DY.C.I.T., CENTRAL CIRCLE-31, MUMBAI v. M/S. TOLARAM & CO., MUMBAI

ITA 1371/MUM/2009 | 2005-2006
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 137119914 RSA 2009
Bench Mumbai
Appeal Number ITA 1371/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 29 day(s)
Appellant DY.C.I.T., CENTRAL CIRCLE-31, MUMBAI
Respondent M/S. TOLARAM & CO., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 31-05-2010
Date Of Final Hearing 20-05-2010
Next Hearing Date 20-05-2010
Assessment Year 2005-2006
Appeal Filed On 02-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R.S.SYAL ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 1371/MUM/2009 (ASSESSMENT YEAR: 2005-06) DY.CIT CENTRAL CIRCLE-31 R NO.409 AAYAKAR BHAVAN M K ROAD 4 TH FL. MUMBAI-400020 .APPELLANT V/S TOLARAM AND CO. LAL ASHISH PLOT NO.219 11 TH ROAD CHEMBUR (E) MUMBAI-400071 PAN:AAAFT5775H ..RESPONDENT APPELLANT BY : SHRI SHRAV AN KUMAR RESPONDENT BY : SHRI JAYDEV O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 12.12.2008 OF CIT(A)- VII MUMBAI FOR THE A SSESSMENT YEAR 2005-06 2. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJUDICATION IN THIS APPEAL IS WHETHER IN THE FACT S AND CIRCUMSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN DELETING ITA NO. 1371/MUM/2009 (ASSESSMENT YEAR: 2005-06) 2 THE EXCESSIVE AND UNREASONABLE EXPENSES DISALLOWED BY THE AO U/S 40A(2)(B) OF THE ACT IN RESPECT OF BUSINESS CENTRE FACILITY CHARGES. 3. WE HAVE HEARD THE LEARNED DR AND LEARNED AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT RECORDS. THE LEARNED AR OF THE ASSESSEE HAS POINTED OUT THAT THE IDENTI CAL ISSUE WAS CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASS ESSEES CASE FOR THE ASSESSMENT YEAR 2000-01 AND FOR THE AS SESSMENT YEAR UNDER CONSIDERATION THE CIT(A) HAS DECIDED T HE ISSUE BY FOLLOWING THE ORDER OF THIS TRIBUNAL. 4. AT THE OUTSET WE NOTE THAT THE CIT(A) IN PARAG RAPH 13 OF THE IMPUGNED ORDER HAS REPRODUCED THE ORDER OF T HIS TRIBUNAL DATED 27.10.2004 PASSED IN ITA NO.2960/ MUM/2004 AND ITA NO . 4144/MUM/2004 FOR THE ASSESSMENT YEAR 2000-01 AS UNDER : 13. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR AND FIND THAT THE SIMILAR PAYMENTS MADE BY M/S TOLARAM AND CO. TO M/S KUKREJA SERVICES PVT LT D WAS THOUGH DISALLOWED BY THE AO BUT ALLOWED BY TH E CIT(A) AND ON THE APPEAL FILED BY THE DEPARTMENT BEFORE THE HONBLE TRIBUNAL THE HON. TRIBUNAL HAS DECIDED THE ISSUE IN ITA NO.2960/M/2004 AND ITA NO.4144/MUM/2004 (DEPARTMENTS APPEAL) FOR AY 2000-01 VIDE ORDER DATED 27.10.2004 AND GAVE THE FINDING IN PARA 14 OF THE ORDER WHICH IS AS UNDER : ITA NO. 1371/MUM/2009 (ASSESSMENT YEAR: 2005-06) 3 14. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE RELEVANT EXTRACT FROM THE AFORESAID DECISION OF THE TRIBUNAL IN THE CASE OF M/S SURAT BUILDERS IS REPRODUCED AS UNDER THE ASSESSING OFFICER HAS NOT GIVEN ANY REASONS FOR THE DISALLOWANCE EXCEPT THAT THE ASSESSEE COULD NOT PRODUCE THE COMPARABLE RATES TO PROVE THAT THERE WAS NOT EXCESSIVE RATE OF PAYMENT TO ITS SISTER CONCERN. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF UPPER INDIA PUBLISHING HOUSE (P) LTD V/S CIT (1979) 117 ITR 569 THAT SECTION 40A(2)(A) CANNOT HAVE ANY APPLICATION UNLESS IT IS FIRST HELD THAT THE EXPENDITURE WAS EXCESSIVE AND UNREASONABLE. NOW THE QUESTION ARISES WHETHER THE ONUS FOR PROVING THE EXCESSIVENESS AND UNREASONABLENESS OF THE EXPENDITURE IS ON THE ASSESSEE OR ON THE DEPARTMENT. IN OUR OPINION THE ONUS IS ON THE DEPARTMENT TO PROVE THAT THE EXPENDITURE INCURRED IS EXCESSIVE OR UNREASONABLE. THE ASSESSEE HAS MADE THE PAYMENTS ACCORDING TO THE ASSESSEE ARE REASONABLE. IT IS THEREFORE FOR THE DEPARTMENT TO PROVE THAT THE PAYMENT HAS BEEN MADE TO SISTER CONCERN WHICH IS UNREASONABLE KEEPING IN VIEW THE SERVICES RENDERED BY THE SISTER CONCERN. THIS PROVISION IS APPLICABLE TO ALL TYPE OF EXPENDITURE INCURRED IN BUSINESS OR PROFESSION BUT IT SHOULD BE BORNE IN MIND THAT THE PROVISION IS MEANT TO CHECK EVASION OF TAX THROUGH EXCESSIVE AND UNREASONABLE PAYMENTS TO RELATIVE AND ASSOCIATE CONCERNS AND SHOULD NOT BE APPLIED IN A MANNER WHICH CAUSES HARDSHIP IN BONAFIDE CASES. THIS HAS BEEN EXPLAINED BY THE CBDT IN THEIR CIRCULAR NO. 6P DATED 6 TH JULY 1968 WE ARE INCLINED TO AGREE WITH THE AFORESAID OBSERVATIONS OF THE ITAT MUMBAI BENCH F. THE OTHER DECISIONS RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE ALSO SUPPORT THE CASE OF THE ASSESSEE. WE THEREFORE HOLD THAT THE ONUS OF PROVING THAT THE EXPENDITURE WAS EXCESSIVE OR UNREASONABLE WAS ON THE DEPARTMENT WHICH HAS NOT BEEN DISCHARGED IN THI S CASE. WE HOLD THAT THE EXPENDITURE WAS LEGITIMATEL Y ITA NO. 1371/MUM/2009 (ASSESSMENT YEAR: 2005-06) 4 INCURRED FOR HE PURPOSES OF THE BUSINESS AND IS ALLOWABLE. WE THEREFORE DELETE THE ADDITION OF RS.20.00 LAKHS SUSTAINED BY THE CIT(A). GROUND OF APPEAL NO.2 OF THE ASSESSEE STAND ALLOWED 5. NOTHING HAS BEEN BROUGHT BEFORE US TO SHOW THAT THE ABOVE ORDER OF THIS TRIBUNAL IS EITHER SET ASIDE O R REVERSED. THEREFORE FOLLOWING THE PRINCIPLE OF CONSISTENCY AS THIS ISSUE HAS ALREADY BEEN DECIDED BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2000-01 WE DELETE THE ADDITION MADE BY THE AO QUA BUSINESS CENTRE FACILITY CHARGES OF RS.14 00 000/- AND ADMINISTRATIVE CHARGES OF RS.2 00 000/-. THE ORDER OF CIT(A) IS UPHELD QUA THIS ISSUE. 6. THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 31 .5.2010 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI DATED 31ST MAY 2010 SRL:24510 ITA NO. 1371/MUM/2009 (ASSESSMENT YEAR: 2005-06) 5 COPY TO: 1. DY.CIT CENTRAL CIRCLE-31 R NO.409 AAYAKAR BHAVAN M K ROAD 4 TH FL. MUMBAI-400020 2.TOLARAM AND CO. LAL ASHISH PLOT NO.219 11 TH ROAD CHEMBUR (E) MUMBAI-400071 3. CCIT CENTRAL-II MUMBAI 4. CIT-CENT-II MUMBAI. 5. ADDL CIT RANGE-MUMBAI 6. CIT(A)-CENTRAL IV MUMBAI 7. DR E BENCH BY ORDER ASSTT. REGISTRAR ITAT MUMBAI