ZANDU REALTY LTD,MUMBAI vs. DCIT 7(3), MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 30/11/2015 of the Ld. First Appellate Authority, Mumbai, confirming the disallowance of entire expenses of Rs.63,75,690/- treating the same as non-business expenses.

On the other hand, the Ld. DR, Shri Suman Kumar, contended that in view of the order of the Tribunal dated 30/11/2015, the present appeal also may be sent to the file of the Ld. Assessing Officer for examination.

2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 30/11/2015 for ready reference and analysis:-

“This appeal has been filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-13, Mumbai (in short Ld. CIT (Appeal), dated 18.08.2013 for the assessment year 2010-11, decided against the assessment order passed by the Assessing Officer (in short ‘AO’) u/s 143(3) of the Act, on the following grounds of appeal: “1.Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of entire business expenditure of Rs. 62,43,863/- and treating it as nonbusiness expenditure and wrongly treated as expenses of Emami Limited. 2.Commissioner of Income Tax (Appeals) ought not to have confirmed the disallowance of business expenditure of Rs. 62,43,863/- made by the Assessing Officer as the expenses incurred for petitioner Company and wrongly treated and confirmed as expenses of Emami Limited. 3.The Commissioner of Income Tax (Appeals) erred in understanding that the expenses of Rs. 62,43,863/- under question were not incurred for the Petitioner Company but for other Company i.e. Emami Limited.

4. The Petitioner Company reserves its rights to add, amend and delete any of the above.”

2. During the course of hearing, arguments were made by Mst. Aarti Vissanji (Ld Counsel) on behalf of the assessee and Shri S. Senthil Kumaran, Departmental Representative (Ld. DR) on behalf of the Revenue.

3. All the grounds address the common issue of disallowance of entire business expenses of Rs.62,43,863/- by treating it as non business expenditure and wrongly treated as expenses of Emami Limited.

3.1. During the course of hearing it has been argued by ld. Counsel of the assessee that in this case FMCG business was demerged with one company namely ‘Emami Ltd.’ with all assets and liabilities. Expenses pertaining to transfer to the said company and expenses which were not accepted by the said company were debited by the assessee company in its books of accounts. The assessee company retained the noncore business and also started the business of real estate development. But the AO hold in the assessment order that the expenses debited in the profit and loss account were pertaining to the said company and were not deleted to the business of the assessee, and were therefore disallowed in the assessment order. Ld. Counsel took us through various pages of the paper book to show that expenses pertaining to the assessee only have been debited in the P & L a/c. In support of her claim, she has also filed before us certificate from M/s. Emami Ltd. She also drew our attention on ‘Notes’ to the accounts given in the annual report, showing that business of the company was not total discontinued and that the assessee company had started the business of real estate development. She also submitted copy of assessment order passed in the assessee’s own case by the AO for A.Y.2012-13 wherein these facts have been mentioned by the AO that the assessee company had started real estate business, and therefore, all the expenses claimed by the assessee were allowed by the AO in the assessment order. She placed reliance on the judgments in the case of Hindustan Chemical Works Ltd 124 ITR 560 (Bom) and CIT v. Ramapur Timber and Turnery Co. Ltd. as reported in 129 ITR 58 (Alld.). Lastly, she submitted, without prejudice, that under some confusion of lower authorities had disallowed these expenses under the belief that these expenses pertaining to M/s. Emami Ltd., whereas the correct facts are that only those expenses have been debited by the assessee which were not accepted by the M/s. Emami Ltd. She fairly submitted that for this purpose this issue can be sent back to the file of the AO for examining all these facts as well as certificate of Emami Ltd. and then allowing the expenses if these were found related to the assessee and not to M/s. Emami Ltd. 3.2. On the other hand, Ld. DR has relied upon the findings of the Ld. CIT(A), however, in response to the documents shown by the Ld. Counsel in support of her contention that these expenses did not pertain to M/s. Emami Ltd, it was fairly submitted by the Ld. DR that he would have no objection if this issue would be sent back to the file of the AO for deciding the same afresh. 3.3. We have heard both the sides and gone through the orders of the lower authorities as well as placed material before us for our consideration. During the course of hearing out attention was drawn by the Ld. Counsel to certificate submitted on behalf of the M/s. Emami Ltd. We have gone through the contents of these documents and find that the facts narrated in this certificate are very crucial and have direct bearing on the issue before us. 3.4 From the perusal of this certificate, it is clear that the expenses which have been claimed by the assessee company do not actually belong to M/s.Emami Ltd. It appears that either these evidences were not submitted properly before lower authorities or these have just been over looked while deciding this issue. We have noted that from the annual report of the assessee company for assessment year 2010- 11,that as per ‘Notes’ to the balance sheet it is clearly mentioned that the assessee company has retained non-core business i.e. other than the business of FMCG undertaking in other words it cannot be said that the assessee company was not having business and had total discontinued its business. It is further brought to our notice that the AO himself passed the assessment order for A.Y.2012-13 in the case of assessee company, wherein it has been mentioned that assessee started the real estate business, and then allowed the expenses claimed by the assessee company.

Thus, taking into account all the facts and circumstances of the case we find it appropriate to send this issue back to the file of AO for deciding it afresh after affording proper opportunity of hearing to the assessee for submitting required details and documents, as per law. The assessee shall also extent requisite cooperation to the AO in this regard. The AO shall Make verification of facts on the basis of evidences as may be submitted by the assessee, and as may be gathers by AO himself. The AO shall keep in mind our guidelines and observations as discussed in paa 3.3 and 3.4 above, while deciding this issue afresh. Thus, these grounds are allowed for statistical purposes.

Assessing Officer disallowed the claimed disallowance of business expenditure of Rs.62,43,863/- treating the same as non-business expenditure. In the present appeal also, identical is the situation, therefore, considering the factual matrix on identical lines, we remand this appeal to the file of the Ld. Assessing Officer to examine the expenses whether it pertains to M/s Emami Ltd. or not. The Ld. Assessing Officer is also provided reasonable opportunity of being heard to the assessee. The assessee is directed to furnish necessary details, documents before the Assessing Officer to substantiate its claim. The Ld. Assessing Officer shall examine the evidences, if any, to be filed before him.

Thus, the appeal of the assessee is allowed for statistical purposes only.

Finally, the appeal of the assessee is allowed for statistical purposes only.

This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 17/01/2018.