Ansuya Ramchandra Padir, Raigad vs Assistant Commissioner of Income-tax, Panvel

आयकर अपील य अ धकरण] पुणे यायपीठ “बी” पुणे म IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE MS.

SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM आयकर अपील सं. / ITA No.1717/PUN/2015 नधा रण वष / Assessment Year : 2008-09 Ansuya Ramchandra Padir, Purusharth Auto Service, Sion-Panvel Express Highway, Kalamboli - 410218.

PAN : AAUPP3407G. ………. अपीलाथ / Appellant बनाम v/s Asst.Commissioner of Income Tax, Panvel Circle, Panvel. ………. यथ / Respondent Assessee by : None.

Revenue by : Shri Mukesh Jha. आदेश / ORDER PER ANIL CHATURVEDI, AM : 1.

This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) – 2, Thane dt.27.11.2015 for the assessment year 2008-09.

2.

The relevant facts as culled out from the material on record are as under :- Assessee is an individual and is stated to be running a retail outlet of diesel and petrol in the name and style of M/s. सुनवाई क तारख / Date of Hearing : 04.12.2017 घोषणा क तारख / Date of Pronouncement: 12.01.2018 2 Purusharth Auto Services.

Assessee filed her return of income for A.Y 2008-09 on 29.09.2008 declaring total income of Rs.59,09,270/-.

The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 30.12.2013 and the total income was determined at Rs.59,74,300/-.

Thereafter Ld.CIT-II invoked the provisions of Sec.263 of the Act vide order dt.22.03.2013 as he was of the view there was loss of revenue due to allowance for claim of the assessee in respect of ‘tenant settlement claim’ at Rs.5,50,000/-.

He accordingly set aside the order passed by the AO u/s 143(3) of the Act and directed the AO to pass a fresh assessment order after considering the directions mentioned therein.

AO thereafter passed order on 30.12.2013 wherein he noticed that assessee had claimed Rs.5,50,000/- as tenant settlement expenses.

AO noticed that the aforesaid sum was paid to the tenant for vacating the premises that was in occupation by the tenant. he tenant.

He was of the view that since the business of the assessee was buying and selling of petrol and diesel on retail basis and it was not that of evicting tenant, the expenses incurred by the assessee to evict the tenant from its premises cannot be considered to have been incurred wholly and exclusively for the purpose of business and accordingly disallowed the expenses.

Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who upheld the order of AO by observing as under : “5.

I have carefully considered the facts of the case, findings of the AO, submissions of the Ld.

Ld.AR and material placed on 3 record.

From the facts of the case, it is seen that the appellant is an owner of petrol pump.

During the year, an amount of Rs.5,50,000/- claimed to had been paid to tenant, under grab of tenant settlement expenses, for vacating the plot.

As per details submitted, it is seen that the appellant had allowed a portion of plot to a tenant to be used for hotel purposes.

The appellant, subsequently decided to expend his business of selling of petrol and petroleum product, therefore requested the tenant to vacate the portion of plot occupied by him.

For peaceful vacation of the plot and to compensate the tenant, the appellant claimed to have paid the above amount.

The appellant however, failed to furnish supporting documentary evidences, confirmations, bank statements, name address of party etc to support his above claim.

5.1 In view of the above facts, during the course of appellate proceedings, the Ld.

Ld.AR was required to furnish name and address of the party to whom the above amount was paid along with corroborative supporting documents such as copy of tenant settlement/agreement for payment of above compensation, confirmation, bank statement reflecting credit of said amount, copy of ledger accounts etc.

In compliance, the Ld.

AR could not furnish the above documents for the reason best known to him.

The Ld. m.

The Ld.

AR also failed to produce the party for examination in person to ascertain the nature and purpose of above payment, if any, along with its genuineness and business link.

He has merely reiterated the fact that the payments have been made wholly and exclusively for the purpose of business, therefore, the same may be allowed as per provisions of section 37 of the Income Tax Act, 1961.

He has also relied upon the ruling of various courts, as stated above.

5.2 I have carefully considered the contents of the above rulings and noticed that in all those cases, those assesses were having the necessary corroborative documents, in their possession, along with proof of payments and confirmation from the recipient, in support of their claims.

On the other hand, the Ld.

AR of the appellant could not produce any credible documents which could prove the claim of the appellant, with regard to payment of Rs.5,50,000/- to the tenant for vacating the plot, occupied by him.

Moreover, the payment , if at all accepted, has been made for vacating the plot, is of enduring benefit, therefore, the same is in the nature of capital expenditure, hence cannot be allowed as business expenditure.

5.3 Secondly, in the absence of required details, the nature and purpose of said transaction and its business needs, if any, cannot be ascertained.

Keeping in view the above discussion, in my concerned opinion, the said amount of Rs.

5,50,000/- is rightly assessed, in the hands of the appellant.

All the grounds of appeal, raised as above are dismissed accordingly.” 3.

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds : 4 “1.

The learned CIT(A) erred in dismissing an appeal on the ground of lack of evidence without appreciating that : a) The learned AO did not doubt the expenditure incurred and payment made. ment made. b) The learned CIT in order u/s 263 directed the AO to give opportunity to the assessee to prove the nature of expenses and its relatedness to the business.

The learned CIT(A) failed to adjudicate the grounds taken and failed to appreciate the case laws relied.” 4.

The case file reveals that though the notice of hearing was issued to the assessee but none appeared on behalf of assessee nor any adjournment application was filed.

We therefore proceed to decide the issue ex-parte qua the assessee on the basis of material on record and after hearing the Revenue.

5.

Before us Ld.D.R. submitted that in the order passed by AO, it has been stated that the order was passed u/s 148 r.w.s.

143(3) of the Act.

He submitted that the mentioning of section of passing the order u/s 148 r.w.s.

143(3) of the Act is wrong and actually it is passed pursuant to the directions of Ld.CIT-II u/s 263 of the Act.

6.

Before us, Ld.D.R. took us through the findings of the AO and supported the order of AO and Ld.CIT(A).

7.

We have heard the Ld.D.R. and perused the material on record.

The statement of facts as filed by the assessee before Ld.CIT(A) reveals that she is running of retail outlet of diesel and petrol in the name and style of “Purusharth Auto Service” at 5 Kalamboli.

In the past she had allowed a person to use a portion of plot area for hotel purpose as she was under the belief that the customers who came for fueling the vehicles prefers to take a halt for tea, snacks etc and by allowing the hotel facility, assessee had tried to improve the service by giving more benefit to the customers.

After few years, the said person stopped operating the restaurant and did not bother to give back the possession to the assessee.

As the area let out to the tenant for operating restaurant was incidental to the business of retail outlet and in order to remove the encroachment, assessee paid the compensation to the tenant through cheques. h cheques.

In the original assessment proceedings the expenditure was allowed by the AO but in the revisionary proceedings, Ld.CIT-II was of the view that the expenditure incurred by the assessee to evict the tenant from its premises was not wholly and exclusively for the purpose of business and therefore directed the AO to reframe the assessment order.

AO in the consequential proceedings disallowed the expenses.

In the present case, the running of diesel and petrol retail outlet by the assessee and the tenant was earlier operating restaurant adjacent to the Petrol outlet is not in dispute.

The tenant has stopped operating the restaurant and for improving and extending the retail outlet, the payment made by the assessee as compensation to the tenant through cheques is also not in dispute.

It is a fact that the amount paid by the assessee was not for acquisition of any new asset but was for the smooth functioning of the existing business.

The assessee’s contention that the non-operation of the restaurant was causing 6 obstacle to the business of the assessee is not found to be false.

Further it is not a case of the Revenue that by incurring expenditure a new asset has been created.

It is a settled law that in ascertaining whether the expenditure has been laid out wholly and exclusively for the purpose of business, what is to be borne in mind is that it is incurred on account of commercial expediency of the assessee.

What is commercial expediency is to be looked from the view of a businessman and that the authorities must not look at the matter from their view point but that of a prudent businessman.

8.

We further find that the Hon’ble Gujarat High Court in the case of CIT Vs.

Navsari Cotton and Silk Mills Limited (1982) 135 ITR 546 (Guj) has inter-alia held that when the expenditure has been incurred for increasing efficiency in working or for removing inefficiency in working or where expenditure is incurred in such as a wise, prudent, pragmatic and ethical man of th man of the world of business would conscientiously incur with an eye on promoting its business prospects, then the expenditure is to be considered as for the purpose of business.

In the present case the contention of the assessee that the compensation paid to get the tenant vacated as he was not operating the restaurant and the premises of the restaurant which was laying in dormant condition was causing hurdle to the existing business is not found to be untrue.

In such a situation, the amount paid by the assessee to the tenant to get him evicted, had a live link with the business of the assessee.

Considering the totality of the 7 aforesaid facts and in view of the tests laid down by the aforesaid decision of Hon’ble Gujarat High Court, we are of the view that the amount paid by the assessee for getting the tenant evicted was an expenditure incurred by the assessee during the course of business and therefore was allowable as “business expenditure”.

We therefore direct the AO to allow the same.

Thus, the ground of the assessee is allowed.

9.

In the result, the appeal of the assessee is allowed.

Order pronounced on 12th day of January, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) यायक सद!य / JUDICIAL MEMBER लेखा सद!य / ACCOUNTANT MEMBER पुणे Pune; दनांक Dated : 12th January, 2018.

Yamini आदेश क# $त&ल'प अ(े'षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3.

4.

5 6.

CIT(A)-2, Thane.

Pr.CIT-2, Thane. "वभागीय %त%न&ध, आयकर अपीलय अ&धकरण, “बी” / DR, ITAT, “B” Pune; गाड, फाईल / Guard file. आदेशानुसार/ BY ORDER // True Copy // व.र/ठ %नजी स&चव / Sr.

Private Secretary आयकर अपीलय अ&धकरण ,पुणे / ITAT, Pune.