SHREEPATI HOLDINGS & FINANCE P. LTD, MUMBAI V. ADDL CIT 4(2), MUMBAI

ITA 8253/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9409 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Bad and doubtful debts; Revenue expenditure
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT, AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. : 8253/MUM/2010 ASSESSMENT YEAR : 2007-08 M/S. SHREEPATI HOLDINGS & FINANCE PVT. LTD. 401, MEHTA MAHAL, 4 TH FLOOR, MATHEW ROAD, OPERA HOUSE, MUMBAI-400 004 PAN NO: AAACS 8111 R VS. ADDL. CIT 4(2), AAYKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI DINESH KUMAR DATE OF HEARING : 14.11.2012 DATE OF PRONOUNCEMENT : 21.11.2012 ORDER PER B. RAMAKOTAIAH, A.M. : THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-8, MUMBAI DATED 15.09.2010. THE ASSESSEE HAS RAISED T HREE GROUNDS IN ITS APPEAL. WHEN THE CASE WAS CALLED NONE APPEARED ON BEHALF OF ASSESSEE EVEN THOUGH THE POSTING NOTICE WAS ACKNOWLEDGED BY THE ASSESSEE ON 08.10.2012. THEREFORE, AFTER HEARING THE LEARNED D R, THE APPEAL WAS DECIDED EX PARTE ASSESSEE. 2. THE GROUND NO. 1 IS AS UNDER :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF YOUR APPEL LANT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LEARNED AO OF `. 16,251/- INVOKING THE PROVISION OF ITA NO : 8253/MUM/2010 M/S. SHREEPATI HOLDINGS & FINANCE PVT. LTD. 2 SECTION 14A AND RULE 8D, AS MUCH AS THE SAME IS NOT APPLICABLE TO A.Y. 2007-08. 2.1 BRIEFLY STATED THE ASSESSEE HAS RECEIVED AN AMO UNT OF `. 22,31,800/- AS DIVIDEND WHICH HAS BEEN CLAIMED AS E XEMPT. AS THE ASSESSEE HAS NOT STATED ANY EXPENDITURE ATTRIBUTABL E TO EARNING THE EXEMPT INCOME, THE A.O. INVOKED THE PROVISION OF SE CTION 14A AND DISALLOWED AN AMOUNT OF `. 16,251/-. BEFORE THE LD. CIT(A) EVEN THOUGH THE ASSESSEE RAISED THE GROUND, THE SAME WAS NOT PR ESSED BY THE WRITTEN SUBMISSION DATED 07.09.2010. THE ASSESSEE PREFERRE D THE GROUND BEFORE US EVEN THOUGH THE SAME WAS DISMISSED AS WITHDRAWN BY THE LD. CIT(A) . 3. AFTER CONSIDERING THE FACTS ON RECORD AND SUBMIS SIONS MADE BY THE DR, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE ASSESSEES GROUND. EVEN THOUGH THE A.O. WORKED OUT THE DISALLOWANCE IN VOKING THE WORKING PROVIDED UNDER RULE 8D, THE DISALLOWANCE OF `. 16,251/-, IN OUR VIEW, IS A REASONABLE AMOUNT ATTRIBUTABLE TO EARNING OF DIVI DEND OF `. 22,31,800/-. CONSIDERING THE FACT THAT THE SAID DISALLOWANCE WAS ALSO NOT PRESSED BEFORE THE LD. CIT(A), WE REJECT THE ASSESSEES GRO UND. 4. GROUND NO. 2 IS WITH REFERENCE TO DISALLOWING AN AMOUNT OF `. 35,919/- AND CAPITALISING THE SAME WHICH WAS CLAIME D UNDER THE HEAD REPAIR AND MAINTENANCE CHARGES. THE A.O. HAS MAD E THE DISALLOWANCE HOLDING THAT THE EXPENDITURE OF `. 35,919/- WAS OF CAPITAL NATURE. IT WAS FOUND THAT THIS EXPENDITURE HAD BEEN INCURRED FOR P URCHASE OF RACKS, STEEL RACKS AND STAFF PRESENCE PUNCHING MACHINE. T HE ASSESSEE HAD EXPLAINED THAT THESE ITEMS WERE PURCHASED AS FITTIN G MATERIALS WHICH ARE USED FOR ELECTRICAL AND OTHER FITTINGS AND, THEREFO RE, THEY ARE TREATED AS REVENUE IN NATURE. THE ASSESSEE HAS PLACED RELIANC E ON THE DECISION OF THE CIT VS. MADRAS AUTO SERVICES PVT. LTD. [233 ITR 468] (SC). THE LD. CIT(A) HOWEVER, WAS OF THE OPINION THAT THE ASSESSE E INCURRED THE ITA NO : 8253/MUM/2010 M/S. SHREEPATI HOLDINGS & FINANCE PVT. LTD. 3 EXPENDITURE FOR PURCHASING AN ITEM WHICH ARE OF END URING UTILITY. THEREFORE, HE HELD THAT THE EXPENDITURE IS OF CAPIT AL IN NATURE. HOWEVER, HE ALLOWED THE DEPRECIATION IN THIS REGARD BUT THE ASSESSEE IS AGGRIEVED. 5. AFTER CONSIDERING THE ARGUMENTS OF THE LD. DR AN D EXAMINING THE FACTS AS AVAILABLE ON RECORD, WE ARE OF THE OPINION THAT EVEN THOUGH THERE IS AN ENDURING BENEFIT, NO FIXED ASSET HAS BEEN CRE ATED BY SPENDING THIS AMOUNT AS FITTINGS. IN VIEW OF THIS, WE HOLD THAT EXPENDITURE IS REVENUE IN NATURE AND, THEREFORE, THE ORDERS OF THE LD. CIT (A) AND THE A.O. ARE REVERSED ON THIS CLAIM AND THE A.O. IS DIRECTED TO ALLOW THE EXPENDITURE AS REVENUE EXPENDITURE. IF ANY DEPRECIATION WAS AL LOWED CONSEQUENT TO THE ORDER OF THE LD. CIT(A), THE SAME CAN BE WITHDR AWN. THE GROUND IS ACCORDINGLY ALLOWED. 6. GROUND NO. 3 PERTAINS TO THE CLAIM OF BAD DEBTS OF `. 2,45,872/-. THE ASSESSEE CLAIMED BAD DEBTS TO THE ABOVE EXTENT, WHEREAS THE A.O. RESTRICTED THE SAME TO THE EXTENT OF BROKERAGE EARN ED AMOUNTING TO `. 22,623/- ON THE REASON THAT THE BALANCE AMOUNT HAS NOT FULFILLED THE CONDITIONS AS PROVIDED U/S.36(2). WHILE AGREEING T HAT THE DECISION OF THE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF SHREYAS S . MORAKIA [5 ITR (TRIBUNAL) 1] IS APPLICABLE TO THE FACTS OF THE CAS E AND ALSO STATING THAT THE GENUINENESS OF THE ASSESSEES CLAIM IS NOT DOUB TED, THE LD. CIT(A) FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH CO URT IN THE CASE OF D. B. (INDIA) SECURITIES LTD. [318 ITR 26] HELD THAT AN A MOUNT DUE FROM THE CLIENT IS ALLOWABLE AS DEDUCTION ON ACCOUNT OF WRIT E OFF OF BAD DEBT BUT SUCH AMOUNT OF BAD DEBT HAS TO BE ARRIVED AT AFTER ADJUSTING THE SALE PROCEEDS OF THE SHARES PURCHASED ON BEHALF OF THE C LIENTS AGAINST THE AMOUNT DUE FROM THE DEBTOR WHICH HAS NOT BEEN IN TH E INSTANT CASE. THEREFORE, HE CONFIRMED THE DISALLOWANCE TO THE EXT ENT OF `. 2,23,249/-. ITA NO : 8253/MUM/2010 M/S. SHREEPATI HOLDINGS & FINANCE PVT. LTD. 4 7. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR AND GOING THROUGH THE ORDERS OF THE A.O. AND LD. CIT(A), WE ARE OF TH E OPINION THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE AGAINST THE ASSESS EE ON A WRONG FINDING. AS SEEN FROM THE SUBMISSION MADE BEFORE THE A.O. PA RTICULARLY AS RECORDED IN PARA 8.1, IT WAS THE ASSESSEES SUBMISS ION THAT THE BAD DEBTS ARE IN RESPECT OF THREE CLIENTS WHO WERE REGULARLY DOING SHARE TRADING ACTIVITY WITH THE ASSESSEE. THE ASSESSEE ALSO ENCL OSED THE COPY OF THE ACCOUNTS OF THE SAID CLIENTS TO SUBMIT THAT THE DEB TS WERE OUTSTANDING FOR A LONG PERIOD AND GRADUALLY IT WAS RECOVERED AND UL TIMATELY NOT RECOVERED AMOUNTS ONLY WERE WRITTEN OFF AS BAD DEBTS. THIS IN DICATES THAT THE ASSESSEE HAS TAKEN ALL THE STEPS FOR RECOVERY OF TH E DEBTS AND, THEREFORE, THE LD. CIT(A)S FINDING THAT THESE WERE NOT DEMONS TRATED SEEMS TO BE NOT CORRECT. SINCE THE LD. CIT(A) HAS GIVEN A FINDING THAT THE GENUINENESS OF THE ASSESSEES CLAIM IS NOT IN DOUBT AND ALSO THE D ECISION OF THE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF SHREYAS S. MOR AKIA (SUPRA) SQUARELY APPLIES IN THE INSTANT CASE, WE HAVE NO HE SITATION IN ALLOWING THE CLAIM, AS THE SAID ORDER OF THE ITAT SPECIAL B ENCH WAS UPHELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHREYAS S. MORAKHIA [ 342 ITR 285] (BOM). THE GROUND IS ALLOWED. THE A.O. IS DIRECTE D TO ALLOW THE BAD DEBT AS CLAIMED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 21 ST DAY OF NOVEMBER, 2012. SD/- S D/ - ( D. MANMOHAN ) ( B. RAMAKOTAIAH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DT: 21 ST NOVEMBER, 2012. ITA NO : 8253/MUM/2010 M/S. SHREEPATI HOLDINGS & FINANCE PVT. LTD. 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI