M/s Mission Row Tea Brokers Pvt Ltd, Kolkata V. D.C.I.T Cir - 4,kolkata, Kolkata

ITA 855/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4958 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2013
• Court: TRIBUNAL
• Department Lawyers: DEBASISH LAHIRI
• Keywords: Depreciation; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM] ITA NO.855/KOL/2013 ASSESSMENT YEAR : 2007-08 M/S. MISSION ROW TEA BROKERS -VERSUS- D.C.I.T., C IRCLE-4, PVT.LT, KOLKATA KOLKATA (PAN:AABCM7986R) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI DEBASISH LAHIRI, JCIT, SR .DR DATE OF HEARING : 18.02.2016. DATE OF PRONOUNCEMENT : 02.03.2016. ORDER PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE DIREC TED AGAINST THE ORDER DATED 27.02.2013 OF CIT(A)-IV, KOLKATA RELATING TO A.Y.2007-08. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN MAKING DISALL OWANCE OF RS.6,53,882/- BEING EXPENSES RELATING TO ASSESSEES DELHI BRANCH OFFICE . 3. THE ASSESSEE IS A COMPANY. IT DERIVES INCOME IN THE FORM OF JOB CHARGES FROM CONTEMPORARY BROKERS P.LTD WHICH IS CLOSELY RELATED TO THE ASSESSEE BESIDES BROKERAGE INCOME FOR PARTICIPATION IN TEA AUCTION O N BEHALF OF OTHERS. IN THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTICED THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.6,53,882/- TOWARDS ITS DELHI OFFICE. THE ASSESSE E HAS THREE UNITS/OFFICE LOCATED AT BARODA, DELHI AND KOLKATA. THE ONLY SOURCE OF INCOM E DURING THE PREVIOUS YEAR IN THE DELHI OFFICE WAS LIABILITY WHICH WAS NO LONGER REQU IRED AND WHICH WAS WRITTEN BACK AS INCOME IN THE PROFIT AND LOSS ACCOUNT. IN THE ABOVE CIRCUMSTANCES AO WAS OF THE VIEW ITA NO.855/KOL/2013 M/S. MISSION ROW TEA BRO KERS PVT. LTD. A.YR.2007-08 2 THAT THE EXPENDITURE INCURRED IN THE DELHI OFFICE A ND CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE CANNOT BE ALLO WED AS DEDUCTION AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE CAN BE ALLOWED AS DEDUCTION, AS NO BUSINESS WAS CARRIED ON IN THE DELHI OFFICE. IN THIS REGARD AO ALSO NOTICED THAT THERE WAS ONLY ONE BANK ACCOUN T MAINTAINED AT DELHI AND THAT CANNOT JUSTIFY THE EXPENDITURE OF DELHI OFFICE. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AFORESAI D SUM. 4. ON APPEAL BY THE ASSESSEE CIT(A) CONFIRMED THE O RDER OF AO. BEFORE CIT(A) ASSESSEE THE LIST OF EXPENSES AT THE DELHI BRANCH O FFICE WHICH WAS UNDER THE FOLLOWING SUB-HEADS - SALARY, BONUS AND EX-GRATIA, MEDICAL RE IMBURSEMENT, STAFF TEA & TIFFIN, LEAVE TRAVEL ASSISTANCE, STAFF WELFARE, RATE AND TA XES, VEHICLE RUNNING EXPENSES, TRAVELING EXPENSES, BUSINESS PROMOTION, SUBSCRIPTIO N, REPAIRS, BOOKS AND PERIODICALS, BANK CHARGES, GAS & ELECTRICITY, SECURITY CHARGES, INTEREST ON DEBENTURES AND DEPRECIATION WAS NOTICED. THE CIT(A) WAS OF THE V IEW THAT FROM THE ABOVE EXPENSES IT WAS EVIDENT THAT A FULL-FLEDGED OFFICE WAS MAINT AINED AT DELHI WITH OFFICE STAFF BY THE ASSESSEE. THE ASSESSEE HAD CONTENDED BEFORE CIT (A) THAT IT WAS NOT NECESSARY THAT JOB WORK OR TEA AUCTION WORK HAS TO BE CARRIED OUT AT EVERY LOCATION WHERE THE ASSESSEE HAS AN OFFICE. BUSINESS EXPEDIENCY MAY REQ UIRE A COMPANY TO OPEN BRANCH AT LOCATIONS WHERE ITS MAIN ACTIVITY IS NOT CARRIED ON . THE CIT(A) THEREUPON QUERIED THE ASSESSEE AS TO WHAT WAS THE BUSINESS EXPEDIENCY WHI CH REQUIRED THE ASSESSEE TO OPEN AN OFFICE AT DELHI. ACCORDING TO CIT(A) THERE WAS NO VALID EXPLANATION GIVEN BY THE ASSESSEE. THE CIT(A) ALSO HELD THAT THE NECESSIT Y TO HAVE LIAISON OFFICE AT DELHI WAS NOT SATISFACTORILY EXPLAINED BY THE ASSESSEE. THE CIT(A) HELD THAT THE MAIN BUSINESS ACTIVITY OF THE APPELLANT IS TEA AUCTION AT KOLKATA AND JOB WORK AT BARODA AND THEREFORE THERE WAS NO COMPELLING NEED TO HAVE A BR ANCH OR ADMINISTRATIVE HEADQUARTER AT DELHI. WITH REGARD TO MAINTENANCE OF A BANK ACC OUNT AT DELHI, THE CIT(A) WAS OF THE VIEW THAT BANK ACCOUNT AT DELHI WAS NOT SO CRIT ICAL AND THE SAME COULD HAVE BEEN OPERATED FROM KOLKATA OR BARODA. ITA NO.855/KOL/2013 M/S. MISSION ROW TEA BRO KERS PVT. LTD. A.YR.2007-08 3 4.1. ANOTHER ARGUMENT TAKEN BY THE ASSESSEE BEFORE CIT(A) WAS IS THAT THE ADMINISTRATIVE OFFICE OF ITS TEA BROKING COMPANY AS WELL AS THE COMPANY FOR WHICH IT DOES JOB WORK AT BARODA WAS AT DELHI. THEREFORE, TH E ASSESSEE TOO NEEDS TO HAVE A BRANCH OFFICE AT DELHI. THE CIT(A) HOWEVER WAS OF T HE VIEW THAT THERE WERE SEVERAL MEANS OF COMMUNICATING THROUGH VARIOUS FAST AND REL IABLE MEANS OF COMMUNICATION LIKE INTERNET, FAX, VIDEO CONFERENCING ETC. SPENDIN G LACS OF RUPEES TO MAINTAIN AN OFFICE AT DELHI AND IT WAS NOT LOGICAL TO HAVE AN OFFICE A T DELHI FOR THE AFORESAID PURPOSE. THE CIT(A) HELD THAT THERE WAS NO BUSINESS ACTIVITY THAT TOOK PLACE AT DELHI. THE DISALLOWANCE MADE BY THE A.O. OF A SUM OF RS. 6,53, 882/- WAS CONFIRMED BY THE CIT(A). 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE I S IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED COU NSEL FOR THE ASSESSEE, WHO REITERATED THE SUBMISSIONS OF THE ASSESSEE AS MADE BEFORE CIT(A). HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF SA BUILDERS VS CIT (2007) 158 TAXMAN 74 (SC) WHEREIN THE HONBLE S UPREME COURT HAS HELD THAT THE REVENUE COULD NOT JUSTIFIABLY CLAIM TO PUT ITSE LF IN THE ARMCHAIR OF THE BUSINESS MAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND AS SUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUM STANCES OF THE CASE. IT WAS HELD THAT ONCE COMMERCIAL EXPEDIENCY FOR INCURRING A PAR TICULAR EXPENDITURE IS PLEADED IT IS TO BE LOOKED AT FROM THE BUSINESS MAN POINT OF VIEW . THE LEARNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). 7. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS. WE HAVE ALSO PERUSED PROFIT AND LOSS ACCOUNT OF THE DELHI OFFICE WHICH IS PLACED AT PAGES 11 AND 12 OF THE ASSESSEES PAPER BOOK. A PERUSAL OF THE PROF IT AND LOSS ACCOUNT OF THE DELHI OFFICE THAT EXPENSES UNDER THE FOLLOWING HEAD HAVE BEEN CLAIMED SALARY, STAFF WELFARE EXPENSES, RENT AND TAXES, TRAVELLING AND CONVEYANCE , BUSINESS PROMOTION, REPAIRS AND MAINTENANCE AND MISCELLANEOUS EXPENSES WHICH IN CLUDE DEPRECATION OF RS.2,45,238/-. THE REVENUE DOES NOT DISPUTE THE NAT URE OF BUSINESS OF THE ASSESSEE. ITA NO.855/KOL/2013 M/S. MISSION ROW TEA BRO KERS PVT. LTD. A.YR.2007-08 4 THE NATURE OF BUSINESS OF THE ASSESSEE IS CARRYING OUT JOB WORK AND ACTING AS BROKERS IN TEA AUCTION IS THE MAIN ACTIVITY OF THE ASSESSE E. IT IS A PLEA OF THE ASSESSEE THAT MANY CORPORATE HOUSES WHICH WOULD SHOW INTEREST RELATED TO THE BUSINESS OF THE ASSESSEE ARE LOCATED AT DELHI AND THEREFORE IT WAS NECESSARY TO HAVE LIAISON OFFICE AT DELHI. THIS FACT COULD NOT DENIED BY THE AO OR CIT(A). THE ARG UMENT OF THE REVENUE ON THIS ASPECT WAS THAT THERE ARE VERY GOOD MEANS OF COMMUN ICATION TODAY AND SITTING IN KOLKATA ONE COULD LIAISE. THE OTHER ARGUMENT OF T HE REVENUE IS THAT THE ASSESSEE HAS NOT EXPLAINED AS TO WHY ADMINISTRATIVE HEADQUARTER WAS REQUIRED AT DELHI WHEN THE MAIN ACTIVITIES OF THE ASSESSEE IS TEA AUCTION AT K OLKATA AND JOB WORK AT BARODA. IN OUR VIEW THE REVENUE AUTHORITIES HAVE CLEARLY ENCROACHE D UPON THE DOMAIN OF A BUSINESS MAN AS TO WHAT IS COMMERCIALLY EXPEDIENT TO BE DONE IN A PARTICULAR SITUATION. IT HAS BEEN REPEATEDLY HELD IN SEVERAL DECISIONS THAT THE REVENUE CANNOT PUT ITSELF IN THE ARMCHAIR OF A BUSINESS MAN AND DECIDE AS TO WHAT EX PENDITURE HAS TO BE INCURRED OR NOT INCURRED. THE FACTUM OF THE EXISTENCE OF THE OF FICE AT DELHI AND INCURRING OF THESE EXPENSES HAD NOT BEEN DENIED BY THE REVENUE. IN SU CH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION O F THE AFORESAID SUM HAD TO BE ALLOWED. WE THEREFORE DIRECT THAT DISALLOWANCE MADE BY THE REVENUE AUTHORITIES BE DELETED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 02.03.2016. SD/- SD/- [M.BALAGANESH] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:02.03.2016. . R.G.(.P.S.) ITA NO.855/KOL/2013 M/S. MISSION ROW TEA BRO KERS PVT. LTD. A.YR.2007-08 5 COPY OF THE ORDER FORWARDED TO: 1. M/S. MISSION ROW TEA BROKERS PVT.LTD, 2/1, OLD C OURT HOUSE CORNER, KOLKATA-700001. 2 THE D.C.I.T., CIRCLE-4, KOLKATA. 3. THE CIT-II, KOLKATA, 4. THE CIT(A)-IV, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES