ITO 21(1)(2), MUMBAI v. KISHORE TITTA, MUMBAI

ITA 3500/MUM/2009 | 2006-2007
Pronouncement Date: 09-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 350019914 RSA 2009
Assessee PAN ABNPT2273L
Bench Mumbai
Appeal Number ITA 3500/MUM/2009
Duration Of Justice 10 month(s) 11 day(s)
Appellant ITO 21(1)(2), MUMBAI
Respondent KISHORE TITTA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 09-04-2010
Assessment Year 2006-2007
Appeal Filed On 28-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI. BEFORE S/SHRI S.V.MEHROTRA AM & V.DURGA RAO JM I.T.A. NO. 3500/MUM/2009 ASSESSMENT YEAR: 2006-07 THE I.T.O. 21(1)(2) V. KISHORE TITTA PRATYAKHASKAR BHAVAN BANDRA KURLA COMPLX. MAYUR AP ARTMENTS DADABAO CRPSS BANDRA(E) MUMBAI. ROAD NO.3 VILE PARLE (W) MUMBAI. PA NO.ABNPT 2273 L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MOHD USMAN RESPONDENT BY : SHRI SAMEER DALAL O R D E R PER S.V.MEHROTRA AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 20.3.2009 OF LD CIT (A)-XXI MUMBAI FOR THE ASSESSMENT YEAR 200 6-07. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE CARRIED ON THE BUSINESS AS PROPRIETOR OF M/S. KALAMBIKAS WHICH WAS ENGAGED IN THE BUSINESS OF MA NUFACTURING & GARMENT EXPORTERS. THE AO NOTED FROM THE DETAILS OF LABOUR CHARGES FIL ED BY THE ASSESSEE THAT PAYMENTS EXCEEDING RS.20 000/- HAD BEEN MADE TO VARIOUS PART IES WITHOUT DEDUCTING TDS THEREBY VIOLATING THE PROVISIONS OF CHAPTER XVII-B. HE OBS ERVED THAT AS PER THE PROVISIONS OF SECTION N 194C WHEN THE SUM CREDITED OR PAID OR LI KELY TO BE CREDITED OR PAID UNDER THE CONTRACT EXCEEDS RS.20 000/- AND WHERE THE AGGREGA TE OF AMOUNTS OF SUMS CREDITED OR PAID DURING THE FINANCIAL YEAR EXCEEDS RS.50 000/- TAX SHOULD BE DEDUCTED AT SOURCE AT THE PRESCRIBED RATES. HE NOTED THAT IN THE PRESEN T CASE THE ASSESSEE HAD FAILED TO DEDUCT THE TAX IN RESPECT OF FOLLOWING EXPENSES:- I) LABOUR CHARGES : RS.63 29 238 II) INT. PAID TO PARTIES : RS. 60 000 ITA NO.3500/M/2009 M/S. KISHORE N.TITTA 2 III) CARRIAGE OUTWARD : RS. 8 65 850 IV) ACCOUNTING FEES : RS. 50 750 V) AUDIT FEES : RS. 33 672 VI) RENT : RS. 1 68 500 RS.75 08 010 THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 40( A)(IA) HE DISALLOWED RS.74 02 220 (75 08 010 1 05 790). 3. LD CIT (A) NOTED THAT THE IMPUGNED PAYMENTS WERE MADE TO THE CONTRACTORS IN CAPACITY OF OWNER AND NOT TO SUB-CONTRACTORS IN CAP ACITY OF CONTRACTOR. AFTER CONSIDERING THE PROVISIONS OF SECTION 194C LD CIT (A) HELD THA T THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX UNDER CHAPTER XVII-B AND THEREFORE NO DISALLOWANCE WAS CALLED FOR U/S. 40(A)(IA) IN REGARD TO SUM OF RS.73 03 548/-. HOWE VER HE CONFIRMED THE DISALLOWANCE IN REGARD TO INTEREST PAID TO PARTIES OF RS.60 000/- A ND AUDIT FEES PAID OF RS.33 672/- WHICH WAS COVERED BY SECTION 194A & 194J. AGGRIEVED THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD CIT (A) ERRED ON FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.73 08 548/- MADE U/S .40(A)(IA) ON THE GROUND THAT THE PROVISO TO SECTION 194C(2) IS NOT APPLICABLE TO THE ASSESSEE. 2. THE LD CIT (A) HAS ERRED ON FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THAT THE ASSESSEE GOT CONT RACT FOR MANUFACTURE OF GARMENTS AND THIS WORK WAS IN TURN GIVEN TO SUB-CONTRACTORS FOR THE LABOUR JOBS. 4. LD D.R. SUBMITTED THAT IT IS CLEAR FROM THE GROU ND THAT THE ASSESSEE GOT THE CONTRACT FOR MANUFACTURING OF GARMENTS AND THEREFO RE THE FINDING THAT HE WAS DOING THE WORK ON HIS OWN ACCOUNT IS NOT CORRECT. 5. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE WAS PROPRIETOR OF M/S. KALAMBIKAS AND WAS ENGAGED IN THE BUSINESS OF MANUF ACTURING AND WAS A GARMENT EXPORTER. HE ON HIS OWN ACCOUNT GOT VARIOUS WORKS DONE AND NOT IN HIS CAPACITY AS CONTRACTOR. THEREFORE THE PROVISIONS OF SECTION 1 94C WERE NOT APPLICABLE. ITA NO.3500/M/2009 M/S. KISHORE N.TITTA 3 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD OF THE CASE. IN THE ASSESSMENT ORDER THE AO HAS OBSERVED AS UNDER: - THE ASSESSEE IS A PROPRIETOR OF M/S. KALAMBIKAS WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING & GARMENT EXPORTERS. NOTHING HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT THE ASSESSEE WAS THE CONTRACTOR AND DOING THE WORK FOR SOME OTHER PERSONS. ON THE CONT RARY DETAILS OF PAYMENTS SHOWS THAT A SUM OF RS.63 29 238/- HAS BEEN PAID TOWARDS LABOUR CHARGES WHICH CLEARLY SHOWS THAT HE GOT ALL THESE WORKS DONE. THE AO HAS NOT POINTED O UT ANY RECEIPT BY THE ASSESSEE FROM SOME OTHER PARTIES ON WHOSE BEHALF THE ASSESSEE CAR RIED OUT THE CONTRACT WORKS. THE PROVISIONS OF SECTION 194C ARE APPLICABLE IN CASE O F CONTRACTOR AND NOT APPLICABLE TO THE OWNER OF THE BUSINESS. THEREFORE WE CONFIRM THE O RDER OF LD CIT (A) ON THIS ISSUE. GROUND NOS.1 & 2 ARE DISMISSED. 7. GROUND NO.3 READS AS UNDER:- 3. THE LD CIT (A) ERRED IN LAW IN DIRECTING TO DIS ALLOW THE INTEREST ONLY ON THE LOANS UTILIZED FOR THE PURPOSE OF HOUSE IN EXCESS O F THE CC LIMIT WITHOUT REALIZING THAT THE ENTIRE AMOUNT WAS UTILIZED FOR THE PURCHAS E OF HOUSE. 8. THE ASSESSING OFFICER NOTICED FROM THE BALANCE S HEET THAT THE ASSESSEE HAD PURCHASED A FLAT AT VILE PARLE FOR RS.44 95 368/- D URING THE FINANCIAL YEAR 2004-05. HE FURTHER NOTED THAT ASSESSEES CAPITAL IN THE SAID C ONCERN WAS ONLY RS.6 06 900/- AND THE BALANCE FUNDS WERE OUT OF SECURED AND UNSECURED LOA NS TOTALING TO RS.40 72 996/-. HE THEREFORE CONCLUDED THAT THE LOANS OBTAINED BY THE ASSESSEE FOR THE PURPOSES OF HIS BUSINESS WERE UTILIZED FOR PURCHASE OF FLAT. HE F URTHER NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.9 11 029/- AS INTEREST EXPE NSES TO THE PROFIT AND LOSS ACCOUNT. AFTER CONSIDERING THE ASSESSEES CONTENTION THE AO CONCLUDED THAT RS.38 88 468/- WAS UTILIZED FOR THE PURPOSES OF INVESTMENT IN HOUSE PR OPERTY AND THEREFORE DISALLOWED INTEREST TO THE EXTENT OF RS.4 66 616/- COMPUTED @ 12%. 9. BEFORE LD CIT (A) AN ADDITIONAL GROUND WAS TAKE N IN WHICH IT WAS INTER ALIA CONTENDED THAT THE INTEREST PAID FOR ACQUIRING A S ELF OCCUPIED HOUSE PROPERTY TO THE EXTENT OF RS.1 50 000/- BE ALLOWED UNDER SECTION 24(B) OF THE I.T.ACT. LD CIT (A) ACCEPTED THIS CONTENTION INTER ALIA OBSERVING THAT THE ONLY ADD ITIONAL CC LIMIT COULD BE SAID TO HAVE BEEN DIVERTED TOWARDS THE INVESTMENT IN HOUSE PROPE RTY AND THE INTEREST PAID THEREON WAS ITA NO.3500/M/2009 M/S. KISHORE N.TITTA 4 LESS THAN RS.1 50 000/-. HE ACCORDINGLY DIRECTED THE AO TO WORK OUT THE INTEREST PAID ON ADDITIONAL CC LIMITED AVAILED AND ADDED BACK THE A MOUNT U/S.36(1)(VIII) AND THEN ALLOW THE SAME AMOUNT NOT BEING MORE THAN RS.1 50 000/- U/S.24(B) OF THE I.T.ACT. 10. LD D.R. SUBMITTED THAT THE FINDINGS OF LD CIT ( A) THAT THE INTEREST IS DISALLOWABLE TO THE EXTENT OF ADDITIONAL CC LIMIT IS NOT CORRECT BECAUSE AS DEMONSTRATED BY THE AO THE ASSESSEE HAD UTILIZED RS.38 88 468/- OUT OF THE CC LIMIT FOR THE PURCHASE OF HOUSE PROPERTY. 11. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS SEEKING DEDUCTION ONLY TO THE EXTENT OF RS.1 50 000/- AND NOT FOR THE BALA NCE AMOUNT. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD OF THE CASE. THE ASSESSEE IN ITS SUBMISSIONS BEFORE THE AO HAD INTE R ALIA STATED THAT HE HAD NOT UTILIZED ANY LOAN TAKEN FOR THE BUSINESS FROM CC ACCOUNT OF ABOUT RS.20 LAKHS AND UNSECURED LOANS OF ABOUT RS.3.50 LAKHS ON THE GROUND THAT THE SAME HAD BEEN INVESTED IN THE STOCK OF RS.52.28 LAKHS AND DEBTORS TO THE EXTENT OF RS.2 .56 LAKHS. HOWEVER IN THE BALANCE SHEET HE HAD SHOWN THE INVESTMENT OF RS.44 95 368/ - AND HAD NOT GIVEN ANY EXPLANATION AS TO HOW THE SAME WAS FINANCED APART FROM THE UTIL IZATION OF CC LIMIT AND FROM SECURED AND UNSECURED LOANS. UNDER SUCH CIRCUMSTANCES THE FINDINGS OF THE ASSESSING OFFICER THAT RS. RS.38 88 468/- HAD BEEN UTILIZED OUT OF TH E BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN HOUSE PROPERTY CANNOT BE DOUBTED. TH EREFORE THE DISALLOWANCE OF INTEREST TO THE EXTENT OF RS.4 66 616/- WAS WARRANTED. HOWE VER THE ALTERNATE PLEA OF THE ASSESSEE REGARDING ALLOWING INTEREST U/S.24(B) WAS FULLY JUS TIFIED AND THEREFORE OUT OF RS.4 66 616/- THE DISALLOWANCE OF INTEREST TO THE E XTENT OF RS.3 16 616/- (RS.4 66 616 RS.1 50 000./-) IS ONLY CALLED FOR. WE ORDER ACCOR DINGLY. THIS GROUND IS PARTLY ALLOWED. 13. IN THE RESULT APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. PRONOUNCED ON 9 TH APRIL 2010 SD/- (V. DURGA RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANTMEMBER) MUMBAI DATED 9 TH APRIL 2010 ITA NO.3500/M/2009 M/S. KISHORE N.TITTA 5 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUMBAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH G MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.3500/M/2009 M/S. KISHORE N.TITTA 6 DATE INITIALS 1. DRAFT DICTATED ON 6.4.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 6.4.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.3500/M/2009 M/S. KISHORE N.TITTA 7