M/s. ORACLE EXPORTS, MUMBAI v. ACIT - 18(1), MUMBAI

ITA 3293/MUM/2007 | 2002-2003
Pronouncement Date: 12-01-2010

Appeal Details

RSA Number 329319914 RSA 2007
Assessee PAN AAAFO0583C
Bench Mumbai
Appeal Number ITA 3293/MUM/2007
Duration Of Justice 2 year(s) 8 month(s) 15 day(s)
Appellant M/s. ORACLE EXPORTS, MUMBAI
Respondent ACIT - 18(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-01-2010
Appeal Filed By Assessee
Bench Allotted C
Tribunal Order Date 12-01-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2002-2003
Appeal Filed On 27-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 3293/MUM/2007 (ASSESSMENT YEAR: 2002-03) M/S. ORACLE EXPORTS ACIT 18(1) 402 CREATIVE INDL. CENTRE MUMBAI N.M. JOSHI MARG LOWER PAREL VS. MUMBAI 400021 PAN - AAAFO 0583 C APPELLANT RESPONDENT APPELLANT BY: SHRI K. GOPAL RESPONDENT BY: SHRI K.K. MAHAJAN O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XVII MUMBAI DATED 12.01.2007. 2. ASSESSEE HAS RAISED 8 GROUNDS ON VARIOUS ISSUES. GR OUNDS (B) (C) AND (H) WITH REFERENCE TO DISALLOWANCE OF VARIOUS EXPEN DITURE HAVE NOT BEEN PRESSED AT THE TIME OF ARGUMENTS. HENCE TREATED AS WITHDRAWN. 3. GROUND (A) PERTAINS TO THE ISSUE OF SALE OF DEPB LI CENCE. THE A.O. HAS DISALLOWED THE DEDUCTION OF RS.51 75 934/- ON SALE OF DEPB LICENCE ON INCOME OF RS.81 74 331/- INCLUDED IN THE BUSINESS P ROFIT. THE ASSESSEES TURNOVER IS LESS THAN RS.1O CRORES AND IT WAS THE C ONTENTION THAT ACTUAL TRANSFER VALUE SHOULD BE CONSIDERED FOR DEPB ENTITL EMENT WORKING FOR SECTION 80HHC. THE LEARNED COUNSEL FAIRLY SUBMITTED THAT THIS ISSUE IS TO BE CONSIDERED AFRESH IN VIEW OF THE DECISION OF THE HO N'BLE SPECIAL BENCH OF ITAT IN THE CASE TO TOPMAN EXPORTS 318 ITR 87 (AT)/ 33 SOT 337. IN VIEW OF THE ABOVE THE ISSUE WITH REFERENCE TO DEPT INCOME U NDER SECTION 80HHC CLAIM WAS RESTORED BACK TO THE FILE OF THE A.O. TO EXAMINE AFRESH IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH QUOTED ABOVE. GROUND IS RESTORED TO THE A.O. TO DO ACCORDINGLY. ITA NO. 3293/MUM/2007 M/S. ORACLE EXPORTS 2 4. GROUND (D) IS WITH REFERENCE TO THE DISALLOWANCE OF AN AMOUNT OF RS.20 000/- TOWARDS BUSINESS PROMOTION EXPENSES. TH E A.O. HAS DISALLOWED AN AMOUNT OF RS.20 000/- OUT OF RS.1 34 765/- INC URRED IN RESPECT OF ENTERTAINMENT EXP OF HOTEL AND CLUBS TOWARDS PERSON AL NATURE OF THE EXPENDITURE. THE CIT(A) HAS CONFIRMED THE SAME. 5. AFTER HEARING THE LEARNED COUNSELS AND SEEING THE F ACTS OF THE CASE AND NATURE OF EXPENDITURE WE ARE OF THE VIEW THAT THERE IS NO NEED TO INTERFERE WITH THE ORDERS OF THE A.O. AND THE CIT(A) IN THIS REGARD. DISALLOWANCE OF RS.20 000/- IS REASONABLE AND JUSTIFIED ON THE FACT S OF THE CASE. ACCORDINGLY THE GROUND IS REJECTED. 6. THE ISSUE IN GROUND (E) IS WITH REFERENCE TO RESTRI CTING THE CLAIM OF TELEPHONE EXPENSES. THE A.O. DISALLOWED AN AMOUNT O F RS.50 000/- TOWARDS EXPENDITURE INCURRED AT RESIDENCE BEING PERSONAL IN NATURE. THE CIT(A) CONSIDERED THAT THE DISALLOWANCE IS LITTLE EXCESSIV E AND RESTRICTED THE DISALLOWANCE TO 10% OF THE TOTAL EXPENDITURE THEREB Y CONFIRMING THE AMOUNT OF RS.40 209/-. 7. CONSIDERING THE NATURE OF THE EXPENDITURE AND THE F ACT THAT THE CIT(A) HAS CONSIDERED THE ISSUE ON FACTS WE ARE OF THE OP INION THAT THERE IS NO NEED TO DIFFER FROM THE FINDINGS OF THE CIT(A). ACCORDIN GLY THE DISALLOWANCE OF 10% OF THE TOTAL EXPENDITURE IS CONSIDERED REASONABLE O N THE FACTS OF THE CASE. THE GROUND IS REJECTED. 8. GROUND (F) PERTAINS TO DISALLOWANCE OF RS.20 000/- OUT OF THE TOTAL PAYMENT OF RS.1 20 000/- PAID TO MRS. SHILPA DAVE WHO IS WIFE OF ONE OF THE PARTNERS. IT WAS ASSESSING OFFICERS CONTENTION THA T SALARY PAID TO OTHER EMPLOYEES IS FAR LOWER AND ACCORDINGLY HE RESTRICTE D THE AMOUNT TO RS.1 00 000/- AND DISALLOWED RS.20 000/-. IT WAS TH E ARGUMENT OF THE ASSESSEE THAT MRS. SHIPLA DAVE IS AN MBA AND THAT S HE IS HEADING THE ACCOUNT AND GENERAL ADMINISTRATION OF THE ASSESSEE FIRM. THE CIT(A) HAS NOT AGREED WITH ASSESSEES CONTENTION HOLDING THE REASO NABLENESS OF THE EXPENDITURE HAS NOT BEEN DISCHARGED AND ACCORDINGLY HE CONFIRMED THE DISALLOWANCE. BEFORE US THE LEARNED COUNSEL SUBMITT ED THAT MRS. SHILPA DAVE IS A QUALIFIED MBA AND IS LOOKING AFTER THE AC COUNTS AS WELL AS ADMINISTRATION. ASSESSEES TURNOVER IS ABOUT RS.9.3 3 CRORES AND HAS ITA NO. 3293/MUM/2007 M/S. ORACLE EXPORTS 3 DECLARED AN INCOME OF MORE THAN RS.24.63 LAKHS AFTE R CLAIMING DEDUCTION OF 80HHC OF RS.57 47 529/-. IT WAS SUBMITTED THAT THE A.O. HAS NO REASON TO DISALLOW COMPARING WITH SUBORDINATE STAFF MEMBERS WHOSE MAXIMUM SALARY RANGED FROM RS.50 000/- TO RS.60 000/-. HE ALSO CON TENDED THAT OUT OF RS.1 20 000/- PAID I.E. AT RS.10 000/- PER MONTH T HE A.O. ARBITRARILY DISALLOWED A SUM OF RS.20 000/-. 9. AFTER HEARING THE LEARNED D.R. AND THE LEARNED COUN SEL WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISALLOW ANY AMOUN T UNDER SECTION 40A(2)(B). OBVIOUSLY MRS. SHILPA DAVE MBA IS A QUA LIFIED PERSON AND SALARY OF RS.10 000/- PER MONTH IS NOT UNREASONABLE. THERE IS NO BASIS FOR DISALLOWING RS.20 000 AND IS ARBITRARY. ACCORDINGLY DISALLOWANCE OF RS.20 000/- CANNOT BE JUSTIFIED. A.O. IS DIRECTED T O ALLOW THE AMOUNT AS CLAIMED. GROUND IS CONSIDERED ALLOWED. 10. GROUND (G) PERTAINS TO TREATMENT OF INTEREST INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. THE ASSES SEE HAD AN INTEREST INCOME OF RS.70 828/- OUT OF THE FIXED DEPOSIT STAT ED TO HAVE KEPT FOR THE PURPOSE OF EXPORT. THE A.O. TREATED THE INTEREST IN COME AND DIVIDEND INCOME AS INCOME FROM OTHER SOURCES. THE CIT(A) HAS CONFIR MED THE SAME. ON THE DIVIDEND INCOME THERE IS NO DISPUTE THAT IT HAS TO BE TREATED AS PART OF OTHER SOURCES AND GROUND (H) PERTAINS TO THIS ON AN AMOUN T OF RS.1 368/- WAS NOT PRESSED. WITH REFERENCE TO THE INTEREST INCOME OF R S.70 828/- IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT FDS ARE KEPT WITH THE BANK FOR SANCTIONING OF CREDIT FACILITIES FOR THE BUSINESS O F EXPORT AND THIS SHOULD BE TREATED AS BUSINESS INCOME RELYING ON THE PRINCIPLE S ESTABLISHED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INDO SWISS JEWELS 284 ITR 389 AND M/S. LOK HOLDING 308 ITR 386. HOWEVER IT WAS F AIRLY CONCEDED THAT THE ASSESSEES CONTENTION WAS NOT EXAMINED BY THE A.O. AND THE MATTER CAN BE RESTORED BACK TO THE A.O. TO EXAMINE THE NEXUS OF D EPOSIT VIS--VIS EXPORT BUSINESS AND EARNING OF INTEREST IS PART OF BUSINES S INCOME. CONSIDERING THE OBJECTIONS OF THE LEARNED D.R. AND THE ARGUMENT OF THE LEARNED COUNSEL WE ARE OF THE OPINION THAT THE NATURE OF INTEREST INCO ME HAS NOT BEEN CORRECTLY APPRECIATED. IT WAS THE CONTENTION OF THE ASSESSEE THAT FDS ARE KEPT AS CONDITION PRECEDENT FOR SANCTION OF CREDIT FACILITI ES AND NOT FOR EARNING INTEREST INCOME. SINCE THIS ASPECT HAS NOT BEEN EXA MINED BY THE A.O. ITA NO. 3293/MUM/2007 M/S. ORACLE EXPORTS 4 FACTUALLY WHETHER THE FDS ARE MADE OUT OF SURPLUS FUNDS OR OUT OF BORROWED FUNDS AND WHETHER IT IS FOR THE PURPOSE OF CREDIT FACILITIES OR NOT AND THE NATURE OF INTEREST INCOME VIS--VIS THE PRINCIPLES ESTABLISHED BY THE HON'BLE BOMBAY HIGH COURT IN THE ABOVE REFERRED CASES WE A RE OF THE OPINION THAT THE MATTER REQUIRES RE-EXAMINATION ON FACTS AS WELL AS ON LAW BY THE A.O. ACCORDINGLY THE ISSUE IS RESTORED BACK TO THE A.O. TO EXAMINE AND DECIDE THE ISSUE AFRESH. GROUND IS TREATED AS ALLOWED FOR STAT ISTICAL PURPOSES. 11. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 12 TH JANUARY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XVIII MUMBAI 4. THE CIT XVIII MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P. ITA NO. 3293/MUM/2007 M/S. ORACLE EXPORTS 5 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 04.01.10 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 06.01.10 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR. PS/PS 7 FILE SENT TO THE BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER