Piruz A. Khambhatta, Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 873/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2164 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: PF JAIN
• Keywords: Business income; Capital expenditure
• Section: 143(3)

Judgement Text

ITA NO 873/A HD/2012 . A.Y. 2007- 08 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 873/AHD/2012 (ASSESSMENT YEAR:2007-08) PIRUZ AREEZ KHAMBATTA. B/H. ELLISBRIDGE GYMKHANA, ELLISBRIDGE AHMEDABAD (APPELLANT ) VS. THE DCIT-CIRCLE-5 AHMEDABAD (RESPONDENT) PAN: ABMPK 6324 N APPELLANT BY : SHRI P.F. JAIN. A.R. RESPONDENT BY : SHRI O.P. BATHEJA SR. D.R. ( )/ ORDER DATE OF HEARING : 09-07-201 3 DATE OF PRONOUNCEMENT : 26 -07-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-XI AHMEDABAD DATED 27.02.2012 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM HOUS E PROPERTY, BUSINESS INCOME, CAPITAL GAINS AND INCOME FROM OTHER SOURCES . ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2007-08 ON 30.07.2007 DEC LARING TOTAL INCOME ITA NO 873/A HD/2012 . A.Y. 2007- 08 2 AT RS. 2,84,011/-. THE CASE WAS SELECTED FROM SCRUT INY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 30.11.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 4,39,530 . AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MA TTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 27.02.2012 DISMISSED THE AP PEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSE E IS NOW IN APPEAL BEFORE US. THE ASSESSEE HAS FILED CONCISE GROUNDS OF APPEAL WHICH READS AS UNDER: - 1. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.6,97,486/- OUT OF LEGAL AND CONS ULTANCY EXPENSES PERTAINING TO TRADEMARK EXPENSES WITHOUT PROPERLY CONSIDERING, AP PRECIATING THE FACTS AND SUBMISSION FURNISHED BY THE APPELLANT BEFORE HIM AN D A.O. AND BY MAKING ERRONEOUS OBSERVATIONS. 2. ON THE FACTS NO DISALLOWANCE OF RS.6,97,486/- OUT O F LEGAL AND CONSULTANCY EXPENSES OUGHT TO HAVE BEEN MADE. BOTH THE GROUNDS ARE CONSIDERED TOGETHER SINCE THEY ARE ON THE SAME ISSUE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED TRADE MARK FEE EXPENSES O F RS. 6,97,486 (AS PER A.R. THE CORRECT FIGURE SHOULD BE 6,46,561/-) U NDER THE HEAD LEGAL AND CONSULTANCY EXPENSES. HE ALSO NOTICED THAT TH E ASSESSEE HAS RECEIVED INCOME FROM TRADE MARK USERS OF RS. 2 LACS . HE NOTED THAT AS COMPARED TO THE LEVEL OF INCOME, THE EXPENDITURE WA S VERY HIGH AND FURTHER ALL THE EXPENSES WERE INCURRED IN FOREIGN C URRENCY AND THE BENEFIT DERIVED BY THE ASSESSEE WAS NOT KNOWN. HE WAS OF T HE VIEW THAT THE TRADE MARK RECEIPTS APPEARED TO BE FROM AN ASSOCIAT E ENTERPRISE. HE THUS DISALLOWED THE CLAIM OF EXPENDITURE OF RS. 6,97,486 /-. AGGRIEVED BY THE ITA NO 873/A HD/2012 . A.Y. 2007- 08 3 ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MA TTER BEFORE CIT(A). CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER BY HOL DING AS UNDER: 2.3 I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS. I HAVE ALSO PERUSED THE CASE OF CIT V/S. RAJENDRA PRASAD MOODY 115 ITR 519 (S.C.) IT IS SEEN THAT APPELLANT HAS RECEIVED TRADEMARK USER CHARGES OF RS,2,00,000/- AND THE SAME WAS OFFE RED FOR TAXATION UNDER THE HEAD INCOME FROM OTHER SOURCES. THE APPELLANT HAS EXPENDED A SU M OF RS.6,97,486/- UNDER THE HEAD TRADEMARK FEE EXPENSES. IT IS MATTER OF RECORD THAT APPELLANT NEITHER IN THE ASSESSMENT PROCEEDINGS NOR IN THE APPELLATE PROCEEDINGS HAS FU RNISHED DETAILS OF TRADEMARK USER CHARGES AND TRADEMARK FEE EXPENSES. THIS WAY, THE NATURE OF RECEIPTS AND EXPENSES COULD NOT BE ESTABLISHED. SINCE APPELLANT HAS CLAIMED DEDUCTION OF RS.6,97,486/- U/S.57(III) OF THE I.T. ACT, IT WILL BE PERTINENT TO ANALYSE PROVISIONS OF SECTI ON 57(III). AS PER THE PROVISIONS OF SECTION 57(III) DEDUCTION CAN ONLY BE ALLOWED IF FOLLOWING CONDITIONS ARE FULFILLED. '(I) THE EXPENDITURE MUST HAVE BEEN INCURRED SOLE LY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INCOME OR MAKING INCOME, (II)THE INCOME MUST BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES (III)THE EXPENDITURE SHOULD NOT BE IN THE NATURE OF A CAPITAL EXPENDITURE, (IV) THE AMOUNT IN QUESTION SHOULD NOT BE IN THE NATURE OF PERSONAL EXPENSES OF THE ASSESSEE; (V) THERE MUST BE A CLEAR NEXUS BE TWEEN THE EXPENDITURE INCURRED AND THE INCOME SOUGHT TO BE EARNED. THESE CONDITIONS EMERGE FROM THE DECISIONS RENDERED IN SETH R. DALMIA V. CIT (1977)110 ITR 644 (SC) AND PADMAVATI JAYKRISHNA V. CIT (1981) 131 ITR 653 (GUJ.) SEE ALSO CIT V. NAWN ESTATES (P) LTD. (1968) 70 ITR 784 (CAL.) ROOPCHAND CHABILDAS & SONS V. CIT (1967) 63 ITR 166 (MAD) UDAYAN CHINUBHA I V. CIT(1978) 111 ITR 584 (GUJ.) AND SMT.ZUBEDABAI V. CIT (1984) 148 ITR 104 (BOM.)' 2.4 AS DISCUSSED ABOVE, APPELLANT HAS NOT FURNISHED DOCUMENTARY EVIDENCES TO PROVE THAT TRADE MARK FEE EXPENSES HAS BEEN INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INCOME WHICH FALLS UNDER THE HEAD INCOME FR OM OTHER SOURCES. ACCORDINGLY, CONDITIONS LAID DOWN U/S.57(III) ARE NOT FULFILLED AND IN MY CONSIDERED VIEW, APPELLANT IS NOT ELIGIBLE TO CLAIM EXPENDITURE OF RS.6,97,486/- U/S.57(III)OF IT. ACT. 2.5 APPELLANT HAS PLACED RELIANCE ON THE CASE OF C IT V/S. V/S. RAJENDRA PRASAD MOODY (SUPRA). HOWEVER, IN THIS CASE THERE WAS A CLEAR NE XUS IN THE INTEREST PAID AND THE INVESTMENTS MADE IN THE EQUITY SHARES. IN THE INSTA NT CASE, APPELLANT HAS FAILED TO PROVE SUCH NEXUS. ACCORDINGLY, THE RATIO OF THIS CASE WIL L NOT BE APPLICABLE IN THE CASE OF APPELLANT. 2.6 IN VIEW OF THE ABOVE, DISALLOWANCE OF RS.6,97, 486/- IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. ITA NO 873/A HD/2012 . A.Y. 2007- 08 4 6. BEFORE US, THE LEARNED A.R. SUBMITTED THAT THE COMP LETE DETAILS OF THE EXPENSES WERE FILED BEFORE ASSESSING OFFICER AND CI T(A). HE PLACED ON RECORD THE COPY OF THE COVERING LETTER ADDRESSED TO ASSESSING OFFICER WHEREIN THE VARIOUS DETAILS WERE SUBMITTED. HE ALS O PLACED ON RECORD DETAILS OF THE EXPENSES DEBITED AS TRADE MARK FEES EXPENSES. HE THUS SUBMITTED THAT THE AFORESAID DETAILS WERE BEFORE AS SESSING OFFICER AND CIT(A) BUT THE SAME WAS NOT EXAMINED. HE THEREFORE SUBMITTED THAT THE MATTER MAY BE SENT BANK TO ASSESSING OFFICER FOR FR ESH EXAMINATION. 7. THE LEARNED D.R. ON THE OTHER HAND RELIED ON THE OR DER OF ASSESSING OFFICER AND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER HAS DISALLOWE D THE ENTIRE EXPENSES OF RS. 646561/- FOR THE REASON THAT THE ASSESSEE HAD N OT SUBMITTED THE DETAILS OF THE TRADE MARK EXPENSES AND DETAILS OF WORKING OF TRADE MARK USER RECEIPTS. BEFORE US, THE LEARNED A.R. HA S SUBMITTED THAT THE DETAILS OF VARIOUS EXPENSES AND TRADE MARK USER INC OME WAS SUBMITTED BEFORE ASSESSING OFFICER AND CIT(A). WE FIND THE A SSESSING OFFICER HAS NOT GIVEN ANY FINDING WITH RESPECT TO THE EXPENSES INCURRED. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT TO MEE T THE ENDS OF JUSTICE THE ASSESSEE BE GRANTED ONE MORE OPPORTUNITY TO FURNISH THE NECESSARY EVIDENCE IN HIS POSSESSION IN SUPPORT OF HIS CLAIM FOR EXPENSES AND SUCH OTHER DETAILS REQUIRED BY ASSESSING OFFICER. WE TH EREFORE REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER AND DIRECT HIM TO DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE EVIDENCE AND SUBMISSIONS OF T HE ASSESSEE AND AFTER ITA NO 873/A HD/2012 . A.Y. 2007- 08 5 GIVING A REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE. THUS THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 26 -07 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD