KUSHAL MADHUSUDAN DALAL, MUMBAI v. ITO 15(1)(3), MUMBAI

ITA 6109/MUM/2010 | 2005-2006
Pronouncement Date: 30-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 610919914 RSA 2010
Assessee PAN AGTPD4202E
Bench Mumbai
Appeal Number ITA 6109/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 21 day(s)
Appellant KUSHAL MADHUSUDAN DALAL, MUMBAI
Respondent ITO 15(1)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-11-2011
Assessment Year 2005-2006
Appeal Filed On 09-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI G.E. VEERBHADRAPPA PRESIDENT AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.6109/MUM/2010 (ASSESSMENT YEAR: 2005-06) SHRI KUSHAL MADHUSUDAN DALAL 3-D PREM KUTIR 177 BABUBHAI CHINAI MARG MARINE DRIVE MUMBAI -400 020 ....... APPELLANT VS INCOME TAX OFFICER-15(1)(3) MUMBAI ..... RESPONDENT PAN: AGTPD 4202 E APPELLANT BY: SHRI H.S. PARIKH RESPONDENT BY: SHRI P.K.B. MENON DATE OF HEARING: 24.11.2011 DATE OF PRONOUNCEMENT: 30.11.2011 O R D E R PER R.S. PADVEKAR JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) -26 MUMBAI DATED 16.06.2010 FOR THE A.Y. 2005-06. 2. THE FIRST ISSUE IS DISALLOWANCE OF CLUB MEMBERS HIP FEES PAID BY THE ASSESSEE OF ` 5 31 691/- AND THIS ISSUE ARISES FROM GROUND NO.1. 3. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASS ESSEE IS A SHARE BROKERS AND AS WELL AS INVESTOR IN THE SHARES. THE ASSESSEE CLAIMED CLUB MEMBERSHIP EXPENDITURE OF ` 5 31 691/- BY GIVING REASON THAT THE SAID EXPENDITURE IS INCURRED FOR PROMOTING HIS BUSINESS. THE A.O. WAS NOT IMPRESSED WITH EXPLANATION OF THE ASSESSEE. THE A.O. HAS NOTED THAT THE ASSESSEE IS RECEIVING ONLY COMMISSIO N AS A SHARE BROKER AND INCOME FROM THE INVESTMENT IN THE KOTAK MAHINDRA & ITA 6109/MUM/2010 SHRI KUSHAL MADHUSUDAN DALAL 2 ISHWARLAL MANGANLAL & SONS ETC. IN THE OPINION OF THE A.O. CONSIDERING THE QUANTUM OF THE COMMISSION INCOME DE CLARED BY THE ASSESSE NO PRUDENT BUSINESSMAN WOULD INCUR HUGE EX PENDITURE ON THE CLUB MEMBERSHIP. THE A.O. REJECTED THE CLAIM O F THE ASSESSEE. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT ( A) BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. COUNSEL ARGUES THAT SEC.37(1) DOES NOT SUGGEST THAT THE ASSESSEE MUST GET THE PRORATE RETURN ON HI S EXPENDITURE BUT WHAT IS CONTEMPLATED FOR ALLOWING THE EXPENDITURE I S THAT IT MUST BE INCURRED FOR THE PURPOSE OF THE BUSINESS. THE LD. COUNSEL RELIED ON THE DECISION IN THE CASE OF OTIS ELEVATOR CO. INDIA LTD. VS. CIT 195 ITR 682 (BOM). WE FIND FORCE IN THE ARGUMENT OF THE LD . COUNSEL ADMITTEDLY THE ASSESSEE IS ENGAGED IN THE SHARE BR OKING. IT IS TRUE THAT THE ASSESSEE HAS DECLARED THE SMALL COMMISSION INCOME. THAT DOES NOT MEAN THAT THE EXPENDITURE HAS NO NEXUS WIT H THE BUSINESS OF THE ASSESSEE. ONLY REQUIREMENT OF SEC.37(1) IS THA T THE EXPENDITURE SHOULD BE FOR THE PURPOSE OF THE BUSINESS. NOWHERE IT IS CONTEMPLATED THAT THE RETURN SHOULD BE PROPORTIONATE TO THE EXPE NDITURE. MOREOVER THE ASSESSEE WOULD GET THE BENEFIT IN FUTURE ALSO. IN OUR OPINION THE CLAIM OF THE EXPENDITURE ON THE CLUB MEMBERSHIP HAS TO BE ALLOWED CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSES SEE. WE THEREFORE DIRECT THE A.O. TO ALLOW THE EXPENDITURE ON THE CLU B MEMBERSHIP. ACCORDINGLY GROUND NO.1 IS ALLOWED. 5. NEXT ISSUE IS DISALLOWANCE OF INTEREST OF ` 91 828/-. 6. WE HAVE HEARD THE PARTIES. THE ASSESSEE DEBITED ` 92 825/- TO THE PROFIT AND LOSS ACCOUNT TOWARDS PAYMENT OF INTE REST. THE A.O. HAS OBSERVED THAT THE ENTIRE BORROWINGS FOR THE PURPOSE OF INVESTMENT IN THE SHARE PROVIDENT FUND AND OTHER VARIOUS ADVANCE S. THE A.O. HAS NOTED THAT THE ASSESSEE HAS PAID SHORT TERM CAPITAL GAIN TAX U/S.111A. MOREOVER THE DIVIDEND EARNED BY THE ASSESSEE IS EX EMPT. THE INTEREST ITA 6109/MUM/2010 SHRI KUSHAL MADHUSUDAN DALAL 3 CLAIM HAS NO NEXUS WITH THE COMMISSION INCOME DECLA RED BY THE ASSESSEE. THE A.O. MADE THE DISALLOWANCE INVOKING SEC.14A. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) B UT WITHOUT SUCCESS. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE LD. COUNSEL VEHEMENTLY ARGUES THAT THE BORROWINGS WERE MADE FOR THE PURPOSE OF THE BUSINESS. NOTHING HAS BEEN PLACED B EFORE US TO CONTROVERT THE FINDINGS OF THE AUTHORITIES BELOW E XCEPT THE ORAL ARGUMENT. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. ACCORDINGLY GROUND NO.2 IS DISMISSED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH NOVEMBER 2011. SD/- SD/- ( G.E. VEERBHADRAPPA ) PRESIDENT ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE : 30TH NOVEMBER 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -26 MUMBAI. 4) THE CIT-15 MUMBAI. 5) THE D.R. A BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 6109/MUM/2010 SHRI KUSHAL MADHUSUDAN DALAL 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 24.11.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.11.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/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 FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER