M/S. TOSHNIWAL & CO., MUMBAI V. INCOME TAX OFFICER-4(2)(4), MUMBAI

ITA 6753/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7473 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 06-01-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 24-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: A K GHOSH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JM AND SHRI T.R. SOOD , AM I.T.A.NO. 6753/MUM/2008 ASSESSMENT YEARS :2005-06 M/S. TOSHNIWAL & CO., F-1, SURYA MAHAL, 4 TH FLOOR, 5, B.B. ROAD, FORT, MUMBAI 400 023. PAN: AAAFT 3566 G VS. THE INCOME-TAX OFFICER-4(2)(4), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. GHOSH RESPONDENT BY : SHRI NAVEEN GUPTA O R D E R PER T.R. SOOD, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 8 TH SEPTEMBER, 2008 OF THE LEARNED COMMISSIONER OF INCO ME-TAX (APPEALS)-IV, MUMBAI AND RELATES TO THE ASSESSMENT YEAR 2005-06. 2. GROUND NO. 2 WAS NOT PRESSED. THEREFORE, THE S AME IS DISMISSED AS NOT PRESSED. THE OTHER GROUNDS ARE AS UNDER: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE APPEL LANTS CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT ALLOWING ENTIRE AMOUNT OF KEY-M ENS INSURANCE PREMIUM OF RS. 7,50,100/- CLAIMED BY THE APPELLANT. 3. ON THE FACTS AND THE CIRCUMSTANCES O F THE APPELLANTS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,13,959/- MADE BY THE A.O. ON ACCOUNT OF TRANSACTION CHARGES PAID TO STOCK EXCHANGE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THIS CASE THE PREMIUM PAID ON KEY-MENS INSURANCE POLICY HAD BEEN HELD TO BE ALLOWABLE ONLY FOR A PARTICULAR PORTION OF THE PERIOD ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING. SINCE SUCH EXPENDITURE IS ALLOWABLE IN VIEW OF THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF P.G. ELECTRONI CS V. ITO (98 TTJ 896. THEREFORE, SUITABLE DIRECTION MAY BE GIVEN TO ALLOW THE BALANCE OF PREMIUM IN THE NEXT YEAR ON THE SAME MATCHING PRINCIPLE. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE RELIED ON THE ORDER OF THE LEARNED CIT(A). ITA NO 6753/M/08 2 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FIN D THAT THE LEARNED CIT(A) DECIDED THIS ISSUE VIDE PARA 1.9 OF HIS ORDE R, WHICH READS AS UNDER: THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT IS THE MERCANTILE SYSTEM OF ACCOUNTING AND GOING BY THE MATCHING PRIN CIPLES, THE EXPENSES ATTRIBUTABLE TO THE CURRENT YEAR SHOULD BE ALLOWED IN THE PRESENT YEAR, I.E.IF GOODS ARE PURCHASED IN A MANUFACTURING COMPANY AND IF ONLY 505 OF THE GOODS ARE USED AS INPUT, ONLY 505 IS CONSIDERED FOR COMPUTING THE CURRENT YEARS INCOME AND THE BALANCE 50% IS CONSIDERED AS OPENING STOCK FOR THE NEXT YEAR. SIMILARLY, THE BENEFIT OF KEYMAN INSURA NCE PREMIUM IS AVAILABLE TO THE APPELLANT FIRM FOR 13 DAYS AT SR. NO.1, 4 DA YS AT SR. NO. 2, 3 DAYS AT SR.NO.3 & 4 AND 1 DAY AT SR.NOS.5 & 8. THE A.O. IS DIRECTED TO ALLOW THE DEDUCTION DURING THE YEAR FOR SUCH PERIOD ONLY. THI S GROUND OF APPEAL IS THUS PARTLY ALLOWED. 6. FROM THE ABOVE, IT IS CLEAR THAT PREMIUM FOR KEY MAN INSURANCE FOR FEW DAYS WAS ALLOWED BECAUSE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. WE AGREE WITH THE SUBMISSION OF THE LE ARNED COUNSEL FOR THE ASSESSEE AND FOLLOWING THIS SYSTEM OF ACCOUNTING TH E BALANCE OF THE PREMIUM SHOULD BE ALLOWED IN THE NEXT YEAR. THEREFORE, WE S ET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE BALANCE OF PREMIUM IN THE YEAR. 7. AS FAR AS THE SECOND ISSUE IS CONCERNED, AFTER H EARING BOTH THE PARTIES, WE FIND THAT IDENTICAL ISSUE CAME UP BEFOR E THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD., VS. ADD. CIT (ITA NO. 19 55/M/08 FOR THE ASSESSMENT YEAR 2005-06) ORDER DATED 26.8.2008, WHEREIN AFTER DISCUSSING THE ISSUE IN DETAIL AT PARA 20 TO 28, IT WAS HELD THAT TRANSACTI ON FEE PAID CANNOT BE TERMED AS FEE PAID FOR TECHNICAL SERVICES AND ACC ORDINGLY PROVISION OF SECTION 194J WERE NOT ATTRACTED AND THERE WAS NO OB LIGATION TO DEDUCT TAX SOURCE AND CONSEQUENTLY SUCH EXPENDITURE WOULD NOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. FOLLOWING THAT DECISION, WE D ECIDE THIS ISSUE IN FAVOR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 19H DAY OF MARCH, 2010. SD. SD. (N.V.VASUDEVAN) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 19 TH MARCH, 2010. KN