Appeal Details
Counselvise Citation
[2010] 136 COUNSELVISE.COM (IT) 1734 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 30 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-06-2010
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
F
Next Hearing Date
18-05-2010
Assessment Year
2005-2006
Appeal Filed On
12-12-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 7083/M/2008 ASSESSMENT YEAR: 2005-06 DY. COMMISSIONER OF INCOME-TAX-18(3), APPELLANT PIRAMAL CHAMBERS, 2ND FLOOR, LALBAUG, PAREL, MUMBAI 400 012 VS. M/S MIKU AGENCIES, RESPONDENT 51, CASA BLANCA, 182, EAST AVENUE, SANTACRUZ (WEST), MUMBAI 54. (PAN AAAFM 3748H APPELLANT BY : MR. V. OJHA RESPONDENT BY : MR. AMEET N. PATEL ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER CIT(A)-XXVIII, MUMBAI, PASSED ON 25.08.2008 FOR THE ASSESSMENT YEAR 2005-06 2. GROUND NO. 1 IS IN RESPECT OF BAD DEBTS CLAIM OF RS. 10,09,073/-. 3. THE AO DISALLOWED THE ASSESSEES CLAIM ON THE GR OUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE DEBTS HAS BECOME BAD AND IRRECOVERABLE AND ALSO THE ASSESSEE FAILED TO S HOW THE EFFORTS MADE TO RECOVER BAD DEBTS AND NO LEGAL ACTION HAD B EEN TAKEN TO RECOVER THE DEBTS. THE AO NOTED THAT THE ASSESSEE F AILED TO PROVE THE DEBTORS WERE WRITTEN OFF IN BOOKS OF ACCOUNTS A ND WERE OFFERED AS INCOME IN ANY EARLIER YEARS. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF ITAT SPECIAL BEN CH IN OMAN INTERNATIONAL BANK SAOG, 100 ITD 285 AND AFTER CONS IDERING THE ASSESSEES SUBMISSIONS AND REMAND REPORT THEREON OF THE ASSESSEE. ITA NO. 7083/M/08 M/S MIKU AGENCIES 2 4. THE LEARNED DR HAS RELIED UPON THE ORDER OF AO W HEREAS THE LEARNED AR HAS RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS CONSIDERED EACH ENTRY OF THE BAD DEB TS AND AFTER OBTAINING AND CONSIDERING THE REMAND REPORT FROM TH E AO FOUND THAT RS. 1,85,462.25 ON ACCOUNT OF GAYATRI CONSTRUC TION CO. PERTAINING TO EARTHMOVING WORKS CONSTRUCTOR, WHICH HAS ALREADY BEEN INCLUDED EARLIER IN THE TURNOVER. THE LEARNED AR SUBMITTED THAT THE DECISION OF ITAT SPECIAL BENCH IN THE CASE OF OMAN INTERNATIONAL BANK SAOG CITED SUPRA, HAS BEEN CONFI RMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIR ECTOR OF INCOME- TAX (INTERNATIONAL TAXATION) V. OMAN INTERNATIONAL BANK, [2009] 313 ITR 128 (BOM). IT IS ALSO THE SUBMISSION OF THE LEARNED AR THAT THE ASSESSEE IS A DEALER AND WHOLESALE DISTRIBUTOR OF AUTO PARTS. THE BAD DEBTS CLAIM RELATED TO TURNOVER EVEN OFFERE D FOR TAXATION IN EARLIER YEARS. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. IN THE LIGHT OF JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF OMAN INTER NATION BANK CITED SUPRA AND THE FACT THAT THE ASSESSEE HAS OFFE RED THIS BAD DEBTS CLAIM IN ITS TURNOVER IN EARLIER YEARS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), THEREFORE, THE OR DER OF CIT(A) IS HEREBY CONFIRMED. 6. GROUND NO. 2 IS IN RESPECT OF ADDITION OF RS. 4, 57,200/- MADE U/S 40A(2)(B) OF THE ACT. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE FIRM PAID SALARY OF RS. 6,26,000/ - AND BONUS OF RS. 1,25,200/- TO SHRI SANJAY BABLA SON OF SHRI M.K . BABLA. THE AO DISALLOWED RS. 3,74,000/- ON THE GROUND THAT PRO OF OF HIGHER QUALIFICATIONS WERE NOT SUBMITTED. THE AO RESTRICTE D THE BONUS TO RS. 42,000/- ON THE GROUND THAT BONUS PAYMENT IS EX CESSIVE AS IN GOVERNMENT UNDERTAKINGS THE BONUS PAYABLE IS 8.33%. THE AO ACCORDINGLY MADE ADDITION OF RS. 3,74,000/- OUT OF SALARY AND BONUS. THE CIT(A) AFTER A DETAILED DISCUSSION ON TH E ISSUE DELETED THE SAID ADDITION OBSERVING THAT SANJAY BABLA IS LO OING AFTER THE ITA NO. 7083/M/08 M/S MIKU AGENCIES 3 ENTIRE BUSINESS ACTIVITIES OF THE ASSESSEE. HE PASS ED MBA QUALIFICATION FROM PUNE UNIVERSITY IN THE YEAR 1996 . THE CIT(A) COMPARED THE PAYMENTS OF SALARY AND BONUS MADE TO S ANJAY BABLA IN EARLIER YEARS FROM FY 2001-02-RS. 6,08,400/-, FY 2002-03, RS. 6,51,600/-, FY 2003-04 RS. 6,97,800/- AND FY 2004-0 5 RS. 75,200/-. THE CIT(A) FURTHER OBSERVED THAT LOOKING INTO THE PRESENT MARKET TREND, QUALIFIED AND TRAINED MAN POWER AND M OREOVER, THE TRUST, CONFIDENCE, INTEREST TO DEVELOP THE FAMILY B USINESS BY MR. SANJAY BABLA HAS TO BE CONSIDERED WHILE DECIDING TH E REASONABLENESS OF SALARY AND BONUS PAID. 8. THE LEARNED DR RELIED UPON THE ORDER OF AO, PART ICULARLY, PARA 6 OF AOS ORDER. ON THE OTHER HAND, THE LEARNE D AR HAS RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT ON IDEN TICAL SET OF FACTS IN CASE OF SISTER CONCERN THE ITAT IN ITA NO. 6074/M/07 & 5861/MUM/2007, IN CROSS APPEALS, HAS DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE AO MADE DISALLOWANCE OUT OF SALARY AND BONUS PAYABLE TO SANJAY BABLA U/S 40A(2)(B) OF THE ACT. SECTION 40A(2) REQUIRES THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE ( B ) OF THIS SUB-SECTION, AND THE [ASSESSING] OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCE SSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MAD E OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF T HE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM , SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESS IVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. IT IS TO BE NOTED HERE THAT DISALLOWANCE U/S 40A CAN BE MADE ONLY IF IT IS FOUND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IS EXCESSIV E OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS. WE FIND THAT THE CIT(A) HAS CATEGORICALLY NOTED THA T THE PAYMENT MADE ON ACCOUNT OF SALARY AND BONUS TO MR. SANJAY B ABLA IS NOT EXCESSIVE. THE CIT(A) HAS CONSIDERED THE PAST PAYME NTS, ITA NO. 7083/M/08 M/S MIKU AGENCIES 4 QUALIFICATION, INCLUDING THE FACT THAT FAMILY BUSIN ESS ETC. THERE IS NO MATERIAL ON RECORD, BASED ON WHICH, IT CAN BE SA ID THAT SALARY AND BONUS PAID TO MR. SANJAY BABLA IS EXCESSIVE OR UNREASONABLE. IN THE ABSENCE OF SUCH MATERIAL, WE INCLINE TO UPHO LD THE ORDER OF CIT(A) ON THIS ISSUE. 10. GROUND NO. 3 IS IN RESPECT OF DELETION OF ADDIT ION OF RS. 16,000/- FOR PERSONAL USE OF MOTOR CAR/SCOOTER RUNN ING EXPENSES. 11. THE ASSESSEE CLAIMED RS. 1,76,731/- TOWARDS MOT OR CAR AND SCOOTER EXPENSES. THE ASSESSEE HIMSELF DISALLOWED R S. 16,030/- TOWARDS PERSONAL ELEMENT. HOWEVER, THE FURTHER DISA LLOWED RS. 16,000/- ON THE GROUND THAT THE ASSESSEE HAS NOT MA INTAINED ANY LOG BOOK. THE CIT(A) DELETED THE SAID ADDITION BY O BSERVING THAT THERE IS NO MATERIAL ON RECORD TO MAKE SUCH ADDITIO N, PARTICULARLY, WHEN THE ASSESSEE HIMSELF HAS DISALLOWED RS. 16,030 /- ON ACCOUNT OF PERSONAL USE. 12. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND T HAT THERE IS NO CONTRARY MATERIAL TO THE FINDINGS OF THE CIT(A), TH EREFORE, WE CONFIRM THE ORDER OF CIT(A). 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. PRONOUNCED IN OPEN COURT ON THIS 11 TH DAY OF JUNE, 2010. SD/- SD/- (R.V. EASWAR) (A.L. GEHLOT ) . PRESIDENT ACCOUNTANT M EMBER DATED: 11 TH JUNE, 2010. ITA NO. 7083/M/08 M/S MIKU AGENCIES 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, F BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 2.6.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 3.6.10 SR.P.S/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.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER
