M/s. Antriksh Communication, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 709/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67935 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: P F JAIN A R
• Keywords: Business expenditure; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NO. 709/AHD/2013 ASSESSMENT YEAR :2008-09 M/S. ANTRIKSH COMMUNICATION S/5, AJAY CENTRE, PALLAVI TOWER, NAVRANGPURA, AHMEDABAD. 380009. V/S . A.C.I.T., CIRCLE-10, AHMEDABAD. PAN NO. A A L F A7625A (APPELLANT) .. (RESPONDENT) *+ , - & BY APPELLANT SHRI P. F. JAIN, A.R. ./*+ , - & /BY RESPONDENT SHRI P. L. KUREEL, SR. D.R. 0 , 1%' /DATE OF HEARING 17.09.2013 234 , 1%' /DATE OF PRONOUNCEMENT 22.11.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A)-XVI, AHMEDABAD, ORDER DATED DECEMBER 19 TH , 2012 FOR A.Y. 2008-09. THE SOLE GROUND OF APPEAL IS AGAINST UPHOLDING THE ADDITION OF RS.16,22,781/- ON ACCOUNT OF ENTERTAINMENT EXPENSES PAID BY THE ASSES SEE. 2. THE A.O. OBSERVED THAT ASSESSEE ASSESSEE IS A PA RTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CHANNEL CONNECTION AND C ABLING WORK. THE A.O. FOUND THAT AUDITED P&L ACCOUNT THE TURNOVER OF THE ASSESSEE HAD FALLEN DOWN DRASTICALLY DURING THE PREVIOUS YEAR RELEVANT TO A. Y. 08-09 AS COMPARED TO THE ITA NO. 709/AHD/2013 A.Y. 08-09 PAGE 2 TURNOVER IN THE IMMEDIATE PRECEDING YEAR. HOWEVER, CERTAIN ADMINISTRATIVE EXPENSES LIKE; SALARY EXPENSES, OFFICE EXPENSES HAD INCREASED BY ALMOST 100% AND ALSO NEW EXPENSES SUCH AS; ENTERTAINMENT, SALES PROMOTION EXPENSES HAD BEEN CLAIMED DURING THE YEAR UNDER CON SIDERATION. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE BUT ASSESSEE DID NOT FURNISH ANY DETAIL IN SUPPORT OF CLAIM OF EXPENSES OR FURNISH ANY JUSTIFICATION FOR INCREASE IN THE EXPENSES/NEW EXPENSES CLAIMED AS CO MPARED TO IMMEDIATE PRECEDING YEAR. THE A.O. FINALLY DISALLOWED 3/4 TH EXPENSES FROM SALARY, OFFICE EXPENSES AND WHOLE AMOUNT OF ENTERTAINMENT AND SALE S PROMOTION OF RS.16,22,788/- DISALLOWED AND ADDED BACK TO THE INC OME OF THE ASSESSEE. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) WHO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 5.4 ON CAREFUL CONSIDERATION OF THE FACTS OF THE C ASE IT EMERGES THAT THE PRINCIPLE CONTROVERSY IS ABOUT THE ADMISSI BILITY OF APPELLANTS CLAIM OF THE IMPUGNED EXPENDITURE AS A RATIFIED BUS INESS EXPENDITURE. THE APPELLANTS ARGUMENT THAT THE OUTST ANDING AMOUNT TO ENTERTAINMENT TAX AUTHORITIES WAS PAID WITH THE OBJECTIVE OF PROTECTING HOSTILE TAKEOVER OF ITS ASSETS AND TO PR EVENT CLOSURE OF HIS BUSINESS HAS BEEN CONSIDERED IN THE LIGHT OF JUDICI AL CITATIONS RELIED UPON BY THE APPELLANT THE APPELLANT HAS ARGUED TH AT IF IT HAD NOT MADE THE PAYMENTS IN RESPECT OF OUTSTANDING LIABILI TIES OF SCPL, THEN IT WOULD NOT HAVE BEEN POSSIBLE FOR IT TO OPER ATE ITS BUSINESS. THUS, BY ITS OWN LOGIC THE APPELLANT HAVE ADMITTED THAT THE PAYMENT WHICH WAS MADE BY IT WAS IN REALITY A LIABILITY OF SCPL. THROUGH ITS SUBMISSIONS, THE APPELLANT HAS ACTUALLY ATTEMPTED T O PROJECT ENTERTAINMENT TAX AUTHORITIES AS VILLAINS, WHO COER CED THE APPELLANT TO MAKE THE PAYMENT OF OUTSTANDING LIABILITIES OF S CPL. THE FACT OF ITA NO. 709/AHD/2013 A.Y. 08-09 PAGE 3 THE MATTER IS HOWEVER IS THAT ENTERTAINMENT TAX LIA BILITIES ARE STATUTORY DUES WHICH HAD TO BE PAID BY AN OPERATOR ENGAGED IN RELATED BUSINESSES. IN THIS CASE SCPL RAN AWAY WITHOUT PA YING ENTERTAINMENT TAX LIABILITIES. IT IS PERTINENT TO NOTE THAT THE MANAGING DIRECTOR OF SCPL AND THE PARTNER OF THE APPELLANT F IRM ARE CLOSELY RELATED WITH EACH OTHER AS HUSBAND AND WIFE. THIS F ACT CANNOT BE LOST SIGHT OF. A CONJOINED READING OF THE FACT INDICATE S THAT IT IS A CLEAR CASE OF EVASION OF STATUTORY DUES BY AN ENTITY CALL ED SCPL AND THE MODUS OPERAND! ADOPTED WAS TO CLOSE DOWN THE BUSINESS SURREPTITIOUSLY AND FORM ANOTHER ENTITY C ALLED ANTRIKSH COMMUNICATION. IT IS ALSO PERTINENT TO NOTE THAT THE CASE LAWS RELIED UPON BY THE APPELLANT ARE W.R.T VALID LEGAL BUS INESSES OPERATED BY TAX PAYERS. AS FAR AS THE APPELLANT FIRM IS CONCE RNED, IT IS IMPORTANT TO NOTE THAT THEY HAD NOT OBTAINED ANY AUTHORISATIO N / APPROVAL FROM ENTERTAINMENT TAX AUTHORITIES BEFORE COMMENCING TH EIR BUSINESS THE ISSUE THAT FINALLY COMES TO MIND IS REGARDING T HE ADMISSIBILITY OF THE APPELLANTS CLAIM OF EXPENDITURE IT IS TRUE TH AT STATUTORY DUES ARE PERMISSIBLE BUSINESS EXPENSES ALLOWED TO A TAX PAYER WHILE DETERMINING ITS TAXABLE PROFITS BUT SUCH EXPE NSES, FOR ALLOWANCE, SHOULD NECESSARILY HAVE A DIRECT NEXUS W ITH THE BUSINESS OF THE APPELLANT. IN THE INSTANT CASE, THE ENTERTAI NMENT TAX LIABILITY PAID BY THE APPELLANT IS NOT ON ACCOUNT OF ANY LIAB ILITY DETERMINED BY ENTERTAINMENT TAX AUTHORITIES AGAINST THE APPELLA NT BUT IS A LIABILITY PAID BY APPELLANT FOR SCPL. AS FAR AS RECORDS ARE C ONCERNED, THE SAID AMOUNT IS PAID BY SCPL TO THE ENTERTAINMENT TA X AUTHORITIES IN THE AFFIDAVIT OF SHRI ASHWINIKUMAR GAMBHIR MENTIONE D SUPRA, SHRI GAMBHIR HAS AGREED TO E THE PAYMENT HIMSELF THUS, THE AMOUNT PAID IS BY SCPL IN RESPECT OF STATUTORY DUES OF AND APPELLANT IS MERELY AN AMOUNT REMITTING AUTHORITY. THE EVIDENCES COMPRISING AFFIDAVITS, PRAYERS ETC FILED BY THE APPELLANT PERT AINING TO COURT CASES INVOLVING ENTERTAINMENT AUTHORITIES HAS BEEN PERUSE D AND IT ITA NO. 709/AHD/2013 A.Y. 08-09 PAGE 4 TRANSPIRES THEREFROM THAT THE ENTIRE CONTROVERSY IS ABOUT OUTSTANDING ENTERTAINMENT TAX LIABILITY OF SCPL AND NOT PERTAIN ING TO THE APPELLANT. THERE IS NOT EVEN AN IOTA OF ANY DISPUTE THAT THE OUTSTANDING ENTERTAINMENT TAX LIABILITY OF SCPL WER E NOT PAYABLE BY SCPL. THE APPELLANT CANNOT MAKE ANY CLAIM IN RES PECT OF PAYMENTS OF THIS LIABILITY AS ITS VALID BUSINESS LI ABILITY. ACTUALLY, SINCE THE APPELLANT IS NOT HAVING ANY AUTHORISATION FROM ENTERTAINMENT TAX AUTHORITIES, THERE IS NO QUESTION OF APPELLANT TO PAY ANY ENTERTAINMENT TAX. THE CASE OF APPELLANT OF MAK ING PAYMENT TO PREVENT A HOSTILE TAKEOVER IS THUS NOT MADE OUT. TH E MERE FACT THAT APPELLANT HAS PAID SOME AMOUNT OF MONIES TO ENTERTA INMENT TAX AUTHORITIES ON BEHALF OF SCPL AND IN RESPECT OF OUT STANDING LIABILITIES OF SCPL, DOES NOT MEANS THAT THE AMOUNT UNDER CONSI DERATION ASSUMES THE CHARACTER OF A GENUINE BUSINESS EXPENDI TURE SO FAR AS APPELLANTS BUSINESS IS CONCERNED. IT IS PERTINENT T O POINT OUT THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT WAS ASKED ABOUT THE FINAL FATE OF COURT LITIGATIONS INITIATED BY IT BEFORE THE HON'BLE GUJARAT HIGH COURT INCLUDING REQUEST FOR PR OVIDING COPY OF FINAL ORDERS. NO COMPLIANCE WAS MADE BY THE APPELL ANT. IT IS FURTHER RELEVANT TO NOTE THAT SINCE SCPL WAS ALSO ENGAGED I N THE BUSINESS OF WORKING AS CABLE OPERATOR, THE IMPUGNED ENTE RTAINMENT TAX PAYMENTS ARE TO BE CONSIDERED FOR ALLOWANCE, SUBJECT TO SATISFACTION OF ALL STATUTORY CONDITIONS, IN THE HA NDS OF SCPL. IT IS ACCORDINGLY HELD THAT THE ADDITION MADE BY THE ID A O OF RS. 16,22,781/- ON ACCOUNT OF INADMISSIBLE ENTERTAINMEN T TAX LIABILITIES IS A CORRECT ADDITION AND THE SAME IS THEREFORE SUSTAI NED. THE SECOND GROUND OF APPEAL RAISED BY THE APPELLANT TO THE EXT ENT OF THE IMPUGNED ADDITION OF RS. 16,22,781/- IS THEREFORE D ISMISSED. TO CLARIFY THE ADDITIONS MADE BY THE A O CHALLENGED BY THE APPELLANT THROUGH SECOND GROUND OF APPEAL ARE DELETED ONLY IN RESPECT OF ADDITION OF RS.2,95,886/- ON ACCOUNT OF SALARY EXPE NSES, ADDITION ITA NO. 709/AHD/2013 A.Y. 08-09 PAGE 5 OF RS 1.08,2807- ON ACCOUNT OF OFFICE EXPENSES, AD DITION OF RS 75,900/- ON ACCOUNT OF SALES PROMOTION EXPENSES AND THE ADDITION OF RS. 16,22,781/- IS CONFIRMED. THE SECOND GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT ARGUED THAT ASSESSEE IS A CABLE OPERATOR. THERE WAS OUTST ANDING DEMAND OF ENTERTAINMENT TAX RS.16,22,781/- IN THE NAME OF SPA CE CHANNEL COMMUNICATION P. LTD. IN WHICH SHRI ASHWINBHAI K. G AMBHIR WAS MANAGING DIRECTOR TILL NOVEMBER 2001. HIS WIFE, NAMELY, SMT . RENUKABEN A. GAMBHIR IS PARTNER OF APPELLANT FIRM. THIS BUSINESS WAS ORIGI NALLY RUN IN THE NAME OF SPACE CHANNEL COMMUNICATION P. LTD. SINCE 1999. TH E ENTERTAINMENT TAX AUTHORITY ADOPTED COERCIVE MEASURES TO RECOVER THE ENTERTAINMENT TAX DUE ON SPACE CHANNEL COMMUNICATION P. LTD. (SCCP LTD.) FRO M THE APPELLANT FIRM BECAUSE THE APPELLANT WAS OPERATING FROM THE SAME O FFICE AND SHRI ASHWINBHAI K. GAMBHIR WAS MANAGING DIRECTOR OF SCCP LTD. AND SMT. RENUKABEN A. GAMBHIR WAS PARTNER IN APPELLANT FIRM. IF THE ASSESSEE DID NOT PAY THEN TAX AUTHORITY WOULD HAVE BEEN SEALED THE O FFICE PREMISES. THEREFORE, THERE WAS NO OPTION BUT TO MAKE PAYMENT OF ENTERTAINMENT TAX FOR THE PURPOSE OF CARRYING ON THE BUSINESS. THE LD. C IT(A) HAS TAKEN REMAND REPORT ON THIS ISSUE FROM THE LD. A.O. WHICH HAS BE EN CONSIDERED BUT HE HAD CONFIRMED THE ADDITION. THEREFORE, IT WAS A BUSINE SS LOSS AND PAYMENTS WERE MADE TO RUN THE BUSINESS FOR BUSINESS PURPOSES. IT HAS BEEN PRAYED THAT THE ADDITION MAY BE DELETED. AT THE OUTSET, LD. SR. D. R. VEHEMENTLY OPPOSED THE SUBMISSION MADE BY THE LD. COUNSEL AND ARGUED THAT LIABILITY WAS AGAINST LTD. COMPANY WHERE ONE OF THE PARTNERS HUSBAND WAS MANA GING DIRECTOR. BOTH ITA NO. 709/AHD/2013 A.Y. 08-09 PAGE 6 THE PARTIES ARE SEPARATE AND LIABILITY OF ONE PERSO N CANNOT BE CLAIMED BY ANOTHER UNDER ANY LAW. HE FURTHER RELIED UPON IN C ASE OF S.A. BUILDERS LTD. 288 ITR 1 (SC) , THAT THERE WAS NO BUSINESS EXPEDIENCY AND NO OBLIGA TION ON THE ASSESSEE TO PAY THE ENTERTAINMENT TAX. THUS, H E REQUESTED TO CONFIRM THE ADDITION. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE DEMAND OF ENTERTAINMENT TAX WAS AGAIN ST LTD. COMPANY. IT HAS BEEN CLOSED DOWN. THE APPELLANT EVEN RUN THE SAME BUSINESS CANNOT CLAIM THE LIABILITY OF OTHER PERSONS. THE LD. CIT(A) HAD GIVEN DETAILED FINDINGS. THE LD. COUNSEL FOR THE APPELLANT HAS NOT CONTROVERTED CIT(A) FINDING. THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A). 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 22.11.2013 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # ,