ACIT 20(3), MUMBAI v. SAVINA MISQUITH, MUMBAI

ITA 2785/MUM/2009 | 2006-2007
Pronouncement Date: 07-01-2011 | Result: Dismissed

Appeal Details

RSA Number 278519914 RSA 2009
Assessee PAN AHQPM7632R
Bench Mumbai
Appeal Number ITA 2785/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 6 day(s)
Appellant ACIT 20(3), MUMBAI
Respondent SAVINA MISQUITH, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 07-01-2011
Date Of Final Hearing 04-01-2011
Next Hearing Date 04-01-2011
Assessment Year 2006-2007
Appeal Filed On 01-05-2009
Judgment Text
1 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH E EE E MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R R R R K PANDA K PANDA K PANDA K PANDA AM AM AM AM & && & SMT ASHA VIJAYARAGHAVAN JM SMT ASHA VIJAYARAGHAVAN JM SMT ASHA VIJAYARAGHAVAN JM SMT ASHA VIJAYARAGHAVAN JM ITA NO. ITA NO. ITA NO. ITA NO. 2785/MUM/2009 2785/MUM/2009 2785/MUM/2009 2785/MUM/2009 (ASST YEAR 2006-07) THE ASST COMMR OF INCOME TAX 20(3) MUMBAI VS MRS SAVINA MISQUITH D-52 CENTRAL PARK OPP POPULAR CAR BAZAAR ANDHERI KURLA ROAD ANDHEREI(E) MUMBAI 93 (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AHQPM7632R AHQPM7632R AHQPM7632R AHQPM7632R ASSESSEE BY: SHRI ASHOK JAIN REVENUE BY: SHRI D SONGATE O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 28.1.2009 OF THE CIT(A)-XXXII RELATING TO ASSESSMEN T YEAR 2006-07. 2 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS AN EMPLOYEE WITH A TRUST NAMED AS ARCHDIOCESE OF BOMBAY AND IS DERIVIN G SALARY INCOME. THE ASSESSEE HAS ALSO DECLARED INCOME BY WAY OF COMMI SSION OF ` 22 07 339/- FROM HDFC BANK FOR FACILITATING THE SURPLUS FUND OF THE TRUST TO BE DEPOSITED WITH THE BANK. THE COMMISSION INCOME IS DECLARED AS BUS INESS INCOME AGAINST WHICH VARIOUS EXPENSES HAVE BEEN CLAIMED AND THE NET PROF IT ON ACCOUNT OF SUCH BUSINESS WAS SHOWN AT `. 11 48 929/-. 2.1 THE ASSESSEE FILED VARIOUS DETAILS DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER ON VERIFICATION OF P&L ACCOUNT NOTED THAT THE ASSESSEE HAS DEBITED VARIOUS EXPENSES AGAINST T HE COMMISSION INCOME 2 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH EARNED FROM HDFC BANK FOR DEPOSITING SURPLUS FUNDS OF THE TRUST WITH THE BANK. ON BEING QUESTIONED BY THE ASSESSING OFFICER THE A SSESSEE VIDE LETTER DATED 10.10.2008 SUBMITTED THAT SHE HAD RENDERED SERVICES TO INVEST THE SURPLUS FUNDS OF ARCHDIOCESE OF BOMBAY AND OTHER CHRISTIAN INSTIT UTIONS IN MUMBAI NAVI MUMBAI AND THANE AS PER RULES AND REGULATION OF CHA RITABLE TRUST. IT WAS SUBMITTED THAT THE ABOVE SERVICES ARE OVER AND ABOV E THE SCOPE OF RESPONSIBILITIES AS DEFINED IN THE EMPLOYMENT CONTA CT. IT WAS SUBMITTED THAT THERE ARE MORE THAN 100+ CHRISTIAN INSTITUTIONS IN MUMBAI NAVI MUMBAI AND THANE. IN ORDER TO UNDERSTAND THE AMOUNT OF INVES TIBLE SURPLUS WITH EACH OF THESE 100+ CHRISTIAN INSTITUTIONS IN MUMBAI NAVI MUMBAI AND THANE THE ASSESSEE UNDERTAKES EXTENSIVE TRAVEL OVER NON CONT RACTED DAYS TO EXPLORE SUCH OPPORTUNITIES FOR WHICH SHE HAS INCURRED `. 78 480/-. 2.2 THE ASSESSEE BEING A QUALIFIED CHARTERED ACCOU NTANT WAS KEEN TO START HER OWN PROFESSIONAL PRACTICE ESPECIALLY IN THE FIE LD OF AUDIT CERTIFICATION AND TAXATION FOR WHICH THE ASSESSEE HAS INCURRED BUSIN ESS DEVELOPMENT EXPENSE OF ` 70 200/-. TO UNDERTAKE SUCH ACTIVITIES AND DEVE LOP HER PROFESSIONAL PRACTICE THE ASSESSEE HAS TAKEN A PREMISES AT ANDHERI EAST FOR WHICH THE RENT HAS BEEN PAID. ACCORDINGLY IT WAS SUBMITTED THAT THE ENTIRE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS; THEREFORE NO DISALLOWANCE SHOULD BE MADE. 2.3 HOWEVER THE ASSESSING OFFICER WAS NOT CONVINCE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT CONNECTED WITH THE EARNING OF INCOME BUT FOR DEVELOPMENT OF HER POTENTIAL IN THE FIELD OF HER PR OFESSION AS CHARTERED ACCOUNTANT. THEREFORE THE CLAIM OF EXPENSES EXCEPT FOR SUB BROKERAGE REFUNDED 3 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH PERTAINS TO OR RELATES TO THE EARNING OF COMMISSION INCOME AND THEREFORE CANNOT BE SAID TO HAVE BEEN INCURRED EXCLUSIVELY FOR THE P URPOSE OF BUSINESS IN TERMS OF SPECIFIC PROVISIONS OF SEC. 37 OF THE I T ACT. FUR THER RENT WAS SHOWN TO HAVE BEEN PAID TO THE MOTHER-IN- LAW OF THE ASSESSEE WIT HOUT ANY LEASE AND LICENSE AGREEMENT AND NO TAX DEDUCTION AT SOURCE HAS ALSO B EEN MADE ON PAYMENT OF RENT CLAIMED TO HAVE BEEN MADE TO HER. SINCE THERE WAS NOTHING ON RECORD TO PROVE THAT THE PREMISES CLAIMED TO HAVE BEEN TAKEN ON RENT WAS EVER USED BY THE ASSESSEE THE ASSESSING OFFICER WAS OF THE OPI NION THAT THE PAYMENT OF RENT AMOUNTING TO ` 4 80 000/- IS DOUBTFUL AND NON GENUINE. THE ASSE SSING OFFICER ACCORDINGLY DISALLOWED THE FOLLOWING EXPENSES CLAIM ED BY THE ASSESSEE OUT OF COMMISSION INCOME: I) RENT AND SERVICES CHARGES ` 4 80 000/- II) TRAVELLING EXPENSES ` 78 480/- III)TELEPHONE/FAX/INTERNET/EXPENSE ` 48 000/- IV) OFFICE EXPENSES ` 1 60 000/- V) BUSINESS PROMOTION EXPENSES ` 70 200/- VI) PRINTING STATIONARY BOOKS AND PERIODICALS ` 25 000/- VII) MISC. EXPENSES ` 62 914/- 3 IN APPEAL THE CIT(A) DELETED THE ADDITION OF ` . 4 80 000/- ON ACCOUNT OF RENT PAID BY THE ASSESSEE TO HER MOTHER-IN-LAW ON T HE GROUND THAT THE ASSESSEE IS USING THE OFFICE PREMISES FOR THE PURPOSE OF RE NDERING OF SERVICES TO 100+ CHRISTIAN INSTITUTIONS AND TO KEEP RECORDS OF THE DEPOSITS MADE IN THE BANK. HE FURTHER NOTED THAT THERE IS NO REQUIREMENT OF TDS T O BE MADE AND THE MOTHER- IN- LAW HAS OFFERED THE RENTAL INCOME IN HER RETURN OF INCOME AND PAID THE TAXES DUE THEREON. HE FURTHER OBSERVED THAT THE OFFICE PREM ISES WERE ALSO NEEDED FOR DEVELOPING AND STARTING THE ASSESSEES PROFESSIONA L ACTIVITY AS A CHARTERED ACCOUNTANT AND THE EXPENSES HAVE TO BE ALLOWED AS REVENUE EXPENSES IRRESPECTIVE OF WHETHER ANY INCOME IS EARNED FROM S UCH PROFESSIONAL ACTIVITY OR 4 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH NOT. HE ACCORDINGLY HELD THAT RENT EXPENSE INCURRE D WAS FOR THE PURPOSE OF EARNING OF THE COMMISSION INCOME AND ALSO FOR CARRY ING OUT THE PROFESSIONAL ACTIVITY. 3.1 SO FAR AS THE OTHER EXPENSES ARE CONCERNED HE HELD THAT THE TRAVELLING EXPENSE AMOUNTING TO ` 78 480/- IS NECESSARY FOR THE ASSESSEE TO INCUR EXPENSES ON CONVEYANCE AND TRAVELLING SINCE THE ASS ESSEE WAS RENDERING SERVICES TO CHRISTIAN INSTITUTIONS AND FOR THIS PU RPOSE SHE HAD TO TRAVEL TO VARIOUS PLACES IN MUMBAI NAVI MUMBAI THANE ETC. FURTHER THE EXPENSES INCURRED BY THE ASSESSEE ARE REASONABLE LOOKING TO THE NATURE O F SERVICES RENDERED AND THE AMOUNT OF COMMISSION EARNED. 3.2 SO FAR AS THE EXPENSES ON ACCOUNT OF TELEPHONE/ FAX/INTERNET OFFICE EXPENSES PRINTING STATIONARY AND MISCELLANEOUS EXP ENSES TOTALLING TO ` 2 95 914/- ARE CONCERNED HE DELETED 90% OF THE SA ME ON THE GROUND THAT IT WAS NECESSARY FOR CARRYING ON ANY BUSINESS OR PROFE SSIONAL ACTIVITY ON DAY-TO-DAY BASIS. HOWEVER SINCE PERSONAL ELEMENT CANNOT BE RU LED OUT; HE DIRECTED THE ASSESSING OFFICER TO DISALLOW 10% OF `. 2 95 914/-. THUS HE CONFIRMED THE ADDITION TO THE EXTENT OF ` 29 591/- AS AGAINST ` 2 95 914/- DISALLOWED BY THE ASSESSING OFFICER. 3.3 SO FAR AS THE EXPENSES INCURRED TOWARDS BUSINE SS PROMOTION THE CIT(A) NOTED THAT THE EXPENSES ARE INCURRED MAINLY FOR TH E PURPOSES OF THE DEVELOPMENT IN THE PROFESSIONAL FIELD OF THE ASSESS EE I.E. AS A CHARTERED ACCOUNTANT AND FROM WHICH THERE IS NO INCOME EARNED AS SUCH. AT THE SAME 5 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH TIME IT ALSO CANNOT BE SAID THAT THE EXPENSES WERE NOT REQUIRED TO BE INCURRED SINCE THE SAME WERE ALSO NECESSITATED FOR BUSINESS ACTIVITIES. ACCORDINGLY HE RESTRICTED THE DISALLOWANCE TO 50%. HE THUS SUSTAIN ED AN AMOUNT OF ` 35 100/- GAVE A RELIEF OF ` 35 100/-. 4 AGGRIEVED WITH SUCH PART RELIEF GIVEN TO THE ASSE SSEE THE REVENUE IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS: I) THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE DISALLOWANCE OF VARIOUS EX PENSES SUCH AS RENT ` 4 80 00/- TRAVELLING EXPENSE - ` 78 480/- BUSINESS PROMOTION EXPANSE ` 35 100/- AND TELEPHONE OFFICE MISCELLANEOUS PRI NTING EXPENSES ` 2 66 323/- II) THE LD CIT(A) ERRED ON FACTS AND IN LAW AND IN CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THE FACTS THAT THE ASSESSEE HER SELF IN THE SUBMISSION FILED ON 5.11.2008 DURING THE ASSESSMEN T PROCEEDING HAS ACCEPTED THAT THE VARIOUS EXPENSE CLAIMED WERE MOST LY NOT RELATING TO THE EARNING OF COMMISSION INCOME BUT TO DEVELOP THE FIELD OF PRACTICING AS A CHARTERED ACCOUNTANT. III) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 5 THE LD DR WHILE SUPPORTING THE ORDER OF THE ASSES SING OFFICER SUBMITTED THAT THE ASSESSEE IS NOT REQUIRED TO INCUR ANY EX PENDITURE FOR EARNING THE COMMISSION INCOME AND THE VARIOUS EXPENSES INCURRED BY HER RELATE TO DEVELOPMENT OF HER POTENTIAL IN THE FIELD OF HER PR OFESSION AS A CHARTERED ACCOUNTANT. SINCE NO INCOME HAS BEEN DERIVED FROM THE PROFESSIONAL ACTIVITY OF THE ASSESSEE AS A CHARTERED ACCOUNTANT AND SINCE TH E EXPENSES DO NOT RELATE TO THE EARNING OF COMMISSION INCOME; THEREFORE THE AS SESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE VARIOUS EXPENSES. FURTHER NO TDS HAS BEEN DEDUCTED ON ACCOUNT OF RENT PAID TO MOTHER-IN-LAW OF THE ASSESS EE. THEREFORE THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE AND THAT OF THE ASSE SSING OFFICER BE RESTORED. 6 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH 5.1 THE LD COUNSEL FOR THE ASSESSEE ON THE OTHER H AND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT SO FAR AS THE D EDUCTION OF TAX AT SOURCE FROM HOUSE RENT IS CONCERNED IT IS NOT REQUIRED SINCE T HE ASSESSEE IS AN INDIVIDUAL AND HER PROFESSIONAL INCOME HAS NOT EXCEEDED THE PRESCR IBED LIMIT U/S 44AB. 5.2 AS REGARDS THE VARIOUS EXPENSES INCURRED BY THE ASSESSEE THE LD COUNSEL FOR THE ASSESSEE REFERRING TO THE APPOINTMENT LETTE R GIVEN BY ARCHDIOCESE OF BOMBAY TO THE ASSESSEE SUBMITTED THAT WORK TIMING OF THE ASSESSEE IS FROM MONDAY TO THURSDAY FROM 9 AM TO 5 PM. APART FROM TH IS THE ASSESSEE IS ENTITLED TO VARIOUS LEAVE SUCH AS PRIVILEGE LEAVE 30 DAYS SICK LEAVE 7 DAYS AND CASUAL LEAVE 7 DAYS IN A YEAR. VARIOUS EXPENSES CLA IMED BY THE ASSESSEE RELATE TO EARNING OF COMMISSION INCOME. WITHOUT INCURRING SUCH EXPENSES THE ASSESSEE WOULD NOT HAVE EARNED SUCH INCOME. THE AS SESSEE IS REQUIRED TO RENDER HER SERVICES TO MORE THAN 100+ CHRISTIAN INS TITUTIONS SITUATED AT MUMBAI NAVI MUMBAI AND THANA. HE ACCORDINGLY SUBMITTED THAT THE CIT(A) IS JUSTIFIED IN DIRECTING THE DISALLOWANCES AND HIS ORDER SHOULD BE UPHELD. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS EMPLOYED WITH ARCHDIOCESE OF BOMBAY. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS SHOWN TO HAVE RECEIVED COMMISSION INCOME OF ` . 22 07 339/- AND AFTER CLAIMING VARIOUS EXPENSES HAS DECLARED NET PROFIT OF ` 11 48 929/-. ACCORDING TO THE ASSESSING OFFICER VARIOUS EXPENSES CLAIMED BY THE ASSESSEE DO NOT RELATE 7 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH TO EARNING OF COMMISSION INCOME AND ARE INCURRED TO DEVELOP HER PRACTICE AS A CHARTERED ACCOUNTANT. WE FIND THE CIT(A) DELETED VARIOUS DISALLOWANCES MADE BY THE ASSESSING OFFICER ON THE GROUND THAT SUCH EX PENSES ARE REQUIRED TO ENTITLE THE ASSESSEE TO EARN COMMISSION INCOME AND ALSO TO CARRY OUT HER PROFESSIONAL ACTIVITIES AS A CHARTERED ACCOUNTANT. FROM THE VAR IOUS DETAILS SUBMITTED BEFORE THE ASSESSING OFFICER WE FIND THE ASSESSEE HAS SU BMITTED THAT IT IS RENDERING SERVICES TO 100+ CHRISTIAN INSTITUTIONS IN MUMBAI NAVI MUMBAI AND THANE. THIS ASPECT HAS NOT BEEN DISPUTED BY THE REVENUE NOR HAS BEEN FOUND TO BE FALSE OR UNTRUE. . . . SIMILARLY THE GENUINENESS OF THE RENT PAID TO H ER MOTHER-IN-LAW AMOUNTING TO ` 4 80 000/- IS ALSO NOT IN DISPUTE. ACCORDING TO T HE ASSESSING OFFICER THE PREMISE HAS BEEN TAKEN ON RENT FOR CAR RYING OUT HER FUTURE PROFESSIONAL ACTIVITY AS A CHARTERED ACCOUNTANT FRO M WHICH NO INCOME HAS BEEN EARNED AND FURTHER NO TAX HAS BEEN DEDUCTED AT SOU RCE. IN OUR OPINION WITHOUT AN OFFICE THE ASSESSEE CANNOT RENDER SERVICES TO 1 00+ CHRISTIAN INSTITUTIONS AND KEEP THEIR RECORDS. FURTHER WE ALSO FIND FORCE F ROM THE SUBMISSIONS OF THE LD COUNSEL FOR THE ASSESSEE THAT NO TAX IS REQUIRED TO BE DEDUCTED AT SOURCE SINCE THE ASSESSEE AS AN INDIVIDUAL AND THE BUSINESS RE CEIPT HAS NOT EXCEED THE PRESCRIBED LIMIT U/S 44AB OF THE I T ACT. 6.1 SO FAR AS THE OTHER EXPENSES ARE CONCERNED SU CH AS TRAVEL EXPENSES EXPENSES TOWARDS TELEPHONE FAX INTERNET OFFICE E XPENSES PRINTING AND STATIONARY ETC. WE FIND THE ORDER OF THE CIT(A) IS JUSTIFIED AND REASONABLE AND DO NOT CALL FOR ANY INTERFERENCE. SINCE IN OUR OPINIO N WITHOUT INCURRING THESE EXPENSES THE ASSESSEE COULD NOT HAVE DONE HER BUSI NESS. FURTHER THE CIT(A) HAS ALREADY SUSTAINED SOME ADDITION ON ACCOUNT OF P ERSONAL ELEMENT IN SUCH EXPENDITURE. 8 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH 6.2 SO FAR AS THE EXPENSES INCURRED TOWARDS BUSINES S PROMOTION WE FIND THE ASSESSEE HAS CATEGORICALLY STATED BEFORE THE ASSESS ING OFFICER THAT THE EXPENSES ARE INCURRED MAINLY FOR DEVELOPMENT OF HER POTENTIA L IN THE FIELD OF HER PROFESSION AS CHARTERED ACCOUNTANT. IT IS ALSO AN ADMITTED FA CT THAT NO INCOME HAS BEEN DECLARED DURING THE YEAR. SINCE THERE IS NO DISPUT E REGARDING THE QUALIFICATION OF THE ASSESSEE AS A CHARTERED ACCOUNTANT; THEREFORE FROM THE DAY SHE HOLDS CERTIFICATE OF PRACTICE SHE IS ENTITLED TO RENDER SERVICES IN THE FIELD OF AUDIT CERTIFICATION AND TAXATION. THEREFORE SHE IS ENTIT LED TO CARRY OUT HER PROFESSIONAL ACTIVITIES AND THE EXPENSE CLAIMED BY HER SHOULD BE ALLOWED. SINCE THE ASSESSEE HAS DECLARED EXPENSE OF ` . 70 200/- ON THIS ACCOUNT OUT OF WHICH THE CIT(A) HAS ALREADY SUSTAINED ADDITION TO THE EXTENT OF ` 35 100/- FOR WHICH THE ASSESSEE IS NOT IN APPEAL BEFORE US; THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND UPHOLD THE SAME. THE GROUND RAISED BY T HE REVENUE IS ACCORDINGLY DISMISSED. 7 IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 7 TH DAY OF JAN 2011. SD/- SD/- ( (( ( SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 7 TH JAN 2011 RAJ* 9 ITA NO.2785/MUM/2009 MRS SAVINA MISQUITH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI