GHANSHYAM W. DIALANI, MUMBAI v. ITO WD 14(2)(4), MUMBAI

ITA 3219/MUM/2014 | 2003-2004
Pronouncement Date: 31-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 321919914 RSA 2014
Assessee PAN AABCR3179H
Bench Mumbai
Appeal Number ITA 3219/MUM/2014
Duration Of Justice 2 year(s) 5 month(s) 24 day(s)
Appellant GHANSHYAM W. DIALANI, MUMBAI
Respondent ITO WD 14(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 31-10-2016
Date Of Final Hearing 27-10-2016
Next Hearing Date 27-10-2016
Assessment Year 2003-2004
Appeal Filed On 06-05-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.3219/MUM/2014 (ASSESSMENT YEAR: 2003-04) GHANSHYAM W DIALANI PROP OF SAIBABA ENTERPRISE DEAR IMPEX AND PEACE INTERNATIONAL FLAT NO.23 BADRINATH CHS SOC. OPP. KHAR GHYMKHANA KHAR (W) MUMBAI-52 VS ITO WD.14(2)(4) MUMBAI PAN : AABCR3179H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI DHARMESH SHAH RESPONDENT BY SHRI PRAKASH R MANE DATE OF HEARING : 31-10-2016 DATE OF PRONOUNCEMENT : 31 -10-2016 O R D E R PER ASHWANI TANEJA AM: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME-TAX (APPEALS)-25 MUMBAI [HEREINAFTER CALLED CIT(A)] DATED 03-07- 2014 PASSED AGAINST THE ASSESSMENT ORDER U/S 143(3) DATED 28-03-2006 FOR A.Y. 2003-04 ON THE FOLLOWING GROUNDS: GROUNDS OF APPEAL AGAINST THE ORDER DATED 06.03.2014 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-2 5 MUMBAI. 2 I.T.A. NO.3219/MUM/2014 FOLLOWING GROUNDS OF APPEAL ARE WITHOUT PREJUDICE T O EACH OTHER: 1 . THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN PASSIN G THE ORDER U/S. 251(1) R.W.S. S. 254(1) OF THE ACT WHIC H IS ILLEGAL AND BAD IN LAW. 2. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN UPHOLD ING THE ORDER OF THE ASSESSING OFFICER BY WHICH HE HAD DISA LLOWED THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S. 24 OF THE ACT AMOUNTING TO RS. 1 50 000/- WHILE DETERMINING INCOM E FROM HOUSE PROPERTY. 3. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN SUSTAI NING DISALLOWANCE OF THE FOLLOWING EXPENSES INCURRED BY THE APPELLANT WHILE CARRYING ON HIS PROPRIETARY BUSINES S UNDER THE NAME AND STYLE OF M/S. SAIBABA ENTERPRISES: (I) RS. 23 890/- OUT OF ELECTRICITY EXPENSES OF RS . 47 780/-; AND (II) RS. 6 420/- OUT OF TELEPHONE EXPENSES OF RS. 1 2 840/-. THE CIT (A) OUGHT TO HAVE DELETED THE AFORESAID DISALLOWANCES AS THE RELATED EXPENSES WERE INCURRED FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. 4. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING DISALLOWANCE OF THE FOLLOWING EXPENSES INCURRED AND CLAIMED BY THE APPELLANT IN RESPECT OF HIS PROPRIETARY BUSI NESS UNDER THE NAME AND STYLE OF M/S. DEAR IMPEX: (I) RS. 2 456/- TOWARDS OF BANK CHARGES AND INTEREST; (II) RS. 1 12 028/- BEING INTEREST ON LOANS; (III) RS. 18 836/- BEING DEPRECIATION; (IV) RS. 5 170/- BEING BROKERAGE; AND (V) RS. 4 000/- AS OFFICE EXPENSES. THE CIT (A) OUGHT TO HAVE DELETED THE AFORESAID DISALLOWANCES AS THE RELATED EXPENSES WERE INCURRED FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. 5. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONCURRING WITH THE DISALLOWANCE OF THE CLAIM OF TH E APPELLANT FOR DEDUCTION U/S. 80HHC OF THE ACT AMOUN TING TO RS. 8 99 586/- ON INCORRECT INTERPRETATION OF THE P ROVISIONS OF THE 3 I.T.A. NO.3219/MUM/2014 ACT. THE CIT (A) OUGHT TO HAVE ALLOWED THE CLAIM OF THE APPELLANT IT WAS IN ACCORDANCE WITH LAW. 6. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN SUS TAINING THE LEVY OF INTEREST U/S. 234A 23413 234C AND 234 D OF THE INCOME-TAX ACT. 2. GROUNDS 1 & 2 WERE NOT PRESSED AND THEREFORE DISMI SSED. 3. GROUND 3: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACT ION OF LD. CIT(A) IN SUSTAINING DISALLOWANCE OF ELECTRI CITY AND TELEPHONE EXPENSES MADE BY THE AO @50% ON THE GROUND THAT ASS ESSEE WAS HAVING MORE THAN ONE PROPRIETARY CONCERN AND THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT FULLY SUBSTANTIATED. 4. DURING THE COURSE OF HEARING BEFORE US IT WAS SUBM ITTED BY THE LD. COUNSEL THAT THOUGH COMPLETE DETAILS WERE NOT SUBMI TTED AND ALL THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSES OF BUSINESS BUT EVEN IF THE ENTIRE EXPENSES WERE NOT SUBSTANTIATED WITH COMPLETE EVIDENCES THE DISALLOWANCE MADE @50% WAS TOO HARSH AND HIGHLY UNFAIR AND THEREFORE IT SHOULD BE REDUCED TO 10%. 5. PER CONTRA THE LD. DR SUBMITTED THAT THE DISALLOWA NCE WAS JUSTIFIED AS COMPLETE DOCUMENTARY EVIDENCES WERE SUBMITTED TO PROVE THAT THE ENTIRE EXPENSES WERE INCURRED FOR THE PURPOSES OF B USINESS OF THE ASSESSEE BUT HE STATED THAT FAIRLY SPEAKING THE DIS ALLOWANCE MAY BE REDUCED TO 25% OF THE TOTAL EXPENSES. 6. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AFTER TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMS TANCES WE FIND IT APPROPRIATE TO REDUCE THE DISALLOWANCE TO 20% OF TH E TOTAL EXPENSES. 4 I.T.A. NO.3219/MUM/2014 THE AO IS DIRECTED TO GIVE RELIEF ACCORDINGLY. THI S GROUND MAY BE TREATED AS PARTLY ALLOWED. 7. GROUND 4: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACT ION OF LOWER AUTHORITIES IN MAKING DISALLOWANCE OF EXPENSE S INCURRED IN RESPECT OF HIS PROPRIETARY BUSINESS UNDER THE NAME AND STYL E M/S DEAR IMPEX. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY TH E LD. COUNSEL THAT THE ASSESSEE IS HAVING MANY PROPRIETORSHIP UNITS AND BU SINESS IS BEING REGULARLY DONE IN ALL THE UNITS. IN THE CASE OF M/ S DEAR IMPEX THE ASSESSEE COULD NOT RECEIVE EXPORT ORDERS; THEREFORE NO INCOME COULD BE BOOKED. BUT ALL THE ASSETS AND LIABILITIES CONTINU ED TO EXIST AND ASSESSEE WAS MAKING EFFORTS TO RECEIVE ORDERS AND EARN INCOM E. UNDER THESE CIRCUMSTANCES EXPENSES INCURRED ON PREVIOUS LIABIL ITIES AND FOR KEEPING THE BUSINESS ALIVE ARE CERTAINLY MEANT FOR BUSINESS AND SHOULD BE ALLOWED AS SUCH. 8. PER CONTRA THE LD. DR SUBMITTED THAT IN ABSENCE OF EXPORT ORDERS IT CANNOT BE SAID THAT THE BUSINESS WAS IN CONTINUATIO N AND THEREFORE THE EXPENSES CANNOT BE ALLOWED. 9. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES. IT IS NOTED THAT THE AO HAS DISALLOWED EXPENSES ON ACCOUNT OF BANK CHARGES INTEREST ON LOANS DEPRECIATION BROKERAGE AND OFFICE EXPENSES. IT HAS BEEN EXPLAINED THAT INTEREST HAS BEEN PAID O N THE LOANS RECEIVED IN EARLIER YEARS WHICH ARE STILL REPAYABLE. IT IS FUR THER NOTED THAT THE ASSESSEE HAS REPORTED IN ITS RETURN OF INCOME THE FOLLOWING INCOMES FROM ITS PROPRIETARY CONCERNS: (A) M/S SAIBABA ENTERPRISES RS.9 953 5 I.T.A. NO.3219/MUM/2014 (B) M/S PEACE INTERNATIONAL EXPORTS RS.18 20 939 (EXPORT ACTIVITY) (C) M/S DEAR IMPEX (-) RS.1 42 490 THUS FROM THE ABOVE IT IS CLEAR THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE VERY MUCH CONTINUES TO BE IN THE BUSINESS AS ALL OTHER PROPRIETARY UNITS ARE ADMITTEDLY CONTINUING TO DO B USINESS. THE ONLY DOUBT COULD BE WITH REGARD TO BUSINESS OF M/S DEAR IMPEX. IT IS NOTED FROM THE BALANCE-SHEET AND P & L ACCOUNT OF M/S DEA R IMPEX THAT THE ASSESSEE CONTINUES TO HOLD ASSETS AND LIABILITIES. THE EXPENSES INCURRED ARE ROUTINE EXPENSES REQUIRED TO KEEP THE BUSINESS ALIVE. FURTHER AS STATED ABOVE ALL OTHER UNITS ARE FUNCTIONING AS US UAL AND THUS IT CANNOT BE SAID THAT ASSESSEES BUSINESS CEASED TO EXIST. U NDER THESE CIRCUMSTANCES IT WILL BE NOT JUSTIFIED TO SAY THAT THESE EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF THE AS SESSEE. THEREFORE WE DIRECT THE AO TO ALLOW ALL THESE EXPENSES AS HAVE B EEN CLAIMED BY THE ASSESSEE IN THE P&L ACCOUNT OF M/S DEAR IMPEX. THI S GROUND MAY BE TREATED AS ALLOWED. 10. GROUND 5: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACT ION OF LOWER AUTHORITIES IN DENYING THE BENEFIT OF DEDU CTION U/S 80HHC ON THE AMOUNT OF SALE OF DEPB LICENCE AMOUNTING TO RS.8 99 586. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY THE LD. COUNS EL THAT NOW THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF JUD GMENT OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS CIT 247 CTR 353 (SC). ACCORDING TO THIS JUDGMENT ONLY PROFIT ELEMENT IS TO BE EXCLUDED WHILE COMPUTING DEDUCTION U/S 80HHC ON THE AMOUNT OF SALE OF DEPB. IT WAS FURTHER ARGUED THAT THE AO HAS NOT CORRECTLY TAKEN THE AMOUNT OF 6 I.T.A. NO.3219/MUM/2014 TURNOVER. THE AO STATED THAT ONLY THAT PART OF TUR NOVER WOULD BE CONSIDERED WHICH IS ACTUALLY REALISED. THE ASSESSE E SUBMITTED THAT ONLY THAT PART OF TURNOVER HAS BEEN CONSIDERED WHILE CLA IMING DEDUCTION U/S 80HHC WHICH HAS ACTUALLY BEEN REALISED AS WOULD BE EVIDENT FROM THE DETAILS FURNISHED BEFORE US (ENCLOSED IN THE PAPER BOOK PAGES 29 TO 31 OF THE PAPER BOOK). IT WAS FURTHER SUBMITTED THAT THE AO HAS WRONGLY AGGREGATED THE TURNOVER OF ALL THE THREE PROPRIETAR Y UNITS WHILE COMPUTING AMOUNT OF DEDUCTION U/S 80HHC. IT WAS SUBMITTED TH AT SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED AND THEREFORE ONLY TURNOVE R OF EXPORT UNIT SHOULD BE CONSIDERED FOR COMPUTING BENEFIT OF DEDUC TION U/S 80HHC. IN HIS SUPPORT THE LD. COUNSEL RELIED UPON THE JUDGME NT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS SURESH MEHTA 291 ITR 462 CIT VS RATHOD BROS 254 ITR 656 (AD) AND CIT VS PADMINI TECHNOLOGI ES LTD 245 ITR (DEL). 11. PER CONTRA THE LD. DR SUBMITTED THAT SINCE THERE H AS BEEN LOT OF LEGAL DEVELOPMENTS ON THIS ISSUE AND FACTS ARE NOT PROPERLY BROUGHT OUT ALL THESE ISSUES RAISED BY THE ASSESSEE MAY BE SENT TO THE AO FOR PROPER ADJUDICATION. 12. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOWER AUT HORITIES AND FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE AO. THE ASSESSEE SHALL FURNISH REQUISITE DETAILS AND DOCUME NTARY EVIDENCES FOR WHICH THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEA RING. THE ASSESSEE IS FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES BEFORE T HE AO AS WERE RAISED BEFORE US. THE AO SHALL TAKE INTO ACCOUNT ALL THE AFORESAID JUDGEMENTS WHILE COMPUTING THE DEDUCTION U/S 80HHC. THE AO SH ALL GRANT RELIEF AS PER LAW AND FACTS. WITH THESE DIRECTIONS THIS GRO UND IS SENT BACK TO THE FILE OF THE AO AND MAY BE TREATED AS ALLOWED FOR S TATISTICAL PURPOSE. 7 I.T.A. NO.3219/MUM/2014 13. IN THE RESULT THE APPEAL MAY BE TREATED AS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF HEARING. SD/- SD/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DT : 7 TH NOVEMBER 2016 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE G-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES