ITO, CHENNAI V. JAK Communicatiions Pvt. Ltd., CHENNAI

ITA 828/CHNY/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5421 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 09-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2013
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Assessee Lawyers: R SIVARAMAN
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 828/MDS/2013 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER, COMPANY WARD-II(1), ROOM NO.515, 5 TH FLOOR, NEW BLOCK, 121, M.G. ROAD, CHENNAI 600 034. (APPELLANT) VS M/S. JAK COMMUNICATIONS PVT. LTD. NO.402, MTH ROAD, AVADI, CHENNAI 600 054 [PAN: AABCJ 1897 N] (RESPONDENT) REVENUE BY : SHRI T.N. BETGIRI, JCIT ASSESSEE BY : SHRI R.SIVARAMAN, ADVOCATE DATE OF HEARING : 09-01-2014 DATE OF PRONOUNCEMENT : 23-01-2014 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, COIMB ATORE DATED 19-02-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 6-07. 2. THE ASSESSEE IS A CABLE OPERATOR MSO AT AVADI, D ISTRICT THIRUVALOORE. THE ASSESSEE FILED ITS RETURN OF INC OME FOR THE I.T.A. NO. 828/MDS/2013 2 AY.2006-07 ON 23-01-2007 DECLARING ITS INCOME AS ` 38,09,180/-. DURING THE COURSE OF SCRUTINY ASSESSMENT, ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED AN EXPENDITU RE OF ` 12,72,745/- UNDER THE HEAD BUSINESS DEVELOPMENT EX PENSES. ON ENQUIRY, ASSESSEE EXPLAINED THESE ARE THE DONATI ONS MADE TO VARIOUS PERSONS TO PROTECT THE ASSESSEES BUSINESS. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE E HAD TAKEN A SECURED LOAN OF ` 6,98,79,782/- AND THE SAME HAS BEEN ADVANCED TO THE RELATED PARTIES. THE ASSESSEE PAID INTEREST OF ` 21,40,778/- ON THE SAID LOAN AMOUNT. THE ASSESSING OFFICER CON CLUDED THAT SINCE THE LOANS AND ADVANCES ARE NOT FOR THE PURPOS E OF ASSESSEES BUSINESS, THEREFORE, INTEREST HAS TO BE DIS-ALLOWED. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 01-12- 2008, THE ASSESSEE CARRIED AN APPEAL BEFORE THE CIT(APPEA LS). THE CIT(APPEALS) PARTLY ALLOWED THE APPEAL OF THE ASSES SEE. THE CIT(APPEALS) ALLOWED 50% OF THE PAYMENTS MADE UNDER THE HEAD BUSINESS DEVELOPMENT EXPENSES AND FURTHER GRANTED RELIEF ON INTEREST ON ` 75.00 LAKHS ADVANCED BY SHRI B.JAYARAMAN, PROPRIETOR, M/S. JAK ESTATES. I.T.A. NO. 828/MDS/2013 3 AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS), TH E REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI T.N. BETGIRI, APPEARING ON BEHALF OF THE RE VENUE VEHEMENTLY OPPOSED THE RELIEF GRANTED BY CIT(APPEAL S). THE LD.DR SUBMITTED THAT THE RELIEF GRANTED BY THE CIT( APPEALS) IS AGAINST THE FACTS OF THE CASE AND WELL SETTLED LAW. 4. ON THE OTHER HAND, SHRI R.SIVARAMAN, ADVOCATE, A PPEARING ON BEHALF OF THE ASSESSEE STRONGLY SUPPORTED THE IM PUGNED ORDER AND PRAYED FOR THE DISMISSAL OF THE APPEAL OF THE R EVENUE. THE LD.COUNSEL SUBMITTED THAT THE PAYMENTS WERE MADE TO CABLE OPERATORS TO PROTECT THE CABLES LAID BY THE ASSESSE E FROM DAMAGE, THEFT ETC., THE TERM DONATION WAS LOOSELY USED B Y THE AR OF THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE HAS A SSAILED THE ORDER OF THE CIT(APPEALS) ON TWO GROUNDS: I.T.A. NO. 828/MDS/2013 4 I. RESTRICTING BUSINESS DEVELOPMENT EXPENDITURE CLA IMED BY THE ASSESSEE TO ` 6.36 LAKHS I.E., 50% OF THE TOTAL AMOUNT CLAIMED BY THE ASSESSEE AND II. ALLOWING INTEREST PORTION ON ` 7.76 LAKHS. 6. A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW SHOW THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF ` 12,72,745/- UNDER THE HEAD BUSINESS DEVELOPMENT EXPENSES. THE EXPENDITURE H AS ALLEGEDLY BEEN INCURRED FOR PROTECTION OF CABLE WIRES, PUBLIC ITY AND ADVERTISEMENT ETC. THE ASSESSING OFFICER IN THE AB SENCE OF DOCUMENTARY EVIDENCE HAS DIS-ALLOWED THE ENTIRE AMO UNT. THE CIT(APPEALS) IN HIS ORDER HAS CATEGORICALLY STATED THAT EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS PROOF OF PAYMEN TS MADE FOR PUBLICITY AND ADVERTISEMENT AND THE PAYMENTS MADE T O LINK OPERATORS IS NOT FURNISHED. THE ONLY EVIDENCE PROD UCED BY THE ASSESSEE BEFORE THE CIT(APPEALS) WAS WITH REGARD TO PAYMENTS MADE. THE CIT(APPEALS) ALLOWED 50% OF THE PAYMENTS MADE AS EXPENDITURE UNDER THE HEAD BUSINESS DEVELOPMENT EX PENSES. WE ARE OF THE OPINION, THAT SINCE THE ASSESSEE HAS NOT FURNISH ANY DOCUMENTARY EVIDENCE NECESSITATING THE EXPENDITURE FOR BUSINESS OR ANY PLAUSIBLE REASON FOR MAKING SUC H PAYMENTS TO I.T.A. NO. 828/MDS/2013 5 PROTECT THE THEFT OR DAMAGE OF CABLE THE ENTIRE EXP ENDITURE HAS TO BE DIS-ALLOWED. THE ASSESSEE HAS MADE ONLY BALD ST ATEMENT BEFORE THE CIT(APPEALS) WITH REGARD TO PUBLICITY AN D ADVERTISEMENT EXPENDITURE. THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED IN THE ABSENCE OF ANY COGENT EVIDENCE. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. THE ENTIRE EXPEN DITURE CLAIMED BY THE ASSESSEE UNDER BUSINESS DEVELOPMENT EXPENSE S IS DIS- ALLOWED. 7. THE SECOND GROUND OF APPEAL OF THE REVENUE IS WI TH REGARD TO ALLOWING INTEREST ON ` 7.76 LAKHS OUT OF ` 21.40 LAKHS DIS-ALLOWED BY THE ASSESSING OFFICER. THE FACT THAT THE AMOUNT OF ` 6,98,79,782/- HAS BEEN TAKEN AS SECURED LOAN HAS NO T BEEN DISPUTED BY THE ASSESSEE. THE ASSESSEE HAS ALSO NO T DISPUTED THE ADVANCING OF LOANS TO THREE PARTIES I.E., I. JAI EXPO ` 27,65,645/- II. KALAI EXPO ` 66,80,206/- III. NAN COMMUNICATIONS P.LTD., ` 1,12,00,000/- THE ASSESSEE HAS PAID INTEREST OF ` 21,40,778/- ON THE SECURED LOANS. THE ASSESSING OFFICER HAS DIS-ALLOWED THE E NTIRE INTEREST I.T.A. NO. 828/MDS/2013 6 PAID ON THE SECURED LOANS FOR THE REASONS THAT THE LOANS AND ADVANCES WAS NOT FOR THE PURPOSE OF BUSINESS. THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LOANS HAVE BEEN ADVANCED TO THE THREE PARTIES FOR BUSINESS PURPOSES ONLY. HOWE VER, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE EITHER BEFO RE ASSESSING OFFICER OR CIT(APPEALS) TO SHOW THE ALLEGED BUSINES S PURPOSE. OUT OF THE TOTAL AMOUNTS ADVANCED, THE ASSESSEE COU LD PROVE THAT A SUM OF ` 75.00 LAKHS WERE ADVANCED BY SHRI B.JAYARAMAN, PROPRIETOR, JAK ESTATES. THE ASSESSEE HAS CONTENDE D THAT THE INVESTMENTS WERE SHORT TERM AND WERE MADE WITH THE INTENTION TO ACQUIRE THE BUSINESS OF NAN COMMUNICATIONS P. LTD., WHICH IS ONE OF THE BIGGEST MSO OPERATIONS IN DISTRICT VELLORE. THE ASSESSEE HAS PRODUCED EVIDENCE BEFORE THE CIT(APPEALS) TO SH OW THAT THE AMOUNT OF ` 75.00 LAKHS FUNDS HAVE FLOWN FROM SHRI B.JAYARAMAN AND NOT FROM THE ASSESSEE-COMPANY. APART FROM ` 75.00 LAKHS, THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENT TO SHOW THAT THE AMOUNT ADVANCED TO THE THREE PARTIES WAS EITHER FOR BUSINESS PURPOSES OR FROM FUNDS OTHER THAN SECURED LOAN TAKE N BY THE ASSESSEE. THE CIT(APPEALS) HAS RIGHTLY DIRECTED TH E ASSESSING OFFICER TO ALLOW THE INTEREST PART ON ` 75.00 LAKHS ADVANCED BY SHRI B.JAYARAMAN, FROM HIS OWN FUNDS AND DIS-ALLOW THE I NTEREST ON THE I.T.A. NO. 828/MDS/2013 7 REMAINING AMOUNT. THIS GROUND OF APPEAL OF THE REV ENUE IS ACCORDINGLY DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON THURSDAY, THE 23 RD JANUARY, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VI KAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 23 RD JANUARY, 2014 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR