HIGH COURT OF BOMBAY
Commissioner of Income-tax, Central – III
V/s.
Cello Plast
IT APPEAL NO. 3731 OF 2010
JULY 27, 2012
JUDGMENT
M.S. Sanklecha, J.
This appeal by the revenue under Section 260(A) of the Income Tax Act, 1961 (hereinafter referred to as the “said Act”) challenges the order dated 19/1/2010 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the “Tribunal”) in ITA No.2200 of 2009 relating to the assessment year 2006-07.
2. The appeal is admitted on the following substantial questions of law :-
(a) Whether on the facts and in the circumstances of the case, the Tribunal in law was right in not sustaining the order of the CIT(A) in confirming the disallowance of the legal and professional charges of Rs. 1,37,500/- ?
(b) Whether on the facts and in the circumstances of the case the Tribunal in law was right in directing the A.O. to allow the claim of depreciation ?
(c) Whether on the facts and in the circumstances of the case, the Tribunal in law was correct in directing the A.O. to allow the claim of deduction u/s. 54EC ?
At the instance and request of the Advocates for both the parties, the appeal is itself taken up for final disposal.
Re Question(a) :
3. The respondent assessee had filed its return of income inter alia seeking a deduction of an expenditure of Rs. 1.37 lacs on the ground that the same was incurred towards the legal and professional charges.
The Assessing Officer, by an order dated 26/9/2008, disallowed the above expenditure as no details in respect thereof had been furnished. On appeal, the Commissioner of Income Tax (Appeals) by an order dated 5/2/2009 upheld the order of the Assessing officer and disallowed the expenses of Rs. 1.37 lacs towards the legal and professional charges. The Tribunal by its order dated 19/1/2010 allowed the respondent’s appeal on the ground that the details of legal and professional charges had been submitted before the Commissioner of Income Tax (Appeals).
4. Mr. Suresh Kumar, the learned counsel for the appellant submits that the finding of the Tribunal is perverse as respondent had not furnished the details of the expenses incurred on account of legal and professional charges either before the Assessing officer or before the Commissioner of Income Tax (Appeals). As against the above, Dr. Shivram learned counsel for the respondent submits that the details of legal and professional expenses were submitted by a letter dated 26/9/2008 before the Assessing Officer and in support thereof produced a copy of the letter dated 26/9/2008 for the perusal of this Court. The relevant extract of the letter dated 26/9/2008 is as under:
“(c) Legal & Professional Charges :Rs. 137500/-During the year 2005-06 the firm has paid a sum of Rs. 137500/- towards legal & professional fees to different professionals for consultation on various Income tax, Excise, Custom matters”.
5. We find that the respondent has not submitted the details of the legal and professional expenses allegedly incurred by it. The letter dated 26/9/2008 merely states that the expenses were incurred towards payment of fees for professional consultation in Income Tax, Excise and Customs matters. However, no details were furnished of the said consultation charges such as the reasons for consultation, the dates of consultation and names of the Consultants. In the circumstances, the Assessing Officer and the Commissioner of Income Tax (Appeals) were correct in disallowing expenditure of Rs. 1.37 lacs as the same was not duly supported by evidence. The Tribunal while passing the impugned order has ignored the fact that the details of expenditure was not furnished by the respondent to the department.
6. In view of the above question (a) is answered in the negative i.e. in favour of the appellant – revenue and against the respondent-assessee.
Re Question (b) :
7. It is an admitted position between the parties that question(b) is covered by the decision of this court in the matter of Commissioner of Income Tax v. G. R. Shipping Ltd. in Income Tax Appeal No.598 of 2009 dated 28/7/2009. In view of the above, question (b) is answered in the affirmative i.e. against the appellant-revenue and in favour of the respondent-assessee.
Re Question (c ) :
8. On 22/3/2006, the respondent sold its factory building earning a long term capital gain of Rs. 49.36 lacs. The respondent sought to avail of the exemption from payment of tax on long term capital gain of Rs. 43.36 lacs under Section 54EC of the said Act by purchasing bonds of the Rural Electrification Corporation Limited (hereinafter referred to as “REC Bonds”). Section 54EC, insofar as it is relevant, reads as under :-
“54EC. (1) Where the capital gain arises from the transfer of a long -term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of the capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-
(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45:
Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees.
