I Kay Holding Co. Pvt. Ltd., New Delhi v. DCIT, New Delhi

ITA 4707/DEL/2010 | 2006-2007
Pronouncement Date: 17-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 470720114 RSA 2010
Bench Delhi
Appeal Number ITA 4707/DEL/2010
Duration Of Justice 4 month(s) 20 day(s)
Appellant I Kay Holding Co. Pvt. Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 17-03-2011
Date Of Final Hearing 17-03-2011
Next Hearing Date 17-03-2011
Assessment Year 2006-2007
Appeal Filed On 28-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO.4707/DEL/2010 ASSESSMENT YEAR : 2006-2007 I KAY HOLDING CO. PVT. LTD. B-21 CHIRAG ENCLAVE NEW DELHI. PAN : AAAC12237C VS. DCIT CIRCLE 11 (1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL JAIN ADVOCATE & SHRI RISHAB JAIN AR REVENUE BY : SHRI SANJAY PURI CIT/DR & SMT. MONA MOHANTY SR. DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 1 ST SEPTEMBER 2010 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX APPEALS (XI) NEW DELHI UPHOLDING DISALLOWANCE OF EXPENSES OF RS.97 817/- U/S 14A OF INCOME TAX ACT MA DE BY LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1) NEW DELHI IS CONTRARY TO LAW AND FACTS OF THE CA SE. 2. THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX APPEALS (XI) NEW DELHI UPHOLDING DISALLOWANCE OF L OSS RS.1 73 852/- INSTEAD OF LOSS RS.16 123/- U/S 94(7) OF INCOME TAX ACT MADE BY LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1) NEW DELHI IS CONTRARY TO LA W AND FACTS OF THE CASE. 3. THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX APPEALS (XI) NEW DELHI UPHOLDING DISALLOWANCE MADE BY LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11 (1) ITA NO.4707/DEL/2010 2 LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11 (1) NEW DELHI OF RS.2 67 081/- ON ACCOUNT OF MEETING & CONFERENCE EXPENSES DURING THE COURSE OF BUSINESS IS AGAINST LAW AND FACTS OF THE CASE. 4. APPELLANT CRAVES THE RIGHT TO ALTER DELETE AMEND AL L OR ANY OF GROUND OF APPEAL. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE BROKING AND TRADING. IT FILED ITS RETURN OF INCOME ON 1 ST DECEMBER 2006 FOR A SUM OF ` 44 89 075/- WHICH HAS BEEN ASSESSED BY THE IMPUGNED ASSE SSMENT ORDER DATED 28 TH NOVEMBER 2008 AT AN INCOME OF ` 51 08 280 IN WHIC H THE FOLLOWING THREE ADDITIONS WERE MADE:- I) U/S 94 (7) OF THE IT ACT - 2 42 131/- II) U/S 14A OF THE IT ACT - 1 09 992/- III) MEETING EXPENSES - 2 67 081/- 3. ALL THE AFOREMENTIONED ADDITIONS ARE SUBJECT MATTE R OF THIS APPEAL. 4. SO AS IT RELATES TO DISALLOWANCE U/S 14A THE ASSESSING OFFICER HAS DISCUSSED THIS DISALLOWANCE IN PARA 4 OF THE IMPUGNED ASSE SSMENT ORDER. THE ASSESSING OFFICER HAS CALCULATED THE DISALLOW ANCE WITH REFERENCE TO RULE 8D AT A SUM OF ` 1 09 992/-. THE DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR IS A SUM OF ` 97 8 1 779/-. THE DISALLOWANCE WAS AGITATED BY THE ASSESSEE BEFORE CIT (A) WHO HAS DEALT WITH THIS ISSUE IN PARA 2.1 TO 2.5 OF HIS ORDER. REFERENCE BEFORE CIT (A) WAS MADE TO THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF GODREJ & BOYCE MFG. PVT. LTD. AS REPORTED IN 43 DTR 177 (BOM.) WHEREIN THE DECISION OF SPECIAL BENCH IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT 117 ITD 169 HAS BEEN REVERSED AND IT HAS BEEN HELD THAT RULE 8D COULD NOT BE APPLIED BEFORE ASSESSMEN T YEAR 2008- 09. REFERRING TO THE SAID DECISION OF BOMBAY HIGH CO URT LEARNED CIT (A) HAS OBSERVED THAT EVEN IF RULE 8D CANNOT BE APPLI ED THERE MUST BE ITA NO.4707/DEL/2010 3 SOME DISALLOWANCE FOR EARNING THE EXEMPT INCOME AND H E HAS RESTRICTED THE DISALLOWANCE @ 1% I.E. AT A SUM OF ` 9 7 817/- AND THUS HAS GRANTED THE RELIEF TO THE ASSESSEE OF ` 12 175/-. T HE ASSESSEE IS AGGRIEVED HENCE IN APPEAL. 5. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LEAR NED AR THAT LEARNED CIT (A) ALSO HAS UPHELD THE DISALLOWANCE ON EST IMATE BASIS WHICH IS NOT PERMISSIBLE. IT WAS SUBMITTED BY HIM THAT HONBLE DELHI HIGH COURT HAS RECENTLY HEARD THE ISSUE REGARDING APPL ICABILITY OF RULE 8D. THEREFORE HE SUBMITTED THAT THE MATTER MAYBE R ESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR RE-CONSIDERATION OF TH E SAME AS WHAT HAS BEEN DONE BY THE ASSESSING OFFICER IS THAT HE HAS APP LIED RULE 8D WHICH IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERAT ION AND LEARNED CIT (A) HAS SIMPLY UPHELD THE DISALLOWANCE ON THE BASIS OF ESTIMATE. 6. ON THE OTHER HAND RELYING UPON THE ORDER OF CIT (A) IT WAS PLEADED BY LD. DR THAT THE ORDER OF THE CIT (A) SHOU LD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. THOUGH IT HAS BEEN HELD B Y THE CIT (A) THAT ON THE BASIS OF DECISION OF BOMBAY HIGH COURT IN THE C ASE OF GODREJ & BOYCE MFG. PVT. LTD. (SUPRA) RULE 8D COULD NOT BE A PPLIED FOR THE YEAR UNDER CONSIDERATION BUT AT THE SAME TIME HE HAS ALSO ESTIMATED THE DISALLOWANCE @ 1% AND HE HAS NOT GIVEN THE REASONS FOR UPHOLDING THE SAID DISALLOWANCE TO THAT EXTENT. THEREFORE KEEPING IN VIEW THE INTEREST OF JUSTICE WE ARE OF THE OPINION THAT THE M ATTER SHOULD GO BACK TO THE ASSESSING OFFICER FOR RE-CONSIDERING THE SAME AFTE R GIVING THE ASSESSEE A REASONABLE OPPORTUNITY AND AFTER GIVING SUCH O PPORTUNITY HE WILL RE-ADJUDICATE THE ISSUE IN ACCORDANCE WITH TH E LAW. ITA NO.4707/DEL/2010 4 8. AT THE TIME OF HEARING LEARNED AR OF THE ASSESSEE D ID NOT PRESS GROUND NO.2 FOR WHICH APPROPRIATE RELIEF HAS ALREADY BEEN GIVEN BY THE CIT (A) HENCE THE SAME IS DISMISSED BEING NOT PRESSED. 9. APROPOS GROUND NO.3 THIS ISSUE HAS BEEN DISCUSSED BY TH E ASSESSING OFFICER IN PARA 5 OF THE IMPUGNED ORDER. IN THE ABSENCE OF DETAILS AND EVIDENCE IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT THIS EXPENDITURE COULD NOT BE ALLOWED ON ACCOUNT OF THEIR BEING NOT ESTABLISHED TO HAVE BEEN INCURRED FOR THE PURPOSE OF B USINESS. BEFORE CIT (A) IT HAS BEEN THE CONTENTION OF THE ASSESSEE THAT ACCORDING TO BUSINESS NEEDS THE ASSESSEE WAS REQUIRED TO INCUR CERTAIN E XPENDITURE AND THE ASSESSEE HAS EARNED NET PROFIT OF ` 44 89 075/-. THERE MAY BE SOME ELEMENT OF PERSONAL NATURE BUT IT DOES NOT MEAN THAT THE ENTIRE EXPENDITURES CAN BE DISALLOWED. HOWEVER LEARNED CIT (A) DID NOT ACCEPT SUCH CONTENTION OF THE ASSESSEE AS ACCORDING TO H IM UNLESS THE ASSESSEE PROVES THAT THEY WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS THE DISALLOWANCE WAS WARRANTED. 10. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LEA RNED AR THAT THE DISALLOWANCE IS ON THE HIGHER SIDE. THE DETAILS WERE F URNISHED BEFORE THE ASSESSING OFFICER AND THE ONLY CONTENTION OF THE ASSE SSING OFFICER IS THAT THE ASSESSEE DID NOT SUBMIT EVIDENCE REGARDING IN CURRING OF THOSE EXPENDITURES FOR THE PURPOSE OF BUSINESS. THE CONT ENTIONS RAISED BEFORE THE CIT (A) WERE REITERATED BEFORE US A ND THUS IT WAS PLEADED THAT APPROPRIATE RELIEF SHOULD BE GRANTED TO THE ASSESSEE. 11. ON THE OTHER HAND RELYING UPON THE ORDER OF TH E ASSESSING OFFICER AND CIT (A) IT WAS PLEADED BY LEARNED DR TH AT THE DISALLOWANCE HAS RIGHTLY BEEN SUSTAINED BY THE CIT (A) AND HIS ORDER ON THIS ISSUE SHOULD BE UPHELD. ITA NO.4707/DEL/2010 5 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. IN OUR OPINION THE E NTIRE EXPENDITURE CANNOT BE DISALLOWED MERELY FOR THE REASON THAT THE A SSESSEE COULD NOT FURNISH EVIDENCE TO SHOW THAT THOSE EXPENDITURES WERE A CTUALLY INCURRED FOR THE PURPOSE OF BUSINESS. THE DETAILS OF EX PENDITURE ARE REQUIRED TO BE EXAMINED IN THE LIGHT OF THE NATURE OF BUSINESS OF THE ASSESSEE AND IF THE ASSESSEE IS ABLE TO ESTABLISH THAT IN THE NORMAL COURSE OF BUSINESS THESE EXPENDITURES WERE REQUIRED TO BE INCURRED THEN THE PORTION RELATING THERETO MUST BE ALLOWED. THE DETAILS HAS NOT BEEN FURNISHED ON RECORD AND THE ORDER OF THE ASSESSING OFFICER AND CIT (A) IS ALSO NOT CLEAR THAT WHAT TYPE OF EXPENDITU RES THEY WERE. THEREFORE WE ARE OF THE OPINION THAT THIS ISSUE IS ALSO REQUIRED TO BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO RE-ADJ UDICATE THE SAME AFTER OBTAINING NECESSARY DETAILS FROM THE ASSESSEE AND AF TER GIVING REASONABLE OPPORTUNITY OF HEARING IN THIS REGARD HE WILL PASS A SPEAKING ORDER ON SUCH DISALLOWANCE. WE DIRECT ACCORD INGLY. FOR STATISTICAL PURPOSES THIS ISSUE IS TREATED TO BE ALLOWED. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED IN THE MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17.03.20 11. SD/- SD/- [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 17.03.2011. DK ITA NO.4707/DEL/2010 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES