AFL PVT.LTD., MUMBAI V. ASST.C.I.T. CENTRAL CIRCLE 13, MUMBAI

ITA 6697/MUM/2008

• Counselvise Citation: 669719914 RSA 2008
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: MITESH JOSHI
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI R.K. PANDA ,(AM) ITA NO.6697/MUM/2008 ASSESSMENT YEAR : 2005-06 M/S. AFL PVT. LTD. AFL HOUSE, LOK BHARATI COMPLEX, MAROL MAROSHI ROAD, ANDHERI(E), MUMBAI-400 059 PAN NO: AABCA2213P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 13, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MITESH JOSHI RESPONDENT BY : SHRI P. K. B. MENON O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 17.01.2008 PASSED BY THE CIT(A), CENTRAL VII, MUM BAI RELATING TO A.Y. 2005-06. 2. THIS APPEAL WAS EARLIER DISMISSED BY THE TRIBUN AL FOR NON PROSECUTION. SUBSEQUENTLY, THE TRIBUNAL VIDE ORDER DATED 20.05.2011 RECALLED THE ORDER. HENCE THIS IS THE RECALLED MATT ER. 3. THE GROUNDS OF APPEAL NO. 1, 2 & 3 RAISED BY THE ASSESSEE READ AS UNDER : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.26,69,74 5/- BEING THE FOREIGN STUDY EXPENSES OF MR. JAMSHED F. GUZDER . 2. THE LEARNED CIT(A) COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF ITA NO: 6697/MUM/2008 M/S. AFL PVT. LTD. 2 RS.18,51,886/- BEING THE FOREIGN STUDY EXPENSES OF MISS. AYESHA GUZDER. 3. THE APPELLANTS SUBMIT THAT THE ABOVE DISALLOWANC ES ARE EXCESSIVE AND UNREASONABLE. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE ABOVE GROUNDS ARE DECIDED AGAINST THE ASSESSEE BY T HE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.603/MUM /2007, ORDER DATED 4 TH MARCH, 2009 FOR THE A.Y. 2003-04. HE DREW THE ATTE NTION OF THE BENCH TO THE RELEVANT OBSERVATION OF THE TRIBUNAL A T PARA 13 AND 14 OF THE ORDER. IN VIEW OF THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE, THE GROUNDS OF APPEAL NO. 1, 2 & 3 ARE DI SMISSED. 5. THE GROUND OF APPEAL NO. 4 RAISED BY THE ASSESSE E READS AS UNDER : 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.76,405/- OUT OF CLEARING EXPENSES. 6. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE I MMEDIATE PRECEDING ASSESSMENT YEAR. WE FIND THE TRIBUNAL VIDE ITA NO.4 806/MUM/2007, ORDER DATED 25 TH JUNE, 2010 FOR THE A.Y. 2004-05 HAS DECIDED THE IS SUE AND ALLOWED THE CLAIM OF THE ASSESSEE. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 5.3 AND 5.4 ARE AS UNDER :- 5.3 WE HAVE CONSIDERED THE RIVAL SUBMISSION, PERUS ED MATERIAL ON RECORD AND ALSO THE JUDGMENT OF THE HON 'BLE HIGH COURT OF KARNATAKA RELIED ON BY THE LEARNED COUNSEL FOR ASSESSEE. THE CASE OF THE ASSESSEE IS THAT SIMILAR EXPENSES WERE INCURRED IN THE EARLIER YEAR AND THE SAME WERE ALLOWED. THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT. THE AO HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT BUT RESORTED TO ADHOC DISALLOWANCE WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW. IN THE CASE OF KONKAN MARINE AGENCIES (SUPRA) THE FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENTS FILED ITS RETURN OF INCOME CL AIMING DEDUCTION IN RESPECT OF INCENTIVE PAID TO DOCK WORK ERS, CASUAL LABOUR CHARGES, SUPERVISORY PAYMENTS AND GANGMEN. T HE AO ITA NO: 6697/MUM/2008 M/S. AFL PVT. LTD. 3 DISALLOWED THE CLAIM OF THE ASSESSEE IN THE ABSENCE OF PROPER VOUCHERS. THE LD. CIT(A) REJECTED THE APPEAL OF THE ASSESSEE. ON APPEAL, THE TRIBUNAL ALLOWED THE APPEAL OF THE A SSESSEE. ON FURTHER APPEAL, THE HON'BLE HIGH COURT OF KARNAT AKA HELD AS UNDER : TAKING INTO CONSIDERATION THE ASSESSEES BUSINESS AND THE PREVAILING PRACTICE IN THE TRADE, WHEREBY PAYME NTS HAD TO BE MADE BY FIRMS LIKE THE ASSESSEE IN ORDER TO ENSURE THAT THE WORK OF HANDLING GOODS WAS DONE WITHIN REASONABLE TIME AND EMERGENCY OPERATIONS OF CARGO HANDLING WERE DONE BEYOND WORKING HOURS, SUCH PAYMENTS WERE MADE EITHER THROUGH LABOUR OR WORKERS UNION. IT COULD NOT BE CONSIDERED TO BE PROHIBITED BY LAW. THE ASSESSEE COULD NOT BE EXPECTED TO TAKE RECEIPTS FROM INDIVIDUAL WORKERS OR MAKE PAYMENT BY WAY OF CHEQUES. THE PAYMENT WAS MADE BY THE ASSESSEE FOR BUSINESS PURPOSES AND THE EXPENDITURE HAD BEEN INCURRED IN THE ORDINARY COURSE OF BUSINES S. THEREFORE, THE DEDUCTION WAS ALLOWABLE BY WAY OF BUSINESS EXPENDITURE. 5.4 IN THE PRESENT CASE, THE EXPENSES WERE INCURRE D BY THE ASSESSEE FOR THE PURPOSE OF THE BUSINESS. THE AO, W ITHOUT VERIFYING THE FACTS OF THE CASE, DISALLOWED THE CLA IM OF THE ASSESSEE BY SAYING THAT THERE MAY BE AN ELEMENT OF PERSONAL EXPENSES. WHEN THE ASSESSEE FURNISHED BOOKS OF ACCO UNT AND ALL THE VOUCHERS, DISALLOWANCE MADE BY THE AO WITHO UT VERIFYING THE DETAILS FILED BY THE ASSESSEE, IS NOT JUSTIFIED. IN SIMILAR CIRCUMSTANCES, THE HON'BLE HIGH COURT OF KA RNATAKA HAS CONSIDERED THE ISSUE AND HELD THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE FOR THE PURPOSE OF BUSINESS. RE SPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE HON'BLE HIGH CO URT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND D IRECT FOR ALLOWANCE OF THE EXPENSES INCURRED BY THE ASSESSEE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY DISTINGUISHING FEATURE B ROUGHT TO OUR NOTICE BY THE LD. DR, THE ABOVE GROUND IS ALLOWED. 8. THE GROUNDS OF APPEAL NO. 5 & 6 RAISED BY THE AS SESSEE READ AS UNDER : ITA NO: 6697/MUM/2008 M/S. AFL PVT. LTD. 4 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN DIRECTING THE ASSESSING OFFICER TO RE-WORK THE ACTUAL AMOUNT OF EXPENDITURE U/S.14A READ WITH RULE 8D PRE SCRIBED BY NOTIFICATION DATED 24 TH MARCH, 2008. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THAT FOR A.Y. 2004-05 THE THEN C OMMISSIONER OF INCOME-TAX (APPEALS) HAD REDUCED THE DISALLOWANC E TO 2.5% OF THE DIVIDEND RECEIVED INSTEAD OF 5% OF DIVIDEND RECEIVED. 9. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE HAD SHOWN DIVIDEND INCOME OF RS.86,56,784/- WHICH WAS CLAIMED AS EXEMPT UNDER THE PROVISIONS OF SECTION 10. IN TERMS OF THE PROVI SIONS OF SECTION 14A, THE ASSESSEE HAD MADE ESTIMATED DISALLOWANCE AMOUNTING TO RS.1 LAKH. ACCORDING TO THE AO, THE AMOUNT SO ESTIMATED APPEAR ED TO BE A MEAGER AMOUNT AS COMPARED TO THE INCOME AND THE RELATED EX PENDITURE. HE, THEREFORE, CALCULATED SUCH AMOUNT AT RS.4,32,839/- BEING 5% ON RS.86,56,784/- AS REASONABLE EXPENDITURE FOR DISALL OWANCE U/S.14A. 10. IN APPEAL, THE LD. CIT(A) DIRECTED THE AO TO RE WORK THE ACTUAL AMOUNT OF EXPENDITURE U/S.14A READ WITH RULE 8D. 11. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. 12. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE EXPENDITURE DISALLOWED BY THE AO IS ACCEPTABLE TO T HE ASSESSEE AND, THEREFORE, THE MATTER NEED NOT BE SENT BACK TO THE AO. 13. AFTER CONSIDERING THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND CONSIDERING THE FACT THAT THE DISALLOWANCE OF 5% OF THE DIVIDEND INCOME AS PROPORTIONATE EXPENDITURE U/S.14A IS ACCEPTABLE TO THE ASSESSEE, WE UPHOLD THE ACTION OF THE AO. THE GROUND RAISED BY T HE ASSESSEE IS ACCORDINGLY DISMISSED. ITA NO: 6697/MUM/2008 M/S. AFL PVT. LTD. 5 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ITSELF I.E. ON 28 TH JULY, 2011. SD/- ( D. K. AGARWAL ) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 28/07/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, A - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI