GENELIA DSOUZA, MUMBAI V. ACIT 11(1), MUMBAI

ITA 6723/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8055 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALG BENCH, MUMB AI BEFORE SHRI D.MANMOHAN, VP AND SHRI D. KARUNAKARA R AO, AM ITA NO. 6723/MUM/2011 ASSESSMENT YEAR-2007-08 GENELIA DSOUZA, 401, CENTRAL PARTK ,ST. ANDREWS ROAD, BANDRA (WEST), MUMBAI-400050 / VS. ACIT-11(1), ROOM NO. 439, AAYAKAR BHAVAN, M.K.ROAD, CHURCHGATE, MUMBAI-400020 ./ PAN :AEMPD5463L ( /ASSESSEE ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI MANDAR VAIDYA / REVENUE BY : SHRI R.N. DSOUZA, DR / DATE OF HEARING : 22/09/2014 / DATE OF PRONOUNCEMENT : 10/10/2014 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE CIT(A)-3, MUMBAI DATED 08/08/2011 FOR THE ASSESSMEN T YEAR 2007- 08. THE GROUNDS READ AS UNDER: I. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING MOBILE CHARGES AMOUNTING TO RS .1,23,291/-. II. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING SOCIETY CHARGES AMOUNTING TO R S. 5,990/-. III. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING BUSINESS PROMOTION EXPENSES AM OUNTING TO RS. 45,850/-. 2. FACT NECESSARY FOR DISPOSAL OF THE APPEAL ARE STA TED IN BRIEF. THE ASSESSEE HEREIN IS A FILM ACTRESS, STAGE SHOW A RTIST AND A MODEL. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO A.Y. 200 7-08, ASSESSEE DECLARED TOTAL INCOME OF RS. 53,62,797. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE 2 ITA NO.6723/MUM/2011. ASSESSEE DEBITED A SUM OF RS. 1,23,291/- TOWARDS PA YMENT OF MOBILE BILL; MOBILE PHONE WAS IN THE NAME OF HER MOTHER SM T. JEANETTE DSOUZA. SINCE THE ASSESSEE DID NOT PAY ANY REMUNER ATION TO HER MOTHER THE ASSESSING OFFICER WAS OF THE VIEW THAT T HE EXPENDITURE INCURRED BY THE MOTHER ON HER MOBILE NUMBER IS NOT CONNECTED TO THE INCOME EARNED BY THE ASSESSEE. THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT SHE WAS NOT MAINTAINING ANY PAID SECRETARY/MANAGER. SMT. JEANETTE DSOUZA WAS HELPI NG HER IN LIAISONING WITH PRODUCERS FOR GETTING FILMS, FIXING HER REMUNERATION, FIXING DATES/SCHEDULE FOR SHOOTING ETC. THE CLAIM O F THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER MAINLY ON THE GROUND THAT THE ASSESSEE DID NOT PAY ANY REMUNERATION TO HER MOTHER . MOREOVER THE ASSESSEE HAD ALREADY DEBITED MOBILE CHARGES AND TEL EPHONE CHARGES OF RS. 1,79,862/- AND RS. 3,380/- TO COVER HER OFFI CIAL USE OF COMMUNICATION EXPENSES. THUS EXPENDITURE INCURRED O N THE MOBILE NUMBER OF HER MOTHER WAS DISALLOWED AS BEING PERSON AL IN NATURE. 3. ON AN APPEAL, LEARNED CIT(A) AFFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE SAME REASON AND THUS THE A SSESSEE PREFERRED A SECOND APPEAL ON THIS ISSUE VIDE GROUND NO. 1. 4. CASE OF THE REVENUE IS THAT THE ASSESSEES MOTHE R IS NOT AN EMPLOYEE OF THE ASSESSEE AND THERE IS NO EVIDENCE T HAT THE SAID EXPENDITURE WAS WHOLLY AND EXCLUSIVELY SPENT FOR AS SESSEES BUSINESS. ON THE OTHER HAND CASE OF THE LEARNED AUT HORISED REPRESENTATIVE, APPEARED ON BEHALF OF THE ASSESSEE, IS THAT SMT. JEANETTE DSOUZA ACTED AS PERSONAL SECRETARY OF THE ASSESSEE AND IN THE PROCESS, SHE HAD TO INTERACT WITH MANY PERSONS. THEREFORE EXPENDITURE INCURRED ON THE USE OF MOBILE PHONE IS WHOLLY AND EXCLUSIVELY CONNECTED TO THE ASSESSEES BUSINESS. I N THIS REGARD 3 ITA NO.6723/MUM/2011. LEARNED COUNSEL ADVERTED OUR ATTENTION TO THE NEWS PAPER REPORT TO HIGHLIGHT THAT MS. GENELIA DSOUZA WAS SHUTTLING BE TWEEN FOUR FILM INDUSTRIES I.E. FROM ALL FOUR REGIONS APART FROM SP ARING TIME FOR BRAND ENDORSEMENTS. THE ASSESSEE WAS NOT MAINTAINING ANY PROFESSIONAL ASSISTANT OR SECRETARY TO EFFECTIVELY LOOK INTO HER ASSIGNMENTS AND SOLELY DEPENDENT ON HER MONTH WHO IN TURN, ACTED AS UNPAID SECRETARY CUM TRUSTED MANAGER. IN THE PROCESS HER M OTHER HAD TO LIAISON WITH THE PRODUCERS, FIX HER REMUNERATION, F IXING SCHEDULE/DATES FOR SHOOTING ETC. IT WAS ALSO SUBMIT TED THAT MANY A TIME INTERNATIONAL CALLS ALSO HAD TO BE MADE IN ORD ER TO GARNER MORE FILMS, STAGE SHOWS, MODELING ACTIVITIES ETC. IT WAS FURTHER SUBMITTED THAT NEITHER THE ASSESSING OFFICER NOR LEARNED CIT( A) HAD VERIFIED OR TEST CHECKED THE EXPENDITURE, TO SHOW THAT THE TELE PHONE CALLS WERE MADE FOR PERSONAL PURPOSES; THE ONLY REASON GIVEN B Y THE TAX AUTHORITIES WAS THAT THE ASSESSEES MOTHER WAS NOT AN EMPLOYEE OF THE ASSESSEE AND HENCE EXPENDITURE INCURRED BY THE ASSESSEES MOTHER CANNOT BE CONSIDERED TO HAVE BEEN INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT WAS TH US SUBMITTED THAT THE TAX AUTHORITIES HAVE DISALLOWED THE CLAIM ARBIT RARILY, OVERLOOKING THE FACT THAT THE ASSESSEES MOTHER ACTED AS MANAGE R TO THE ASSESSEE AND IN THE PROCESS HAD TO INCUR EXPENDITURE IN THE FORM OF MAKING CALLS ETC. TO FIX SCHEDULES. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. IT DESERVES TO BE NOTICED THAT NEITHER THE ASSESSING OFFICER NOR LEARNED CIT(A) DISCUSSED ABOU T THE EXCESSIVE NATURE OF EXPENDITURE OR VERIFIED THE CALLS MADE BY ASSESSEES MOTHER TO HIGHLIGHT THAT THE EXPENDITURE WAS INCURRED FOR NON-BUSINESS PURPOSES; THE ONLY REASON GIVEN BY THE TAX AUTHORIT IES WAS THAT THE ASSESSEES MOTHER WAS NOT AN EMPLOYEE OF THE ASSESS EE. CONTENTS OF 4 ITA NO.6723/MUM/2011. THE NEWS PAPER REPORT, AS WELL AS PLEA OF THE ASSES SEE THAT SHE WAS ACTING AS UNPAID PERSONAL SECRETARY/PERSONAL ASSIST ANT, WERE NOT CONTROVERTED BY PLACING ANY COGENT MATERIAL ON RECO RD. WE ARE THEREFORE OF THE OPINION THAT ARBITRARY DISALLOWANC E OF ENTIRE EXPENDITURE IS NOT CALLED FOR. HOWEVER, IT CANNOT B E RULED OUT THAT THERE WILL BE SOME PERSONAL ELEMENT ON MOBILE PHONE CALLS. WE ARE OF THE OPINION THAT A TOKEN DISALLOWANCE OF ABOUT 20% O F THE TOTAL CLAIM WOULD MEET THE ENDS OF JUSTICE. IN OTHER WORDS, WE DIRECT THE ASSESSING OFFICER TO ALLOW MOBILE CHARGES TO THE TU NE OF RS. 1,00,000/-. GROUND NO. 1 IS DISPOSED OF ACCORDINGLY . 6. GROUND NO.2 RELATES TO THE DISALLOWANCE OF SOCIE TY MAINTENANCE CHARGES AMOUNTING TO RS. 5,990/-. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DEBITED A SUM OF RS. 5,990/- TOWARDS HER S HARE OF THE SAID CHARGES IN CONNECTION WITH FLAT OWNED BY SHRI NEIL DSOUZA, ASSESSEES FATHER. THE AUDITORS REPORT IS THE SOUR CE FOR THIS INFORMATION. CONSIDERING THE FACT THAT THE ASSESSE E RESIDES WITH HER FATHER, WHO OWNS THE FLAT AT BANDRA, ASSESSEE CLAIM ED THE SAME AS AN ALLOWABLE EXPENDITURE AGAINST HER INCOME. HOWEVER, THE AO DISALLOWED THE SAME BY HOLDING THAT SHE IS NOT ENTI TLED TO THE SAID CLAIM. DURING THE FIRST APPELLATE PROCEEDINGS, ASS ESSEE SUBMITTED THAT SHE DOESNT OWN ANY OTHER FLAT DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, SHE IS A CO-RESIDENT O F THE SAID FLAT ALONG WITH HER PARENTS. IT WAS ALSO SUBMITTED THAT THE SA ID CLAIM, WHICH IS A PART OF THE TOTAL EXPENDITURE OF AT RS. 23,958, S HOULD BE ALLOWED TOWARD HER SHARE OF EXPENDITURE. AS PER THE ASSESSE E, IT IS NEITHER EXCESSIVE NOR UNREASONABLE IN TERMS OF SECTION 40A( 2)(B) OF THE ACT. THE CIT(A) CONSIDERED THE SAID CLAIM OF THE ASSESSE E AND HELD THAT SOCIETY MAINTENANCE CHARGES, BEING ATTACHED TO THE FLAT, WHICH IS NOT HELD BY THE ASSESSEE, IS THE LIABILITY OF FLAT OWNE R AND NO SHARE OF IT IS 5 ITA NO.6723/MUM/2011. ALLOCABLE TO THE CO-RESIDENT OF THE SAID FLAT. THE ASSESSEE HAS NO LIABILITY TO PAY AND THEREFORE, THE CLAIM OF THE AS SESSEE SHOULD NOT BE ALLOWED. THUS, HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 7. DURING THE PROCEEDINGS BEFORE US, LD. COUNSEL FO R THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES. 8. ON THE OTHER HAND, LD. DR FOR THE REVENUE HEAVIL Y RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDER OF THE REVENUE AS WELL AS THE RELEVANT MATERIAL PLACED BEF ORE US. PARA 2.3 OF THE ORDER OF LEARNED CIT(A), IN THIS CONTEXT, IS RE LEVANT AND SO IT IS EXTRACTED FOR IMMEDIATE REFERENCE :- 2.3 . IT IS SEEN THAT THE APPELLANT HAS NOT ACQUIRED THE BANDRA FLAT DURING THE YEAR UNDER APPEAL. IT IS ALSO A FACT TH AT THE APPELLANT WAS RESIDING WITH HER PARENTS IN THE FLAT OWNED BY HER FATHER. THE APPELLANT HAS CLAIMED 50% SOCIETY MAINTENANCE CHARGES USED AS OFFICE ACCOMMODATION BY HER IN THE FLAT OF HER FATHER. HOWEVER, THE SOCIETY MAINTENANCE CHARGES ARE IN ANY CASE HAVE TO BE BORNE BY FATHER WHO IS THE OWNER OF THE FLAT AND BY USING THE SAID PORTION BY THE APPELLANT SHE COULD NOT REQUIRE TO I NCUR ANY EXPENSES TOWARDS SOCIETY MAINTENANCE. THEREFORE, THE EXPENS ES DISALLOWED IN RESPECT OF SOCIETY MAINTENANCE CHARGES AMOUNTING TO RS. 5,990/- IS CONFIRMED. 10. IT IS UNDISPUTED FACT THAT THE IMPUGNED FLAT IS NOT OWNED BY THE ASSESSEE. HER FATHER, BEING THE OWNER, NEEDS TO PAY THE SOCIETY MAINTENANCE CHARGES FULLY. FURTHER IT IS NOT THE CAS E OF THE ASSESSEE THAT SHE IS A TENANT IN THE FLAT AND HENCE LIABILIT Y IS NOT FASTENED ON ASSESSEE BY ANY AGREEMENT. IN SUCH CIRCUMSTANCES, IN OUR OPINION, THE FINDING OF THE CIT(A) IS FAIR AND REASONABLE. THEREFORE, IT DOES NOT CALL FOR ANY INTERFERENCE. 11. GROUND NO.3 RELATES TO THE DISALLOWANCE OF BUSI NESS PROMOTION EXPENSES AMOUNTING TO RS. 45,850/-. THE FACTS OF T HE CASE ARE THAT 6 ITA NO.6723/MUM/2011. THE ASSESSEE INCURRED BUSINESS PROMOTION EXPENSES O F RS. 1,64,695/-. AFTER DISALLOWING 25% OF THE SAME TOWARD S PERSONAL EXPENSES, THE ASSESSEE DEBITED NET AMOUNT OF RS. 1, 23,521/-. DURING THE ASSESSMENT PROCEEDINGS AFTER ANALYSING THE SAID EXPENDITURE, AO FOUND THAT A SUM OF RS. 1,08,401/- WAS SPENT ON A P ARTY ON 17/12/2006 AT THE CLUB MUMBAI, WHERE 200 PEOPLE WER E INVITED. OUT OF ABOVE, RS. 9,325/- WAS PAID IN CASH FOR WHIC H NO BILLS ARE PLACED ON RECORD. THEREFORE, THE AO WORKED OUT FUR THER DISALLOWANCE OF RS. 45,850/- AS PER THE WORKING GIVEN ON PAGE NO .2 OF HIS ORDER. ASSESSEE CARRIED THE MATTER TO THE CIT(A), AND THE ADDITION WAS CONFIRMED. BEING AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 12. DURING THE PROCEEDING BEFORE US, LD. COUNSEL FO R THE ASSESSEE RELIED ON THE SUBMISSIONS MADE BEFORE THE LOWER AUT HORITIES. 13. ON THE OTHER HAND, LD. DR OF THE REVENUE SUPPOR TED THE ORDERS OF AUTHORITIES BELOW. 14. WE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. IT IS NOTICED THAT THE GROSS EXPENDITURE ON ACCOUNT OF BUSINESS PROMOTION IS RS. 1,64,695/- AND ASSESSEE DISALLOWED 25% OF THE SAME ON HER OWN. DURING THE ASSESSMENT PROCEEDINGS , AO FOUND THE NEED FOR FURTHER DISALLOWANCE OF RS. 45,850/- TOWAR D PERSONAL EXPENSES OUT OF EXPENDITURE INCURRED ON A PARTY AT THE CLUB IN MUMBAI. AO ALSO DISALLOWED ANOTHER SUM OF RS. 9,352/- WHICH WAS PAID IN CASH. THE CIT(A) CONFIRMED THE SAID ADDITIO N. 15. IN OUR OPINION, THE AO IGNORED THE FACT THAT TH E ASSESSEE VOLUNTARILY DISALLOWED 25% OF THE TOTAL EXPENDITURE. THEREFORE, CONCLUSIONS OF AO/CIT(A) ON THE ADDITION OF RS. 45,850/- HAS NO B ASIS. IT IS NOT THE CASE OF REVENUE THAT THE EXPENDITURE IN QUESTION IS NOT GENUINE. ACCORDINGLY, 7 ITA NO.6723/MUM/2011. THE DISALLOWANCE OFFERED BY THE ASSESSEE IS FAIR AN D REASONABLE AND THUS, THERE IS NO NEED FOR FURTHER DISALLOWANCE OF RS. 45 ,850/-. IN FACT ASSESSEE HAD ALSO NOT CHALLENGED THE ADDITION OF RS. 9,352/-. ACCORDINGLY, THE CONCLUSION OF THE CIT(A) ON THE ISSUE OF RS. 45,850/- IS REVERSED. ACCORDINGLY, GROUND NO.3 IS ALLOWED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/1 0/2014. !' # $% &! ' 10/10 /2014 ( ) SD/- SD/- D.MANMOHAN D.KARUNAKARA RAO (VICE PRESIDENT) (ACCOUNTANT MEMBER) MUMBAI , DATED 10 /10 /2014 F{X~{T? P.S. !'*+, -, / COPY OF THE ORDER FORWARDED TO : (1) *./0 / THE ASSESSEE; (2) / THE REVENUE; (3) 12 3 / THE CIT(A); (4) 1 / THE CIT, MUMBAI CITY CONCERNED; (5) ,4(**5.6 5.6$ 7 / THE DR, ITAT, MUMBAI; (6) (8/9 / GUARD FILE. * / TRUE COPY !' / BY ORDER : / ; / (DY./ASSTT. REGISTRAR) 5.6$ 7 / ITAT, MUMBAI,