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2019 (4) TMI 1572 - ITAT MUMBAIDisallowance of depreciation on astrology fees - architectural and management consultancy fees and payments were capitalized in the books - service provider raised invoice / debit note as “Astrology Fees” - TDS u/s 194J at the rate of 10% was deducted - genuineness of expenditure - assessee claimed depreciation on such capitalization - main reason why the ld CIT(A) doubted the genuineness of payments to Mr Anand Nair due to the MOU. - HELD THAT:- Once the income has been assessed in the hands of one entity, then the same income cannot be assessed in the hands of the other entity. Further, the Hon’ble Bombay High Court in the case of CIT v Noshira D Mody [2014 (4) TMI 1157 - BOMBAY HIGH COURT] held that where the recipient of commission has offered the same to tax, it cannot be disallowed u/s 37(1) in the hands of the payer. Therefore, we are of the considered view that when Shri Anand Nair has offered the professional fees to tax, it cannot be disallowed in the hands of the payer. Shri Anand Nair has already paid tax to Government in respect of the fees received by him from the assessee company. The payment of fees to Mr Anand Nair cannot be considered as non-genuine, when all evidences conclusively proved that said payment is genuine and it was incurred wholly and exclusively for business purpose. The assessee has rightly capitalized the same under the head Plant and Machinery. Hence, the AO is directed to allow depreciation claimed on architect fees paid to Shri. Anand Nair and capitalized in books under fixed assets. Disallowance of rent paid to Mr Anand Nair - Leave and License agreement for a period of three years - flats were to be used for accommodating the guests and employees of the assessee company who come from outstation - HELD THAT:- Guest house could be a better and cheaper option than the hotel in terms of comfort, privacy and familiar surroundings. With regard to sale in subsequent years at a low price, it is noted that the same is a transaction between a brother to his sister; therefore, not a correct benchmark to determine the rent is excessive. Further, Shri Anand Nair is not a related party. The payments were made to Shri Anand Nair by account payee cheque. TDS was duly deducted u/s 194I of the Act. Applicable service tax has been charged. The rent was offered to tax in the hands of Shri Anand Nair. The sample guest list demonstrates that the guest house was constantly used by employees and their families for personal / official purpose or for holding interviews. The payment is reasonable from the point of view of the Assessee Company as it would have to incur huge expenses if it were to accommodate outstation guests and employees in Hotels. Also assessee is able to block premises for a period of 3 years and have the premises whenever it desires. Therefore, only for the reason that rent is high genuineness of payment cannot be questioned and disallowance be made. But, considering the size of flat and the locality, we are of the view that rent payment of ₹ 1,00,000/- per month for two flats appears to unreasonable and excessive. Further, the AO did not brought on record any comparable cases of similar nature or find out market rate prevailing at that time. Therefore, we are of the considered view that this issue needs to be re-examined by the AO Disallowance of housekeeping charges paid - paid with respect to two flats at Vakola, Mumba pursuant to a Housekeeping agreement for a period of three years - HELD THAT:- Whether the expenditure is justified/reasonable or not has to be seen from the businessman point of view and AO cannot step in the shoes of Assessee as held by the Hon’ble Supreme Court in Hero Cycles (P) Ltd. vs. CIT [2015 (11) TMI 1314 - SUPREME COURT OF INDIA] . Therefore, we are of the view that the lower authorities were erred in treating housekeeping charges as non genuine payments. But, considering the size of flat, we are of the view that housekeeping payment of ₹ 1,00,000/- per month for two flats appears to unreasonable and excessive. Further, the AO did not brought on record any comparable cases of similar nature or find out market rate prevailing at that time. Moreover, this issue is linked with disallowance of rent payment to flats. Since, we have already set aside disallowance of rent issue to the file of AO, we feel that this issue also needs to be reexamined by the AO. Depreciation attributable to Plant & Machinery purchased from M/s Triochem Sucrotech Engineering & Projects P Ltd. - non adjudication by the CIT(A) at all in its order - request to be set aside to the CIT(A) to give a proper finding - HELD THAT:- .CIT (A) has analysed each and every party alleged to be bogus and her analysis was so minute that she has even identified a payment of ₹ 92,81,009/- in respect of one party whereby such payment was debited in P&L account and directed to be disallowed over and above the addition made by AO. The Ld. DR could not pint out any other infirmity in the order of CIT(A), but, simply argued that no express finding was given in respect of transaction with Tricohem, therefore, matter may be set aside to CIT(A). We are of the considered opinion that the ld. CIT (A) has adequately dealt with this issue and we do not find any infirmity whatsoever in the order of CIT(A). Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted the disallowance on the ground that no dividend was earned - HELD THAT:- There is no doubt that investment in subsidiaries ought to be included for 14A disallowance. However, other factors have also to be looked into like net worth, investment amount, receipt of dividend etc. We note that as against net worth of the assessee as on 31.03.2011 of ₹ 401.92 crores, investment stood at ₹ 25.85 crores. Thus, the assessee has adequate own funds. Hence, following the Hon’ble Bombay High Court decision of CIT v HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] no interest could be disallowed. It is also on record that the assessee has neither received any dividend income nor claimed any income to be exempt. Since there is no exempt income earned, there is no question of invoking Section 14A. See VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI]
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