M/S EXPRESS CONFECTIONERS PVT LTD , Ranchi V. DCIT CIRCLE-1 , RANCHI

ITA 73/RAN/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1758 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL ACIT
• Assessee Lawyers: VINAY JALAN; RAJIV RANJAN
• Keywords: Capital asset; Business expenditure
• Section: 142(1); 37(1); 201; 191

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH , RANCHI , BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ./ ITA NO. 73 / RAN /20 1 8 ( / ASSE SSMENT YEAR : 20 13 - 20 1 4 ) M/S EXPRESS CONFECTIONERS PVT. LTD., C/O SRI VINAY KUMAR JALAN, M/S O.P.JALAN AND ASSOCIATES CONSULTANTS LLP, 48 CART SARAI ROAD, UPPER BAZAAR, RANCHI, JHARKHAND, PIN - 834001 VS. DCIT, CIRCLE - 1, RANCHI ./ ./ PA N/GIR NO. : A A ACE 4056 B ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI VINAY JALAN & RAJIV RANJAN, ADV /REVENUE BY : SHRI P.K.MONDAL , ACIT( DR ) / DATE OF HEARING : 20 / 0 5 /201 9 / DATE OF PRONOUNCEMENT 2 1 / 0 5 /201 9 / O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), RANCHI , JHARKHAND, DATED 09.02.2018 PASSED IN FIRST APPEAL NO. CIT(A), RANCH I/10066/2016 - 17 FOR THE ASSESSMENT YEAR 201 3 - 201 4 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT, THE LD. CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFIC ER AMOUNTING TO RS. 27,422/ - UNDER THE HEAD 'CLUB SUBSCRIPTION EXPENSES', WITHOUT APPRECIATING THE FACT THAT THE SAID EXPENSE WAS INCURRED IN 'ORDER TO ENTERTAIN THE GUESTS AT A COMPARATIVELY CHEAPER RATE. 2. FOR THAT, THE LD. CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. ASS ESSING OFFICER AMOUNTING TO RS. 2,30,355/ - ON ACCOUNT OF 'LOSS ON SALE OF FIXED ASSETS'. ITA NO. 73 / R AN /201 8 2 3. FOR THAT, THE OTHER GROUNDS SHALL BE URGED AT THE TIME OF HEARING. RELIEF CLAIM ED IN THE APPEAL: TO DELETE THE ADDITIONS/ DISALLOWANCES SO CONFIRMED BY THE LD. CIT(A) AND/OR PASS ANY SUCH ORDER/ORDERS AS YOUR HONOUR MAY DEEM FIT AND PROPER 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURER OF NASTA BREAD WHICH IS A POPULAR ITEM OF BREAD IN JHARKHAND. THE ASSESSEE FILED ITS RETURN OF INCOME ON 26.11.2013 DECLARING TOTAL INCOME AT RS.10,24,830/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER ISSUED NOTICES U/S.143(2) & 142(1) OF THE ACT TO THE ASSESSEE. AFTER EXAMINATIONS OF BOOKS OF ACCOUNTS THE ASSESSING OFFICER MADE THE ADDITIONS OF RS.27,422/ - ON ACCOUNT OF CLUB SUBSCRIPTION EXPENSES AND RS.2,30,355/ - ON ACCOUNT OF THE LOSS ON SALE OF FIXED ASSETS, ASSESSING TOTAL I NCOME OF THE ASSESSEE AT RS.12,82,610/ - AND PASSED ORDER U/S.143(3) OF THE ACT, DATED 29.03.2016. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO CIT(A) AND THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE CON FIRMED BOTH THE DISALLOWANCES MADE BY THE ASSESSING OFFICER AFTER OBSERVING AS UNDER : - [ 6.2] I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND HAVE PERUSED THE ASSESSMENT ORDER. THE FINDING OF FACT IS THAT NO EVIDENCE HAS BEEN PRODUCED TO SUGGEST TH AT SUCH EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. THE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED AND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE. FURTHER, MERE PAYMENT BY ITSELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLESS THE S AME IS PROVED TO BE PAID FOR COMMERCIAL ITA NO. 73 / R AN /201 8 3 CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER HIMSELF INDEPENDENT LY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS ALLOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FOR THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITL ED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGHT TAKE OF HIS RIGHTS. AT THE SAME TIME, THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT T O A DEDUCTION AND IT IS FOR THE ASSESS TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UNDER SECTION 37(1). THE POSITION IS WELL - SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDUSTRIES (I) (P.) LTD. [1969] 74 ITR 17. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UNDER SECTION 37( L). IN CIT V. CHANDRAVILAS HOTEL [1987] 164 FUR 102 1 (GUJ.) IT IS HELD THAT IF THE EXPENDITURE IS DOUBTED BY THE ASSESSING AUTHORITY, IT IS THE DUTY OF THE ASSESSEE TO PROVE BY LEADING EVIDENCE THAT THE EXPENDITURE WAS IN FACT, INCURRED. ACCORDINGLY, ON T HE FACTS AND CIRCUMSTANCES OF THE CASE, GROUND OF APPEAL IS DISMISSED. X X X X X X X [7.2] I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND HAVE PERUSED THE ASSESSMENT ORDER. LOSS ARISING ON THE SALE OF CAPITAL ASSET IS A CAPITAL LOSS AND CANNO T BE ALLOWED AS A BUSINESS EXPENSE. UNDER THE INCOME TAX ACT, CONCEPT OF BLOCK OF ASSETS IS PROVIDED FOR FIXED ASSETS. THIS MEANS THAT ALL THE ASSETS BELONGING TO A PARTICULAR CATEGORY ARE CLUBBED TOGETHER AND KNOWN AS BLOCK OF ASSETS. WHENEVER AN ASSET IS SOLD FROM THIS BLOCK THE SALE PRICE IS REDUCED FROM THE WRITTEN DOWN VALUE OF THE BLOCK (WDV). SECTION 43(6)(C)(I) OF THE INCOME TAX ACT PROVIDES THAT THE WDV OF THE BLOCK OF ASSETS WILL BE COMPUTED BY REDUCTION OF THE MONEYS PAYABLE IN RESPECT OF ANY ASS ET FALLING WITHIN THAT BLOCK, WHICH IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR. SO, ONCE THE SALE PRICE IS ALREADY REDUCED FROM THE WDV NO LOSS CAN BE CLAIMED. GROUND OF APPEAL IS DISMISSED. 5. AGAINST THE ABOVE ORDER OF C IT(A), THE ASSESSEE NOW IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6. LD. AR BEFORE ME SUBMITTED THAT THE ASSESSEE BEING A PROFESSIONALLY MANAGED COMPANY, INCURRED THE EXPENSES FOR BUSINESS PURPOSES IN ORDER TO ENTERTAIN THE GUESTS AT CHEAPER RATE. HOWEVER, BOTH ITA NO. 73 / R AN /201 8 4 THE AUTHORITIES BELOW HAVE ERRED IN DISALLOWING THE SAME. WITH REGARD TO DISALLOWANCE MADE ON ACCOUNT OF LOSS ON SALE OF FIXED ASSETS , LD. AR SUBMITTED THAT THE LOSS ON SALE OF FIXED ASSET WAS A LOSS OF COMPANY AS THE ASSETS ARE SOLD BELOW THE DEPREC IATION VALUE. THEREFORE, NO QUESTION ARISES FOR DISALLOWING THE SAME AND PRAYED FOR DELETING THE SAME. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. I HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RELEVAN T MATERIAL PLACED IN THE RECORD OF THE TRIBUNAL . PRIMA FACIE , ON THE ISSUE OF DISALLOWANCE MADE ON ACCOUNT OF EXPENDITURE FOR CLUB EXPENSES, I FIND THAT AS PER THE ORDERS OF CIT(A) AND AO, NO EVIDENCE HAS BEEN PROVIDED BY THE ASSESSEE TO SUGGEST THAT SUCH EXPENSES WERE INCURRING WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE CIT(A) AFTER PLACING RELIANCE ON VARIOUS JUDICIAL DECISIONS OBSERVED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM ALLOWANCE U/S.37(1) OF THE ACT AS HE FAILED TO PLACE SUFFICIENT MATERIALS. ACCORDINGLY, I DO NOT FIND ANY ERROR IN THE ABOVE OBSERVATIONS OF BOTH THE AUTHORITIES BELOW AND I UPHELD THE SAME. THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. WITH REGARD TO DISALLOWANCE MADE ON ACCOUNT OF LOSS ON SALE OF FIXED ASSET S, I FIND THAT IN THE ASSESSMENT ORDER, THE AO ADDED THE LOSS CLAIMED BY THE ASSESSEE UNDER THE HEAD LOSS ON SALE OF FIXED ASSETS, WHICH IS NOT ADMISSIBLE U/S.30 TO 37(1) OF THE ACT. IN THE APPELLATE PROCEEDINGS THE CIT(A) OBSERVED THAT LOSS ARISING ON T HE SALE OF CAPITAL ASSET IS A CAPITAL LOSS AND CANNOT BE ALLOWED AS A BUSINESS EXPENSES. LD. CIT(A) FURTHER OBSERVED THAT ONCE THE SALE PRICE IS ALREADY REDUCED FROM ITA NO. 73 / R AN /201 8 5 THE WDV, NO LOSS CAN BE CLAIMED. ACCORDINGLY, I DO NOT FIND ANY MISTAKE IN THE OBSERVATION S OF THE LD. CIT(A) AND I UPHELD THE SAME. HENCE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON 2 1 / 05 / 201 9 . SD/ - ( CHANDRA MOHAN GARG ) / JUDICIAL MEMBER / RANCHI ; DATED 2 1 / 05 /201 9 PRAKASH KUMAR MISHRA , S R.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, RANCHI 1. / THE APPELLANT - . M/S EXPRESS CONFECTIONERS PVT. LTD., C/O SRI VINAY KUMAR JALAN , M/S O.P.JALAN AND ASSOCIATES CONSULTANTS LLP, 48 CART SARAI ROAD, UPPER BAZAAR, RANCHI, JHARKHAND, PIN - 834001 2. / THE RESPONDENT - DCIT, CIRCLE - 1, RANCHI 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, RANCHI 6. / GUARD FILE. //TRUE COPY//