M/s R.C. Gupta & Bros. (HUF), New Delhi V. ACIT, New Delhi

ITA 696/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52534 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 12-07-2011
• Assessment Year: misc
• Appeal Filed On: 15-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Business income; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH F DELHI ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NO. 696 (DEL) OF 2010 ASSESSMENT YEAR : 2003-04. M/S. R. C. GUPTA & BROS. [HUF]; ASSTT. COM MISSIONER OF INCOME-TAX, C/O. RAJIV SAXENA & CO., [ADVS. & SOLICITORS] VS. C I R C L E : 22 (1), 318, POCKETD, MAYUR VIHAR II, N E W D E L H I. D E L H I 110 091. P A N / G I R NO. AAA HR 2629 N. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI RAJIV SAXENA, ADV.; DEPARTMENT BY : MS. PRATIMA KAUSHIK, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 03-04 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXIII, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. THE LD. CIT (APPEALS) IS NOT JUSTIFIED IN RESTRICTING ADDITION OUT OF CAR AND TELEPHONE EXPENSES AT 10 PER CENT AMOUNTING TO RS.1 9,191/- ON ESTIMATED BASIS ON ACCOUNT OF PERSONAL USE. THE LD. CIT (APPEALS) HAS FAILED TO APPRECIATE THAT EXPENDITURE INCURRED ON CAR AND TELEPHONE WERE TOTA LLY FOR THE PURPOSE OF BUSINESS AND NO SUCH DISALLOWANCE WAS MADE IN ANY O F THE PRECEDING OR SUCCEEDING YEARS; 2 I. T. APPEAL NO. 696 (DEL) OF 2010 2. THAT THE LD. CIT (APPEALS) IS NOT JUSTIF IED IN CONFIRMING THE ADDITION OF RS.15,250/- INCURRED ON REPLACEMENT OF OLD AND DAMA GED SYNTEX WATER TANK AS THE SAME WAS OF REVENUE NATURE AND THE SAME IS REQUIRED FOR SUPPLY OF WATER TO THE TENANTS AND GETS DAMAGED VERY OFTEN; 3. THAT THE LD. CIT (APPEALS) IS NOT JUSTIF IED IN CONFIRMING THE ADDITION OF RS.3,92,075/- OUT OF LEGAL AND PROFESSIONAL EXPENS ES CLAIMED AT RS.4,22,075/- INCURRED ON ACCOUNT OF DEFENDING THE CASE OF TAKE O VER BY FINANCIAL INSTITUTIONS OF M/S. BHARAT STRIPS LTD. AND WINDING UP OF M/S. GWAL IOR STRIPS LTD. WHERE THE APPELLANT WAS A PROMOTER AND MUCH FINANCIAL STAKES WERE INVOLVED. 3. AT THE TIME OF HEARING LD AR OF THE ASSESSEE DID NOT PRESS GROUND NO 1 & 2 RELATING TO RESTRICTING THE ADDITION OUT OF CAR, TELEPHONE EXPE NSES AT 10 PER CENT AMOUNTING TO RS.19,191/- AND CONFIRMING THE ADDITION OF RS.15,250/- INCURRED ON REPLACEMENT OF OLD AND DAMAGED SYNTAX WATER TANK. THEREFORE, BOTH THE GROUNDS OF APPEAL ARE DISMISSED AS NOT PRESSED. 4. THE ONLY REMAINING ISSUE FOR CONSIDERATION RELAT ES TO CONFIRMING THE ADDITION OF RS.3,92,075/- OUT OF LEGAL AND PROFESSIONAL EXPENSE S. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF LEGAL EXPENSES AS THE PAYMENTS DID NOT RELATE TO ASSESSEES BUSINESS. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED THAT THE PAYMENT OF RS.3 ,92,075/- RELATED TO BILLS OF LAYERS PERTAINING TO TWO COMPANIES M/S. GWALIOR STRIPS LTD . AND M/S. BHARAT STRIPS LTD. OF WHICH THE ASSESSEE WAS A PROMOTER. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS A PROMOTER OF THESE COMPANIES. SHRI R. C. GUPTA, THE KARTA OF ASSESSEE WAS 75 YEARS OLD AND WAS DEPENDENT ON OTHERS FOR ATTENDING THE PROCEEDINGS BY WAY OF AUDI TORS, LAWYERS OR MEMBERS OF THE FAMILY. THEREFORE, THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. CIT (APPEALS) NOTED THAT IF THE LEGAL AND P ROFESSIONAL CHARGES PERTAINED TO THE BUSINESS OF THE ASSESSEE, THE SAME WERE ALLOWABLE AS REVENUE EXPENDITURE. THE LD. CIT (APPEALS) NOTED THAT EXPENDITURE INCURRED ON LEGAL AND PROFES SIONAL CHARGES RELATING TO TWO COMPANIES COULD NOT BE TREATED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE LD. CIT (APPEALS) ACCORDINGLY UPHELD THE DISALLOWANCE OF LEGAL AND PROFESSIONAL CHARGES. 3 I. T. APPEAL NO. 696 (DEL) OF 2010 5. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT SH. R.C. GUPTA WAS PROMOTER OF M/S. GWALIOR STRIPS LTD. AND M/S. BHARAT STRIPS LTD . AND WAS DRAGGED INTO LITIGATIONS. SHRI R. C. GUPTA WAS KARTA OF R. C. GUPTA & BROS. [HUF]. SHRI R. C. GUPTA WAS GUARANTOR. THE LD. AR OF THE ASSESSEE HAS FILED COPY OF PLAINT BEF ORE THE DEBT RECOVERY TRIBUNALI, DELHI IN THE CASE OF STATE BANK OF INDIA VS. BHARAT STRIP S LTD. & OTHERS; COPY OF AFFIDAVIT OF SHRI R. C. MEHTA, DY. GENERAL MANAGER OF SBI, REHAB ILITATION & RECOVERY BRANCH, SANSAD MARG, NEW DELHI AND COPY OF ORDER IN I.A. NO. 60/2 IN OA NO. 285 OF 2000 IN SUPPORT OF HIS CONTENTION THAT EXPENDITURE WAS INCURRED TO DEF END THE PROPERTY OF HUF FROM ATTACHMENT, HENCE, AN ALLOWABLE EXPENDITURE. ON THE OTHER HAND , THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS IT IS CLEAR THAT THE STATE BANK OF I NDIA HAD FILED DEBT RECOVERY SUIT AGAINST M/S. BHARAT STRIPS LTD. AND SHRI R. C. GUPTA IN HIS INDIVIDUAL CAPACITY. IT IS SEEN FROM THE CONTENTS OF THE ORDER PASSED ON 4/09/2002 THAT THE APPLICANT, STATE BANK OF INDIA, PRAYED FOR ATTACHMENT OF IMMOVABLE PROPERTY BEING INDUSTRIAL P LOT NO. 21 (CORRESPONDING TO NEW PLOT NO. 221) SITUATED AT OKHLA INDUSTRIAL ESTATE, PHASE -III, NEW DELHI. IN REPLY DEFENDANT NO. 2 HAD STATED THAT IT WAS NOT HIS INDIVIDUAL PROPERTY, BUT WAS OWNED BY R. C. GUPTA & BROS, WHICH IS AN HUF. ON THE BASIS OF ORDER DATED 4/09/ 2002 IT HAS BEEN PLEADED THAT THE STATE BANK OF INDIA WAS TRYING TO GET THE PROPERTY ATTACH ED. SH. R.C. GUPTA IN THE CAPACITY OF KARTA OF ASSESSEE HUF HAD INCURRED EXPENDITURE BY WAY OF LEGAL AND PROFESSIONAL CHARGES IN ORDER TO DEFEND THE PROPERTY OF THE ASSESSEE HUF. IT IS N OT THE CASE OF THE ASSESSING OFFICER THAT THE PAYMENTS OF LEGAL CHARGES ARE NOT GENUINE. SIN CE THE ASSESSEE HAD MADE PAYMENT TO DEFEND THE PROPERTY FROM ATTACHMENT, THE SAME IS AL LOWABLE AS DEDUCTION. THE EXPENDITURE INCURRED TO DEFEND THE PROPERTY IS ALLOWABLE AS DED UCTION AGAINST BUSINESS INCOME OF THE ASSESSEE. THEREFORE, THE PAYMENTS BY WAY OF LEGAL AND PROFESSIONAL CHARGES IS ALLOWABLE AS DEDUCTION. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 4 I. T. APPEAL NO. 696 (DEL) OF 2010 THE ORDER PRONOUNCED IN THE OPEN COURT ON : 05 TH AUGUST, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 05 TH AUGUST, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 5 I. T. APPEAL NO. 696 (DEL) OF 2010