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M/S. Shyam Ahuja Pvt... v. Income Tax Officer -...
Tribunal Summary: Cross Appeals ITA Nos. 7024/Mum/2011, 6493/Mum/2011 & 7025/Mum/2011
Factual and Procedural Background
The three consolidated appeals arise from orders dated 11-05-2011 of the learned Commissioner of Income Tax (Appeals) - XIII, Mumbai, relating to assessment years 2003-2004 and 2006-2007. The assessee is a company engaged in the manufacture and dealing of carpets, fabrics and related items. For A.Y. 2003-2004 the assessee filed a return showing a loss and claimed various expenses in the profit & loss account, including sundry debit balances written off of Rs. 2,47,832 and advances written off of Rs. 12,97,991 (advances to Intentia South Asia Pvt. Ltd. for software). The Assessing Officer disallowed both amounts on the ground that the explanations and documents were incomplete or not legible and the assessee had not fully substantiated the claims. The CIT(A) confirmed the disallowance of sundry debit balances but allowed the advances written off as business loss under section 28.
For A.Y. 2006-2007 the assessee's appeal challenged several disallowances: (1) employee contributions to PF, ESIC and labour welfare fund of Rs. 5,75,100 (disallowed because paid after due date), (2) addition under section 41(1) of Rs. 2,52,352 being amount shown as creditors outstanding (The Taj Mahal Hotel / Taj Magazine) and alleged to have been written back, and (3) general store expenses of Rs. 1,46,161 (disallowed for want of proof that they were business expenses). The CIT(A) had upheld these disallowances. Both the assessee and Revenue appealed to the Tribunal; the three appeals were disposed of by a common order.
Legal Issues Presented
- Whether sundry debit balances written off (Rs. 2,47,832) are deductible under section 36(1)(vii) of the Income-tax Act where the bad debts are claimed to have been written off in the accounts.
- Whether advances written off (Rs. 12,97,991) paid for acquisition/implementation of software and later abandoned due to defective implementation are allowable as business loss under section 28 of the Act.
- Whether employee contributions to PF, ESIC and labour welfare fund (Rs. 5,75,100) paid after the due date are disallowable, or whether payment before the due date of filing the return avoids disallowance (having regard to retrospective operation of a statutory amendment).
- Whether the addition under section 41(1) (Rs. 2,52,352) on account of alleged cessation of liability is sustainable where the amount was shown as income in a later year and later repaid to the creditor.
- Whether general store expenses (Rs. 1,46,161) are allowable business expenses where the goods were supplied to premises owned by the assessee and used as transit accommodation for staff/directors, with previous years' allowance and some recoveries from occupants.
Arguments of the Parties
Assessee's Arguments
- Regarding sundry debit balances (Rs. 2,47,832): the assessee submitted complete details and relied on the Supreme Court decision in T.R.F. Limited v. CIT (TRF Ltd.) (2010) 323 ITR 397 (SC) to contend that a write-off in the accounts suffices for deduction under section 36(1)(vii).
- Regarding advances written off (Rs. 12,97,991): the assessee explained the advances were for software (Intentia South Asia Pvt. Ltd.) which had to be abandoned due to poor implementation; reliance was placed on decisions including CIT v. Raychem RPF Ltd., Commissioner of Income-Tax v. Anjani Kumar Co. Ltd., and DCIT v. Edelweiss Capital Ltd. to support allowance as business loss under section 28.
- Regarding employee contributions (Rs. 5,75,100): the assessee contended that the entire amount was deposited before the due date of filing the return and relied on the Supreme Court decision in Commissioner of Income Tax v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and the Delhi High Court in CIT v. AIMIL Ltd. to argue that no disallowance is permissible.
- Regarding the addition under section 41(1) (Rs. 2,52,352): the assessee produced ledger extracts showing the amount credited to other income in year ending 31-03-2008 and pointed out the amount was shown as income for A.Y. 2008-2009 and subsequently repaid to the creditor.
- Regarding general store expenses (Rs. 1,46,161): the assessee argued the supplies were for Usha Kiran premises (owned by the company) used as transit accommodation for staff/directors; similar expenses were allowed in prior years; premises is capitalised and depreciation claimed; some recoveries were made—reliance placed on Greaves and Cotton & Co. Ltd. v. CIT.
Revenue's Arguments (including Assessing Officer)
- Supported the Assessing Officer's findings: that the details/documents in support of the sundry debit balances and advances were incomplete or illegible and thus the expenditures were not sufficiently substantiated.
- Maintained that advances written off and other claimed amounts should be disallowed where substantiation is lacking.
- For employee contributions, the Department opposed the assessee's reliance on retrospective operation of the statutory amendment and supported the AO and CIT(A) orders disallowing the amounts claimed.
- For the section 41(1) addition and general store expenses, the Department supported the AO and CIT(A) findings and opposed the assessee's claims on the record.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| DIT (Int Tax) v. Oman Int. Bank & SAOG (2009) 313 ITR 128 (Bom) | Relied on by the learned CIT(A) in affirming that the assessee failed to discharge the onus in relation to sundry debit balances (as applied by CIT(A)). | The Tribunal noted that the CIT(A) relied on this decision in confirming the A.O.'s disallowance; however, the Tribunal examined the statutory provision and later Supreme Court authority (TRF) and reached its own conclusion. |
| T.R.F. Limited v. Commissioner of Income Tax, Ranchi (TRF Ltd.) [2010] 323 ITR 397 (SC) | Establishes that, after 1-4-1989, it is sufficient for deduction under section 36(1)(vii) that the debt is written off as irrecoverable in the assessee's accounts; no further proof of irrecoverability is necessary. | The Tribunal expressly followed this Supreme Court decision to hold that, absent any contrary material from the Revenue to show the amount was not written off in the books, the disallowance of Rs. 2,47,832 could not be sustained and was deleted. |
| CIT v. Raychem RPF Ltd. (2011) 245 CTR (Bom) 515 : (2011) 64 DTR 57 | Relied upon by the assessee in support of the claim that advances written off can be allowable (specific rule not detailed in the Tribunal's text). | The Tribunal recorded that the assessee relied on this decision among others; the Tribunal did not separately analyse Raychem but followed other precedents to allow the advance write-off as business loss. |
| Commissioner Of Income-Tax v. Anjani Kumar Co. Ltd. (2002) 178 CTR (Raj.) 424 : 2003 259 ITR 114 (Raj.) | Holds that irrecoverable advance payment made by an assessee for acquisition of a capital asset which did not materialise was allowable as business loss. | The Tribunal relied on this principle in support of allowing the advance written off (Rs. 12,97,991) as business loss under section 28 and declined to interfere with the CIT(A)'s order. |
| DCIT v. Edelweiss Capital Ltd., ITA No. 3971/Mum/2009 (order dated 15-02-2011) | Holds that payments advanced for development of a website (or similar project) which did not materialise are revenue in nature and when irrecoverable can be claimed as business loss under section 28. | The Tribunal cited this decision (including quoted reasoning) and followed it, treating the assessee's abandoned software project advances as allowable business loss and upholding the CIT(A)'s allowance. |
| Commissioner Of Income Tax v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) | Held that omission of the second proviso to section 43B is curative in nature and applies retrospectively from 1-4-1988 (affects timing of deductibility for certain payments). | The Tribunal followed this decision in allowing the deletion of the disallowance of employee contributions (Rs. 5,75,100) where the amounts were deposited before the due date of filing the return. |
| CIT v. AIMIL Ltd. (2010) 321 ITR 508 (Del) | Held that if the employee's share of contribution is paid before the due date of filing the return under section 139(1), then no disallowance can be made. | The Tribunal respectfully followed this decision (along with Alom) to delete the AO's disallowance for PF, ESIC and labour welfare fund. |
| Greaves and Cotton & Co. Ltd. v. CIT (2006) 201 CTR (Bom) 544 : (2005) 279 ITR 42 (Bom) | Relied on by the assessee in support of allowance of general store / related expenses (specific principle not detailed in the Tribunal's text). | The Tribunal noted the assessee's reliance; in the absence of contrary material and on the rule of consistency (past allowance of similar expenses), the Tribunal deleted the disallowance of Rs. 1,46,161. |
Court's Reasoning and Analysis
The Tribunal addressed each contested item by applying the statutory provisions and relevant authorities as follows.
Sundry Debit Balances Written Off (Rs. 2,47,832) — A.Y. 2003-2004
The Tribunal examined section 36(1)(vii) which permits a deduction where a debt is "written off as irrecoverable" in the accounts. The Tribunal relied on the Supreme Court decision in T.R.F. Limited v. CIT, which clarified that after 1-4-1989 it is sufficient that the debt is written off in the accounts and no further proof of actual irrecoverability is necessary. The Tribunal noted that the Assessing Officer had not examined whether the amount was written off in the assessee's books and observed that Revenue had not produced contrary material to show that the sum was not written off. Applying TRF, the Tribunal concluded that the disallowance sustained by the CIT(A) was not sustainable and deleted the disallowance.
Advances Written Off (Rs. 12,97,991) — A.Y. 2003-2004 (Revenue appeal)
The facts were not disputed that the assessee had advanced the amount to Intentia South Asia Pvt. Ltd. for software, that the software project had to be abandoned due to improper implementation, and that balance payment was avoided. The CIT(A) had allowed the claim as business loss under section 28. The Tribunal considered precedents (Anjani Kumar Co. Ltd. and Edelweiss Capital Ltd.) where irrecoverable advances made for projects that did not materialise were held to be allowable as business loss (Edelweiss elaborated that certain expenditures for operational facilities like websites are not capital in nature and irrecoverable advances can be claimed as revenue loss). Finding no distinguishing features, the Tribunal followed these decisions and upheld the CIT(A)'s allowance, rejecting the Revenue's ground.
Employee Contributions to PF, ESIC & Labour Welfare Fund (Rs. 5,75,100) — A.Y. 2006-2007
The Tribunal found it undisputed that the assessee had deposited the amounts before the due date for filing the return. It applied the Supreme Court's decision in Alom Extrusions (holding that the statutory omission is curative and retrospective from 1-4-1988) and the Delhi High Court decision in AIMIL (holding that employee share paid before filing date cannot be disallowed). Respectfully following these authorities and the Tribunal's consistent view, the Tribunal held the AO's disallowance unsustainable and deleted it.
Addition under Section 41(1) — Rs. 2,52,352 (The Taj Mahal Hotel / Taj Magazine) — A.Y. 2006-2007
The Tribunal noted that the liability to the creditor had been allowed in earlier assessment years and, as on 31-03-2006 the liability was shown as subsisting in the balance sheet; it had not ceased nor been remitted by the creditor and was enforceable. The assessee had shown the amount as income for A.Y. 2008-2009 and had repaid the liability in subsequent years (not controverted by Revenue). In these circumstances the Tribunal concluded the amount was not assessable as cessation of liability under section 41(1) and deleted the addition.
General Store Expenses — Rs. 1,46,161 — A.Y. 2006-2007
The assessee explained that the goods were supplied to Usha Kiran premises, which the company owned and used as transit accommodation for staff and directors; some recoveries were made from occupants; similar expenditures were allowed in prior years; and depreciation on the premises was claimed. The Tribunal found no contrary material from Revenue to show the expenses were non-business or personal. Applying the rule of consistency (past acceptance of similar expenses) and in the absence of contradictory evidence, the Tribunal deleted the disallowance.
Holding and Implications
HOLDING:
- Assessee's appeals for A.Y. 2003-2004 and A.Y. 2006-2007 are allowed.
- Revenue's appeal for A.Y. 2003-2004 is dismissed.
Direct Consequences and Practical Effects:
- The disallowance of sundry debit balances written off (Rs. 2,47,832) has been deleted and the amount is allowed under section 36(1)(vii) in light of T.R.F. Limited (SC) and absence of contrary proof.
- The advances written off (Rs. 12,97,991) to a software vendor for an abandoned project are allowed as business loss under section 28, following Anjani Kumar and Edelweiss precedents; Revenue's challenge is rejected.
- The disallowance of employee contributions (Rs. 5,75,100) has been deleted because payments were made before the due date for filing returns and in light of Alom Extrusions (SC) and AIMIL (Del HC).
- The addition under section 41(1) of Rs. 2,52,352 has been deleted because the liability had not ceased, was shown as income in a later year and later repaid; thus section 41(1) was held inapplicable.
- The general store expense disallowance (Rs. 1,46,161) was deleted on the facts (use for staff accommodation in assessee-owned premises, prior allowance and lack of contrary proof), applying consistency principles.
Broader implications: The Tribunal applied existing authorities (including Supreme Court and High Court decisions) to the facts before it. The opinion does not purport to lay down new law; it applies established precedents to allow the specific claims on the facts of this case.
Dinesh Kumar Agarwal, J.M:— The cross appeals in ITA No. 7024.Mum/2011 & 6493.Mum/2011 preferred by the assessee and Revenue are directed against the order dtd. 11-5-2011 passed by the ld. CIT(A) - 13 Mumbai for the A.Y 2003-2004. The appeal in ITA No. 7025.Mum/2011 preferred by the assessee is directed against the order dtd. 11-5-2011 passed by the ld. CIT(A) - 13, Mumbai for the A.Y 2006-2007. All these appeals are disposed of by this common order for the sake of convenience.
FOR A.Y 2003-2004 (BY ASSESSEE)
2. Briefly stated facts of the case for the A.Y 2003-2004 are that the assessee company is engaged in the business of manufacturing and dealers of carpets, fabrics and other items. The return of income was filed declaring total loss of Rs. 1,19,55,292/-. During the course of assessment proceedings it was observed by the A.O that the assessee has claimed certain expenses to the P & L account including the sundry debit balances written off Rs. 2,47,832/- and advances written off Rs. 12,97,991/-. In response to various notices issued calling for the details in respect of sundry debit balances written off, the assessee reiterated that the assessee has furnished details of the amount written off wherein names of the parties, particulars in respect of the amount written off etc. and the amount in question is mentioned. In respect of advances written off of Rs. 12,97,991/- it has been stated that it is in respect of advances made to Intentia South Asia Pvt. Ltd. for purchase of software, licence and implementation and the details of the entire transactions were provided during the course of the original assessment proceedings vide letter dtd. 24-02-2006 along with enclosures of 63 pages. The assessee has also furnished the copy of the same. However, the A.O after considering the assessee's explanation and the details filed observed that the same are incomplete and not legible. He further observed that the assessee could not fully substantiate the expenses claimed by it and accordingly he disallowed both the claims of the assessee i.e sundry balances written off Rs. 2,47,832/- and advances written off Rs. 12,97,991/-.
3. On appeal, on the issue of disallowance of sundry balances written off Rs. 2,47,832/- the ld. CIT(A) while relying on the decision in DIT (Int Tax) v. Oman Int. Bank & SAOG (2009) 313 ITR 128 (Bom) held that the assessee has failed to discharge even prima facie onus, confirmed the disallowance made by the A.O On the issue of disallowance of advances of Rs. 12,97,991/- given to Intentia South Asia Pvt. Ltd., the ld. CIT(A) observed that the appellant had to abandon the software project due to non-proper implementation and quality of software and avoiding making the balance payment to software vendor, allowed the claim of the assessee as business loss u/s 28 of the Income tax Act, 1961 (the Act).
4. Being aggrieved by the order of the ld. CIT(A) the assessee and the Revenue both are in appeal before us.
ITA No. 7024.Mum/2011 (By assessee - A.Y 2003-2004)
5. The sole ground taken by the assessee is against the sustenance of disallowance of debit balances written off Rs. 2,47,832/-.
6. At the time of hearing the ld. counsel for the assessee submits that the assessee has filed complete details of sundry balances written off amounting to Rs. 2,47,832/-, therefore, following the decision of Hon'ble Supreme Court in TRF Ltd. v. CIT (2010) 323 ITR 397 (SC), the claim of the assessee be allowed.
7. On the other hand, the ld. D.R supports the order of the A.O and the ld. CIT(A).
8. We have carefully considered the submissions of the rival parties and perused the material available on record. According to the relevant provisions of section 36(1)(vii), if an assessee writes off a debt or part thereof as irrecoverable in the accounts for the previous year, the same can be allowed as deduction under section 36(1)(vii). The controlling words/phrase in clause (vii) is “which is written off as irrecoverable”. No further proof is necessary. In T.R.F Limited v. Commissioner Of Income Tax, Ranchi . [2010] 323 ITR 397 (SC), the Hon'ble Supreme Court noticed the difference in the language in section 36(1)(vii) as it existed prior to April 1, 1989 and after April 1, 1989 and laid down (page 398):
“This position in law is well-settled. After April 1, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in the accounts of the assessee. When a bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors.”
Respectfully following the above decision and in the absence of any contrary material placed on record by the Revenue to show that the assessee has not written off the amount of Rs. 2,47,832/- in its books of account, we are of the view that the disallowance sustained by the ld. CIT(A) is not sustainable in law and accordingly we delete the disallowance of Rs. 2,47,832/- made by the A.O The ground taken by the assessee is, therefore, allowed.
ITA. No. 6493.Mum/2011 (By Revenue - A.Y 2003-2004)
9. The sole ground taken by the Revenue is against the deletion of disallowance of advances written off Rs. 12,97,991/-
10. At the time of hearing the ld. D.R supports the order of the A.O
11. On the other hand, the ld. Counsel for the assessee while relying on the order of the ld. CIT(A) also relied on the following decisions:—
1. CIT v. Raychem RPF Ltd. (2011) 245 CTR (Bom) 515 : (2011) 64 DTR 57.
2. Commissioner Of Income-Tax v. Anjani Kumar Co. Ltd. (2002) 178 CTR (Raj.) 424 : 2003 259 ITR 114 (Raj.) : (2002) 124 TAXMAN 429 (Raj).
3. DCIT v. Edelweiss Capital Ltd. in ITA No. 3971.Mum/2009 for A.Y 2005-2006 order dtd. 15-2-2011.
He, therefore, submits that the order passed by the ld. CIT(A) in allowing the claim of the assessee be upheld.
12. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee has given the amount of advance of Rs. 12,97,991/- to Intentia South Asia Pvt. Ltd. The assessee had to abandon the software project due to non-proper implementation and quality of software and claimed the loss as business loss allowable u/s 28 of the Act, which was disallowed by the A.O on the ground that the assessee could not fully substantiate such loss. However, on appeal the ld. CIT(A) allowed the same as business loss.
13. In Anjani Kumar Co. Ltd. (supra) it has been held that irrecoverable advance payment made by assessee for acquisition of a capital asset which did not materialise was allowable as business loss.
14. In Edelweiss Capital Ltd. (supra) it has been held by the Tribunal (Para No. 8):—
“……….In the present case, we are of the opinion that even if the websites had materialized, the expenditure could not have been viewed as capital expenditure because the website is put up for the purposes of day-to-day running of the business and even if one were to view that some enduring benefit is obtained by the assessee, the benefit cannot be said to accrue to the assessee in the capital field. A website is something where full information about the assessee's business is given and it helps the assessee's customers in dealing with it. A website constantly needs updating, otherwise it may become obsolete. It helps in the smooth and efficient running of the day-to-day business. The expenditure would have been allowable as revenue expenditure; as a corollary, when the website did not materialize, the amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable, can be written off and claimed as loss incidental to the business. The loss is thus allowable as business loss in terms of section 28 of the Act. We accordingly uphold the assessee's alternative plea. In the result, the ultimate decision of the CIT(A) is upheld, though not as a valid claim of bad debt but on grounds of business loss. The appeal of the department is accordingly dismissed”.
15. In the absence of any distinguishing feature brought on record by the Revenue, we respectfully following the above decisions hold that the loss claimed by the assessee at Rs. 12,97,991/- is allowable in terms of section 28 of the Act and accordingly we decline to interfere with the order of the ld. CIT(A) in allowing the same. The ground taken by the Revenue is, therefore, rejected.
ITA. No. 7025.Mum/2011 (By Assessee - A.Y 2006-2007)
16. Ground No. 1 is against the sustenance of disallowance of employees contribution towards P.F, ESIC and labour welfare fund Rs. 5,75,100/-.
17. Brief facts of the above issue are that the A.O observed that the assessee has deposited payment of PF Rs. 5,66,832/-, ESIC Rs. 6060/- and labour welfare of Rs. 2208/- after due date, therefore, he disallowed the entire amount of Rs. 5,75,100/- and added to the total income of the assessee. On appeal, the ld. CIT(A) upheld the disallowance made by the A.O
18. At the time of hearing the ld. counsel for the assessee submits that now this issue stands covered in favour of the assessee by the decision of the Hon'ble Supreme Court in Commissioner Of Income Tax v. Alom Extrusions Limited . (2009) 319 ITR 306 (SC), therefore, the issue may be decided accordingly.
19. On the other hand, the ld. D.R supports the order of the A.O and the ld. CIT(A)
20. We have carefully considered the submissions of the rival parties and perused the material available on record. We find the facts are not in dispute inasmuch as it is also not in dispute that the assessee has deposited the entire amount of PF, ESIC and labour welfare fund much before the due date of filing of return. The issue relating to retrospective operation of omission of second proviso to section 43B was considered by the Hon'ble Supreme Court in Commissioner Of Income Tax v. Alom Extrusions Limited . [2009] 319 ITR 306/185 Taxman 416 wherein it was held that it is curative in nature and would apply retrospectively, with effect from 1-4-1988. The Hon'ble Delhi High Court in CIT v. AIMIL Ltd. (2010) 321 ITR 508 (Del) has held that if the employee's share of contribution is paid before the due date of filing of the return u/s 139(1), then no disallowance can be made. Respectfully following the above decisions and the consistent view of the Tribunal, we are of the view that the disallowance made by the AO Rs. 5,75,100/- is not sustainable in law and accordingly we delete the same. The ground taken by the assessee is, therefore, allowed.
21. Ground No. 2 is against the sustenance of disallowance of Rs. 2,52,352/- added u/s 41(1) of the Act.
22. Brief facts of the above issue are that the A.O observed that the assessee vide letter dtd. 24-11-2008 has furnished a statement showing creditors outstanding for more than two years in respect of The Taj Mahal Hotel (Taj Magazine) Rs. 2,52,352/-. On being asked it was submitted by the assessee that the amount of Rs. 2,52,352/- has been written back in the year 2007-2008. The A.O, in the absence of any evidence, added the outstanding credit of Rs. 2,52,352/- to the income of the assessee as cessation of liability u/s 41(1) of the Act. On appeal, the ld. CIT(A) while agreeing with the views of the A.O, confirmed the addition made by the A.O
23. At the time of hearing the ld. Counsel for the assessee submits that in the P & L account for the year ended 31-3-2008 the assessee has credited excess provision and unclaimed balances written back under the head other income which includes the amount of The Taj Mahal Hotel Rs. 2,52,352/- and in support he placed on record the copy of the relevant pages of the ledger account for the A.Y 2008-2009 appearing at page 9-10 of the assessee's paper book. He further submits that in the subsequent years, the assessee has also repaid the said amount to the creditor, therefore, no addition is called for.
24. On the other hand, the ld. D.R supports the order of the A.O and ld. CIT(A).
25. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the amount due to sundry creditor The Taj Mahal Hotel (Taj Magazine) had been allowed in the earlier assessment years in computing the business income of the assessee. It is also not in dispute that the assessee had not unilaterally written back the account of the creditor the Taj Mahal Hotel (Taj Magazine) in its P & L account. The liability was shown in the balance sheet as on 31-3-2006 which shows that the liability is subsisted and did not cease nor was it remitted by the creditor. The liability was enforceable in a court of law. In this view of the matter and keeping in view that the assessee has shown the above amount as income for the A.Y 2008-2009 and has also made the repayment of the said liability to the creditor in subsequent assessment years, which was not controverted by the Revenue, we are of the view that the amount is not assessable u/s 41(1) of the Act and accordingly we delete the same. The ground taken by the assessee is, therefore, allowed.
26. Ground No. 3 is against the sustenance of disallowance of general store expenses Rs. 1,46,161/-.
27. Brief facts of the above issue are that the assessee company claimed general store expenses of Rs. 1,46,161/- supported by bills of grocery supplied by Rakhango general Stores. In the absence of any expediency of this expense, the A.O disallowed the same. On appeal, the ld. CIT(A) while agreeing with the views of the A.O, upheld the disallowance made by the A.O
28. At the time of hearing the ld. Counsel for the assessee submits that before the ld. CIT(A) it was submitted that the above expenses have been incurred by the assessee for the supply of grocery items and other general store items at Usha Kiran Building which is owned by the appellant company and used by the staff and directors of the company as transit accommodation. It was further submitted that the A.O ought to have been appreciated that the directors of the company and staff are placed out of Mumbai who on frequent travel to Mumbai from places such as Bhadhoi, Mirzapur, Mallur, Jaipur and USA. If such people are accommodated in the hotel, the expenses would have been much higher and, therefore, the company has used to put them in Usha Kiran premises. It was further submitted that out of the payment made to general store Rs. 1,61,179/-, the appellant company has made certain recoveries and, therefore, the net amount was claimed at Rs. 1,46,161/-. It was further submitted that in the last three financial years i.e F.Y 2003-2004, 2004-2005 and 2005-2006 the amount of general store expenses Rs. 1,59,692/-, Rs. 1,46,161/- and Rs. 1,61,179/- respectively has been allowed. It was further submitted that the said premises is owned by the company, capitalised in the books of accounts and depreciation has also been allowed. In the light of the said explanation submitted before the ld. CIT(A), the ld. Counsel for the assessee submits that the expenses claimed by the assessee be allowed. The reliance was also placed on the decision in Greaves and Cotton & Co. Ltd. v. CIT (2006) 201 CTR (Bom) 544 : (2005) 279 ITR 42 (Bom) : (2005) 149 TAXMAN 180 (Bom).
29. On the other hand, the ld. D.R supports the order of the A.O and the ld. CIT(A).
30. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that assessee has claimed such expenses on the ground that the supply of store items was made to the Usha Kiran premises owned by the assessee company and used by the staff and directors of the assessee's company as a transit accommodation and after making some recoveries from the employees and directors, the net amount of Rs. 1,46,651/- was claimed and the similar expenses were allowed in past. In the absence of any contrary material placed on record by the Revenue to show that such expenses have not been incurred for business purposes or personal in nature, we following the rule of consistency, delete the disallowance made by the A.O and sustained by the ld. CIT(A). The ground taken by the assessee is, therefore, allowed.
31. In the result, assessee's appeal for A.Y 2003-2004 and 2006-2007 are allowed and Revenue's appeal for A.Y 2003-2004 stands dismissed.
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