ACIT 2(3), MUMBAI V. RADHIKA HOTELS P.LTD, MUMBAI

ITA 7378/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2621 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RA JEEV WAGLAY
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI [BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER] / I .T.A. NO.7378/MUM/2013 ( / ASSESSMENT YEAR: 2010-11 ACIT 2(3), R.NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI 400020 / VS. M/S. RADHIKA HOTELS PVT. LTD., 801, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI - 400026 ./ ./ PAN/GIR NO. : AAACR3010N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. RAJEEV WAGLAY DEPARTMENT BY: SHRI. A. RAMCHANDRA ! '# $ % & ' / DATE OF HEARING: 08.09.2015 ()*+ % & ' /DATE OF PRONOUNCEMENT: 30.10.2015 ,- / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6, MUM BAI [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 20.09.2013 PASSE D IN APPEAL NO.6/IT/107/RG.2(3)/12-13 PERTAINING TO ASSESSMENT YEAR 2010-11. THE REVENUE HAS IN THIS APPEAL RAISED THE FOLLOWING THR EE GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE OF RS. 15,56,400/- CLAIMED AS BUSINESS EXPENDITURE WIT HOUT APPRECIATING THAT THE EXPENSES RELATED EITHER TO INCOME EXEMPT FROM TAX O R INCOME FROM HOUSE PROPERTY AND WERE THUS NOT ALLOWABLE DEDUCTIONS. ITA NO.7378/MUM/2013 ASSESSMENT YEAR: 2010-11 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE OF RS.15,56,400/- CLAIMED AS BUSINESS EXPENDITURE WITH OUT APPRECIATING THAT AS AGAINST CLAIM OF SUCH HUGE EXPENSES, BUSINESS RECEI PTS OF ONLY RS.2,40,468/- WERE SHOWN AND AS SUCH THE EXPENDITURE CLAIMED WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS AND HENCE THEY ARE NOT ALLOWABLE AS DEDUCTION. 2. THE ASSESSEES MAIN SOURCE OF INCOME IS THE INCO ME FROM HOUSE PROPERTY AND BUSINESS INCOME. THE ASSESSEE SUBMITTED THE AU DITED BALANCE SHEET, PROFIT AND LOSS ACCOUNT ETC. DURING THE COURSE OF ASSESSME NT PROCEEDINGS. THEREAFTER IN VIEW OF THE DETAILS FILED BY THE ASSESSEE, ASSES SMENT OF THE APPELLANT WAS CONCLUDED BY VIRTUE OF ORDER DATED 30/01/2013. THE AO DISALLOWED THE DIFFERENT EXPENSES TO THE TUNE OF RS.15,56,400/- ON THE GROUND OF THAT THERE WAS NO BUSINESS INCOME TO THAT EXTENT. SUBSEQUENTLY, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A)6, MUMBAI AND THE APPEAL OF THE AS SESSEE WAS ALLOWED AND LEARNED CIT(A) ALLOWED THE EXPENSES TO THE TUNE OF RS.15,56,400/- BY HOLDING THAT THE EXPENDITURE CANNOT BE DISALLOWED ON THE GR OUND THAT EVEN THERE WAS NO BUSINESS INCOME. BEING AGGRIEVED THE REVENUE HAS F ILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE RECORD CAREFULLY. THE DEPARTMENTAL REP RESENTATIVE HAS ARGUED THAT LD. CIT(A) HAS WRONGLY ALLOWED THE EXPENDITURE TO T HE TUNE OF RS.15,56,400/- WHILE THERE WAS NO PROPORTIONATE THE BUSINESS INCOM E HENCE THE SAID AMOUNT HAS WRONGLY BEEN DISALLOWED BY THE LD. CIT(A), HENCE, T HE ORDER OF THE CIT(A) IN THIS REGARD IS WRONG AGAINST LAW AND IS LIABLE TO B E SET ASIDE. 4. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FO R THE ASSESSEE HAS REFUTED THE SAID CONTENTIONS AND ARGUED THAT THE EXPENDITUR E INCURRED BY THE ASSESSEE IS NOT IN DISPUTE AND THE REASON GIVEN BY THE CIT(A) I S PLAUSIBLE REASON, THEREFORE THE LD. CIT(A) HAS RIGHTLY ALLOWED THE EXPENDITURE TO THE TUNE OF RS.15,56,400/- AND ALSO PLACED RELIANCE UPON THE LAW SETTLED IN CA SE OF J.K.WOLLEN MANUFACTURERS VS CIT, 72 ITR 612 (SC). IT IS ALSO ARGUED THAT THE ASSESSEE IS A ITA NO.7378/MUM/2013 ASSESSMENT YEAR: 2010-11 3 CORPORATE ENTITY WHICH HAS TO INCUR SOME EXPENDITUR E TO MAINTAIN IT EVEN IF IT IS NOT CARRYING ON ANY BUSINESS ACTIVITY BUT THE SAME IS REQUIRED TO BE ALLOWED IN THE INTEREST OF JUSTICE. THE LEARNED REPRESENTATIV E OF THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE JUDGMENT DELIVERED BY THE ITAT, M UMBAI BENCH IN THE CASE OF PREIMUS INVESTMENT & FINANCE LTD. VS. DCIT,(171T TJ MUMBAI 794). WITH DUE REGARDS TO THE CONTENTIONS RAISED BY THE REPRES ENTATIVE OF THE PARTIES &PERUSING THE RECORD CAREFULLY, IT IS APPARENT ON R ECORD THE ASSESSING OFFICER HAS DISALLOWED THE EXPENDITURE ONLY ON THE GROUND T HAT THERE WAS NO BUSINESS INCOME TO THAT EXTENT. IT IS NOT NECESSARY TO EARN THE INCOME PROPORTIONATE TO THE EXPENDITURE. THE AO DID NOT DISPUTE ABOUT THE EXPE NDITURE CLAIMED BY THE ASSESSEE. EVEN, THE GENUINENESS OF THE EXPENDITURE WERE NOT DOUBTED. IT IS ALSO NOT THE CASE OF REVENUE THAT THE ASSESSEE DID NOT C ONDUCT THE BUSINESS IN THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE CONTENDED T HAT HE HAS TO INCUR SOME EXPENDITURE TO MAINTAIN THE BUSINESS IN THE MARKET. THE REASONABLENESS OF THE EXPENDITURE IS NOT REQUIRED TO BE DECIDED ON THE PO INT OF REVENUE. THE ASSESSMENT IS NOT REQUIRED TO BE DONE ON THE BASIS OF ASSUMPTION AND PRESUMPTION. ATLEAST AO SHOULD HAVE SOME SUBSTANTI AL MATERIAL WITH HIM TO DISALLOW THE EXPENDITURE. IT IS REQUIRED TO DECIDED ON THE BASIS OF RECORD AND REQUIREMENTS OF THE BUSINESS OF THE ASSESSEE. IN T HIS REGARD WE ALSO FIND OF THE SUPPORT OF LAW SETTLED IN CASE OF J.K.WOLLEN MANUFA CTURERS VS CIT, 72 ITR 612(SC) IN WHICH IT HAS BEEN HELD THAT: BUSINESS EXPENDITURE-ALLOWABILITY-REASONABLENESS H AS TO BE DECIDED FROM THE POINT OF VIEW OF BUSINESSMAN-ASSESSEE PAYING 25 % OF NET PROFIT AS COMMISSION TO GENERAL MANAGER IN ADDITION TO SALARY-AAC ALLOWING 50% OF AMOUNT CLAIMED AS REASONABLE AND TRIBUNAL CONCURRING WITH IT HIGH C OURT HOLDING THAT THE AMOUNT IN QUESTION NOT LAID AND WHOLLY AND EXCLUSIVELY FOR BU SINESS-NOT JUSTIFIED-NEITHER THE HIGH COURT NOR TRIBUNAL APPLIED THE PROPER LEGAL TE ST-TRIBUNAL CANNOT DETERMINE REMUNERATION WHICH IN THEIR VIEW SHOULD BE PAID TO AN EMPLOYEE-ASSESSEE ENTITLED TO DECIDE THE REMUNERATION PAYABLE ON BASIS OF COMMERC IAL EXPEDIENCY-ON FACTS OF THE CASE, ASSESSEE ENTITLED TO FULL DEDUCTION OF THE AM OUNT PAID AS COMMISSION AS WHOLLY AND EXCLUSIVELY LAID OUT FOR BUSINESS. THE COORDINATE BENCH OF MUMBAI HAS ALSO DEALT WITH THE QUESTION IN CASE FILED AS PREIMUS INVESTMENT & FINANCE LTD. VS. DCIT,(171T TJ MUMBAI 794). ITA NO.7378/MUM/2013 ASSESSMENT YEAR: 2010-11 4 THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES AND LA W MENTIONED ABOVE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT(A) AT THIS STAGE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 30 TH OCTOBER, 2015 SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) , / ACCOUNTANT MEMBER . / , /JUDICIAL MEMBER 0 ! 1$ MUMBAI; 2,' DATED : 30 TH OCTOBER, 2015 MP MP MP MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! 3& ( ) / THE CIT(A)- 4. ! 3& / CIT 5. 4#5 6 /&/'78 , ' 78+ , 0 ! 1$ / DR, ITAT, MUMBAI 6. 6 9: ; $ / GUARD FILE. / BY ORDER, 4& /& //TRUE COPY// / ! (DY./ASSTT. REGISTRAR) !' # , 0 ! 1$ / ITAT, MUMBAI