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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

Mr. Sanjeev M. Kapoor L/h Late Mahendra Kapoor 301, Shantanu Apartment St. Martin Road, Bandra (W) Mumbai 400 050 VS. Income Tax Officer Ward11(1)(2), Aayakar Bhavan 101, M.K. Road, Mumbai 400 020
July, 13th 2012
              `    ,   `' 

              IN THE INCOME TAX APPELLATE TRIBUNAL
                           "B" BENCH, MUMBAI

         ..  ,                                  ,     

         BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER, AND
                SHRI RAJENDRA, ACCOUNTANT MEMBER


                    . / ITA no. 4204/Mum./2008
                  (   / Assessment Year : 2003­04)

Mr. Sanjeev M. Kapoor
L/h Late Mahendra Kapoor                             .......................  /
301, Shantanu Apartment                                                 Appellant
St. Martin Road, Bandra (W)
Mumbai 400 050

                                  v/s

Income Tax Officer
Ward­11(1)(2), Aayakar Bhavan                            ...................    /
101, M.K. Road, Mumbai 400 020                                      Respondent

   ./ ./PAN/GIR no.AHTPK2156R



                 / Assessee by : Mr. M. Subramanian
                 / Revenue by           : Mr. P.K.B. Menon



    /                                                /
Date of Hearing ­ 27.06.2012                   Date of Order ­ 11.07.2012







                                 / ORDER

PER B.R. MITTAL, J.M.


      The present appeal preferred by the Revenue, is directed against the
impugned order 1st March 2011, passed by the learned Commissioner­XX,
Mumbai, for assessment year 2008­09.
                                                            Mr. Sanjeev M. Kapoor
                                                                              2
2.    Ground no.1, of the appeal is general in nature and do not require any
adjudication.


3.    In ground no.2 of the appeal, the assessee has disputed the order of
the learned Commissioner (Appeals) in disallowing the deduction under
section 80RR of the Income Tax Act, 1961 (for short "the Act") amounting to
` 16,74,600.


4.    The relevant facts are that the assessee is an individual and is a
playback singer. He claimed that on account of services rendered as a
singer, he has received remuneration in foreign currency to the equivalent of
a sum of ` 56,75,311. The Assessing Officer has stated that two encashment
certificates from Wallstreet Finance Ltd. for ` 14,34,600 and ` 2,40,000,
were not in Form 10H. Therefore, the Assessing Officer denied the claim
under section 80RR, inter­alia, in respect of above two amounts. Being
aggrieved, the assessee filed appeal before the first appellate authority.


5.    On behalf of the assessee, it was contended that the Reserve Bank of
India (RBI) had issued circular by virtue of which the said finance company
namely Wallstreet Finance Ltd., had issued the said certificate and,
therefore, the Assessing Officer was not justified to deny the claim under
section 80RR in respect of the aforesaid two amounts aggregating to `
16,74,600. The learned Commissioner (Appeals) sought a remand report
from the Assessing Officer. The learned Commissioner (Appeals) has stated
that the Assessing Officer, in his remand report, stated that one certificate
issued by Wallstreet Finance Ltd., was in the name of assessee's son Mr.
Rohan Kapoor of ` 24,00,000, and whereas, the other certificate of `
14,34,600, is in the name of the assessee. He has stated that the Assessing
Officer pointed out that as per RBI circular, Form ECF is in place of Form
10H, but the certificate issued by Wallstreet Finance Ltd., was not in such
form. In view of the above, the learned Commissioner (Appeals) confirmed
the action of the Assessing Officer to disallow deduction under section 80RR,
in respect of ` 16,74,600. Hence, the assessee is in further appeal before the
Tribunal.
                                                           Mr. Sanjeev M. Kapoor
                                                                              3
6.    During the course of hearing, the learned Counsel for the assessee
referred to Pages­4 & 5 of the paper book and submitted that Wallstreet
Finance Ltd., issued encashment certificate for the remittance of foreign
currency to the assessee. However, the learned Counsel for the assessee
conceded that one of the certificates i.e., placed at Page­5 of ` 2,40,000, is
in the name of assessee's son Mr. Rohan Kapoor. He further referred to
Page­6 of the paper book and submitted that the RBI, vide its letter dated
16th June 2006, stated that certificate of encashment of foreign currency
issued by FFNCs in Form­ECF and not in Form­10H. He also referred to
page­7 of the paper book which is a copy of RBI's letter dated 31st October
1998, addressed to various dealers in foreign exchange / FFMCs / restricted
money changers, inter­alia, confirming that encashment of foreign currency
notes / travelers cheques, the certificate should be issued in Form no.ECF
and not in Form 10H. The learned Counsel for the assessee submitted that
Wallstreet Finance Ltd. is a FFMCs and, accordingly, the certificate issued for
encashment of foreign currency is in order. Therefore, it is not justified to
disallow deduction claimed under section 80RR to the assessee.


7.    The learned Departmental Representative relied on the orders of the
authorities below and submitted that for deduction under section 80RR, rule
prescribe the certificate in Form no.10H. Since the assessee could not furnish
the encashment certificate in Form 10H, the assessee could not be allowed
deduction under section 80RR of the Act.


8.    We   have   carefully   considered   the   submissions   of   the   learned
Representatives of the parties and the orders of the authorities below as also
the relevant pages of paper book (supra).


9.    We observe that the RBI, vide its letter dated 31st October 1998, copy
placed at page­7 of the paper book and again vide letter dated 16th June
2006, copy placed at page­6 of the paper book, clarified that in the case of
salaries of shipping crew members, the certificate is to be issued in Form
10H against encashment of foreign currency / travelers chaque but in other
cases, the certificate should be issued for encashment of foreign currency
notes / travelers cheuqes in Form ECF. We observe that Walstreet Finance
                                                           Mr. Sanjeev M. Kapoor
                                                                             4
Ltd. an authorised FFMCs issued certificate of ` 14,34,600, copy placed at
Page­4, to the assessee and the said certificate should be accepted as valid
to allow deduction to the assessee under section 80RR of the Act. However,
the other certificate of ` 2,40,000, copy placed at Page­5 of the paper book,
is not in the name of the assessee but is in the name of assessee's son and,
therefore, the assessee cannot take benefit for deduction under section 80RR
in respect of ` 2,40,000. Hence, we modify the orders of the authorities
below by directing that the assessee be entitled for deduction under section
80RR, in respect of ` 14,34,600, and the same should be allowed subject to
compliance of conditions of section 80RR of the Act. Hence, ground no.2,
taken by the assessee is allowed in part restricting the claim of the assessee
for deduction under section 80RR to ` 14,34,600, on the basis of the
certificate issued by Wallstreet Finance Ltd.


10.   In ground no.3, of the appeal, the assessee has disputed the order of
the learned Commissioner (Appeals) in approving the action of the Assessing
Officer to disallow interest paid to bank on borrowings.


11.   The Assessing Officer has stated that the assessee debited `
9,63,212.41, as bank interest. The Assessing Officer has stated that the
assessee was asked to explain the nexus of interest payment to the income
earned. The Assessing Officer, after considering the explanation of the
assessee, which is stated by him at pages­4 and 5 of the assessment order,
has stated that the assessee made investment in partnership firm namely
Siddhi Vinayak Builders. That the share of firm is exempted under section
10(2A) of the Act. He has further stated that the assessee has neither
received interest income, remuneration from the firm and dividend from the
companies in which the assessee has used the loan for investment.
Therefore, the Assessing Officer has disallowed the claim of interest as per
the provisions of section 14A of the Act which provides that no deduction
shall be allowed in respect of expenditure incurred in relation to income
which does not form part of the total income under the Act. The learned
Commissioner (Appeals) also confirmed the action of the Assessing Officer
after seeking remand report from the Assessing Officer and observed that
the assessee has also not given any reply to the remand report, copy of
                                                               Mr. Sanjeev M. Kapoor
                                                                                 5
which was given to him. Hence, the assessee is in further appeal before the
Tribunal.





12.   During the course of hearing, the learned Counsel for the assessee
could not controvert the above facts, save and except, stating that the
matter could be restored to the file of Assessing Officer as was done in the
assessment year 2002­03.


13.   On     the     other   hand,   the   learned   Departmental    Representative
submitted that the Assessing Officer as well as the learned Commissioner
(Appeals) has disallowed the claim of interest after discussing the facts but
in the earlier assessment year, the Tribunal restored the matter to the file of
the learned Commissioner (Appeals) as there was no discussion in the orders
of the authorities below. The learned Counsel for the assessee could not
controvert     the     above    submissions     of   the   learned    Departmental
Representative.


14.   We have perused the order of the Tribunal for assessment year 2002­
03 in ITA no.2942/Mum./2007, order dated 13th February 2008, copy placed
at Pages­15 to 17 of the paper book found substance in the submissions of
the learned Departmental Representative. Moreover, we observe that the
learned Commissioner (Appeals) also sought remand report on the above
issue in the assessment year under consideration and gave a copy to the
assessee but no reply was filed by the assessee. Considering the facts of the
case, and the reasons given by the authorities below, we do not find any
infirmity in the order of the learned Commissioner (Appeals) to confirm the
action of the Assessing Officer in the absence of any documents placed on
record. Hence, we uphold the order of the learned Commissioner (Appeals)
to disallow the interest by rejecting ground no.3, of the appeal taken by the
assessee.


15.   In ground no.4, of the appeal, the assessee has disputed the order of
the learned Commissioner (Appeals) in confirming the addition of ` 2,00,000,
on account of low withdrawal of house hold expenses.
                                                              Mr. Sanjeev M. Kapoor
                                                                                6
16.   We have perused the orders of the authorities below. We observe that
the Assessing Officer has stated that the assessee has shown no withdrawal
for house hold expenses and claimed that his wife's income from AOP is used
for house hold expenses. During the course of hearing, the learned Counsel
for the assessee referred to Page­11 of the paper book stating that his wife
has shown withdrawal from her account and the same was used for
household expenses. Further, on perusal of the said statement placed at
Page­11 of the paper book, we observe that there is a withdrawal by way of
cheque and no details have been given as to how much amount was
contributed by assessee's wife for household expenses. Further, there is no
dispute to the fact that there are no household expenses shown by the
assessee in Profit & Loss account filed by him. Considering the facts and
circumstances of the case, we do not find any reason to interfere with the
order of the learned Commissioner (Appeals) and, accordingly, reject ground
no.4, of the appeal taken by the assessee.


17.   In grounds no.5 to 7, of the appeal, the assessee has disputed levy of
interest charged under section 234A, 234B and 234C of the Act.


18.   Since charging of interest under the above sections is consequential,
no specific adjudication is required.


19.               

11.   In the result, assessee's appeal is allowed in part.

                th
              11 July 2012    
      Order pronounced in the open Court on 11th July 2012



             Sd/-                                                   Sd/-
                                                               ..  
                                                                   
      RAJENDRA                                                  B.R. MITTAL
  ACCOUNTANT MEMBER                                          JUDICIAL MEMBER



MUMBAI,    DATED:     11th July 2012
                                                   Mr. Sanjeev M. Kapoor
                                                                     7


Copy to:

(1)   The Assessee;
(2)   The Revenue;
(3)   The CIT(A), Mumbai, concerned;
(4)   The CIT, Mumbai City concerned;
(5)   The DR, "B" Bench, ITAT, Mumbai.


                                               / True Copy
                                           / By Order
Pradeep J. Chowdhury
Sr. Private Secretary


                                   /   (Dy./Asstt. Registrar)
                                    ,  / ITAT, Mumbai
 
 
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