TMI Blog2014 (12) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... dings are set aside – Decided in favour of assessee. - ITA No. 717/Del/2013 - - - Dated:- 11-11-2014 - Shri H. S. Sidhu, J.M. And Shri J. Sudhakar Reddy, AM,JJ. For the Appellant : Shri TN Chopra, Adv. For the Respondent : Sh. Sameer Sharma, Sr. D.R. ORDER Per J. Sudhakar Reddy, Accountant Member This is an appeal filed by the assessee directed against the order dated 17.12.2012 of Ld.CIT(Appeals)-XVIII, New Delhi pertaining to the AY 2004- 05. 2. Facts in brief:- The assessee is a company and is in the business of export of tea and trading of other items. It filed its return of income on 1.11.2004 and thereafter a revised return u/s 139(5) was filed on 9.12.2005 declaring total income of ₹ 4,91,774/- from long term capital gain and declaring a loss of ₹ 1,13,85,958/-. In the revised computation of income, loss from business was shown at ₹ 70,89,892/-, the income from house property was shown at ₹ 10,21,020/- and income from other sources being dividend was shown at ₹ 1,63,63,336/-, which was claimed exempt u/s 10(34) of the Act. 2.1. An order u/s 143(3) was passed on 30.11.2006 determining the total loss at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 37,96,922/- Add: Addition as discussed above ₹ 1,28,66,654/- Total income : ₹ 90,69,732/- Rounded Off to: ₹ 90,69,730/- Assessed at ₹ 90,69,730/-. Necessary forms issued. Charge interest as per law and rules. Penalty proceedings u/s 271(1)(c ) of the Act have separately been initiated. 2.3. Aggrieved the assessee carried the matter in appeal inter alia challenging the reopening of the assessment as well as the disallowance made by the AO u/s 14A. The First Appellate Authority dismissed the appeal. Further aggrieved the assessee is before us on the following grounds. 1. On the facts and in the circumstances of the case the learned CIT (A) is not correct in sustaining the reopening of assessment by the assessing officer after four years. 2. The learned CIT (A) has totally ignored the basic contention of the assessee that the question of deduction of expenditure debited to P L as well as any disallowance under section 14A of Income tax Act has been specifically examined by the Assessing Officer during the original as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count and further details are on the file and such no expenses have direct relation with the tax free income. 8. The appellant hereby craves its right to take any additional grounds or amend or withdraw any grounds of appeal. 3. We have heard Shri TN Chopra, the Ld.Counsel for the assessee and Mr.Sameer Sharma, the Ld.D.R. on behalf of the Revenue. 4. On a careful consideration of the facts and circumstances of the case, on perusal of orders of lower authorities, material on record and case laws cited, we hold as follows. 4.1. The reasons of reopening are as follows. 11. Reasons for the belief that income has escaped assessment: The assessment of M/s Rama Associates Ltd. For the AY 2004-05 was completed after scrutiny in November,2006 determining a loss of ₹ 37.97 lakhs after allowing exemption of ₹ 163.63 lakhs u/s 10(34). On verifying the records, it is seen that the proportionate administrative expenses attributable to above income were not deducted in computing the admissible exemption. Section 14A of the Act provides that for the purpose of computing the total income under chapter VI of the Act, no deduction shall be allowed in respect of the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of ₹ 7,01,14,533/-; (f) Details of misc. Income; (g) Details of commission; (h) Justification of purchase tax of ₹ 54,22,532/- copy of account to be furnished; (i) Since there had been no business activity, only expenses such as personnel exp, admn.exp, selling exp, financial charges etc. Paid to others be disallowed ₹ 1,55,818/-. (Emphasis ours) 4.3. In reply to the specific enquiry the assessee vide letter dt. 24.11.2006 explained as follows. expenditure incurred on earning the dividend income: The amount of Dividend has been received by the assessee company by way of the cheques payable at par at all branches of the Bank for which no collection charges have been levied by the bank. The details of the Dividend received by the assessee company and the copies of the bank account in which the said Dividend cheques have been deposited are being enclosed herewith, which clearly reflect that the entire amount of credit has been given by the Bank in respect of the cheques deposited for Dividend without charging any collection expenses, and accordingly no expenditure have been incurred by the assessee company for earning the Dividend income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No's. The said staff is required for managing day today activities of the company. Whenever export orders are received, the staff is required to arrange for the purchase of goods, their handling and completion of various formalities for exports, the assessee company has to maintain staff as all the members and staffs are quite experienced and are well versed with the nature of business activities carried on by the asessee company. The assessee company keeps on trying to procure orders and has to necessarily keep the said staff in the expectation that wherever such negotiations/efforts will materialize, the experienced and skilled manpower will be required to execute these orders. The, staff is also required for managing the online lottery dealership and money lending activities, by the assessee company. The administrative expenses mainly consists of communication charges which are normal telephone, expenses of ₹ 1,78,787/- in respect of telephone installed at business premises. The travelling and conveyance expenditure claimed at ₹ 2,79,956/- are in respect of the traveling undertaken by the employees for the, purpose of business of the assessee and local conveya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity falls on him as a trader, and the transaction in respect of which proceedings are taken out arises out of and is incidental to the assessee's business, then litigation expenses are deductible - Modi Industries Ltd. Vs en (1977) 110lTR 855 (Ali). It is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best. The fact that he does not leave the carriage of the case of the case in the heads of the prosecuting agency of the Government is no ground for disallowing the expenditure - CIT Vs Dhanrajglrji Raja Narasingi1i (1973) 911TR 544 (SC) In view of the above it is humbly submitted that the entire expenditure in the company is for the purpose of business of the assessee company and is incurred on account of commercial expediency and being fully vouched such is fully allowable. It is submitted accordingly. 4.5. A perusal of the above clearly demonstrates that a specific query was asked on the issue of disallowance required to be made u/s 14A of the Act, by the AO during the original assessment proceedings. After considering the reply of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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