ITO 7(2)(2), MUMBAI v. RASRAJ LEASING & FINANCE P.LTD, MUMBAI

ITA 2057/MUM/2010 | 2006-2007
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 205719914 RSA 2010
Assessee PAN AAACR3878G
Bench Mumbai
Appeal Number ITA 2057/MUM/2010
Duration Of Justice 10 month(s) 17 day(s)
Appellant ITO 7(2)(2), MUMBAI
Respondent RASRAJ LEASING & FINANCE P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 28-01-2011
Assessment Year 2006-2007
Appeal Filed On 12-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI J. SUDHAKAR REDDY A.M. AND SHRI V. DU RGA RAO J.M. ITA NO. 2057/M/2010 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX APPELLANT 7(2) ROOM NO. 624 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. VS. M/S RASRAJ LEASING & FINANCE PVT. LTD. RESPONDEN T 51/2 RANCHODDAS VILLA BHAUDAJI CROSS ROAD MATUNGA MUMBAI 400 019. (PAN AAACR 3878 G) APPELLANT BY : MR. R.S. SRIVASTAVA RESPONDENT BY : MR. DINESH RASIKLAL SHAH . ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- 13 MUMBAI PASSED ON 24/11/2009 FOR THE AS SESSMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THREE GROUNDS OF APPEAL THE SUM AND SUBSTANCE OF WHICH IS THE CIT(A) ERRED IN DELETING THE DISALLOWANCES OF EXPENSES U/S 37(1) OF RS. 12 28 037/- MADE BY THE A O. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED E-RETURN ON 25/10/2006 DECLARING TOTAL INCOME OF RS. 17 85 6 49/- WHICH WAS PROCESSED U/S 143(1) OF THE ACT AND ACCEPTED THE SA ME. THE ASSESSEE ITA NO. 2057/M/10 M/S RASRAJ LEASING & FINANCE PVT. LTD. 2 IS IN THE BUSINESS OF FINANCE AND INVESTMENT AND TH E SOURCES OF INCOME ARE FROM INTEREST INCOME DIVIDEND INCOME L ONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAINS. DURING THE YEAR THE ASSESSEE HAS SHOWN THE INCOME RECEIVED FROM SAID HEADS AT RS. 54 70 810/-. THE ASSESSEE HAD CLAIMED AGAINST THE SAID INCOME AN EX PENSES OF RS. 12 28 037/- AS BUSINESS EXPENSES. THE AO ASKED THE ASSESSEE AS TO WHY THE ABOVE EXPENSES SHOULD NOT BE DISALLOWED U/S 37(1) OF THE ACT. IN REPLY THE ASSESEE HAD SUBMITTED THAT ALL THESE EXPENSES SHOULD BE ALLOWED AS THEY ARE RELATED TO THE BUSINESS. HOWEVE R THE AO HAS NOT ACCEPTED THE EXPLANATION OFFERED BY THE ASSESSEE ON THE GROUND THAT FROM THE NATURE OF BUSINESS OF THE ASSESSEE AND A R EVIEW OF THE SOURCES OF INCOME THE ABOVE EXPENSES ARE FOUND TO BE NOT EXPENDED ON EARNING THE INCOME AS STATED IN THE P&L A/C. HEN CE THE SAID EXPENSES OF RS. 12 28 037/- DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A). 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E THE CIT(A) DELETED THE DISALLOWANCE OF BUSINESS EXPENDITURE O N TWO COUNTS I) THE GENUINENESS OF THE EXPENDITURE HAVE BEEN INCURR ED IS NOT DISPROVED NOR THEY HAVE BEEN PROVED TO BE FICTITIOU S AND II) THE REASONABLENESS OF THE BUSINESS DECISIONS/COMMERCIAL IS TO BE JUDGED FROM THE ANGLE OF BUSINESSMEN AND COMMERCIAL EXPEDI ENCY CANNOT BE TESTED ON SUBJECTIVE STANDARD OF REVENUE. THE REVEN UE AGGRIEVED BY THE ORDER OF CIT(A) AND FILED APPEAL BEFORE ITAT. 5. THE LEARNED DR BESIDES RELYING UPON THE ORDER OF AO SUBMITTED THAT SECTION 37(1) SPECIFICALLY PROVIDES THAT ANY E XPENDITURE NOT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF THE BUSINESS OR PROFESSION SHALL NOT BE ALLOWED IN COMP UTING INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION AND THE AO HAS RIGHTLY DISALLOWED THE C LAIM OF EXPENDITURE ITA NO. 2057/M/10 M/S RASRAJ LEASING & FINANCE PVT. LTD. 3 BY THE ASSESSEE U/S 37(1). THEREFORE HE SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO IS R ESTORED. 6. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE BY POINTING OUT FROM THE PAGES 17 & 42 OF THE PAPER BO OK SUBMITTED THAT ALL THE DETAILS IN RESPECT OF THE CLAIM OF THE ASSE SSEE WERE SUBMITTED BEFORE THE AO AS WELL AS BEFORE THE CIT(A) AND THE EXPENDITURE INCURRED BY THE ASSESSEE WAS FOR THE PURPOSE OF BUS INESS THEREFORE THE SAME IS ALLOWABLE U/S 37 OF THE ACT. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS APPE AL IS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IS ALLOWABLE A S BUSINESS EXPENDITURE OR NOT. AS PER SECTION 37(1) OF THE ACT ANY EXPENDITURE WHICH IS NOT DESCRIBED U/S 30 TO 36 NOT BEING CAPI TAL EXPENDITURE OR PERSONAL EXPENDITURE OF THE ASSESSEE LAID OUT OR EX PENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS OR PROFESSION. IN THE PRESENT CASE THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES INCLUDING CLUB MEMBERSHIP FEES ALSO. THE LEARNED CIT(A) ALLOWED THE EXPENSES CLAIMED BY THE ASSESSEE U/S 37 WITHOUT EXAMINING THE FACTS OF THE CASE AS TO HOW T HE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S. PARTICULARLY THE EXPENSES RELATING TO CLUB FEES THE CIT(A) HAS NOT AT ALL EXAMINED THE FACTS OF THE CASE AND SIMPLY BY FOLLOWING THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF OTIS ELEVATORS VS. CIT 1 95 ITR 682 (BOM.) ALLOWED THE EXPENSES INCURRED BY THE ASSESSEE. THER EFORE IN THE INTEREST OF NATURAL JUSTICE WE DEEM IT FIT AND PRO PER TO REMIT THE MATTER BACK TO THE FILE OF THE CIT(A) WITH A DIRECT ION TO EXAMINE THE FACTS OF THE CASE AND DECIDE THE ISSUE IN ACCORDANC E WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 2057/M/10 M/S RASRAJ LEASING & FINANCE PVT. LTD. 4 8. IN THE RESULT THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JANUARY 2011. SD/- SD/- (J. SUDHAKAR REDDY) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 28 TH JANUARY 2011. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE D BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV