROUND NO.2 IS PARTLY ALLOWED. 5. GROUND NO.3 READS AS UNDER:- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) XII, MUMBAI HAS ERRED IN HO LDING THAT EVEN NO EXPENSES ARE INCURRED FOR MAKING INVES TMENTS IN MUTUAL FUNDS UNDER TAKEN BY THE BANK ON BEHALF O F THE APPELLANT DISALLOWANCE U/S.14A OF ` 3,26,834/- IS JUSTIFIED BASED ON THE FACT THAT THE DISALLOWANCE U/S 14A WOU LD BE BASED ON BOTH DIRECT AND INDIRECT EXPENSES AND THAT APPLICATION OF RULE 8D IS RETROSPECTIVE. ITA 6595/MUM/2009 S.F. ENGINEER 4 6. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITS THAT THIS ISSUE HAS TO GO BACK TO THE FILE OF THE A.O. FOR FR ESH ADJUDICATION AS ADMITTEDLY RULE 8D IS NOT APPLICABLE AS PER THE DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BOMBAY MAN UFACTURING CO. LTD. THE LD. D.R. HAS NO OBJECTION TO REMAND THE I SSUE BACK TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. ACCORDING LY, WE SET ASIDE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND REMAND G ROUND TO THE FILE OF THE A.O. ACCORDINGLY, GROUND NO.3 IS TREATED AS AL LOWED FOR STATISTICAL PURPOSE. 7. GROUND NO.4 READS AS UNDER:- 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) XII, MUMBAI HAS ERRED IN HO LDING THAT LEGAL AND PROFESSIONAL EXPENSES OF ` 1,61,000/- IN RESPECT OF FILING SUITS AND EVICTION ORDER ON TENAN TS OF MARLOW PROPERTY, THE INCOME FROM WHICH IS TAXABLE U NDER THE HEAD PROPERTY INCOME AND ` 50,000/- IN RESPECT OF MCGM CASE FILED IN RESPECT OF THE TENANTED PROPERTY USED AS THE OFFICE IS NOT ALLOWABLE AS AN EXPENSE. 8. THE LD. COUNSEL SUBMITS THAT HE IS ONLY PRESSING THE RELIEF IN RESPECT OF THE FEES PAID TO SHRI DINESH GANDHI FOR APPEARING IN THE CASES OF MCGM AND ABOUT TWO OTHER PAYMENTS, HE IS N OT PRESSING THE RELIEF OF THOSE PAYMENTS I.E. ` 1,50,000/- AS LEGAL FEES PAID TO DIKSHIT MANEKLAL & CO. FOR APPEARING IN THE CASE OF METAL B OX AND ` 11,000/- AS LEGAL FEES PAID TO MR. A.V. YADAV FOR APPEARING IN MARLOW CHS SUIT. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE HAS RENOV ATED THE BATHROOM AND TOILETS IN THE BUSINESS PREMISES AND M UNICIPAL COUNCIL TOOK THE ACTION AGAINST THE ASSESSEE AND THE ASSESS EE WAS REQUIRED TO DEFEND THE CASE BY ENGAGING LAWYER AND IT WAS A BUS INESS EXPEDIENCY FOR WHICH THE ASSESSEE HAS INCURRED THE EXPENSE. H E PLEADED FOR ALLOWING THE SAME. WE HAVE HEARD THE LD. D.R. WHO VEHEMENTLY ITA 6595/MUM/2009 S.F. ENGINEER 5 OPPOSED FOR ALLOWING THE SAID EXPENDITURE. AS PER THE FACTS ON RECORD, WE FIND THAT THE PAYMENT MADE TO SHRI DINESH GANDHI IS TOWARDS THE ACTION TAKEN BY THE MCGM FOR CARRYING OUT RENOVATIO N AND RECONSTRUCTION OF BATHROOM IN THE OFFICE PREMISES T ENANTED TO THEM. THE SAID EXPENDITURE, IN OUR OPINION, IS INCURRED F OR THE BUSINESS PURPOSE AND ACCORDINGLY ALLOWABLE U/S.37(1). WE, A CCORDINGLY, DIRECT THE A.O. TO ALLOW THE EXPENDITURE IN RESPECT OF THE LEGAL FEES PAID TO SHRI YADAV AMOUNTING TO ` 50,000/-. ACCORDINGLY, GROUND NO.4 IS PARTLY ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH JULY 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 15TH JULY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)23, MUMBAI. 4) THE CIT-XII, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 6595/MUM/2009 S.F. ENGINEER 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 12.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 13.07.2011 SR.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.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER