SHREE MADHU TEXTILES, MUMBAI V. ITO 14(2)(3), MUMBAI

ITA 7432/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101054 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 17-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SANJAY ARORA , JM AND SHRI PAWAN SINGH , J M ./ I.T.A. NO. 7432/MUM/2013 ( / ASSESSMENT YEAR: 2010 - 11 ) SHREE MADHU TEXTI LES 158/164, LAXMI BHAVAN, 4 TH FLOOR, KALBADEVI ROAD, MUMBAI - 400 002 / VS. ITO - 14(2)(3), MUMBAI ./ ./ PAN/GIR NO. AAAFS 6536 R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIMAL PUNAMIYA / RESPONDENT BY : SHRI VACHASPATI TRIPATHI / DATE OF HEARING : 02.6.2016 / DATE OF PRONOUNCEMENT : 19 . 9 .2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSES SEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 25 , MUMBAI (CIT(A) FOR SHORT) DATED 01.11.2013 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 15.1.2013 . 2. THE APPEAL INVOLVES A SINGLE ISSUE, I.E., THE MAINTAINABILITY IN LAW OF THE DISALLOWANCE OF EXPENDITURE, CLAIMED IN THE SUM OF RS.7,53,609/ - , E FFECTED AT RS.3,57,936 / - IN ASSESSMENT OF THE ASSESSEES BUSINESS INCOME , RETURNED AT RS.5,56,411/ - FOR THE YEAR , IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO. 7432/MUM/2013 (A.Y. 2010 - 11) SHREE MADHU TEXTILES VS. ITO 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ONLY BUSINESS T HE ASSESSEE WAS FOUND TO HAVE UNDERTAKEN DURING THE RELEVANT YEAR WAS COMMISSION ON MARKETING OF BUILDING M ATERIAL, EARNING A GROSS INCOME OF RS.1, 37 ,954 / - , I.E., APART FROM INTEREST INCOME OF RS.8 3 ,6 3 8 / - FROM TWO PARTIES. THE IMPUGNED EXPENDITURE WAS ACCORDINGLY FOUND EXCESSIVE , AND BARRING SOME EXPENDITURE ALLOWED IN FULL, WAS ALLOWED O NLY AT 50%, RESULTING IN THE IMPUGNED DISALLOWANCE. IN APPEAL, THE LD. CIT(A) O BSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO SHOW THAT THE EXPENDITURE HAD BEEN CLAIMED FOR EARNING COMMISSION INCOME. THE S OLITARY TRANSACTION OF SALE OF SHARES (OF RS. 2 7 ,8 30 / - ), HELD AS INVESTMENT FROM THE PAST AND REFLECTED AS SUCH, COULD NOT BE CONSIDERED AS BUSINESS . EVEN OTHERWISE , SUCH A MEAG E R ACTIVITY WOULD NOT JUSTIFY INCURRING EXPENDITURE IN THE SUM CLAIMED. THE CLAIM OF EXPLORING NEW BUSINESS OPPORTUNITIES WAS A LSO AN ILLUSION AS THE SAME IS NOT SUPPORTED BY ANY MATERIAL ON RECORD. THE FABRIC BUSINESS WAS NOT ALIVE DURING THE RELEVANT YEAR. THE ASSESSEE, IN HIS VIEW, WAS UNDERGOING A TRANS I TION DURING THE RELEVANT YEAR. THOUGH, THEREFORE, THERE WAS NO BUSINESS DU RING THE YEAR, EXCEPT OF - COURSE THE MARKETING ACTIVITY FOR COMMISSION, THE ASSESSING OFFICER (A.O.) HAD YET ALLOWED EXPENDITURE AT RS.3,95,673 / - (I.E., WITH OUT A FINDING OF THE SAME AS BEING TOWARD THE SAID ACTIVITY) OUT OF THE TOTAL CLAIM FOR RS.7.54 L ACS (REFER PARA 4.3 OF THE IMPUGNED ORDER) . THE DISALLOWANCE BEING CONFIRMED THUS, THE ASSESSEE IS IN SECOND APPEAL. 4 . W E HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEES CLAIM O F INCURRING EXPENDITURE IN EXPLORING NEW BUSINESS OPP ORTUNITIES IN THE FIELD OF MARKETING P RE F AB , ENGINEERING BLDG. MATERIAL, USED IN MAKING F ACTORIES AND W AREHOUSES; M ARKETING S ENSORS AND D RYWALL , USED IN H OTELS, O FFICE S AND H OSPITALS, AND OF HAVING INCURRE D BULK OF THE EXPENDITURE CLAIMED THERE O N, E XPLAIN S BOTH ITS CASE AS WELL AS THE INCURRING OF THE EXPENDITURE IN THE SUM CLAIMED. THE SAME MAY, THEREFORE, WELL BE TRUE, I.E., DESPITE NON - FURNISHING OF ANY 3 ITA NO. 7432/MUM/2013 (A.Y. 2010 - 11) SHREE MADHU TEXTILES VS. ITO EVIDENCE IN ITS RESPECT, WHICH A SPECT THOUGH CANNOT BUT BE KEPT IN REGARD . HOWEVER, THE EXPENDITURE I NCURRED TOWARD SETTING UP , I.E., PRIOR TO THE SETUP OF , A BUSINESS , IS NOT ALLOWA BLE . IN THE P RESENT CASE , THE EXP ENDITURE DOES NOT EVEN QUALIFY TO BE SO IN - AS - MUCH AS THE ASSESSEE IS YET TO IDENTIFY THE BUSINESS TO B E SET UP, AND IS IN THE PROCESS OF EVAL UATING/APPRAISING THE PROSPECTS/FEASIBILITY OF DIFFERENT BUSINESS E S. THE EXPENDITURE ON EXPLORING NEW BUSINESS OPPORTUNITIES BY THE ASSESSEE, EVEN IF IT WERE EVIDENCED, IS THUS NOT ADMISSIBLE. THE REALIZATION OF AN INVESTMENT ALSO CANNOT BE REGARDED AS BUS INESS, EVEN AS WE FIND NO INDICATION OF THE SAME, I.E., SHARE TRADING, AS BEING THE ASSESSEES BUSINESS, GIVING CREDENCE TO THE REVENUES PERCEPTION OF THE ASSESSEE HAVING SOLD THE SAID SHARES TO LEND A SEMBLANCE OF A BUSIN ESS . T HE EXPENDITURE WHICH IS D EDUCTIBLE , IT MAY BE APPRECIATED, IS THAT UNDERTAKEN IN THE COURSE OF CARRYING ON A BUSINESS, AND IT COULD NOWHERE BE SHOWN THAT THE EXPENDITURE STANDS INCURRED IN RELATION TO ANY BUSINESS. WE, THEREFORE, FIND NO REASON TO DIST URB THE CON CURRENT FINDING S O F THE R EVENUE AUTHORITIES, WITH WE IN FACT CONCURRING WITH THE LD. C IT (A) IN THAT THE AO HA S BEEN MORE THAN REASONABLE IN ALLOWING A GOOD PART (OVER 50%) OF THE EXPENDITURE CLAIMED, ALLOWING THUS A BENEFIT OF DOUBT TO THE ASSESSEE. WE MAY IN THIS REGARD AL SO STATE THAT THE WORD WHOL LY IN THE EXPRESSION WHOLLY AND EXCLUSIVELY OCCURRING IN SECTION 37(1) , IT IS TRITE LAW, RELATES TO THE QUANTUM OF THE EXPENDITURE, WHILE THE WORD EXCLUSIVELY CONFINES ITSELF TO THE PURPOSE OF THE EXPENDITURE ITS OBJECT A ND MOTIVE , SO THAT IT IS BOTH REASONABLE AND PERMISSIBLE FOR THE R EVENUE AUTHORITIES TO MAKE AN ASSESSMENT OF THE PROPORTION OF THE EXPENDITURE THAT IN ITS CONSIDERED VIEW COULD BE SAID TO HAVE BEEN INCURRED FOR THE RELEVANT BUSINESS, DISALLOWING THE BALAN CE W HERE THE SAID CONDITION IS NOT SATISFIED IN FULL . IT IS IN ALL CASES A MATTER OF FACT, BASED ON EVIDENCES FOR AND AGAINST, WITH THE ONUS BEING ON THE ASSESSEE IN - AS - MUCH AS IT IS IT WHO CLAIMS THE SAME AND IS EVEN OTHERWISE - IN THE NORMAL COURSE OF EV ENTS, EXPECTED TO HAVE THE SAME (EVIDENCE S ). THE ALLOWANCE OF INTEREST EXPENDITURE, I.E., IN PART, DESPITE ABSENCE OF BUSINESS, APPEARS TO BE IN VIEW OF 4 ITA NO. 7432/MUM/2013 (A.Y. 2010 - 11) SHREE MADHU TEXTILES VS. ITO THE ASSESSEE ALSO HAV ING EARNED INTEREST INCOME, ASSESSED AS BUSINESS INCOME. WE ACCORDINGLY, DECLINE I NTERFERENCE. WE DECIDE ACCORDINGLY . 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 19 , 201 6 SD/ - SD/ - ( PAWAN SIN GH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 19 . 0 9 .201 6 . . ./ ROS HANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRA R) , / ITAT, MUMBAI