N VENSIMAL SECURITIES LTD, MUMBAI V. ITO 4(3)(3), MUMBAI

ITA 941/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3951 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 10-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAKASH L PA THADEDR
• Keywords: Depreciation; Tax effect
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBA I BENCH B, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.941/MUM/2012 ASSESSMENT YEAR: 2004-05 M/S. N. VENSIMAL SECURITIES LTD., 37/41, SHAHVIRI BUILDING, PICKET ROAD, MUMBAI-400002 PAN: AAACN3305Q VS. ITO WARD 4(3)(3), ROOM NO. 637, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 (APPELLANT) (RESPONDENT) ITA NO.584/MUM/2012 ASSESSMENT YEAR: 2004-05 ITO WARD 4(3)(3), AAYAKAR BHAVAN, MUMBAI-400020. VS. M/S. N. VENSIMAL SECURITIES LTD., MUMBAI-400002. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JAYANT BHATT REVENUE BY : SHRI PRAKASH L. PA THADE(DR) DATE OF HEARING : 08.02.2016 DATE OF PRONOUNCEMENT : 26.02.2016 O R D E R PER PAWAN SINGH, JM: 1. THESE TWO CROSS APPEAL ARE FILED BY THE ASSESSEE AN D THE REVENUE IN RESPECT OF ASSESSMENT YEAR (AY) 2004-05. SINCE BOTH THE APPEAL PERTAINING TO THE SAME AYS AND FILED ON DIFFERENT GROUNDS WERE HEARD TOGETHER. ITA NO. 941/MUM/2012 2. THE ASSESSEE HAS RAISED THE GROUND OF APPEAL ABOUT THE DISALLOWANCE OF DIRECTORS REMUNERATION OF RS.19,59,000/-, REPAIR AND MAINTENA NCE RS.7,35,929/-, TRAVELLING EXPENSES RS. 50,000/-, VEHICLE MAINTENANCE RS. 58,2 21/-, BUSINESS PROMOTION EXPENSES RS. 97,703/- AND BMC TAXES RS. 2,47,687/-. 2 ITA NOS. 941 & 584/M/2012 M/S N. VENSIMAL SECURITIE S LTD. 3. THE BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN MANUFACTURING LEATHER(SIC) AND ITS EXPORTS, SHARE TRADING, INVEST MENT IN SHARES, REAL ESTATE AND RENTING OUT PROPERTY FILED ITS RETURN OF INCOME ON 30.10.20 04 DECLARING TOTAL INCOME OF RS. 32,28,990/- ALONG WITH P&L ACCOUNT, BALANCE-SHEET & AUDITORS REPORT. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE AND QUES TIONNAIRE WERE ISSUED TO THE ASSESSEE AND WHILE MAKING THE ASSESSMENT, THE ASSESSING OFFI CER (AO) OBSERVED THAT ASSESSEE DERIVES INCOME FROM HOUSE PROPERTY OF RS. 1,33,15,0 00/-, OTHER INCOME OF RS. 90,993/-, INTEREST AND I.T. REFUND OF RS. 3,98,908/- AND THER E WAS NO REVENUE EARNED FROM MANUFACTURING OF LEATHER, ITS EXPORT, THE TOTAL INC OME INVESTMENT MADE DURING THE YEAR WERE RS. 39,075/-. THERE IS NO SHARE TRADING ACTIVI TY AND NO INVESTMENT IN SHARE BEING ONLY BUSINESS ACTIVITY CARRIED OUT BY ASSESSEE WAS LEASING OUT OF ITS OWN PROPERTY AND CONCLUDED THAT THE EXPENSES INCURRED IN EARNING THE LEASE RENT ARE ALLOWABLE TO THE EXTENT OF LIMITS LAID DOWN U/S. 23 & 24. 4. THE AO FURTHER OBSERVED THAT THE LEATHER UNIT OF AS SESSEE IS CLOSED DOWN SINCE 2002 AND HAS NOT BEEN OPERATING SINCE THEN AND AFTER EXAMINI NG THE P&L A/C (ANNEXURE-H) BESIDE THE OTHER DISALLOWANCE MADE THE FOLLOWING DISALLOWA NCE. (A) DIRECTORS REMUNERATION OF RS. 19,59,000/- BY OBSER VING THAT NO SERVICE IS BEING OFFERED TO THE COMPANY AS THERE IS NO BUSINESS AND IF ALL SERVICES HAVE BEEN OFFERED IN RESPECT OF HOUSE PROPERTY WHICH IS COVERED U/S 23/2 4 OF THE ACT. (B) REPAIR & MAINTENANCE OF RS. 7,65,929/- BY OBSERVING THAT IT WAS NOTICED THAT THERE IS CERTAIN ITEMS WHICH WERE AS OF CAPITAL NATURE BEING ENDURING IN NATURE AND FURTHER DEPRECIATION WAS ALLOWED AS PROPERTY RENOVATED APPE ARS TO HAVE BEEN LEASED OUT AND ONLY EXPENSES ALLOWABLE U/S 23/24 OF THE ACT. (C) TRAVELLING EXPENSES OF RS. 1,05,485/- BY OBSERVING THAT THESE CONSIST CHIEFLY AIR TICKETS TO HYDERABAD AND MADRAS AND EXPENSES INCURR ED ON BOARDING AND LODGING IN HYDERABAD AND MADRAS ARE NOT ALLOWABLE AS PER SECTI ON 14A AS THERE WAS NO BUSINESS ACTIVITY TRAVELLING WOULD HAVE BEEN UNDERTAKEN ONLY IN RESPECT OF PURSUING INSURANCE CLAIM AND SECUNDERABAD BUSINESS. (D) VEHICLE MAINTENANCE OF RS. 1,16,442/- BY OBSERVING THAT NO JUSTIFICATION HAS BEEN GIVEN, AND ALLOWED A SUM OF RS.16,442/- ONLY BY CON CLUDING THAT NO JUSTIFICATION WAS GIVEN. (E) THE ASSESSEE CLAIM IS OF BUSINESS PROMOTION OF RS. 97,703/- AND THE SAME WAS DISALLOWED BY OBSERVING THAT RS. 74,140/- WAS PAID TO THE THE OBEROI TOWARDS HOTEL BILL OF MR. HIRO HARJANI WHICH IS PAYMENT ON ACCOUNT OF SPA FOR BODY 3 ITA NOS. 941 & 584/M/2012 M/S N. VENSIMAL SECURITIE S LTD. MASSAGES AND TREATMENT AND THE OTHER PAYMENTS RELAT E THE CLUB BILLS RAISED BY CCI AND NSCI, HENCE TOTAL DISALLOWANCE WAS RS. 97,703/- WAS MADE. (F) BMC TAX OF RS. 2,47,687/- WAS DISALLOWED ON THE PRE TEXT THAT THIS AMOUNT WAS ALLEGEDLY PAID TO M/S VIJAY SYNTHETICS P. LTD. WHO IS OWNER AS PER MUNICIPAL RECORD IN SUPPORT OF WHICH A LEDGER ACCOUNT WAS PRODUCED A ND THE SAME WAS DISALLOWED AS NO PAYMENT PROOF HAS BEEN FURNISHED AND THE SAME WA S NOT ACCEPTED ONLY ON THE BASIS OF LEDGER ACCOUNT. 5. AGAINST ALL THE DISALLOWANCE, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DISMISSED THE APPEAL AND CONFIRMED THE DISAL LOWANCE IN ITS ORDER DATED 11.11.2011 AGAINST WHICH THE PRESENT APPEAL IS FILE D BEFORE US. 6. WE HAVE ALREADY OBSERVED THE CONTENTION OF AO ABOUT THE GROUNDS OF VARIOUS DISALLOWANCE/ADDITION BY AO, NOW WE SHALL TAKE UP T HE DISALLOWANCE CONFIRMED BY THE CIT(A). 7. THE CIT(A) WHILE CONFIRMING THE DIRECTORS REMUNERA TION CONCLUDED THAT THERE WAS NO BUSINESS AND NO INCOME UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION IN THE RELEVANT AY, THE ASSESSEE HAS NOT DISPUTED THAT ITS CHENNAI FACTORY WAS DESTROYED IN A MAJOR FIRE AND THE ASSESSEE HAS NO BUSINESS DURING THE RELEVANT AY AND THE REMUNERATION OF DIRECTORS IS NOT JUSTIFIABLE AND THE SAME WAS C ONFIRMED. 8. WE HAVE SEEN THE ORDER OF AO AS WELL AS CIT(A), THE AR OF THE ASSESSEE HAS ARGUED THAT THE REMUNERATION WAS PAID IN TERMS OF THE CONTRACT WITH THE DIRECTORS. THE ASSESSEE HAS SHOWN TO US THAT IT HAS TAKEN STEPS TO REVIVE THE F ACTORY SO THAT IT CAN BE HELD THAT THE ASSESSEE WAS CONSTRAINED TO CLOSE THE FACTORY ON TE MPORARY BASIS. UNDER THESE SET OF FACTS WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY TH E AO WAS RIGHTLY CONFIRMED BY THE CIT(A), HENCE, WE DO NOT FIND ANY MERIT TO INTERFER E IN THE FINDING OF THE CIT(A). 9. THE NEXT DISALLOWANCE IS ON ACCOUNT OF REPAIR & MAI NTENANCE, THE CIT(A) OBSERVING THAT ALL EXPENSES WERE MADE FOR REMOVING CEMENT SHE ET FROM ROOF AND FIXING NEW SHEET PAINTING OF MAIN ANGLE AND CIVIL CONSTRUCTION WORK. 10. WE HAVE PERUSED THE ORDER OF AO AND CIT(A), THE AO WHILE DEALING WITH THIS ADDITION/DISALLOWANCE HAS OBSERVED THAT SUCH EXPENS ES ARE ONLY EXPENSES WHICH ARE ALLOWABLE U/S 23 & 24 OF THE ACT. THE FINDING OF AO IS WELL REASONED AND SUPPORTED WITH THE LEGAL PROVISION WHEREIN THE ASSESSEE IS ENTITLE D FOR 30% OF DEDUCTION WHICH IS ALREADY CLAIMED BY THE ASSESSEE, HENCE, THE ADDITIO N DOES NOT REQUIRE ANY INTERFERENCE. 11. THE FURTHER GROUND FOR OUR CONSIDERATION IS TRAVELL ING EXPENSES OF RS. 50,000/-, THE CIT(A) WHILE DEALING WITH THIS GROUND HAS OBSERVED THAT A SUM OF RS. 1,05,485/- WAS ADDED BY THE AO BY INVOKING THE PROVISION OF SECTIO N 14A.THE CIT(A) CONCLUDED THAT 4 ITA NOS. 941 & 584/M/2012 M/S N. VENSIMAL SECURITIE S LTD. RULE 8D IS NOT APPLICABLE FOR AY-2004-05 AND ONLY A REASONABLE EXPENDITURE TO BE ALLOWED U/S. 14A OF THE ACT AND THUS GRANTED THE RE LIEF OF RS. 55,445/- OUT OF TOTAL CLAIM OF RS. 1,05,485/-. 12. WE HAVE PERUSED THE ORDER OF AO AND THE CIT(A) AND FIND THAT THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.5,00 0/- U/S. 14A OF THE ACT. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER ON THIS ISSUE. 13. FURTHER GROUND OF OUR CONSIDERATION IS VEHICLE MAIN TENANCE OF RS. 58,221/-. THE ASSESSEE CLAIMED VEHICLE MAINTENANCE OF RS. 1,16,44 2/- OUT OF WHICH AO ALLOWED ONLY RS. 16,442/- AND THE CIT(A) FURTHER ALLOWED 50% OF THE VEHICLE MAINTENANCE EXPENSES BY CONCLUDING THAT THERE IS NO SUPPORTING VOUCHER A ND THUS THE ASSESSEE HAS ALREADY AVAILED THE RELIEF OF RS. 41,779/- AND RS. 16,442/- AND ONLY A SUM OF RS. 58,221/- WAS CONFIRMED BY THE CIT(A). KEEPING IN VIEW THE ENTIRE CIRCUMSTANCES OF THE CAS E, WE DEEM IT APPROPRIATE TO DELETE THE REMAINING ADDITION. 14. NEXT GROUND FOR OUR CONSIDERATION IS BUSINESS PROMO TION EXPENSES OF RS. 97,073/-. THE CIT(A) WHILE CONFIRMING THIS ADDITION HAS CONCLUDED THAT ALL THESE EXPENSES WERE INCURRED IN THE NAME OF MR. HIRO HARJANI ON ACCOUNT OF USE OF SPA FOR BODY MASSAGE AND TREATMENT AT HOTEL OBEROI WHICH WAS NOT CONSID ERED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE, THE AR OF THE ASSESSEE COULD NOT SUBSTANTIATE AS TO EXPENSES INCURRED OF BODY MASSAGE IN A HOTEL IS FOR BUSINESS PURPOSE, HENCE WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ADDITION/DISALLOWANCE MADE BY A O AND CONFIRMED BY CIT(A). 15. THE NEXT GROUND FOR OUR CONSIDERATION IS DISALLOWAN CE OF BMC TAXES OF RS. 2,43,687/-, THE CIT(A) WHILE DEALING WITH THIS ADDITION HAS CON CLUDED THAT THE ASSESSEE ALLEGEDLY PAID SUCH AMOUNT TO M/S VIJAY SYNTHETICS P. LTD. AS THE PROPERTY WAS IN THE NAME OF M/S VIJAY SYNTHETICS P. LTD. AND CONCLUDED THAT ASSESSE E FAILED TO FURNISH PROOF FOR PAYMENT OF TAXES. THE AR OF THE ASSESSEE HAS ARGUED THAT AS SESSEE HAS PLACED ON RECORD THE POSSESSION LETTER OF THE PROPERTY BEARING UNIT NO. 201 AND 301 TOGETHER WITH SEVEN CAR PARKING SPACE IN THE PROPERTY BEARING BUILDING NO. B1 IN MEHRA INDUSTRIAL ESTATE, VILLAGE-MOHILI, ANDHERI(E), MUMBAI. 16. WE HAVE PERUSED THE ORDER OF AO AS DISCUSSED IN THE EARLIER PARAGRAPH AND THE ORDER OF CIT(A) AND FIND THAT NEITHER PAYMENT RECEIPT OF BMC CHARGES IS PLACED ON RECORD NOR ANY OTHER COGENT EVIDENCE TO PROVE THE PAYMENT MADE TO THE BMC EXCEPT THE STATEMENT THAT MUNICIPAL TAX BILL WAS RECEIVED IN THE NAME OF M/S VIJAY SYNTHETICS P. LTD. AND PROPORTIONATE TAX BILL WAS PAID TO M/S VIJAY SYNTHE TICS P. LTD. EVEN THE PAYMENT RECEIPT FROM M/S VIJAY SYNTHETICS P. LTD. IS ALSO NOT PLACE D ON RECORD IN ABSENCE OF ANY 5 ITA NOS. 941 & 584/M/2012 M/S N. VENSIMAL SECURITIE S LTD. DOCUMENTARY EVIDENCE, WE ARE NOT INCLINED TO INTERF ERE IN THE FINDING OF CIT(A) AND THE SAME IS HEREBY CONFIRMED, HENCE, APPEAL OF THE ASSE SSEE IS DISMISSED. ITA NO. 584/MUM/2012 17. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE DELETION OF DISALLOWANCE OF RS. 14,52,410/- ON ACCOUNT OF BAD-DEBTS U/S 36[1](VII) OF THE I.T. ACT, 1961. SINCE THE PRESENT APPEAL IS NOT MAINTAINABLE IN VIEW OF THE L ATEST CIRCULAR PRESCRIBED BY THE CENTRAL BOARD OF DIRECTOR TAXES(CBDT), VIDE ITS CIRCULAR NO .21/2015(F.NO.142/2007-ITJ (PT.) DATED 10 TH DECEMBER, 2015. BY VIRTUE OF THIS THE REVENUE IS P RECLUDED FOR MAINTAINING/FILING THE APPEAL IN WHICH THE TAX EFFECT IS LESS THAN RS. 10,00,000/ -, ADMITTEDLY THE DISALLOWANCE DELETED IS OF RS. 14,52,410/-, HENCE THE PRESENT APPEAL IS NOT MAINTA INABLE AND THE SAME IS DISMISSED. 18. IN THE RESULT, APPEAL FILED BY THE ASSESSEE AS WELL AS THAT BY REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH FEBRUARY, 2016. SD/- SD/- ( B.R.BASKARAN ) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 26/02/2016 S.K.PS/JV, SPS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI. 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY/