KISHORE BAGI TRANSPORT P. LTD, MUMBAI v. DCIT 5(2), MUMBAI

ITA 1268/MUM/2010 | 2006-2007
Pronouncement Date: 03-12-2010 | Result: Allowed

Appeal Details

RSA Number 126819914 RSA 2010
Assessee PAN AAACK3786G
Bench Mumbai
Appeal Number ITA 1268/MUM/2010
Duration Of Justice 9 month(s) 16 day(s)
Appellant KISHORE BAGI TRANSPORT P. LTD, MUMBAI
Respondent DCIT 5(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 03-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 03-12-2010
Assessment Year 2006-2007
Appeal Filed On 16-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 1268/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. KISHORE BAGAI TRANSPORT P. LTD. DCIT 5(2) 201 ARUN CHAMBERS TARDEO RD. ROOM NO. 655 5TH FLO OR NEAR AC MARKET MUMBAI 400034 VS. AAYAKAR BHAVAN M.K. ROAD PAN - AAACK 3786 G MUMBAI 400020 APPELLANT RESPONDENT ITA NO. 1351/MUM2010 (ASSESSMENT YEAR: 2006-07) DCIT 5(2) M/S. KISHORE BAGAI TRANSPORT P. LTD. ROOM NO. 655 5TH FLOOR 201 ARUN CHAMBERS TARDEO R D. AAYAKAR BHAVAN M.K. ROAD VS. NEAR AC MARKET MUMBAI 400034 MUMBAI 400020 PAN - AAACK 3786 G APPELLANT RESPONDENT ASSESSEE BY: SHRI SHARAD PATEL REVENUE BY: SHRI A.K. NAYAK O R D E R PER B. RAMAKOTAIAH A.M. THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE AGAINST THE ORDER OF THE CIT(A)-IX MUMBAI DATED 15.12.2009. 2. ASSESSEE IS CONTESTING THE ISSUE OF DISALLOWANCE OF MEMBERSHIP AND SUBSCRIPTION FEES OF ` 5 04 050/- AND DIRECTORS MEDICAL EXPENSES OF ` 22 228/- CLAIMED AS BUSINESS EXPENDITURE. THE REVEN UE IS CONTESTING THE ALLOWANCE BY THE CIT(A) OF TRANSPORTATION CHARGES O F ` 1 35 10 770/- PAID TO M/S. BAGAI GOLDEN TRANSPORT CO. THE ISSUES ARE DECI DED AS UNDER. 3. CLAIM OF MEMBERSHIP FEES : ASSESSEE HAS PAID AN AMOUNT OF ` 5 04 050/- STATED TO BE PAID TO THE NATIONAL SPOTS CLUB OF INDIA TOWARDS MEMBERSHIP. THE A.O. NOTICED THAT THE MEMBERSHIP WA S TAKEN IN THE NAME OF MRS. KARISHMA QURESHI DIRECTOR OF THE AS COMPAN Y. HE WAS ALSO OF THE OPINION THAT THE ENTRANCE FEES PAID IS IN THE NATUR E OF CAPITAL EXPENDITURE. ITA NO. 1268/MUM/2010 M/S. KISHORE BAGAI TRANSPORT P. LTD. 2 ACCORDINGLY HE DISALLOWED THE AMOUNT. THE CIT(A) UP HELD THE DISALLOWANCE HOLDING THAT THE AMOUNT WAS IN THE CAPITAL FIELD AS PER THE DECISION OF THE EMPIRE JUTE CO. LTD. 124 ITR 1 AND FURTHER THE EXPE NSES ARE INCURRED FOR THE PERSONAL BENEFIT OF THE DIRECTOR AND NOT FOR TH E BUSINESS OF THE ASSESSEE. 4. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE COM PANY INSTEAD OF TAKING CORPORATE MEMBERSHIP FOR A PERIOD OF 15 YEAR S HAS AVAILED INDIVIDUAL MEMBERSHIP IN THE NAME OF THE DIRECTOR FOR LIFETIME AND SIMILAR ISSUE WAS ALLOWED IN EARLIER YEARS BY THE ITAT AND ACCORDINGL Y THE EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE. 5. THE LEARNED D.R. HOWEVER POINTED OUT THAT THE ISS UE IN EARLIER YEARS WAS WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL WHEREIN THE ITAT HAS HELD THAT THE EXPENDITURE IS REVENUE IN NATURE BUT THE ISSUE IN THIS YEAR IS WHETHER THE MEMBERSHIP TAKEN IN INDIVIDUAL NAME CAN BE ALLOWED IN THE HANDS OF THE COMPANY. 6. AS RIGHTLY SUBMITTED BY THE LEARNED D.R. THE ISSUE IN EARLIER YEARS WAS WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL IN NATURE AND THE ITAT HAS HELD THAT ENTRANCE FEES PAID FOR OBTAINING MEMB ERSHIP IS IN THE NATURE OF REVENUE EXPENDITURE AND ALLOWED THE SAME. HOWEVE R THIS YEAR THE A.O. NOT ONLY CONSIDERED THE ISSUE WHETHER THE EXPENDITU RE IS CAPITAL OR REVENUE BUT ALSO THAT MEMBERSHIP IS TAKEN IN THE INDIVIDUAL NAME OF THE DIRECTOR AND NOT CORPORATE MEMBERSHIP. THE CIT(A) ALSO HAS G IVEN SIMILAR FINDING IN HIS ORDER. SINCE THE ISSUE IS NOT ONE OF THE CORPOR ATE MEMBERSHIP NECESSITY OF CLAIMING THE EXPENDITURE FOR THE PURPOSE OF BUS INESS HAS TO BE PROVED BY THE ASSESSEE BEFORE THE A.O. THIS ASPECT WHETHER T HE EXPENDITURE INCURRED IS FOR THE PURPOSE OF BUSINESS AND CAN BE ALLOWED U NDER SECTION 37(1) HAS NOT BEEN CONSIDERED THE A.O. IT IS FOR THE ASSESSEE TO SUBSTANTIATE THE CLAIM SINCE THE MEMBERSHIP IS NOT A CORPORATE MEMBERSHIP AND WAS TAKEN IN THE NAME OF INDIVIDUAL DIRECTOR. EVENTHOUGH THE LEARNED COUNSEL TRIED TO SUBSTANTIATE THAT SIMILAR MEMBERSHIPS TAKEN IN THE EARLIER YEARS IN OTHER DIRECTORS NAME WERE ALLOWED BY THE A.O. THESE FACTS ARE NOT ON RECORD. HENCE IN THE INTEREST OF JUSTICE WE ARE OF THE OPI NION THAT THE ISSUE IS TO BE EXAMINED BY THE A.O. AFRESH. ASSESSEE IS DIRECTED T O FURNISH THE NECESSARY ITA NO. 1268/MUM/2010 M/S. KISHORE BAGAI TRANSPORT P. LTD. 3 EVIDENCES THAT THE MEMBERSHIP TAKEN IS FOR THE PURP OSE OF BUSINESS AND AFTER EXAMINING THE NECESSITY FOR INCURRING THE EXP ENDITURE AS PER PROVISIONS OF SECTION 37(1) THE A.O. CAN ALLOW THE EXPENDITUR E IF SO ALLOWABLE. WE MAKE IT CLEAR THE IN CASE THE EXPENDITURE IS FOR THE PUR POSE OF BUSINESS THEN THE EXPENDITURE IS TO BE TREATED AS REVENUE EXPENDITURE ONLY BUT NOT CAPITAL EXPENDITURE AS SIMILAR ISSUE WAS ALREADY CONSIDERED IN EARLIER YEARS AND HELD AS REVENUE EXPENDITURE. THEREFORE ON THE ISSU E WHETHER IT IS CAPITAL OR REVENUE THE ISSUE WAS ALREADY CRYSTALLISED BY THE DECISION IN EARLIER BUT WHETHER INDIVIDUAL MEMBERSHIP CAN BE ALLOWED IN THE HANDS OF THE COMPANY IS TO BE EXAMINED AND FOR THIS THE MATTER RESTORED TO THE FILE OF THE A.O. TO EXAMINE THE CLAIM AS PER PROVISIONS OF SECTION 37(1 ). GROUND 1 IN ASSESSEE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 7. CLAIM OF MEDICAL EXPENSES : ON NOTICING THE CLAIM OF MEDICAL EXPENSES OF THE DIRECTOR IN THE P & L ACCOUNT OF AN AMOUNT OF ` 22 228/- THE A.O. DISALLOWED THE SAME HOLDING IT AS A PERSONAL E XPENSE. BEFORE THE CIT(A) IT WAS CONTENDED THAT THIS EXPENDITURE WAS INCURRED AS CONTRACTUAL OBLIGATION. SINCE NO EVIDENCE WAS FILED BEFORE THE CIT(A) THE CIT(A) DID NOT ALLOW THE CLAIM. 8. BEFORE US IT WAS CONTENDED THAT THE DIRECTORS ARE E NTITLED FOR MEDICAL EXPENSES AND THESE EXPENSES WERE CONSIDERED AS PERQ UISITES IN THE HANDS OF THE DIRECTOR. SINCE THE A.O. HAS NOT EXAMINED THE N ATURE OF THE EXPENDITURE AND THE PURPOSE OF SPENDING THE AMOUNT FOR THE DIRE CTORS WE ARE OF THE OPINION THAT THIS ISSUE IS TO BE EXAMINED AFRESH BY THE A.O. ASSESSEE IS DIRECTED TO FURNISH NECESSARY DETAILS IN THIS REGAR D INCLUDING THE NATURE OF CONTRACTUAL OBLIGATION AND THE FACT THAT THE SAME I S TREATED AS PERQUISITES IN THE HANDS OF THE DIRECTORS AS PER THE PROVISIONS OF LAW. THE ISSUE IS RESTORED TO THE FILE OF THE A.O. TO CONSIDER IT AFRESH. GROU ND 2 IN ASSESSEE APPEAL IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 9. TRANSPORTATION EXPENSES : THE REVENUE IS CONTESTING THE ALLOWANCE OF TRANSPORTATION EXPENSES OF ` 1 35 10 770/- PAID TO MS. BAGAI GOLDEN TRANSPORT CO. AT THE OUTSET IT WAS SUBMITTED THAT T HIS ISSUE WAS COVERED BY THE ITAT ORDER IN EARLIER YEARS 2003-04 WHERE THIS ISSUE WAS FIRST TIME RAISED ITA NO. 1268/MUM/2010 M/S. KISHORE BAGAI TRANSPORT P. LTD. 4 BY THE A.O. AND SUBSEQUENTLY IN A.Y. 2004-05 AND 20 04-06. IT WAS SUBMITTED THAT THIS ISSUE WAS COVERED AGAINST THE R EVENUE. 10. THE BRIEF FACT ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND LOGISTIC SERVICES HA S MADE A PAYMENT OF ` 1 35 10 770/- TO ONE OF ITS ASSOCIATE CONCERN M/S. BAGAI GOLDEN TRANSPORT CO. AS TRANSPORTATION CHARGES. THE A.O. HELD THAT THIS EXPENDITURE IS NOT INCIDENTAL TO BUSINESS OF THE ASSESSEE AS THE ASSES SEE ALSO SPENDS HUGE EXPENDITURE IN THE FORM OF TRUCK HIRE CHARGES RENT OF GODOWNS ETC. AND THERE IS NO PROOF THAT THE SERVICES CLAIMED HAVE BE EN RENDERED AND HE FOLLOWED THE ORDERS IN A.Y. 2000-01 2003-04 2004- 05 AND 2005-06. IN A.Y. 2003-04 THE MATTER WAS EXAMINED IN DETAIL BY THE CI T(A) AND AFTER A REMAND REPORT IN WHICH THE A.O. ACCEPTED THAT THE SAID COM PANY HAS RENDERED THE SERVICES FOR WHICH CHARGES HAVE BEEN PAID THE CIT( A) HAS ALLOWED THE EXPENDITURE. WHEN THIS ISSUE WAS CONTESTED BEFORE T HE ITAT THE ITAT UPHELD THE ORDER OF THE CIT(A) AS UNDER: - 11. HAVING GONE THROUGH THE MATERIAL ON RECORD AND HAVING CONSIDERED THE RIVAL CONTENTIONS OF BOTH THE PARTIE S WE FIND THAT THE ASSESSEE HAS FILED ALL NECESSARY DOCUMENTARY EVIDEN CE BEFORE THE CIT(A) AND THE CIT(A) HAS ALSO CALLED FOR THE REMAND REPOR T FROM THE AO. THE AO AFTER VERIFICATION OF ALL THE DOCUMENTS HAS ACKNOW LEDGED THAT THE ASSOCIATE CONCERN OF THE ASSESSEE M/S. BAGAI GOLDEN TRANSPORT CO. HAS INDEED RENDERED SERVICES TO THE ASSESSEE. ONCE THE SERVICES HAVE BEEN APPROVED THEN THE PAYMENT MADE BY THE ASSESSEE IS ALSO JUSTIFIED. THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A) AND THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 11. SIMILAR VIEW WAS ALSO TAKEN IN EARLIER YEARS IN ITA NO. 2720/MUM/2007 FOR A.Y. 2004-05 AND ITA NO. 4838/MUM /2008 FOR A.Y. 2005-06. SINCE THE ISSUE OF ADDITION MADE ON ACCOUN T OF TRANSPORTATION CHARGES PAID TO M/S. BAGAI GOLDEN TRANSPORT CO. WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISIONS ON THE FACT THA T THE SAID COMPANY RENDERED SERVICES TO THE ASSESSEE THE PAYMENT MADE BY THE ASSESSEE IS JUSTIFIED. AS WE ARE IN AGREEMENT WITH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND UPHOLD THE ORDER OF THE CIT(A). THE ONLY GROUND RAISED BY THE REVENUE IN THE APPEAL IS THUS DISMISS ED. ITA NO. 1268/MUM/2010 M/S. KISHORE BAGAI TRANSPORT P. LTD. 5 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 3 RD DECEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IX MUMBAI 4. THE CIT V MUMBAI CITY 5. THE DR G BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.